NIRI Earnings Process Practices Research Report...2016 2010 N=170. 2016 N=378. NIRI ANALYTICS NIRI...

N I R I A N A L Y T I C S

NIRI Earnings Process Practices Research Repor t

S E C T I O N 1

Respondent Demographics and

Survey Methodology

N I R I A N A LY T I C S | N I R I E A R N I N G S P R O C E S S P R A C T I C E S R E S E A R C H R E P O R T

3

DEMOGRAPHICS COMPANY INDUSTRY

Micro-cap

5%

29%

39%

15%

12%

Small-cap Mid-cap Large-cap Mega-cap

Micro-cap: Less than $250 million

Small-cap: $250 million-less than $2 billion

Mid-cap: $2 billion-less than $10 billion

Large-cap: $10 billion-less than $25 billion

Mega-cap: $25 billion+

Methodology

All NIRI corporate members were invited to participate

in this electronic survey through direct e-mail invitations

from April 11 to May 8, 2016. The survey inquired about

quiet periods, earnings guidance, earnings releases, and

earnings call practices for corporate investor relations

professionals working within publicly traded companies.

The survey also collected demographic information.

A total of 407 individuals completed the survey, yielding

a response rate of 18 percent. A sample of this size has a

margin of error of plus or minus 4.4 percent at a 95 percent

confidence level. This means that if the survey was repeated

100 times with different samples from the population of

IROs, 95 out of 100 samples would yield a result within

plus or minus 4.4 percent of each statistic reported in this

study. For example, if an answer is offered by 50 percent

of respondents, the results would range between a high of

54 percent (rounded) and a low of 46 percent for 95 out of

100 other samples from the same population. In charts and

tables, numbers may not total 100 percent due to rounding.

2%

4%

3%

2%

2%

8%

3%

7%

2%

6%

9%

1%

8%

6%

3%

3%

11%

7%

3%

2%

5%

1%

2%

Auto & Components

Banks

Capital Goods

Commercial & Professional Services

Consumer Durables & Apparel

Consumer Services

Diversified Financials

Energy

Food,Beverage & Tobacco

Health Care Equipment & Services

Household & Personal Products

Insurance

Materials

Media

Pharmaceuticals, Biotechnology & Life Sciences

Real Estate

Retailing

Semiconductors & Semiconductor Equipment

Software & Services

Technology Hardware & Equipment

Telecommunication Services

Transportation

Utilities

S E C T I O N 2

Quiet Per iod Practices


5

“Quiet periods” are defined as a specific period of time

during which the officers of a company will not talk

about the company’s financials. Typically, a “quiet period”

occurs prior to issuing quarterly earnings press releases.

The proportion of respondents participating in a quiet

period has increased by 9 percentage points (to 91%)

over the last six years.

The quiet period is informal for 58 percent, and codified in

formal policy for 42 percent of respondents.

COMPANY HAS A QUIET PERIOD - BY YEAR

2010

82% 91%

2016

2010 N=170.

2016 N=378.


6

Almost half (50%) have a quiet period that lasts

between 17 and 30 days. There is a positive correlation

between market cap size and the likelihood a company

will have a quiet period. Additionally, as market cap size

increases, so does the likelihood of the company having

a formal (codified in policy) quiet period, as opposed

to an informal one. For example, while one out of every

seven micro-caps has a formal quiet period, one of every

two mega-caps does.

COMPANY HAS A QUIET PERIOD - BY MARKET CAP AND TYPE

32%

10%

8%

7%

9%

53%

60%

54%

41%

38%

15%

30%

38%

52%

53%

Micro-cap

Small-cap

Mid-cap

Large-cap

Mega-cap

No quiet period Informal quiet period Formal quiet period

82 percent of companies

report abstaining from broker

conferences and 70 percent

abstain from meetings with the

investment community during

a quiet period. 66 percent will

take one-on-one phone

calls with investors during

a quiet period.

N=390.

S E C T I O N 3

Guidance Practices


8

The overwhelming majority of respondents provide some

form of guidance (either financial, non-financial, or both

forms) (94%), holding steady with percentages from 2014.

58 percent of respondents provide both forms of guidance

(financial and non-financial), identical to 2014 percentages,

and compared with 39 percent in 2012.

33 percent provide only financial guidance, up

5 percentage points since 2014.

9 percent provide only non-financial guidance, which

has remained the same since 2012.

COMPANY PROVIDES SOME FORM OF GUIDANCE (FINANCIAL, NON-FINANCIAL, OR BOTH FORMS) - BY YEAR

93%

2009 2010 2012 2014 2016

90%

88%

94% 94%

2016 N=360.


9

Guidance provided, in any form, varies by company market cap.

One in five micro-cap companies do not issue any guidance (financial or non-financial);

while nine out of ten mid-caps do issue guidance in one form, or both forms.

COMPANY PROVIDES SOME TYPE OF GUIDANCE - BY MARKET CAP

Micro-cap Small-cap Mid-cap Large-cap Mega-cap

No Yes

80%

20% 13% 9% 11% 18%

87% 91% 89% 82%

N=360.


10

Among respondents choosing to guide, the majority

provide financial guidance in almost all its aspects in the

form of a range (between 3% and 62% of respondents).

The second and third most common methods of providing

different types of financial guidance are directional

information, and fixed estimates.

Most respondents report not providing financial guidance

for combined ratio (95%), or company working capital

(80%). Sixty-four percent of respondents do not provide

guidance on depreciation, and 60 percent do not provide it

for segment data. Note that row percentages may not sum

to 100 percent due to rounding.

Concerning periodicity of estimates, the majority

choose to provide guidance that extends across an

annual time span (67%), 29 percent provide quarterly

estimates, and 20 percent provide long-term (greater than

one year) estimates. Respondents were allowed to select

multiple responses.

FINANCIAL GUIDANCE AND METHOD PROVIDED (%) FOR ALL RESPONDENTS

Fixed estimate

Range% of financial

measureEarnings

modelDirectional information

Other methodGuidance not

provided

Working Capital <1 7 <1 — 11 3 79

Revenue or Sales 3 59 3 <1 7 1 27

Gross Margin 2 15 6 3 15 3 56

SG&A or G&A 4 20 2 <1 15 2 57

Depreciation 10 16 <1 1 8 1 64

Operating Expenses/Margins

3 27 5 2 19 1 43

EBITDA or EBIT 1 31 4 <1 6 3 55

Tax Rate 19 36 7 1 8 2 27

Earnings/EPS 2 62 1 <1 3 1 31

Capital Expenditures 21 38 4 <1 9 <1 28

Cash Flow/Free Cash Flow

5 32 3 <1 8 3 49

Segment Data 1 17 2 <1 19 1 60

N=240.


11

TOP 5 FINANCIAL GUIDANCE METRICS USED

1

Revenue or Sales

2

Tax Rate

3

Capital Expenditures

4

Earnings/EPS

5

Operating Expenses/Margins


12

The largest percentages of non-financial guidance

provided were qualitative statements about market

conditions (42%), and trend information that may impact

company business (41%). All qualitative guidance

percentages have remained stable over the last two years.

In 2016 there were no differences in market cap for

provision of non-financial guidance.

GUIDANCE PROVIDED ON NON-FINANCIAL MEASUREMENTS

%

Qualitative statements about market conditions 42

Trend information that may impact company business 41

Industry-specific information 29

Market growth 22

Non-financial metrics or key performance indicators (KPIs) 20

Qualitative statements on high-level performance measures 28

Estimates or forecasts of factors that may drive earnings 24

Environmental, social, or governmental factors 7

Other 6

N=390.


13

The percentage of those reporting they would update financial guidance

during the quarter or year if there were a material change has declined by five

percentage points since 2014, to 89 percent. This 89 percent would update

financial guidance if there was either a positive or negative material change.

COMPANY WILL UPDATE FINANCIAL GUIDANCE IF THERE IS A MATERIAL CHANGE - BY YEAR

93%

2005 2007 2008 2009 2010 2012 2014 2016

88%87%

91%

93%94% 94%

89%

2016 N=293.

S E C T I O N 4

Earnings Release Practices


15

Little has changed in the last eight years regarding the

percentage of companies that issue an earnings release (91% in

2008, compared with 97% in 2016). The vast majority continue

to issue a full press release (98%), despite SEC guidance

indicating that an advisory release with link to the full release on

corporate website fulfills transparency requirements.

IROs choose to disseminate the earnings release through four

different channels, on average (minimum number of channels

was one and the maximum was nine). The most popular

dissemination method continues to be through press release

via paid press release distribution service (80%), followed by

the company website (73%), and conference calls or webcasts

(65%). The least popular dissemination method for the earnings

release is an advisory press release with a link to the full press

release on the company website, which is practiced by only

5 percent of respondents.

COMPANY ISSUES AN EARNINGS RELEASE - BY YEAR

Issued an earnings release in 2008

Issued an earnings release in 2016

91% 97%

2008 N=429.

2016 N=328.


16

EARNINGS RELEASE TIMING RELATIVE TO FILING 10-Q

EARNINGS RELEASE TIMING RELATIVE TO FILING OF 10-K

Same day as filing 10-Q

22%

Same day as filing 10-K

12%

Same day as filing 10-K

24%

Same day as filing 10-Q

43%

1-7 days prior to filing 10-Q

36%


14%

15+ days prior to filing 10-Q

7%


31%

1-7 days prior to filing 10-K

14%


28%


24%


15%


18%

15+ days prior to filing 10-Q

23%

15+ days prior to filing 10-K

59%

15+ days prior to filing 10-K

30%

2008

2016

2008

2016

2008 N=281. 2016 N=390.


17

POSITIONING OF GAAP RECONCILIATION TABLES

NON-GAAP ITEMS PROVIDED IN EARNINGS RELEASE

After financial tables at end of release

Immediately after non-GAAP items

Before financial tables at end of release

56%

15%

5%

%

Do not provide any non-GAAP items in earnings release 4

EBITDA 40

Cash flow/free cash flow 32

Adjustments to common metrics 40

Industry specific metrics 19

Company specific metrics 20

One time/special items 35

An overwhelming 96 percent of IROs provide non-GAAP items in their earnings releases.

N=390.

S E C T I O N 5

Earnings Cal l Practices


19

COMPANY HOLDS AN EARNINGS CALL - BY YEAR

1996

Yes | 80% Yes | 97%

2016

In 2016 the overwhelming majority of respondents held earnings calls (97%), and

these results are identical to those found in NIRI’s 2014 and 2011 studies. Twenty

years ago, 20 percent of companies did not hold quarterly earnings calls.

1996 N=203.

2016 N=323.


20

TYPE OF EARNINGS CALL USED - BY MARKET CAP

Micro-cap

Small-cap

Mid-cap

Conference call Webcast In-person Live video

32% 53%

79%

78%

69%

1%

1%

2%

2%

4%

82%

81%

63%

74%

68%

72%

Large-cap

Mega-cap

For those that do conduct quarterly earnings calls, the

majority format is still a telephonic call (80%), followed

closely by webcasting (70%). One percent each reported

utilizing in-person, live-streaming video, and podcast

formats (participants could select more than one format).

Details of earnings call formats by market cap are

illustrated in the graph, and it illustrates how utilization

of newer technology formats was reported by small, mid

and mega cap respondents, which is identical to findings

reported in 2014.

N=385.


21

FORMAT OF EARNINGS CALL USED - BY MARKET CAP

Micro-cap

Small-cap

Mid-cap

Formal live comments, live Q&A Pre-recorded formal comments, live Q&A

Script published prior to call, brief live comment, live Q&A Script published prior to call, straight to Q&A

93%

85%

7%

11%

4%

81%

18%

1%

75%

19%

2%

2%

11%

87%

4%

Large-cap

Mega-cap

15 percent of those who hold earnings calls currently pre-

record their formal comments and then hold a live Q&A.

This is an increase of 5 percentage points since 2014,

and 7 percentage points since 2011. Overall, an increase

of 88 percent in the last five years.

At the same time, those who pre-record are less likely

to disclose their comments are pre-recorded than in

years past. Only 11 percent of those that record formal

comments beforehand disclose they are pre-recorded

(a 5 percentage point drop since 2011).

N=341.


22

Percentage of the most popular day to hold the earnings call.

Monday (3%)

Tuesday (17%)

Wednesday (30%)

Thursday (42%)

Friday (8%)

Release earnings before open, hold the call on the same day(48%)

88% 53% 40% 47% 56%

Release after close the day prior, hold the call the next day(26%)

0% 16% 19% 33% 44%

Release after close, hold the call after close on the same day(26%)

12% 31% 41% 20% 0%

MOST POPULAR DAY TO HOLD THE EARNINGS CALL, AND MOST POPULAR TIMING BETWEEN RELEASING EARNINGS AND HOLDING THE EARNINGS CALL

N=313.

Thursdays are the most popular day to hold the quarterly

earnings call (42% of respondents), followed by Wednesday

(30%), Tuesday (17%), Friday (8%) and Monday (3%).

74 percent of respondents host their earnings call on the

same day as the earnings release.

These findings remain virtually identical to those from 2014.


23

DAY THE EARNINGS CALL IS HELD

TIMING OF THE EARNINGS RELEASE IN RELATION TO THE EARNINGS CALL

Monday 3%

Release earnings before open, hold the call on the same day

48%

Release after close the day prior, hold the call

the next day 26%

Release after close, hold the call after close

on the same day 26%

Friday 8%

Tuesday 17%

Wednesday 30%

Thursday 42%


24

<90 days 1 quarter 2 quarters 3 quarters 1 year >1 year

Audio 40% 20% 1% 1% 24% 14%

Script of call 5% 11% 1% 0% 28% 55%

Slide presentation 6% 18% 2% 1% 25% 48%

Webcast 25% 22% 2% 1% 34% 16%

TYPE OF CONTENT AND ARCHIVAL LENGTH

Companies are most likely to archive an audio of the

earnings call on their website (70%), followed by the

earnings call script (67%), and the webcast (66%). The table

details the type of content archived after the earnings call,

and the length of time the content is archived. An increasing

percentage of respondents are reporting archiving earnings

call content materials for greater than one year’s time.

N=273.


25

MATERIALS USED DURING THE EARNINGS CALL - BY MARKET CAP

37%

32%

11%

41%

30%

4% 4%4% 4%

33%

42%

7% 7%

5%

37%

31%

34% 34%

8%


Do not use any materials during earnings call Slide deck Fact book Other materials

Note as market-cap size increases, so does the likelihood

of utilizing supplemental materials during the earnings call.

Overall 35 percent of respondents stated they don’t use any

supplemental materials during the earnings call. Of those

that do use supplemental materials, the most common

utilized is a slide deck (35%), followed by other company

specific materials (6%), and a fact book (5%).

N=390.


26

SUPPLEMENTAL MATERIALS POSTED TO WEBSITE (IN ADDITION TO EARNINGS RELEASE) - BY MARKET CAP

32%

37%

21%

47%

23%

20%

15%

10%

52%

7%

44%42%

36%

24%

8%

46%

42%40%

36%

41%

28%

17%

32%

11% 11%


Do not post supplemental info/data to website Non-GAAP reconciliations

Operational metrics Slide presentation Historical financials

Overall, while 13 percent of companies do not post

any supplemental information in addition to their earnings

release, those that do supply varied materials. One-half

(50%) post the slide presentation, 48 percent post non-

GAAP reconciliations, 27 percent post historical financials

or financial tables, and 19 percent post operational metrics.

‘Other’ supplemental material posted varied widely and

was, for the most part, industry specific.

N=390.


27

Conduct a post-earnings call

64%

PREVALENCE OF POST-EARNINGS CALLS, AND INVITED PARTICIPANTS

33%

48%

33%

2%

Buy-side

Sell-side

Top Shareholders

Other

The majority of IROs (64%) report conducting post-earnings calls. Most calls are made to

the sell-side (48%), followed by calls to the top shareholders, and those on the buy-side (each 33%).

N=390.

NIRI is dedicated to advancing the practice

of investor relations and the professional

competency and stature of its members.

All contents © 2016 National Investor Relations Institute. All rights are reserved and content may not be reproduced, downloaded, disseminated, or transferred, in any form or by any means, except with the written prior agreement of NIRI.

Connect with us:

National Investor Relations Institute

225 Reinekers Lane, Suite 560

Alexandria, VA 22314

703.562.7700

www.niri.org

http://www.niri.org

http://www.facebook.com/NIRI.National

http://www.linkedin.com/company/national-investor-relations-institute

https://twitter.com/niri_national

https://www.youtube.com/user/NIRINational

mailto:research%40niri.org?subject=

NIRI Earnings Process Practices Research Report...2016 2010 N=170. 2016 N=378. NIRI ANALYTICS NIRI...

Documents

Transcript of NIRI Earnings Process Practices Research Report...2016 2010 N=170. 2016 N=378. NIRI ANALYTICS NIRI...