Thursday, November 10, 2016

Are Quarterly Press Releases Optimized for Reach and Impact?

David C. Collins, Anna Vikentiev
Catalyst Global LLC
November 14, 2016

The press release is thought to have been first introduced 110 years ago by Ivy Lee, considered the father of modern public relations. Lee’s agency was working with the Pennsylvania Railroad to manage communications around the 1906 Atlantic City train wreck. The release was provided directly to journalists, before other versions of the story could be spread and reported.

Ivy Ledbetter Lee 
Fast forward, much about communication and disclosure has changed radically. Press releases are distributed via paid wire services instantly and simultaneously to the media AND everyone else, with an immediate social media feedback loop attached. The speed, breadth of reach and mode of access to press releases could not be more different, yet how have investor communications evolved to adjust to today’s completely different paradigm?

To assess the status and relevance of today’s IR news release practices, we focused on quarterly results press releases - the workhorse of IR messaging. Though voluntary, quarterly releases are used widely to communicate to investors about a firm’s financial performance. A 2006 study by Dr. Elaine Henry confirmed that investors are influenced by how earnings press releases are written, and Warren Buffet has stated he would not invest in a company whose disclosure he cannot understand, because this implies intentional obfuscation. [1]

Our research involved reviewing 84 quarterly releases issued on three randomly selected days in July and August 2016. 

...what we seem to be observing is the 
difference between “disclosure” and
 “communication” in quarterly releases... 

Release headlines were analyzed based on the following criteria:

Quarterly Release Headline Analysis
Is there a financial measure in the headline?
(i.e. “EPS of $1.25”, “Net Income of $23.2M” or “Revenue of $3.8B”)
Is there any indication of 1/4ly performance direction?
(terms like “record,” “rises,” “declines” or “improves”)
Is there an explanation of “drivers” behind the results?
(such as “due to sales of the new software release” or “improved cost management and acquisition synergies”
Is it clear what the company does? / their general industry category? (United Rentals & Puget Sound Bancorp are clear, but it’s hard to guess what PTC, or Umpqua actually do…)

Quarterly Release Headline Content

Action word:
Period Description:
Second Quarter
Is the Year Included?
What quarterly measure is reported?
*(Results 49%; Financial Results 30%; Financial and Operating Results 5%; Other results 4%)

And we also considered a few areas of release content:

Quarterly “Earnings” Release Content
Are additional tables used to help illustrate the results? 

Does the release provide perspective on future results / trends?

Does the release explain key drivers behind the results?

Are comprehensive financial statements provided in the release?

Was the complimentary logo provided in wire service version?

As you can see, our primary focus was headlines – the point of discovery for any quarterly release, and we saw that: 
(a) most quarterly results releases were virtually identical and undifferentiated, and
(b) most companies avoided discussion of their numerical results, underlying trends or drivers in their headline

Most also opted not to explain the nature of what their company does beyond the name, which in 42% of instances provided no help. In general, the headlines we reviewed provided little perspective that might help their story become discovered by new investors. 

This evidence suggests that – knowingly or not – the releases are being written with  existing investors as the principal audience. We come to this viewpoint because few companies took steps to catalyze new investor attention by providing more qualitative or quantitative information in their headlines to better illustrate the investment to those who don't know the story.

In our thinking, such information might assist a prospective new investor in determining that they should “click on the link” or “open the email rather than ignoring the item and moving on – a lost opportunity for new engagement.

Please note that our perspective focuses more on small and microcap companies that face challenging barriers for coverage or visibility of any kind – making the optimization of their news release content even more critical to developing new interest in (and demand for) their shares.

How IR Press Releases Are Delivered and Consumed Today
But returning to Ivy Lee, much has changed from a time when the media was THE gatekeeper and the principle conduit of news and information. Today, financial news releases are disseminated instantly, globally and are consumed directly by investors in an electronic format  either online or via email. Can you recall the last time you read breaking news on paper?

Disclosure History Digression
Going back to the late 1980s / early 1990s, quarterly press releases reviewed operating results that were disclosed in paper-based 10-Q or 10-K SEC filings. Releases were sent in paper form directly to the media and paid wire services by messenger, mail or even relayed via phone calls but only those who visited an SEC reading room (principally in Washington, DC) - or contracted a service to do so - could access SEC filings. 

Paid wire services would receive hard copy press releases, re-key them into their system and then distribute the release content electronically to their network of media subscribers. Given constrained access to SEC filings, the quarterly press release was the most broadly distributed disclosure. Yet the media's succinct coverage of quarterly results (via major news wires like Dow Jones, Reuters, AP & Bloomberg - and the publishing of "earnings tables" in the Wall Street Journal, etc.) was the most immediate, visible and impactful source for most investors and the principal driver of the markets.

Facsimile transmission arrived in the 1980s to "revolutionize" release dissemination to media and investors, but only in the mid 1990s did the SEC mandate electronic filings on Edgar. At the same time the dawn of the Internet and proliferation of email was making Edgar and press release access broadly and immediately available. 

Today, via paid wire services, quarterly news is instantly pushed to all major financial portals and SEC filings are immediately accessible via Edgar, a substantial change to the dynamics of news distribution and access - yet it seems little has changed in quarterly news content, despite the radical change in its use and the way it is accessed. 

In this new world of electronic delivery, quarterly news release visibility is distilled down to a headline hyperlink on a web page or an email subject line, and both require a definitive action by the viewer to see more – including any sub-headlines, highlights, tables or the full release. 

All the fine writing, financials, background, historical perspective, informative links or insightful management commentary are for naught – if the prospective investor is not persuaded to click your headline link or open your release email. For that reason, we counsel our clients to differentiate their headlines to make them more effective in communicating specific information about your company.

"The most precious resource on 
Wall Street is time - not capital..."

Yet our survey finds most headlines lack such enhancements to better stimulate engagement and further review. Said another way, most releases inherently assume they will be read and/or they seem to assume some level of subsequent dialogue or research on the part of the investor.


So let’s turn to some recommendations on how to optimize the reach of quarterly releases– while not negatively impacting the dialogue with those already converted.

1.  Remove obvious, empty-calorie words from your headline and replace with value-added content such as the date and or time of the webcast! Investors are busy – get to the point, make things easy for them – plus fewer words are cheaper!

Rather than:

ABC Group, Incorporated to Report Fiscal 2016 Third Quarter 
Financial Results of Operations and Host an Investor
Conference Call and Internet Webcast
[22 words]
ABC Group Reports Q3 Results and Hosts 
Call Wednesday, November 2nd at 4:30pm ET
[14 words]

2.   If your company name does not clearly explain your business, add a phrase in your headline to clarify your sector/industry to increase the odds your news will be discovered by editors, investors, reporters, blogs, other industry participants and search engines interested in your sector.

Rather than:
 “Company X Reports Fiscal 2016 Second….
“Connectivity and Networking Solutions Provider Company X …”

To illustrate this thinking, BusinessWire's social guru Serena Ehrlich suggests using Google Trends to research the prevalence of search activity around possible headline key words. This example uses a company that produces connectivity and networking products, but their corporate name was a family name that provides no clue as to the nature of their business or products. 

The blue line shows search activity for the Company name, and the red and yellow lines represent search activity for the words “connectivity” and “networking.” Clearly, by simply adding the word “networking” to their press release headline, Company X would benefit from much higher visibility and potential discovery via searches or data mining / data analytics.

3.  Use a financial measure(s) (Revenue, net income, EPS, etc.) in your headline to provide a clear window on the scale of your business and valuation, relative to readily available share price/market cap data, to help readers assess your story’s relevance to their strategy.

Rather than:

 “Company Y Announces Fiscal 2016 Second Quarter …Results”

We suggest:
 “Company Y Reports Q2 Revenues of $125M"

A frequent pushback on this concept is the concern of precedent and that such a measure must be reported when it is unfavorable. While we cannot reject this concept, the fear of having to highlight an uncertain future event does not seem sufficiently objectionable to adhere to flavorless headline structures that provide no exposure augmentation potential. 

Our thinking was also echoed in a graduate paper: “Headlines are a framing feature that can be used to capture and retain attention with the ultimate intention of affecting the thoughts and feelings of readers, thus influencing their opinions. Therefore, headlines have a key role in a company's communication strategy.”[2] Hard to achieve these goals when your headline is indistinguishable from thousands of others. 

4.   Add an element of performance direction to your headline to attract new investors with appropriate investment styles (growth, special situations, turnarounds, value, etc.) Getting the direction of your performance out more broadly – whether up or down – should reach more new relevant investors.

We suggest:

 “[Digital Content Provider] Company Y Q2 Revenues Rose 22% to $125M"

5.     A step further would be to explain a key driver behind the change of the measure.

We suggest:

 “[Digital Content Provider] Company Y Q2 Revenues Rose 22% to
$125M, Driven Principally by New Distribution Relationships"


“[Specialty Chemicals Distributer] Z Corp. Q2 Revenues declined 17% to

$325M, Reflecting Impact of Price Competition and Scheduled Plant Maintenance"

6.  Similarly, we recommend that you include key elements of your conference call comments in the press release, – not just on the call which has a fraction of a release’s reach and engagement, particularly with retail investors. This includes business drivers, industry trends and management strategy that will impact your future results.

7.  Include comprehensive financial statements in your wire service release, as 13% of releases we surveyed did not take this simple step to push their financials to investment portals on a global basis. This is where investors may first discover you.

Further, if your performance is strong and the numbers show it clearly, a comparison table with percentages is a great addition to a successful release. 56% of releases surveyed did NOT take advantage of this opportunity. In our view tables with a % or $ change column make operating improvements far more apparent than do words.  

8.  Finally, take advantage of all that the online world has to offer to enhance your news - assuming you are successful in getting an investor to look at your release. Graphics, images, video and hyperlinks to sources that build upon the release content and context will enhance the success of your message. Also, social media provides a "force multiplier" benefit to your disclosures by providing the opportunity to position your news in front of new viewers through the smart use of key words, hashtags and appropriately noted stock symbols ("cashtags"). 

We advocate adding more content to your headline to make it more effective in communicating – rather than merely disclosing your performance. Interestingly, 83% of the survey releases chose to clarify the year of the results they were reporting in the  headline (when that is both understood AND clarified in the release itself), yet 91% of the releases chose to NOT reference any measure of financial performance in the headline (despite that being the reason for the release), and 82% also refrained from providing any directional context on their quarterly performance.

The decisions driving headlines that provide so little relevant information seem based in an orientation toward “disclosure” rather than “communication” in quarterly releases.  The bulk of releases surveyed erred on the side of unembellished disclosure, to the detriment of their potential reach and utility.  This approach also begs the question of why even bother issuing a release if it provides no more perspective or utility than the
10-Q or 10-K?   

The most precious resource on Wall Street is time - not capital, making it incumbent upon the IR practitioner to make it efficient and easy for investors to get to the data they need. The fewer the steps, the more likely they will make the journey.

We also surveyed the use of a complimentary corporate logo in wire service releases. We were surprised to find that just over 2/3rds took advantage of this free, easy to use feature that provides a more compelling visual portrayal of your news that also reinforces your corporate branding. That nearly 1/3rd of releases did not use this free feature does make us wonder about their thought process in passing up the opportunity.  

Summary: While we are all too aware of myriad forces at work in shaping corporate disclosure, we believe it is the role of the IRO or IR consultant to advocate for the “communications” opportunities within quarterly and other news and at least ensure that key decision makers are aware of the pros and cons of the current approach versus alternatives that might enhance communications reach.

Impediments to change in quarterly communications can be huge – as we have often observed over decades of IR consulting. The status quo carries probably the greatest weight in the homogenization of quarterly release content – with “we’ve done it this way for years” or “it’s the way our leading peers communicate” as two prominent justifications. We also know well the extra time and attention that required to successfully champion such changes - both to develop and then advocate for and defend. Even a receptive audience will often want to table changes until “next quarter,” when the sponsorship burden reemerges. 

While our study just scratched the surface, we believe the questions the data raises are germane to the ROI of today's IR communications. These questions include: 

·  Who is your audience? What are your communications goals?
·  What are you trying to achieve with your news release?  With your headline?
·  Have you maximized your potential communications value? 
·  How should the evolution of communications technology and distribution inform our  content and processes?

Many thanks to Anna Vikentiev, our intern and Fordham Gabelli School of Business Master’s Degree candidate in Investor Relations, who conducted the research and contributed to the writing of this article. Without Anna – this would still be an idea.

We welcome feedback or questions on our research findings and recommendations.

David Collins
Managing Director
Catalyst Global LLC
212 924 9800 or


[1] Are Investors Influenced by the Way Earnings Press Releases are Written? Elaine Henry.  The Journal of Business Communication, 4 (45), 363-407, 2008
[2] Opportunistic Disclosure in Press Release Headlines. Saorin, Osma, Jones. Accounting and Business Research, 2012

Wednesday, August 17, 2016

Thoughts on Making Investor Perception Surveys Earn Their Keep

It may sound self-serving coming from IR consultants who offer investor perception surveys - but I do believe there is much merit in using an experienced third party to conduct such research. The reason is that many investors are reluctant to provide negative feedback to management teams out of fear that it could harm their relationship and negatively impact their access to management for questions, updates, etc.  
Using a third party that enforces the anonymity of respondents - and makes this clear to investors being surveyed - can help elicit more constructive responses about all aspects of the Company, from management's competency, corporate governance and even the IR program and effectiveness. 
The perceptions are reported in a general way – as coming from “Institutional Shareholder,” Sell-side Analyst Covering the Company; Sell-Side Analyst not covering the company; etc.
Of course many investors are very free in expressing their candid views - and want their comments associated with their name (and likely have regularly expressed their opinions to management in the past) - so for some percentage of investors this third party approach is not necessary. 
Additionally – most perception surveys focus on the key investors in the stock and analysts covering the stock – but identifying issues that could be affecting those who have not yet initiated a position or coverage – is probably more important than those who are already “converted.”  The nature of the questions is also critical as chosing between: 1) Strongly Agree; 2) Agree;  3)Neither agree nor disagree or 4) No Opinion  - when the asked to respond to the statement: "XYZ Corp. is clearly focused on financial discipline and shareholder returns" provides little room for value-added perception gathering! 
Finally, it makes most sense to report perception research to the board of directors so that they can assess the key issues affecting the company's share price without a C-Suite filter (easier said than done in many cases).
A closed circuit perception study - where critiques are fed back only to those responsible for the IR effort - will tend to lead to no meaningful adjustments - and is therefore a likely waste of time resources rather than  a productive exercise.
I know this sounds a bit cynical, but unfortunately in our experience, companies that can benefit most from perception research (and making the adjustments that the research identifies) also tend to be those that are less likely to bring IR perception issues to the Board for consideration.
Given the importance that investment community perceptions have on equity valuations, it really does seem to be worthy of regular board discussion – but from our experience – primarily in the realm of small caps – this is not an issue of much Board level focus – until it’s too late and the activists are knocking at the door.

We're always happy to speak to Companies about our perception survey work - and how to optimize the ROI from the effort. 

David Collins

Managing Director
Catalyst Global 
212 924 9800