What is an earnings call? A Beginner's Guide
An earnings call is a quarterly conference call where company executives discuss their company’s financial performance.
Think of earnings calls as a company podcast where every quarter the company releases a new episode.
Are earnings calls required?
No. There is no legal requirement for a company to conduct an earnings conference call. Public companies are required to disclose their financial performance but the specific earnings call is not required.
In fact, some publicly traded companies do not conduct earnings calls. Earnings calls have been known to get canceled when there is a pending acquisition offer or merger announcements.
What is the format for an earnings call?
Safe Harbor Statement (2-3 minutes)
An earnings call starts with a Safe Harbor Statement that serves as a reminder to let the listeners know that the earnings call may be recorded and that the executives will make forward-looking statements. The company usually wants to make it clear that they have no obligation to update any comments made on an earnings call if new information were to emerge. The Safe Harbor Statement is pretty universal across all companies.
Management Remarks (15-20 minutes)
Next is the Management’s prepared remarks. The CEO and CFO will essentially read off of a script where they give an overview of the quarter/year. Information discussed during this section includes but is not limited to earnings per share, revenue, gross margin, dividend announcements, etc.
The CFO will focus on the financial details of the reporting period while the CEO usually focuses on the bigger picture. Guidance for the following quarter and/or year is also given during this time.
Question & Answer (30-40 minutes)
Next is the Q&A section. This is when analysts and institutional investors have a chance to ask the management team questions.
Closing Remarks (1-2 minutes)
Occasionally, company executives will briefly summarize their opening remarks.
How long is an earnings call?
Earnings calls typically last about 45 minutes to 60 minutes. There is no requirement for length. Some earnings calls last only 20 minutes and some earnings calls last over 90 minutes. The biggest variable that dictates the length of an earnings call is the number of questions that get asked during the Q&A.
How do I listen to an earnings call?
Every publicly traded company has an Investor Relations section on their corporate website. A link to the earnings call webcast will be available on the Investor Relations website.
How often do earnings calls take place?
Once per quarter. Earnings calls coincide with the release of a company’s earnings results. For companies that are on a quarterly release cycle, their earnings calls also take place on a quarterly basis.