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Anearnings call is ateleconference orwebcast in which apublic company discusses its financial results for a reporting period, often providingearnings guidance for future performance. The term stems fromearnings per share (EPS), calculated as net income (the "bottom line" from theincome statement) divided by shares outstanding. Earnings calls typically accompany apress release summarizing results and are often paired with mandatory filings under local securities laws. These calls are a key mechanism for companies worldwide to communicate financial health and strategy to investors,financial analysts, and stakeholders, with practices varying by region and regulatory framework.
In the United States, a 2014 survey by theNational Investor Relations Institute (NIRI) found that 97% of its member companies conducted quarterly earnings calls, with most offering webcasts.[1] Globally, listed companies on exchanges like theLondon Stock Exchange (LSE),Tokyo Stock Exchange (TSE), orShanghai Stock Exchange (SSE) also hold similar calls, though frequency and format differ.
Generally, the call will begin with a company official, typically theInvestor Relations Officer (IRO), reading asafe harbor statement to limit the company's liability should actual results prove different from expected indicators reported in the discussion. Then one or more company officials, often including theChief executive officer andChief financial officer, will discuss the operational results and financial statements for the period just ended and their outlook for the future. The teleconference will then be opened for questions by investors,financial analysts, and other call participants. Management will answer many of these questions, although if the data is unavailable to them they may decline or defer response. Depending on the size and complexity of the company, the difference between actual and expected results, and other factors, the length of the call will vary.
There is no general requirement for how far in advance notice of a call must be given. However, keeping the investor and analyst communities happy is part of management's job, so the call will generally be announced a few days or weeks in advance. If the company has a website, then there will probably be a section titledInvestor Relations orInvestors, where call schedules and archived past calls will typically be posted.
Many companies are tracked by financial analysts that publish estimates of earnings per share (EPS). The company may also providefinancial guidance as to what EPS are likely to be. If management knows that its results are going to be significantly different from its guidance or from analyst expectations, it may choose to make apreannouncement of differing results. See alsoEarnings management.
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If the call occurs within 48 hours of a press release filed with theUnited States Securities and Exchange Commission (SEC) onForm 8-K and meets certain other criteria, there is no obligation to separately report the call to the SEC. Otherwise, it must be reported on Form 8-K. If the call contains non-Generally Accepted Accounting Principles (GAAP) information, then there are additional requirements under SEC regulations, includingRegulation FD.
Companies headquartered in the United States with securities traded on a US-based stock market or other exchange are required to file audited annual reports with the SEC onForm 10-K following the end of afiscal year and unaudited reports onForm 10-Q following the end of a fiscal quarter. These companies announce earnings and generally hold an earnings call quarterly.
Some companies with shares publicly listed also haveAmerican Depositary Receipts (ADRs) that are traded on US stock exchanges and are required to file Forms20-F and6K with the SEC. They are likely to have their earnings announcements and calls coordinated with the schedule required in the country where their shares are traded.
In 2013, the National Investor Relations Institute (NIRI) publishedStandards of Practice: Earnings Release Content, available to NIRI members.[2]