Forward-looking statements are statements made by a company that are not based on historical facts, but instead are predictions or estimates about future business conditions and performance. These statements are often found in a company’s financial statements, earnings reports, and management discussion and analysis (MD&A) section of their annual report. They can also be found in press releases, presentations to investors, and other public communications.
Forward-looking statements can cover a wide range of topics, including:
- Predictions of future revenues, earnings, and other financial items
- Plans and expectations for future operations or management changes
- Predictions about the effects of regulatory or competitive conditions
- Projections about industry trends and market conditions
- Plans for future product launches or capital expenditures
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. Therefore, actual results may differ significantly from those expressed or implied in the forward-looking statements due to a variety of factors.
In the U.S., the Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information. As long as the statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying significant factors that could cause actual results to differ materially from those in the forward-looking statement, a company may not be held liable for material differences.
Regardless, investors should exercise caution and not rely solely on these predictions when making investment decisions. It’s always advisable to consider a company’s historical performance, current market conditions, and other substantive financial information.
Example of Forward-Looking Statements
Suppose a company called AutoTech, which manufactures electric vehicles, releases an earnings report. In this report, the CEO might say:
We anticipate that our revenues will grow by 15-20% in the next fiscal year due to the increased demand for electric vehicles and our plans to expand into new markets in Asia.
This is a forward-looking statement as it predicts future revenue growth and plans for expansion, both of which are not guaranteed and may not occur as stated.
In accordance with regulations, AutoTech would likely accompany this statement with a cautionary note, such as:
“These forward-looking statements are based on current market conditions and our current expectations. Actual results may differ materially due to risks and uncertainties, including changes in demand for electric vehicles, challenges with our expansion strategy, currency fluctuations, and regulatory changes in the markets we operate in.”
This disclaimer is meant to remind investors that while the company has a positive outlook on its future, there are numerous factors that could cause the actual results to differ from the projections.