An earnings call is a conference call during which a public company discusses the financial results of a reporting period like a quarter or fiscal year. The name “earnings call” comes from the fact that the company typically discusses earnings per share (EPS) along with other financial metrics and figures during the call.
Earnings calls are usually led by the company’s executive team — the CEO, CFO, and sometimes other executives — and are open to analysts, investors, and sometimes the media. The call often begins with prepared remarks by the executives, which usually include a discussion of the company’s performance during the period, and the company’s outlook for future periods.
After these prepared remarks, the call typically opens up to a question-and-answer (Q&A) session where analysts and investors can ask detailed questions about the company’s results and future prospects.
Companies generally hold earnings calls quarterly, in conjunction with the release of their financial results, so there are typically four earnings calls in a given year. The information shared during these calls can be vital for investors and analysts to make informed decisions about whether to buy, sell, or hold a company’s stock. Earnings calls can be found on a company’s investor relations website and are often available for replay after the call has completed.
Example of an Earnings Call
Let’s imagine an example using a hypothetical technology company, Tech Innovations Inc.
Tech Innovations Inc. has just finished its Q1 (first quarter) of the fiscal year and has prepared its quarterly financial statements. The company announces that it will hold its Q1 earnings call on April 28th at 2:00 pm ET. Investors and analysts interested in the company can dial in using the number or webcast link provided on the company’s investor relations website.
On the day of the earnings call, the CEO of Tech Innovations Inc., along with the CFO, starts the call by summarizing the Q1 financial results. They announce that the company had revenue of $150 million for the quarter, a 10% increase over Q1 of the previous year. They also mention an Earnings Per Share (EPS) of $0.25, which is in line with analysts’ expectations.
The CEO talks about the successful launch of a new product during the quarter, which helped boost sales. The CFO provides more detailed financial results, including information about the company’s costs, operating expenses, and net income.
Next, the executives discuss their outlook for Q2 and the rest of the fiscal year. They predict steady growth due to strong demand for their products and an expanding market.
After the prepared remarks, the call is opened up for questions. An analyst from a prominent investment firm asks about the company’s plans for dealing with increasing competition. The CEO responds by discussing the company’s commitment to innovation and customer service.
Once all questions have been answered, the call is concluded. A recording of the call is later made available on the Tech Innovations Inc.’s investor relations website for those who could not attend the live session.
The information from this earnings call, along with the company’s financial reports, is used by analysts and investors to assess the company’s performance and future potential, helping them make informed investment decisions.