TBP Guide to Earnings Calls & Town Halls

We’re deep into earnings season, and there’s no better drama than quarterly corporate earnings calls and the “town hall”  meetings  for employees (otherwise known as McKinsey Masterpiece Theater) that goes along with them.  They are chock full of cryptic euphemisms that could easily mislead the novice observer.  So, as a BP Public Service™, we offer the following guide to earnings calls and company town halls.  These comments or references are made by senior management types during the “call or hall.”  Town Halls these days are just about synonymous with “crisis.”  Topics typically discussed include management changes (i.e. “spending more time with his family/pursue other interests, we thank him for a long and distinguished career”), a new comp structure (involving “enhancements” that in reality result in lower compensation; how does that work?), suspension of a dividend and/or massive writedown or loss, damage control of one or more messes caused by either lack of oversight or pure greed, or a face-saving, reorganizing-the-deck-chairs-on-the-Titanic restructuring that allows Peter Principle managers to keep their jobs a while longer while the boat takes on more water.

That said, keep your ears open for any of the following:

1. “I don’t look at the stock price, and suggest you don’t, either.” I don’t look at the stock price because my stewardship of the company currently has it in the crapper, and if I did look I’d have no choice but to resign.  And if you look, you’d agree.

2. “Look at our stock price.” A true Unicorn of a phrase heard very rarely on earnings calls or in town hall meetings.  Uttered almost exclusively by Steve Jobs.

3. Anything having to do with “right-sizing” the company. At current staffing levels, the company might have difficulty paying its senior management the outlandishly egregious salaries and bonuses we’re currently receiving.  Consequently, we have to cut staff by X percent so our gravy train can keep on chugging.  This phrase is usually a favorite of CEOs who like to give the pretense of knowing what’s going on, but actually have no clue whatsoever (queue Stan O’Neal, who right-sized every department except the one that ultimately blew up Merrill Lynch.  Way to go, Stan.  The only thing that should have “right-sized” was O’Neal’s exit package — down to a single-fare MetroCard.).

4. Anything relating to “synergies.” A mythical construct where the whole is greater than the sum of the parts, i.e. that two (or more) businesses that have come together via merger or acquisition actually complement each other.  More often than not, these combinations usually involve forcing a square peg into a round hole.  If there were truly “synergies” instead of absurd overlap in the majority of M&A deals, said deals would not be accompanied by announcements of massive layoffs — each side would continue doing what it does best and the businesses would, in fact, complement each other.  For example, Viagra and Cialis would be a terrible combination.  On the other hand, a Viagra/Red Bull NoonerPak™ would let you do your business and then fight off that drowsy after-effect so you could…do your business.  Perfect!  (Damn, is McKinsey hiring?)

5. “We’re going to focus on our core competencies.” I have no idea how to grow our business outside the realm of what it was when I took the reins, and any attempts I’ve made to do so have failed.  So we will continue to do what we’ve always done and hope that we catch a tailwind.  (Quick, someone get McKinsey on the phone.)

6. “I’m going to ask you all to redouble your efforts.” As with #3, this is a thinly veiled reference implying that the same workforce must increase revenues (top line), and then profits (bottom line), after which senior management salaries and bonuses will skyrocket.  See also: Productivity, Increasing.

7.  “We should discuss that off-line.” Said in response to a question asked during a town hall (very bad form to say to an analyst on an earnings call), this response means that the questioner will likely be given a cardboard box in which to pack his/her personal belongings and be escorted out of the building by security.  Takeaway:  Never ask a challenging question during a town hall.  If you are not going to genuflect before senior management, keep your trap shut.  After all, they ran the company into the ground much better than you ever could.

8. Anything related to “visibility.” In this age of short-termism, “visibility” centers around this or next quarter’s earnings, no further.

9. Any comment mentioning “respect” for a competitor. Simply an outright lie.  No CEO or his/her team has any respect for any competitor.  They have nothing but contempt for them, particularly if said competitor is kicking their ass.

10.  Anything having to do with “circling back.” This response to a question means that the answer is unknown or, if the answer is known but this answer is given regardless, it implies #7 is in effect, which means the question should not have been asked and the questioner is on borrowed time.  In either case, the bottom line is that the answer will never be made public.

11.  Talk about our “best ideas” or our “best thinking.” I would hope that senior management is relaying its “best ideas” and “best thinking” to the rank and file.  If not, why are they being so egregiously overpaid?  Are you kidding me?  Do you think I come to work every day to hear your “worst ideas” or “worst thinking” although, in fact, given what your “best thinking” has done for us, that might not be such a bad idea.

12.  All the things that happen “at the end of the day.” This is little more than verbal celery.  The only thing that actually happens at the end of the day is that everyone goes home wondering WTF senior management was talking about and how they can possibly be so divorced from reality.

13.  Know the difference between “tactical” and “strategic.” “Tactical” refers to grievous errors in decision-making to be made in the short-run.  “Strategic” refers to the slippery slope the company will be on longer term once the “tactical” screw-ups have been executed.  Related: “Strategic alternatives,” which implies that management recognizes the extent to which they’ve destroyed the company and are looking to pull a collective Stephen Slater while the worker bees go about their business, not-so-blissfully unaware.

14.  “We’re going to assess the situation.”  Whatever initiative we undertook was an epic failure (how about adding this to the next corporate tchotchke catalog?),  so now we are going to step back, wait a while, and hope that everyone forgets about it so we don’t have to discuss it on our call next quarter.  In the meantime, we will continue to work on how best to spin this to put it in the best possible light in the event it doesn’t just go away or we can’t sweep it under the rug.

There are dozens — probably hundreds — more.  By all means please contribute in comments.  Keep it pithy.

H/T to Maggie for her help.

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