WITH the third-quarter earnings season fast approaching now is the time to begin planning an advisory release process for your next earnings announcement.
Implemented properly, this process enables companies to communicate their results more effectively, level the playing field between investors, offer a more engaging experience for investors and analysts, and cut their disclosure costs.
At the National Investor Relations Institute Annual Conference in June, Meredith Cross, director the Securities and Exchange Commission’s (SEC) division of corporation finance pointed out that the advisory release process was permissible even before the commission’s 2008 website guidance. She said the SEC’s only concern would be if investors complained about the process.
Companies that have used the advisory release process for several quarters have seen no negative reaction from their investors. In fact, the advisory release process offers a solution to the concerns raised by the CFA Institute in a letter to the SEC (PDF 292 KB) about the uneven access that results when companies use PR wire services. The CFA Institute represents 100,000 financial analysts, portfolio managers and other financial professionals.
Implementing the advisory release process requires modest forethought and planning. Most companies will not need any new website technology. The ability to precisely schedule website posting is a useful tool to have when implementing the process, but it’s not essential. Most major IR website vendors’ content management systems support scheduled posting.
Unfortunately, if your company uses Business Wire, you will need to switch to a different PR wire service to use this process. Business Wire has so far refused to support its clients using advisory releases, arguing that financial newswires like Bloomberg, Reuters and Dow Jones require earnings releases to contain the financials so that their computers can generate news flashes for news-driven high-frequency trading systems.
Apart from the obvious issue of companies and their long-term shareholders subsidizing a few wealthy high-frequency traders, the fact is the financial wires have alternatives. All subscribe to EDGAR’s full-text feed service, and some also use advanced web crawlers that can retrieve information from company websites. It’s worth noting that Business Wire’s parent company Berkshire Hathaway does not issue full-text earnings releases.
If your company uses one of the other PR wire services, you’re ready to use the advisory earnings release process explained below:
Two weeks prior to the announcement
1. Notify investors about the upcoming announcement in a PR wire release. Most companies today announce the date and time of their earnings calls in a PR wire release about two weeks before the release date. Under the advisory earnings release process, this same release can be expanded to include details of where and at what time the company will post its earnings release.
The release should explain that the company will post the full-text of the earnings release on its website and on EDGAR, and provide direct links to the pages where investors can easily access the information. The link to the company website should go to a page where the earnings information will be accessible in a single click. Investors should not have to navigate or search the site to find the information.
If you have outsourced your website to vendor that uses long URLs, your IT department or webmaster can easily create a short URL like http://mycompany.com/earnings that automatically redirects to the vendor’s long URL. This will take no longer than two minutes to set up and you can use it for future releases as well.
The link to EDGAR is a back-up location for the information in the unlikely event that something goes wrong with your website on the day of the release. The link should go to the list of your company’s filings on EDGAR rather than to the top-level EDGAR search page. If you were Microsoft, this is the page you would use: http://bit.ly/bw4KAc Notice that we have shortened the long URL for Microsoft’s EDGAR filings list using the free Bit.ly service. You can do the same for your company.
2. Submit the notification release to EDGAR on Form 8-K. Submitting your upcoming earnings release details to EDGAR will help to ensure that the information is picked up by a variety of earnings calendar services that distribute the information to investors and many different websites.
SEC filings are widely distributed on the web and closely watched by the media. Both the NYSE and NASDAQ recognize 8-Ks as equivalent to PR wire releases. However, in the case of webcast notifications, PR wire releases are still seen as a requirement. This is because Item 202(b)(4) of the SEC’s 8-K requires companies to use “a widely disseminated press release” to notify investors of upcoming earnings presentations to avoid having to file transcripts of the calls.
This is a redundant requirement that should have been scrapped years ago. If an earnings release submitted on a Form 8-K fully meets the requirements of Reg FD, then there’s no reason why an earnings call notice submitted on a Form 8-K several days in advance of a presentation should not be considered “widely disseminated” as well.
3. Distribute details of the event via your website. The notice about your upcoming release and earnings call will in all likelihood be posted on your IR website shortly after it has been distributed via a PR wire service. This likely will also trigger email alerts and RSS updates being sent to your subscribers. You should post details of the release and call in your IR website’s calendar, which should also trigger email and live calendaring updates. If you are using social media channels, such as Facebook and Twitter, status updates should be distributed to these channels as well.
Publishing your earnings release on your website
Publishing your earnings release under the advisory release process requires coordinating three separate activities:
1) Publishing the release on your website, which should automatically trigger email alerts, RSS updates and social media status updates;
2) Distributing a second PR wire advisory telling investors that the earnings release has in fact been posted on your website and providing the same direct links to it as in the first advisory; and
3) Submitting the earnings release on Form 8-K to the SEC.
The first two events can be automated by scheduling the publication of the information via your website content management system so that it coincides with the time that the PR wire service will distribute the confirming advisory release.
Since EDGAR does not support scheduling, you will have to submit the filing as close as possible to the time the release goes live on your website. An 8-K typically takes two minutes from submission to acceptance. Since the 8-K serves as a back-up and only needs to be filed prior to the earnings call for the information to be considered fully disseminated, a few minutes difference between the posting on your website and acceptance on EDGAR is not a big deal.
You should also know that there is strictly speaking no requirement for you to issue the second advisory release. Google Inc., for instance, does not issue a second advisory. However, most investors have over the years become conditioned to expect earnings releases to be distributed via a PR wire. If you do not issue the second advisory, they may not know when the information has been published.
However, as more companies adopt the advisory release process, and as investors and the media routinely go to company websites to access the information, it’s likely that they will stop relying on PR wires and chose to receive information directly from companies’ own push technologies, such as real-time RSS feeds, social media updates or email.
Finally, companies using the advisory release process should provide their earnings releases in multiple formats, including HTML for onscreen reading, PDF for downloading and printing, and Excel for downloading the financials.
As your company becomes more comfortable with the process, you can consider adding additional formats and materials to improve the experience for investors and attract more interest in the information. For instance, you can post the release and earnings presentation in embeddable formats like SlideShare so that investors and finance bloggers can share them with their followers and readers. You could also provide a CFO video to accompany the earnings release and make this available on a video sharing service like YouTube or Vimeo.
While most companies adopt the advisory release process to save money, my main motive in recommending it is that it gives you greater control and more options to improve the experience of investors. By making your disclosures easier and more engaging to use, more investors will likely use the information and better understand what is driving your company’s results.
You can learn much more about using your IR website for disclosure in our guidelines: The New Online Disclosure.