𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝗠𝗮𝗿𝗸𝗲𝘁𝘀 / 𝗜𝗻𝘃𝗲𝘀𝘁𝗼𝗿 𝗥𝗲𝗹𝗮𝘁𝗶𝗼𝗻𝘀 𝗶𝗻 𝗧𝘄𝗼 𝗠𝗶𝗻𝘂𝘁𝗲𝘀 𝗼𝗿 𝗟𝗲𝘀𝘀
𝗚𝘂𝗶𝗱𝗮𝗻𝗰𝗲: 𝗔 𝗙𝘂𝗻𝗰𝘁𝗶𝗼𝗻 𝗼𝗳 𝗣𝗿𝗲𝘀𝗲𝗻𝘁𝗮𝘁𝗶𝗼𝗻 𝗮𝗻𝗱 𝗖𝗼𝗺𝗺𝘂𝗻𝗶𝗰𝗮𝘁𝗶𝗼𝗻

Providing successful financial guidance as a public company is a function of two variables:

Presentation - how a company illustrates and formats financial data for investors, and

Communication - the forums a company uses to provide financial data to investors.

When a company gets these two variables right, investors will reach the conclusions management wants investors to reach.

𝗚𝘂𝗶𝗱𝗮𝗻𝗰𝗲: 𝗞𝗲𝘆 𝗖𝗼𝗻𝘀𝗶𝗱𝗲𝗿𝗮𝘁𝗶𝗼𝗻𝘀

Three questions drive the successful presentation and communication of guidance.

Providing the Right Detail?

A company must provide the necessary data to build a model and inform an outlook for investors.

Communicating Clearly?

Once a company provides the necessary financial data to create an outlook, the associated data must be understandable. A company should use tables and graphs to help clarify and present the data driving financial guidance.

Are Investors Reaching the Right Conclusion?

Once a company gives guidance, success is found when investors reach similar conclusions to management.

The right detail + clear communication = alignment between investor expectations and management outlook.

𝗚𝘂𝗶𝗱𝗮𝗻𝗰𝗲 𝗣𝗿𝗲𝘀𝗲𝗻𝘁𝗮𝘁𝗶𝗼𝗻

There are five components of presentation one should be aware of when communicating guidance.

𝗞𝗣𝗜𝘀 / 𝗠𝗲𝘁𝗿𝗶𝗰𝘀: A company should provide the necessary and essential KPIs / metrics or inputs to a price x quantity calculation so that investors can build a financial model to drive understanding of the underlying business.

𝗖𝗮𝗹𝗰𝘂𝗹𝗮𝘁𝗶𝗼𝗻𝘀: A company should illustrate to investor how to calculate or provide the components of a KPI so that investors can calculate components accurately

𝗗𝗮𝘁𝗮 𝗗𝗶𝘀𝗽𝗹𝗮𝘆 𝗮𝗻𝗱 𝗥𝗶𝗴𝗵𝘁 𝗗𝗮𝘁𝗮: A company should illustrate and format the essential data for financial guidance in a credible and understandable format for investors to digest. Tables and graphs are incredibly helpful here.

𝗔𝗰𝗰𝘂𝗿𝗮𝗰𝘆: Throughout the guidance process, the finance and accounting team must constantly ask is the data accurate? The goal is to have the right checks and balances in place to ensure the data presented is accurate and aligns with management’s outlook

𝗚𝘂𝗶𝗱𝗮𝗻𝗰𝗲 𝗖𝗼𝗺𝗺𝘂𝗻𝗶𝗰𝗮𝘁𝗶𝗼𝗻

There are four components of communication one should be aware of when communicating guidance.

𝗙𝗼𝗿𝗺𝗮𝘁 𝗮𝗻𝗱 𝗙𝗼𝗿𝘂𝗺: A company needs to consider not only the right format of its guidance components, but also the right forum, e.g., earnings release, earnings call, supplement, and / or the investor presentation, or some mix of all of the above.

The key is focusing on presenting the essential financial data, clearly and accurately, so that investor expectations will align with management’s outlook.

𝗧𝗮𝗯𝗹𝗲𝘀 𝗮𝗻𝗱 𝗚𝗿𝗮𝗽𝗵𝘀: Using tables to illustrate a possible calculation and using graphs to illustrate trends in the data are extremely helpful. Illustrating calculations and trends makes it easy for investors to see what management is trying to communicate

𝗥𝗲𝗰𝗼𝗻𝗰𝗶𝗹𝗶𝗮𝘁𝗶𝗼𝗻𝘀: Accurate and clear reconciliations can give insight to underlying trends and help explain anomalies. Sometimes, non-GAAP reconciliations are the most valuable piece of information provided in the earnings release.

𝗖𝗮𝗹𝗹𝗯𝗮𝗰𝗸𝘀: Live discussions with analysts and investors represent a key component in ensuring understanding and alignment.

𝗞𝗲𝘆 𝗟𝗲𝗮𝗿𝗻𝗶𝗻𝗴

Right Data + Clear and Accurate Communication = Alignment of Investor Expectations and Management Outlook