After a tumultuous 3Q21, businesses are likely to face more financial challenges and changes in 2022. Our Ketchum Fin Comms team share their predictions on the most likely trends for the year ahead.
Amped up Earnings
Christine Beggan, VP, Financial Communications
We are continually inundated with content through news, websites and social media – so much so that much of it doesn’t break through. The same goes for earnings content from many companies. Analysts following the company and investors with a stake in the company are bought in – albeit often with a full schedule of companies to cover and track, and not enough time – but getting the messages to resonate more broadly can be challenging.
Most companies take a traditional approach to communicating earnings results, issuing a standardized press release with the results and hosting a conference call, typically with both prepared remarks and time for analyst Q&A. It goes beyond the SEC requirements and gives some context and color to the results. Best-in-class companies take a surround sound approach, sharing key financials and highlights from the quarter through social tiles and infographics displaying them more visually in an easily digestible format.
Even the best-in-class companies are looking for ways to share their results in a more compelling and engaging manner. We expect companies to take a more expanded approach, building on their ways of communicating financials to better break through and leveraging social media channels further.
Leaning into Financial Literacy
Kelsie Aziz, Managing Account Supervisor, Financial Communications
As the “Great Resignation” continues and companies continue to look for ways to engage employees while treating them like partners, one aspect that shouldn’t be overlooked is communicating financial results internally. By hosting townhalls after earnings or arming managers with toolkits on how to communicate financial results, employees can understand how the company is performing and what part they might play in the company’s overall financial health.
When communicating financial results internally, it’s best to remember to communicate complex financial terms in a simple, straightforward way. Giving examples and tying numbers or results back to certain departments can also help show employees how their day-to-day roles impact the bigger picture. The videos and graphics used externally can also be distributed internally in newsletters, providing a visual way for employees to digest what can be complex financial information.
This is also a great time for leaders, especially during quarters with good results, to thank their employees for their hard work and dedication.
A New Way of Doing Business: Standardizing ESG
Christina Kohl, Account Coordinator, Financial Communications
In the last year and a half, the media landscape has been dominated by headlines about the Climate Bill, Black Lives Matter, the Presidential election, Covid and mental health, and the significant change movements of the time – and investors are paying attention to how businesses react.
Although business leaders typically wouldn’t call for more regulation, executives are showing signs of support for SEC action on ESG filings. Why? Because there’s higher demand for standardized ESG metrics coming from investors. CEOs and CFOs are facing tough questions from media, investors and analysts about what their companies are doing to address these societal topics. That’s where we’ve seen discussions on ESG come up quite often during recent quarterly earnings calls and annual reports.
Investment management firm Pimco reported that based on an analysis of earnings call transcripts of about 10,000 global companies, ESG mentions were at 5% in 2019. In May 2021, the percentage of earnings calls mentioning ESG climbed to 19%. Also, recent data shows that mindfulness in ESG investing will persist. According to a different analysis by financial services company Morningstar, global sustainable fund assets reached $3.9 trillion at the end of September.
As the world realizes the high standard for ESG metrics in powerful companies, we’ll likely see the SEC take big steps towards required disclosures on policies like climate, diversity and inclusion, and workforce pay in 2022. Investors will play an even bigger role, as they’ve raised the bar for business leaders to hold themselves accountable in driving this change.
Rock, Paper, Scissors; Inflation, Pricing, Margin
Benjamin Thiele-Long, Managing Director, Financial Communications
All signs point to continued market uncertainty in 2022. U.S. economic activity resurged in 2021 after a year marked by lockdowns and stay-in-place orders. However, the second half of 2021 has shown a more nuanced story, with companies grappling with supply-side constraints and rising price pressures.
This saw stocks wobble across multiple sectors – including Consumer Stables, Utilities, Auto, Retail and Construction. CEOs and CFOs faced repeated tough questions around pricing strategy, management of labor and supply chain cost, and the uncertainty of protecting margins while not passing on prices to consumers during the holiday season.
And things are going to get tougher. At the beginning of December 2021, Goldman Sachs cut its outlook for economic growth for next year, anticipating 2022 gross domestic product (GDP) growth of 3.8%, down from 4.2% previously on a full year basis, and U.S. consumer prices climbed at their fastest annual rate since 1982, with the CPI hitting 6.8%
Companies will need to use Q4 earnings to lean into clarity around cost management and pricing, well prepared and ready to respond to tough questions with authenticity and clarity. This is also a time to remind investors and analysts alike of their ability to still deliver on long-term transformational strategies and respond with dexterity to the continuing changes of the pandemic.
AMC and the Rise of Accessibility
Alex Ruhl, Senior Account Executive, Financial Communications
Companies will attempt to be more open and inclusive to retail investors, as a lot of boardrooms and stakeholder events can feel a bit out of touch or difficult to access. There is an expressed desire to improve the access and inclusiveness of boardrooms across the market, allowing retail investors to feel acknowledged, since traditional stakeholder meetings and investor days typically cater to institutional or larger net worth investors.
For example, during AMC‘s 2021 Q2 earnings call, CEO Adam Aran mentioned there were over 10,000 individual investors on the call, and possibly hundreds of thousands or millions who might listen to replays. The rise of almost “activist retail investing” in meme stocks paints the picture that companies can no longer ignore individuals.
Some companies have also released earnings calls on YouTube, allowing ease of access and providing the ability for anyone, especially retail investors, to join and engage with the brand, outside of what is traditionally a corporate IR page.