How does a CFO prep for an earnings call? Short answer … it’s a sh*t ton of work. Here’s what I do: ⬇️

1. Stay on top of performance No good waiting until the quarter is gone I use weekly updates and monthly management accounts to track performance vs plan inside the quarter. If something comes off; I’m onto my Business Unit CFOs to ensure there’s a plan.

I’m tracking yoy LFL revenue, EBIT v last year and budget, & FCF in absolute. If something falters I’ll keep digging (through monthly management reviews) to ensure we understand the issue and how to fix it. Ensure accountability is in right place, and monitor relentlessly.

Sounds easy. But the art is in creating the right organizational tension in the right place at the right time to get the right person to take the correct action. And accordingly fix the root problem…

This is important because if numbers are dogsh*t, it’s important that I’m able to explain what we are doing about it to the market. AND even more importantly… To already be doing what must be done, by the time the call comes round. Patient with outputs, impatient with inputs.

2. A clean close. Every CFOs worst nightmare. Going back to the market and telling them you got the numbers wrong. I’ve had literal nightmares about this 😂😎. A restatement is the closest thing a CFO gets to sh*tting their pants in public. And no-one wants to do that…

It’s never happened to me (touch wood). So going above and beyond to make sure the quarter is clean is a must. Having a robust accounting function who can sign off on their share of the balance sheet is crucial here. I’ll review with all of my BU CFOs and relevant finance VPs.

I’ll use my internal audit function if Im ever worried about integrity (can be an issue early in a new CFO role). And the audit committee and board is there to keep me honest. I welcome the scrutiny; reporting integrity cannot be compromised.

3. Establish the fact base. Now the books are clean and closed we finalise the key reporting KPIs: - LFL Revenue growth (volume, mix, price split) - EBITDA and EBIT margins - Working cap - Free cash Flow 😍 - Leverage - Any relevant ops KPIs

The Corporate Finance Team (under the VP of Finance) will prepare the deck in skeleton form (i.e. numbers only). It’s useful to get to this as soon as possible, and the immersion helps with the next stage.

4. Build the story Me & VP of IR will spend time to work out what the story is for the qtr. What do we want to say? Are we able to say it? I.e. is our preferred narrative consistent with the core facts How do we bring it together in a way that is lucid, and consistent?

Pro tip; I think of each call like an episode of a tv show. We need to make sure that the narrative flows from one episode (quarter) to the next. It can take unexpected twists and turns, that’s normal, but it needs explaining very clearly.

If you left a cliffhanger last time round, you need to address that up front. Building confidence with the markets is all about saying what you are going to do … then doing it. Simple but hard.

We then make sure the deck clearly reflects that narrative and build out the slides / charts and commentary to fit. Lots of finetuning to get it right. Making sure that the narrative is consistent with the published strategy (or well explained if not) is also important.

5. BoD Sign Off The Board of Directors need to sign off the published materials. The audit committee will give the numbers a good kick, and the BoD will focus on the narrative.

A good BoD will be far tougher on management than the analysts will be. I find this helpful, and good conditioning for the call itself. Embrace the challenge.

6. Prep. Once the materials are locked down (7-14 days before call), I get into deep prep. Prepping the script, the, supporting analysis. Evaluating every angle of challenge. This could be anything from 1 to 5 days of work depending on a range of things.

7. Day of the call. The releases go out to the market and the analyst call is normally a few hours later. My VP of IR will be working overtime to gauge market reaction and question themes. A good VP of IR will know the questions before they are asked

I’ll have a run through or two with the CEO to make sure the boss is on message (freestylin’ is suitably discouraged). This helps prep me mentally for the call too and ensure I’m on my toes. We fire questions at each other to make sure we’ve covered the bases.

If the above is done properly, the call itself is straight forward. It’s just a case of executing against the prep. Making sure you don’t give room for bears to push a thesis after the call is important. So tie up loose ends from the Q&A (inc finance media if necessary)

Sometimes the heavy prep feels wasted. Sometimes I’m glad I did it. And it’s never when I expect. Again, living my mantra that I would dearly like to minimise the probability of sh*tting my pants in public… I always opt to do the prep.

8. Debrief This is really important. What commitments have we made to our investors? How do we take this back to the business? How do we make sure our management teams feel the same accountability for delivery we do. Then we are back to step 1… time to do what we promised!

Footnotes: a) I talk about driving performance (step 1 and 8) in my Sacred 5 thread. I will republish this over the next few days

b) Some of the steps I outlined can be delegated to VP Finance or VP IR. This depends on size of business / finance team, sensitivity of call, my internal v external priorities etc.

c) This can be easily adapted for the board meetings of private companies with outside directors. Step 1-4 are almost identical. 5-8 change a bit to reflect the format and audience, but the principles are similar.

TLDR CFO Earnings Call Prep: 1. Drive Performance 2. Clean Close 3. Establish Facts 4. Build the story 5. Board Sign Off 6. Prep hard 7. Deliver call 8. Debrief. Rinse and repeat.

That’s earning calls! Please: 1. Follow @secretcfo for more, and; 2. RT the below tweet to spread the word.