Sharon Merrill, Inc.
WORK WE’VE DONE: CASE STUDIES
Communicating Shortfalls

Blunting the impact of missed earnings

A software company preemptively announces an earnings shortfall with a conference call followed by a cross-country road show. As a result of the proactive communications plan, there was minimal impact on the company’s stock price, favorable media coverage, and no discernable damage to its credibility.

Client Challenge: Prevent an earnings shortfall from damaging corporate credibility

This software company had consistently met Wall Street’s expectations, and its stock was trading close to a 52-week high as it neared the end of the second year since its IPO. But several large customer orders failed to come through and others were postponed until the new fiscal year. Realizing that its fourth-quarter results would fall short of the analyst consensus, the company wanted to minimize any damage to management’s credibility and quickly regain investment momentum.

Sharon Merrill Approach: Pre-release, conference call and road show

Sharon Merrill worked with management to execute a proactive pre-release of its quarterly financial results. A news release and investor conference call on the morning of the announcement emphasized that the factors causing the shortfall did not diminish the company's excellent long-term prospects. Meetings with key sell-side analysts and institutional investors immediately followed the pre-release. Sharon Merrill assisted management in preparing for the conference call and road show, as well as for media interviews.

Results: Enhanced management credibility

More than 100 investors participated in the conference call and 65 attended group meetings with management. A feedback survey conducted by Sharon Merrill found that investors appreciated management's candidness and willingness to be available for meetings. News articles, which appeared on the Dow Jones and Bloomberg newswires, and in The Wall Street Journal, The New York Times, The Boston Globe and other publications, reflected the positive messages framed by the news release and conference call.