Week 5 Discussion
COLLAPSE
Earnings Call Review
Listen to (or read the transcript of) your organization’s or any publicly traded company’s most recent quarterly earnings call and respond to the following questions:
TIP: To find an earnings call or transcript, go to the “Investor Relations” section of the company’s website. There you will find links to financial reports and recordings of recent calls.
If you were an employee of this company, how could you leverage this resource to benefit you or your company
?
Post your initial response by Wednesday, midnight of your time zone, and reply to at least 2 of your classmates’ initial posts by Sunday, midnight of your time zone.
1st person to respond to
Phil
Charles RE: Week 5 DiscussionCOLLAPSE
Hello Professor/Classmates,
Listen to (or read the transcript of) your organization’s or any publicly-traded company’s most recent quarterly earnings call and respond to the following questions: Tesla
I have never listened to an earnings call, so reading Tesla’s Q4 and FY2021 updates.
Before the topics and Q&A sessions, CEO Musk gave an overview and highlighted milestones that were accomplished and future outlook statement. The two critical milestones that Musk shared were 1) Tesla had the highest operating margin in the industry at above 14% GAAP operating margin, and 2) Generated $5.5B in GAAP net income.
Among the topics covered were;
Highlights
Financial Summary
Operational Summary
Vehicle Capacity
Core Technology
Other Highlights
Outlook
Photos & Charts
Key Metrics
Financial Statements
Additional Information
I found information on vehicle capacity, core technology, key metrics, outlook, and other highlights helpful and insightful. Notably, on the one hand, Tesla was limited in operating its factories at total capacity due to the continuation of the global supply chain, transportation, labor, and other manufacturing challenges; however, their positive outlook still hinges on how well that challenge improves. I thought many of the issues were addressed, namely Autopilot and Full Self-Driving (FSD), very interested to see if FSD by the end of 2022.
Was there a discussion of profit or EPS by Company Management? Explain what this implies, what is the driving force, and what actions you would recommend?
Musk alluded to the company’s profitability in his opening statements, to where he dubbed 2021 as a breakthrough year for Tesla. He sees growth for 2022 going above 50%. The driving force hinges on improving innovations to reduce the cost of manufacturing and operations in the long term. Additionally, Musk considers Full Self-Driving (FSD) software a tremendous asset value, thus the focus. Robotaxis were mentioned, but not sure how viable that will be near term.
Were the analysts’ questions aggressive and challenging or supportive and respectful? How well did management respond to the questions?
Many questions were asked, and Elon and his CFO answered nine. I found the questions reasonable, many technical, but responded appropriately.
What additional insights were you able to gain in regard to the company’s financial health, forward guidance, and strategic financial decisions?
The answer to this question is very Muskesk. How is the progress of the 25k compact car? Can you give any updates? Answer: Well, we’re not currently working on a $25,000 car–we have enough on our plate right now — it’s sort of the wrong question. Really, it’s really the thing that overwhelmingly matters is when is the car autonomous? I think, at the point in which it is autonomous, the cost of transport drops by, I don’t know, a factor of 4 or 5 (Musk, 2).
Making all cars autonomous is the priority, which can dictate the cost, whether cheaper or more costly.
Was there any information or perspective shared that a competitor could benefit from?
Tesla’s forward-looking statement and outlook provided key insights that a competitor could benefit.
If you were an employee of this company, how could you leverage this resource to benefit you or your company
Tesla, in my view, did not offer much of anything that a company can use to their benefit. Much of what Musk said has been known for years. They can use the information to plan, maybe change course since Musk is constantly moving the goal post, which also forces them to do so.
Phil
References
1. Tesla Inc. 2022. Q4 2021 Earnings. Retrieved from:
https://ir.tesla.com/#tab-quarterly-disclosure
2. Tesla Inc. 2022. Q4 2021 Earnings Q&A. Retrieved from:
https://app.saytechnologies.com/tesla-2021-q4
2nd person to respond to
Gabriela Stamate RE: Week 5 DiscussionCOLLAPSE
Greetings Prof. Armstrong & Classmates,
I have chosen Shopify, the company to listen to their Q3 2021 earnings call. One, because it is a Canadian tech company whose own growth skyrocketed in the last two years, they finally met the ideal conditions to thrive. Two, as it is rather a new company, so I wanted to know what a company like that does with the success they have and what strategic plans they have for the future, as they do so much better financially. It was the first time I listened to such a recording- in almost one hour presentation; half was about the quarterly results about the company, plans, and achievements. The second half was opened to Q&A, which was the most interesting part.
There was no surprise when they announced a strong quarter, with higher revenues or GMV (Gross Merchandise Value) than the previous period. They announced their strategic partnerships with social media like TikTok, Spotify sales channel, Roque, and various platform features offered to their merchants, like Shopify Pay, Shopify Markets, Shopify Balance, or Shopify Capital. In the new normality, Shopify aims to serve as the essential internet infrastructure for eCommerce for a growing base of entrepreneurs around the world (Shopify, 1). Their goal is to make it easier for their merchants to sell anywhere by enhancing their platform to be more intuitive, allowing larger brands to migrate easier with Shopify and build a direct relationship with their customers. The Shopify charismatic trait targeted from the beginning the entrepreneurs who are passionate about their work, the small businesses, the backbones of economies by creating for these merchants the tools to support their businesses and be successful.
During this earnings call webcast, I would have preferred to hear how they plan to manage the situation if, near in the future, people go back to work and start traveling again, like in the old days. As they have mentioned, during summer 2021, the numbers dipped when people started to go back in the office; as an eCommerce tech company, their success is significantly related to the current pandemic situation. The Q&A half was very informative; the questions were smart and pertinent to the current context, questions about the supply-chain issues that affect the Shopify merchants, the future of retail, technological trends like Super Apps, and lastly, the retention rate of merchants with Shopify. Some of the questions were well supported and clearly responded, some not so much – three management representatives were participating in this call.
Overall, a fair, informative earnings call, where Shopify demonstrated their ongoing desire to bring solutions and make selling an easy process for everyone, whether is a small merchant or a large brand, locally or internationally.
Thank you. Gabriela
References:
JWI530
The Mary Story
TALKING TO THE STREET – THE
QUARTERLY EARNINGS CALL
TALKING TO THE STREET – THE
QUARTERLY EARNINGS CALL
Mary was faced with a cash “problem” – she learned that her
company had quite a bit of cash reserves, and it was up to her and
her team to make some very important decisions about how to
manage that cash. She learned that poor cash management –
especially improper ways of dealing with excess cash in a business –
can have disastrous results.
As Mary headed to work one morning the following week, her phone
beeped with an urgent reminder. Andrea, the CFO, had invited her to
join in on the quarterly Earnings Release call. Mary knew that the
Company had quarterly financial conference calls every three
months. But until now, she hadn’t been all that motivated to get
involved. She recalled how she had once used a link from Investor
Relations to listen in on a call earlier in the year. Frankly, Mary found
it a little confusing and quite boring…
But Mary had been studying the financial reports, and was more
familiar with the terminology. She was confident that from now on,
these calls would make more sense to her. She understood that by
participating in the call she could learn what was truly important to the
CEO, Senior Leaders and key stakeholders. Armed with this
knowledge, Mary could make sure that her division’s efforts lined up
with the strategies and goals of the company’s top leadership.
When Mary got to Andrea’s office, she was somewhat surprised to
find Andrea and some of her executive support team already
assembled and prepared for the call. It was obvious to Mary that
leadership took these quarterly calls seriously. As Mary sat down at
the conference table, Andrea began to explain that the SEC requires
that companies provide public and very broad disclosures. This type
of financial transparency ensures that everyone from the big time
Wall Street firms to the Mom and Pop investor can have access to
the same information at the same time. It also prevents “insider
trading”
Andrea also mentioned that aside from such legal requirements, the
company viewed these interactions as great marketing opportunities.
She explained that Jack, the CEO, along with the entire investor
relations team knew that key stakeholders would parse every word
and carefully consider the detailed numbers that they were about to
release.
And who were these stakeholders? They could be current owners
and potential new owners, Wall Street Analysts, banks who may have
lent or who are considering lending money to the company,
Government regulators and even potential acquiring companies.
Based on the stakeholder’s assessment of the published information,
the company could see a positive or negative impact on stock price.
Investors will either buy into a company’s visions and strategies, or
they won’t.
Mary could see why Jack, Andrea and the entire management team
invested so much time and energy to get things right. She wondered
if all companies did that… Andrea went on to explain that all
publically traded companies are required to disclose this information.
Private companies generally have the option – but most choose not
to be overly transparent with the information.
Jack, the CEO, pointed out that the key to a successful earnings call
consisted of giving the right information and setting a proper tone.
The goal: to build confidence across all divisions of the company. He
also explained the importance of not giving away proprietary
information that their competition could leverage against them. The
entire leadership team spent a lot of time reviewing and discussing
the disclosures of their top 4 competitors. Mary found it amazing that
so much insight could be gained from listening to the quarterly calls!
Andrea suggested that Mary consider doing the same review for the
main competitors of the Perfume Division she was running – just to
see if she couldn’t gain some useful “competitive intelligence.” She
reminded Mary that while companies are required to share relevant
yet generic corporate information, large conglomerates may or may
not share detailed information pertaining to specific divisions. There
was a lot of “detective” work involved in this type of analysis –
Andrea explained to the assembled team that their company would
breakdown and share revenue and operating margin results for their
different geographic territories (including the US, Europe, Latin
America and Asia), but that they don’t report the breakdown of results
by division.
This struck Mary as being somewhat odd – perhaps even a bit
counter-productive. After all, she thought that the investment
community would want to understand how the Perfume Division was
doing. Andrea agreed with Mary that the investment community
would be interested in such data – but so would the company’s direct
competitors! This is the tradeoff they had talked about earlier…how
information must be prudently shared, without risking the loss of a
competitive advantage. Andrea explained that they would only
discuss division results in general terms when there was a significant
material change in operations, or if they wanted to highlight
something important or ground-breaking. If the Perfume Division
started posting record sales numbers, they would certainly want to
share that!
As she listened to Andrea’s strategies, she couldn’t help but think that
it wouldn’t be long before her division would have some pretty
phenomenal numbers to post and share… She couldn’t wait to see
how Jack would leverage this required disclosure to build excitement
and confidence in the Company’s strategy and financial results!
The earnings call was truly a way to “talk to the streets” in terms of
sharing a company’s collective financial data – and it didn’t hurt that
Mary had so much good information to share. As she began to
assemble some documents to share at the next earnings call, Mary
made a mental note of the fact that there was a lot was riding on her
leadership at this point. She wanted the company to succeed in all
aspects, and she was determined to do all she could do to help it
reach the levels of success she felt were clearly in reach – starting
with her department!
