Publicly traded companies do salespeople a huge favor once every three months. They provide a quarterly update on the company during their earnings call. It’s usually a conference all with prepared remarks to begin, highlighting key company events and performance, followed up with a Q&A session by investment analysts.
The main purpose of the earnings call is to provide a financial update on the performance of the company. However, the call is often filled with other useful information that salespeople can use to discover opportunities, learn about the strategic direction of the company straight from the CEO, current problems and challenges the company is facing, new M&A activity, plans for spending, focus areas, and leadership changes to name a few things.
All of these are potential pieces of information that a salesperson can leverage.
The Basic Structure of an Earnings Call
- Boilerplate Introduction
- CEO Update
- CFO Update
- Analyst Questions
All earnings calls pretty much start the same way. A person from Investor Relations will read a standard introduction to comply with some laws or regulation. If you’re a salesperson you can always skip this. It’s not going to have information you can use.
CEO Update On Earnings Call
The most valuable part of an earnings call is the CEO update section. It’s right after the Investor Relations introduction and usually has the most valuable information. Sometimes the CEO will continue his update after the CFO speaks so be sure to review the entire call. In the example below, you’ll see how this plays out.
Here are some examples of useful pieces of information in the January 29, 2020 McDonald’s Earnings Call..
McDonalds President and CEO
“This invaluable time spent with our people, partners and customers reinforced to me the vitality and global alignment we’re seeing behind our Velocity Growth Plan.”
Right away you learn something very important. There is a “Velocity Growth Plan” and as you read on more you learn of its importance.
“Across the country, we’re seeing clear evidence of the power of Bigger, Bolder Vision 2020, which is our U.S. Adaptation of the Velocity Growth Plan developed in combination with our franchisees.”
As a salesperson, if you sell something that helps with anything related to growth, you’re going to need to understand how your service or product offering fits in or supports this plan
“Joe Erlinger, an 18-year veteran of our company, is now head of our U.S. business, where he’s responsible for the operations of nearly 14,000 restaurants across the country. Joe returned to the U.S. after several years of increasing responsibility around the world.”
Here’s a key new leadership announcement in the earnings call. If you’re an Enterprise Account Executive selling into the company, this may be new information that helps you map out the organizational structure.
“Most recently, he served as President of our International Operated Markets, where we had oversight for McDonald’s wholly owned markets outside the U.S. With Joe’s transitioning, Ian Borden has expanded his role to oversee both our IOM and IDL segments.”
“It’s an important role for McDonald’s as we maximize the full potential of our 3-legged stool of company, franchisee and supplier resources”
Here’s another person in a new leadership position, Ian Borden.
And a little insight into how McDonalds sees itself as a 3-legged stool of a company.
CFO Update on Earnings Call
After the initial CEO update, the CFO will usually get into the weeds of the financial performance of the company. If they’re global, they’ll talk about region or country performance. If they have different lines of business, they’ll provide an update on how they’re performing. Depending on what you sell, this can be fruitful.
It’s also useful for understanding how they structure their business and what is working and what’s not. Some CFOs will provide updates on where they’re spending money, whether that’s an increase in investment in technology to pursue a digital transformation or they’re going to continue buying back shares.
Often times if you help to improve margins or reduce costs with your offering, there can be gold in the CFOs remarks.
Here we have a few updates from the CFO that provide some insight into McDonald’s.
“Our strong top line momentum continued in the fourth quarter, with global comp sales increasing 5.9%. And as we’ve seen consistently throughout the year, each of the operating segments contributed meaningfully to our growth. “
“France delivered its 11th consecutive quarter of comp sales growth with continued all-time high market share. The quarter benefited from delivery expansion, digital engagement and continued deployment of EOTF. The market has also been successful with the balance of premium and core burger offerings. The U.K. reported a remarkable 55th consecutive quarter of comp sales growth and continued to gain market share across nearly all dayparts. The quarter benefited from extended breakfast hours, compelling digital offers, successful national LTOs and delivery, which has grown to about 10% of sales in the restaurants that offer it. Turning to the U.S. Comp sales increased 5.1% for the quarter, with balanced growth across all dayparts. While traffic was negative, the U.S. continues to drive significant average check growth, with contributions from both product mix and strategic pricing. Similar to prior quarters in 2019, Experience of the Future contributed to positive comp sales in the fourth quarter.”
There’s a lot more information in the CFO’s statement that can be useful but if you didn’t know anything about McDonald’s it would be critical to understand what EOTF or Experience of the Future is as it’s had a huge impact on company performance.
As the CFO’s statement comes to a close, he turns it back to Chris Kemczinski, President and CEO.
“Now I’ll turn it back to Chris to talk more about our Velocity Growth Plan and where we’re headed in 2020.”
Sure sounds like the “Velocity Growth Plan” is important.
“Nowhere is the power of our Velocity Growth Plan and franchise model come more to life than in our restaurants. In my recent travels to our European markets, I saw this firsthand everywhere I went. I was struck in particular during a visit to a restaurant in France, a society that famously values good food and beverages and inviting atmosphere in the spirit of community. There, I saw an engaged owner/operator who knew her customers by name and had made her modernized restaurant a vibrant gathering place for the community. Kids were everywhere. Much like their counterparts around the world, young adults were busy multitasking between bites of burgers and fries. Parents appear to be appreciating a moment of rest and other adults were seated in singles and pairs, some having a full meal, others just having coffee.
With the scene that reinforced the fundamentals of the Velocity Growth Plan by simultaneously pulling the levers of great-tasting food with good value, convenience and a pleasing customer experience, this owner/operator, and many others across France and other international markets, are growing visits. A similar dynamic is playing out in the U.K., where our system is doing a great job meeting customers’ expectations for convenience and speed while providing differentiated experiences for guests dining in, visiting the drive-thru or ordering through McDelivery. This dynamic is playing out in Italy, where customer satisfaction scores are up at drive-thru and dine-in and across all three peak dayparts of breakfast, lunch and dinner. The excitement and energy behind our Velocity Growth Plan is widespread. It’s a result of this commitment that our business is growing and our strategy continues to deliver.”
Here we hear the CEO mention levers related to the Velocity Growth Plan. If you planned on doing any cold outreach to McDonald’s, referencing the “Velocity Growth Plan” would be a surefire what to demonstrate not only that you did your sales research but that you’re able to align with something the C-Suite is focusing on and believes in.
As the President and CEO continues, he sheds more light on their strategy and what they will continue to execute on.
“At the same time, there’s a realization that we can and will do more to deliver better taste, greater value and enhanced convenience for our customers. This is the guiding philosophy behind our three accelerators: Experience of the Future, digital and delivery. With Experience of the Future, our strategy is focused on enhancing the customer experience by improving convenience, hospitality and personalization. As Kevin said, in the U.S., we completed about 2,000 projects in 2019 and are on track for just about all restaurants to be modernized by the end of 2020. Customers are recognizing the changes we have made for their benefit. Customer satisfaction scores in the U.S. are at an all-time high. In our IOM markets, where the vast majority of our restaurants are now modernized, we have a strong foundation for long-term success by creating greater convenience, comfort and hospitality for our guests.”
President and CEO mentions something pretty interesting. He talks about the “guiding philosophy behind our three accelerators”
Here are three triggers if you sell anything related to the focus of their strategy. McDonalds is telling you they want to enhance the customer experience by improving convenience, hospitably and personalization. Leveraging this info in a cold email or bringing up this topic in a discovery call is a fantastic way to help you, help McDonalds. Even if they’ve already started and are near completion, there are good chances to improve what they’re working on or support it. If you sold something that helped measure or analyze customer experience or improved personalization, that could be valuable.
“Meanwhile, our digital journey, another critical accelerator, is focused on giving customers simpler, smoother and more personal engagement with McDonald’s by leveraging the most relevant technology. To that end, we significantly strengthened our digital capabilities in 2019. In markets around the world, for example, a growing community of registered users is redeeming digital-only offers, giving our teams more opportunity to understand customer needs and create engaging digital customer experiences. Throughout the year, we made targeted investments to accelerate our capabilities. The suggestive sell capability of Dynamic Yield is now deployed in nearly all outdoor digital menu boards across the U.S. and Australia.“
It’s likely McDonalds has already signed the contract with providers to help with the digital journey but often times things are completed or foundations have to be put in place before additional offerings are added. Simply asking about the performance of the digital journey might elicit a pain or a problem, you offering or service could help with. As anyone in sales knows, there is always an opportunity to replace or upgrade the current provider.
“In both markets, we’re using the technology to make smarter recommendations to customers of menu items they are likely to want. There’s no question that digital is transforming global retail. Across the system, there is great excitement about the role it will play in transforming McDonald’s by strengthening and deepening relationships with our customers. So we know there’s great potential with digital, but there’s also a lot of hard work to do to realize our ambitions. I recently announced creation of a new digital customer engagement team to accelerate customer-focused digital initiatives, including ordering, personalization, payments, loyalty and delivery platforms. Lucy Brady is leading this team. Lucy has been a driving force behind the evolution of the Velocity Growth Plan and rapid expansion of our McDelivery platform in her most recent role leading Corporate Strategy and Business Development.”
If it wasn’t clear yet, the CEO is all in on digital transformation in retail and has created a brand new team led by Lucy Brady. This is the third new leadership mention and arguably the most valuable one for any enterprise salesperson who sells customer engagement tech. In fact, this is one of the biggest sales nuggets or account insights. The CEO is all in and is even explaining what the customer focused digital initiatives are.
It gets better…
“Lucy and her team will be responsible for developing new industry-leading digital experiences for our customers, and they’ll partner with our global technology team to build new product road maps and technology solutions to fuel growth. With our third accelerator, we’re bringing more customers the McDonald’s they love with the convenience of delivery. Today, about 2/3 of our restaurants worldwide, nearly 25,000, offer McDelivery. In just three years, McDelivery has gone from generating $1 billion in sales for McDonald’s company and franchise restaurants to over $4 billion in sales this past year. We now have multiple 3PL partners in most major markets, including the U.S., where the rapid scaling of DoorDash is showing consistent growth; and the U.K., where we recently announced an agreement to partner with Just Eat.”
Right away you can see there is a huge opportunity to do outreach. This is a high valuable trigger with a specific title/team, and clear mission. Any cold outreach that references this golden sales nugget will be a cut above the rest of the typical outreach or outreach that references something from her LinkedIn profile.
“We continue to see great runway ahead of us to drive awareness and trial, and we’re doubling down on our efforts to encourage frequency and retention. As we inject speed, agility and flexibility into our system through the accelerators of Experience of the Future, digital and delivery, we continue to focus on the fundamentals of running great restaurants, and customers are noticing. Across our largest markets, we’ve reduced the time it takes a customer to receive their order by an average of 20 seconds. With this change, most markets saw overall customer satisfaction improve in 2019. Our Velocity Growth Plan provides a solid and sustainable foundation to grow our business in 2020 and beyond, yet we know that we must stay in tune with evolving customer needs and adapt to changing market conditions.”
Have anything that helps encourage frequency and retention? Can you tie that into the Velocity Growth Plan? If so, you not only have a reason to reach out but you’ve got a good chance of making a positive first impression.
Next, the CEO passes it back to the CFO who goes into more numbers about the business. And then the CFO passes it back to CEO before they take questions.
Analyst Questions on Earnings Call
This section is always worse skimming and can be hit or miss. Many questions are not going to be relevant for salespeople, especially if they get into the financial weeds but often times an analyst will bring up a pain or problem the business needs to solve or has previously invested in trying to fix. These analysts follow the company closely and have great insight into the operation structure, business strategy, and other key performance considerations. Rarely companies will not take any questions but usually they’ll take a handful with some followup questions for clarity.
David Tarantino — Baird — Analyst
“My question is on some of the investments you made on the technology side. You made some pretty big bets across the last year or so, and it looks like you’re sort of staffing up to support that technology investment with your G&A spending. So just wondering, one, are there more big investments on the horizon that you see as needed? And then two, have you considered recouping some of those investments or sharing some of the cost of your franchisees through a technology fee or something similar that others have put in place?”
Chris Kempczinski — President and Chief Executive Officer
“Yes. Well, as you noted, we did do two acquisitions last year, we bought Dynamic Yield, which was going to help us with our suggestive sell capability; and we bought Apprente, which is for voice recognition through the drive-thru of that capability. I would say our typical approach is partner not buy. And so both of those, for somewhat different reasons were, I think, unique situations. I don’t foresee that buying tech companies is going to be our approach going forward. But we do want to be nimble enough where there are situations that come up that we will make an acquisition. I think in the case of Dynamic Yield, what we saw there was really an opportunity for us to accelerate our rollout of suggestive sell across most of our major markets there with what we believe to be kind of the leading technology in the industry.”
And so with the idea of really wanting to drive an acceleration and do it with a leading partner, we made that acquisition of Dynamic Yield. Fast forward, even less than a year later, we’ve got Dynamic Yield in all 10,000-plus U.S. restaurants with a drive-thru. It’s fully rolled out in Australia. And we’re seeing a comp lift, very consistent with what we had modeled when the acquisition was done. Similarly, with Apprente, we’ve got Apprente in test in a handful of U.S. restaurants, and we remain optimistic about that. So I think what you’re seeing really is, for us, just an emphasis on — we believe digital has the opportunity to really be a huge growth driver for us. When we can partner with people and do it kind of under our traditional model, that’s always our preference.
But if there are times that we need to do an acquisition, we’re certainly not going to take that off the table. I think your question about is there a model in terms of how that gets shared with franchisees, I think one benefit is when you get the lift that we are getting with something like Dynamic Yield, we obviously participate through rent and service on that. So I’d say the first part is all of these are meant to drive top line growth, and when we see that, we certainly participate from rent and service. On the ongoing costs, the ongoing costs do get passed through to franchisees as part of our normal tech fee. We kind of separate tech costs between development costs and sort of the ongoing operating costs. We will typically pay for the development costs on our own, and then the ongoing costs are what gets shared through a tech fee arrangement with our franchisees. So that’s been kind of our model for a long period of time. I don’t see that model changing.”
Although this is a question more about M&A activity you can see McDonald’s is more open to partnering with top players in their industry. It’s an important piece of information to remember, providing social proof or industry awards can matter. Additionally, as the analyst points out, McDonalds is putting people in place to leverage technology to improve the business. This is a huge signal that they’re ripe for new technology vendors that support their Velocity Growth Strategy.
Where to find earnings call transcripts?
Salespeople shouldn’t listen to earnings calls. It’s not a good use of their time. Salespeople should instead look for the transcript of the earnings call. There are three main ways.
- Investor Relations page on the company website. Usually but not always they’ll have a transcript. https://corporate.mcdonalds.com/corpmcd/investors-relations/company-profile.html
- You can google for “company name” transcript and sometimes sites like the www.fool.com will have them. You’ll need to make sure it’s the most recent one.
- The easiest way is by having an account with www.cheetahiq.com Not only do we provide the most recent earnings call without having to search for it, you can search for key phrases and other keywords to narrow down what you’re looking for. We’ll search the most recent earnings transcripts, not just one at a time, their 10-K, job postings, and more. If you haven’t read 10-Ks before for sales research you’ll want to check that out.
Earnings call transcripts can be a great source of information for enterprise salespeople. They’re consistent updates you can rely on. Once every three months you may have a new reason to reach out to a company or information you can use as a touchpoint in a lengthy enterprise sales cycle.
If you’re interested in earnings calls for sales research you should also check out how to use 10-Ks for sales research.