Visualizing IR

Data visualization has received a lot of attention in recent years, helping investors connect the dots on otherwise cryptic numbers by presenting a compelling visual.  The problem is, not everything should be presented as a visualization.  You know what I’m talking about … those “SmartArt”-happy PowerPoint presentations that attempt to demonstrate how everything is like a funnel.

The good news is that more experts are surfacing to help guide management teams to create visualizations that demonstrate a company’s performance.  In certain ways, there is a parallel to be drawn here with a spiritual guru helping a subject ingest a hallucinogenic that leads to salvation.

I’m not suggesting that IROs need to eat Peyote to make a compelling visual. But Arif Ansari, associate professor of clinical data sciences and operations at the University of Southern California’s Marshall School of Business, makes a compelling argument about mind-altering practices that could, in fact, lead to better data visualization.

When I interviewed Ansari for a recent IRupdate story, he told me to close my eyes and think about how I could depict some aspect of my business visually.  He sharpened his point by using the acronym “OPEN MIND,” which stands for identifying an “Opportunity, Pain point or need, Engaging, Nailing down a hypothesis, and Monetizing Insights with New Development.”

The first two times I attempted Ansari’s method, I came up with nothing but a bunch of gobbledygook, and then on my third attempt, all of the stars aligned and my mind presented the perfect visualization.  NOT!

OK, there is no bullet proof method when it comes to visualizing data effectively.  Perhaps seeing it done right is a good place to start.  Following  are a few examples:

  • The Coca-Cola Company’s “Annual Review,” which highlights the company’s achievements for the year, is an example of how to select visual images after narrowing in on a target audience.  In this case, retail investors.
  • Procter & Gamble provides a visual overview of the company on its IR website, including how the company creates value for shareholders, a table that breaks down reportable segments, percent of net sales, percent of net earnings, categories, and brand names, as well as circles that convey parts of a whole for business segments, geographic regions, and market maturity.
  • Colgate-Palmolive’s 2014 annual report utilizes slide shows and videos to highlight the company’s brands, strategies, and growth. The company also provides a visual description of its sustainability practices, in addition to financial charts that are animated when scrolling down the page.

— Evan Pondel, epondel@pondel.com

From the Mouth (Pen) of Warren Buffett

This weekend, Warren Buffett’s highly anticipated Chairman’s letter was published in the Berkshire Hathaway annual report.  Below are some of my favorite quotes from the nearly 30 page missive.  The Wall Street Journal, which notes that the annual letter is “among the most widely read — and most widely discussed — dispatches in the business world” shared a list of their favorites as well.

  • When talking about Berkshire’s acquisitions. “I’ve made some dumb purchases.” You’ve got to love a leader who tells it like it is.
  • When talking about acquisitions in general (attributed to Charlie Munger). “If you want to guarantee yourself a lifetime of misery, be sure to marry someone with the intent of changing their behavior.”
  • When talking about activism. “To be sure, certain hostile offers are justified: Some CEOs forget that it is shareholders for whom they should be working, while other managers are woefully inept. In either case, directors may be blind to the problem or simply reluctant to make the change required.” Buffett goes on to say that Berkshire “will not engage in unfriendly takeovers.”
  • When talking about investments. “Woody Allen once explained that the advantage of being bi-sexual is that it doubles your chance of finding a date on Saturday night. In like manner – well, not exactly like manner – our appetite for either operating businesses or passive investments doubles our chances of finding sensible uses for Berkshire’s endless gusher of cash.”
  • When talking about computers and online activity. “I now spend ten hours a week playing bridge online. And, as I write this letter, “search” is invaluable to me. (I’m not ready for Tinder, however.)” The fact that Warren Buffett even knows what Tinder is, is impressive.
  • When talking about GEICO Insurance. “All the while, our gecko never tires of telling Americans how GEICO can save them important money. I love hearing the little guy deliver his message: ‘15 minutes could save you 15% or more on car insurance.’ (Of course, there’s always a grouch in the crowd. One of my friends says he is glad that only a few animals can talk, since the ones that do speak seem unable to discuss any subject but insurance.)” No real lesson here, just some great humor.
  • When talking about GAAP versus non-GAAP. “I suggest that you ignore a portion of GAAP amortization costs. But it is with some trepidation that I do that, knowing that it has become common for managers to tell their owners to ignore certain expense items that are all too real. ‘Stock-based compensation’ is the most egregious example. The very name says it all: ‘compensation.’ If compensation isn’t an expense, what is it? And, if real and recurring expenses don’t belong in the calculation of earnings, where in the world do they belong?” I’m sure many agree.
  • When discussing poor returns.  “… and we are now paying the price for my misjudgments. At other times, I stumbled in evaluating either the fidelity or the ability of incumbent managers or ones I later appointed. I will commit more errors; you can count on that. If we luck out, they will occur at our smaller operations.” So refreshing for a leader to admit to his mistakes.
  • When discussing the Berkshire annual meeting. “Charlie and I have finally decided to enter the 21st Century. Our annual meeting this year will be webcast worldwide in its entirety.” This is great news for those of us who cannot make it to Omaha (40,000 did last year).
  • When still discussing the Berkshire annual meeting. “Our second reason for initiating a webcast is more important. Charlie is 92, and I am 85. If we were partners with you in a small business, and were charged with running the place, you would want to look in occasionally to make sure we hadn’t drifted off into la-la land. Shareholders, in contrast, should not need to come to Omaha to monitor how we look and sound. (In making your evaluation, be kind: Allow for the fact that we didn’t look that impressive when we were at our best.)” And, “Viewers can also observe our life-prolonging diet. During the meeting, Charlie and I will each consume enough Coke, See’s fudge and See’s peanut brittle to satisfy the weekly caloric needs of an NFL lineman. Long ago we discovered a fundamental truth: There’s nothing like eating carrots and broccoli when you’re really hungry – and want to stay that way.” I think I love this man!

— Laurie Berman, lberman@pondel.com

When it Bleeds, it Leads

When I started at The Wall Street Journal Online in the 1990s as a wet-behind-the-ears news assistant, I can still recall one of my editors making a crack in the newsroom about “when it bleeds, it leads.” The market had experienced a steep sell off that day and my editor was in the throes of putting a headline on a story about the blood bath stocks had taken.

The recent market volatility harkens back to the all-consuming frenzy that permeated the newsroom when the Dow dropped in a big way, and it got me thinking: Are financial journalists partial to writing stories about negative news, and if so, does that provoke even more irrational fear in the market?

To gain some insight on what people think, I decided to engage Twitter’s polling option, which is free if you tweet the poll to followers.  I wanted to drum up more than five votes, so I paid Twitter to promote the poll.  Following are the results:

 

Even though the question elicited 295 votes, the results were not very conclusive.  Nearly a third of respondents believe that media are more inclined to publish stories about a bear market, and the same goes for a bull market.  At the same time, 44 percent of voters claimed media are indifferent about publishing bull or bear market news, which is where I take issue.  Call me a curmudgeon, but I do believe that media are more inclined to publish negative news, after all who wants to read about positive news unless puppies are involved?

The German word schadenfreude comes to mind, which means to take pleasure in someone else’s misery.  A lot of folks have made a lot of money in the stock market during the last several years, and quite frankly, this recent correction may be validating for all of those other folks who haven’t been able to generate solid returns.   Getting your comeuppance on Wall Street is a sexy story to tell these days, with the hit movie “The Big Short” drawing hordes of crowds, not to mention Martin Shkreli’s rise to fame as the hedge-fund-turned-pharma-exec devil incarnate.

I fully support holding fraudulent companies, executives and anyone else in the capital markets accountable, although finding that balance can certainly be difficult when journalists’ salaries are miniscule relative to what folks make on Wall Street. Perhaps the only way to ensure that financial media are less biased toward writing bludgeoning stories is to get their salaries more in line with the people they cover.  And who knows, that might help ameliorate market volatility and put more money in the hands of everyone.

— Evan Pondel, epondel@pondel.com  

Hello 2016

We’re excited to usher in 2016 and looking forward to keeping you informed on this blog about all things relevant to investor relations, strategic public relations and Julia Child’s secret recipes.  Now that your ears are perked, following are a couple of interesting tidbits from PondelWilkinson.

  • Evan Pondel recently wrote the cover story for IRupdate magazine on how to think like an activist.   He interviewed Chris Kiper, founder of activist firm Legion Partners, for a rare look at his playbook.  Check out the story on page six of the issue.
  • PondelWilkinson volunteered a couple of weeks ago at Working Dreams’ Holiday Toy Event, where PW helped foster children select presents that were donated to the organization.  Following is a picture of the team.Working Dreams
  • And last but certainly not least, Roger Pondel wrote the following New Year’s resolution on transparency.

2016 Resolution: Don’t Forget the Transparency

At the risk saying, “We told you so,” 2015 proved to be a year when companies that failed to heed our mantra, Transparency Adds Value, took it on the chin.

Whether privately owned or publicly traded, in times of crisis or when all is going well, transparency always pays off…period. And the lack thereof, almost always backfires bigtime.

Probably the year’s biggest lack-of-transparency story was Volkswagen’s emission-cheating scandal that actually began more than 10 years ago, long before the news broke. I guess it’s hard to keep those kinds of secrets forever. Want to buy a VW today? How ‘bout an Audi?

In our business, people sometimes have the misimpression that it’s all about spin. (I hate that word, except when it’s part of an exercise class and done to a Latin jazz beat.)

No, it’s not about spin. It’s about journalistic fact finding, developing a communications and messaging strategy, perhaps biting some bullets a la corporate castor oil style…then telling the truth to mitigate the damage and maintain reputation.

And it’s not all about crises. Just look at what happened in 2015 to the valuations of many once-considered-hot, pre-public tech companies that lost billions in combined valuation because of lack of transparency.

Lack of transparency hurts customers, employees and investors alike. And while no one is happy to hear less than stellar corporate news, the market rewards transparency. Companies that do not practice it would do well to heed our mantra in 2016 and beyond.

Here’s to a transparent 2016 that brings peace and prosperity to all!

Overused Words in 2015

The year is coming to a close quickly and reflecting on what we’ve learned in the last 12 monthsuni will hopefully set us up for success in 2016.

Much of our work at PondelWilkinson involves writing, and in the world of investor relations and financial communications, certain words are used more frequently than others in the span of a year.

Following is a top-10 list of the most overused words in 2015, along with (tongue-and-cheek) alternatives for the year ahead.

  1. Disruptive/transformeresque
  2. Unicorn/rhinoceros (two horns are better than one)
  3. Leading/simply the best
  4. Revolutionary/other worldly
  5. Activist/Laird Hamilton (one very active guy)
  6. Deep value/there’s treasure buried in them hills
  7. Emerging/turtle head
  8. Strategic alliance/friends with benefits
  9. Merger/friends with benefits (yes, a repeat)
  10. Consolidation/I crush your head

— Evan Pondel, epondel@pondel.com

Remaking Tuesday

EBOTIt’s Tuesday…that day of the week when your lazy Sunday afternoon nap is a distant (but fond) memory and the manic frenzy of Monday has passed, but the rest of the work week still seems like a long stretch of road.

Here at PondelWilkinson, we’ve decided that Tuesday needs a makeover. For too long, Tuesday has been treated like the Jan of the Brady Bunch week – taken for granted, overlooked and underappreciated despite serving as the stepping stone to Hump Day, Throwback Thursday, and Thank God It’s Friday.

In our humble opinion, it’s time we remember and acknowledge why #EverythingsBetterOnTuesday (or #EBOT, for short)

Here’s just the start of a list we’ve come up with:

  • #EverythingsBetterOnTuesday because let’s face it — it isn’t Monday
  • #EverythingsBetterOnTuesday because you can usually find some two-fer deal
  • If you’re in PR, #EverythingsBetterOnTuesday because it’s easier to talk to reporters
  • #EverythingsBetterOnTuesday because you can usually find a radio station that will play two songs in a row from your favorite artist : )
  • If you’re in the stock market, #EverythingsBetterOnTuesday because it’s typically the largest purchase day of the week (Wall Street types don’t call it “Turnaround Tuesday” for nothing)

So after you finish that last sip of your morning coffee, square up those shoulders and take a moment to appreciate the day. Because everything’s better on Tuesday.

Share with us your photos and thoughts on why #EBOT ; ) We’ll share our favorite posts next Tuesday!

–E.E. Wang and George Medici

Winning a Proxy Contest

Since 2000, the number of activist campaigns launched has increased by more than 500%, according to S&P Capital IQ and Ipreo Research.

 

In nearly two decades, I’ve seen my share of contentious proxy contests … from both sides of the table.  Here are some of the lessons I’ve learned for developing a winning strategy if you are on the side of facing an activist campaign:

 

  • No matter what, avoid getting emotional or taking it personally.

For boards and managements faced with a disgruntled shareholder’s demands (whether in the form of a letter to the company or an alternate proposed proxy), it’s understandable to feel like the attack is personal and unwarranted. Maybe your board or CEO has made an attempt to reach out – only to have the shareholder dig in his or her heels or make additional demands (like more board seats, changes in dividend policy, etc.).

 

It’s easy in those circumstances for frustration and emotions to start to escalate, but a cool head is critical as a board or management team considers the various options available in responding to a shareholder activist’s tactics.

 

  • Firing the first shot may not give you an advantage.

Unless you’re the activist, firing the first shot in a proxy contest will often do more harm than good. It is the equivalent to picking a fight – one that will likely result in the following:

 

o   The disgruntled shareholder will most likely become more entrenched and more likely to escalate the fight…and now, you’ve provided the ammunition to attack your position and put you on the defensive.

o   Other shareholders may begin to question whether the company’s management and board are open to shareholders’ concerns and feedback.

o   Employees may begin to question whether the company is stable and can become distracted by any resulting negative media attention.

o   Lastly, firing the first shot often places your board and management into a zero-sum battle with the shareholder and eliminates the likelihood of reaching an agreement or compromise. The only parties who benefit when a proxy fight moves into a zero-sum scenario are the multitude of consultants both sides will have to engage to try and win the war.

 

In most cases, the best strategy is to prepare for the first shot. By taking a wait and see approach, your team puts itself in a better position to have more options available in choosing a response that will reinforce your team’s credibility and perspective with all stakeholder groups….and force the activist into playing defense.

 

  • Don’t forget the other stakeholders who will be affected by your actions.

Often, the discussion around a proxy contest focuses on the board and management (“us”) versus the shareholder activist group (“them”).  Other shareholders are often viewed as battlefield prizes to be “won over” and other stakeholders who can influence the vote (such as employees and former employees who hold shares, as well as news media who write on the story) often are forgotten all together.

 

When developing your battle plan, it’s important to remember that your actions and statements will also be judged by several stakeholders and not just in the context of the vote or the logic of the arguments presented. Important thoughts to consider include:

 

o   Will our actions and statements be viewed as prolonging or escalating the fight or trying to facilitate a positive and quick resolution?

o   Does this action or statement put us in the role of “emotional instigator” or “cool-headed problem solver?”

o   Will our statements and actions be perceived as being responsive and considerate of shareholders’ interests or for the sake of self-preservation?

 

  • Keep the big picture in mind.

While it can be easy to forget the “big picture” in the heat of a proxy battle, it’s important that the board remember to always keep in mind its ultimate desired outcomes.  In most cases, the board and management’s ultimate goals are:

 

a) to preserve shareholder value to the greatest extent possible; and

b) retain majority control over the Company’s strategy.

 

Each action and reaction should be considered in the context of how it will facilitate bringing the company closer to its desired outcomes in the fastest and most painless way possible.  In a proxy contest, you don’t win points for how many punches or knock outs you can land – but for how you are able to move effectively in bringing the contest to a conclusion with minimal damage to your company.

 

–E.E. Wang, ewang@pondel.com

 

Take $tock in Mama Mancini’s Meatballs

You may have heard the radio commercials with Dan Mancini touting his homemade meatballs.  But did you hear the one about Mama Mancini’s being a publicly traded company?

 

Thirty-second spots recently aired on satellite radio during CNBC’s weekly broadcast not only pitching Mama Mancini’s great-tasting meatballs, but alerting potential investors that the company is traded on the OTC (over-the-counter) bulletin board under the ticker symbol MMMB.

 

A steady stream of “investment” commercials has been hitting the airwaves since the SEC last year loosened its advertising rules for equities and alternative investment vehicles.

 

Much of this mixing of consumer and investment messaging is a relatively new concept, built on the premise that consumers are investors, too, and vice-versa.  It’s not just advertising, either.  Some publicly traded restaurant and sporting goods chains have hocked their ticker symbols at checkout.

 

The challenge is determining whether touting your stock to consumers is worth it, especially if the stock is trading for pennies on the dollar. This could potentially dilute the brand, both from the consumer and investor perspective, and create the perception of a company that is awkwardly trying to find new capital.

 

Creativity is the key for consumer-facing stocks marketing directly to customers.  Executives need to be aware of the impact these ads can have on a company’s brand perception.  What happens when the consumer has a bad experience?  Is he or she going to hit the investor chat rooms and bash the company?

 

Allowing consumers to “discover” that a company is publicly traded may have a greater impact and create a more interested investor.  If not, consumers may question whether the company is truly interested in them or promoting its stock.

 

– George Medici, gmedici@pondel.com

 

 

EXTREME IR: Fast, Furious & Highly Connected

Extreme IR

After practicing investor relations for more than 20 years, I’m always excited to learn something new.  And, I did just that at the recent NIRI 2014 Annual Conference in Las Vegas.

 

The first thing I learned is that I love live tweeting.  Sending updates from the conference sessions I attended really made me feel connected (which makes sense given the theme of the conference, “EXTREME IR: Fast, Furious & Highly Connected”).  It was fun being able to spread the vast body of knowledge represented at the conference, so I thought I would recount those tweets here, verbatim, (in more than 140 characters) so that they reside in one handy place for easy reference by my fellow IROs.  If you attended and have any thoughts to add (or even if you didn’t attend and have any thoughts to add), please share them below in the comments section.

 

  1. Regardless of who is setting up investor meetings, be clear about goals and expectations before the outreach starts.
  2. $1 billion market cap is preferred by investors for European NDRS.  $5 billion for Asia.
  3. 83% of buy-side wants cos. to hold investor day yearly.  Only 35% of companies host one yearly.
  4. Almost half of global buy-side won’t invest w/o meeting mgmt.  35% won’t invest before an avg. of 3 interactions.
  5. Law says corporations can keep profits and use them as they see fit. Boards not required to maximize shareholder value. Hmmmm.  Chatter that institutions could share holdings every 30 days with the companies they own is palatable. Will it become a reality?
  6. CEO pay ratio disclosure will become a requirement in the fall and will take effect next year.  Of 75 in session, 31% give quarterly guidance, 45% annual, 15% multi-year, 9% other.
  7. If non-GAAP measures are used as basis for exec comp make sure they tie to your company’s business goals.
  8. Non-GAAP EPS most common non-GAAP measure seen by investor community based on recent survey.
  9. About 1/3 of 40 participants in today’s session on guidance post full transcripts of earnings calls on their websites
  10. Don’t assume index investors don’t have an active interest in governance issues.
  11. Use letter from the board in proxy statement to discuss thoughts on compensation, succession planning, etc.
  12. More sessions on activism than any other topic.  Clearly a hot button issue for IR today.
  13. Boards need to be aware of what investors think even if it’s hard to deliver negative news
  14. There is a difference between active investors and activist investors. The latter trying to force change.
  15. Number of people moving into IR from finance grew 60% y-o-y.  Field is obviously getting more competitive.
  16. IR Certification will likely require 3 years’ experience to qualify for exam.  A bachelor’s degree is also recommended.
  17. Body language is important.  Hedge funds actively learn about “tells” to read between the lines when meeting with management.
  18. Analyst Day info attendees want: new initiatives; access to mgmt.; forward looking guidance; current financials; product demos.
  19. Q&A is most important part of an Analyst Day according to a recent investor survey.

 

— Laurie Berman, lberman@pondel.com

IndyCar’s Rise Again: A Client Perspective

One of our clients, a leading e-cigarette company, recently inked a two-year sponsorship deal with KVSH Racing and four-time IndyCar Series champion Sebastien Bourdais that is proving to be very successful. Finishing a respectable seventh at this year’s Indianapolis 500, Bourdais currently sits in eighth place in the standings and is one of most successful drivers in history with 31 wins and 47 podiums. PW Senior Vice President George Medici was live on the scene with the following take on IndyCar’s return to glory.

 

KVSH Racing’s Sebastien Bourdais at the 2014 Indy 500.

KVSH Racing’s Sebastien Bourdais at the 2014 Indy 500.

Last Sunday marked the 98th running of the Indy 500, an event billed as the “greatest spectacle in racing.”  One can only truly experience the magnificence of this historical event if lucky enough to be present at Indianapolis Motor Speedway (IMS) during Memorial Day weekend.

 

Close to 300,000 people attend the race, which began in 1911 on a track of 3.2 million bricks.  A yard-wide strip of these bricks still remain across the width of the asphalt track.  It has become customary for the winning driver to kiss the “yard of bricks” after the race.

 

Ryan Hunter-Reay got to kiss those bricks last week as he became the 2014 Indy 500 champion, winning in dramatic fashion, holding off three-time Indy 500 winner Helio Castroneves by .0600 of a second, one of the closest margins of victory in IndyCar history.

 

As exciting as the race was, IndyCar Series, the premier level of American open wheel racing, is struggling to capture viewers.  The Series saw its viewership drop 22 percent last year for 19 race telecasts across ABC and NBCSN, compared with 15 telecasts in the prior season, averaging 953,000 viewers, down from 1.2 million viewers in 2012.   Much of the downturn has been a result of the infighting between IndyCar Series and Champ Car World Series (formerly CART).  The two finally merged in 2008, but left a trail of discontented fans fueled by top drivers leaving the series for Formula One and NASCAR.

 

There is some good news.  Ratings are up, a little.  This year’s Indy 500 scored a TV rating of 4.0, compared with a 3.7 score in 2013.  The added races in 2013 also led to increased total reach for the race series. Still, attracting eyeballs and fans in the seats continue to be a challenge for IndyCar organizers.  Industry insiders, however, are positive about IndyCar’s future, saying the series is “rising,” and that they are confident it will make its way back to the glory days of the 70s, 80s and 90s.

 

Ditto says our client, who already is seeing enormous return on investment as IndyCar attracts an affluent, well-educated consumer with greater discretionary income.  In fact, on-site marketing at races has not only generated wider brand awareness, but also is increasing sales.

 

Hunter-Reay’s win is a good start for IndyCar on the road back to prominence.  He’s the first American to win the Indy 500 in almost a decade, being quoted after the race promoting the series saying, “This (race) is American history. It’s where drivers are made.”

 

While this may be a recipe for success, it’s unclear if Hunter-Reay was solely responsible for the higher ratings.  Media reports say race fans were watching NASCAR driver Kurt Busch compete in both the Indy 500 and Coca-Cola 600, attempting to drive 1,100 miles in a single day in two different states.  Busch finished sixth in the Indy 500 and withdrew from the Coca-Cola 600 due to a blown engine.

 

It’s really about the drama that gets people interested.  Look what Tiger Woods did for golf.  Without him in the field, golf tournaments just don’t have the same cache when he plays.  Good, bad or indifferent, more people are watching Tiger.

 

IndyCar also can learn a thing or two from NASCAR’s playbook, such as extending the race season (which it did in 2013) and adding more drivers.  A side-by-side comparison between IndyCar and NASCAR shows stark differences, everything from more prize money to more races and drivers.

 

While adding U.S. drivers to the IndyCar Series may help spur fan interest, it’s hard to deny the talented array of race pros that hail from other countries, including Sebastien Bourdais of France.

 

Contrary to some public opinion, IndyCar is as American as apple pie.  A tour of the Indianapolis Motor Speedway Hall of Fame Museum is evidence of the racetrack’s impact on racing history, right here in the United States, a theme that may help carry the IndyCar Series back to national prominence.  In the interim, it may not be a bad idea to raise the drama level between drivers – because everyone loves a great race story.

 

— George Medici, gmedici@pondel.com