Quarterly reports – What are they and why should companies publish them?

A company that is listed on a national stock exchange (in the US, UK, India or any other country) must follow certain regulations and rules set by the regulatory body of the country. In India, that would be the Securities and Exchange Board of India (SEBI) and in the US, it would be the Securities and Exchange Commission (SEC).

‘Public’ companies must disclose their financial information regularly which includes the balance sheet, income statement, cash flow statement, etc. Depending on the country and the financial year that is followed, public companies would be expected to release quarterly results once every three months.

In India, the financial year is from April to March and listed companies must publish their quarterly reports in Q1 (April, May, June), Q2 (July, August, September), Q3 (October, November, December) and Q4 (January, February, March). The fourth quarter results are disclosed along with the mandatory annual performance of the company.

Elements of quarterly disclosures

Quarterly Reports, sometimes referred to as Quarterly Earnings Reports, don’t necessarily have to be limited to the disclosure of financial figures but may include an executive summary, goals, and objectives of the company for the upcoming quarters, highlights of the quarter completed, and may also have details on new and ongoing challenges faced by the organization along with strategies planned to overcome them.

Here are some elements that organizations typically include in their Quarterly Reports:

  • Press release – Companies include this as a part of their quarterly disclosures. This can be used by the management to provide some context to the results being reported.
  • Letter to shareholders – This is similar in intention to the press release where a company’s management can communicate with shareholders with prepared statements
  • Financial statements- The company can provide financial highlights for the quarter finished along with specific data such as:
  1. Net Revenue
  2. Gross Profit
  3. Net Income
  4. Earnings per Share (EPS)
  5. Dividend
  • Outlook or guidance – Many listed companies may choose to provide forward-looking statements on upcoming quarters for the year.
  • Company data – Along with financial results, companies may also be obligated to provide other information such as compensation for executives or information about the Board of Directors.

Additional aspects and significance of quarterly reports

Fundamentally, these reports give readers insights into the overall health of the company by providing an overview of sales, expenses, net income, and earnings per share (EPS). All this information, combined with a standardized format of reporting data (generally a form that the regulatory body provides to all listed companies), allows for investors and/or stakeholders to compare data across quarters (QoQ). Additionally, companies also provide links or access for readers to compare a quarter’s performance of the previous year with the quarter of the current year.

Listed companies combine their release of quarterly results with earnings calls, which are usually in the format of a conference call between the senior management of a public company, investors, analysts, and the media. On an earnings call, the company discusses important aspects of its quarterly performance with the audience present. This helps investors and analysts make informed decisions related to the company. These reports evoke market reactions and are a likely indicator of how the company’s stock will be valued in the future. When earnings results exceed market expectations, the share price increases and vice versa.

Investors associated with the company for a long time can track its performance and decide whether to invest more. Alternatively, investors known to take a ‘short’ position in markets can use the information from earnings calls and financial results to take a position on the company’s stocks which can significantly impact prices.

Summary of effects and benefits

There is a wide range of impacts on companies, based on their quarterly financial results and other information:

  • Overall health – As mentioned earlier, stakeholders, investors, and analysts would be able to get an idea of the overall health of the company based on its financial performance.
  • Stock prices – The performance of the company every quarter has a direct impact on its stock price depending on whether it has exceeded expectations or not.
  • Business units – All the additional information, including sectoral performance that is generally provided during the earnings conference call, will allow investors and analysts to get a granular view of the performance of disparate business units. This can be taken a step further, as readers will also get an idea of the type of growth or income and therefore assess the overall sustainability of the organization.
  • Country’s economy – Some large corporations operating in specific industries can be strategically important to a country’s economy. The impact of such organizations’ earnings results can provide insights into the health of a country’s economy. For example, very large manufacturing corporations or those operating in the oil and gas industry can help readers get an idea of the direction in which a country’s economy is heading.

While the significance of quarterly reports can never be underestimated, it is important to ensure certain fundamentals of the reporting process:

  • Timely and accurate reporting is of paramount importance to the regulated markets, the listed companies, and the overall economy of the country
  • The format of disclosures must enhance readability and accessibility for investors and analysts to be able to compare the data with peers and competitors so that investment decisions are improved
  • All relevant and currently available information should be disclosed. Therefore, in addition to the format, disclosures must also be continuous
  • Companies must take note of deadlines set by regulatory bodies and ensure to release information accordingly so that the data provided is current and relevant.

All of this can be a complex task for companies. After all, it isn’t just about publishing data but doing so in a manner that makes it easy to read, while also providing context to readers. Many companies choose to use various design elements to creatively represent the content and numbers so that it is easy for investors and stakeholders to get the whole picture.

This is where specialized report design agencies like Report Yak come in to help companies simplify the process. We conceptualize, write compelling content, and design corporate reports including annual reports, integrated reports, quarterly reports, impact reports, sustainability reports, etc. Check out our work here and feel free to reach out with any queries.