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Annual reports, quarterly reports and earnings calls


GenXer

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My wife is in enterprise software sales. She reads 10-K reports as she prepares for meetings with prospects. She looks for keywords like supply chain, projects, and initiatives to better understand them. I was looking at a few of these reports and Apple’s most recent 10-K is 400 pages; most 8-Ks are 20-40 pages. That’s a pretty heavy lift to read these documents.

I was wondering if investors religiously read 10-K, 8-K, and 10-Q reports and earnings calls to make investment decisions.

If so, what are the key metrics you look for in these reports?

If not, what other information sources do you use?

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On 12/24/2024 at 3:42 PM, GenXer said:

My wife is in enterprise software sales. She reads 10-K reports as she prepares for meetings with prospects. She looks for keywords like supply chain, projects, and initiatives to better understand them. I was looking at a few of these reports and Apple’s most recent 10-K is 400 pages; most 8-Ks are 20-40 pages. That’s a pretty heavy lift to read these documents.

I was wondering if investors religiously read 10-K, 8-K, and 10-Q reports and earnings calls to make investment decisions.

If so, what are the key metrics you look for in these reports?

If not, what other information sources do you use?

They do not. There are no key metrics. Everything is completely fabricated financial magic and people are just skirting reporting requirements and burying anything of significance in cute accounting tricks. 

Investors are largely filled with analysts who just try to pretend like they are doing due diligence, none of them even know what these businesses fundamentally do and are often tricked by marketing gimmicks instead of core product strategies. 

Its boring to say "yeah apple is a supply chain company" its a lot sexier to say "apple leads innovation in consumer technology" 

Apple isn't doing anything first, best or even good anymore. They are exceptional at sourcing material, contract manufacturing, moving literal country GDP worth of finished and unfinished goods across borders and merchandising it globally. That isn't taking away from Apple as a company but this isn't why people invest in them, they want to invest in Apple intelligence, vision pro or some other bullshit thing that does absolutely jack shit for their actual business.

They make cheap ass phones and computers that the sell for a ridiculous margin because they have vertically integrated in a way no one else can and on top of that they charge an ongoing fee for everything that gets done on these devices through their app store fee structure.

That's apple. 

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On 12/24/2024 at 3:42 PM, GenXer said:

My wife is in enterprise software sales. She reads 10-K reports as she prepares for meetings with prospects. She looks for keywords like supply chain, projects, and initiatives to better understand them. I was looking at a few of these reports and Apple’s most recent 10-K is 400 pages; most 8-Ks are 20-40 pages. That’s a pretty heavy lift to read these documents.

I was wondering if investors religiously read 10-K, 8-K, and 10-Q reports and earnings calls to make investment decisions.

If so, what are the key metrics you look for in these reports?

If not, what other information sources do you use?

I had 4 accounts I consulted on in the same industry, so I had the bandwidth to actually dial into the calls or listen to the recordings they would post on their IR page.

I would also use AI to summarize them and parse out key themes and challenges as well.

The key to these things, to @immamac point is to ignore the rosy, financial spin the company puts on and key in to the investors questions asking about gaps/weaknesses -- especially if they smell blood in the water and pile on. I've heard some very uncomfortable calls and the professional tap dancing can be amusing.

Edited by Vegas64
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9 minutes ago, Vegas64 said:

I had 4 accounts I consulted on in the same industry, so I had the bandwidth to actually dial into the calls or listen to the recordings they would post on their IR page.

I would also use AI to summarize them and parse out key themes and challenges as well.

The key to these things, to @immamac point is to ignore the rosy, financial spin the company puts on and key in to the investors questions asking about gaps/weaknesses -- especially if they smell blood in the water and pile on. I've heard some very uncomfortable calls and the professional tap dancing can be amusing.


I’ve found transcripts of the earnings calls are usually on the IR pages. Not as entertaining as listening to the audio of awkward pauses on challenging questions. Seems like the awkward questions and responses would identify companies underperforming. Correct?

What about companies actually doing well. How are those identified?

I’ve found next quarter projections are normally discussed before the Q&A during the earnings calls. Is failure to meet these projections what identifies underperforming companies?

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7 hours ago, immamac said:

They do not. There are no key metrics. Everything is completely fabricated financial magic and people are just skirting reporting requirements and burying anything of significance in cute accounting tricks. 

Investors are largely filled with analysts who just try to pretend like they are doing due diligence, none of them even know what these businesses fundamentally do and are often tricked by marketing gimmicks instead of core product strategies. 

Its boring to say "yeah apple is a supply chain company" its a lot sexier to say "apple leads innovation in consumer technology" 

Apple isn't doing anything first, best or even good anymore. They are exceptional at sourcing material, contract manufacturing, moving literal country GDP worth of finished and unfinished goods across borders and merchandising it globally. That isn't taking away from Apple as a company but this isn't why people invest in them, they want to invest in Apple intelligence, vision pro or some other bullshit thing that does absolutely jack shit for their actual business.

They make cheap ass phones and computers that the sell for a ridiculous margin because they have vertically integrated in a way no one else can and on top of that they charge an ongoing fee for everything that gets done on these devices through their app store fee structure.

That's apple. 

airpods

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On 12/24/2024 at 2:42 PM, GenXer said:

My wife is in enterprise software sales. She reads 10-K reports as she prepares for meetings with prospects. She looks for keywords like supply chain, projects, and initiatives to better understand them. I was looking at a few of these reports and Apple’s most recent 10-K is 400 pages; most 8-Ks are 20-40 pages. That’s a pretty heavy lift to read these documents.

I was wondering if investors religiously read 10-K, 8-K, and 10-Q reports and earnings calls to make investment decisions.

If so, what are the key metrics you look for in these reports?

If not, what other information sources do you use?

i used to read them in my capacity for M&A.

i regularly read them for competitor analysis in my capacity as CFO. it is mostly to understand a companies priorities and performance not investing. companies are very explicit about their plans and vocal so you don't have to dig far into financial reports.

if you are investing, banker meetings are best but not available for majority of the public.

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I spend a fair amount of time looking and reading financial statements and 10k/qs. I always start at the cash flow statement. It’s hard to fake cash flow. It also will tell you if the company is able to fund its capital via its existing operations or debt/equity offerings.

Agree with the comments above on listening to the Q&A on the quarterly calls. The prepared remarks will always reflect the company’s desired message but occasionally you can pick up some good nuggets in the Q&A.

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1 minute ago, hornmpa96 said:

I spend a fair amount of time looking and reading financial statements and 10k/qs. I always start at the cash flow statement. It’s hard to fake cash flow. It also will tell you if the company is able to fund its capital via its existing operations or debt/equity offerings.

Agree with the comments above on listening to the Q&A on the quarterly calls. The prepared remarks will always reflect the company’s desired message but occasionally you can pick up some good nuggets in the Q&A.

I worked for a company that got super creative hiding their fcf problems by selling all kinds of crazy shit to make it appear better than it was. I agree it's the hardest one to fudge, but with how large and complex some of these businesses are now they can do one time shit that makes it look far better than reality. 

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Just now, immamac said:

I worked for a company that got super creative hiding their fcf problems by selling all kinds of crazy shit to make it appear better than it was. I agree it's the hardest one to fudge, but with how large and complex some of these businesses are now they can do one time shit that makes it look far better than reality. 

If they were selling assets, that cash flow should have been in the investing section of the cash-flow statement and segregated from operating cash-flow. Free cash flow is a non-GAAP measure which brings up another item. I try and stick to the GAAP financials. The non-GAAP stuff is the Wild West. The SEC tries to police it but it’s really tough.

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Just now, hornmpa96 said:

If they were selling assets, that cash flow should have been in the investing section of the cash-flow statement and segregated from operating cash-flow. Free cash flow is a non-GAAP measure which brings up another item. I try and stick to the GAAP financials. The non-GAAP stuff is the Wild West. The SEC tries to police it but it’s really tough.

I'd love your take on what they were doing. One day when all the dust settles on some stuff I'll start a thread on it. 

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On 12/27/2024 at 8:04 AM, immamac said:

The same way it's useful for any text summarization. 

Its like asking if cliffs notes are as good as reading the book. Sure you can pass a plot test by reading the cliffs notes, but you dont know the details. 

 

On 12/27/2024 at 8:02 AM, GenXer said:

Was AI useful for this?

For sure, especially if you are approaching these reports, which it sounds like you are— er I mean your “wife” is lol— with a very specific point of view or perspective on where you fit into the companies strategy. You can then control F for your specific call outs you care about (e.g. SAP 4HANA upgrade or whatever you sell).

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From a sales perspective, the purpose for reading the reports and transcripts of to try to find strategic initiatives to align with... To either create a large solution sale that signs to an important strategic priority or to open a conversation with (hopefully) an ICP/persona that you hope will have some type of influence (and authority if your fortunate) and see if you can convince them to talk to you. (Or both, ultimately).

This is pretty standard software sales territory and account planning stuff.

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On 12/24/2024 at 10:42 PM, GenXer said:

My wife is in enterprise software sales. She reads 10-K reports as she prepares for meetings with prospects. She looks for keywords like supply chain, projects, and initiatives to better understand them. I was looking at a few of these reports and Apple’s most recent 10-K is 400 pages; most 8-Ks are 20-40 pages. That’s a pretty heavy lift to read these documents.

I was wondering if investors religiously read 10-K, 8-K, and 10-Q reports and earnings calls to make investment decisions.

If so, what are the key metrics you look for in these reports?

If not, what other information sources do you use?

Congrats to your wife. I don't know any other sales person that does that due diligence. That said, she'll find more 'color' about the companies focus on the earnings presentations and transcripts than in the dry Q/Ks.

For my personal curiosity and investment decisions I sniff through them, mostly studying the financial tables and commentary on specific sections of my interest.  There's not going to be valuable information hidden in there that other people won't have uncovered anyway.

Much of the text in the 10K are boilerplate descriptions, and not material news.  Some analysts use PDF Compare feature to scan for changes in the text from year to year.

 

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6 hours ago, 52-80 said:

Congrats to your wife. I don't know any other sales person that does that due diligence. That said, she'll find more 'color' about the companies focus on the earnings presentations and transcripts than in the dry Q/Ks.

For my personal curiosity and investment decisions I sniff through them, mostly studying the financial tables and commentary on specific sections of my interest.  There's not going to be valuable information hidden in there that other people won't have uncovered anyway.

Much of the text in the 10K are boilerplate descriptions, and not material news.  Some analysts use PDF Compare feature to scan for changes in the text from year to year.

 

Not knocking homeboy's wife, but tell me you don't know any sales people without telling me you don't know any sales people. It's pretty apple pie in the enterprise sales business, from what I've seen in various GTM and organizational support roles.

That said, it's also pretty smart to tag the corporation you cover in all manner of alerts: google, seeking alpha, owler, etc. so you are catching real-time market moving info as it hits and staying current with the business.

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2 hours ago, Vegas64 said:

Not knocking homeboy's wife, but tell me you don't know any sales people without telling me you don't know any sales people. It's pretty apple pie in the enterprise sales business, from what I've seen in various GTM and organizational support roles.

That said, it's also pretty smart to tag the corporation you cover in all manner of alerts: google, seeking alpha, owler, etc. so you are catching real-time market moving info as it hits and staying current with the business.

when i was in enterprise sales i had a large book and a full team working under me and they werent voracious financials-readers. the job is relationship based with a lot of persistence and process.

its obviously good to have broad knowledge of your customer, but there was no meaningful edge to digest the minutiae from a dry quarterly filing.  could you give me an example of one?like, you find out a company retired some outstanding bonds and opened a new untapped revolver loc so they should have more cashflow and you can charge them more money for cloud storage?

the level of client-knowledge they work with is either major news that is already very public, or things they learn from the client that is too specific/immaterial to be disclosed in such broad filings.

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9 hours ago, 52-80 said:

when i was in enterprise sales i had a large book and a full team working under me and they werent voracious financials-readers. the job is relationship based with a lot of persistence and process.

its obviously good to have broad knowledge of your customer, but there was no meaningful edge to digest the minutiae from a dry quarterly filing.  could you give me an example of one?like, you find out a company retired some outstanding bonds and opened a new untapped revolver loc so they should have more cashflow and you can charge them more money for cloud storage?

the level of client-knowledge they work with is either major news that is already very public, or things they learn from the client that is too specific/immaterial to be disclosed in such broad filings.

Off the top of my head I can remember being on the case team for an O&G organization (F500) whose VP layer were dragging their feet and hiding behind thin gruel change management and process change management concerns, despite other stakeholders letting us know that there was real executive sponsorship and appetite.

I was able to glean from the transcripts that a) the C-Suite thought they had a good enough data foundation (contact drivers across the omnichannel already) where the VPs were saying wasn't ready b) IT readiness was good enough and c) a FCF target was bandied. Being able to come back and threaten with "your CEO/Board is saying XYZ-- maybe we should ask them if we can get the sponsorship" unlocked the project.

Same company, different time (their VP's were stuck in mud)-- there was some recent M&A and integration work and VP's were dragging feet and in the quarterly the CEO is explicitly calling out an exact accretive value number he was going to provide to the street AND a general timeframe. 

Less examples of tactical detail to get a project unstuck or advance a deal and more leveraging leaderships own words, goals and commitments to the investor community and shareholder base and pointing it back at them. Two examples off the top of my head that I was directly involved in and I know there are many, many more.

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2 hours ago, Vegas64 said:

Off the top of my head I can remember being on the case team for an O&G organization (F500) whose VP layer were dragging their feet and hiding behind thin gruel change management and process change management concerns, despite other stakeholders letting us know that there was real executive sponsorship and appetite.

I was able to glean from the transcripts that a) the C-Suite thought they had a good enough data foundation (contact drivers across the omnichannel already) where the VPs were saying wasn't ready b) IT readiness was good enough and c) a FCF target was bandied. Being able to come back and threaten with "your CEO/Board is saying XYZ-- maybe we should ask them if we can get the sponsorship" unlocked the project.

Same company, different time (their VP's were stuck in mud)-- there was some recent M&A and integration work and VP's were dragging feet and in the quarterly the CEO is explicitly calling out an exact accretive value number he was going to provide to the street AND a general timeframe. 

Less examples of tactical detail to get a project unstuck or advance a deal and more leveraging leaderships own words, goals and commitments to the investor community and shareholder base and pointing it back at them. Two examples off the top of my head that I was directly involved in and I know there are many, many more.

I don't find it typical that close subordinates to exec management subvert or resist the commitments announced in periodic releases. They're news to the investing public, but will have already been planned and bought-in internally. They're often pitched by the subordinates after all.

These folks may temper the overselling that occurs in the calls, sure. But it's not a magic reverse uno card to argue 'your ceo said the company is streamlining internal tooling to save cost but you're still using this expensive and complex multi-vendor solution'. Things sell on merit, on economics, on goodwill and backscratching ('this deal will make you look good'). The im-telling-your-dad approach doesnt strike me as something effective, IME anyway.

I had a kid and switched into products with minimal traveling required, but I do miss the sales world a bit. Extreme freedom and clear objectives: you can do pretty much whatever you want, so long as you meet the numbers!

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