NIRI Measuring Your IR Program s Success …...NIRI ANALYTICS | MEASURING YOUR IR PROGRAM’S...

N I R I A N A L Y T I C S

NIRI Measuring Your IR Program’s Success Research

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N I R I A N A LY T I C S | M E A S U R I N G YO U R I R P R O G R A M ’ S S U C C E S S R E S E A R C H R E P O R T

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Executive Summary

� 93 percent of IROs use at least one goal for their IR program.

� The most frequently used IR goals are quantitative in nature.

� Differences can be seen in the type (quantitative or qualitative), and number of IR goals used, by company size.

� 81 percent of IROs use at least one IR metric to measure their IR program’s success.

� Type (quantitative or qualitative), number of IR metrics used, and IR metric category, all varied by company size.

� 7 distinct IR metric categories, and the top 5 IR metrics used are detailed in this report.

S E C T I O N 1

Respondent Demographics and

Survey Methodology


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MARKET CAP SIZE COMPANY INDUSTRY

11%

25%

32%

13%

19%

Small-cap Mid-cap Large-cap Mega-cap

Micro-cap: Less than $250 million

Small-cap: $250 million-less than $2 billion

Mid-cap: $2 billion-less than $10 billion

Large-cap: $10 billion-less than $25 billion

Mega-cap: $25 billion+

Methodology

All NIRI corporate members were invited to participate

in this electronic survey through direct e-mail invitations

from July 25 to August 15, 2016. The survey inquired

about IR department goals, and goal measurement

metrics for corporate investor relations professionals

working within publicly traded companies. The survey

also collected demographic information.

A total of 515 individuals completed the survey, yielding

a response rate of 19 percent. A sample of this size has

a margin of error of plus or minus 3.9 percent at a 95

percent confidence level. This means that if the survey

was repeated 100 times with different samples from the

population of IROs, 95 out of 100 samples would yield a

result within plus or minus 3.9 percent of each statistic

reported in this study. For example, if an answer is offered

by 50 percent of respondents, the results would range

between a high of 54 percent (rounded) and a low of 46

percent for 95 out of 100 other samples from the same

population. In charts and tables, numbers may not total

100 percent due to rounding.

1%

3%

3%

2%

3%

8%

3%

7%

2%

6%

9%

2%

9%

6%

3%

3%

11%

7%

2%

2%

4%

1%

3%

Auto & Components

Banks

Capital Goods

Commercial & Professional Services

Consumer Durables & Apparel

Consumer Services

Diversified Financials

Energy

Food, Beverage & Tobacco

Health Care Equipment & Services

Household & Personal Products

Insurance

Materials

Media

Pharmaceuticals, Biotechnology & Life Sciences

Real Estate

Retailing

Semiconductors & Semiconductor Equipment

Software & Services

Technology Hardware & Equipment

Telecommunication Services

Transportation

Utilities

Micro-cap

S E C T I O N 2

IR Program Goals


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Micro-cap

COMPANY HAS AT LEAST ONE GOAL FOR IR PROGRAM BY MARKET CAP

Large-capMid-capSmall-cap Mega-cap

92%

Yes No

IR Program Goals

NIRI asked IROs what their current goals were for their

IR program. The question was open-ended to allow for

freedom of response. All reported goals were categorized,

revealing a mix of both quantitative and qualitative current

goals. Overall, 93 percent of respondents mentioned at

least one goal currently being used to measure success

for their IR program. Of those, 78 percent of respondents

report utilizing quantitative goals, 56 percent utilize

qualitative, and 40 percent use a mix of both. When

analyzed by company size, small differences can be seen

in the percentage of companies that choose to have goals

for their IR department, with at least 9 out of 10 companies

across all market caps (and in the case of micro-caps, 10

out of 10 companies) reporting at least one goal. Across

all market caps, the most frequently cited IR goals were

quantitative (“diversify, increase, meet with, reduce,”

etc.), followed in frequency by qualitative goals (“improve,

effective, clarify, awareness,” etc.). Differences can

be noted in the types of goals used by IROs in smaller

companies compared to larger companies, with more

emphasis placed on quantitative language in smaller

caps.

100% 90% 97% 93%

N=230


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In micro-cap companies, the most frequently cited IR

goal was “to increase/improve/diversify the shareholder

base/top shareholders,” while in mega-cap companies

it was “to improve shareholder communications/analyst

coverage/analyst quality/ensure understanding of the

story.”

The number of goals per IR department varied by, and was

positively correlated to, company size. For example micro-caps

expressed, on average, just over 2 goals per department, while

mega-caps mentioned almost 3 goals. The overall average

number of current goals was 2.3 per IR department.

MEAN NUMBER OF GOALS USED TO MEASURE IR PROGRAM SUCCESS BY MARKET CAP

0.0 0.5 1.0 1.5 2.0 2.5 3.0

Mega-cap

Large-cap

Mid-cap

Small-cap

Micro-cap

Overall 2.3

2.1

2.2

2.3

2.5

2.9

N=230


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TYPE OF GOALS USED TO MEASURE IR PROGRAM SUCCESS BY MARKET CAP

The chart above illustrates how the use of quantitative

goals declines slightly, and the use of qualitative goals,

a mix of both, or no goals at all, generally increases as

market-cap size increases. Additionally, among IROs who

are currently using only one type of goal (either quantitative or

qualitative goals, rather than a mix of the two) differences can

be seen in the types of goals chosen by market-cap size. For

example, 73 percent of micro-caps who report only one type

of goal make them quantitative, while 56 percent of mega-

caps do the same. Conversely, only 13 percent of micro-caps

choose to use only qualitative goals, while for mega-caps, this

percentage jumps to one-third (31 percent).

Micro-cap Small-cap Mid-cap Large-cap Mega-capQuantitative Goals Qualitative Goals Mix of Both No Goals Mentioned

N=248. Participants could select multiple responses, will sum to >100%.

S E C T I O N 3

IR Program Metr ics


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Yes

COMPANY USES AT LEAST ONE METRIC FOR IR PROGRAM BY MARKET CAP

No

Micro-cap Small-cap Mid-cap Large-cap Mega-cap

IR Program Metrics

NIRI asked IROs to describe the metrics they use to

measure their IR program’s success. Answers to this

open-ended question were labeled and categorized,

resulting in seven distinct groups of qualitative and

quantitative metrics. Similar to IR goals, when analyzed

by company size, small differences can be seen in

the percentage of companies that choose to use

metrics for their IR department, with 75 percent or

more across all market caps reporting they use at least

one metric to measure their IR program’s success.

While only 7 percent of IROs did not specify at least

one current goal for their IR department, almost

three times that amount (19 percent) did not mention

at least one metric. Of those that did mention at

least one, 74 percent of respondents report utilizing

quantitative metrics for their IR department, 31 percent

utilize qualitative, and 24 percent use a mix of both

quantitative and qualitative metrics.

80% 75% 79% 88% 91%

N=230.


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0.0 0.5 1.0 1.5 2.0 2.5

2.0

1.9

1.7

2.0

2.2

2.4

The top predictor of whether an IRO will use quantitative

metrics to measure their IR program’s success, is their use

of quantitative goals. IROs who use at least one quantitative

goal were 0.34 times more likely to use quantitative metrics to

measure their IR program’s success. Use of qualitative goals

was the top predictor of use of qualitative metrics for an IR

program. IROs who use at least one qualitative goal were

0.28 times more likely to use qualitative metrics. In line

with the relationship between the number of IR goals and

company size, the number of different metrics used per

IR department varied by, and was positively correlated

with, company size. For example micro-caps mentioned,

on average, under 2 metrics (1.7) per department, while

mega-caps mentioned 2.4 metrics. The overall average

number of metrics was 2 per IR department.

MEAN NUMBER OF METRICS USED TO MEASURE IR PROGRAM SUCCESS BY MARKET CAP

Overall

Micro-cap

Small-cap

Mid-cap

Large-cap

Mega-cap

N=228.


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TYPE OF METRICS USED TO MEASURE IR PROGRAM SUCCESS BY MARKET CAP

After use of quantitative IR goals, company size was the

second strongest predictor of use of quantitative metrics

to measure an IR program’s success. For every increase

in market cap size, an IRO was 0.16 times more likely to

use quantitative metrics to measure their IR department’s

success. The chart above illustrates how use of quantitative

metrics increases, while use of qualitative metrics or a mix

of both fluctuates, and use of no metrics at all decreases, as

market cap size increases.

Micro-cap Small-cap Mid-cap Large-cap Mega-capQuantitative Metrics Qualitative Metrics Mix of Both No Metrics Mentioned

N=228. Participants could select multiple responses, will sum to >100%.


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Types of Metrics

Interestingly, while smaller-cap company IROs more frequently use quantitative IR goals, large and mega-

cap companies are more likely to use quantitative IR metrics. Among IROs who are currently using only

one type of metric (either quantitative or qualitative, rather than a mix of the two types) we can also see

differences in the types of metrics chosen by market-cap size. For example, while 58 percent of micro-caps

who report only one type of metric choose quantitative measurements, 80 percent of mega-caps do the

same. Conversely, while 17 percent of micro-caps choose to use only qualitative metrics, only 5 percent of

their mega-cap IRO counterparts reported the same.

IR METRICS CATEGORIES:

• STOCK PRICE/SHARE FLUCTUATION

• ANALYST COVERAGE

• INVESTOR OUTREACH (NDRS, ROADSHOWS, MEETINGS, EVENTS)

• PERCEPTION STUDIES/INVESTOR FEEDBACK

• SHAREHOLDER COMPOSITION/DIVERSITY

• IR COMMUNICATIONS/UNDERSTANDING OF THE IR STORY

• OTHER METRICS (WEB ANALYTICS, MANAGEMENT PERCEPTION, AWARDS)

Across all market-caps, the most frequently mentioned IR metrics used quantitative language (“number of,

increase in, decrease in, meet with xx number of, top ten, stock price,” etc.). Overall, qualitative metrics

(“success of, management happiness, quality of, informal,” etc.) were not as frequent. Just as there are

differences in the types of goals used, however, there are also differences in the types of metrics used, by

company size.


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For smaller companies, shareholder composition/diversity

was the number one metric used, followed by stock price/

share volatility. For larger companies, it was quality of investor

outreach, followed by perception studies/investor feedback.

This is to be expected, since as a company’s IR spend grows,

the ability to conduct investor outreach events (such as NDRs,

etc.) and expensive perception studies increases, while smaller

companies might rely more heavily on metrics they can track

internally with little budget spend, such as the composition of

their shareholder base, and their stock price/fluctuation.

SPECIFIC IR METRICS USED TO MEASURE IR PROGRAM SUCCESS BY MARKET CAP

Stock price 22%

Stock price 15%

Shareholder composition 28%

Shareholder composition 15%

Investor outreach 22%

Investor outreach 37%

Perception studies 12%

Perception studies 20%

Micro and Small-cap Large and Mega-cap

N=156.


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TOP 5 IR PROGRAM METRICS USED

1QUALITY OF INVESTOR OUTREACH (NDRS, MEETINGS,

EVENTS, CONFERENCES, ETC.)

2SHAREHOLDER COMPOSITION/DIVERSITY

PERCEPTION STUDIES/INVESTOR FEEDBACK

ANALYST COVERAGE

STOCK PRICE/SHARE FLUCTUATION

3

4

5


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QUALITY OF INVESTOR OUTREACH (NDRS, MEETINGS, EVENTS, CONFERENCES, ETC.)

“Number of management calls and meetings held with both buy and sell-side targets.” -- Micro-cap: Less than $250 million, Telecommunication Services.

“Number of NDRs and sell-side conferences.” -- Small-cap: $250 million to less than $2 billion, Materials.

“Number of top shareholders introduced in person, view the correlations between interactions and share purchases.” -- Small-cap: $250 million to less than $2 billion, Pharmaceuticals, Biotechnology & Life Sciences.

“The quality of meetings between investment and management. Management team logs at least fifteen days on the road doing NDRs and conferences.” -- Mid-cap: $2 billion to less than $10 billion, Diversified Financials.

“Number and quality of conferences, meetings, roadshows and calls. Number of meeting requests and conference call participants.” -- Mid-cap: $2 billion to less than $10 billion, Insurance.

“The percent of shares covered at NDRs and at conferences attended, and the number of targets contacted.” -- Large-cap: $10 billion to less than $25 billion, Media.

“Number of meetings and calls with Top 50 shareholders.” -- Large-cap: $10 billion to less than $25 billion, Retailing.

“Quality (defined as size/portfolio turnover metrics) of meetings during our NDRs and conferences.” -- Large-cap: $10 billion to less than $25 billion, Energy.

“Quality of our investor meetings towards attracting large, material shareholders.” -- Mega-cap: $25 billion and above, Health Care Equipment & Services.

“Attend twelve sell-side conferences; IRO presents at seven sell-side conferences; Conduct roadshows in thirty-five cities; Ensure at least fifteen investors from a roadshow meeting purchase at least 100,000 shares within six months.” -- Mega-cap: $25 billion and above, Household & Personal Products.


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SHAREHOLDER COMPOSITION/DIVERSITY

“Percent that is institutionally held.” -- Micro-cap: Less than $250 million, Diversified Financials.

“Our shareholder base - the percent that is institutional vs. retail by their geographic location.” -- Micro-cap: Less than $250 million, Software & Services.

“Number of new shareholders each year purchasing fifty thousand shares or more, relative multiples.” -- Small-cap: $250 million to less than $2 billion, Telecommunication Services.

“The percentage of our stock held by value holders.” -- Small-cap: $250 million to less than $2 billion, Pharmaceuticals, Biotechnology & Life Sciences.

“Percentage of institutional ownership by a combination of Growth/GARP style firms.” -- Small-cap: $250 million to less than $2 billion, Technology Hardware & Equipment.

“Broaden the percent of ownership from the Top 25 and add GARP/low-mid turnover investors to the shareholder base.” -- Small-cap: $250 million to less than $2 billion, Utilities.

“Our Top 15 quality investors (defined as having an annual turnover rate of fifty percent or less) own at least ninety percent of our stock as of our set end-of-year date.” -- Mid-cap: $2 billion to less than $10 billion, Real Estate.

“Weighted average shareholder turnover and holding period.” -- Mid-cap: $2 billion to less than $10 billion, Retailing.

“Our targeted vs. actual shareholder profile.” -- Large-cap: $10 billion to less than $25 billion, Healthcare Equipment & Services.

“Holdings by long-only investors.” -- Mega-cap: $25 billion and above, Retailing.

“Reduce our concentration of institutional ownership over time.” -- Mega-cap: $25 billion and above, Transportation.


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STOCK PRICE/SHARE FLUCTUATION

“Stock price and daily volume.” -- Micro-cap: Less than $250 million, Media.

“The turnover rates of our Top 10 shareholders, our stock volatility and our stock performance relative to peers.” -- Small-cap: $250 million to less than $2 billion, Consumer Services.

“An increase in multiple assigned to our company valuation.” -- Small-cap: $250 million to less than $2 billion, Energy.

“Valuation, P/E.” -- Mid-cap: $2 billion to less than $10 billion, Capital Goods.

“Stock performance relative to the SOX and TSRR.” -- Mid-cap: $2 billion to less than $10 billion, Consumer Durables & Apparel.

“EV/EBITDA multiple.” -- Mid-cap: $2 billion to less than $10 billion, Health Care Equipment & Services.

“Our revenue multiple vs. our peers.” -- Mid-cap: $2 billion to less than $10 billion, Retailing.

“Stock price and the turnover rate of our top long funds.” -- Large-cap: $10 billion to less than $25 billion, Consumer Durables & Apparel.

“Improved P/E and lower beta, this is a long-term goal.” -- Large-cap: $10 billion to less than $25 billion, Health Care Equipment & Services.

“Holding period calculations.” -- Mega-cap: $25 billion and above, Health Care Equipment & Services.

“P/E ratio relative to our peers.” -- Mega-cap: $25 billion and above, Banks.

“Relative stock performance vs. our peers and in the major indices.” -- Mega-cap: $25 billion and above, Real Estate.


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PERCEPTION STUDIES/INVESTOR FEEDBACK

“Qualitative measures related to the success of outreach, and our investor perceptions.” -- Small-cap: $250 million to less than $2 billion, Technology Hardware & Equipment.

“Investor and sell-side analyst feedback.” -- Small-cap: $250 million to less than $2 billion, Insurance.

“Surveying our top buyers and sellers, investor perception studies.” -- Mid-cap: $2 billion to less than $10 billion, Automobiles & Components.

“What investors say about us. We have management directly ask our investment community ‘How’s our IR?’” -- Mid-cap: $2 billion to less than $10 billion, Automobiles & Components.

“We complete shareholder and analyst perception studies annually.” -- Mid-cap: $2 billion to less than $10 billion, Pharmaceuticals, Biotechnology & Life Sciences.

“No specific metric, we utilize perception studies to gather feedback from the buy and sell-side.” -- Large-cap: $10 billion to less than $25 billion, Food & Staples Retailing.

“Perception studies and SWOT analysis.” -- Large-cap: $10 billion to less than $25 billion, Food, Beverage & Tobacco.

“Shareholder feedback and perception studies regarding whether our strategy was heard.” -- Large-cap: $10 billion to less than $25 billion, Banks.

“Anonymous feedback from our roadshows.” -- Mega-cap: $25 billion and above, Retailing.

“Validation via external perception studies.” -- Mega-cap: $25 billion and above, Diversified Financials.

“Engage third parties to conduct perception studies and implement the actionable items.” -- Mega-cap: $25 billion and above, Materials.


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ANALYST COVERAGE

“Adding analyst coverage.” -- Micro-cap: Less than $250 million, Automobiles & Components.

“Number of new analysts covering the company.” -- Small-cap: $250 million to less than $2 billion, Diversified Financials.

“Accuracy of sell-side estimates.” -- Small-cap: $250 million to less than $2 billion, Energy.

“Analysts consensus vs. internal review.” -- Small-cap: $250 million to less than $2 billion, Real Estate.

“Review of sell-side notes to gauge level of understanding of key messages.” -- Mid-cap: $2 billion to less than $10 billion, Materials.

“Accuracy of consensus estimates vs. our guidance.” -- Mid-cap: $2 billion to less than $10 billion, Utilities.

“Analyst coverage vs. our peers (both quantity and quality).” -- Mid-cap: $2 billion to less than $10 billion, Banks.

“Quantify regular and active dialogue with buyside, sellside and trading desks.” -- Mega-cap: $25 billion and above, Transportation.

“Sell-side reports and their grasp of our model. Buy-side’s type of questions that signal the depth of their understanding.” -- Mega-cap: $25 billion and above, Semiconductors & Semiconductor Equipment.

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NIRI Measuring Your IR Program s Success …...NIRI ANALYTICS | MEASURING YOUR IR PROGRAM’S...

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