Here Are Our F**king Earnings
Davos is done, Q4 US GDP, and deep dive on swearing on earnings calls
Interest rates just dropped to their lowest level since September, America’s largest private employer raised its minimum wage, and Jamie Dimon kept his same salary after a down year. Q4 US GDP is released tomorrow along with jobless claims.
Let’s dive in.
Bottom Line Up Front
- JPMorgan kept CEO Jamie Dimon’s total pay at $34.5M for 2022, a year in which the firm’s profit fell by almost a quarter (Fortune)
- Google has cut 1,800 employees in California, including 27 massage therapists (CNBC)
- Walmart increases average hourly wage to more than $17.50 (Yahoo)
- Union membership in the U.S. dropped to the lowest since the government began collecting the data in 1983 (BLS)
- US Senator Josh Hawley plans to introduce a bill to ban TikTok nationwide (Reuters)
- A number of Ukrainian officials, including the deputy defense minister, have resigned amid corruption allegations of financial impropriety (NYT)
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Deep Dive: Here are our f**king earnings
2022 was a record year for earnings call swearing. As tech’s earning week ramps up, the sector continues to drag down the S&P. Let’s discuss what this means for its executives.
We feel for chief executives and CFOs who are more and more finding themselves cussing on quarterly earnings calls. After all, you can only have so many salary raises and private jet trips for “work.” Especially these days.
Even more sad for them, many services now transcribe earnings calls. The better tools may be able to censor here and there, rendering the occasional swear word as “[expletive].” But that also allows you to easily search how often that word was used on a call without manually putting together a list of all potential “bad” words.
Using AlphaSense/Sentieo’s transcription search function on earnings calls, you find trending excuses terms you’d expect in 2022. For example, Q3’s most featured list included mentions of runaway inflation, pandemics, interest rate increases, supply chain snafus and wars. These difficulties helped lift swearing on earnings calls and investor days to a new record high in 2022.
It's no secret that we here at Litquidity deplore the use of vulgarities, so the following was hard for us. When the FT first looked into this last year, it turned out that most of the redacted swear words were pretty plain vanilla, like “shit” and “bullshit”. And while the quantity hit a new high in 2022, the quality is probably just as low.
But it’s still quite the accomplishment to hit a new record, given that one of the all-time champion corporate swearers — T-Mobile’s John Legere — no longer works at the company.
Luckily, that still leaves you with Ryanair’s Michael O’Leary, who swore nine times on just one conference call back in July. The rant included these gems on Heathrow and Boeing:
I’m not a customer of Heathrow, I have no time for the (expletive)(expletive) that comes out of Heathrow, which is one of the greatest overcharging monopolies anywhere in Europe at smarming on about need for large cost increases when they can’t burn a pizza in a brewery.
. . . I do not have great confidence in the Boeing management in Seattle. In fact, I have very little confidence in them. And therefore I expect them to continue to (expletive) up deliveries or have delayed deliveries despite the fact that they have very few deliveries to make next year. But that’s where we are with Boeing.
The Origin Story
One of the most famous examples was from Carol Bartz, CEO of Yahoo in 2009, who criticized the company for having too many management employees compared to engineers. Bartz immediately apologized on the call, saying "I knew that would slip out one of these times."
At times, executives' ire has been directed at specific analysts. In 2013, natural gas company Encana Corp apologized after an unknown employee could be heard whispering "f-----g a-----e" in response to an analyst's question. Enron's CEO also famously employed "a-----e" against a hedge fund manager who questioned the company's opaque accounting.
By the time 2016 rolled around, analysts and investors listening in to the latest round of earnings calls may have heard Kanye-esque rants, Halcon Resources CEO Floyd Wilson describe his company's properties with colorful language, or CBS's Leslie Moonves curse at Fox for its great World Series ratings.
Profanity usage was up from 2014 or 2015, but still down from earlier in the decade. Whether it was a resurgence in swearing or just finally having the ability to track it, the public was beginning to take note of just how normalized swearing on earnings calls had gotten.
Unlike 2021, the most common word to show up in conference calls over the last 10 years was "damn," as in "pretty damn profitable." Yes, words like "a--" and "s---" also showed up hundreds of times across more than 100,000 transcripts in both positive and negative contexts.
Using a fairly wide definition of profanity that includes most words that are frowned upon in your internship interview, it's clear that a small number of companies are responsible for a good portion of foul language in conference calls. The biggest perpetrators in 2016 included Cypress Semiconductor, Titan International, Scotts Miracle-Gro, Wynn Resorts and Emerson Electric. Major household names like T-Mobile and Yum Brands are also relatively high on the list.
The Swearing Strategy
Intuitively, the use of R-rated language in a conference call has the possibility to cast corporate leaders in a negative light if the profanity seems inappropriate or unprofessional. On the other hand, there is some evidence that using profanity selectively can make a person seem more intense and persuasive.
If asked whether swear words make a person seem more trustworthy, people will often say no, but if asked to rate the credibility of statements with and without swear words, the profanity actually seems to make the information seem more believable.
As a composite index, the companies with relatively high levels of profanity don't seem to be harmed too much by their word choices. In fact, that index would have beaten the S&P 500 by about 40 points over the past decade, even if that gain is mostly driven by the potty mouths at a few large companies. Most of the businesses in the index have smaller market caps, so big companies like Mastercard and JPMorgan have outsized influence.
Certainly not all profanity helps build confidence in a company. In 2007, CEO Albert Lord of Sallie Mae (SLM Corp) failed to reassure investors who were growing nervous about certain mortgage-backed securities. The executive appeared "agitated" on the call, leading into a 21 percent drop in the company's stock price.
Swearing Continues to Skyrocket in Q4
In the tightening economic and employment environments, time will only tell who the next big f--k up to drop that word on an earnings call will be. There have “only” been a few instances of CEOs dropping f-bombs while talking to investors… but you’d hope for none given they’re effectively serving as the (overpaid) figurehead of the company.
The use of the f-word tends to make people sit up and take notice. While profanity in earnings calls seems to be on the rise compared to the last few years, no CEO has f--ked up in the last three years.
But if we know anything about a bear market, it's that records are meant to be broken. (Unless you're the Knicks).
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