Assignment and Challenges

Our client, a $500 million NASDAQ-listed consumer brand company, endured the impact of an inaccurate short report and subsequent multiple, slanted media pieces during 2023. While management believed they understood investors’ concerns, the team wanted to confirm its thesis and offer solid data to the board so leadership could effectively take action, address misconceptions, and improve communications.

Solution

Perception Study Overview: LHA Investor Relations conducted an investment community perception study on behalf of the company to gather insights from various stakeholders, including shareholders, former shareholders, prospective investors, and sell-side analysts. The study involved interviews with approximately 30 targets. LHA analyzed data from interviews and delivered a summary presentation for the executive management and board of directors; a detailed report of data-based recommendations and analysis; and an appendix of interview transcriptions.

The analysis included 10 themes that investors deemed important, areas of concerns and praise, as well as quotes illustrating various viewpoints. A sample of the report data and recommendations follow.

Data

• 48% of the participants reported execution, in reference to achieving guidance and building credibility, would improve investor confidence.
• 69% of those who responded focused on the bottom line (46% EBITDA and 23% cash flow). Investors commented, “Focus on cash flow and profits as the “growth for growth” fad is over.”
• 48% of respondents acknowledge the complex capital structure is confusing and can be an investment hinderance. Increased simplicity would be positive.
• 58% of participants wanted more transparency by brand but note it does not need to be extremely granular details.

Recommendations

• Strategy: Prioritize investing in core brands, focus on cash flow and profitability, and align board and management with shareholders.
• Communication: Improve transparency, report operating metrics consistently, and clarify financial data by brand.
• Brand Health: Showcase brands more and conduct Net Promoter surveys.
• Management and Corporate Governance: Expand the board with (specific industry) experienced directors, leverage CFO for investor outreach, and address concerns about corporate governance.
• Short Report: Respond appropriately to short reports, dispel allegations, and maintain focus on operations.
• Capital Structure and Buybacks: Simplify the capital structure, consider modest stock buyback programs, and address concerns about debt.
• Analyst Day and Guidance: Provide detailed brand information, address conservative guidance, and focus on realistic growth expectations.
• Valuation Metrics: Focus on EBITDA, free cash flow, systemwide sales, and management quality.

Result

Management valued LHA’s comprehensive data, full interview transcriptions, and strategic recommendations. The team requested LHA give a brief presentation to the board and address directors’ questions. The leadership completed some of strategic counsel and incorporated communication guidance into the next quarter-end reporting period press release, conference call script and presentation. Combined with solid execution the stock price rose over 22% and investors indicated better understanding during the conference call Q&A session.