| Brian Pittman’s exclusive interview this week: Michael Salter, Director of Investor Relations and Corporate Communications, MOSAID Technologies
Still having trouble separating fact from fuss when it comes to social media and IR? Leery of falling victim to “Shiny Object Syndrome”? Seeking more model best practices for integrating social media into traditional IR programs?
Then consider the case of MOSAID, which has successfully incorporated Web video into the company’s recently launched IR Channel. Specifically, “Web video has become an indispensible tool here for reaching retail investors,” says MOSAID communications and IR director, Michael Salter. “I think we are going to see a dramatic increase in the use of video for IR in the coming years.”
It just makes sense, he explains: “People are consuming more and more information via video, and eventually it’s going to seem very natural to be able to view a video of the management of the company you are investing in. Using video is inherently democratic. At present, meeting top management is a privilege that’s largely reserved for institutional investors,” says Salter, who works with Web video platform and provider Investor Candy to deliver no-nonsense, high quality online IR focused video.
With video, “IR professionals can essentially extend that offer to everyone,” he continues. “And that’s a key reason we implemented a dedicated investor channel, because it creates a new kind of experience for investors.” Salter adds that the videos on the company’s IR channel can be viewed on an iPhone, Blackberry and other smart phone with Wi-Fi capability.
But the MOSAID Investor Channel is about far more than video, Salter stresses. “We see it as a powerful communication platform that is going to allow us to work with the sell-side to extend our message into new communities of investors.” In addition, the Investor Channel includes administration software that allows Salter to track video viewing, downloads, account set up and so on. “The response has been very good,” he says.
Read on for details behind MOSAID’s forward looking IR channel—and Salter’s tips, caveats and roadblocks other IROs can expect to encounter when incorporating social media:
You’ve had a great year, what with earnings up 40 percent. And yet you’re undervalued, according to a recent Business News Network interview I saw posted on your IR channel. How do you deal with that and better educate the market about what you do?
When we say we’re undervalued, we’re looking at it on a price earnings basis in comparison to some U.S. peers and those that do patent licensing. I’m thinking of companies like InterDigital, Tessera and Acacia (Technologies) and Rambus. What we’re looking at is that on an operations metric standpoint, we score highly, and on the valuation metrics side, we score lower. On a P/E basis, etc., we score less than our peers—even though we basically restructured the company back in 2007.
Can you give a quick background on the restructuring and the proxy contest that drove it—and then tie that into your value story to investors?
MOSAID was founded in 1975 and was doing semiconductor design focusing on memory chips. We had a memory chip tester business. Around 1999, we our signed first patent license agreement. And then in the fall of 2006, we had a proxy contest that resulted in a hedge fund called Loeb Partners getting three seats on the board. Then in the following year, we decided to focus on patent licensing only. We sold the chip design and memory test business—and started to bulk up on patents.
So really, you look at our fiscal ’07 revenues and they ticked down as we restructured. In ’09, they grew by 14% and the same in ’10. We’ve been profitable for five years in a row over six years at a 22% compounded annual growth rate. We report Canadian GAAP and use pro forma net income, and have a 35% compounded growth rate in earnings.
Another important thing is that we are one of the few Canadian small-cap technology companies to pay a dividend; it’s about a 4.5% yield and we’ve been paying that for five years. The next important piece to mention is that we continued to grow during the downturn. We delivered that dividend in the worst of downturn and continued to post revenue growth.
So, we have a fairly stable growth story—it’s not hockey stick, but it’s high profit and there’s a real degree of consistency in the patent business.
Getting back to the standpoint of being undervalued, then: We are delivering on results three years into the restructuring, but are still undervalued in our eyes, yes. As a result, we wanted to do something different to tell our stories to investors.
How are you doing that—where did you start?
Well, we started with all the usual things. We started marketing aggressively in ’08 and late ’09 because our results stood up. When you show that in a downturn, people are more interested in the story. There’s no question that when the stock hit a low of $7 Canadian in late ’08 and throughout ’09, we then had a good run peaking at $25 in early ’10. We’ve since given some of that back as of late. The main point here is we think from a valuation perspective, there’s a lot of room to grow.
So, one of the things that IR people normally do in a situation like that is they take the story out and get it in front of more people. We’ve done that by:
1. Increasing analyst coverage. At the lull, we had four and now we have five. I think another two will start to cover us, soon, as well. We took the route of doing more aggressive marketing to get more coverage.
2. Increasing road shows. Twice a year, we just go down and visit analysts for a day, in addition to visiting with investors. We dedicated two days a year to this—and we just got more rigorous in terms of asking covering brokers taking us out to include 25% new names on every trip. We were more insistent around that. We also increased the schedule of events—we basically asked for briefings of the sales desk at brokerages, including retail sales lunches. In 2006, by contrast, we did a road show and just visited buy side clients. But now, a typical day will include briefing the sales desk and a retail broker lunch.
3. Increasing outreach beyond Toronto. Canadian IR tends to be Toronto-centric, so we wanted to break out of that and our geographic trips increased as a result. We made sure we visit Vancouver, Calgary and Montréal on a more regular basis.
4. Increasing financial media relations. Another point tangential to IR is that we have a dedicated business channel in Canada called the Business News Network. In ’06-’07, we weren’t on that at all. I developed our relationship with BNN so we are now on four to six times a year. We can use those interviews as links on our website, which you saw, and then send those to our lists, and so on.
5. Increasing IR database contacts. We also re-focused on building our IR database of names more proactively using blast emails to update contacts on of all our financial information. Related to this is that we’ve increased our regular communication to our holders.
Good ideas all—what about non-traditional efforts. When did those start?
Beyond putting in place an IR strategic plan, getting more aggressive about marketing and our media outreach, we also started our MOSAID Investor Channel, which went online January, 2010. That’s the big new initiative.
What have the results and feedback been like?
They’ve been excellent. This is not necessarily about reaching a mass audience—it’s the about quality over quantity. So the feedback is more qualitative. That said, the reactions I’m getting are, for example, other IR professionals at a bank saying MOSAID is differentiating itself, a retail broker out in Vancouver saying it’s great because she can now send the videos to her client lists, and that those clients actually get to “meet management” via those videos.
Our chairman Carl Schlachte—a former CEO, and also past president of ARC International, which does configurable processor technology—got it right away. His reaction was, “I wish my guys had this for me. It would have saved me all kinds of time.” What he meant was: How do you do retail outreach?
Reaching retail shareholders has always been a huge issue for IR. That’s because it’s not cost-effective for management to do a lot of retail broker meetings, let alone meet small retail shareholders. So, with our investor channel, it’s not just about video—it’s a communications platform that gives the retail broker an ability to set up a private account that has nothing to do with us and then send video to his client list.
There is software in the Investor Candy platform that lets him see who viewed the video.
So why did you go this route—considering all the trends and tools in social media?
In the context of social media, we looked at Twitter, LinkedIn, YouTube, blogs and so on. Essentially, we centered on the use of video as being best suited for our company and IR. I think it hooks into social trends—it meets IR challenges and it’s fundamentally about creating a different kind of investor experience. It’s founded in the idea that a privileged few investors meet management. From a trends standpoint where securities regulators talk about access to management—video suits the bill.
What about triggering decisions to consider your stock—how does video help with that?
It’s not just a simple matter of video. Really, you have to get more people consuming your message. Clearly, video is one way of doing that. Once they’ve consumed your message, that becomes the precursor to considering your stock as an investment. That consideration is a precursor of demand.
Where does this initiative stand now, since you launched in January?
Stage two of this project for us is about working with the broker community and covering analysts to get them to use the Investor Channel as a way to begin engaging their clients. Now that we have it up and running, our goal is to actively educate people about the Investor Channel and engage with retail brokers to see if they’re interested in using it and get feedback as to how we can evolve that tool.
For example, BMO Capital Markets has been covering MOSAID for many years. They are a schedule one Montreal bank with a cross-Canada retail bank network. They have hundreds of retail brokers and have offices in the U.S. They’ve been doing equity research with us for years, and we’ve been a top pick of theirs many times. They’ve seen this channel and like it. We will be asking them how to introduce the channel to their retail brokers. They are reading research reports on us, and now they have video and other tools to help them with their sales kit.
People are using video all over the place online—so what’s the real innovation here? And what lessons for IROs come out of that?
Well, the video you’re referencing is typically advertising or marketing-communications driven. There are sales videos, videos from the trade floor and lots of corporate videos out there. But people haven’t created a dedicated investor channel with a commitment to content over the long term. That’s the innovation.
Our strategy will be to generate a video accompanying every press release MOSAID does. Frequency should be about 12-15 new videos per year. So you would have an earnings video every quarter. If you have a major customer win or contract announcement, there would be a video, as well. In our case, we are involved in litigations on patent licensings, so we’d also do a litigation update video, for example.
Beyond the regular flow of new videos, we also have “strategy videos” about our vision and strategy. These include the CFO talking about how and why we give guidance, for example.
Have you ever seen a video by a CFO on the practice of giving guidance? Probably not. So we have a library of videos talking about the strategy and operations of the company—and those are updated on average about once a year. Then, there’s the regular stream of new content. So, among the challenges is that it can’t be a one-off effort. Video must be a key component of a sustainable IR strategy.
What other challenges are there for IROs considering Web video?
In terms of IR people doing this—there is a learning curve involved. We worked on this a solid eight months before launching it. We had to be sure our key execs were comfortable with video, that the board signed on, and that we were willing to dedicate the time to it. I must emphasize that the time component is more critical than the costs. It’s a reasonable cost—we’re not talking here about $150,000 corporate videos featuring things like cakes and corporate HQ scenes and airplanes. We shoot this onsite against a white backdrop. It’s extremely low-cost compared to traditional corporate video.
It’s not advertising or marcom style video, either. It’s IR/corporate communications video—and that’s a very different style. More important, though, is the management of time and commitment.
So how did you determine the tone and look?
We did a lot of preliminary research determining the look and feel that would work for investors. We did a series of interviews with covering analysts and existing shareholders talking about how management communicates and how we’re perceived. We were aiming for authenticity. We came up with a catch phrase … that people knew us for our “quiet confidence.” We wanted a look and feel that reflected that.
One of the biggest reactions since we launched has been people saying, “These are not commercials.” That’s key—you can’t have anything in it that seems promotional. Also, these aren’t two-minute short videos. They run five to seven minutes. People may say that’s too long—but not for IR. Would you spend five minutes reading an annual report or 10K…yes. So, we’re not trying to be entertaining. It’s information.
What about disclosure issues—how do you address that?
We put the script and the finished video through the same disclosure process as we do for any other publicly released document. In the same way we review MDNA, financial statements, press releases, annual reports and so on—we use a disclosure committee here. We put the video script through the committee and then we review the final video with them. We look at everything from the script to titles to graphics, etc.
Video is a different medium and securities regulators are putting out guidelines for the use of electronic communications. So, we also have the entire channel reviewed by our securities lawyers. For instance, we tweaked the forward-looking statements that run in front of each video.
Any caveats or lessons for others based on your learning curve?
One thing we learned was this: Prior to launch, we were shooting videos and using promotional language such as, “We know you have made an investment in MOSAID or are considering one…” or, “We welcome you as a new shareholder in MOSAID.” Our securities lawyer said if we used promotional language like that, the entire video could be seen as a secondary offering. So we had to go back and scrub all that language. That took us a week of editing to remove that—so that’s a big tip here for readers. Do that review first.
We don’t say, “Here are the top ten reasons for buying MOSAID stock,” and we don’t talk about our thinking of why it’s undervalued. We just talk about our business strategy, our revenue growth strategy, our guidance—just the facts. So we had to learn what’s acceptable and not acceptable in video.
Another example is this: We announced a share offering in late January of 2010, then we closed in February. Our lawyers advised us to shut the channel down during the period that shares were on offer, until the shares had been distributed, because there was a concern that the channel might be viewed promoting the new offering, even though we had it vetted. So we did that to be on the safe side. We had a three-week period where we took it down. Lots of people noticed that and asked for it back.
So, you have to take the time to have it legally vetted and planned out. Take the time to figure out your review and disclosure process.
Can you elaborate on your choice of Investor Candy as your platform?
We are the first client for Investor Candy. We are also the first in Canada to start a dedicated investor based channel, so we’re breaking new ground with them. What I liked about Investor Candy is that Curtis Hollister, the founder, is an entrepreneur. He started and sold a few companies. He is not a traditional IR person or IR service provider. They class themselves as an innovation or ideas company. They are extremely bright and just bring a very different perspective. I didn’t feel I was working with a traditional investor relations supplier. They were bringing me something different.
This wasn’t intended to replace any of the traditional work we do. I wouldn’t stop doing any of the traditional IR efforts. This was about engaging with shareholders differently and creating a different investor experience—that’s what they brought to us.
IR communications tends to be conservative and should be. I don’t think IR should be leading the charge on communications practices. I report to a CFO. Company finances are supposed to be conservatively managed. Yet, there’s no doubt we’re a television culture now. YouTube is popular for a reason. This is about how to use video as a communications platform within investor relations, and how to do it in a planned, strategic way.
So, they’re an innovative company, and we love their platform. But beyond that, the innovation here, again, is the dedicated nature of the channel and the commitment to produce videos on a regular basis—not having this mistaken as marketing communications. This is video for investors. If you think about an investor meeting where you’re talking about growth rates, expenses, margins, total available markets, ratios of all kinds and so on—a lot of people will look at these videos and say they’re boring. That’s fine. Our model is to create an investor relations video genre—and then to work with the investment industry to learn how to extend the reach of these videos via their networks. That’s where we are now. That is the big job for the next six months or year. Internally, we made a two-year commitment to this to fund it. You can’t start it and let it run out of steam.
What other social media tools are you looking at?
These days, analysts and investors are using these tools, so you should be there, too. On that note, using Twitter may be fine for a company with a lot of PR activity—that’s right for them. But you have to figure out what social media tool is right for you and your particular needs. Previous to this, I worked for a company that did a press release a week. Here, I do half that. So de facto, there is less to “Tweet” about. It’s the same with blogging. There is frankly just less for MOSAID to blog about. We’re a patent licensing company, and we are prevented from discussing or disclosing those contracts or details.
So when we were doing our analysis of how to respond to social media—we realized we don’t have a lot to blog about. Another thing I’ve noted from IR people and others is they run out of stuff to talk about. There just isn’t that much they can talk about—so they end up talking about trends in the industry, etc. But every single video here is about our business. A core principle about corporate communications and IR is to approach everything by asking, “How does this help my business?” A CEO blog on some business trend isn’t really about his or her business. But these videos are about our business, our strategy, our operations and our investor story. Other tools didn’t fit us and our circumstances at MOSAID.
In IR, the question is, “How does this help you get people interested in your shares?” That’s it. Video answers that for us.
Is it easier to incorporate this stuff from an IR perspective when you hold a dual IR/PR role?
I would think so. At a company with 50 employees, I’m responsible for IR, corporate communications, media relations and the Web. I can see overlapping roles potentially creating issues at larger companies concerning who would have responsibility for implementing an investor channel.
What’s your advice to other IROs in terms of being strategic about integrating social media in general?
It starts with an analysis of your company’s communications challenges and which tool you think furthers your objectives. There is a feeling that if you say no, you’re not “with it.” So counter that by rigorously analyzing this, conducting a communications analysis of your own situation—frequency, what you can say and not say—and your industry sector’s business model.
For us, video fit our situation and strategic needs. We knew we were coming out of meetings with buy-side clients and they were saying that patent licensing is hard to understand—but when our execs speak, it’s credible, strong and clear. We were having success when people met management. So, this is an extension of that, because management had a lot of credibility coming away from face-to-face meetings. This became a great way to introduce management to shareholders and talk about a business model that few public companies are engaged in.
Video leverage is one of your best assets if management is a strength for you as an IRO. You can have tens of thousands of people meeting management this way, whereas in an average year, you as an IRO might be doing up to eight trips. There are only so many people who can meet management via traditional road shows. This takes it all to the next level. |
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