Details matter. A lesson from reading financial statements & earning calls

Since I started to invest in my free time, I have spent a great deal of time on reading materials related to the companies I am interested in. Much of such time is on the official financial statements from the companies. For me, it has been a rewarding exercise in and of itself as I have learned a lot about the businesses. One of the lessons is to pay attention to details which, despite in only footnotes, can carry significant information and insights. An example is this footnote from Facebook’s quarterly earning report today:

Source: Facebook

If you read the table from top to bottom, you’ll likely be surprised at the stark difference in SG&A between this and last year. The footnote below explains why it is the case. Without paying attention to the footnote, in many cases, you’ll miss out important information.

Here is how the same footnote is presented in a presentation. This time, the difference in Operating Income is more “obvious” due to the visual effect.

Source: Facebook

Another source of valuable information is the earning calls. Quite often will you find information from the calls that is not in the official report. For instance, in the last earning call, Apple revealed this on their subscriptions:

Thirdly, as you mentioned, our subscriptions are becoming a very large portion of our business and they’re growing very well above services average. And the fact that we are saying that we will surpass 0.5 billion during 2020, we’re not putting a specific date during 2020, but I think you’ve seen over recent quarters that we’ve been adding about 120 million on a year-over-year basis for a number of quarters now. And this is an incredible staggering number, right, when you think about it.

Source: SeekingAlpha

Such information, I believe, is not available in the SEC filing. Yet, it is very informative to investors.

Obviously, when you invest your own money, you’d better know as much about the companies you invest in as possible. Thus, it requires as much research as possible and I find reading materials, including but not limited to the call transcripts and financial statements, highly informative and helpful.

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