An Investor Guide:
Effective Meetings with Management Teams
from Matt Reustle
After participating in over 1,000 management meetings – some as an investor, some as a chaperone, and some supporting management – I’ve seen the good, the bad, and the ugly. Management teams are professionally trained for these interactions, yet you won’t find many resources for the investor side of the table. This aims to fill that gap.
This guide is tailored for public investors and focuses on meetings, not calls. There is some cross-application for private markets, but they are not identical.
You must appreciate that a management meeting is unlike any other meeting. It’s a perpetual courtship, never a marriage. Communication is highly regulated. And investors’ aggressive tendencies force a guarded mentality from management. But always remember that while only 5% of the average meeting typically yields new insights, the other 95% is not a waste. View it as relationship building which brings future value.
I broke this guide into three parts:
- Preparation and Process
- Formulating Questions Effectively
- Appendix: Understanding a Company 101
If you find this useful or have feedback, I’d love to hear from you: email / linkedin / twitter
Preparation and Process
- Understand the Setting
- First meetings are for relationship building to open up direct communication
- HQ visits are massively different than being the 7th 1×1 meeting of the day
- Prioritization
- For known companies, focus on 1-2 important variables. Depth over breadth.
- For new companies, fill gaps that you couldn’t answer in your own diligence
- Know what your PM/team will ask post-meeting – ensure it is covered
- Preparation
- Have a list of important questions and keep it tucked away until the end
- Isolate your most important question. Meetings get cut short. Have it ready.
- Know who’s attending and tailor to them (CEO for strategy, CFO for financials)
- Don’t completely dismiss meetings with IR – many are valuable.
- Group meetings require a tactical strategy. There is less flow and less time.
- Managing the meeting
- Have a concise introduction to yourself, your fund, and the investment strategy.
- Control the meeting whenever possible. Avoid “running through the deck”.
- State your primary objectives of the meeting at the onset.
- You only get one first impression – make your first question strong/informed.
- Don’t make your note-taking uncomfortable.
- Ask critical questions but keep a relaxed atmosphere.
- Don’t cut off a struggled answer. Embrace silence. They will talk.
- Revisit evasive answers with a follow-up. If still evasive, revisit at the end.
- Close on a positive note – give management a chance to educate you.
- In overly critical meetings, gracefully acknowledge with appreciation at the end.
- End meeting with “I’ll share my recap notes” – the ball is in your court
- The meeting departure can be a good time to pick up psychology.
Effective Questions
Management teams are trained. They are scripted. Getting new insights requires focusing on how you ask questions.
- Understand decision frameworks over binary choices. Avoid “yes” or “no” questions:
- Worse: “Will you increase capex in this segment?”
- Better: “What would make you increase capex in this segment”
- Use peer references to better frame questions and further discussion:
- “All of your peers operate at 2x leverage, what drives the more conservative 1.5x approach from your side?”
- Build decision-making context through historical events:
- “The special dividend in 2019 – what was the framework?”
- “What was the reception from shareholders on that?”
- “How involved is the Board in those decisions?”
- Avoid overly general questions and aim to go a layer deeper:
- Better: “What’s the origin of the dividend payout methodology”
- Worse: “How do you think about capital allocation?”
- Avoid offering easy outs:
- Better: “What was the thought process behind the re-segmentation?”
- Worse: ”or am I reading too much into it and it’s not a big deal”
- Dig into the details that are behind the big initiatives:
- “You have talked a lot about your AI focus – what are the resources being put towards that?”
- Are you hiring engineers? How many?
- Where are they coming from?”
- Dig into what they don’t talk about by comparing it to what they do talk about:
- “Your ROIC is here – but your ROIIC has been declining for years – what’s driving that?”
- On critical questions, use a bad cop approach if you aren’t confrontational (yet):
- “My team keeps asking why the integration was haircut AGAIN – I know it’s apparently on track but can you help me better explain it?”
- Isolate data when you assessing future risks
- “I know your net retention is high – but if you looked at that 10% churn last year and surveyed them – what do you think is the number one reason they leave?”
- Reframe their answers to tease out nuance
- “So as long as the consolidation of your customer base continues to happen amongst itself – that’s a net neutral or potentially positive impact?”
- Or more aggressively “As long as the larger companies – who aren’t customers – don’t start consolidating your customers – then it shouldn’t be a risk?”
- Test your non-consensus assumptions through researched questions.
- “So if this is growing HSD top-line, that’s big incremental margins, that should easily drive double-digit earnings growth. Why would the street be so much lower?”
- Conservative teams are more likely to correct false negatives than affirm false positives.
- “That’s only a $2bn market so even if you get to 10% share – that won’t be more than 15% of your earnings – so not really a needle mover?”
- Companies can be weird about talking about competitors – ask tactfully
- “How can XYZ earn 500bp margin in this segment vs the peer group? What, if any, are the structural differences in your businesses?”
- Understand management’s market awareness through prompts
- “What do you think the market is missing about your stock?”
- “What were you surprised I didn’t ask about?”
Things to Remember
- Nothing bothers management more than unprepared investors
- Arrogance is not just bad for relationship building, you will get less information.
- You should be speaking less than the management team by a wide margin.
- Limit sharing your views to things that they would care about.
Appendix: Understanding a Company 101
This is a simple framework for understanding any business. MOST ANSWERS SHOULD COME WITHOUT NEEDING MANAGEMENT. If you can’t find an answer, that may be intentional, so make sure to tailor any management question with that in mind.
Income Statement
- Revenue
- Is a sale contractual or transactional?
- What percentage of business for the upcoming quarter/year is locked in on day one versus “go-get”?
- What drives a sale?
- How does this business win vs competitors?
- How long are contracts? Is it per seat, usage-based, etc.?
- How is pricing determined?
- Do contracts contain escalators?
- What is management’s strategy around price – willing to gain/lose share based on price?
- Do contracts hold up in this industry / Are they frequently broken?
- How much business is available in a given year?
- How much switching exists in the industry?
- Is there general visibility in revenue + 1 year, + 3 year, etc.
- Are there any large cliffs in contracts in future years?
- TAM
- How big is the available market?
- How fast is the market growing? Is it connected to a macro variable (e.g. GDP, new home construction, etc.)
- Is this company gaining/losing market share?
- Are there limits to share gains in any given year or in a mature state?
- Unit Economics / Margins (will vary massively by the type of company and by segment)
- What are the fixed vs variable costs in the business?
- What expenses can be modeled as a consistent % of revenue (e.g. commissions, advertising)
- What expenses allow for operating leverage? (e.g. G&A)
- What is P&L of a new location, payback period, and time to reach mature state?
- What is ROI of a new widget sale?
- LTV to CAC for a new subscriber?
- What is the incremental margin on future sales?
- What is the pace of margin improvement/compression?
- What is a mature state for margins? Do you have evidence they can get there?
- Is there a risk that margins are TOO high because they are currently underinvesting in R&D/headcount or getting greedy with price?
- Cyclicality
- How cyclical is the revenue?
- How has the market performed in macro downturns?
- How has the company performed (financially) in those downturns?
- Are they gaining or losing share in downturns?
- Miscellaneous
- How does FX impact the business?
- Are there any unique accounting principles around revenue recognition?
- Is there anything unique about tax rate and future tax policy?
Cash Flow Statement
- Working Capital
- For every dollar of revenue – what is tied up in working capital?
- Understand nuances around inventory, receivables, and payables
- Non-Cash Expenses
- How does depreciation compare to capex over a 1, 3, 5-year period?
- How does share-based compensation impact FCF?
Balance Sheet
- Leverage
- Target DEBT/EBITDA?
- Interest coverage ratio?
- When is management willing to add leverage?
- Liquidity
- What is the minimum liquidity?
- How does management think about any revolving facility as a function of liquidity?
- Debt/Liabilities
- Floating vs Fixed interest rate exposure
- Is there potential to bring down interest costs in the future from refinancing?
- Are there upcoming maturities?
- Any unique instruments in the capital stack?
- Who are the lenders and do they have a reputation?
- Covenants
- Any unique pension or lease liabilities?
Value Chain Analysis
- Relative Power within an Industry
- Where does the value accrue in the industry?
- Does pricing flow evenly from the initial supplier to end-customer? What drives gaps?
- What differentiates companies within an industry?
- Is there significant revenue concentration?
- Is there significant supplier concentration?
- Do monopolies or oligopolies exist in the value chain?
- In cyclical markets, where are the chokepoints in booms?
- Is vertical integration common within the peer group?
- How does regulation impact value accrual?
Capital Allocation + Key Metrics
- Capital Spend
- What is maintenance capex?
- What is return-on-incremental-invested capital?
- What are the payback periods?
- What is the useful life of new projects?
- Shareholder Distributions
- Preference for dividends vs buybacks?
- What is dividend policy?
- How has that changed over time?
- What is buyback methodology?
- What valuation methodology do they use internally?
- What is track record on buybacks?
- M&A
- When does the company make acquisitions?
- What is the process for making acquisitions? (tuck-in or transformative)
- Where do they source their opportunities?
- How do they structure acquisitions? (equity/debt/JV-first)
- What is return profile of those acquisitions?
- Are there non-core divisions that could be spun off?
- How does management view the synergy of divisions?
Incentives + Proxy Analysis
- How is management incentivized?
- How much equity do they own?
- How does that compare to peers?
- Do those metrics align with what shareholders typically reward?
- How are separate divisions compensated?
- What % is based on company performance vs. division performance? Equity vs cash?
- Corporate governance
- Is there anything unique with voting shares?
- Poison pills?
- Board
- Who makes up the board? Insider vs Outsider
- How much turnover on board?
- What gets put to vote annually? Anything unique?
Miscellaneous
- How has management guidance aligned with actual performance?
- What is track record of CEO and CFO?
- Understand bad periods and the mindset from what happened. If caught offside, what has changed?
- What are the biggest constraints to growth? Capital? Labor? Service improvement?