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The New Company Performance Metric: Earnings Before Coronavirus (EBITDAC)

$JPM $BLK

A meme circulated on Twitter recently suggesting that companies suffering from the global pandemic will trot out a new performance metric: EBITDAC, for earnings before interest, tax, depreciation, amortisation and coronavirus. It’s apparently not a joke.

Some companies are adjusting their numbers to avoid triggering defaults on loans, Refinitiv LPC reported last month.

There is really just 1 Question that corporate executives need answer when they start releasing Quarterly earnings, penning their yearly letters to shareholders and holding their virtual annual meetings in coming weeks and that is how long can the company last in this environment?

Everything else is 2nd. Cash is the King of all metrics.

There are several things companies should avoid when releasing their Quarterly updates or introductions to the Y 2019 annual report.

Gloating about results before the pandemic hit is out and CEOs should not predict the course of this health crisis. There will be time for reckoning when the danger has passed.

The thousands of companies now prepping Q-1 statements with the advice of high-priced consultants and internal public relations departments do have a few good examples from which they can draw some pointers.

A week ago, BlackRock’s Larry Fink set the sombre mood music with his annual missive.

JPMorgan Boss Jamie Dimon’s letter to shareholders published Monday was “one of his best and most useful.”

Given the human toll the disease is taking and the economic pain that many are enduring, it is important to acknowledge the suffering.

Mr. Dimon’s 2nd sentence sums it up: “Our thoughts remain with the communities and individuals, including healthcare workers and first responders, most deeply hit by the Covid-19 crisis.”

Remember that nobody cares about how the company did in the pre-virus era now.

Mr. Dimon went a step further and detailed how a worse-case scenario in which the American economy shrinks by 33% and the jobless rate spikes to 14% would impact his bank. In those circumstances, which he called “quite severe”, JPMorgan would end the year with $170-B of common equity Tier 1 capital, but would have to consider suspending dividend payments.

Whatever numbers companies decide to emphasise, they must not be too clever or overconfident.

Survival is what matters, not just to shareholders, but to employees. Explaining what is being done to keep workers productive, healthy and simply employed, is Key. Because when this health crisis breaks, and the world returns to a new normal, those companies that treated their people to the best of their ability should be able to attract Top talent at the expense of those who did not.

Have a healthy day, stay home, Keep the Faith!

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