We Are Going to Miss Guidance — What Do We Do?

Market volatility, economic uncertainty, and changing business conditions can make it difficult for public companies to maintain previously issued earnings guidance. When management teams determine that actual or expected results are likely to fall materially outside prior guidance, companies should carefully evaluate whether additional disclosure is appropriate. A divergence from analyst or broader market expectations may be relevant to that assessment, but it does not independently create a duty to disclose.

If the company is engaged in, or preparing for, a securities offering or other capital markets transaction, disclosure considerations are more nuanced. Companies should carefully assess whether prior guidance, offering materials, and diligence disclosures remain materially accurate and complete in light of evolving results and trends.

Is There a Duty to Update Prior Guidance?

Generally, companies do not have a broad affirmative duty under the federal securities laws to update prior earnings guidance solely because later events cause expectations to change. However, companies should consider whether prior statements remain materially accurate and not misleading in light of subsequent developments. The analysis is specific to the company’s particular facts and circumstances. Even when no clear legal duty to update exists, companies may determine that updating or withdrawing guidance is the more prudent disclosure approach under the circumstances.

Evaluate the Situation Early

Once management becomes aware of a potential guidance miss, the company should assess the anticipated size of the variance, the reliability of available financial information, whether the shortfall appears temporary or indicative of a broader trend, the timing of the company’s next scheduled earnings announcement, and whether prior public statements remain accurate in light of current developments. There is no mandated threshold requiring a company to preannounce earnings results.

Should the Company Prerelease Results?

If management concludes that previously issued guidance is no longer achievable, the company should consider whether waiting until the scheduled earnings release could create disclosure or investor relations concerns. Relevant considerations may include the magnitude and visibility of the expected miss, recent statements reaffirming guidance, ongoing investor or analyst engagement, unusual trading activity or market speculation, and whether silence could be viewed as misleading in context. Companies that choose to prerelease information typically do so after the relevant quarter or fiscal year has ended, once preliminary results are sufficiently reliable, and before the regular earnings announcement. When a company publicly discloses material nonpublic information regarding its results of operations or financial condition for a completed quarterly or annual period, it should also evaluate whether the disclosure triggers an obligation to furnish a Form 8-K under Item 2.02. The analysis should also consider Item 2.02(b), which exempts information disclosed orally, telephonically, by webcast, or by broadcast as part of a presentation complementary to a related written announcement furnished on Form 8-K, but only if its timing, accessibility, website, and notice conditions are all satisfied.

An Item 2.02 report must disclose the date of the announcement or release, briefly identify it, and include its text as an exhibit, and the non-GAAP requirements of Item 10(e)(1)(i) of Regulation S-K apply to the disclosure. Because Item 2.02 reaches only completed quarterly or annual fiscal periods, a mid-quarter revision of guidance for a period still in progress does not trigger it, although Regulation FD and a voluntary Item 8.01 report should still be considered. Release of additional or updated material nonpublic information regarding a completed period triggers a further Item 2.02 obligation, so a company that prereleases and later refines its preliminary figures should expect to furnish a second report.

Reassessing Guidance Practices

Public companies are generally not required to provide earnings guidance, and many companies revisit their approach during periods of heightened uncertainty. Potential alternatives may include temporarily suspending guidance, withdrawing previously issued guidance, replacing quantitative guidance with qualitative commentary, broadening ranges or limiting guidance to selected metrics, or reducing the time horizon covered by guidance. When a company changes or discontinues its guidance practices, it should generally make the announcement through a method reasonably designed to provide broad, non-exclusionary distribution of the information to the public.

Practical Checklist

Companies evaluating a potential guidance miss should coordinate closely among legal, finance, and investor relations teams and, when appropriate, involve the disclosure committee and outside advisors.

• Could prior guidance or recent public statements become materially misleading in light of current developments?
• Has management recently reaffirmed guidance publicly or in investor discussions?
• Could the anticipated variance warrant a prerelease or interim disclosure?
• Does the company have sufficient confidence in preliminary results to support any interim disclosure?
• Are analyst expectations materially inconsistent with expected results?
• Could silence create increased disclosure, litigation, or reputational risk?
• Have any analysts or investors been selectively updated in a manner that could raise Regulation FD considerations?
• Should insider trading restrictions or blackout periods be revisited?
• Do risk factors or forward-looking statement disclosures require updating?
• Is the company engaged in, or contemplating, a securities offering, an at-the-market program, or another financing activity?
• Could offering materials, diligence disclosures, or comfort procedures require updating?
• Could a prerelease trigger Form 8-K Item 2.02 obligations?
• Are disclosure committee members, auditors, and outside advisors aligned on timing and messaging?
• Have disclosure decisions and escalation procedures been appropriately documented?