Zuora’s Todd McElhatton sees the argument that a potential return to six-month reporting periods would hamper investor access to information as an unfounded one: “Frankly, I don’t buy that,” McElhatton, the software company’s chief operating and financial officer, told CFO Dive in an interview.

In September, President Donald Trump returned to a push he had made in his first term to shift to six-month reporting periods — ditching the quarterly reports which have been mandated by the Securities and Exchange Commission since 1970, CFO Dive previously reported.

A return to the bi-or semi-annual reporting periods first mandated by the SEC in 1955 would help companies to save money and better focus on management of the business, Trump argued in a social media post. Others, however, have pointed to quarterly reports as a key “pressure point” for businesses, giving both management and investors early visibility into trends, experts have told CFO Dive.

When thinking of the impact moving to semiannual reporting may have on both investors and business leaders, it’s important to remember that public companies, are “actively involved with conferences and regular dialogue” with their shareholders outside of quarterly reporting calls, McElhatton said.

“I think it's an unfounded concern that investors aren't going to have the information that they need. There's more information that's available,” he said. “There's tons of opportunities to communicate with these companies.”

Crafting a longer runway

A long-time software industry executive, McElhatton’s resume includes stints at companies including SAP, VMware and Oracle, according to his LinkedIn profile.

He has served as COFO for Redwood City, California-based Zuora, a software-as-a-service billing subscription provider, since June 2020, helping to shepherd the business through its recent transition to a private entity in February following its acquisition by Silver Lake and GIC LTD in a $1.7 billion transaction, according to company press releases. He also sits on the board of directors and serves as a member of the audit committee for cloud analytics and data platform Teradata.

From his perspective as a finance leader at both public and private companies, as well as serving on a board, there’s “a tremendous amount of overhead and time and cost that is spent on doing the quarterly earnings,” he said.

For CFOs, a move back to a six-month reporting cadence can help eliminate some of those pressures: with Zuora’s transition to a private entity, there was a “significant amount of cost that we were able to take out that we just didn't need for overheads and insurance and third-party fees that were associated with the overhead of being a public company,” McElhatton said.  

That means revenue can then be re-invested back into the business, he said. Shifting away from quarterly reporting could also create more room for finance chiefs to maneuver when it comes to longer-term planning or decision-making, he said, noting that most CFOs would likely appreciate “longer runways” there.

With Zuora as a private entity, “one of the things that we ask ourselves is where we’d like the company to be in two years, and that is kind of the driving factor of where we make decisions,” he said. That’s not to say the business made bad decisions as a public company, but “there were suboptimal decisions that you made because, ‘hey, we've got to make [the] quarterly earnings report,’” he said.

Opening the path to public

In another potential benefit, returning to bi-annual reporting could also help bolster the number of companies that ultimately wind up going public, McElhatton said — pointing out that the current quarterly reporting requirements can prevent companies from doing so.

The number of U.S. public companies has steadily declined over the past few decades, dropping from 8,800 in 1997 to 3,952 by the end of last year, in part due to consolidation, according to a February report by Forbes — a trend McElhatton expects will continue.

“I think you're going to see more and more companies with the capital that is available, especially with private equity, saying, ‘let's be private,’” he said. “It gives us a whole lot more freedom to operate the business and a longer time frame to do the right things for the business, and it takes off a tremendous amount of overhead that you have as a public company.”

In the current environment, there’s also a “tremendous amount of capital that's out there in the private markets, and you're now seeing companies that have valuations in the hundreds of billions of dollars, that aren't in a hurry to go public,” he said. “And part of that is there's a heavy overhead [to] being public.”

When asked about the likelihood of returning to bi-annual reporting requirements, “this is probably the time that it would happen, just because there is an intense amount of scrutiny on, where can we remove some of the regulatory burdens?” McElhatton said. One of the hallmarks of the current administration has been to find ways to remove such burdens, and doing away with quarterly reports represents a low-risk way to do so, he said.