BlackBerry Ltd. announced on Wednesday a first quarter result that was dominated by and dominated by nonstandard numbers, exposing the company to the risk of an enforcement action by the Securities and Exchange Commission (US Securities and Exchange Commission).
The title in the earnings statement highlights the cybersecurity firm's non-GAAP revenue or revenue that does not comply with the accounting standards not authorized by the regulator.
It then lists four non-GAAP measures, including other non-GAAP sales figures, along with the corresponding GAAP-compliant measures. However, the SEC does not allow for exclusive concentration on non-GAAP measures. [1
BlackBerry from Waterloo, Ontario
commented on adjusted sales in a footnote: "In the first quarter of fiscal year 2020, the Company recorded deferred software revenue, which was, however, due to accounting for business combinations in $ 20 million, of which $ 19 million was in BlackBerry Cylance and $ 1 million in Internet of Things (IoT). "
In other words, the security software company is increasing its revenue, which GAAP never allows for an acquisition.
This is important as this additional $ 20 million will bring the company "adjusted" sales of $ 267 million, exceeding the $ 265 million FactSet consensus. Actual GAAP sales of $ 247 million are below the FactSet consensus.
The stock fell 8.6% in active afternoon trading to bring it to a 5-month closing low. Trading volume exceeded 14.1 million shares, more than three times the daily average.
Many intelligence services reported the higher number early Wednesday, suggesting that the company had exceeded Wall Street's estimates of revenue when it did not. The Company had a net loss of $ 35 million or 9 cents per share for the quarters ended May 31, lower than the loss of $ 60 million or 11 cents per share for the same period last year. The adjusted figure per share was 1 cent, ahead of the FactSet consensus for breakeven.
Looking back on the company's annual report for the year ending February 28, 2019, it can be seen that $ 12 million of software accruals acquired last year were recognized as a result of Was not allowed to be included in the accounting rules for business combinations. This means that BlackBerry has adjusted sales in the first quarter more than in the entire last year.
BlackBerry added a further footnote to its explanation of the revenue adjustment: "In the first quarter of fiscal year 2020, the Company recognized a deferred commission expense of approximately 5 million commissions earned but not recognized as a result of business combination accounting requirements. USD. " In other words, the company has also adjusted its figures to cover commission expenses on the $ 20 million in revenue it has recovered.
Corporate Communications Director Sarah McKinney responded to questions from MarketWatch on the subject as follows:
"We understand and report our results in full compliance with the securities laws and regulations that apply to us as a foreign private issuer including regulations for the application of non-GAAP measures. In particular, we present our comparable GAAP and non-GAAP results side by side in our press releases so that they are equally prominent and provide full voting on how we need to do this.
"We have been consistent with this approach for many quarters, believing that our presentation of these non-GAAP measures provides management and shareholders with important information about our financial performance," McKinney wrote in an e-mail.
But many companies have been urged by the SEC in recent years because of these very practices, some require more than a pressure and fines from the regulator to get it right, as MarketWatch has reported.
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dropped dramatically as an investigation related to "company publications, including comments on historical financial results and reports on certain non-GAAP measures, including those that are executive compensation could affect programs, certain forward-looking statements, stock trading plans and retaliatory measures.
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The company did the same thing as BlackBerry, adding revenue from acquisitions to GAAP sales figures that have led to their numbers look better.
Symantec is defending a class action lawsuit against these allegations and has recently received several SEC statements on the claims. The investigation of the company by the SEC will continue.
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Similarly, MarketWatch reported last year that ADT Inc. & # 39; s
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The use of non-GAAP measures was confusing for investors, as the company's earnings looked better. The SEC agreed and imposed a fine of $ 100,000 on the commercial and residential property security company last December. (Only three months later, the company reinstated it and even encouraged journalists to make a calculation to create a SEC-prohibited measure that makes a loss appear like a profit.)
In 2016, the SEC took part A set of updated policies will set a proper course of action against the overuse of non-GAAP figures. This she wrote to FedEx Corp.
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more than once to notify the company that it does not meet the reporting requirements related to non-GAAP disclosures. The company responded that it had made significant "proactive" changes to the release of its fourth quarter results. However, the SEC had to write again to find that these changes were insufficient.
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Rosanna Landis Weaver, payroll program manager for As You Sow, a non-profit organization that promotes business "Adding revenue that GAAP never recognizes or nobody bases on non-GAAP revenue is outrageous instead of being paid on the basis of actual numbers.
"How can they justify the capture of commissions on revenue that they will never realize in GAAP?" She said.
BlackBerry shares were down most recently on Wednesday, but rose 6.6% in 2019, while the S & P 500
has gained 16.3% and the Dow Jones Industrial Average
DJIA, + 0.17%