BlackBerry Ltd. reported first-quarter fiscal result on Wednesday that led by and was dominated by non-standard numbers, and puts the company in jeopardy of US Securities and Exchange Commission enforcement.
The headline of the earnings release highlights the company's non-GAAP revenue, or revenue that does not match generally accepted accounting principles, does not allow a regulator to allow.
It then continues to list four non-GAAP measures, including other non-GAAP revenue numbers, along with their corresponding GAAP measures, but the exclusive focus on non-GAAP over default numbers is also not permitted by the SEC.  Under SEC rules, companies must lead with their GAAP numbers. They are allowed to add non-GAAP calculations, as many companies say provide a more accurate picture of underlying earnings. But they must equalize the two numbers and offer a full reconciliation of the two.
Waterloo, Ontario-based BlackBerry
explained his adjusted revenue in a footnote: "In the first quarter of fiscal 2020, the company recorded software paid revenue but not recognized due to the $ 20 million business relationship accounting policies. Of which $ 1
In other words, the security software company enters revenue that will never be allowed under GAAP as a result of an acquisition.
That's important because the extra $ 20 million gives the company a "adjusted" revenue of $ 267 million, bringing it over the FactSet consensus of $ 265 million. The actual revenue number, under GAAP, is $ 247 million, under the FactSet consensus.
The stock tumbled 8.6% in active afternoon trading, to put it on track for a 5 month closing low. The trading volume increased by 14.1 million shares, more than three times the full-year average.
Many news services reported the highest number early in Wednesday, suggesting that the company had beaten Wall Street estimates of revenue as it had not. The company achieved a net loss of $ 35 million, or 9 cents per share, in the quarter to May 31, narrower than the $ 60 million loss, or 11 cents per share, posted in the previous period. It is adjusted per share number was 1 cent, before FactSet consensus for breakeven.
Looking back on the company's annual report for February 28, 2019, it shows that it has been adjusted for software-deferred revenue of about $ 12 million, which was acquired but not allowed to be recognized last year due to the business context accounting policies. This means that BlackBerry has made a larger adjustment to revenue in the first quarter than last year.
BlackBerry added its explanation of the revenue adjustment in another footnote: "In the first quarter of fiscal 2020, the Company recorded deferred commission costs on acquired but not recognized due to accounting policies for business relationships of around $ 5 million."  In other words, the company also adjusted its numbers to recognize commission cost of $ 20 million of revenue it added back, even though it will never recognize either the sum of its own books.
Corporate Communications Manager Sarah McKinney responded to MarketWatch issues in the case with this statement:
"We fully understand and report our performance in accordance with the Securities Act and the regulations that apply to us as a foreign private issuer, including rules of use In particular, we present our comparable GAAP and non-GAAP results immediately side by side in our press releases, giving them the same highlight, and we are giving full tuning that we need to do.
"We has been consistent in this approach for many quarters, and we believe that our presentation of these non-GAAP measures gives management and shareholders important information about our economic development, "McKinney wrote in email comments.
But many companies have been called off by SEC in recent years for these very practices, some requiring more than one push and fines from the regulator to get it right, like MarketWatch have reported.
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] At the end of 2018, Symantec stock
SYMC, + 0.58%
fell dramatically when it revealed a survey related to "the company's disclosure including comments on historical financial performance, reporting of certain non-GAAP measures, including those that could affect executive compensation programs, certain forward-looking statements, stock trading plans and retaliation. "
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The company did the same as BlackBerry, returning income write-downs from acquisitions to GAAP income figures that made their numbers look better.
Symantec now defends a class-action lawsuit regarding these claims and recently received several commentary letters from the SEC on the information. The SEC's survey of the company continues.
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MarketWatch also reported last year at ADT Inc.s
ADT, + 1.36%
use of non-GAAP calculations was confusing to investors as it made the company's numbers look better. The SEC agreed, and hit the commercial and residential security company with a $ 100,000 fine in December, and ordered it to cease and design the non-standard revenue calculations. (Just three months later, the company again used them again, even encouraging journalists to make a calculation to make a calculation that the SEC has banned, and which makes a loss as a profit.)
Back in 2016 , the year the SEC began a proper breakdown on overuse of non-GAAP numbers with a set of updated guidelines, it wrote to FedEx Corp.
FDX, + 2.97%
more than once to tell the company that there were no reporting requirements related to non-GAAP information. The company responded to saying it had made significant "proactive" changes in its fiscal fourth-quarter earnings release. However, the SEC had to write again to say that these changes were not enough.
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Rosanna Landis Weaver, CEO of the CEO pays editions at As You Sow, a nonprofit that promotes corporate social responsibility, told MarketWatch about BlackBerry: "It is outrageous that you add back revenue that is never recognized by GAAP or has anyone paid on the basis of non-GAAP revenue rather than real numbers.
"How can they justify accounting for commissions on revenues they will never recognize in GAAP?" she said.
BlackBerry shares were last Wednesday but has increased 6.6% in 2019, while S&P 500
received 16.3% and Dow Jones Industrial Average
DJIA, + 0.17%
has received 14.0%.