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BlackBerry violates SEC rules with use of non-standard metrics
Cybersecurity company is using an adjusted revenue number that is not allowed by the SEC; stock drops toward 5-month low.
BlackBerry Ltd. reported fiscal first-quarter earnings on Wednesday that led with and were dominated by non-standard numbers, putting the company at risk of an enforcement action from the U.S. Securities and Exchange Commission.
The headline on the earnings release highlights the cybersecurity company’s non-GAAP revenue, or revenue that does not conform with Generally Accepted Accounting Principles, a metric the regulator does not allow.
It then proceeds 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 standard numbers is also not allowed by the SEC.
Under SEC rules, companies must lead with their GAAP numbers. They are allowed to add non-GAAP metrics, which many companies say give a truer picture of underlying earnings. But they must give equal prominence to the two sets of numbers and offer a full reconciliation of the two.
Waterloo, Ontario-based BlackBerry BB, -8.45% explained its adjusted revenue in a footnote: “During the first quarter of fiscal 2020, the Company recorded software deferred revenue acquired but not recognized due to business combination accounting rules of $20 million, of which $19 million was included in BlackBerry Cylance and $1 million was included in IoT (Internet of Things).”
In other words, the security software company is adding in revenue that will never be allowed under GAAP as the result of an acquisition.
That matters because that extra $20 million gives the company an “adjusted” revenue of $267 million, which brings it above the FactSet consensus of $265 million. The actual revenue number, under GAAP, is $247 million, below the FactSet consensus.
The stock tumbled 8.6% in active afternoon trading, to put it on track for a 5-month closing low. Trading volume topped 14.1 million shares, more than triple the full-day average.
Many news services reported the higher number early Wednesday, suggesting the company had beaten Wall Street estimates on revenue, when it had not. The company posted a net loss of $35 million, or 9 cents a share, in the quarter to May 31, narrower than the loss of $60 million, or 11 cents a share, posted in the year-earlier period. It’s adjusted per-share number was 1 cent, ahead of the FactSet consensus for breakeven.
Looking back at the company’s annual report for the year to Feb. 28, 2019 shows it adjusted for software deferred revenue of approximately $12 million that was acquired but not allowed to be recognized last year due to business combination accounting rules. That means BlackBerry has made a larger adjustment to revenue in the first quarter than for all of last year.
BlackBerry added to its explanation of the revenue adjustment in another footnote: “During the first quarter of fiscal 2020, the Company recorded deferred commission expense on acquired but not recognized due to business combination accounting rules of approximately $5 million.”
In other words, the company also adjusted its numbers to recognize commission expense on the $20 million of revenue it added back in—even though it will never recognize either sum on its own books.
The company’s head of corporate communications Sarah McKinney responded to MarketWatch questions on the matter with this statement:
“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 rules regarding the use of non-GAAP measures. In particular, we present our comparable GAAP and non-GAAP results immediately side-by-side in our press releases, giving them equal prominence, and we provide full reconciliations as we are required to do.
Back in 2016, the year the SEC began a proper crackdown on the overuse of non-GAAP numbers with a set of updated guidelines, it wrote to FedEx Corp. FDX, +2.69% more than once to tell the company it was not meeting reporting requirements related to non-GAAP disclosures. The company responded to say it had made significant “proactive” changes tin its fiscal fourth-quarter earnings release. However, the SEC had to write again to say that those changes were not enough.
https://www.marketwatch.com/story/blackberrys-use-of-non-standard-metrics-violates-sec-rules-2019-06-26
Geithner's Tax Troubles Are Serious
Timothy Geithner has just run into a potentially serious obstacle on the road to his confirmation as Barack Obama's Treasury secretary.
Tuesday, the Senate Finance Committee made public concerns about Geithner's tax obligations, which resulted in his recent payment of $42,702 in additional taxes and interest for tax years 2001 to 2004. In addition, the committee's report on the matter says that in 2005 Geithner employed a housekeeper for about three and a half months after her ability to work in the U.S. had lapsed.
Speaking to reporters Tuesday, Committee Chairman Max Baucus, D-Mont., described Geithner's errors as "serious," but he said they were "honest mistakes" that "do not rise to the level of disqualification." Baucus also said Geithner corrected the problems as soon as he learned of them. The Montana Democrat wants to have a confirmation hearing on Friday because he says it's important to have a Treasury secretary on "day one." Obama's inauguration takes place Jan. 20.
But Geithner's tax troubles are more worrisome for his confirmation than Baucus lets on–and not just because the Internal Revenue Service is part of the Treasury Department.
According to the Senate committee's report, Geithner "recently filed amended tax returns" for each tax year from 2001 through 2006. However, the report doesn't specify when these returns were filed, leaving open the question about how long Geithner knew about the improprieties before he fixed them.
On Dec. 5, Obama's transition team told Finance Committee staff that Geithner hadn't paid social security or self-employment taxes on income received from the International Monetary Fund from 2001 to 2004, the report says. Three years ago, the IRS audited Geithner for tax years 2003 and 2004, which resulted in him paying back taxes and interest–but no penalties–totaling $16,732.
However, Geithner voluntarily amended his 2001 and 2002 returns only after Obama expressed interest in nominating him to the Treasury post. The total bill this time: $25,970.
Income taxes for U.S. citizens who work for the IMF can be tricky. The IMF doesn't withhold an employee's share of social security taxes, and all of the organization's employees are responsible for meeting their own tax obligations. The IMF gives its employees–Geithner included–direction on how to pay self-employment taxes. And Geithner, a former Treasury official who is now president of the New York Fed, has dealt with complicated tax issues before, the report notes.
Was Geithner previously aware of irregularities on his 2001 and 2002? Did he only correct them when it became evident that a congressional committee would likely scrub his tax records in anticipation of confirmation hearings? The report doesn't say. Officials from Obama's transition team were not immediately available to comment.
But there's another concern, related to three people who have worked for him as household help since 2004. "He did not obtain the required Form I-9, Employment Eligibility Verification, from these persons at the time they were hired to verify their legal work status," the Finance Committee's report says.
Nonetheless, Geithner was apparently aware of their legal status–someone entered into an address book owned by the Geithners, the report says. The Geithners apparently made a record that one employee's legal work status expired in July 2005, though she "did not renew her legal work status and the Geithners did not follow up with the employee to confirm whether she had done so." The person remained on the family's payroll until October 2005.
For now at least, Obama is standing by Geithner, one of his most vaunted Cabinet nominees.
"The president-elect chose Tim Geithner to be his Treasury secretary because he's the right person to help lead our economic recovery during these challenging times," incoming White House Press Secretary Robert Gibbs said in a statement. "He made a common mistake on his taxes and was unaware that his part-time housekeeper's work authorization expired for the last three months of her employment."
And Senate Democrats–including Majority Leader Harry Reid and Sen. Charles Schumer of New York–are already starting to rally behind the nominee, who has been a major player in the government's response to the economic crisis.
https://www.forbes.com/2009/01/13/treasury-geithner-obama-biz-beltway-cx_bw_0113geithner2.html#591558444817
US Market Report
A lackluster day today-here as well as on world markets as previously mentioned it is on hold for the weekend habbenings-it has not done much since futures had it's yo-yo action prior to opening bell.
Tech shares led the way even with the current situations surrounding them. Remember we most likely own these things so shorting them will be an exercise in hair-pulling. Munchkins often-repeated mantra of "it's almost done" or "it's X % there" was the catalyst.
Trade-sensitive industrial stocks, led by Boeing Co, provided the biggest lift to the Dow. The SP500 has actually under-performed
when you measure it against the others. Chinese stocks dipped at the open, scrambled back and then did nothing for the rest of the day. European stocks ended lower - despite the Mnuchin pop.Today's strength was a rebound in cyclicals as recent out-performance of defensives was dumped.
The volume on it has been less than stellar too-that will need to see some improvement imo.
Treasury yields spiked notably higher today (front-end under-performing). See Cap#3
10Y yields worked their way back up to a key resistance level from FOMC day…with a deja vu nature to the move.
The Dollar dipped today but remains in a tight range for the 3rd day since the FOMC day dump. A rise in crude prices boosted energy stocks-cause meet affect.
We had a draw-down on oil/gasoline inventory's (that were at record levels BTW)
and oil and gasoline futures (RBOB) took off. Of course, right in front of holiday weekend travel. The Aramco bond-holders get a bit of a reprieve on that too. Volumes down a bit but that is to be expected with a sit-on-the-hands type of holding pattern.
And then there is Bitcoin……up over $2000 in the last 24 hours - Bitcoin's biggest daily dollar rise since Dec 2017)
Gee I wonder what got signed at the same time…How about the Executive Order of asset seizures…
President Trump Freezes Assets Of Human Traffickers
https://dailycaller.com/2018/01/01/finally-president-trump-freezes-assets-of-human-traffickers/
BTW gold has now disconnected from Bitcoin, it had been tracking it almost tick by tick.Gold dropped most in 3 weeks today… back to 2-day lows.
Some headlines
Huawei Technologies loses trade secrets theft case against U.S. chip designer
A U.S. jury on Wednesday cleared California semiconductor designer CNEX Labs Inc of stealing trade secrets from Chinese electronics giant Huawei Technologies.
Huawei had sued CNEX in U.S. District Court, Sherman, Texas, for misappropriation of trade secrets involving a memory control technology and for poaching its employees.
https://www.reuters.com/article/us-huawei-tech-usa-verdict/huawei-technologies-loses-trade-secrets-theft-case-against-u-s-chip-designer-idUSKCN1TR2YH
US Prosecutors Join Hunt For Shadowy International Insider-Trading Ring
this was a notable in pb but this is from another source and a bit moar ascerbic-btw this pepe absolutely hates these fuckers-no skill or brians needed, just grift and lack of a moral compass
American prosecutors are joining forces with prosecutors from several European countries to investigate an international ring of sophisticated traders who rely on insider tips to reap huge profits.
As Bloomberg describes it, the cabal of more than a dozen traders sounds like something out of a movie: The shadowy illicit traders are scattered across Europe and the Middle East.
The group has used sophisticated techniques, which we detail below, to trade ahead of media reports, reaping tens of millions of dollars in profits.
The group has a very clear MO: They cultivate sources who might have access to insider information, then they feed that information to the media.
Before the story broke, the traders would position accordingly.
rest at link
https://www.zerohedge.com/news/2019-06-26/us-prosecutors-join-hunt-shadowy-international-insider-trading-ring
pepe used about five sentences from here today but credit must be given
https://www.zerohedge.com/news/2019-06-26/bitcoin-soars-most-2017-dollar-drops-bond-yield-pops
https://finance.yahoo.com/quote/%5EDJI?p=^DJI
https://www.marketwatch.com/investing/bond/tmubmusd10y?
https://www.dailyfx.com/crude-oil
Dolby 10% owner sold $7.07m in shares-June 21-25
Dolby Laboratories, Inc. designs and manufactures audio and imaging products for the cinema, television, broadcast and entertainment industries. Its products for cinema include Digital Cinema Servers and Cinema Audio Products, and broadcast and other include Dolby Conference Phone and Other Products. It offers services to support theatrical and television production for cinema exhibition, broadcast and home entertainment, including equipment training and maintenance, mixing room alignment and equalization, as well as audio, color and light image calibration. Its technologies include Advanced Audio Coding and High Efficiency Advanced Audio Coding, Dolby AC-4, Dolby Atmos, Dolby Digital, Dolby Digital Plus, Dolby TrueHD, Dolby Vision, Dolby Voice and High Efficiency Video Coding. It distributes its products in over 80 countries. Its technologies are incorporated in offerings in various end markets, such as the broadcast, Personal Computer, mobile, consumer electronics and other markets.
Number of employees : 2 151 people.
https://www.marketscreener.com/DOLBY-LABORATORIES-INC-12317/company/
https://www.secform4.com/insider-trading/1308547.htm
Happy Birthday anon