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Mind (Carefully)The Financial Metrics——-Tech Startup Style
davidstockmanscontracorner.com / By TELIS DEMOS, SHIRA OVIDE and SUSAN PULLIAM at The Wall Street Examiner /
Hortonworks Inc. Chief Executive Rob Bearden forecast in March 2014 that the software firm would have a “strong $100 million run rate” by year-end. But the number looked a lot smaller after Hortonworks went public and then reported financial results: just $46 million in revenue last year.
It turns out that Mr. Bearden wasn’t talking about revenue, though he didn’t say so at the time. The Santa Clara, Calif., company now says the $100 million target was for “billings,” a gauge of future business that isn’t part of generally accepted accounting principles. Mr. Bearden declines to comment.
As young technology companies jostle for investors who will pour money into the firms as they try to make it big and strike it rich, some companies are using unconventional financial terms.
Instead of revenue, these privately held firms tout “bookings,” “annual recurring revenue” or other numbers that often far exceed actual revenue.
The practice is perfectly legal and doesn’t violate securities rules because the companies haven’t sold shares in an initial public offering. Public companies can use “non-GAAP” financial terms but must explain them and disclose how they differ from measurements that follow strict accounting rules.
When Mr. Bearden made his forecast last year, Hortonworks had just raised $100 million that valued the company at more than $1 billion. It went public in December, now has a stock-market value of about $1.1 billion and is required to abide by accounting rules that include disclosing the company’s actual revenue.
The post Mind (Carefully)The Financial Metrics——-Tech Startup Style appeared first on Silver For The People.
Source: http://silveristhenew.com/2015/06/10/mind-carefullythe-financial-metrics-tech-startup-style/
