This week’s edition covers a few notable SEC Filings and earnings calls that focus on ASC 606.
To quickly identify ASC 606 information in the below links, click on the link, hit Control + F, enter the text “606” or “2014-09” or "ASC" and click through your search results.
SEC Filings and Earnings Calls
Our thoughts: Starting on page 7 of the 10-Q, the company provides a summary of the impact of its ASC 606 adoption. Then, on page 8, the company provides a description of its revenue recognition policies under ASC 606, which transitions into a “Disaggregation of Revenue” section on page 9. This section offers an interesting presentation of this information that has not been seen in other reviewed filings in terms of how it disaggregates revenues. Page 10 offers information on its relevant disclosures, with additional detail in the “Significant Judgments when Applying Topic 606” section. Overall, the unique way the company presents its disaggregation of revenues, combined with solid qualitative information on its policies and disclosures makes this worth a read.
Moving onto the company’s earnings call transcript, if you do a search for “606”, the first seven references are all found in an answer to a question posed by analyst Ross Muken - Evercore ISI. The answer delves into why the company thinks comparing disclosures between 605 and 606 “isn’t a valuable exercise”. The 8th, and final, reference to “606” is included in a response to a question from an analyst named George Hill - RBC Capital Markets LLC. In the response. The company explains how the specific combination of ASC 606 and software sales performance for the quarter impacted the amount and timing of revenue recognition.
FLEETCOR Technologies, Inc.:
Our thoughts: Pages 1 and 2 offer quantitative results and impacts of ASC 606 in the company’s EX-99.1 filing in terms of expected outlook and actual results.
The Q3 2018 earnings call transcript has more eye-catching material. If you search for “606” in the transcript, one of the first references to 606 is part of the company’s effort to set the table for how its financial information will be presented in terms of 606 and 605 formats. While this is a quick read, the value comes from the company's proactive nature, coming right out of the gate with a contextual statement on its results to avoid confusion/questions.
Our thoughts: The value in this filing is in the section named “Item 4. Controls and Procedures”. It’s within this section that the company puts forward statements regarding its evaluation of disclosure controls and procedures as part of adopting ASC 606. It then discusses how the acquisition of a company in August 2018 will be treated with respect to disclosure controls and processing. This is a solid reference point for any company that could encounter a situation where it has adopted ASC 606 and subsequently acquires a company that might not be in the same ASC 606 adoption state in terms of controls and processes.
FireEye Inc.:The EX-99.1 document provides a fair amount of quantitative actual data as well as forward-looking ASC 606 information that sets the context for reviewing the earnings call transcript. It’s within the earnings call transcript where additional value exists. Specifically, when searching within the transcript on “606”, the 3rd and 4th references explain the company’s view on ASC 606’s impact on deferred revenue. This is key as the company explains how the ASC 606 impact, combined with sales results, are leading to deferred revenue differences when compared to prior year deferred revenue amounts. The 5th and final reference to “606” is in response to a question from an analyst (Gabriela Borges - Goldman Sachs & Co. LLC) regarding ASC 606’s impact to get further clarification. This is worth a quick review.
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