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Patterns in Deferred Revenue, 2011-2016
Wednesday, April 12, 2017

Deferred revenue is income that a company has coming to it sometime in the future—just not in this filing period. For example, you might sign a $55 million contract with a customer to deliver goods over the course of five years: $5 million paid today at signing; another $10 million due at end of the year, and then four more payments of $10 million due at the end of the following four years.

The first $5 million is revenue you can book today. The next $10 million due in a few quarters is current deferred revenue: money coming within the next 12 months. The remaining $40 million is non-current deferred revenue, due beyond the current year. All deferred revenues are listed as liabilities on the balance sheet.

Calcbench keeps an eye on deferred revenue from time to time. In a post last summer we found that patterns in deferred revenue have held remarkably steady over recent years. A spike in deferred revenue for a single company can mean several things, such as a change in strategy (say, a shift from selling goods to selling long-term service contracts), or customers pushing expected payments into future periods (not good).

For corporate filers as a whole, however, deferred revenue as a portion of total revenue continue to hold steady. See Table 1, below.

In other words, aside from a relative spike in 2015, over the last six years, for the average U.S. filer deferred revenue has fluctuated between 6.3 to 6.9 percent of total revenue. That’s a narrow band.

How many companies report deferred revenue? Again, that fluctuates within a narrow range of 27.5 to 30.7 percent—and the 30.7 percent happened in 2015, the same year we saw a spike in average deferred revenue.

We did see a shift in the proportion of current versus non-current deferred revenue. For the last few years, average amount of non-current deferred revenue was below average current deferred revenue. Due to a brisk increase in non-current deferred revenue in recent years, however, now that column is larger than current deferred revenue. (See Table 2, below.)

Why is that happening? Is it a good or bad thing? We here in central command can’t say, looking at these broad data samples. Our Data Query Tool helps to identify broad trends within a sample population—but once you do find a pattern that catches your eye, you can dive into our Company In Detail page to see how a specific company you follow compares to that pattern.

That’s the point of our lesson today: to show how one part of the Calcbench data empire can interact with another. Taken together, within a few keystrokes you can find the precise question you want to ask—and, if the company has reported it, the exact answer too. Or you can enjoy putting the tough questions to the CFO on that next earnings call, with the data to support it.

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