Let’s go back to NICE’s profit. When talking about the profits of companies traded on Wall Street it is important to understand the rules of the game and the method of reporting on the American stock exchange. The companies traded there report two sets of data – the profit according to the accounting reports (GAAP), and are accompanied by non-GAAP reports, which are not in accordance with accounting principles. These reports should provide more accurate and clean information to the report readers. These data neutralize one-time accounting noises, providing the economic profit, the representative profit. This way, the reports reader or report analyzer correctly understands the business trends. The technique of accessing non-GAAP reports is simple – based on accounting reports but neutralizing items (mainly one-time expenses) that do not affect the business trends and which do not affect the company’s valuation.
Sounds good – investors want to get data without noise. But there is a problem – these reports are administrative reports (of company managers), these reports are not controlled and not really supervised; These reports are not necessarily consistent. Most importantly, these reports will always express a better situation, they will always cancel expenses, and in most cases will not do the opposite – no one-time income will be eliminated. Why are non-recurring expenses yes? And non-recurring income is not? Probably that is possible.
Still – despite the drawbacks this is the definitive report on Wall Street. Analysts and investors align themselves with it. Accounting, with all due respect, is only the raw material for the non-accounting report.
So when you talk about NICE’s profit – the $ 300 million in 2018 – you’re talking about non-accounting profit. The said accounting is $ 160 million. But where did this gap come from?