Billings timing flatters one quarter and borrows from the next

Billings in security software swing with the timing of large contracts. A strong quarter can simply be a quarter with a crowded renewal calendar, and it borrows from the quarter that follows.

Why billings mislead

Multi-year deals billed upfront, changes in billing terms and the timing of big renewals all move billings without changing the underlying business. The market reads billings as a proxy for demand anyway, so a timing quirk can move the shares as much as a real change would.

Annual recurring revenue is steadier, and closer to what the business actually earns.

What I'm watching

• Recurring revenue growth, rather than billings
• Changes in billing duration disclosed in the filings
• Large deal counts, which show whether growth depends on a few contracts

Where I stand

Short, on expectations set by a flattering billings number. The business is sound; the recent quarters look better than the run rate underneath them.

What would change my mind

Recurring revenue accelerating on its own, without billings timing help. That would show the demand is really there, not just the renewal calendar.