Awesome, Tara! Thank you for all of this great information on REVENUE!!!!
What a great job at breaking down the components of revenue, today! I'm looking forward to next month already 
To support JMP on our journey of separating from SAS, the Finance team has grown quickly over the past year. As an organization, we strive to share the “Why?” even if it sounds like complex Finance lingo.
In this new series "Financial Literacy 101", we aim to explain basic financial topics in a way that is beneficial to all.
For many, the term revenue is no foreign concept. After all, it’s no secret that JMP has grown in revenue year over year! However, when Finance starts throwing around words like revenue recognition, material rights, and the matching principle, your stomach may start to turn sour. This is part 1 of a 2-part series to dive deeper into “Revenue” and what that means. This month we will explain how JMP defines and recognizes revenue today. Next month we will explain some of the basic accounting principles and how we will need to appropriately book our revenue in the future.
How do we use the word revenue
today
?
In general, revenue is income earned from the sale of goods sold or services provided. For JMP, this means revenue earned on both the license and the post contract services, or technical support, for our product offerings. Other revenue, representing a small portion of total revenue, is earned on Discovery Summit user group fees, education in Japan and China, and other miscellaneous items. Revenue is presented as gross on the Income Statement, before any costs of goods sold, and is currently recognized in full when an invoice is sent to a customer.
This is an example and does not reflect JMP’s actual financial information.This is an example and does not reflect JMP’s actual financial information.
This is an example and does not reflect JMP’s actual financial information.
Total Software Revenue (TSR)
: this represents all software income as recognized in full when invoiced. This occurs when a contract is fully executed and the license is delivered to the customer, NOT when cash is received or as the annual term progresses.
New Software Revenue (NSR)
: this is the portion of total software revenue represented by the new sales invoiced. Upgrades are accounted for as NSR.
Renewal Software Revenue (RSR)
: this is the portion of total software revenue represented by the renewal of existing contracts with customers invoiced.
Total Software Revenue (TSR) Growth
: this is a percent comparison of TSR year-to-date (YTD) versus the prior year TSR YTD
Commissions
: a portion of the total Sales Team compensation package that is based on sales credit, paid based on annual sales targets and role within the sales team hierarchy. A large percentage of JMP Sales Commissions are based on NSR.
Why does this matter for JMP?
As Jon Weisz mentioned during kickoff, and reiterated at the reunion, JMP strives to be a Rule of 40 company as one of its 2023 Financial Goals, meaning >25% EBITDA and 15% TSR Growth. It is important to understand JMP’s revenue, especially in the context of its growth year over year, and how this impacts our goals.
Also, as JMP moves into becoming an “auditable” company, we will need to understand how our revenue is booked today versus the differences in booking under Generally Accepted Accounting Principles (GAAP). These are standards that encompass all requirements around corporate or business accounting.
Why does this matter to me as an employee?
All employees have an impact on our sales revenue growth. Calculations of Sales Team’s Commission Plans are based on NSR (mostly), Renewals, and TSR. In addition, TSR, along with EBITDA percentage, is a key component in the 2023 Performance Bonus Plan for non-Sales employees.
Related articles:
EBITDA
.
P&L (Profit and Loss)
.
