"Bookings" in a DCF analysis

quick question for you valuation gurus out there. have any of you valued an internet start up based on bookings (it sounds like these are deferred revenues for subscription services)?

this particular company presented both the bookings figures as well as the revenue figures. first, they used the revenue line as a start point to get to their NOPAT, then in their cash flow adjustments, they added back the delta between the bookings and the revenues to arrive at free cash flow.

intuitively, this seems wrong to me but i'm having a difficult time coming up with a clean answer when they argue that "bookings" should be included because it's a cash inflow.

help?! thanks.

 

yes, sounds like deferred revenue. this should be captured in changes in net working capital from the deferred revenue(liability) component. i guess they can add back the delta but i'm guessing you would add/subtract the delta from the changes in the liability account not the difference between revenue and deferred revenue.

 
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