Would be interesting to see cash flow, which is probably more relevant when comparing against capital raised. If this is EBITDA, then included in those losses for these companies is a ton of stock based compensation which really has zero effect on cash flow.
The stock-based compensation numbers are truly staggering. EBITDA/FCF measures tend to completely ignore it, making actual profitability significantly worse than non-GAAP measures imply
While on a GAAP basis, Dropbox is losing money, the company generated $0.18 of non-GAAP earnings per share in 2017, an incredible feat for a software business of their size and growth.
Their GAAP operating margin was (10)% in 2017, but the non-GAAP margin was 5%. Their free cash flow margin has been improving dramatically over the past few years, and was at 28% in 2017, up from 16% in 2016 and (11)% in 2015. [1]
I wouldn't say the same thing about Uber, because they seem to have a negative operating margin, unlike Dropbox.
This is the whole point. Anyone can look at the final result and sneer "unprofitable", but it's meaningless without actually looking at the figures and understanding what their cashflows are.
Good point: it was a loss according to GAAP, but the non-GAAP results weren't a loss. Whereas it looks like they're projecting a non-GAAP loss as well next quarter.
(I don't know what the relevant differences are here on GAAP vs non-GAAP.)
A very large chunk of GAAP losses are attributable to stock comp expense (a quick and easy way to check cumulative profits/losses is looking at the balance sheet’s equity section for “accumulated deficit”) which still gets counted as an expense but since it’s non-cash it’s not a drain on whatever the company has raised. If you look at Uber’s last three FY’s, they’ve cumulatively reported losses of about $16 billion, and stock comp has been about $6.5 billion of that. For the vast majority of public companies this isn’t as material but for all these VC-backed, Bay Area-type tech companies they have this systemically dysfunctional culture where they dole out stock and options to no end.
Before we jump the gun on this "loss", read this first:[1]
Net loss - GAAP net loss was $511 million for the fourth quarter of 2013 compared to a net loss of $9 million in the same period last year. The company's Q4 GAAP net loss included $521 million of stock-based compensation expense, of which $406 million was for restricted stock units previously granted to employees, for which no expense had been recognized, until the effective date of our initial public offering in accordance with GAAP.
Adjusted EBITDA - Adjusted EBITDA was $45 million for the fourth quarter of 2013 compared to $18 million in the same period last year.
Non-GAAP net income / loss - Non-GAAP net income was $10 million for the fourth quarter of 2013 compared to a Non-GAAP net loss of $0.3 million in the same period last year.
Oddly enough the "The company's Q4 GAAP net loss included $521 million of stock-based compensation expense, of which $406 million was for restricted stock units previously granted to employees, for which no expense had been recognized, until the effective date of our initial public offering in accordance with GAAP." seems be tucked away in "Research and Development" part of the P&L.
It's worth noting they have $2.2b in cash:
> Cash, cash equivalents and marketable securities - As of December 31, 2013, cash, cash equivalents and marketable securities were approximately $2.2 billion, compared to $321 million as of September 30, 2013.
TL;DR - This $645m "loss" isn't what you think it is.
Is there anything funnier than money incinerating "tech" companies' non-GAAP EBITDA? "Hey, sure we may have lost $1.5B, but look if we ignore over $1.3B of stock based compensation and a few other very real expenses, we actually made money!"
> Net loss - GAAP net loss was $511 million for the fourth quarter of 2013 compared to a net loss of $9 million in the same period last year. The company's Q4 GAAP net loss included $521 million of stock-based compensation expense, of which $406 million was for restricted stock units previously granted to employees, for which no expense had been recognized, until the effective date of our initial public offering in accordance with GAAP.
EBITDA should really be renamed EBMS: Earnings Before Manipulative Shenanigans. A high net profit might be heavily correlated with high EBITDA, but it's relatively easy to show a GAAP profit while being in terrible financial shape, and not so easy to do that with EBITDA.
In this case, I'd consider Dropbox's emergence into slight EBITDA profits as not great, but a definitely welcome sigh of relief for a unicorn market full of bullshit.
Good point, that must be it. It seemed consistent with something I remember reading last year where they had made some implausibly small profit. For example, the article says:
Non-GAAP EPS was $0.05 for the fourth quarter of 2011 compared to $0.09 for the fourth quarter of 2010.
I think what this really proves is that I don't understand GAAP or SEC accounting and things look especially mysterious to me around the time of an IPO.
Stock-based compensation is counted as an expense in the accounting rules used by public companies (GAAP).
So if they give $100M in stock awards, that’s a negative $100M on the company’s profit & loss statement, even though it’s not actually paid in cash by the company.
For that reason many tech companies also report non-GAAP numbers where the profit looks nicer because they can leave out stock-based compensation (and anything else they feel like they can get away with).
2) Breaking out GAAP and non-GAAP figures is totally standard and commonplace among publicly traded companies. Take a look at Ford's Q2 letter, for example, which has a whole page describing why they use Non-GAAP financial measures to supplement GAAP figures [https://s22.q4cdn.com/857684434/files/doc_financials/2019/q2...]
It's not like Groupon. EBITDA is a totally normal metric to get a sense of how the core business is doing, and positive EBITDA in tech is a good leading indicator of profitability.
EBITDA is basically "how profitable would the business be if they had no debt and their existing assets never lost value?". For companies with factories, airplanes, etc. the physical plant deterioration matters a lot. For biotech companies with patents that expire after 20 years, asset value loss matters a lot too. But tech companies have neither physical capital nor TTL'ed intellectual property, so EBITDA is a good approximation.
What happened here is that the whole travel industry is falling apart, not accounting gimmicks.
Maybe but say YC put $20k into Airbnb for a stake now worth $1bn and $80k into 4 other statups that went bust. GAAP would show a net loss of $80k which would not reflect very accurately how they were doing. GAAP has been designed more to provide a consistent way of calculating corporate income tax than to accurately show how a company is doing.
Also, if we are talking EBITDA, Snap did hit a positive GAAP net income for a single quarter: https://techcrunch.com/2022/02/03/snap-finally-did-it-yall/
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