Twitter's CEO, "We closed out the year with our business advancing at a great pace. Revenue growth accelerated again for the full year, and we had record quarterly profits on an adjusted EBITDA basis."
Record quarterly profits on an adjusted EBITDA basis AND a net loss of $578 million on $1.4 billion of revenue….
Attention Investors: Stop Falling for This Tech Bubble Trick
By Timothy Green at Motley Fool
Excerpt:
EBITDA has managed to make this unsustainable, money-losing company look like a success story. Not only does EBITDA ignore the cost of the food trucks, which are required to generate any revenue in the first place, it also ignores interest, which is a real cash expense. EBITDA is in no way equivalent to cash flow.
Putting lipstick on a pig
Twitter's adjusted EBITDA not only excludes depreciation and amortization, which totaled $208 million during 2014, but it also excludes $632 million of stock-based compensation. More than 40% of Twitter's expenses are completely ignored in an effort to produce a number that makes the company appear profitable.
A good rule of thumb for all investors to follow: Always question the numbers management wants you to see. Companies make up all sorts of non-GAAP, adjusted figures in an attempt to make things look better than they really are. Sometimes, these figures are perfectly reasonable. Other times, like in the case of Twitter's magical adjusted EBITDA, they're not.
