Navigating the Jungle of EBITDA and Adjusted EBITDA — A Laughably Simple Guide by Ridehaluing

Welcome, folks! We were so excited when we announced our comeback two days ago on Instagram. And like the good old days, Medium for Ridehaluing is where we talk about something serious. It’s where you (wow, we have grown to 100 followers, LOL) learn about something here.

If you’ve been watching the roller coaster ride of the stock market in Jakarta or the US lately, you may be scratching your head, wondering why certain tech-startup stocks are still diving faster than a Komodo dragon chasing its dinner, despite those companies boasting that they’re on track to achieve “Adjusted positive EBITDA.” So let’s dive into this EBITDA jungle, machete in hand.

First off, EBITDA. It stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. Yes, it’s quite a mouthful, more so than a plate full of Nasi Goreng. In the finance world, it’s essentially a measure of a company’s operational performance before a few annoying things like taxes and interest are factored in. It’s like seeing how much you earn before your wife or sugar baby gets her share (Kidding, dear, you’re worth every Rupiah!).

Now, what about Adjusted EBITDA? This is where things get trickier than finding a parking spot in Senopati on Saturday night. Adjusted EBITDA is just like EBITDA but with a few more adjustments or exclusions. Think of it as getting your favorite Martabak but asking for extra cheese, chocolate, and no peanuts (because you’re a nut-free person).

These adjustments can include one-time, unusual, or non-operational expenses. Picture it as your annual earnings after excluding your impulsive purchase of Tory Burch flat shoes because it was “10% off ” in Plaza Senayan. So, Adjusted EBITDA essentially lets the company say, “Hey, ignore those high costs — they were one-offs, like that extravagant wedding you had in Bali!”

However, there’s a catch, and it’s as sneaky as a macaque at Uluwatu temple. While Adjusted EBITDA can give a clearer picture of ongoing business operations, it can also be a magic wand in the company’s hand to make its financial performance look better than it is by excluding costs they deem ‘unimportant.’ It’s like photoshopping your beach selfies to look like a supermodel when you’ve been enjoying too much Nasi Campur Bali in reality.

Why is this important? Well, just because a company has a positive Adjusted EBITDA doesn’t mean it’s in great financial shape. If they’re still burning cash faster than you can say “Satay!”, their stock price may continue to decline. This is what we’ve been seeing with some tech startups lately. They’re like the guy who claims to be rich because he doesn’t pay his bills. Watch out for these characters!

So, remember, folks, EBITDA and Adjusted EBITDA are just tools in your financial toolbox, not silver bullets. Like a good Sambal, they can add flavor to your understanding of a company’s performance, but they’re not the whole meal. Selamat berinvestasi (happy investing)!

And remember, the only thing more complicated than understanding EBITDA is explaining to your wife why you bought more crypto coins instead of that diamond necklace she wanted!