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Judging from mbesto's comment, back when they were on AWS, those costs would have been included in EBITDA? So if AWS cost $10/year, would EBITDA be $10?
by ryanschneider 9y ago
Judging from mbesto's comment, back when they were on AWS, those costs would have been included in EBITDA?
So if AWS cost $10/year, would EBITDA be $10?
- jeeyoungk 9y agoYes, it is considered Opex (operational expenditure) with no asset to depreciate over time.
- mbesto 9y agoSort of. EBITDA is Earnings Before ITDA. Quick example, with super simple math: Scenario A (AWS) - Over 5 years, you bring in $1M per year in revenue - Every year you pay $200k in AWS fees - Your earnings (Net Income) are $800k per year, your EBITDA is $800k per year Scenario B (Buy your own hardware) - Over 5 years, you bring in $1M per year in revenue - You pay $1M in year one for hardware and depreciate it over the next 10 years at $100k per year - Your earnings (Net Income) are $800k per year, your EBITDA is $900k per year There are a ton of nuances to this, but this is generally how it works. As you can see the depreciation schedule affects this a lot, as well as when you choose to make the investment. Hence why it's feasible that Dropbox took out it's largest operating expense, i.e. AWS storage, which literally overnight increased EBITDA. It just so happens to be that a year ago they switched over to their own data center, and now they are touted "EBITDA profitable". Long story - these stories are kinda stupid unless you get to see the full income statement, balance sheet and cash flow statement.