📈 Positive EBITDA but Negative FCF? 📊
🔹 EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) measures a company's operating performance, excluding certain non-operational expenses.
🔹 Positive EBITDA indicates that the core operations are profitable and generating revenue.
🔹 However, 🔴 Negative Free Cash Flow (FCF) suggests that the company's cash outflows are exceeding its cash inflows.
🔹 This could occur due to several reasons:
🔄 Heavy Depreciation/Amortization: EBITDA excludes depreciation and amortization, which could be high due to significant investments in fixed assets. Although not impacting EBITDA, these expenses reduce cash flow.
🧾 Interest Payments: EBITDA excludes interest expenses. If a company has high-interest payments, it might have a positive EBITDA but negative FCF due to the interest outflows.
⚖️ Working Capital Changes: A company might have growing accounts receivable or inventory, tying up cash. This is not reflected in EBITDA but affects FCF.
💼 Capital Expenditures: High investments in property, equipment, or other long-term assets could lead to negative FCF even with positive EBITDA.
📉 Non-Cash Expenses: EBITDA doesn't consider non-cash charges. If a company has write-offs or non-cash losses, it may impact FCF negatively.
💡 Investments: A company might be strategically investing in growth, leading to negative FCF temporarily. EBITDA would still show operational profitability.
📊 Seasonality: EBITDA might be positive due to strong quarters, but if expenses or investments are heavily concentrated in certain periods, FCF could be negative.
🔹 In summary, while positive EBITDA generally suggests operational success, negative FCF can result from factors not accounted for in EBITDA, such as cash tied up in non-operational aspects or significant investments.