Reddit's 2023 EBITA -$69.3 million

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So, Reddit finally filed for an IPO. After nearly 20 years, starting on its own, being acquired by Condé Nast Publications in 2006, spun out in 2011.

Having a long gestation as a private company getting investment dollars isn’t unusual today. For a number of years now, the trend has been to see increasingly long years of waiting to seek an exit so investors can allow the company to develop. To strengthen. To build a capability of making money.

Which makes Reddit’s filing — its S-1 using technical terms — so interesting is that it’s taken so long to still be losing money by the truckful. That’s $232,432.87 a day, or nearly $9,685 an hour.

Maybe this has something to do why Condé Nast’s parent, Advance Publications, waved goodbye to Reddit so many years ago.

The company calls itself an “emerging growth company” by the definition of the JOBS Act, and will continue to be until any one of the three following conditions happens: their revenue at least equals $1.235 billion; they reach the last day of the fiscal year following the fifth anniversary of the IPO offering; they reach the date on which during a previous three-year period in which they issue more than $1 billion in non-convertible debt; or, under the Exchange Act, they’re deemed a “large accelerated filer.”

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Feb 26, 2024,11:53pm EST
Reddit IPO Announcement - Photo Illustration
The Reddit logo is being displayed on a smartphone with the Reddit icon visible in the background in ... [+]NURPHOTO VIA GETTY IMAGES
So, Reddit finally filed for an IPO. After nearly 20 years, starting on its own, being acquired by Condé Nast Publications in 2006, spun out in 2011.

Having a long gestation as a private company getting investment dollars isn’t unusual today. For a number of years now, the trend has been to see increasingly long years of waiting to seek an exit so investors can allow the company to develop. To strengthen. To build a capability of making money.

Which makes Reddit’s filing — its S-1 using technical terms — so interesting is that it’s taken so long to still be losing money by the truckful. That’s $232,432.87 a day, or nearly $9,685 an hour.

Maybe this has something to do why Condé Nast’s parent, Advance Publications, waved goodbye to Reddit so many years ago.

The company calls itself an “emerging growth company” by the definition of the JOBS Act, and will continue to be until any one of the three following conditions happens: their revenue at least equals $1.235 billion; they reach the last day of the fiscal year following the fifth anniversary of the IPO offering; they reach the date on which during a previous three-year period in which they issue more than $1 billion in non-convertible debt; or, under the Exchange Act, they’re deemed a “large accelerated filer.”

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There are 54 pages of risk factors, which, after reading many S-1 filings over the years, seems pretty long. One of the most notable is the sentence, “We have incurred substantial losses during our history and may never achieve profitability.”

There are companies that have said that in the past, but they were much younger. AmazonAMZN +0.9% has a reputation of being unprofitable for a very long time, but in the last quarter of 2001, it had its first profitable quarter. That was about seven years after the company started running out of the garage of Jeff Bezos.



FedExFDX +1% had a notable period of losses, which included acquisition of a huge amount of capital equipment like warehouses, planes, and trucks. It hit profitability for the first time four years after it started in 1971.




After two decades, Reddit still warns that it’s not making money. Losses can eventually be useful for companies when they can carry them forward and finally offset profits, but the profits do have to come. At the end of 2023, the company has $216.7 million in federal and $177.1 million of state net operating losses (NOLs) to carry. The state ones are gone in 2026 if there aren’t profits to apply them to. Federal NOLs through 2017 can only be carried for 20 years to fully offset taxable income. After 2017, due to the Tax Cuts and Jobs Act, they can be carried indefinitely to offset only 80% of taxable income annually. So, the losses at this point are theoretically helpful, but practically? Who knows?

In 2023, the company’s revenue was $804.0 million. Research and development, at $438.3 million, was more than half, an awfully big number for a company of this age. Total costs and expenses were $944.2 million. The net loss was $90.8 million, which at least is an improvement over 2022, with its $666.7 million in revenue and $158.6 million in losses.

Reddit favors non-standard accounting metrics like adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization). The adjusted part include “stock-based compensation expense and related taxes, other (income) expense, net, and certain other non-recurring or non-cash items impacting net income (loss) that we do not consider indicative of our ongoing business performance.” Which makes it tough to know exactly what’s being included or excluded.

The adjusted EBITDA in 2023 was still -$69.3 million.

And they like free cash flow as a “liquidity measure.” Free cash flow in 2023 was -$84.8 million. In 2022, it was -$100.3 million.

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