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Wiktionary says there are 606 words with the prefix “Neo”, meaning “new” – the opposite of “paleo”



Neonate, neoliberalist, and the pervasive “Neocloud”


Here’s mine – “Neoaccounting” – neo adjustments required for positive EBITDA


Practised by neoclouds like Coreweave


In the June 26 quarter, “paleo” accounting said they lost $626m


But Neoaccounting or “Adjusted EBITDA”, says they “made” $1.5bn


an impressive $2.1bn swing with revenue of only $2.6bn ..


Although +59% Adjusted EBITDA margin looks much better than a Net loss margin of -24%


These adjustments included:


“Acquisition related costs” excluded because they are “inconsistent in amount and frequency, and do not correlate to the operation of our business”


So why is stock-based compensation excluded?


– It’s very “consistent” – high and increasing,
– unfortunately “frequent”, and
– “correlated to the operation of their business” …


And is “compute” really so profitable if Depreciation is 54% of revenue?


Anyway, what’s the truth?


A GAAP loss of $626m or adjusted EBITDA of $1.5bn?


Well, Cash from operating activities was $679m, but deduct $6.4bn of capex and “Free cash (out)flow” was ($5.7bn)


But that capex included “capitalised internal-use software”


Meaning a worse GAAP loss if expensed ..


And the balance sheet?


Current assets of $9.5bn with current liabilities of $20.9bn, suggesting a liquidity shortfall of $11.4bn over the next year


Somewhat concerning after raising $10bn last quarter


and only $5.5bn of unrestricted cash left – insufficient to settle their $10bn of accounts payable + accrued liabilities ..


not to mention the $41bn of long-term debt & lease liabilities


Maybe they can borrow more


But the interest expense is already 25% of quarterly revenue


And the coupons were 9.65% ($) and 8.5%(€) when they borrowed 2 months ago,


Those bonds are already below par, yielding 11.6% and 10.2%


So I suspect an equity injection is needed


Except management seemed happy using phrases like: “an exceptional quarter”, “incredible progress”, and “extraordinary execution” so maybe I’m wrong ..


Their presentation said, “We use non-GAAP financial measures to make strategic decisions, establish business plans and forecasts, identify trends affecting our business & evaluate operating performance.”


And then say “we believe that these non-GAAP financial measures … may be helpful to investors…”


No thanks – there’s a reason my handle is #numbersnotnarrative


If Coreweave really is the “Essential cloud for AI”, then I’m concerned


Because all I see are GAAP losses and a very weak balance sheet


Give me “paleo accounting” every day of the week


#valueinvesting
#investing



Disclosure



Ranmore Global Equity Fund has no position in any of the securities mentioned
This is not advice, do your own work



Source: Coreweave

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