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Hey, future bankers!

Hope everyone is doing well! Today we’re covering the intuition behind EBITDA, a time you missed a deadline, and BuzzFeed stock’s huge surge.

🚀 Let’s get into it.

🔢 Technical Question

What is EBITDA? Why is it important when valuing a company?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It's a financial metric used to assess a company's operational performance and profitability. Here's a simple breakdown of its components and why it matters:

1. Earnings Before Interest and Taxes (EBIT): This measures the company's core profitability from its operations, ignoring how the company is financed (interest) and what it pays in taxes.

2. Depreciation and Amortization: These are non-cash expenses that reflect the reduction in value of tangible assets (depreciation) and intangible assets (amortization) over time.

Intuition Behind EBITDA

- Operational Focus: EBITDA isolates the earnings generated purely from business operations, excluding the effects of financing decisions (interest), tax environments, and non-cash accounting entries (depreciation and amortization). This helps investors and analysts understand how well the business itself is performing.

- Non-Cash Expenses Exclusion: By excluding depreciation and amortization, EBITDA provides a clearer picture of the company's cash flow from operations, which can be critical for assessing liquidity and cash generation capability.

Why EBITDA is Important in Valuing a Company

1. Comparison Across Companies: EBITDA allows for more straightforward comparisons between companies, especially those in the same industry, as it removes the effects of different financing structures, tax rates, and accounting policies.

2. Cash Flow Indicator: Since it excludes non-cash expenses, EBITDA is a rough proxy for cash flow from operations. This is crucial because cash flow is necessary for maintaining operations, investing in growth, and paying down debt.

3. Valuation Multiple: EBITDA is commonly used in valuation multiples like the EV/EBITDA ratio (Enterprise Value divided by EBITDA). This ratio helps investors determine if a company is over or undervalued by comparing its enterprise value (which includes debt and equity) to its EBITDA.

4. Performance Measure: For companies with significant capital expenditures, EBITDA can be a better measure of operational performance than net income, which includes depreciation and amortization that can vary greatly between companies due to differences in investment in assets.

🗣 Behavioral Question

Tell me about a time when you missed a deadline.

Responding to this question can be challenging, but with the right approach, you can turn it into an opportunity to demonstrate your problem-solving skills and growth mindset. Here are a couple of best practices for crafting your response:

1. Be Honest and Take Responsibility

   • Acknowledge the mistake without making excuses.

2. Highlight What You Learned and How You Improved

   • Emphasize the steps you took to prevent a similar situation in the future.

By following these best practices, you can turn a potentially negative experience into a powerful demonstration of your ability to learn from mistakes and improve your performance.

🗞 Industry News

📈 BuzzFeed Stock Goes Wild After Former Presidential Candidate Acquires Activist Stake

BuzzFeed stock saw a significant surge, as much as 83%, after former Republican presidential candidate Vivek Ramaswamy disclosed a 7.7% stake in the company. Ramaswamy, a biotech entrepreneur, believes BuzzFeed shares are undervalued and plans to engage the board in discussions to maximize shareholder value. This move raises questions about BuzzFeed’s strategic direction, especially considering the company’s struggles since going public in 2021, which led to a more than 90% fall in stock value.

In an attempt to reach profitability, BuzzFeed has undergone major changes in the past year. The company announced plans to close its news division and cut about 31% of its workforce in total. Additionally, BuzzFeed sold the digital media company Complex Networks, which it had acquired for about $300 million, to live video shopping platform NTWRK in a $108.6 million all-cash deal. Despite reporting an adjusted EBITDA loss of $11.3 million in the first quarter, the company expects to break even in the current quarter.

Read more about this story below.

Thanks for tuning in today! Best of luck to everyone working through recruiting right now. If you sign an offer, reply to this email and let us know about it! Like seriously, do it—we’d love to hear about it!