Dawn Lepore has been chairman and CEO of online apothecary Drugstore.com
Drugstore.com reports, as it must, traditional measures such as revenue and net profit, but it also points investors toward something it calls "adjusted EBITDA" it uses to track earnings before interest, taxes, depreciation, amortization of intangible assets -- hold on, gotta catch a breath -- noncash marketing expense, stock-based compensation, and, this quarter, a noncash charge from a legal settlement.
I say "this quarter" because this is the way Drugstore.com works; I don't mean to imply that it just started doing this for some nefarious reason. What I mainly want to do here is highlight the impact that tracking earnings, as we used to say around here, "before all the bad stuff," can have on your reckoning of a company's business. (Sure enough, "EBABS" first came into Foolish use in early 1999, as a quick search reveals.)
In Drugstore.com's case, the impact is substantial. Net losses came in at $6.4 million, up from $6 million a year ago. EBABS, however, was just one-third that at $2.2 million. That's a huge difference -- more than material, and more than enough to suggest that using the second number might actually obscure, rather than improve, an investor's ability to understand what's going on at Drugstore.com.
But investors are smarter than that. They know, as does Lepore, Drugstore.com's story pretty well by now -- or at least it looks that way based on the fact that its market value managed only a small downward move on lower-than-usual trading volume, even following an earnings release.
Losing money and leaking cash, the company needs a leader who can set it on a path to improved operating efficiency, set its business vision straight, and help it boost profit margins on top of its already impressive top-line figures. Given the magnitude of that task, the details of quarterly financial numbers seem mundane.
Fool contributor Dave Marino-Nachison doesn't own shares of Drugstore.com.
