Agreed that free cash flow can be misleading some cases, and digging a bit deeper helps us understand what those cases are.

Free cash flow and net profit should equal each other if summed up over the entire lifetime of a company.

The trickiness of course comes in the timing of when revenue and expenses are recognized. Whereas a large capital investment hits free cash flow the same year, it only impacts net profit over the course of its depreciation.

Free cash flow can be misleading for companies that require a disproportionately large capital investment upfront but negligible expenses thereafter. This can be illustrated by taking an edge case to the extreme: Let’s say a company required a $1,000,000 capital investment in Year 1, $0 in subsequent expenses, and brought in a piddling $1 in annual revenue until it shut down in Year 10. The company would have been free cash flow positive in Year 2 through Year 10, which would be misleading because in fact the company was never profitable and also had negative ($999,999) free cash flow in Year 1.

> I agree with depreciation and other non cash expenses obfuscating P&Ls, but can we agree that in an article focused on securing debt financing, which will incur real interest expense, the term “free cash flow profitability”, “loosely” meaning “profitability” is a little misleading

It depends on the industry. DO is in the capex heavy industry so depreciation is not a funky accounting cost, it is actually something that's applicable to the vast majority of their assets.

Yeah, this was my first thought. Technically if you go back in time and model past Cash Flow Statements, you could layer on what you think the real go forward infrastructure cost is to their CFS.

If they are consistently laying out capex, it actually could be very reasonable to just use CFS and not opex.

Software is not typically depreciated though. DO is writing code now that will last for decades but they have to take the accounting hit for it in one year.

At least in my small European country, I believe you can use a deprecation schedule for software as long you buy it externally, instead of creating it in-house.

The same is true for other creative work/IP. The reasoning being, I believe, that it is hard to appreciate (as in: set a monetary value) for such work. If you buy, you’ve given the open market a chance to work its magic and the price is believed to be closer to something like truth.

This might go a long way towards explaining why company management in Europe often have some kind of mysterious love for vendor supplied software and doesn't see any in-house development as a competitive advantage or worth spending on maintaining.

Code rarely last decades without maintenance and complete rewrites over time - unless you’re the government.

Plenty of enterprises are running decades old code that powers their core business.

I maintain some LOB PHP5 apps, that started as PHP3 - these internal systems are over 10yr old. Just chugging along, producing value for the business. But yeah, pretty rare stuff, and everything I see is small/internal.

That’s what I was taught when I took accounting. Every measure has drawbacks, so you can’t rely on just one.

Income statement, balance sheet and statement of cash flows together give you a pretty complete picture.

> but can we agree that in an article focused on securing debt financing

We could also agree that its a tech-blog article, which means 99% of the people reading it simply do not care about financials, other then "huge raise! wow, revenue! great profitability potential".