Blue Apron Wants Investors to Pay More Attention to Non-GAAP Measure That Makes Performance Look Better

Chris Gaetano
Published Date:
Jan 16, 2019

Meal kit delivery company Blue Apron's stocks surged yesterday after presenting a custom non-GAAP metric to investors that, the company said, indicates it will achieve profitability this year, though the actual GAAP numbers tell a different story, according to Market Watch. The company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) eliminates share-based compensation expense, in addition to interest income expense, benefit provisions for income taxes, and depreciation and amortization. This metric paints a much rosier picture than under GAAP. Because the company has experienced ongoing losses and revenue declines, the value of its stock decreased by 60 percent over the past year. However, according to Market Watch, when the company presented investors with this new figure, its shares jumped by 38 percent in a day. 

Blue Apron is not unique in its use of non-GAAP figures. A recent study found that the percentage of Fortune 500 companies using bespoke metrics on top of the mandated GAAP figures rose from 59 percent in 1996 to 96 percent in 2016.  While boosters have said the use of non-GAAP metrics allow companies to offer information that investors genuinely want, the Securities and Exchange Commission has, in the past, voiced suspicion that certain companies are using them to instead confuse investors and distract from negative news. For example, the SEC critiqued Tesla in 2016 for adding back certain costs to the GAAP revenue calculation to come up with a custom figure. The SEC said that the company lacked substantive reasons for presenting this tailored figure to investors, and dismissed Tesla's reasoning that management uses the figures internally, noting that the justification needs to involve why using it is better for investors in particular. 

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