Help me understand what Trump media's $300M loss actually means

Factual Questions
1

Warning: This is a FQ thread not a political thread and the mods have sharp teeth so post snark at your own risk.

This article about Trump media contains the following explanation.

In Q1, the company recorded $311 million in non-cash expenses arising from the conversion of promissory notes, and the associated elimination of prior liabilities, immediately before the closing of TMTG’s merger with DWAC. Trump Media and Technology Group had a first-quarter operating loss of $12.1 million based on adjusted EBITDA calculations; approximately half of that amount — $6.3 million — consisted of one-time payments related to the closing of TMTG’s merger with DWAC. The company reported an operating loss of $98.35 million for Q1 on a generally accepted accounting principles (GAAP) basis.

Can someone with financial acumen help translate what this means?

How much of this loss is real as opposed to money just moving around, and how much is a one time thing, versus what sort of loss we should expect in Q2?

2

Maybe you can learn something from ElectoralVote, although I came away confused too. Here is what Trump Social said (as quoted by EV):
“By adding features to Truth Social, launching live TV streaming, and building out its ecosystem, the Company aims to first develop a slate of best-in-class products that can then be leveraged to increase revenue and drive long-term value.” Since this is FQ, I refrain from further comment.

3

The actual filing says, “Revenues decreased by approximately $345.7, or 31%, for the three months ended March 31, 2024 compared to revenue of approximately $1,116.2 for the three months ended March 31, 2023. A significant portion of the decrease was attributable to a change in the revenue share with one of our advertising partners, in connection with an agreement intended to improve the Company’s short-term, pre-merger financial position. Additionally, revenue has varied as we selectively test a nascent advertising initiative on the Company’s Truth Social platform. This very early-stage initiative resulted in advertising revenues of $770.5 for the three months ended March 31, 2024.”

I’m not a finance professional, but it sounds like there was a change in how they split the advertising revenue with another company.

4

Thanks for the responses, I was worried this thread would be a one-post wonder.

From @Hari_Seldon’s link it sounds like the losses might real expendatures rather than simple accounting gimics but is probably mostly a one time thing, but I would still like to better understand the numbers that I quoted in the OP.

What @Dewey_Finn quoted seems to be entirely related to the revenue side of things, which appears grim, going from a bit over 1 million down to 770 thousand, but which is basically a rounding error compared to the $345 Million expenses.

5

Sounds like they used one paper (existing promisory notes) to pay off others (debts, liabilities) so basically paper in, paper out.

*“EBITDA”
Earnings before interest, tax, depreciation, amortization; so basically raw money in and out from actual operations. $6.3 million related to merger, so things like paperwork, fees, etc. - and likely, bonuses and a lot of expensive lawyers.

GAAP - loss of $98.35M once the $12.3M is added to those other expenses like “interest, tax, depreciation, amortization”?

6

I just want to point out that the blurb in the original post doesn’t actually say they lost 311 million, it says they had 311 million in Q1 expenses, which isn’t the same thing.

I’m not an accountant, but does it seem weird to anyone else that they’d say they had a loss of 12.1 million by EBITDA, and 98.35 million by GAAP? AFAIK they wouldn’t be identical, but they shouldn’t be so far apart either.

7

I am not a financial whiz, but I’ve written a few annual reports (not the financial parts.) This sounds suspiciously like the old custom of pre-booking orders before the end of a financial period to pump up the results, and then canceling them as soon as the new financial period starts.

In other words, advertising partner X orders $6.3 million in commercial time in advance putting it on the books, and then cancels the order the next month, or quarter, or after the merger. People who are smarter than me have told me it’s shady, but not exactly criminal - although I’ll bet it could be grounds for a lawsuit if someone could actually prove damagers from the paper shuffling.

But a $98.3 million operating loss when only $12.1 million can be written off as just paper shuffling suggests the new company is heavily leveraged.

8

Thanks again everyone, I just noticed that the link in the OP was wrong. Here is the correct one.

Trying to follow what was said above, it sound like:

  1. They moved around about 214 million in debt from one place to another.
  2. The spent 6.3 million on getting the merger done.
  3. They spent another 5.8 million (12.1-6.3) on interest on their debt.
  4. they spent 86 million (98.35-12.1) on on actual expenses such as keeping the company running and trying to get their live streaming set up.
  5. They brought in 700 thousand which was down from the 1 million they brought in last quarter.