Many of us may not have heard of the term or acronym EBITDA, but already know what it is. It’s a profitability measurement/equation that is imperative to not just casino marketing, but to all types of marketing and business operations as well. Before delving in further, it’s probably best to get the precise definition of the term. EBITDA refers to “earnings before interest taxes depreciation and amortization” and is the most common method of measuring cash flow. At this year’s G2E, Profit Builder HD’s Trevor Taylor will be addressing EBITDA scores and how they are important to direct marketing initiatives.
‘EBITDA can be calculated “top down” by adding back DDA or depreciation and amortization deducted as sales costs to operating income before interest and taxes. EBITDA can also be calculated “bottom up” by adding interest and DDA back to pretax income.’ For example, if you’re a casino host and your income statement lists a pretax income of $4 million, a DDA of $15 million and an interest expense of $1 million, then your EBITDA is $20 million.
EBITDA is essentially your casino’s revenue minus your expenses (excluding taxes, interest, depreciation and amortization) or your net income with interest, taxes, depreciation and amortization added back to it. It’s a powerful tool for most industries as it eliminates the effects of financing and accounting decisions.
Your EBITDA score is an essential point of measurement for investors or for anyone looking to manage your business’s operations. A common misconception is that EBITDA represents cash earnings or cash flow, but it is a better metric for evaluating profitability. To learn more about EBITDA scores and how they are related to direct marketing initiatives, register for Trevor Taylor’s seminar at the Global Gaming Expo.