EBITDA vs Adjusted EBITDA EBITDA / Adj. EBITDA
A proxy for operating cash earnings that strips out financing, taxes, and depreciation, and then, when "adjusted," strips out whatever else management chooses.
The fork, why two teams get different numbers
Plain EBITDA is arithmetic and roughly comparable. "Adjusted" EBITDA is a
non-GAAP measure with no standard definition, so the add-back list is where
companies fight. One team adds back stock-based compensation (a real, recurring
expense) and calls it non-cash; another leaves SBC in and adds back only
litigation settlements. Restructuring that recurs "one-time" every year, rent
under lease accounting, and acquisition costs all appear or vanish by policy.
Two companies with identical GAAP results can post Adjusted EBITDA 20%+ apart.
The trap
"Adjusted EBITDA" flatters margins by converting recurring costs into "one-time" add-backs, SBC is the classic: it is a genuine cost of compensating employees, and adding it back overstates cash profitability at high-equity-comp firms.
- The full trap, worked on a real export
- Every formula variant, spelled out
- The reconciliation anchor, what to tie it to and when to refuse
Reference: SEC Regulation G · SEC Non-GAAP C&DIs · FASB ASC 718 (Stock Compensation)