Business & finance
Adjusted EBITDA
Adjusted EBITDA is earnings before interest, taxes, depreciation and amortisation, further adjusted by the company to exclude items such as stock-based compensation and one-time costs; it is a non-GAAP measure.
EBITDA is a rough measure of operating profit before financing, taxes and non-cash accounting charges for assets. "Adjusted" EBITDA removes more items the company considers unusual or non-cash, most commonly stock-based compensation, acquisition costs, restructuring, impairment and litigation charges.
Ad tech and software companies emphasise adjusted EBITDA because heavy stock-based pay and acquisition amortisation can make GAAP net income look much weaker. Investors use it to compare operating profitability and to value companies through multiples such as EV/EBITDA. Adjusted EBITDA margin (adjusted EBITDA ÷ revenue) is closely watched.
The risk is that "adjusted" can hide real costs. Stock-based compensation dilutes shareholders, and "one-time" charges can recur every year. In the US, SEC rules require companies to reconcile non-GAAP measures to the closest GAAP measure and not to present them more prominently. Also note that margin comparisons depend on gross vs net revenue reporting.
Think of it like this
Adjusted EBITDA is like describing your monthly budget "before rent, car loan and that one-off vet bill": useful to see day-to-day spending, but not your real bank balance.
An example
A company has GAAP operating income of US$50M, plus US$40M depreciation and amortisation and US$90M stock-based compensation: adjusted EBITDA = US$180M.
Related terms
EV/EBITDA
EV/EBITDA is a valuation ratio that divides a company's enterprise value (market cap plus debt minus cash) by its EBITDA, showing how many years of operating earnings the business is priced at.
Earnings report
An earnings report is the periodic announcement, usually quarterly, in which a public company discloses its revenue, profit and other key results, often with an investor call and updated guidance.
Revenue ex-TAC
Revenue ex-TAC is revenue minus traffic acquisition costs (TAC), the amounts paid to publishers and partners for the ad space or traffic, showing what an ad company keeps.
Form 10-Q
Form 10-Q is the quarterly report US public companies file with the SEC for each of the first three fiscal quarters, containing unaudited financial statements and management's discussion of results.
Guidance (forecast)
Guidance is a public company's own forecast of its future results, such as next quarter's revenue or full-year adjusted EBITDA, usually given as a range alongside an earnings report.