Term · Profitability & Growth
Adjusted EBITDA
In briefAdjusted EBITDA is an earnings figure adjusted by management, from which items such as one-off effects, share-based compensation or restructuring costs are removed. Because there is no uniform definition, the quality and transparency of these adjustments determine how meaningful it is.
Definition
EBITDA adjusted by management, from which one-off effects, share-based compensation or restructuring costs may be removed.
How it is calculated
Formula. Adjusted EBITDA = EBITDA ± management adjustments. The metric is not standardised; the issuer's definition and delineation are decisive.
Why it matters for small caps
In the small-cap space, adjusted EBITDA is frequently used because GAAP/IFRS results are volatile; the quality of the adjustments is decisive.
Common misreadings
- It is accepted as a better result without checking whether "one-off" costs recur regularly.
In the process
Frequently asked
What does Adjusted EBITDA mean?
It is an adjusted operating result before interest, taxes and depreciation/amortisation, corrected for special effects. The prefix "adjusted" refers to adjustments the company itself defines.
How is Adjusted EBITDA used in analysis?
It is meant to show the ongoing earning power without distorting one-off items, which is frequently used for volatile small companies. It makes sense to reconcile it with the unadjusted IFRS or HGB result.
What should be watched with Adjusted EBITDA?
It becomes problematic when supposedly one-off costs appear year after year and the adjustment permanently flatters the result. Every adjustment should be questioned individually.
Related terms
Sources
Primary
ESMA – Guidelines on Alternative Performance Measures
https://www.esma.europa.eu/document/esma-guidelines-alternative-performance-measures
https://www.esma.europa.eu/document/esma-guidelines-alternative-performance-measures
Methodology
U.S. SEC – Non-GAAP Financial Measures
https://www.sec.gov/rules-regulations/staff-guidance/corporation-finance-interpretations/non-gaap-financial-measures
https://www.sec.gov/rules-regulations/staff-guidance/corporation-finance-interpretations/non-gaap-financial-measures
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.