---
title: "What Is Adjusted EBITDA?"
term: "Adjusted EBITDA"
description: "Adjusted EBITDA is earnings before interest, taxes, depreciation, and amortization, plus non-recurring or non-cash items removed to show a cleaner view of ongoing operating performance."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/adjusted-ebitda
---

# What Is Adjusted EBITDA?

> Adjusted EBITDA is earnings before interest, taxes, depreciation, and amortization, plus non-recurring or non-cash items removed to show a cleaner view of ongoing operating performance.

**Adjusted EBITDA** is a normalized profitability metric that starts with EBITDA and adds back expenses management argues are one-time, non-cash, or unrelated to core operations.

## How it works

Buyers build a quality-of-earnings report. Legal fees for a single acquisition might add back; recurring "integration" costs every year might not. Stock-based compensation treatment varies—some strategics ignore it; some PE firms cap add-backs. The result drives leverage capacity and purchase price multiples.

Venture-stage companies rarely lead with adjusted EBITDA until growth slows and cash flow matters. Late-stage SaaS approaching PE or public comparables may introduce adjusted EBITDA alongside [ARR](/glossary/arr) to show path to sustainable margins.

## Why it matters

- **Founders:** Document add-backs with invoices and narratives before diligence. Aggressive adjustments erode trust and retrade price.
- **Investors:** Compare reported adjustments across portfolio companies; pattern of permanent "one-time" costs signals weak controls.
- **GPs:** LBO models hinge on exit EBITDA—optimistic adjustments at entry compound at exit assumptions.

## Common mistake

Adding back all marketing spend as "growth investment" while claiming the business is profitable on adjusted EBITDA. Buyers haircut obvious gaming.

## Related ideas

EBITDA, quality of earnings, enterprise value multiples, and [add-on acquisition](/glossary/add-on-acquisition) synergy models.

## FAQ

### What is adjusted EBITDA in simple terms?

Start with EBITDA—operating profit before interest, tax, depreciation, and amortization—then add back one-time costs like restructuring, lawsuit settlements, or excessive owner perks to show what the business might earn in a normal year.

### Why does adjusted EBITDA matter?

Private equity prices many deals as a multiple of adjusted EBITDA. Small changes in what's 'adjusted' swing enterprise value by millions. Founders and investors fight over which expenses are truly non-recurring.


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Source: https://venturecapitaltracker.com/glossary/adjusted-ebitda