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September 23, 2023

“Adjusted EBITDA (As Adjusted)” Is Our New Favorite Non-GAAP Measure Being Used By a Real-life Company

Today in creative accounting news, Jonathan Weil has the absurd notion that some company would use a profitability metric with a lot of convenient adjustments to achieve a desired earnings outcome. And then try to rationalize it to analysts and investors in a press release. I'm floored.

The company in question is Black Box Corp. "a leading communications system integrator dedicated to designing, sourcing, implementing and maintaining today's complex communications solutions." Yep! That sounds like a business! The metric that caught Weil's attention is "adjusted EBITDA (as adjusted)" and it's a pretty impressive attempt in financial distraction. 

Here's the company's explanation of EBITDA (as adjusted) and adjusted EBITDA (as adjusted):

Management believes that EBITDA (as adjusted), defined as Net income (loss) plus provision (benefit) for income taxes, interest, depreciation, amortization, the goodwill impairment loss and the joint venture investment loss, is a widely-accepted measure of profitability that may be used to measure the Company's ability to service its debt. Adjusted EBITDA (as adjusted), defined as EBITDA plus stock compensation expense, may also be used to measure the Company's ability to service its debt.
Got it? Luckily they provided a table (numbers are in thousands):
Whoa, that's a nice goodwill impairment you had last year! Probably glad to get out of the way, huh? 
Weil points out the joint venture loss and stock comp expense in the third quarter adds $4.4 million back to EBITDA (aka everything but the bad stuff). Presto! $24 million adjusted EBITDA (as adjusted). 
It's no Adjusted Consolidated Segment Operating Income, but this is a solid effort.


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