EBITDAmargin

EBITDA margin is a financial metric that expresses a company’s earnings before interest, taxes, depreciation, and amortization as a percentage of its revenue. It provides a view of operating profitability by removing non-operating and non-cash accounting items, focusing on the core business performance.

Calculation is straightforward: EBITDA margin equals EBITDA divided by total revenue, multiplied by 100 to yield a percentage. EBITDA can be calculated as operating income plus depreciation and amortization, or as net income plus interest, taxes, depreciation, and amortization, depending on the data available. Revenue used in the denominator is typically total revenue or net revenue, as defined by the company.

The metric is widely used to compare the operating efficiency of different firms, especially within industries with varying capital structures and tax regimes. It is also useful for tracking performance over time and for benchmarking against peers. Many analysts report “adjusted EBITDA margin,” which excludes certain non-recurring or non-cash items to better reflect ongoing operating performance.

Limitations include its non-GAAP nature and the lack of a standardized definition, which can hinder comparability. EBITDA excludes interest, taxes, depreciation, and amortization, as well as changes in working capital and capital expenditures, so it does not measure cash flow available to equity holders or debt holders. Consequently, EBITDA margin should be considered alongside other margins and cash-flow metrics.

Example: with revenue of 500 million and EBITDA of 150 million, EBITDA margin is 30%.