Every company has a story it tells the market.
Some are straightforward: We sell things. People buy them. After paying our bills, we make money.
Others are more… interpretive.
Those companies don’t talk about profits. They talk about adjusted profits. They don’t mention costs; they “reframe” them. They don’t lose money; they “invest aggressively in future growth.” And when things go truly sideways, they bring out the most soothing metric of all:
EBITDA.
Earnings Before Interest, Taxes, Depreciation, and Amortization.
Also known as: earnings before all the parts that make earnings inconvenient.
If you’ve spent any time reading earnings releases, listening to conference calls, or scrolling through investor decks, you’ve met EBITDA’s softer-spoken cousin: Adjusted EBITDA, often whispered gently into the ears of analysts who are encouraged not to ask too many follow-up questions.
This is a story about listening carefully. Because companies rarely lie outright. They simply speak in a dialect designed to make the truth sound optional.
EBITDA: The Metric That Wants to Be Liked
EBITDA didn’t start life as a villain.
It was originally meant as a rough operating proxy—a way to compare companies before capital structure, tax regimes, and accounting quirks complicated things. In capital-intensive industries, it could help normalize comparisons.
But somewhere along the way, EBITDA stopped being a tool and became a personality.
A comforting one.
Because EBITDA doesn’t care how much debt you have.
It doesn’t care how expensive your equipment is.
It doesn’t care whether your assets actually wear out.
It’s earnings with all the adult responsibilities removed.
And that makes it incredibly useful—especially for companies that struggle with the parts EBITDA politely ignores.
When EBITDA Becomes the Headline, Something Else Is Missing
A simple rule of thumb:
If a company leads its earnings release with EBITDA instead of net income, it’s trying to manage your emotional response.
This doesn’t automatically mean fraud, deception, or catastrophe. But it does mean the company knows where the weak spots are—and doesn’t want you staring at them too long.
Because profits are binary.
You either have them or you don’t.
EBITDA, on the other hand, lives in a more flexible emotional space. It’s optimistic. Aspirational. Hope-adjacent.
EBITDA says, “Ignore the messy stuff. Focus on the potential.”
Investors should immediately ask: Why?
Adjusted EBITDA: The Whisper Gets Louder
Once EBITDA enters the conversation, “adjusted” is never far behind.
Adjusted for:
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Restructuring costs
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Stock-based compensation
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Acquisition expenses
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One-time charges (that somehow happen every quarter)
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“Non-core” items that seem suspiciously core
At some point, you’re no longer looking at a financial statement. You’re reading a résumé where every weakness has been relabeled as “experience.”
If EBITDA is a whisper, Adjusted EBITDA is a lullaby.
And the goal is simple: keep you calm.
The Curious Case of the Permanent One-Time Expense
Nothing deserves more skepticism than a recurring “one-time” adjustment.
If something happens every quarter, it is not one-time.
If it happens every year, it is not exceptional.
If it happens for a decade, it is the business model.
Yet companies routinely exclude:
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Legal costs
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Severance
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Integration expenses
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Technology migrations
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Supply chain disruptions
These are presented as unfortunate anomalies instead of what they actually are: the cost of doing business imperfectly.
Listening closely matters here. Because when management consistently removes the same costs from EBITDA, they’re telling you something without meaning to:
We can’t make money without pretending parts of our business don’t exist.
Debt: The Thing EBITDA Doesn’t Want to Talk About
EBITDA has a special relationship with debt.
Specifically, it pretends debt is a personality trait instead of a financial obligation.
Interest expense? Ignored.
Refinancing risk? Ignored.
Maturity walls? Ignored.
This is why EBITDA looks best right before trouble starts.
Because debt doesn’t matter—until it suddenly does.
And when rates rise, cash flows tighten, or lenders get nervous, EBITDA offers no protection. It doesn’t pay interest. It doesn’t refinance bonds. It doesn’t show up when creditors want actual money instead of adjusted narratives.
Companies that lean heavily on EBITDA while carrying large debt loads are often telling you: Please don’t look at the balance sheet too closely.
Capital Expenditures: The Elephant in the Income Statement
EBITDA also avoids a very uncomfortable reality: things break.
Machines wear out.
Software needs updating.
Buildings decay.
Infrastructure ages.
Depreciation exists for a reason. It reflects the real economic cost of staying in business.
When companies emphasize EBITDA while downplaying capital expenditures, they’re quietly separating earnings from sustainability.
A business that generates EBITDA but requires massive reinvestment just to stand still is not nearly as profitable as it appears.
The whisper here is subtle but consistent: Our future costs are someone else’s problem.
The EBITDA Personality Test
You can learn a lot about a company’s culture by how it talks about EBITDA.
Some companies:
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Use it sparingly
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Reconcile it clearly
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Emphasize cash flow and returns alongside it
Others:
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Center entire narratives around it
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Treat it as a moral victory
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Avoid discussing how it converts into actual cash
The latter group often sounds defensive without realizing it. They emphasize “strong EBITDA growth” while avoiding words like margin, free cash flow, or return on invested capital.
That’s not accidental.
It’s selective hearing, applied outward.
Analysts, Incentives, and the Whisper Economy
EBITDA didn’t become dominant on its own.
It thrived because it made life easier for everyone involved:
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Management could tell a cleaner story
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Analysts could maintain forecasts without awkward questions
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Bankers could justify valuations
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Investors could feel informed without discomfort
This is the whisper economy: nobody explicitly lies, but nobody pushes too hard either.
Because pushing too hard risks access.
And access, in modern finance, is currency.
Listening for What Isn’t Said
Being an EBITDA Whisperer doesn’t mean rejecting the metric outright. It means treating it as a starting point, not a conclusion.
The real work begins with questions like:
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How does EBITDA convert to free cash flow?
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How stable are the adjustments?
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What percentage of EBITDA goes to capital expenditures?
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How sensitive is the business to interest rates?
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What happens if growth slows?
Most importantly: Who benefits most from this framing?
When EBITDA dominates the conversation, someone is being protected—from scrutiny, from expectations, or from reality.
When EBITDA Is Useful (Yes, Sometimes)
To be fair, EBITDA has legitimate uses:
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Comparing businesses with different capital structures
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Evaluating operating leverage
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Assessing covenant compliance
But usefulness depends on context and restraint.
When EBITDA becomes the only metric that matters, it stops being informative and starts being performative.
And performance is not the same thing as performance.
Valuation Games: EBITDA’s Favorite Playground
EBITDA multiples are seductive.
They’re simple.
They’re clean.
They’re abstract enough to feel sophisticated.
But they also remove friction.
A company trading at 10x EBITDA sounds reasonable—until you realize:
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Capital expenditures consume half of it
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Interest eats another chunk
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Taxes finish the job
Suddenly that “cheap” multiple isn’t so cheap.
Valuation without cash flow is a thought experiment, not an investment process.
The Red Flag Checklist
You don’t need forensic accounting skills to spot trouble. You just need to listen differently.
Be cautious when:
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EBITDA grows faster than revenue
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Adjustments increase over time
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Cash flow lags earnings consistently
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Management avoids balance sheet questions
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Capital intensity is minimized in discussions
These aren’t accusations. They’re signals.
And signals are what good listeners follow.
The Quiet Confidence of Real Earnings
The most trustworthy companies don’t whisper.
They speak plainly:
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Here’s what we earned
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Here’s what we spent
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Here’s what we kept
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Here’s what could go wrong
They don’t need EBITDA to do the emotional heavy lifting.
Because when the fundamentals are strong, the truth doesn’t need protection.
Final Thought: Listening Is an Investment Skill
Financial literacy isn’t about memorizing ratios. It’s about interpreting tone.
It’s about noticing what’s emphasized, what’s minimized, and what’s avoided entirely.
EBITDA isn’t the enemy.
But it is a mask.
And the companies most eager for you to focus on it are often the ones hoping you won’t notice what’s underneath.
So listen carefully.
Because when a company whispers, it’s usually telling you exactly what it doesn’t want you to hear.
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