PwC Study Shows Nearly 60% of IPOs Used Non-GAAP Measures During Past Three Years
Adjusted EBITDA most common non-GAAP measure
NEW YORK, Oct. 29, 2014 /PRNewswire/ -- According to a new report released today by PwC US, nearly 60 percent of IPOs over the past three years used at least one non-GAAP measure (NGM) in their financial statements, with 65 percent of those filings focusing on earnings before interest, income taxes, depreciation and amortization (EBITDA) measures. The report, How non-GAAP Measures Can Impact Your IPO, includes findings from an analysis of over 400 IPOs completed between 2011 and 2013 to provide a detailed look at the various types of NGMs used over that period.
"Management teams, investors, regulators and ratings agencies are keenly focused on NGMs and how they are being used by new equity issuers," said Neil Dhar PwC's U.S. Capital Markets leader. "As companies prepare for an IPO, among the many choices they must make is how to utilize NGMs in their filings and in their communications with potential investors. NGMs provide meaningful insight into a company's liquidity, cash flow, and operating performance and using the right NGMs can help new issuers highlight key facts and circumstances to positively position themselves to the investment community."
PwC's research showed that adjusted EBITDA NGMs appeared in 46 percent of reviewed filings. Of those, over 70 percent included an adjustment for stock, share or other equity based compensation. Other common EBITDA adjustments related to impairment (33 percent), acquisition (20 percent), and restructuring & reorganization impacts (15 percent). PwC also identified a wide diversity in EBITDA adjustments made by companies, noting that 80 percent of the filings included at least one unique adjustment, which ranged from management fees to accretion charges, to income or losses from discontinued operations.
Adjustments to EBITDA can be determined at the discretion of the Company, and can vary significantly from organization to organization, impacting comparability between companies and industries. The research also showed how some industries have developed other common NGMs in addition to or as a replacement for Adjusted EBITDA, including the Asset Management, Banking & Capital Markets and Entertainment, Media and Communications sectors.
After Adjusted EBITDA, other common NGMs in the financial statements analyzed included EBITDA (19 percent), adjusted net income (nine percent), free cash flow (four percent) and adjusted gross profits (four percent).
"Companies should be ready to enter the IPO markets while the window is open and having their financial reporting in order from the start is a key factor in the process," Mike Gould, PwC's U.S. Public Offerings leader. "While NGMs are a key tool for companies planning to enter the public market, it is a complex process that must be thought through objectively to avoid potential missteps, unanticipated costs and delays in their offerings."
PwC's Deals practitioners help corporate and private equity executives navigate transactions to increase value and returns. In today's increasingly daunting economic and regulatory environment, our experienced M&A specialists assist clients on a range of transactions from smaller and mid-sized deals to the most complex transactions, including domestic and cross-border acquisitions, divestitures and spin-offs, capital events such as IPOs and debt offerings, and bankruptcies and other business reorganizations. We help clients with strategic planning around their growth and investment agendas and advise on business-wide risks and value drivers in their transactions for more empowered negotiations, decision-making and execution. We help clients expedite their deals, reduce their risks, capture and deliver value to their stakeholders and quickly return to business as usual. Our local and global deal strength is derived from our deal professionals in 35 cities in the U.S. and across a global network of firms in 75 countries. In addition, our network firm PwC Corporate Finance provides investment banking services within the U.S. For more information, visit www.pwc.com/us/deals
About PwC US
PwC US helps organizations and individuals create the value they're looking for. We're a member of the PwC network of firms, which has firms in 157 countries with more than 195,000 people. We're committed to delivering quality in assurance, tax and advisory services. Find out more and tell us what matters to you by visiting us at www.pwc.com/US.
© 2014 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the US member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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SOURCE PwC US
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