Adjusted EBITDA

Adjusted EBITDA is Upwork Inc.'s non-GAAP profit measure, net income with interest, tax, depreciation and amortisation added back and stock-based compensation and other items outside core operations removed as well.

Upwork Inc. reports adjusted EBITDA in every quarterly earnings release, in the Key Financial and Operational Metrics table of the Form 10-Q and 10-K, and in its guidance for the next quarter and the year. It is a non-GAAP measure: it does not appear in the audited income statement, and securities rules require Upwork to reconcile it to the nearest GAAP figure, net income, in the same document. The reconciliation is where the definition lives. Starting from net income, Upwork adds back interest, income taxes, depreciation and amortisation, which is ordinary EBITDA, and then stock-based compensation, usually the largest adjustment, together with items such as restructuring, impairments and acquisition costs that it treats as non-recurring. The exact list is Upwork's and can change from year to year.

The measure exists to show the cash-like profitability of the operating business, and Upwork manages to it: guidance is given in adjusted EBITDA, and the quarterly story is often told as margin on this line. Its weakness is the same as its purpose. Stock-based compensation is a real cost to shareholders, so adjusted EBITDA runs well above net income and can be positive in a quarter where GAAP profit is negative.

For readers of this site it is the profit side of the picture that gross services volume and take rate leave out: how much of what Upwork keeps turns into operating profit.