What Is OIBDA?

Operating income before depreciation and amortization (OIBDA) is a non-GAAP measure of financial performance used by companies to show profitability in continuing business activities, excluding the effects of capitalization and tax structure.

Sometimes OIBDA is also considered not to include items such as changes in accounting principles that are not indicative of core operating results, income from discontinued operations, and the earnings/losses of subsidiaries.

Calculated as:

OIBDA=OI + D + A + Tax + Interestwhere:OI=Operating IncomeD=Depreciation\begin{aligned}&\text{OIBDA}=\text{OI}\ +\ \text{D}\ +\ \text{A}\ +\ \text{Tax}\ +\ \text{Interest}\\&\textbf{where:}\\&\text{OI}=\text{Operating Income}\\&\text{D}=\text{Depreciation}\\&\text{A}=\text{Amoritization}\end{aligned}OIBDA=OI + D + A + Tax + Interestwhere:OI=Operating IncomeD=Depreciation

Understanding OIBDA

Operating income before depreciation and amortization (OIBDA) is gaining ground as companies move away from using earnings before interest, taxes, depreciation, and amortization (EBITDA). These two measures are similar except in terms of the income numbers they use. In OIBDA, the calculation is started with GAAP net operating income. In EBITDA, the calculation is started with GAAP net income.

Unlike EBITDA, OIBDA does not incorporate non-operating income. This is seen as an advantage for comparison purposes because non-operating income usually doesn't reoccur year after year and its separation from operating income ensures that all income reflects only the income earned from regular operations.

Because most methods of valuation begin with discounted cash flows, OIBDA is an important piece of detailed financial analysis. Analysts will keep a close eye on shifts and patterns in this metric as it might be a signal of changes in core operations.