Non-GAAP Measures
Financial metrics that exclude certain items required by GAAP, presented alongside official figures to show adjusted performance.
What is Non-GAAP?
Non-GAAP financial measures are performance metrics that differ from those prepared under Generally Accepted Accounting Principles (GAAP) by excluding certain income or expense items. Common adjustments include stripping out stock-based compensation, amortization of acquired intangibles, restructuring charges, acquisition costs, and legal settlements. Popular non-GAAP metrics include Adjusted EBITDA, Adjusted Operating Income, Adjusted EPS, and Free Cash Flow. The SEC (Regulation G) requires companies to reconcile non-GAAP measures to the most directly comparable GAAP figure when presenting them publicly. Critics argue that companies cherry-pick exclusions to paint an overly favorable picture; proponents say non-GAAP metrics better reflect recurring operating performance by removing noise.
Example
Salesforce reported GAAP net income of $1.4 billion in FY2024 but non-GAAP operating income of $7 billion — a 5x difference primarily driven by $4+ billion in stock-based compensation excluded from the non-GAAP figure. Both figures are disclosed, with a full reconciliation table required by the SEC.