Is your business as profitable as it seems on paper? In 2025, more Australian companies are turning to Adjusted EBITDA as the yardstick for real operational performance. But what is it, and why has it become the gold standard for investors and lenders?
What Is Adjusted EBITDA and Why Is It Trending in 2025?
EBITDA—Earnings Before Interest, Taxes, Depreciation, and Amortisation—has long been a favourite shortcut for evaluating a company’s financial health. But as business becomes more complex and one-off events skew the numbers, analysts and business owners have embraced Adjusted EBITDA for a clearer, truer view.
- Adjusted EBITDA strips out not just the usual non-operating expenses, but also irregular, non-cash, or one-time items—think asset write-downs, restructuring costs, and government grants.
- In 2025, with ongoing economic volatility and ATO reporting changes, Adjusted EBITDA is increasingly cited in loan covenants, M&A deals, and ASX reporting.
For example, when a Melbourne-based tech startup secured $10 million in Series B funding this year, their Adjusted EBITDA—excluding a one-off cyber incident cost—was front and centre in investor discussions.
How Adjusted EBITDA Is Calculated: Beyond the Basics
While classic EBITDA is relatively straightforward, the ‘adjusted’ part is where business acumen comes in. Here’s a step-by-step look, with a focus on 2025’s most relevant adjustments:
- Start with EBITDA: Net profit + interest + taxes + depreciation + amortisation.
- Add back: Non-recurring expenses (e.g., COVID-related shutdowns, restructuring costs, legal settlements).
- Remove: Non-cash gains, government grants, or income from asset sales.
- Adjust for: Changes in accounting standards—such as the 2024 AASB 1060 updates, which affect how some lease costs and deferred tax assets are recognised.
Example: An Australian manufacturer’s 2024–25 EBITDA was $2.3 million. After stripping out a $200,000 one-time machinery upgrade cost and a $120,000 COVID recovery grant, the Adjusted EBITDA landed at $2.18 million—a more accurate reflection of its ongoing earning power.
Why Adjusted EBITDA Matters in Today’s Market
Australian lenders, private equity, and even the ATO are paying closer attention to Adjusted EBITDA in 2025. Here’s why:
- True Operating Performance: Stripping out the noise reveals the business’s real earning potential, vital for valuation and loan assessments.
- Deal-Making Currency: In recent M&A activity—such as Wesfarmers’ $1.1 billion acquisition of a logistics firm—Adjusted EBITDA multiples (not just plain EBITDA) drove the final price.
- Benchmarking and Growth: With shifting tax rules and pandemic-era government support winding down, Adjusted EBITDA helps business owners track genuine growth and compare apples with apples across sectors.
But beware: Adjusted EBITDA isn’t a panacea. Over-aggressive ‘adjustments’ can make results look rosier than reality. In 2025, the ACCC and ASX have both flagged concerns about inconsistent reporting—so transparency is key.
How Australian Businesses Are Using Adjusted EBITDA in 2025
From boardrooms to bank meetings, Adjusted EBITDA is shaping business strategy:
- Loan Applications: Major banks now routinely request Adjusted EBITDA figures when assessing business finance, as it gives a clearer view of risk.
- Performance Incentives: Executive bonuses and employee share schemes are increasingly tied to Adjusted EBITDA targets, especially in high-growth sectors.
- Investor Relations: ASX-listed companies are updating their investor presentations to include detailed Adjusted EBITDA breakdowns, with footnotes on every adjustment for 2025 compliance.
In short, understanding and accurately presenting Adjusted EBITDA can make the difference between closing a deal and missing out in Australia’s competitive business landscape.
Conclusion: Use Adjusted EBITDA Wisely for Financial Clarity
Adjusted EBITDA is more than just a buzzword—it’s a powerful tool for demystifying your business’s true performance in 2025. Used transparently and consistently, it can unlock better funding, sharper valuations, and smarter growth decisions. But remember: clarity and honesty in your adjustments are what set trustworthy businesses apart.
