EBITDAR: Meaning, Formula, Example, Pros & Cons What is EBITDAR? EBITDAR stands for Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring or Rent costs. It is a non-GAAP profitability metric used to isolate a company's core operating performance by excluding financing, tax, non-cash, and certain one‑time or location-dependent costs. Companies commonly using EBITDAR include restaurants, casinos, and firms that have recently undergone restructuring or that pay significant rent. Key points
EBITDAR focuses on operating profitability by removing interest, taxes, depreciation, amortization, and either restructuring or rent expenses.
It is primarily an internal analysis tool; public companies are not required to report EBITDAR.
* Useful for comparing operational performance across peers with different capital structures, tax situations, or property ownership. Explore More Resources
Formula and calculation Common formulations:
EBITDAR = EBITDA + Restructuring or Rent costs
Equivalently: EBITDAR = Net Income + Interest + Taxes + Depreciation + Amortization + Restructuring/Rent Notes on components:
Interest and taxes are removed because they relate to financing and jurisdictional tax rules, not core operations.
Depreciation and amortization are non-cash accounting allocations for tangible and intangible assets.
* Restructuring costs are often excluded as one-time items; rent can be excluded to compare companies regardless of ownership vs. leasing. Explore More Resources
Example Assume Company XYZ:
Revenue: $1,000,000
Operating expenses: $400,000 (includes Depreciation $15,000, Amortization $10,000, Rent $50,000)
Interest: $20,000
Taxes: $10,000 Calculations:
1. Net income = $1,000,000 − $400,000 − $20,000 − $10,000 = $570,000
2. EBIT = Net income + Interest + Taxes = $570,000 + $20,000 + $10,000 = $600,000
3. EBITDA = EBIT + Depreciation + Amortization = $600,000 + $15,000 + $10,000 = $625,000
4. EBITDAR = EBITDA + Rent = $625,000 + $50,000 = $675,000 Explore More Resources
Advantages
* Excludes one-time restructuring costs to show recurring operating results.
* Facilitates comparisons across companies with different capital structures or geographic rent levels.
* Helps focus on expenses management can more directly influence, excluding some uncontrollable items.
Limitations
* May remove costs that are recurring or partly controllable (e.g., repeated restructurings), masking true operating discipline.
* Excluding rent and restructuring can understate actual cash needs and mislead about free cash flow.
* Geographic pricing and revenue differences may offset higher local costs, so removing rent can distort economic comparisons.
* Non-GAAP — not standardized; companies may calculate it differently.
EBITDAR vs. EBITDA, EBIT, and Net Income
* EBITDA excludes interest, taxes, depreciation, and amortization. EBITDAR further excludes rent or restructuring costs.
* EBIT excludes depreciation and amortization but includes rent and restructuring; it reflects accounting profit before financing and taxes.
* Net income is the bottom-line profit after all expenses; it includes every cost and follows accounting rules.
Choice among these depends on the analytical focus: operational cash-generation (EBITDA/EBITDAR), accounting profit (EBIT), or final profitability (net income).
When to use EBITDAR
* Internal performance reviews after a recent restructuring.
* Comparing companies with different asset ownership (owned vs. leased properties).
* Industries with significant rent exposure (restaurants, hotels, casinos) where rent can distort operational comparability.
What is a good EBITDAR margin? There’s no universal benchmark by industry, but as a rule of thumb:
An EBITDAR margin in double digits (≥10%) is generally considered strong.
Some high-margin businesses may see EBITDA/EBITDAR above 20%; compare peers within the same sector for context. Bottom line EBITDAR is a useful non-GAAP metric for isolating operating performance by excluding financing, tax, non-cash, and either restructuring or rent costs. It helps compare companies with different capital structures or one-time events, but it can also obscure recurring or cash-driven expenses. Use it alongside standardized measures (EBITDA, EBIT, net income) and industry benchmarks to get a balanced view. Explore More Resources