Modeling - Should I pull in adjusted or GAAP historical financials in building an operating model?
Hello all,
I was wondering if I could get some advice on which to pull in for building an operating model - adjusted or GAAP financials? I've been using the 3 statement model template from Bloomberg to pull in historicals and the default is adjusted for obvious reasons, but does that make sense to use in building my operating model given the massive discrepancies? Any thoughts would be very much appreciated. Thank you!
Both. Show the non-GAAP reconciliation -> reported, like subtracting D&A, SBC, and 1x events from adjusted EBITDA to get to GAAP operating income.
Right, I understand you will want to show the adjusted metrics as well but for pulling in historicals that should be GAAP then you show you walk to adjusted. This walk is the only time to show adjusted? Since the Bloomberg 3 statement model template adjusted will pull in the adjusted values for each line item, not a walk. I can clarify further if needed, just want to make sure we are on the same page.
I'm not familiar with the Bloomberg template. The models I work with are solely focused on non-GAAP numbers (the ones that matter) but we have to back our way into the GAAP numbers and justify how we got to our non-GAAP ones. So for example, if we have adjusted S&M, my excel formula would have to show "GAAP S&M - S&M SBC - Acquired Intangibles Amortization for S&M". I usually add a table below my model with all the adjustments that were made and reference them above in the formulas for the model.
Most people pull in reported figures and then make adjustments to get to their adjusted figures. Sounds like you are working backwards.
Exactly my thoughts. So it makes sense to pull in the GAAP then do a walk to show adjusted. Adjusted numbers that matter are EBITDA and earnings?
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