High scrutiny
Uncapped catch-all
(h) any other unusual or non-recurring charges, expenses or losses;
Labelled high scrutiny: catch-all language with no cap.
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What it checks
Every add-back, sorted by how much scrutiny it needs
Add-back categories
Non-cash charges, restructuring, transaction costs, run-rate synergies, owner and related-party items and more.
Caps
Which add-backs are capped, which share a cap, and whether the cap is measured before or after add-backs.
Projected savings
Run-rate cost savings and synergies not yet realized, the realization window and good-faith estimates.
Catch-all language
“Any other unusual or non-recurring” items and costs that count even if a deal never closes.
Bridge check
For adjusted EBITDA bridges: whether it adds up, and add-backs as a share of adjusted and reported EBITDA.
Verified quotes
Every quote is matched word-for-word against your text. Anything that can't be verified is dropped.
Definition
What are EBITDA add-backs?
EBITDA add-backs (also written add backs or addbacks) are adjustments added to EBITDA to remove items a company argues are non-recurring, non-cash or not part of ongoing operations. The result is adjusted EBITDA — sometimes called normalized EBITDA, or pro forma EBITDA when it includes acquisitions or savings as if they had happened at the start of the period.
In a credit agreement, the same adjustments sit inside the definition of Consolidated EBITDA, where they drive every leverage and coverage test and the size of debt baskets. Uncapped run-rate synergies and catch-all language are the add-backs lenders scrutinize most — check the covenants that use them with the financial covenant extractor.
In an acquisition, a quality of earnings (QoE) report tests whether reported earnings and proposed add-backs are supported. Continua can check add-backs against the QoE and financial statements and flag risks and red flags across the deal file.
Common add-backs and what lenders check
| Add-back | What lenders check | Usual scrutiny |
|---|---|---|
| Non-cash charges and stock compensation | Whether charges that will be paid in cash later are excluded | Low |
| Restructuring and integration costs | Caps, time limits and whether costs recur | Medium |
| Transaction costs | Whether deals that never closed still count | Medium |
| Run-rate cost savings and synergies | Cap, realization window, actions actually taken | High |
| Pro forma acquired EBITDA | Support for the target's numbers | High |
| Owner or related-party adjustments | Market comparables and documentation | Medium |
| “Any other unusual or non-recurring” items | Catch-all scope with no cap | High |
Adding back or normalizing? A quality of earnings report — and the quality of earnings analysis behind it — is where add-backs are tested against invoices, payroll and the general ledger. For lenders, the analysis continues into underwriting and due diligence.
Examples
EBITDA add-back examples
Illustrative drafting — and how the analyzer labels each add-back.
Scrutinize
Run-rate synergies
(g) the amount of “run-rate” cost savings and synergies projected by the Borrower in good faith to be realized within twenty-four (24) months…
Labelled scrutinize: projected savings, good-faith estimate and a 24-month window — capped here.
Scrutinize
Transaction costs
(f) fees, costs and expenses incurred in connection with any acquisition or issuance of Indebtedness, in each case whether or not consummated;
Labelled scrutinize: counts even if the deal never closes, with no cap.
Needs support
Owner compensation
Owner compensation in excess of market: 650
Labelled needs support: an owner adjustment that should be backed by market comparables.
How it works
From excerpt to verified findings
1. Paste a definition or bridge
Add a Consolidated EBITDA definition, or an adjusted EBITDA reconciliation with its notes.
2. We classify each add-back
Category, caps, realization windows and issues — labelled by fixed rules, not guesswork.
3. Check the numbers
For bridges, we add up the adjustments and show projected savings as a share of the total.
FAQ
Frequently asked questions
What are EBITDA add-backs?
Adjustments added to EBITDA to remove items a company argues are non-recurring, non-cash or not part of ongoing operations, producing adjusted EBITDA.
Which add-backs do lenders push back on most?
Projected cost savings and synergies that have not yet been realized, uncapped catch-all language, and transaction costs that can be added back even if the deal never closes.
What is a cap on add-backs?
A limit, often a percentage of EBITDA, on how much certain add-backs can contribute. Whether the percentage is measured before or after the add-backs changes how much room it gives.
What is the difference between adjusted, normalized and pro forma EBITDA?
The terms overlap. Normalized usually means removing owner-specific or one-time items; pro forma usually means including acquisitions or savings as if they had happened at the start of the period.
What is a quality of earnings report?
An accounting review, usually commissioned in an acquisition, that tests whether reported earnings and proposed adjustments are supported and likely to recur.
Does the tool decide whether an add-back is valid?
No. It classifies each add-back, flags caps, time limits and projections, and checks that a bridge adds up. Supporting evidence needs the underlying documents.
What happens to my document?
Files are converted to text on our servers and not stored. Text is processed by our AI model provider for this check only and is not used for training.
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