What is a non-GAAP measure?
A non-GAAP measure is a financial figure that adjusts a GAAP result, such as adjusted EBITDA or earnings excluding stock-based compensation, which public companies must reconcile to GAAP. SEC rules require the most directly comparable GAAP measure, shown with equal or greater prominence, plus a reconciliation. SEC staff guidance says excluding normal, recurring, cash operating expenses needed to run the business can make a measure misleading.
Why it matters to a revenue leader
Many public companies talk to investors in non-GAAP terms such as adjusted EBITDA or adjusted operating margin, and some tie executive pay to them. Sales compensation and selling costs are normal recurring operating expenses, so they generally stay in those figures. A richer commission plan or a discount-heavy quarter shows up directly in the metric the CEO and CFO discuss most.
Example
Fictitious numbersA public facility services company reports GAAP operating income of $40 million. It adds back $12 million of stock-based compensation and $8 million of acquisition costs to report adjusted operating income of $60 million. Its $15 million of sales commissions stays in both figures, so every point of extra commission rate lowers the adjusted number the CFO guides on.
"Which non-GAAP metric does our CFO guide on, and how does my team's spend show up in it?"
Sources
- Non-GAAP Financial Measures (Corporation Finance interpretations) checked 9 Oct 2026
- How to Read a 10-K/10-Q checked 9 Oct 2026