Operating Income Before Depreciation and Amortization (OIBDA)

What is OIBDA?

OIBDA measures a company’s profitability from its core operations before accounting for depreciation and amortization. It strips out the non-cash charges related to spreading asset costs over time and—when applicable—interest and tax expenses that may be included in operating income. Because it focuses on operating performance, OIBDA is often used to evaluate how well a company generates revenue while controlling production and operating costs.

Why it matters

• Highlights core operating performance by removing non-cash asset charges.
• Useful for comparing companies with different capital structures or tax situations.
• Can indicate operational efficiency without the noise of financing, taxes, or accounting depreciation policies.

Core components

• Operating income (OI): Revenue minus cost of goods sold (COGS) and operating expenses. It reflects profit from core business activities.
• Depreciation (D): Allocation of tangible asset costs (e.g., machinery) over their useful lives.
• Amortization (A): Allocation of intangible asset costs (e.g., patents) over their useful lives.
• Interest and taxes: Usually excluded from operating income (appear below operating income on the income statement). If they are included in operating income for a particular company, they should be added back when calculating OIBDA.

Formula and calculation

Standard OIBDA approach:
OIBDA = Operating Income + Depreciation + Amortization [+ Interest + Taxes (only if already included in OI)]

How to calculate:
1. Locate operating income on the income statement.
2. Find depreciation and amortization amounts. If not presented separately, check the cash flow statement (non-cash D&A is typically added back to net income in operating activities).
3. Add D&A to operating income. Add interest and taxes only if they have been included in operating income on that company’s financial statements.

OIBDA vs. EBITDA

• OIBDA starts with operating income and focuses strictly on operating results; EBITDA starts with net income and therefore can include non-operating items before the add-backs.
• OIBDA excludes non-operating income and one-time charges, which can make comparisons of core operations cleaner across periods or companies.
• Both are non-GAAP metrics and should be used cautiously alongside GAAP measures.

Example (Walmart, fiscal year ending Jan. 31, 2021)

• Operating income (2021): $22.548 billion
• Depreciation & amortization (from cash flow): $11.152 billion
• OIBDA (2021): $22.548B + $11.152B = $33.700 billion

Comparative figures:
* 2020 OIBDA: $31.55 billion (OI $20.568B + D&A $10.987B)
* 2019 OIBDA: $32.635 billion (OI $21.957B + D&A $10.678B)

Interpretation: Walmart’s 2021 OIBDA increased versus 2020 and 2019, reflecting stronger operating income and higher depreciation expense (possible new asset purchases).

Limitations and considerations

• Not a GAAP measure — companies may calculate or present it differently.
• D&A can be embedded in COGS or SG&A, requiring use of the cash flow statement to locate them.
• Excluding depreciation and amortization can overstate sustainable profitability for asset-heavy businesses; comparisons are most meaningful among companies with similar capital intensity and accounting policies.
• Companies can adjust what they include or exclude, so review financial statements and footnotes to ensure apples-to-apples comparisons.

Key takeaways

• OIBDA isolates operating profitability by adding back depreciation and amortization to operating income.
• It is helpful for assessing operating performance but must be used with awareness of accounting differences and capital intensity.
• Always confirm how a company reports D&A, interest, and taxes and use OIBDA alongside other metrics for a fuller financial picture.