What is EBITDA margin?
EBITDA as a percent of revenue — operating profitability before depreciation, amortization, interest and tax.
EBITDA margin measures operating profitability before depreciation, amortization, interest, and tax — earnings as a share of revenue with the accounting effects and the capital-structure effects stripped out. Lenders covenant on it, buyers price companies off it, and boards track it because it's comparable across companies with different assets and financing.
The honest way to compute it from a P&L is bottom-up: revenue minus every operating expense except depreciation and amortization, divided by revenue. Interest and tax live below the operating line anyway; D&A you exclude explicitly. What it hides matters too — EBITDA is not cash flow, and capital-intensive businesses can look wonderful on EBITDA while bleeding cash on capex.
Negative EBITDA margin isn't a broken metric — it's a company still investing ahead of revenue, and the number to pair it with is burn rate. What EBITDA margin is genuinely bad at: comparing a software company to a manufacturer (asset intensity differs), and any use that forgets the DA in the name is real economic cost.
Formula
EBITDA margin = (revenue − operating expenses excl. D&A) ÷ revenue × 100
Bottom-up from the GL: revenue − all operating expenses except depreciation and amortization. EBIT = EBITDA − D&A when you need it.
The Sumwise question
Calculate September EBITDA and EBITDA margin from the GL: total revenue, operating expenses excluding depreciation, EBITDA, and EBITDA margin as a percent of revenue.
Runs on gl_2026.csv. The September GL sample again — the same eleven-account export, with depreciation split out as its own account (9000) so the exclusion is explicit.
Worked example — gl_2026.csv
| Revenue (software + services) | $540,500 |
| Operating expenses excluding depreciation | $575,800 |
| EBITDA | −$35,300 |
| EBITDA margin | −6.5% |
| EBIT (after $14,200 depreciation) | −$49,500 |
September EBITDA is −$35,300, a −6.5% margin — the sample company is still investing ahead of revenue, which is exactly why it tracks burn rate and runway alongside this number.
gl_2026.csv — drop it into the demo's Your-own-CSV tab (or Excel) and re-run the example.
Common questions
Why exclude depreciation and amortization?
To make operating performance comparable across companies with different asset bases and financing: D&A reflects past capital spending, interest reflects leverage, tax reflects jurisdiction. Strip those and the residue is closer to "how well does this business convert revenue into operating profit."
Is EBITDA margin the same as operating margin?
No — operating margin is EBIT (operating profit after D&A) over revenue. EBITDA margin will always read higher. When someone quotes "margin" without a prefix, ask which.
What's a good EBITDA margin?
Software companies commonly run 20–40% at scale; services businesses live in single digits to low twenties. The more useful benchmark is the company's own trend — margin improving (or degrading) on a like-for-like basis, computed the same way each quarter.
Compute ebitda margin on your own export, every month
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