For many healthcare innovators, EBITDA paints an incomplete picture, not because the business isn’t strong, but because GAAP doesn’t always capture the economics that drive long-term value.
The GAAP Challenge
Digital health: GAAP allows software development costs to be capitalized once technical feasibility is reached, but many teams default to expensing everything.
MedTech and biotech: R&D must be expensed under GAAP. For companies with early commercial traction, this treatment can artificially depress earnings.
Why Adjusted EBITDA Matters
In these cases, presenting adjusted EBITDA with non-GAAP R&D capitalization can provide a more accurate picture, so long as the methodology is transparent, consistent, and well-supported. This is not accounting sleight of hand; it’s about aligning costs with revenues so investors and buyers see the business’s true earnings trajectory.
What Thoughtful Founders Are Doing
Capitalizing R&D for digital health, as GAAP permits.
Presenting adjusted EBITDA bridges that clarify rather than obscure performance.
Using clear, transparent adjustments to reflect the business, not disguise it.
Example:
GAAP EBITDA: $5.0M
Capitalized R&D: $3.0M
Amortization: ($0.6M)
R&D Adjusted EBITDA: $7.4M
Buyers and investors will do this math anyway. The most effective founders help them get there faster.