What Is EBITDA Minus Capex?
EBITDA minus capex takes earnings before interest, taxes, depreciation, and amortization and deducts capital expenditures, the cash a company spends on property and equipment. The result is a rough proxy for pre-tax, pre-working-capital cash flow that credits a business for its operating earnings while penalizing it for the reinvestment required to sustain them.
The measure exists because EBITDA alone flatters capital-intensive businesses. Two companies can post identical EBITDA while one must plow half of it back into equipment every year and the other spends almost nothing. Subtracting capex exposes that difference and brings the metric closer to the cash actually available to service debt or reward investors.
How to Calculate It
The calculation is simply EBITDA − Capex, with both figures taken from the same period; capex appears in the investing section of the cash flow statement. Suppose a cable operator generates $500 million of EBITDA and spends $200 million on capex, while a software company generates $500 million of EBITDA and spends only $25 million. Their EBITDA minus capex figures of $300 million and $475 million tell a very different story than their identical EBITDA.
In multiples work, analysts compute EV/(EBITDA − Capex) alongside EV/EBITDA. Because the denominator shrinks when capex is subtracted, EV/(EBITDA − Capex) is the higher multiple whenever capex is positive and EBITDA exceeds capex. Some practitioners refine the metric by using only maintenance capex and excluding growth investment, though company disclosure rarely separates the two cleanly.
Why It Matters
Lenders and leveraged finance teams care about EBITDA minus capex because it approximates the cash available for debt service before interest and taxes. In sectors such as telecom, shipping, industrials, and utilities, screening on EV/EBITDA alone can make heavy spenders look deceptively cheap; the capex-adjusted multiple corrects that distortion when comparing across capital intensity.
It is also a classic interview topic. Candidates are often asked which multiple is larger, EV/EBITDA or EV/(EBITDA − Capex), and why an analyst would prefer one over the other. The strong answer notes that the capex-adjusted version is a better cash flow proxy for capital-intensive companies but adds noise when capex is lumpy or heavily growth-driven.
