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How non-GAAP measures and key performance indicators can impact your IPO

March 2021

For the past 30 years, companies have used non-GAAP measures (NGMs) and other metrics as an important part of the financial reporting process when pursuing an initial public offering. NGMs and key performance indicators (KPIs) provide an opportunity for management to tell a story to the reader of the financials and give investors a different view into the company.

Most companies establish a set of NGMs and KPIs at the time of the IPO. By doing this they get a full picture of their business drivers and help set the stage for future performance. It is important for companies to spend time ensuring that the chosen NGMs and KPIs authentically reflect how the business is managed, and that the company will have no hesitation continuing to provide such metrics once listed as a public company.

Recent trends in NGMs

NGMs continue to be in the spotlight for creating and driving an effective equity story. More companies use NGMs now as compared to ten years ago and the majority of the time, the results, as captured in the NGMs, are better than those reported under US GAAP metrics.

But not all NGMs are created equal, and depending on a company’s industry and based on the story the company is trying to tell investors, certain NGMs may have a higher efficacy.

Recent trends in KPIs

In recent IPOs, there has been a wide range of KPIs being reported. Although there is no perfect method for categorizing these KPIs, they can be thought of as broadly falling into one of four categories.

Companies generally tend to gravitate towards reporting more KPIs related to financial and customer non-financial categories. Often such drivers are used to highlight the strength and longevity of a company’s customer base in order to lend further credibility and proof points to the equity story. 

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Mike Bellin

Mike Bellin

IPO Services Co-Leader, PwC US

David Ethridge

David Ethridge

IPO Services Co-Leader, PwC US

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