Tuesday, June 20, 2023

Today we conclude our series on non-GAAP adjustments to net income with our third and final report on the subject, and one sure to be popular with financial analysts who love gossip.

Our list of the biggest adjusters we found!

As previously discussed on this blog, Calcbench teamed up with an elite squad of accounting students at Suffolk University to analyze the non-GAAP adjustments to net income made by 200 randomly selected companies in the S&P 500. Altogether, we found 1,188 individual reconciling items with a total value of almost $219 billion. Companies averaged 5.9 reconciling items in 2022, and average adjusted non-GAAP net income was $3.97 billion, 38 percent higher than average GAAP net income of $2.87 billion.

But who cares about averages, right? Let’s get to specific names of which companies adjusted by how much.

Table 1, below, shows the 10 firms in our sample with the largest total adjustments to net income, alongside what that GAAP-approved net income actually was.

As one can see, these are very large companies that made very large adjustments, for a variety of reasons. For example, AT&T’s ($T) $26.299 billion in adjustments comes almost entirely from one massive goodwill impairment charge of $24.8 billion, mostly taken against its Latin America operations. On the other hand, Pfizer’s ($PFE) adjustments of $6.346 billion were scattered across categories such as amortization of intangible assets, acquisition costs, restructuring, tax provisions, and the ever-popular “other” category.

Table 1 is only a small portion of our complete list of big adjusters. You can download the full Top 50 list from our Research Page and then conduct a close analysis of whatever companies are on your watch list.

Also remember that we published yet another non-GAAP report last week to examine non-GAAP adjustments by industry. You might even want to cobble that industry report and this Top 50 report together to derive extra insight.

For example, if one of the companies you follow is on our Top 50 list, you might then use our Interactive Disclosure database to find the exact breakdown of its non-GAAP adjustments, and then compare that list against what seems to be the norm for its industry. If your big adjuster’s disclosures seem wildly out of whack for its industry norms, that might be something to ask about on the next conference call.

In other words, if you have non-GAAP on your mind, Calcbench has all the data you need to conduct whatever analysis you want. We’re also happy to help with more detailed questions or even yet more non-GAAP industry analyses, if you have a good idea. Drop us a line at info@calcbench.com any time and let us know what’s on your mind.

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