EBITDA for iGaming Businesses: Definition and Use in Valuation

The short answer

EBITDA is earnings before interest, taxes, depreciation and amortisation. It shows what a business earns from operating, before the effects of how it is financed, how it is taxed on profit, and non-cash accounting charges. Buyers use it because it lets them compare businesses with different owners, debt and tax positions on the same footing.

For iGaming businesses, EBITDA is the main earnings measure for licensed operators, platforms and larger affiliate groups that have a management team. One point catches sellers out: gaming taxes are operating costs and sit above EBITDA. Only corporate tax on profit is excluded.

Where EBITDA sits in an iGaming P&L

EBITDA = NGR − all operating costs, or, working backwards, net profit + corporate tax + interest + depreciation + amortisation.

The split matters because a buyer who sees gaming tax added back will lose trust in the whole figure. Gaming tax is paid on every euro of revenue in a regulated market, whoever owns the business.

Worked example

The figures below are illustrative, for an online casino over the trailing 12 months.

In this example EBITDA is about 18% of NGR. Margins vary widely between operators, depending mainly on gaming tax, platform terms and how much is spent on acquisition, so compare an operator against similar businesses rather than against a general rule.

Reported vs adjusted EBITDA

Reported EBITDA comes straight from the accounts. Adjusted EBITDA, sometimes called normalised EBITDA, restates it for a new owner: one-off costs and owner-specific items added back, and missing costs such as unbooked affiliate commissions or a below-market salary deducted.

Buyers price on adjusted EBITDA, but they only accept adjustments they can verify. Typical adjustments in iGaming deals:

• Added back: one-off legal or licence application costs, platform migration costs, owner pay above the cost of a manager, personal costs run through the business
• Deducted: unbooked commissions and provider fees, gaming tax not yet provided for, bonus cost cut before the sale, sportsbook margin above its long-run average, a manager’s salary where the owner works unpaid

The adjusting financial statements guide explains which add-backs survive diligence, and the QofE guide shows how an accountant tests them.

When buyers use EBITDA, NGR or revenue multiples instead

EBITDA is not always the right base for a price. Buyers choose the measure that best reflects what they are buying.

A strategic buyer that will move players onto its own platform may ignore the seller’s EBITDA, because most of the seller’s costs will disappear. That buyer is pricing NGR and player quality. A financial buyer that keeps the business standalone will price EBITDA. Knowing which kind of buyer you are dealing with tells you which number to defend.

What EBITDA hides

EBITDA is a useful common language, but it leaves out costs a buyer will still pay.

• Capitalised development. Operators that build their own platform often capitalise developer salaries as an asset, which moves the cost below EBITDA as amortisation. Buyers usually treat ongoing development as an operating cost and deduct it.
• Capital spending. New game integrations, hardware, platform upgrades and licence renewals require cash every year. EBITDA ignores them.
• Working capital. PSP rolling reserves, player balances and the timing of commission and tax payments can tie up significant cash.
• Customer acquisition as an investment. Some sellers present acquisition spend as an investment that could be switched off. If revenue depends on it, it is an operating cost.
• Concentration and durability. Two businesses with the same EBITDA are worth very different amounts if one depends on a handful of VIPs or one traffic source.
• Corporate tax. It is excluded for comparability, but the buyer will pay it.

That is why buyers also look at free cash flow, monthly trends and revenue quality before they settle on a multiple.

EBITDA for affiliate businesses

For an affiliate group, the structure is simpler. Revenue is commission from operator programmes, split between revenue share, CPA and fixed fees. Costs are mainly content, links, hosting, tools and staff. There is no gaming tax and no platform fee, so margins are usually much higher than an operator’s.

Three points matter when calculating it:

• Content and link spend are operating costs. They maintain rankings. Treating them as one-off investments inflates EBITDA, and buyers reverse it.
• Revenue-share income lags acquisition. Players sent this year keep paying commission for months or years. A site that has just cut traffic acquisition may still show strong EBITDA from older players, while future revenue is already falling.
• Fixed listing fees can end. If a large share of revenue comes from fixed-fee placements on short contracts, buyers will ask how many will renew.

For a single owner-run site, SDE is usually the better measure; for a group with staff, EBITDA is.

FAQ

What does EBITDA stand for?

Earnings before interest, taxes, depreciation and amortisation.

Are gaming taxes included in EBITDA?

Yes. Gaming taxes and licence fees are operating costs and are deducted before EBITDA. Only corporate income tax on profit is excluded.

What is the difference between EBITDA and SDE?

EBITDA deducts a market salary for whoever runs the business. SDE adds back all of one owner’s pay. EBITDA suits businesses with management; SDE suits owner-run ones.

What is adjusted EBITDA?

Reported EBITDA restated for a new owner: one-off and owner-specific items added back, missing costs deducted. Buyers price on it, but only accept adjustments they can verify.

Why would a buyer value my casino on NGR rather than EBITDA?

Because it plans to move your players onto its own platform and team, so your current costs will largely disappear. It is paying for the players, not your cost base.

What EBITDA multiple do iGaming businesses sell for?

It varies too much for one figure. Licence type, market, trend, concentration, platform model and buyer type all move it. A valuation should give a range with the reasons behind it.

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