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What is an EBITDA bridge?

An EBITDA bridge is any easy way for investors or users of the financial statements to understand what financial line items drove year over year changes in EBITDA.

For example, if EBITDA was $500 in FY19 and increased to $800 in FY20, investors would want to know whether the increase was due to revenue growth, improved gross margin, or a decline in operating expenses. As the visual shows, revenue increased by $500, but was offset by a $300 increase in cost of goods sold. This resulted in additional gross profit of $200, with the remaining $100 increase in EBITDA due to a reduction operating expense.

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