# Glossary > The measures and terms used on compounders.ai, defined in plain words. The live [Glossary](https://www.compounders.ai/glossary/) in the terminal lists every published definition with its exact method and version. Source: https://www.compounders.ai/docs/glossary/ · Updated 2026-10-19 · Ruleset 1.4.0 ## Companies and archetypes ### Serial acquirer A listed company that grows mainly by buying many smaller businesses, year after year, as its business model, and that keeps buying with the cash those businesses generate. Constellation Software, Lifco, Halma and Roper Technologies are examples. ### Compounder A company that reinvests its earnings at high returns for long periods, so that its earnings per share grow at a high rate for years. A serial acquirer compounds by reinvesting in acquisitions. ### Archetype One of the five groups compounders.ai sorts serial acquirers into: software / VMS roll-ups, Nordic industrial acquirers, UK serial acquirers, US industrial acquirers, and distribution / services roll-ups. The accounting patterns and the KPIs that matter differ by archetype. ### Vertical-market software (VMS) Software built for one industry, such as municipal government, dentistry or logistics. VMS businesses are small, sticky and cash-generative, which makes them the classic target of software serial acquirers. ## Earnings ### Reported operating profit The operating subtotal the company reports on its income statement (operating income, operating profit or the filer's equivalent), as filed. ### Reported EBITA Reported operating profit plus the year's acquired-intangible amortization, before any other adjustment. ### Normalized EBITA Reported operating profit adjusted under compounders.ai's published ruleset: acquired-intangible amortization added back, other purchase-accounting effects removed in both directions, one-off items removed unless they recur, and stock-based compensation, capitalized development amortization and acquisition costs kept as costs. Every adjustment is cited. See [Methodology](https://www.compounders.ai/docs/methodology/#what-is-normalized-ebita). ### Normalized EBITDA EBITDA built from cited components (operating profit plus depreciation and amortization) plus every normalization adjustment except the acquired-intangible amortization, which the depreciation and amortization line already holds. Also shown after lease payments. ### Acquired-intangible amortization The amortization of intangible assets that purchase accounting creates when a company is bought: customer relationships, technology, order books and trade names. It is a non-cash cost of having acquired, and normalized EBITA adds it back (Rule 1). ### Purchase accounting The accounting for a business combination (IFRS 3, ASC 805): the price paid is allocated to the assets and liabilities acquired at their fair values, including intangible assets that were never on the seller's books, with the rest recorded as goodwill. ### Earn-out remeasurement The change in the fair value of contingent consideration, a part of the price that depends on the acquired business's later performance. It is a change in the price paid, so normalized EBITA removes it in both directions (Rule 1b). ### Inventory fair-value step-up The uplift of acquired inventory to fair value in purchase accounting, released through cost of sales as the inventory is sold. Normalized EBITA adds it back (Rule 1b). ### Loss-contract reserve release The release, through cost of sales, of a liability recorded at acquisition for the acquired company's unfavourable contracts. Normalized EBITA removes it, the mirror of the inventory step-up (Rule 1b). ### Capitalized development amortization The amortization of software and development costs a company capitalizes itself. It is ongoing reinvestment and stays a cost in normalized EBITA (Rule 2). ### Stock-based compensation (SBC) Pay in shares or options. A real cost and a real source of dilution, kept as a cost in normalized EBITA (Rule 3); its share of revenue is shown as a signal. ### Recurrence test Any item type a company labels one-time in four of the last five years is treated as recurring and stays in normalized EBITA (Rule 4). ### Acquisition transaction costs The costs of making acquisitions: advisers, due diligence and the integration a deal needs. A real operating cost for a company whose business is acquiring; kept in normalized EBITA for every company, with the amount visible on the ledger (Rule 4). ### Management-adjusted measure A company's own adjusted profit measure, such as adjusted EBITA or adjusted operating profit, as its filing prints it. Shown beside normalized EBITA with the gap between them; never used as the normalized figure. ### Adjusted net income and adjusted EPS The owners' net income as filed plus the after-tax effect of each normalization adjustment, and that figure per weighted-average basic or diluted share as the filing prints the count. ## Growth ### Organic growth Revenue growth from businesses a company already owned, excluding acquisitions, disposals and currency effects, under the company's own definition. Definitions differ, for example in when an acquired business starts to count as organic, so the definition is shown beside the number. ### Acquired growth The part of revenue growth that comes from acquired businesses, as the company discloses it. ### Currency effect The part of reported revenue growth caused by translating foreign revenue at different exchange rates. ### Growth bridge The split of a year's revenue growth into organic, acquired, currency and, where disclosed, price and volume, taken from the company's own disclosure as printed (Rule 5). ## Returns on capital ### Normalized NOPAT Net operating profit after tax: normalized EBITA after tax, each adjustment taxed at its disclosed or normalized rate. ### Invested capital Debt plus total equity, including any redeemable minority interests printed between liabilities and equity, minus cash, at year end. Shown with and without goodwill. ### ROIC Return on invested capital: normalized NOPAT divided by the average of opening and closing invested capital. Shown including and excluding goodwill: including it judges the price paid for acquisitions, excluding it judges the businesses themselves. ### ROIIC Return on incremental invested capital: the change in normalized NOPAT divided by the change in average invested capital over three years. It shows whether new capital still earns what the old capital earns. ### Return on acquisition capital The NOPAT that acquisitions added divided by the capital spent on them, published only where the filings disclose what the acquired businesses contribute. It answers whether the acquisition engine still works at scale. ## Cash flow ### FCF before acquisitions Free cash flow before acquisitions: operating cash flow less capital expenditure, capitalized software and purchased intangibles, lease principal, and interest paid where the company books it in financing activities, all under the company's reviewed cash-flow placement policy. ### FCF after acquisitions FCF before acquisitions less the cash paid for acquisitions, net of cash acquired. ### FCF available to shareholders (FCFA2S) FCF before acquisitions less dividends paid to minority shareholders, plus interest and dividends received in investing activities, less debt issuance costs, each where the filing presents the line. Constellation Software reports the measure in its MD&A; where a company prints its own, it is shown beside compounders.ai's. ### FCF conversion Unlevered FCF before acquisitions divided by normalized NOPAT: how much of the normalized profit arrives as cash. ### Acquisition deployment rate Cash spent on acquisitions, net of cash acquired, divided by FCF before acquisitions: how much of the year's free cash flow went into buying businesses. ### Cash-flow placement policy A reviewed, per-company record of where the filing books interest paid and lease payments in the cash-flow statement. IFRS lets companies choose, so free cash flow is computed only under a policy that states the choice. ## Leverage ### Net debt Current and non-current debt minus cash, as printed on the balance sheet. ### Net debt to EBITDA Net debt divided by EBITDA from cited components. Also shown including lease liabilities, under the company's lease placement policy. ## Shares ### Share basis The share count a per-share figure is stated on. After a stock split a company restates its earlier per-share figures; compounders.ai never applies a split ratio itself and marks with † any figure on an earlier share basis than the latest year. ### Minority gate Normalized EBITA per diluted share is withheld in a year where minority interests take 5% or more of the profit, where redeemable minorities are 5% or more of total equity including them, or where their share cannot be read, because a consolidated figure would overstate what the owners earn. ### Denominator gate Nothing is divided by a diluted share count that an earlier filing printed differently for the same year, unless a registered split or a reviewed restatement explains the difference. ### Foots and ties A share count foots when the printed opening count plus every printed movement equals the printed closing count; counts tie when they add up to a printed total. A count publishes only when it foots or ties. ## Data and sources ### Citation The record behind a published figure: the filing, the element or page it was read from, and the text as filed. Every figure on compounders.ai has one. ### Withheld figure A figure compounders.ai does not publish because the filings do not support it. The cell stays empty and carries the reason, for example that the filing does not print the input or that two filings disagree. ### Restatement mark A mark on a year a later filing printed differently: ↻ for a re-presentation, ≈ for a lower-precision earlier print, † for an earlier share basis. ### Ruleset version The version of the normalization rulebook a figure was made under, identified by the hash of the document that defines it. The current version is 1.4.0. ### Inline XBRL The machine-readable tagging inside a filing's HTML that marks each figure with a concept, a period, a unit and a scale. compounders.ai reads tagged figures exactly as tagged. ### ESEF and UKSEF The European Single Electronic Format, in which companies listed in the European Union and Norway file annual reports with inline XBRL, and its UK counterpart for London-listed companies. ### SEC EDGAR The US Securities and Exchange Commission's filing system, the source of the 10-K, and of the 40-F and 6-K some Canadian companies file. ### SEDAR+ The Canadian securities regulators' filing system, where Canadian companies that do not file with the SEC publish their annual reports, as PDFs. ### Critical and key audit matters The matters an independent auditor judged most significant in the audit, described in its report with how the audit addressed them: critical audit matters under the US PCAOB's AS 3101, key audit matters under ISA 701 and its UK and Canadian equivalents.