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Stock-based compensation

Pay delivered in shares rather than cash; a real expense on the income statement and a steady source of share count growth.

Stock-based compensation shows up as an expense in GAAP earnings but is added back in cash flow statements and in most adjusted metrics, which is why adjusted numbers can flatter a company that pays heavily in stock. The shares are real and permanent even though no cash left the building.

Compare annual SBC to revenue and to the share-buyback spend. Many companies buy back stock purely to offset rsu issuance, which is maintenance rather than a return of capital.

Example: SBC of $600M against revenue of $4.0B is 15%. The company spends $550M on buybacks in the same year, so the share count is roughly flat and shareholders received nothing back on net.

Related: rsu, employee-stock-options, share-buyback

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