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Use Case  ·  For the CFO

Up to
85%

SBC is what's between you and GAAP profitability.

For many companies, the gap between GAAP and non-GAAP earnings is almost entirely the SBC line. Carver Edison aims to remove up to 85% of it, putting GAAP profitability within reach without cutting grants, reducing headcount, or changing comp philosophy.

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GAAP Profitability V  /  V

The Problem

Your company may be generating real economic profit. But SBC flows through the income statement as an operating expense, and until it's gone, the GAAP line tells a different story - one that analysts, investors, and credit agencies use to make decisions about your company.

01.

SBC is often the primary driver of GAAP losses

For many growth-stage and mid-cap companies, the gap between non-GAAP and GAAP net income is almost entirely the SBC line. Strip it out and the company is profitable. Leave it in and the headline number is a loss - regardless of how healthy the underlying business is.

02.

Non-GAAP adjustments create persistent narrative friction

Relying on adjusted metrics puts you in a defensive position every quarter. Analysts ask about it. Investors price in skepticism. Credit agencies use the GAAP number. Explaining away SBC expense cycle after cycle is a cost that compounds - even when the business fundamentals are strong.

03.

The conventional fixes all have tradeoffs

Companies trying to reduce SBC expense typically face a hard choice: cut grants (and risk retention), slow hiring (and slow growth), or reduce ESPP participation (and erode the employee value proposition). Carver Edison is the only approach that is designed to eliminate SBC expense while preserving - and even improving - what employees receive.

The Mechanism

Eliminate the expense. Keep the program. Cross the line.

Traditional ESPPs require companies to issue new shares and recognize the discount as SBC expense. Cashless Participation® is designed to restructure the economic outcome so shares are not issued and SBC recognition is materially reduced, while employees still participate in the stock's upside.

Traditional ESPP

SBC recognized each cycle. GAAP loss persists indefinitely.

SBC expense recognizedYes
Impact on net incomeNegative
New shares issuedYes
GAAP vs non-GAAP gapPersists
Path to GAAP profitBlocked

Cashless Participation®

Materially less SBC recognized. GAAP profit becomes achievable.

SBC expense recognizedMinimal
Impact on net incomePositive
New shares issuedNone
GAAP vs non-GAAP gapCloses
Path to GAAP profitStructural
The change is structural, not cosmetic. No restatements, no accounting workarounds. SBC recognition is materially reduced.

The Outcome

The same equity program. Without the income statement drag.

The same equity program your people already have, with up to 85% of the SBC expense designed to leave the income statement, moving reported earnings toward GAAP profitability without cutting grants or headcount.

Illustrative example

A path to GAAP profitability as soon as next quarter.

For a company with $80M in non-GAAP operating income and $100M in annual SBC.

Today

Non-GAAP operating income $80M
SBC expense $100M
GAAP operating income ($20M)
GAAP status Loss

With Carver Edison

Non-GAAP operating income $80M
SBC expense $15M
GAAP operating income $65M
GAAP status Profitable

Methodology: SBC flows through operating expenses. Cashless Participation® reduces recognized SBC by 85% ($100M → $15M) without changing what employees receive. Same operating fundamentals — different GAAP outcome. Many growth-stage companies sit one year of SBC reduction away from index-eligibility and GAAP profitability.

Outcomes are not guaranteed and vary based on company-specific factors and market conditions.

Related Outcomes

GAAP profitability is the destination. These are the levers that get you there.

01.

Reduce SBC Expense

Designed to decrease stock-based compensation by as much as 85% on the same grants.

See use case → 03.

Improve EPS

Lower SBC can lift net income. Fewer shares shrink the denominator. Structured so EPS improves from both ends.

See use case → 04.

Maximize Your Buyback

Designed to eliminate the need to spend buyback capital just to offset the dilution caused by your compensation plan.

See use case →

See how close you are to GAAP profitability.

We'll model the projected impact on GAAP net income using your actual SBC expense and grant schedule.

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Certain statements describe potential outcomes of program design. These outcomes are not guaranteed and depend on company-specific factors, employee participation, and market conditions.