Stock-based compensation to revenue measures what percentage of a company's revenue is consumed by stock-based compensation expense. It is calculated by dividing trailing twelve-month SBC by trailing twelve-month revenue. This metric is especially important for technology companies, where SBC can be a major expense that significantly reduces the earnings available to existing shareholders through dilution.
A ratio above 10% means more than 10 cents of every revenue dollar goes to equity compensation. For mature technology companies, 5-15% is typical. For high-growth startups, 20-30% is not uncommon but raises questions about how much of the company's growth is being captured by employees versus existing shareholders.
SBC to Revenue = Stock-Based Compensation (TTM) / Revenue (TTM)
GeminIQ divides TTM stock-based compensation by TTM revenue, both from SEC filings.
A: Below 5% is low for any industry. Between 5% and 15% is typical for mature technology companies. Above 15% is high and warrants investigation into whether the level of dilution is justified by the talent retention and growth it enables. Non-technology companies typically have ratios below 3%.
A: While SBC does not directly consume cash, it dilutes existing shareholders by increasing the share count. A company that generates $1B in net income but issues $300M in SBC is effectively transferring 30% of its earnings to employees through equity. The dilution is a real economic cost — just not a cash one.
A: Some companies report SBC on the income statement, others only in the cash flow statement as a non-cash adjustment. GeminIQ uses the SBC value from the filing, prioritizing the XBRL-tagged Share Based Compensation Expense.