Wall Street Prep

Last Twelve Months (LTM)

Guide to Understanding Last Twelve Months (LTM) Revenue

Learn Online Now

Last Twelve Months (LTM)

LTM Definition in Finance (“Last Twelve Months”)

Last twelve-month (LTM) metrics, which are often used interchangeably with “trailing twelve months” (TTM), are used to measure a company’s most recent financial state.

Typically, LTM financial metrics are calculated for a certain event such as an acquisition, or an investor seeking to evaluate the operating performance of a company in the prior twelve months.

The LTM income statement of a company is ordinarily compiled in full, but the two critical financial metrics in M&A tend to be:

In particular, many transaction offer prices are based on a purchase multiple of EBITDA – hence, the widespread usage of calculating the LTM EBITDA.

How to Calculate LTM Revenue (Step-by-Step)

The following steps are used to calculate a company’s LTM financial data:

  • Step 1: Find the Last Annual Filing Financial Data
  • Step 2: Add the Most Recent Year-to-Date (YTD) Data
  • Step 3: Subtract the Prior Year YTD Data Corresponding to the Prior Step

LTM Formula

The formula for calculating a company’s last twelve months financials is as follows.

Last Twelve Months (LTM) = Last Fiscal Year Financial Data + Recent Year-to-Date Data – Prior YTD Data

The process of adding the period beyond the fiscal year ending date (and subtracting the matching period) is called the “stub period” adjustment.

If the company is publicly traded, the latest annual filing data can be found in its 10-K filings, whereas the most recent YTD and corresponding YTD financial metrics to deduct can be found in the 10-Q filings.

LTM Revenue Calculation Example

Suppose a company has reported $10 billion in revenue in the fiscal year 2021. But in Q-1 of 2022, it reported quarterly revenue of $4 billion.

The subsequent step is to source the corresponding quarterly revenue – i.e. revenue from Q-1 of 2020 – which we’ll assume was $2 billion.

Here in our illustrative example, the LTM revenue of the company is $12 billion.

  • LTM Revenue = $10 billion + $4 billion – $2 billion = $12 billion

The $12 billion in revenue is the amount of revenue generated in the preceding twelve months.

LTM vs. NTM Revenue: What is the Difference?

  • Historical vs. Pro Forma Performance: In contrast to historical financials, NTM financials – i.e. “next twelve months” – are more insightful for expected future performance.
  • Scrubbed Financials: Both metrics are “scrubbed” to remove any distorting impacts from non-recurring or non-core items. More specifically in the M&A context, the LTM/NTM EBITDA of a company is typically adjusted for non-recurring items and does NOT align directly with U.S. GAAP, but the financials are more representative of the actual performance of the company.
  • M&A Purchase Multiple: The purchase multiple in M&A can be based on either the historical or projected basis (NTM EBITDA), but there must be a specific rationale as to why one was chosen over the either. For example, a high-growth software company could potentially focus on NTM financials if its projected performance and growth trajectory are substantially distinct from its LTM financials.

Limitations of Last Twelve Months (LTM) Financials

The primary concern with using TTM metrics is that the true impact of seasonality is not accounted for.

Retail companies, for instance, see a significant proportion of their total sales during the holidays (i.e. November to December). But rather than falling precisely in line with the fiscal ending period, most sales occur in the middle of a fiscal period.

Therefore, trailing metrics that neglect the back-weighted revenue of such companies without any normalization adjustments is prone to misinterpretations.

With that said, it is essential to take into consideration such factors when assessing LTM metrics, as the metric can be skewed – e.g. considers two high volume quarters as opposed to one fiscal period.

Step-by-Step Online Course

Everything You Need To Master Financial Modeling

Enroll in The Premium Package: Learn Financial Statement Modeling, DCF, M&A, LBO and Comps. The same training program used at top investment banks.

Enroll Today
Inline Feedbacks
View all comments
Learn Financial Modeling Online

Everything you need to master financial and valuation modeling: 3-Statement Modeling, DCF, Comps, M&A and LBO.

Learn More

The Wall Street Prep Quicklesson Series

7 Free Financial Modeling Lessons

Get instant access to video lessons taught by experienced investment bankers. Learn financial statement modeling, DCF, M&A, LBO, Comps and Excel shortcuts.