Warren Buffett introduced "owner earnings" in his 1986 shareholder letter as a truer measure of what a business actually generates for its owners than accounting net income:
Owner Earnings = Net Income + D&A - Maintenance Capex - Change in Working Capital - SBC (Intrinsic's addition)
Why not just use net income? Net income includes non-cash accounting charges (depreciation and amortization) that don't represent real cash leaving the business, but it also doesn't account for the real cash a company must spend just to keep its existing operations running (maintenance capex) or fund working capital growth. Owner earnings corrects for both.
The test Buffett described it by: owner earnings are, roughly, the cash a business could distribute to shareholders every year without in any way diminishing its future competitive position or volume. That's the whole test — could this cash be paid out as a dividend tomorrow without weakening the business?
Intrinsic's one addition. Buffett's original definition predates the modern scale of stock-based compensation in tech. Intrinsic subtracts SBC too, by default, treating it as the real dilution cost it is — see the SBC explainer for the full reasoning.