Depreciation expense is added back to net income because it was a noncash transaction (net income was reduced, but there was no cash outflow for depreciation).

What does it mean to add-back depreciation?

Depreciation Add-Back

The portion of depreciation expense that is shown on the income statement is the only portion of depreciation that is considered an "add-back." The amount varies based on the value of the company's assets, their remaining life and the method of depreciation used.

Where do you add depreciation back?

Depreciation is a non-cash expense, which means that it needs to be added back to the cash flow statement in the operating activities section, alongside other expenses such as amortization and depletion.