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Adjusted EBITDA

EBITDA after management's chosen add-backs: stock-based pay, restructuring, acquisition costs and anything else described as non-recurring.

Adjusted EBITDA is a non-gaap measure with no fixed definition, which makes it useful and dangerous in equal parts. Add-backs for genuine one-offs improve comparability; add-backs for costs that recur every single year do not.

The test is the multi-year record. Restructuring charges adjusted out in five consecutive years are a cost of doing business, and so is the stock-based pay that shows up in sbc-as-percent-of-revenue.

Example: Northwind Tools reports $195M of EBITDA and $238M of adjusted EBITDA, adding back $32M of stock-based pay and $11M of restructuring. Restructuring has appeared in each of the last four years.

Related: ebitda, non-gaap, pro-forma, sbc-as-percent-of-revenue, one-time-charge

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