Adjusted EBITDA, a non-GAAP financial measure used in management’s annual incentive plan, excludes the impact of certain items, including expected incentive compensation costs, foreign currency fluctuations, capitalized software development costs and acquisitions and divestitures and associated costs. The Adjusted EBITDA metric is used to set performance goals and calculate the bonus and is based on a “pre-bonus” number to incorporate the underlying performance of the business, consistent with our ongoing evaluation of performance. Adjusted EBITDA also excludes stock-based compensation which is a non-cash expense and not tied to annual performance measurements.

As we noted in a related question this month, the compensation committee reviews and approves all compensation practices, which includes regular evaluations of our annual incentive plans and benchmarks relative to market practice. We carefully monitor the impact of incremental Adjusted Revenue on the bonus by measuring the “sharing ratio,” expressed as projected bonus payout as a percentage of Adjusted EBITDA. Our Board of Directors has the discretion to limit the bonus if the sharing ratio is not aligned with expectations.