Hey Searchfunder community - wondering if anyone has come across this scenario before involving an owner's draw (distribution) in an S-Corp being treated as an EBITDA adjustment.

Intermediary has presented an adjusted EBITDA figure accounting for this Owner's Draw as excess compensation, which in some years is quite significant, e.g. ~30% of adj. EBITDA.

My understanding as I read the company's I/S and B/S (and as I did a little supplemental reading on the subject since I'm not an accountant), owner's draw or distribution in an S-Corp is essentially a reduction of the equity account, pulled out of retained earnings. It does not appear on, nor does it have an impact on, the Income Statement. Even so, this intermediary is treating it as an EBITDA adjustment.

Is this adjustment BS and the owner is just pulling accumulated cash out of the company that has nothing to do with its in-year profitability, do my accounting skills still need more work, or is it somewhere in between?