XM Radio 2012 Annual Report Download - page 68

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information to investors regarding our current and projected cash flow, along with other GAAP measures (such
as cash flows from operating and investing activities), to determine our financial condition, and to compare our
operating performance to other communications, entertainment and media companies.
We believe these Non-GAAP financial measures provide useful information to investors regarding our
financial condition and results of operations. We believe investors find these Non-GAAP financial performance
measures useful in evaluating our core trends because it provides a direct view of our underlying contractual
costs. We believe investors use our current and projected adjusted EBITDA to estimate our current or prospective
enterprise value and to make investment decisions. By providing these Non-GAAP financial measures, together
with the reconciliations to the most directly comparable GAAP measure, we believe we are enhancing investors’
understanding of our business and our results of operations.
These Non-GAAP financial measures should be viewed in addition to, and not as an alternative for or
superior to, our reported results prepared in accordance with GAAP. Please refer to the glossary (pages 20
through 26) for a further discussion of such Non-GAAP financial measures and reconciliations to the most
directly comparable GAAP measure.
The following table contains our key operating metrics based on our adjusted results of operations for the
years ended December 31, 2012, 2011 and 2010, respectively:
Unaudited Adjusted
For the Years Ended December 31,
2012 2011 2010
(in thousands, except for per subscriber amounts)
ARPU .............................................. $ 12.00 $ 11.58 $ 11.73
SAC, per gross subscriber addition ....................... $ 54 $ 55 $ 59
Customer service and billing expenses, per average
subscriber ......................................... $ 1.07 $ 1.03 $ 1.03
Free cash flow ....................................... $709,446 $415,742 $210,481
Adjusted EBITDA .................................... $920,343 $731,018 $626,288
Note: See pages 20 through 26 for glossary.
ARPU is derived from total earned subscriber revenue, net advertising revenue and other subscription-
related revenue, net of purchase price accounting adjustments, divided by the number of months in the period,
divided by the daily weighted average number of subscribers for the period. (See accompanying glossary on
pages 20 through 26 for more details.)
•2012 vs. 2011: For the years ended December 31, 2012 and 2011, ARPU was $12.00 and $11.58,
respectively. The increase was driven primarily by the increase in certain of our subscription rates
beginning in January 2012, and an increase in subscriptions to premium services, partially offset by
subscription discounts offered through customer acquisition and retention programs and a decrease in the
contribution from the U.S. Music Royalty Fee.
•2011 vs. 2010: For the years ended December 31, 2011 and 2010, ARPU was $11.58 and $11.73,
respectively. The decrease was driven primarily by an increase in subscription discounts offered through
customer acquisition and retention programs and a decrease in the contribution from the U.S. Music
Royalty Fee, partially offset by an increase in subscriptions to our premium services, including Premier
packages, data services and Internet subscriptions.
12