XM Radio 2012 Annual Report Download - page 78

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Adjusted Revenues and Operating Expenses – We define this Non-GAAP financial measure as our actual
revenues and operating expenses adjusted to exclude the impact of certain purchase price accounting adjustments
and share-based payment expense. We use this Non-GAAP financial measure to manage our business, to set
operational goals and as a basis for determining performance-based compensation for our employees. The
following tables reconcile our actual revenues and operating expenses to our adjusted revenues and operating
expenses for the years ended December 31, 2012, 2011 and 2010:
Unaudited For the Year Ended December 31, 2012
(in thousands) As Reported
Purchase Price
Accounting
Adjustments
Allocation of
Share-based
Payment Expense Adjusted
Revenue:
Subscriber revenue .................... $2,962,665 $ 228 $ — $2,962,893
Advertising revenue, net of agency fees .... 82,320 — — 82,320
Equipment revenue .................... 73,456 — — 73,456
Other revenue ........................ 283,599 7,251 — 290,850
Total revenue .......................... $3,402,040 $ 7,479 $ — $3,409,519
Operating expenses
Cost of services:
Revenue share and royalties ........... $ 551,012 $146,601 $ — $ 697,613
Programming and content ............. 278,997 37,346 (6,120) 310,223
Customer service and billing .......... 294,980 — (1,847) 293,133
Satellite and transmission ............. 72,615 — (3,329) 69,286
Cost of equipment ................... 31,766 — — 31,766
Subscriber acquisition costs ............. 474,697 90,503 — 565,200
Sales and marketing ................... 248,905 14,828 (10,310) 253,423
Engineering, design and development ..... 48,843 — (6,238) 42,605
General and administrative .............. 261,905 — (35,978) 225,927
Depreciation and amortization (a) ........ 266,295 — — 266,295
Share-based payment expense ........... — — 63,822 63,822
Total operating expenses ................. $2,530,015 $289,278 $ — $2,819,293
(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated
with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the Merger. The increased
depreciation and amortization for the year ended December 31, 2012 was $53,000.
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