XM Radio 2015 Annual Report Download - page 77

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implemented at our call centers operated by our vendors, as well as a decrease in the rate
at which subscribers call to cancel.
•2014 vs. 2013: For the years ended December 31, 2014 and 2013, customer service and
billing expenses, per average subscriber, were $1.07 and $1.06, respectively. The increase
was primarily driven by bad debt expense.
Free Cash Flow includes cash provided by operations, net of additions to property and
equipment, restricted and other investment activity, and the return of capital from investment in
unconsolidated entity, excluding the $210,000 pre-1972 sound recordings legal settlement payment.
(For a reconciliation to GAAP see the accompanying glossary on pages 18 through 23 for more
details.)
•2015 vs. 2014: For the years ended December 31, 2015 and 2014, free cash flow was
$1,315,193 and $1,155,776, respectively, an increase of $159,417, or 14%. Excluding the
$210,000 pre-1972 sound recordings legal settlement payment, the increase was primarily
driven by higher net cash provided by operating activities from improved operating
performance, and higher collections from subscribers, partially offset by higher interest
payments.
•2014 vs. 2013: For the years ended December 31, 2014 and 2013, free cash flow was
$1,155,776 and $927,496, respectively, an increase of $228,280, or 25%. The increase was
primarily driven by higher net cash provided by operating activities from improved
performance, collections from subscribers and distributors, the absence of satellite
construction related payments and dividends received from Sirius XM Canada, partially offset
by payments related to improvements to our terrestrial repeater network.
Adjusted EBITDA. EBITDA is defined as net income before interest expense, net of amounts
capitalized; income tax expense and depreciation and amortization. Adjusted EBITDA excludes the
impact of other income, loss on disposal of assets, loss on extinguishment of debt, loss on change
in value of derivatives as well as certain other non-cash charges, such as certain purchase price
accounting adjustments, share-based payment expense and settlements related to the historical use
of pre-1972 sound recordings. (For a reconciliation to GAAP see the accompanying glossary on
pages 18 through 23 for more details.)
•2015 vs. 2014: For the years ended December 31, 2015 and 2014, adjusted EBITDA was
$1,657,617 and $1,467,775, respectively, an increase of 13%, or $189,842. The increase was
due to growth in adjusted revenues primarily as a result of the increase in our subscriber
base and certain of our subscription rates, partially offset by higher costs associated with the
growth in our revenues and subscriber base.
•2014 vs. 2013: For the years ended December 31, 2014 and 2013, adjusted EBITDA was
$1,467,775 and $1,166,140, respectively, an increase of 26%, or $301,635. The increase was
due to growth in adjusted revenues primarily as a result of the increase in our subscriber
base and certain of our subscription rates, improved revenue share and OEM subsidy rates
per vehicle, and the renewal of certain programming agreements at more cost effective
terms; partially offset by higher legal expenses and costs associated with the growth in our
revenues and subscriber base.
Liquidity and Capital Resources
Cash Flows for years ended December 31, 2015 compared with the years ended December 31,
2014 and the year ended December 31, 2014 compared with the year ended December 31, 2013.
13