XM Radio 2015 Annual Report Download - page 86

Customer service and billing expenses, per average subscriber—is derived from total customer
service and billing expenses, excluding connected vehicle customer service and billing expenses
and share-based payment expense, divided by the number of months in the period, divided by the
daily weighted average number of subscribers for the period. We believe the exclusion of share-
based payment expense in our calculation of customer service and billing expenses, per average
subscriber, is useful as share-based payment expense is not directly related to the operational
conditions that give rise to variations in the components of our customer service and billing
expenses. Customer service and billing expenses, per average subscriber, is calculated as follows:
2015 2014 2013
For the Years Ended December 31,
Unaudited
Customer service and billing expenses, excluding connected
vehicle (GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $346,789 $340,094 $317,832
Less: share-based payment expense (GAAP) . . . . . . . . . . . . . . . . . . . (2,982) (2,780) (2,219)
$343,807 $337,314 $315,613
Daily weighted average number of subscribers . . . . . . . . . . . . . . . . . . 28,337 26,284 24,886
Customer service and billing expenses, per average subscriber . . $ 1.01 $ 1.07 $ 1.06
Free cash flow—is derived from cash flow provided by operating activities, 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. Free cash flow is calculated as follows:
2015 2014 2013
For the Years Ended December 31,
Unaudited
Cash Flow information
Net cash provided by operating activities . . . . . . . . . . . . . . . . . $ 1,244,051 $ 1,253,244 $1,102,832
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . $ (138,858) $ (96,324) $ (700,688)
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . $(1,141,079) $(1,144,001) $ (788,284)
Free Cash Flow
Net cash provided by operating activities . . . . . . . . . . . . . . . . . $ 1,244,051 $ 1,253,244 $1,102,832
Additions to property and equipment . . . . . . . . . . . . . . . . . . . (134,892) (121,646) (173,617)
Purchases of restricted and other investments. . . . . . . . . . (3,966) — (1,719)
Return of capital from investment in unconsolidated
entity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 24,178 —
Pre-1972 sound recordings legal settlement . . . . . . . . . . . . 210,000 — —
Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,315,193 $ 1,155,776 $ 927,496
New vehicle consumer conversion rate—is defined as the percentage of owners and lessees of
new vehicles that receive our satellite radio service and convert to become self-paying subscribers
after the initial promotion period. At the time satellite radio enabled vehicles are sold or leased, the
owners or lessees generally receive trial subscriptions ranging from three to twelve months. We
measure conversion rate three months after the period in which the trial service ends. The metric
excludes rental and fleet vehicles.
Subscriber acquisition cost, per installation—or SAC, per installation, is derived from subscriber
acquisition costs and margins from the sale of radios and accessories, excluding purchase price
accounting adjustments, divided by the number of satellite radio installations in new vehicles and
shipments of aftermarket radios for the period. Purchase price accounting adjustments associated
with the Merger include the elimination of the benefit of amortization of deferred credits on
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