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2014 2013 2012
For the Years Ended December 31,
Unaudited
Interest and investment income (GAAP) . . . . . . . . . . . . . . . . $ (15,498) $ (6,976) $ (716)
Loss on change in value of derivatives (GAAP) . . . . . . . . . 34,485 20,393 —
Other loss (income) (GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . 887 (1,204) 226
Income tax expense (benefit) (GAAP) . . . . . . . . . . . . . . . . . . 337,545 259,877 (2,998,234)
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,467,775 $1,166,140 $ 920,343
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 from the Merger 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, 2014, 2013 and 2012:
(in thousands) As Reported
Purchase Price
Accounting
Adjustments
Allocation of
Share-based
Payment Expense Adjusted
Unaudited For the Year Ended December 31, 2014
Revenue:
Subscriber revenue. . . . . . . . . . . . . . . . . . $3,554,302 $ — $ — $3,554,302
Advertising revenue . . . . . . . . . . . . . . . . . 100,982 — — 100,982
Equipment revenue. . . . . . . . . . . . . . . . . . 104,661 — — 104,661
Other revenue . . . . . . . . . . . . . . . . . . . . . . 421,150 7,251 — 428,401
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . $4,181,095 $7,251 $ — $4,188,346
Operating expenses
Cost of services:
Revenue share and royalties . . . . . . $ 810,028 $ — $ — $ 810,028
Programming and content . . . . . . . . . 297,313 3,781 (9,180) 291,914
Customer service and billing . . . . . . . 370,585 — (2,780) 367,805
Satellite and transmission . . . . . . . . . 86,013 — (4,091) 81,922
Cost of equipment . . . . . . . . . . . . . . . . 44,397 — — 44,397
Subscriber acquisition costs . . . . . . . . . 493,464 — — 493,464
Sales and marketing . . . . . . . . . . . . . . . . 336,480 — (15,454) 321,026
Engineering, design and development 62,784 — (8,675) 54,109
General and administrative . . . . . . . . . . 293,938 — (38,032) 255,906
Depreciation and amortization(a) . . . . . . 266,423 — — 266,423
Share-based payment expense . . . . . . — — 78,212 78,212
Total operating expenses . . . . . . . . . . . . . . $3,061,425 $3,781 $ — $3,065,206
(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, 2014 was $39,000.
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