# SIRIUS XM HOLDINGS INC. (SIRI) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from SIRIUS XM HOLDINGS INC.'s 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/908937/000090893724000008/siri-20231231.htm
Accession: 0000908937-24-000008
Filing date: 2024-02-01
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/SIRI/
All MD&A years: /company/SIRI/mda/
Previous year: /company/SIRI/mda/fy2022/ (FY 2022)
Next year: /company/SIRI/mda/fy2024/ (FY 2024)

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results and the timing of events could differ materially from those projected in forward-looking statements due to a number of factors, including those described under “Item 1A - Risk Factors” and elsewhere in this Annual Report on Form 10-K. See “Special Note About Forward-Looking Statements.”

All amounts referenced in this Item 7 are in millions, except subscriber amounts are in thousands and per subscriber and per installation amounts are in ones, unless otherwise stated.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

Executive Summary

We operate two complementary audio entertainment businesses - one of which we refer to as “SiriusXM” and the second of which we refer to as “Pandora and Off-platform”. 

Sirius XM

Our Sirius XM business features music, sports, entertainment, comedy, talk, news, traffic and weather channels and other content, as well as podcasts and infotainment services, in the United States on a subscription fee basis. Sirius XM's packages include live, curated and certain exclusive and on demand programming. The Sirius XM service is distributed through our two proprietary satellite radio systems and streamed via applications for mobile devices, home devices and other consumer electronic equipment. Satellite radios are primarily distributed through automakers, retailers and our website. Our Sirius XM service is also available through our in-car user interface, which we call “360L,” that combines our satellite and streaming services into a single, cohesive in-vehicle entertainment experience.

The primary source of revenue from our Sirius XM business is subscription fees, with most of our customers subscribing to monthly, quarterly, semi-annual or annual plans.  We also derive revenue from advertising on select non-music channels, which is sold under the SiriusXM Media brand, direct sales of our satellite radios and accessories, and other ancillary services.  As of December 31, 2023, our Sirius XM business had approximately 33.9 million subscribers.

In addition to our audio entertainment businesses, we provide connected vehicle services to several automakers. These services are designed to enhance the safety, security and driving experience of consumers. We also offer a suite of data services that includes graphical weather and fuel prices, a traffic information service, and real-time weather services in boats and airplanes.

Sirius XM also holds a 70% equity interest and 33% voting interest in Sirius XM Canada. Sirius XM Canada's subscribers are not included in our subscriber count or subscriber-based operating metrics.

Pandora and Off-platform

Our Pandora and Off-platform business operates a music, comedy and podcast streaming discovery platform, offering a personalized experience for each listener wherever and whenever they want to listen, whether through mobile devices, vehicle speakers or connected devices.  Pandora enables listeners to create personalized stations and playlists, discover new content, hear artist- and expert-curated playlists, podcasts as well as search and play songs and albums on-demand.  Pandora is available as (1) an ad-supported radio service, (2) a radio subscription service (Pandora Plus) and (3) an on-demand subscription service (Pandora Premium).  As of December 31, 2023, Pandora had approximately 46.0 million monthly active users and 6.0 million subscribers.

The majority of revenue from Pandora is generated from advertising on our Pandora ad-supported radio service which is sold under the SiriusXM Media brand. We also derive subscription revenue from our Pandora Plus and Pandora Premium subscribers.

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We also sell advertising on other audio platforms and in widely distributed podcasts, which we consider to be off-platform services. We have an arrangement with SoundCloud Holdings, LLC ("SoundCloud") to be its exclusive ad sales representative in the US and certain European countries and offer advertisers the ability to execute campaigns across the Pandora and SoundCloud platforms. We also have arrangements to serve as the ad sales representative for certain podcasts. In addition, through AdsWizz Inc., we provide a comprehensive digital audio and programmatic advertising technology platform, which connects audio publishers and advertisers with a variety of ad insertion, campaign trafficking, yield optimization, programmatic buying, marketplace and podcast monetization solutions.

Liberty Media

As of December 31, 2023, Liberty Media beneficially owned, directly and indirectly, 83.4% of the outstanding shares of our common stock.  As a result, we are a “controlled company” for the purposes of the NASDAQ corporate governance requirements.

On December 11, 2023, Holdings entered into definitive agreements whereby, subject to the terms thereof, Liberty Sirius XM Holdings Inc., a Delaware corporation and a wholly owned subsidiary of Liberty Media (“New Sirius”), would split-off from Liberty Media. The transactions would be effectuated by means of a redemptive split-off of New Sirius (the “Split-Off”), which will own all of the assets and liabilities attributed to Liberty Media’s Series A Liberty SiriusXM common stock (“LSXMA”), Series B Liberty SiriusXM common stock (“LSXMB”) and Series C Liberty SiriusXM common stock (“LSXMK”, together with the LSXMB and LSXMA stock, the “Liberty SiriusXM Group”). Following the Split-Off, New Sirius will combine with Holdings through the merger of Radio Merger Sub, LLC, a Delaware limited liability company and a wholly owned subsidiary of New Sirius (“Merger Sub”), with Holdings, with Holdings becoming a wholly owned subsidiary of New Sirius (the “Merger” and, together with the Split-Off, the “Transactions”). As part of the Merger, New Sirius will be renamed “Sirius XM Holdings Inc.”

To effect the Transactions, on December 11, 2023, Liberty Media entered into (i) a Reorganization Agreement (the “Reorganization Agreement”) with Holdings and New Sirius, and (ii) an Agreement and Plan of Merger (the “Merger Agreement”) with New Sirius, Holdings and Merger Sub.

In connection with the Merger Agreement and the Reorganization Agreement, on December 11, 2023, certain trusts related to Dr. John C. Malone (collectively, the “Malone Stockholders”) entered into a voting agreement (the “Voting Agreement”) with Liberty Media, Holdings and New Sirius, pursuant to which, among other things, the Malone Stockholders agreed, subject to the terms of the Voting Agreement, to vote their respective shares of Liberty Media’s LSXMA and LSXMB in favor of the Split-Off.

The Transactions have been unanimously approved by Liberty Media’s Board of Directors and a Special Committee of the Board of Directors of Holdings and by Holdings’ Board of Directors. The Transactions are expected to be completed early in the third quarter of 2024, subject to approval by a majority of the aggregate voting power of the shares of Liberty SiriusXM common stock present, whether in-person or by proxy, at a stockholder meeting, the receipt by Liberty Media and New Sirius of tax opinions from their respective tax counsel, as well as the receipt of required regulatory approvals and the satisfaction of other customary closing conditions. A subsidiary of Liberty Media owning a majority of the outstanding shares of Holdings has delivered a written consent approving the Transactions on behalf of a majority of Holdings’ stockholders. Following the Transactions, Liberty Media and New Sirius will operate independently, and neither is expected to have any ownership interest in the other. All of the executive officers of Holdings immediately prior to consummation of the Transactions will be the initial executive officers of New Sirius, and New Sirius will continue to operate under the SiriusXM name and brand.

The Reorganization Agreement, the Merger Agreement and the Voting Agreement are filed as exhibits to this Annual Report on Form 10-K.

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Results of Operations

Set forth below are our results of operations for the year ended December 31, 2023 compared with the year ended December 31, 2022. Refer to our Form 10-K for the year ended December 31, 2022 filed with the SEC on February 2, 2023 for our results of operation for the year ended December 31, 2022 compared with the year ended December 31, 2021. The results of operations are presented for each of our reporting segments for revenue and cost of services and on a consolidated basis for all other items.

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Sirius XM Revenue

Sirius XM Subscriber Revenue includes fees charged for self-pay and paid promotional subscriptions, U.S. Music Royalty Fees and other ancillary fees.

For the years ended December 31, 2023 and 2022, subscriber revenue was $6,342 and $6,370, respectively, a decrease of less than 1%, or $28. The decrease was primarily driven by a reduction in paid promotional revenue resulting from lower overall rates from automakers offering paid promotional subscriptions and lower revenue generated from our connected vehicle services, partially offset by an increase in self-pay revenue.

We expect subscriber revenues to decrease based on the mix of our subscriber base and a decline in the average price of our subscriptions.

Sirius XM Advertising Revenue includes the sale of advertising on Sirius XM’s non-music channels.

For the years ended December 31, 2023 and 2022, advertising revenue was $169 and $196, respectively, a decrease of 14%, or $27. The decrease was due to a decline in the number of spots sold and aired, primarily on news and entertainment channels.

We expect our Sirius XM advertising revenue to grow as we improve monetization opportunities through SiriusXM Media, our advertising sales group.

Sirius XM Equipment Revenue includes revenue and royalties from the sale of satellite radios, components and accessories.

For the years ended December 31, 2023 and 2022, equipment revenue was $193 and $189, respectively, an increase of 2%, or $4. The increase was driven by higher chipset production driven by an increase in OEM demand, partially offset by lower royalty rates.

We expect equipment revenue to decrease due to the transition to our next generation chipset at higher costs.

Sirius XM Other Revenue includes service and advisory revenue from Sirius XM Canada, revenue from our connected vehicle services, and ancillary revenues.

For the years ended December 31, 2023 and 2022, other revenue was $136 and $150, respectively, a decrease of 9%, or $14. The decrease was primarily driven by lower royalty revenue generated by Sirius XM Canada and our connected vehicle services.

We expect other revenue to decline as revenue generated by Sirius XM Canada and from our connected vehicle services decrease.

Pandora and Off-platform Revenue

Pandora and Off-platform Subscriber Revenue includes fees charged for Pandora Plus and Pandora Premium.

For the years ended December 31, 2023 and 2022, Pandora and Off-platform subscriber revenue was $524 and $522, respectively, an increase of less than 1%, or $2. The increase was primarily driven by a rate increase on Pandora Plus, partially offset by a decline in the subscriber base.

We expect Pandora and Off-platform subscriber revenues to remain flat.

Pandora and Off-platform Advertising Revenue is generated primarily from audio, display and video advertising from on-platform and off-platform advertising.

For the years ended December 31, 2023 and 2022, Pandora and Off-platform advertising revenue was $1,589 and $1,576, respectively, an increase of 1%, or $13. The increase was primarily driven by higher podcasting revenue, partially offset by lower sell-through on the Pandora ad-supported service.

We expect Pandora and Off-platform advertising revenue to increase driven by growth in our Off-platform and podcast businesses.

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Total Consolidated Revenue

Total Consolidated Revenue for the years ended December 31, 2023 and 2022, was $8,953 and $9,003, respectively, a decrease of 1%, or $50.

Sirius XM Cost of Services

Sirius XM Cost of Services includes revenue share and royalties, programming and content, customer service and billing and transmission expenses.

Sirius XM Revenue Share and Royalties include royalties for transmitting content, including streaming royalties, as well as automaker, content provider and advertising revenue share.

For the years ended December 31, 2023 and 2022, revenue share and royalties were $1,603 and $1,552, respectively, an increase of 3%, or $51, and increased as a percentage of total Sirius XM revenue. The increase was driven by higher web streaming royalty rates as well as the expiration of certain licenses covering pre-1972 sound recordings.

We expect our Sirius XM revenue share and royalty costs to remain relatively flat as higher royalty rates under the statutory webcasting license resulting from increases in the Consumer Price Index are anticipated to be offset by lower eligible subscription revenue.

Sirius XM Programming and Content includes costs to acquire, create, promote and produce content. We have entered into various agreements with third parties for music and non-music programming that require us to pay license fees and other amounts.

For the years ended December 31, 2023 and 2022, programming and content expenses were $549 and $546, respectively, an increase of 1%, or $3, and increased as a percentage of total Sirius XM revenue. The increase was driven by higher content licensing costs.

We expect our Sirius XM programming and content expenses to remain flat as additional programming offerings are offset by expiring agreements.

Sirius XM Customer Service and Billing includes costs associated with the operation and management of internal and third party customer service centers, and our subscriber management systems as well as billing and collection costs, bad debt expense, and transaction fees.

For the years ended December 31, 2023 and 2022, customer service and billing expenses were $393 and $415, respectively, a decrease of 5%, or $22, and decreased as a percentage of total Sirius XM revenue. The decrease was primarily driven by lower call center and personnel-related costs, partially offset by higher transaction costs.

We expect our Sirius XM customer service and billing expenses to decrease driven by lower call center costs as a result of efficiencies from our investment in our digital platform.

Sirius XM Transmission consists of costs associated with the operation and maintenance of our terrestrial repeater networks; satellites; satellite telemetry, tracking and control systems; satellite uplink facilities; studios; and delivery of our Internet and 360L streaming and connected vehicle services.

For the years ended December 31, 2023 and 2022, transmission expenses were $171 and $158, respectively, an increase of 8%, or $13, and increased as a percentage of total Sirius XM revenue. The increase was primarily driven by higher costs associated with our 360L platform and streaming.

We expect our Sirius XM transmission expenses to increase as costs associated with consumers using our 360L platform rise and investments in streaming grow.

Sirius XM Cost of Equipment includes costs from the sale of satellite radios, components and accessories and provisions for inventory allowance attributable to products purchased for resale in our direct to consumer distribution channels.

For the years ended December 31, 2023 and 2022, cost of equipment was $14 and $13, respectively, an increase of 8%, or $1, and increased as a percentage of equipment revenue. The increase was driven by higher inventory write downs.

We expect our Sirius XM cost of equipment to decrease as aftermarket sales decline.

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Pandora and Off-platform Cost of Services

Pandora and Off-platform Cost of Services includes revenue share and royalties, programming and content, customer service and billing, and transmission expenses.

Pandora and Off-platform Revenue Share and Royalties includes licensing fees paid for streaming music or other content related to podcasts as well as revenue share paid to third party ad servers. We make payments to third party ad servers for the period the advertising impressions are delivered or click-through actions occur, and accordingly, we record this as a cost of service in the related period.

For the years ended December 31, 2023 and 2022, revenue share and royalties were $1,292 and $1,250, respectively, an increase of 3%, or $42, and increased as a percentage of total Pandora and Off-platform revenue. The increase was primarily due to higher podcast revenue share driven by growth in podcast advertising revenue as well as higher royalty expense due to costs related to an increase in certain web streaming royalty rates.

We expect our Pandora and Off-platform revenue share and royalties to increase based on a variety of music-related factors, including higher royalty rates under the statutory webcasting license, and additional costs associated with our podcast distribution agreements.

Pandora and Off-platform Programming and Content includes costs to produce, license and promote podcast content and live listener events.

For the years ended December 31, 2023 and 2022, programming and content expenses were $69 and $58, respectively, an increase of 19%, or $11, and increased as a percentage of total Pandora revenue. The increase was primarily attributable to higher podcast license fees and live event costs, partially offset by lower personnel-related costs.

We expect our Pandora and Off-platform programming and content costs to remain flat as lower personnel-related costs are offset by additional programming and live listener events and promotions.

Pandora and Off-platform Customer Service and Billing includes transaction fees on subscription purchases through mobile app stores and bad debt expense.

For the years ended December 31, 2023 and 2022, customer service and billing expenses were $83 and $82, respectively, an increase of 1%, or $1, and increased as a percentage of total Pandora revenue. The increase was primarily driven by higher bad debt expense, partially offset by lower transaction fees.

We expect our Pandora and Off-platform customer service and billing costs to decrease with declines in the Pandora subscriber base.

Pandora and Off-platform Transmission includes costs associated with content streaming, maintaining our streaming radio and on-demand subscription services and creating and serving advertisements through third-party ad servers.

For the years ended December 31, 2023 and 2022, transmission expenses were $35 and $56, respectively, a decrease of 38%, or $21, and decreased as a percentage of total Pandora revenue. The decrease was primarily driven by lower colocation and personnel-related costs as well as lower streaming costs resulting from a decline in listener hours.

We expect our Pandora and Off-platform transmission costs to increase as a result of an increase in Off-platform advertising driving higher data costs.

Operating Costs

Subscriber Acquisition Costs are costs associated with our satellite radio service and include hardware subsidies paid to radio manufacturers, distributors and automakers; subsidies paid for chipsets and certain other components used in manufacturing radios; device royalties for certain radios and chipsets; product warranty obligations; and freight. The majority of subscriber acquisition costs are incurred and expensed in advance of acquiring a subscriber. Subscriber acquisition costs do not include advertising costs, marketing, loyalty payments to distributors and dealers of satellite radios or revenue share payments to automakers and retailers of satellite radios.

For the years ended December 31, 2023 and 2022, subscriber acquisition costs were $359 and $352, respectively, an increase of 2%, or $7, and increased as a percentage of total revenue. The increase was driven by higher hardware

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subsidies driven by installations, which grew due to increased production by automakers, partially offset by lower commission and hardware subsidy rates.

We expect subscriber acquisition costs to fluctuate with OEM installations.  We intend to continue to offer subsidies and other incentives to induce OEMs to include our technology in their vehicles.

Sales and Marketing includes costs for marketing, advertising, media and production, including promotional events and sponsorships; cooperative and artist marketing; and personnel related costs including salaries, commissions, and sales support. Marketing costs include expenses related to direct mail, outbound telemarketing, email communications, social media, television and performance media.

For the years ended December 31, 2023 and 2022, sales and marketing expenses were $931 and $1,075, respectively, a decrease of 13%, or $144, and decreased as a percentage of total revenue. The decrease was primarily due to a decrease in streaming marketing and marketing to support our brands as well as lower personnel-related costs.

We anticipate that sales and marketing expenses will remain flat based on current levels of direct marketing, performance media, and brand marketing spend associated with acquiring and retaining listeners and subscribers.

Engineering, Design and Development consists primarily of compensation and related costs to develop chipsets and new products and services, including streaming and connected vehicle services, research and development for broadcast information systems and the design and development costs to incorporate Sirius XM radios into new vehicles manufactured by automakers.

For the years ended December 31, 2023 and 2022, engineering, design and development expenses were $322 and $285, respectively, an increase of 13%, or $37, and increased as a percentage of total revenue. The increase was driven primarily by higher cloud hosting and personnel-related costs.

We expect engineering, design and development expenses to decrease in future periods as we capitalize more investments as we continue to develop our infrastructure, products and services.

General and Administrative primarily consists of compensation and related costs for personnel and facilities, and include costs related to our finance, legal, human resources and information technologies departments.

For the years ended December 31, 2023 and 2022, general and administrative expenses were $550 and $525, respectively, an increase of 5%, or $25, and increased as a percentage of total revenue.  The increase was primarily driven by increased legal costs, including amounts associated with the settlement of certain litigation matters of $24 during the three months ended June 30, 2023, as well as higher personnel-related benefits attributed to our Deferred Compensation Plan.

We expect our general and administrative expenses to decrease driven by a decline in personnel-related and legal costs.

Depreciation and Amortization represents the recognition in earnings of the cost of assets used in operations, including our satellite constellations, property, equipment and intangible assets, over their estimated service lives.

For the years ended December 31, 2023 and 2022, depreciation and amortization expense was $554 and $536, respectively, an increase of 3%, or $18, and increased as a percentage of total revenue.  The increase was driven by the accelerated end of life of certain software as well as increases in capitalized software and hardware, partially offset by lower amortization expense related to our intangible assets.

Impairment, Restructuring and Acquisition Costs represents impairment charges, associated with the carrying amount of an asset exceeding the asset's fair value, restructuring expenses associated with the abandonment of certain leased office spaces, acquisition costs and costs associated with the Transactions.

For the years ended December 31, 2023 and 2022, impairment, restructuring, and acquisition costs were $82 and $64, respectively. During 2023, we recorded a charge of $34 primarily related to severance and other related costs, costs associated with the Transactions of $16, impairments primarily related to terminated software projects of $15, vacated office space impairments of $12, accrued expenses of $3 for which we will not recognize any future economic benefit, and a cost-method investment impairment of $2. During 2022, we recorded an impairment of $43 associated with terminated software projects, $16 related to certain vacated office spaces, $5 in connection with furniture and equipment located at the impaired office spaces, and $6 related to personnel severance as well as acquisition related costs of $2; partially offset by $8 from the gain on the sale of real estate.

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Other Income (Expense)

Interest Expense includes interest on outstanding debt.

For the years ended December 31, 2023 and 2022, interest expense was $423 and $422, respectively, an increase of less than 1%, or $1.  The increase was primarily driven by higher rates driven by the Credit Facility and Incremental Term Loan, partially offset by a lower average outstanding debt balance.

Other (Expense) Income primarily includes realized and unrealized gains and losses from our Deferred Compensation Plan and other investments, interest and dividend income, our share of the income or loss from equity investments in Sirius XM Canada and SoundCloud, and transaction costs related to non-operating investments.

For the years ended December 31, 2023 and 2022, other (expense) income was $(5) and $(9), respectively.  Other expense for the year ended December 31, 2023, was primarily driven by losses associated with certain investments, partially offset by trading gains associated with the investments held for our Deferred Compensation Plan. Other expense for the year ended December 31, 2022, was primarily driven by losses associated with the investments held for our Deferred Compensation Plan.

Income Taxes

Income Tax Expense includes the change in our deferred tax assets, current federal and state tax expenses, and foreign withholding taxes.

For the years ended December 31, 2023 and 2022, income tax expense was $260 and $392, respectively, and our effective tax rate was 17.1% and 24.4%, respectively.

Our effective tax rate of 17.1% for the year ended December 31, 2023 was primarily driven by federal and state income tax expense, partially offset by the benefits related to research and development and certain other credits, as well as a release in state valuation allowance. Our effective tax rate of 24.4% for the year ended December 31, 2022 was primarily impacted by federal and state income tax expense as well as changes in state valuation allowance, partially offset by a benefit related to research and development and certain other credits.

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Key Financial and Operating Performance Metrics

In this section, we present certain financial performance measures, some of which are presented as Non-GAAP items, which include free cash flow and adjusted EBITDA. We also present certain operating performance measures. Our adjusted EBITDA excludes the impact of share-based payment expense.  Additionally, when applicable, our adjusted EBITDA metric excludes the effect of significant items that do not relate to the on-going performance of our business.  We use these Non-GAAP financial and operating performance measures to manage our business, to set operational goals and as a basis for determining performance-based compensation for our employees. See the accompanying Glossary for more details and for the reconciliation to the most directly comparable GAAP measure (where applicable).

We believe these Non-GAAP financial and operating performance measures provide useful information to investors regarding our financial condition and results of operations. We believe these Non-GAAP financial and operating performance measures may be useful to investors in evaluating our core trends because they provide a more direct view of our underlying costs. We believe investors may use our adjusted EBITDA to estimate our current enterprise value and to make investment decisions. We believe free cash flow provides useful supplemental information to investors regarding our cash available for future subscriber acquisitions and capital expenditures, to repurchase or retire debt, to acquire other companies and our ability to return capital to stockholders. By providing these Non-GAAP financial and operating performance measures, together with the reconciliations to the most directly comparable GAAP measure (where applicable), we believe we are enhancing investors' understanding of our business and our results of operations.

Our 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.  In addition, our Non-GAAP financial measures may not be comparable to similarly-titled measures by other companies.  Please refer to the Glossary for a further discussion of such Non-GAAP financial and operating performance measures and reconciliations to the most directly comparable GAAP measure (where applicable).  Subscribers and subscription related revenues and expenses associated with our connected vehicle services and Sirius XM Canada are not included in Sirius XM's subscriber count or subscriber-based operating metrics. Subscribers to Cloud Cover are not included in Pandora's subscriber count.

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Set forth below are our subscriber balances as of December 31, 2023 compared to December 31, 2022.

[[GREPCENT_TABLE]]
[["","As of December 31,","","2023 vs 2022 Change"],["(subscribers in thousands)","2023","","2022","","","","Amount","","%"],["Sirius XM"],["Self-pay subscribers","31,942","","","32,387","","","","","(445)","","","(1)","%"],["Paid promotional subscribers","1,933","","","1,918","","","","","15","","","1","%"],["Ending subscribers","33,875","","","34,305","","","","","(430)","","","(1)","%"],["Sirius XM Canada subscribers","2,629","","","2,567","","","","","62","","","2","%"],["Pandora and Off-platform"],["Monthly active users - all services","46,026","","","47,638","","","","","(1,612)","","","(3)","%"],["Self-pay subscribers","6,008","","","6,215","","","","","(207)","","","(3)","%"],["Paid promotional subscribers","\u2014","","","\u2014","","","","","\u2014","","","nm"],["Ending subscribers","6,008","","","6,215","","","","","(207)","","","(3)","%"]]
[[/GREPCENT_TABLE]]

nm - not meaningful

The following table contains our Non-GAAP financial and operating performance measures which are based on our adjusted results of operations for the years ended December 31, 2023 and 2022. Refer to our Form 10-K for the year ended December 31, 2022 filed with the SEC on February 2, 2023 for our Non GAAP financial and operating performance measures for the year ended December 31, 2022 compared with the year ended December 31, 2021.

[[GREPCENT_TABLE]]
[["","","","For the Years Ended December 31,","","","","","","2023 vs 2022 Change"],["(subscribers in thousands)","","","","","2023","","2022","","","","","","","","Amount","","%"],["Sirius XM"],["Self-pay subscribers","","","","","(445)","","","348","","","","","","","","","(793)","","","nm"],["Paid promotional subscribers","","","","","15","","","(76)","","","","","","","","","91","","","nm"],["Net additions","","","","","(430)","","","272","","","","","","","","","(702)","","","nm"],["Weighted average number of subscribers","","","","","33,993","","","34,039","","","","","","","","","(46)","","","\u2014","%"],["Average self-pay monthly churn","","","","","1.6","%","","1.5","%","","","","","","","","0.1","%","","7","%"],["ARPU (1)","","","","","$","15.56","","","$","15.63","","","","","","","","","$","(0.07)","","","\u2014","%"],["SAC, per installation","","","","","$","13.18","","","$","14.32","","","","","","","","","$","(1.14)","","","(8)","%"],["Pandora and Off-platform"],["Self-pay subscribers","","","","","(207)","","","(109)","","","","","","","","","(98)","","","(90)","%"],["Paid promotional subscribers","","","","","\u2014","","","(69)","","","","","","","","","69","","","nm"],["Net additions","","","","","(207)","","","(178)","","","","","","","","","(29)","","","(16)","%"],["Weighted average number of subscribers","","","","","6,169","","","6,308","","","","","","","","","(139)","","","(2)","%"],["Ad supported listener hours (in billions)","","","","","10.48","","","10.88","","","","","","","","","(0.40)","","","(4)","%"],["Advertising revenue per thousand listener hours (RPM)","","","","","$","99.39","","","$","101.19","","","","","","","","","$","(1.80)","","","(2)","%"],["Total Company"],["Adjusted EBITDA","","","","","$","2,790","","","$","2,833","","","","","","","","","$","(43)","","","(2)","%"],["Free cash flow","","","","","$","1,203","","","$","1,551","","","","","","","","","$","(348)","","","(22)","%"]]
[[/GREPCENT_TABLE]]

nm - not meaningful

(1)    ARPU for Sirius XM excludes subscriber revenue from our connected vehicle services of $161 and $182 for the years ended December 31, 2023 and 2022, respectively.

48

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Sirius XM

Subscribers. At December 31, 2023, we had approximately 33,875 subscribers, a decrease of approximately 430 subscribers, or 1%, from the approximately 34,305 subscribers as of December 31, 2022. The decrease was due to a decrease in our self-pay subscriber base resulting from lower vehicle conversion rates and higher vehicle related churn.

For the years ended December 31, 2023 and 2022, net subscriber additions were (430) and 272, respectively, a decrease of 702. Self-pay net additions decreased as a result of lower new and used vehicle conversion rates, unfavorable vehicle related churn and lower streaming net additions, partially offset by lower non-pay churn and higher OEM volumes. Paid promotional net additions increased as a result of higher vehicle sales.

Sirius XM Canada Subscribers. At December 31, 2023, Sirius XM Canada had approximately 2,629 subscribers, an increase of 62, or 2%, from the approximately 2,567 Sirius XM Canada subscribers as of December 31, 2022.

Average Self-pay Monthly Churn is derived by dividing the monthly average of self-pay deactivations for the period by the average number of self-pay subscribers for the period. (See accompanying Glossary for more details.)

For the years ended December 31, 2023 and 2022, our average self-pay monthly churn rate was 1.6% and 1.5%, respectively. The increase was driven by higher vehicle related churn, partially offset by lower non-pay churn.

ARPU is derived from total earned subscriber revenue (excluding revenue derived from our connected vehicle services) and net advertising revenue, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. (See the accompanying Glossary for more details.)

For the years ended December 31, 2023 and 2022, ARPU was $15.56 and $15.63, respectively. The decrease was driven by an increase in subscribers on promotional and streaming-only self-pay subscription plans, a reduction in rates associated with paid promotional plans from automakers as well as lower advertising revenue; partially offset by increases in certain subscription rates.

SAC, Per Installation, is derived from subscriber acquisition costs less margins from the sale of radios, components and accessories (excluding connected vehicle services), divided by the number of satellite radio installations in new vehicles and shipments of aftermarket radios for the period. (See the accompanying Glossary for more details.)

For the years ended December 31, 2023 and 2022, SAC, per installation, was $13.18 and $14.32, respectively. The decrease was driven by a change in the mix of OEMs.

Pandora and Off-platform

Monthly Active Users. At December 31, 2023, Pandora had approximately 46,026 monthly active users, a decrease of 1,612 monthly active users, or 3%, from the 47,638 monthly active users as of December 31, 2022. The decrease in monthly active users was driven by an increase in ad-supported listener churn and a decline in the number of new users.

Subscribers. At December 31, 2023, Pandora had approximately 6,008 subscribers, a decrease of 207, or 3%, from the approximately 6,215 subscribers as of December 31, 2022.

For the years ended December 31, 2023 and 2022, net subscriber additions were (207) and (178), respectively, a decrease of 16%, or 29. Net additions decreased as a result of decreases in trial starts and lower retention due to certain price increases.

Ad supported listener hours are a key indicator of our Pandora business and the engagement of our Pandora listeners. We include ad supported listener hours related to Pandora's non-radio content offerings in the definition of listener hours.

For the years ended December 31, 2023 and 2022, ad supported listener hours were 10.48 billion and 10.88 billion, respectively. The decrease in ad supported listener hours was primarily driven by the decline in monthly active users, partially offset by higher hours per active user.

RPM is a key indicator of our ability to monetize advertising inventory created by our listener hours on the Pandora services. RPM is calculated by dividing advertising revenue by the number of thousands of listener hours to our Pandora advertising-based service.

For the years ended December 31, 2023 and 2022, RPM was $99.39 and $101.19, respectively. The decrease was a result of a decline in sell-through of advertising spots.

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Total Company

Adjusted EBITDA. EBITDA is defined as net income before interest expense, income tax expense and depreciation and amortization.  Adjusted EBITDA excludes or adjusts for the impact of other expense (income), loss on extinguishment of debt, impairment, restructuring and acquisition costs, costs associated with the Transactions, other non-cash charges such as share-based payment expense, and legal settlements and reserves (if applicable). (See the accompanying Glossary for a reconciliation to GAAP and for more details.)

For the years ended December 31, 2023 and 2022, adjusted EBITDA was $2,790 and $2,833, respectively, a decrease of 2%, or $43. The decrease was due to higher web royalty and podcast revenue share costs as well as lower overall revenue, partially offset by lower sales and marketing costs.

Free Cash Flow includes cash provided by operations, net of additions to property and equipment, and restricted and other investment activity. (See the accompanying Glossary for a reconciliation to GAAP and for more details.)

For the years ended December 31, 2023 and 2022, free cash flow was $1,203 and $1,551, respectively, a decrease of $348, or 22%. The decrease was driven by higher capital expenditures driven by satellite construction and investments in our products and technology platform as well as higher cash taxes paid.

Liquidity and Capital Resources

The following table presents a summary of our cash flow activity for the year ended December 31, 2023 compared with the year ended December 31, 2022. Refer to our Form 10-K for the year ended December 31, 2022 filed with the SEC on February 2, 2023 for our cash flows for the year ended December 31, 2022 compared with the year ended December 31, 2021.

[[GREPCENT_TABLE]]
[["","For the Years Ended December 31,"],["","2023","","2022","","","","2023 vs 2022"],["Net cash provided by operating activities","$","1,850","","","$","1,976","","","","","$","(126)"],["Net cash used in investing activities","(686)","","","(548)","","","","","(138)"],["Net cash used in financing activities","(1,005)","","","(1,562)","","","","","557"],["Net increase (decrease) in cash, cash equivalents and restricted cash","159","","","(134)","","","","","293"],["Cash, cash equivalents and restricted cash at beginning of period","65","","","199","","","","","(134)"],["Cash, cash equivalents and restricted cash at end of period","$","224","","","$","65","","","","","$","159"]]
[[/GREPCENT_TABLE]]

Cash Flows Provided by Operating Activities

Cash flows provided by operating activities decreased by $126 to $1,850 for the year ended December 31, 2023 from $1,976 for the year ended December 31, 2022.

Our largest source of cash provided by operating activities is cash generated by subscription and subscription-related revenues.  We also generate cash from the sale of advertising through our Pandora and Off-platform business, advertising on certain non-music channels on Sirius XM and the sale of satellite radios, components and accessories.  Our primary uses of cash from operating activities include revenue share and royalty payments to distributors, programming and content providers, and payments to radio manufacturers, distributors and automakers. In addition, uses of cash from operating activities include payments to vendors to service, maintain and acquire listeners and subscribers, general corporate expenditures, and compensation and related costs.

Cash Flows Used in Investing Activities

Cash flows used in investing activities in the year ended December 31, 2023 were primarily due to spending for capitalized software and hardware, the construction of satellites and acquisitions of tax-effective investments for total cash consideration of $39. Cash flows used in investing activities in the year ended December 31, 2022 were primarily due to spending for capitalized software and hardware, to construct satellites, and acquisitions for total cash consideration of $136. We spent $297 and $247 on capitalized software and hardware as well as $285 and $122 to construct satellites during the years ended December 31, 2023 and 2022, respectively.

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Cash Flows Used in Financing Activities

Cash flows used in financing activities consists of the issuance and repayment of long-term debt, the purchase of common stock under our share repurchase program, the payment of cash dividends and taxes paid in lieu of shares issued for stock-based compensation.  Proceeds from long-term debt have been used to fund our operations, construct and launch new satellites, fund acquisitions, invest in other infrastructure improvements and purchase shares of our common stock.

Cash flows used in financing activities in the year ended December 31, 2023 were primarily due to repayments under our Credit Facility of $1,750, the payment of cash dividends of $383, the repurchase of $193 in principal amount of Pandora's 1.75% Convertible Senior Notes due 2023, the purchase and retirement of shares of our common stock under our repurchase program for $274 and payment of $63 for taxes in lieu of shares issued for share-based compensation, partially offset by borrowings under our Credit Facility of $1,670. Cash flows used in financing activities in the year ended December 31, 2022 were primarily due to repayments under our Credit Facility of $2,220, the payment of cash dividends of $1,339, the purchase and retirement of shares of our common stock under our repurchase program for $647, and payment of $114 for taxes in lieu of shares issued for share-based compensation, partially offset by borrowings under our Credit Facility of $2,300 and an amendment to our Credit Facility to incorporate an Incremental Term Loan borrowing of $500 ($499 net of costs) which matures on April 11, 2024.

Future Liquidity and Capital Resource Requirements

Based upon our current business plans, we expect to fund operating expenses, capital expenditures, including the construction of replacement satellites, working capital requirements, interest payments, taxes and scheduled maturities of our debt with existing cash, cash flow from operations and borrowings under our Credit Facility.  As of December 31, 2023, no amount was outstanding under our Credit Facility and $1,750 was available for future borrowing under our Credit Facility.  We believe that we have sufficient cash and cash equivalents, as well as debt capacity, to cover our estimated short-term and long-term funding needs, including amounts to construct, launch and insure replacement satellites, as well as fund future stock repurchases, future dividend payments and to pursue strategic opportunities.

Our ability to meet our debt and other obligations depends on our future operating performance and on economic, financial, competitive and other factors.

We regularly evaluate our business plans and strategy. These evaluations often result in changes to our business plans and strategy, some of which may be material and significantly change our cash requirements. These changes in our business plans or strategy may include: the acquisition of unique or compelling programming; the development and introduction of new features or services; significant new or enhanced distribution arrangements; investments in infrastructure, such as satellites, equipment or radio spectrum; and acquisitions and investments, including acquisitions and investments that are not directly related to our existing business.

We may from time to time purchase our outstanding debt through open market purchases, privately negotiated transactions or otherwise. Purchases or retirement of debt, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

As part of our ESG strategies, we have made, and expect to make, certain tax-efficient investments in clean energy technologies, including industrial carbon capture and storage. These investments will produce tax credits and related tax losses. Over the next seven years, we currently expect to generate more than $250 million in net-after tax cash benefit. The payments on these equity investments will be classified as investing activities from a cash flow perspective, while the tax credits and losses will benefit our federal cash taxes in operating activities.

Capital Return Program

As of December 31, 2023, our board of directors had authorized for repurchase an aggregate of $18,000 of our common stock.  As of December 31, 2023, our cumulative repurchases since December 2012 under our stock repurchase program totaled 3,731 shares for $16,834, and $1,166 remained available for additional repurchases under our existing stock repurchase program authorization.

Shares of common stock may be purchased from time to time on the open market and in privately negotiated transactions, including in accelerated stock repurchase transactions and transactions with Liberty Media and its affiliates. We intend to fund the additional repurchases through a combination of cash on hand, cash generated by operations and future

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borrowings. The size and timing of any purchases will be based on a number of factors, including price and business and market conditions.

On January 24, 2024, our board of directors declared a quarterly dividend on our common stock in the amount of $0.0266 per share of common stock payable on February 23, 2024 to stockholders of record as of the close of business on February 9, 2024.

Debt Covenants

The indentures governing Sirius XM's senior notes and the agreement governing the Sirius XM Credit Facility include restrictive covenants.  As of December 31, 2023, we were in compliance with such covenants.  For a discussion of our “Debt Covenants,” refer to Note 13 to our consolidated financial statements in Part II, Item 8, of this Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

We do not have any significant off-balance sheet arrangements other than those disclosed in Note 16 to our consolidated financial statements in Part II, Item 8, of this Annual Report on Form 10-K that are reasonably likely to have a material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Contractual Cash Commitments

For a discussion of our “Contractual Cash Commitments,” refer to Note 16 to our consolidated financial statements in Part II, Item 8, of this Annual Report on Form 10-K.

Related Party Transactions

For a discussion of “Related Party Transactions,” refer to Note 12 to our consolidated financial statements in Part II, Item 8, of this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods. Accounting estimates require the use of significant management assumptions and judgments as to future events, and the effect of those events cannot be predicted with certainty. The accounting estimates will change as new events occur, more experience is acquired and more information is obtained. We evaluate and update our assumptions and estimates on an ongoing basis and use outside experts to assist in that evaluation when we deem necessary. We have identified all significant accounting policies in Note 2 to our consolidated financial statements in Part II, Item 8, of this Annual Report on Form 10-K.

Non-Financial Instrument Valuations. Our non-financial instrument valuations are primarily comprised of our determination of the estimated fair value allocation of net tangible and identifiable intangible assets acquired in business combinations, our annual assessment of the recoverability of our goodwill and other nonamortizable intangibles, such as trademarks, and our evaluation of the recoverability of our other long-lived assets upon certain triggering events. If the carrying value of our long-lived assets exceeds their estimated fair value, we are required to write the carrying value down to fair value. Any such writedown is included in Impairment, restructuring and acquisition costs in our consolidated statement of operations. Judgment is required to estimate the fair value of our long-lived assets. We may use quoted market prices, prices for similar assets, present value techniques and other valuation techniques to prepare these estimates. We may need to make estimates of future cash flows and discount rates as well as other assumptions in order to implement these valuation techniques. Due to the degree of judgment involved in our estimation techniques, any value ultimately derived from our long-lived assets may differ from our estimate of fair value. As each of our operating segments has long-lived assets, this critical accounting policy affects the financial position and results of operations of each segment.

As of December 31, 2023, the intangible assets not subject to amortization for each of our consolidated reportable segments were as follows (amounts in millions):

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[[GREPCENT_TABLE]]
[["","","Goodwill","","FCC Licenses","","Trademarks","","Total"],["Sirius XM","","$","2,290","","","$","2,084","","","$","250","","","$","4,624"],["Pandora and Off-platform","","959","","","\u2014","","","312","","","1,271"],["Consolidated","","$","3,249","","","$","2,084","","","$","562","","","$","5,895"]]
[[/GREPCENT_TABLE]]

We perform our annual assessment of the recoverability of our goodwill and other nonamortizable intangible assets in the fourth quarter each year, or more frequently if events and circumstances indicate impairment may have occurred. The accounting guidance permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test. The accounting guidance also allows entities the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to the quantitative impairment test. The entity may resume performing the qualitative assessment in any subsequent period. In evaluating goodwill on a qualitative basis, we review the business performance of each reporting unit and evaluate other relevant factors as identified in the relevant accounting guidance to determine whether it is more likely than not that an indicated impairment exists for any of our reporting units. We consider whether there are any negative macroeconomic conditions, industry specific conditions, market changes, increased competition, increased costs in doing business, management challenges, the legal environments and how these factors might impact company specific performance in future periods. As part of the analysis, we also consider fair value determinations for our reporting units that have been made at various points throughout the current and prior year for other purposes. If based on the qualitative analysis it is more likely than not that an impairment exists, we perform the quantitative impairment test.

Useful Life of Broadcast/Transmission System. Our satellite system includes the costs of our satellite construction, launch vehicles, launch insurance, capitalized interest, spare satellites, terrestrial repeater network and satellite uplink facilities. We monitor our satellites for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset is not recoverable.

We operate two in-orbit Sirius satellites, FM-5 and FM-6, which launched in 2009 and 2013, respectively, and estimate they will operate effectively through the end of their depreciable lives in 2024 and 2028, respectively.

We currently operate three in-orbit XM satellites, XM-3, XM-5 and SXM-8. Our XM-3 satellite was launched in 2005 and is used as an in-orbit spare and reached the end of its depreciable life in 2020. Our XM-5 satellite was launched in 2010 and is expected to reach the end of its depreciable life in 2025. Our SXM-8 satellite was launched in 2021 and is expected to reach the end of its depreciable life in 2036. Our SXM-8 satellite replaced our XM-3 satellite. We have entered into agreements for the design, construction and launch of four additional satellites, SXM-9, SXM-10, SXM-11 and SXM-12.

Our satellites have been designed to last fifteen-years. Our in-orbit satellites may experience component failures which could adversely affect their useful lives. We monitor the operating condition of our in-orbit satellites and if events or circumstances indicate that the depreciable lives of our in-orbit satellites have changed, we will modify the depreciable life accordingly. If we were to revise our estimates, our depreciation expense would change.

Income Taxes. Deferred income taxes are recognized for the tax consequences related to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for tax purposes, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.

We assess the recoverability of deferred tax assets at each reporting date and, where applicable, a valuation allowance is recognized when, based on the weight of all available evidence, it is considered more likely than not that all, or some portion, of the deferred tax assets will not be realized. Our assessment includes an analysis of whether deferred tax assets will be realized in the ordinary course of operations based on the available positive and negative evidence, including the scheduling of deferred tax liabilities and forecasted income from operations. The underlying assumptions we use in forecasting future taxable income require significant judgment. In the event that actual income from operations differs from forecasted amounts, or if we change our estimates of forecasted income from operations, we could record additional charges or reduce allowances in order to adjust the carrying value of deferred tax assets to their realizable amount. Such adjustments could be material to our consolidated financial statements.

As of December 31, 2023, we had a valuation allowance of $88 relating to deferred tax assets that are not more likely than not to be realized due to the timing of certain state net operating loss limitations and acquired net operating losses that were not likely to be utilized.

ASC 740, Income Taxes, requires a company to first determine whether it is more likely than not that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more likely than not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority. If the tax position is not more likely than not to be sustained, the gross amount of the unrecognized tax

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position will not be recorded in the financial statements but will be shown in tabular format within the uncertain income tax positions. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs due to the following conditions: (1) the tax position is “more likely than not” to be sustained, (2) the tax position, amount, and/or timing is ultimately settled through negotiation or litigation, or (3) the statute of limitations for the tax position has expired. A number of years may elapse before an uncertain tax position is effectively settled or until there is a lapse in the applicable statute of limitations. We record interest and penalties related to uncertain tax positions in Income tax expense in our consolidated statements of comprehensive income. As of December 31, 2023, the gross liability for income taxes associated with uncertain tax positions was $171.

Glossary

Monthly active users - the number of distinct registered users on the Pandora services, including subscribers, which have consumed content within the trailing 30 days to the end of the final calendar month of the period. The number of monthly active users on the Pandora services may overstate the number of unique individuals who actively use our Pandora service, as one individual may use multiple accounts. To become a registered user on the Pandora services, a person must sign-up using an email address or access our service using a device with a unique identifier, which we use to create an account for our service.

Average self-pay monthly churn - for satellite-enabled subscriptions, the Sirius XM monthly average of self-pay deactivations for the period divided by the average number of self-pay subscribers for the period.

Adjusted EBITDA - EBITDA is defined as net income before interest expense, income tax expense and depreciation and amortization. Adjusted EBITDA is a Non-GAAP financial measure that excludes or adjusts for the impact of other expense (income), loss on extinguishment of debt, impairment, restructuring and acquisition costs, costs associated with the Transactions, other non-cash charges such as share-based payment expense, and legal settlements and reserves (if applicable). We believe adjusted EBITDA is a useful measure of the underlying trend of our operating performance, which provides useful information about our business apart from the costs associated with our capital structure and purchase price accounting. We believe investors find this Non-GAAP financial measure useful when analyzing our past operating performance with our current performance and comparing our operating performance to the performance of other communications, entertainment and media companies. We believe investors use adjusted EBITDA to estimate our current enterprise value and to make investment decisions. As a result of large capital investments in our satellite radio system, our results of operations reflect significant charges for depreciation expense. We believe the exclusion of share-based payment expense is useful as it is not directly related to the operational conditions of our business. We also believe the exclusion of the legal settlements and reserves, impairment, restructuring and acquisition related costs, to the extent they occur during the period, is useful as they are significant expenses not incurred as part of our normal operations for the period.

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Adjusted EBITDA has certain limitations in that it does not take into account the impact to our consolidated statements of comprehensive income of certain expenses, including share-based payment expense. We endeavor to compensate for the limitations of the Non-GAAP measure presented by also providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the Non-GAAP measure.  Investors that wish to compare and evaluate our operating results after giving effect for these costs should refer to net income as disclosed in our consolidated statements of comprehensive income. Since adjusted EBITDA is a Non-GAAP financial performance measure, our calculation of adjusted EBITDA may be susceptible to varying calculations; may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP. The reconciliation of net income to the adjusted EBITDA is calculated as follows:

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[[/GREPCENT_TABLE]]

(1)Allocation of share-based payment expense:

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[["","","","For the Years Ended December 31,"],["","","","","","2023","","2022"],["Programming and content","","","","","$","34","","","$","34"],["Customer service and billing","","","","","5","","","6"],["Transmission","","","","","6","","","6"],["Sales and marketing","","","","","45","","","52"],["Engineering, design and development","","","","","46","","","39"],["General and administrative","","","","","48","","","60"],["Total share-based payment expense","","","","","$","184","","","$","197"]]
[[/GREPCENT_TABLE]]

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Free cash flow - is derived from cash flow provided by operating activities, net of additions to property and equipment and purchases of other investments. Free cash flow is a metric that our management and board of directors use to evaluate the cash generated by our operations, net of capital expenditures and other investment activity. In a capital intensive business, with significant investments in satellites, we look at our operating cash flow, net of these investing cash outflows, to determine cash available for future subscriber acquisition and capital expenditures, to repurchase or retire debt, to acquire other companies and to evaluate our ability to return capital to stockholders. We exclude from free cash flow certain items that do not relate to the on-going performance of our business, such as cash flows related to acquisitions, strategic and short-term investments, including tax efficient investments in clean energy as well as net loan activity with related parties and other equity investees. We believe free cash flow is an indicator of the long-term financial stability of our business.  Free cash flow, which is reconciled to “Net cash provided by operating activities,” is a Non-GAAP financial measure.  This measure can be calculated by deducting amounts under the captions “Additions to property and equipment” and deducting or adding Restricted and other investment activity from “Net cash provided by operating activities” from the consolidated statements of cash flows. Free cash flow should be used in conjunction with other GAAP financial performance measures and may not be comparable to free cash flow measures presented by other companies.  Free cash flow should be viewed as a supplemental measure rather than an alternative measure of cash flows from operating activities, as determined in accordance with GAAP.  Free cash flow is limited and does not represent remaining cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt maturities. We believe free cash flow provides useful supplemental information to investors regarding our current 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. Free cash flow is calculated as follows:

[[GREPCENT_TABLE]]
[["","","","For the Years Ended December 31,"],["","","","","","2023","","2022"],["Cash Flow information"],["Net cash provided by operating activities","","","","","$","1,850","","","$","1,976"],["Net cash used in investing activities","","","","","(686)","","","(548)"],["Net cash used in financing activities","","","","","(1,005)","","","(1,562)"],["Free Cash Flow"],["Net cash provided by operating activities","","","","","1,850","","","1,976"],["Additions to property and equipment","","","","","(650)","","","(426)"],["Sales of other investments","","","","","3","","","1"],["Free cash flow","","","","","$","1,203","","","$","1,551"]]
[[/GREPCENT_TABLE]]

ARPU - Sirius XM ARPU is derived from total earned subscriber revenue (excluding revenue associated with our connected vehicle services) and advertising revenue, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period.

Subscriber acquisition cost, per installation - or SAC, per installation, is derived from subscriber acquisition costs less margins from the sale of radios and accessories (excluding connected vehicle services), divided by the number of satellite radio installations in new vehicles and shipments of aftermarket radios for the period. SAC, per installation, is calculated as follows:

[[GREPCENT_TABLE]]
[["","","","For the Years Ended December 31,"],["","","","","","2023","","2022"],["Subscriber acquisition costs, excluding connected vehicle services","","","","","$","359","","","$","352"],["Less: margin from sales of radios and accessories, excluding connected vehicle services","","","","","(179)","","","(176)"],["","","","","","$","180","","","$","176"],["Installations (in thousands)","","","","","13,640","","","12,270"],["SAC, per installation (a)","","","","","$","13.18","","","$","14.32"]]
[[/GREPCENT_TABLE]]

(a)Amounts may not recalculate due to rounding.

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Ad supported listener hours - is based on the total bytes served over our Pandora advertising supported platforms for each track that is requested and served from our Pandora servers, as measured by our internal analytics systems, whether or not a listener listens to the entire track. For non-music content such as podcasts, episodes are divided into approximately track-length parts, which are treated as tracks. To the extent that third-party measurements of advertising hours are not calculated using a similar server-based approach, the third-party measurements may differ from our measurements.

RPM - is calculated by dividing advertising revenue, excluding AdsWizz and other off-platform revenue, by the number of thousands of listener hours on our Pandora advertising-based service.

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