SiriusXM Reports 2012 Results - Subscribers Grow to a Record 23.9 Million

- Record Revenue of $3.4 Billion, Up 13%

- Net Income of $3.5 Billion Includes an Income Tax Benefit of $3.0 Billion

- Adjusted EBITDA Reaches a Record $920 Million, Up 26%

- Free Cash Flow Grows 71% to a Record $709 Million

NEW YORK, Feb. 5, 2013 /PRNewswire/ -- Sirius XM Radio (NASDAQ: SIRI) today announced fourth quarter and full year 2012 financial and operating results, including 2012 revenue of $3.4 billion, up 13% from 2011 revenue of $3.0 billion.  Net income for 2012 and 2011 was $3.5 billion and $427 million, respectively, or $0.51 and $0.07 per diluted share, respectively.  Net income for 2012 included a $3.0 billion income tax benefit and $133 million loss on extinguishment of debt.  Adjusted EBITDA in 2012 was $920 million, up 26% from $731 million in 2011.

(Logo: http://photos.prnewswire.com/prnh/20101014/NY82093LOGO )

"Thanks to the outstanding team at SiriusXM, we capped a great 2012 with a strong fourth quarter, adding more than 500,000 net new subscribers and attaining outstanding revenue, adjusted EBITDA, and free cash flow.  SiriusXM also returned capital to shareholders for the first time in the history of satellite radio through a $327 million special cash dividend in December.  We are confident in our guidance for growth in 2013 and continue to be sharply focused on enhancing shareholder value, including through our recently announced common stock repurchase program that we are initiating this year," said Jim Meyer, Chief Executive Officer, SiriusXM.

"We continue to broaden our Internet capabilities to expand the user experience and strengthen our in-vehicle technologies.  We are thrilled to announce that our personalized radio feature, MySXM, is now in public beta testing and will be available to our Internet subscribers in the near future.  We are committed to ensuring SiriusXM's long-term leadership in audio and data services, particularly in vehicles, and we will do that by continuing to innovate and improve our technology, programming, and customer care," noted Meyer.

Additional 2012 highlights include:

  • Record post-merger subscriber growth.  Net subscriber additions of 2.0 million in 2012 were higher than in any year since 2007, before the 2008 merger of Sirius and XM. Self-pay net subscriber additions improved by 36% year-over-year to nearly 1.7 million, resulting in an all-time high self-pay subscriber base of nearly 19.6 million.  The total paid subscriber base rose to a record high 23.9 million. Total paid and unpaid trials were 6.1 million at year-end 2012.
  • Churn and conversion remains stable.  Self-pay monthly churn was 1.9% in 2012, unchanged from 2011.  New vehicle consumer conversion rate was 45% in 2012, also unchanged from 2011.
  • Free cash flow grows to record level.  Free cash flow was $709 million in 2012, an increase of 71% from $416 million in 2011.  This figure represents the highest annual free cash flow attained in the history of the Company.

FOURTH QUARTER 2012 HIGHLIGHTS

Revenue in the fourth quarter of 2012 was up 14% to $892 million from $784 million in the fourth quarter of 2011. Net income for the fourth quarters of 2012 and 2011 was $156 million and $71 million, respectively, or $0.02 and $0.01 per diluted share, respectively. Adjusted EBITDA was $230 million for the fourth quarter of 2012, up 38%.

Additional fourth quarter 2012 highlights include:

  • Ramping self-pay subscriber growth.  Self-pay net subscriber additions improved by 41% to approximately 529,000 in the fourth quarter of 2012 from approximately 374,000 in the fourth quarter of 2011.
  • Self-pay churn improves.  Self-pay monthly churn was 1.8% in the fourth quarter of 2012, an improvement from 1.9% in the fourth quarter of 2011 and 2.0% in the third quarter of 2012.  New vehicle consumer conversion rate was 44% in the fourth quarter of 2012, unchanged from the fourth quarter of 2011.
  • Substantial free cash flow improvement.  Free cash flow grew by 40% to $269 million in the fourth quarter of 2012, a record amount for a single quarter, from $192 million in the fourth quarter of 2011.

"In 2012, we took significant steps to strengthen SiriusXM's balance sheet.  We paid down more than $1 billion of short maturity, high-coupon debt and replaced it with $400 million of 10 year, 5.25% debt and a $1.25 billion undrawn revolving credit facility.  We ended the year with more than $520 million of cash after paying a special cash dividend in December that totaled $327 million.  With debt to adjusted EBITDA falling from 4.1x at December 2011 to under 2.7x at December 2012, we are below our leverage target and have ample liquidity to pursue strategic opportunities and return capital to stockholders through our $2 billion stock buyback program," remarked David Frear, SiriusXM's Executive Vice President and Chief Financial Officer.

2013 GUIDANCE

The Company affirmed its 2013 subscriber, revenue, adjusted EBITDA and free cash flow guidance:

  • Self-pay net subscriber additions of approximately 1.6 million,
  • Total net subscriber additions of approximately 1.4 million,
  • Revenue of over $3.7 billion,
  • Adjusted EBITDA of over $1.1 billion, and
  • Free cash flow approaching $900 million.

STOCK REPURCHASE PROGRAM

As SiriusXM commences its previously announced $2 billion share repurchase program, the Company expects to repurchase shares of common stock from time to time on the open market and in privately negotiated transactions.  Liberty Media Corporation, the beneficial owner of approximately 50.2% of the Company's stock, is no longer required to participate in the share repurchase program on a pro rata basis and has indicated it may or may not do so in the future.

2012 RESULTS











SIRIUS XM RADIO INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME





















For the Three Months Ended December 31,


For the Twelve Months Ended December 31,


(in thousands, except per share data)

2012


2011


2012


2011



(Unaudited)


(Unaudited)






Revenue:









Subscriber revenue

$           774,466


$           672,498


$      2,962,665


$       2,595,414


Advertising revenue, net of agency fees

22,438


20,077


82,320


73,672


Equipment revenue

22,273


22,658


73,456


71,051


Other revenue

73,238


68,505


283,599


274,387


Total revenue

892,415


783,738


3,402,040


3,014,524


Operating expenses:









Cost of services:









Revenue share and royalties

141,641


130,436


551,012


471,149


Programming and content

73,795


70,367


278,997


281,234


Customer service and billing

82,346


67,052


294,980


259,719


Satellite and transmission

18,635


18,663


72,615


75,902


Cost of equipment

12,465


13,201


31,766


33,095


Subscriber acquisition costs

126,683


116,771


474,697


434,482


Sales and marketing

72,446


68,302


248,905


222,773


Engineering, design and development

16,374


14,186


48,843


53,435


General and administrative

68,120


63,270


261,905


238,738


Depreciation and amortization

66,814


67,015


266,295


267,880


Total operating expenses

679,319


629,263


2,530,015


2,338,407


Income from operations

213,096


154,475


872,025


676,117


Other income (expense):









Interest expense, net of amounts capitalized

(45,545)


(75,208)


(265,321)


(304,938)


Loss on extinguishment of debt and credit facilities, net

-


-


(132,726)


(7,206)


Interest and investment income (loss)

3,907


(4,620)


716


73,970


Other income (loss) 

412


1,017


(226)


3,252


Total other expense

(41,226)


(78,811)


(397,557)


(234,922)


Income before income taxes

171,870


75,664


474,468


441,195


Income tax (expense) benefit

(15,626)


(4,328)


2,998,234


(14,234)


Net income

$           156,244


$             71,336


$      3,472,702


$          426,961


Realized loss on XM Canada investment foreign currency adjustment

-


-


-


6,072


Foreign currency translation adjustment, net of tax

87


(327)


49


(140)


Comprehensive income

$           156,331


$             71,009


$      3,472,751


$          432,893


Net income per common share:









Basic

$                 0.02


$                 0.01


$               0.55


$                0.07


Diluted

$                 0.02


$                 0.01


$               0.51


$                0.07


Weighted average common shares outstanding:









Basic

5,218,827


3,751,423


4,209,073


3,744,606


Diluted

6,634,911


6,501,014


6,873,786


6,500,822

























SIRIUS XM RADIO INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS



As of December 31,



2012


2011


(in thousands, except share and per share data)





ASSETS





Current assets:





Cash and cash equivalents

$                       520,945


$                       773,990


Accounts receivable, net

106,142


101,705


Receivables from distributors

104,425


84,817


Inventory, net

25,337


36,711


Prepaid expenses

122,157


125,967


Related party current assets

13,167


14,702


Deferred tax asset

923,972


132,727


Other current assets

12,037


6,335


Total current assets

1,828,182


1,276,954


Property and equipment, net

1,571,922


1,673,919


Long-term restricted investments

3,999


3,973


Deferred financing fees, net

38,677


42,046


Intangible assets, net

2,519,610


2,573,638


Goodwill

1,815,365


1,834,856


Related party long-term assets

44,954


54,953


Long-term deferred tax asset

1,219,256


-


Other long-term assets

12,878


35,657


Total assets

$                    9,054,843


$                    7,495,996


LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





Accounts payable and accrued expenses

$                       587,652


$                       543,193


Accrued interest

33,954


70,405


Current portion of deferred revenue

1,474,138


1,333,965


Current portion of deferred credit on executory contracts

207,854


284,108


Current maturities of long-term debt

4,234


1,623


Related party current liabilities

6,756


14,302


Total current liabilities

2,314,588


2,247,596


Deferred revenue

159,501


198,135


Deferred credit on executory contracts

5,175


218,199


Long-term debt

2,222,080


2,683,563


Long-term related party debt

208,906


328,788


Deferred tax liability

69


1,011,084


Related party long-term liabilities

18,966


21,741


Other long-term liabilities

85,993


82,745


Total liabilities

5,015,278


6,791,851







Stockholders' equity:





Preferred stock, par value $0.001; 50,000,000 authorized at December 31, 2012 and 2011:





Series A convertible preferred stock; no shares issued and outstanding at December 31, 2012 and 2011

-


-


Convertible perpetual preferred stock, series B-1 (liquidation preference of $0.001 per share at December 31, 2012 and 2011); 6,250,100 and 12,500,000 shares issued and outstanding at December 31, 2012 and 2011, respectively

6


13


Common stock, par value $0.001; 9,000,000,000 shares authorized at December 31, 2012 and 2011; 5,262,440,085 and 3,753,201,929 shares issued and outstanding at December 31, 2012 and 2011, respectively

5,263


3,753


Accumulated other comprehensive income, net of tax

120


71


Additional paid-in capital

10,345,566


10,484,400


Accumulated deficit

(6,311,390)


(9,784,092)


Total stockholders' equity

4,039,565


704,145


Total liabilities and stockholders' equity

$                    9,054,843


$                    7,495,996

















SIRIUS XM RADIO INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS





For the Years Ended December 31,


(in thousands)

2012


2011


Cash flows from operating activities:





Net income

$                   3,472,702


$                      426,961


Adjustments to reconcile net income to net cash provided by operating activities:





Depreciation and amortization

266,295


267,880


Non-cash interest expense, net of amortization of premium

35,924


39,515


Provision for doubtful accounts

34,548


33,164


Amortization of deferred income related to equity method investment

(2,776)


(2,776)


Loss on extinguishment of debt and credit facilities, net

132,726


7,206


Gain on merger of unconsolidated entities

-


(75,768)


Loss on unconsolidated entity investments, net

420


6,520


Dividend received from unconsolidated entity investment

1,185


-


Loss on disposal of assets

657


269


Share-based payment expense

63,822


53,190


Deferred income taxes

(3,001,818)


8,264


Other non-cash purchase price adjustments

(289,050)


(275,338)


Distribution from investment in unconsolidated entity

-


4,849


Changes in operating assets and liabilities:





Accounts receivable

(38,985)


(13,211)


Receivables from distributors

(19,608)


(17,241)


Inventory

11,374


(14,793)


Related party assets

9,523


30,036


Prepaid expenses and other current assets

647


8,525


Other long-term assets

22,779


36,490


Accounts payable and accrued expenses

46,043


(32,010)


Accrued interest

(36,451)


(2,048)


Deferred revenue

101,311


55,336


Related party liabilities

(7,545)


(1,542)


Other long-term liabilities

3,042


152


Net cash provided by operating activities

806,765


543,630







Cash flows from investing activities:





Additions to property and equipment

(97,293)


(137,429)


Purchase of restricted and other investments

(26)


(826)


Release of restricted investments

-


250


Return of capital from investment in unconsolidated entity

-


10,117


Net cash used in investing activities

(97,319)


(127,888)







Cash flows from financing activities:





Proceeds from exercise of stock options

123,369


11,553


Payment of premiums on redemption of debt

(100,615)


(5,020)


Repayment of long-term borrowings

(915,824)


(234,976)


Repayment of related party long-term borrowings

(126,000)


-


Long-term borrowings, net of costs

383,641


-


Dividends paid

(327,062)


-


Net cash used in financing activities

(962,491)


(228,443)


Net (decrease) increase in cash and cash equivalents

(253,045)


187,299


Cash and cash equivalents at beginning of period

773,990


586,691


Cash and cash equivalents at end of period

$                      520,945


$                      773,990






Subscriber Data and Operating Metrics          

The following table contains subscriber data and key operating metrics for the three and twelve months ended December 31, 2012 and 2011, respectively:












Unaudited



For the Three Months Ended December 31,


For the Twelve Months Ended December 31,



2012


2011


2012


2011











Beginning subscribers

23,365,383


21,349,858


21,892,824


20,190,964


Gross subscriber additions

2,553,489


2,326,174


9,617,771


8,696,020


Deactivated subscribers

(2,018,536)


(1,783,208)


(7,610,259)


(6,994,160)


Net additions

534,953


542,966


2,007,512


1,701,860


Ending subscribers

23,900,336


21,892,824


23,900,336


21,892,824











     Self-pay

19,570,274


17,908,742


19,570,274


17,908,742


     Paid promotional

4,330,062


3,984,082


4,330,062


3,984,082


Ending subscribers

23,900,336


21,892,824


23,900,336


21,892,824











     Self-pay

528,755


374,432


1,661,532


1,221,943


     Paid promotional

6,198


168,534


345,980


479,917


Net additions

534,953


542,966


2,007,512


1,701,860











Daily weighted average number of subscribers

23,612,076


21,542,690


22,794,170


20,903,908











Average self-pay monthly churn

1.8%


1.9%


1.9%


1.9%











New vehicle consumer conversion rate

44%


44%


45%


45%











ARPU

$                        12.12


$                        11.61


$                        12.00


$                        11.58


SAC, per gross subscriber addition

$                             54


$                             55


$                             54


$                             55



















Glossary

Adjusted EBITDA - EBITDA is defined as net income before interest and investment loss; interest expense, net of amounts capitalized; income tax expense and depreciation and amortization. We adjust EBITDA to remove the impact of other income and expense, loss on extinguishment of debt as well as certain other charges discussed below. This measure is one of the primary non-GAAP financial measures on which we (i) evaluate the performance of our businesses, (ii) base our internal budgets and (iii) compensate management. Adjusted EBITDA is a non-GAAP financial performance measure that excludes (if applicable):  (i) certain adjustments as a result of the purchase price accounting for the merger of Sirius and XM, (ii) goodwill impairment, (iii) restructuring, impairments, and related costs, (iv) depreciation and amortization and (v) share-based payment expense. The purchase price accounting adjustments include: (i) the elimination of deferred revenue associated with the investment in XM Canada, (ii) recognition of deferred subscriber revenues not recognized in purchase price accounting, and (iii) elimination of the benefit of deferred credits on executory contracts, which are primarily attributable to third party arrangements with an OEM and programming providers. 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 physical plant, capital structure and purchase price accounting. We believe investors find this non-GAAP financial measure useful when analyzing our results and comparing our operating performance to the performance of other communications, entertainment and media companies. We believe investors use current and projected adjusted EBITDA to estimate our current and prospective enterprise value and to make investment decisions. Because we fund and build-out our satellite radio system through the periodic raising and expenditure of large amounts of capital, our results of operations reflect significant charges for depreciation expense. The exclusion of depreciation and amortization expense is useful given significant variation in depreciation and amortization expense that can result from the potential variations in estimated useful lives, all of which can vary widely across different industries or among companies within the same industry. We believe the exclusion of restructuring, impairments and related costs is useful given the nature of these expenses. We also believe the exclusion of share-based payment expense is useful given the significant variation in expense that can result from changes in the fair value as determined using the Black-Scholes-Merton model which varies based on assumptions used for the expected life, expected stock price volatility and risk-free interest rates.