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

Feb 05, 2013, 07:00 ET from Sirius XM Radio

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.        

Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statements of comprehensive income of certain expenses, including share-based payment expense and certain purchase price accounting for the merger of Sirius and XM. 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 (in thousands):

Unaudited

For the Three Months Ended December 31,

For the Twelve Months Ended December 31,

2012

2011

2012

2011

Net income (GAAP):

$           156,244

$             71,336

$        3,472,702

$           426,961

Add back items excluded from Adjusted EBITDA:

Purchase price accounting adjustments:

Revenues

1,880

1,958

7,479

10,910

Operating expenses

(68,781)

(71,785)

(289,278)

(277,258)

Share-based payment expense, net of purchase price accounting adjustments

17,462

15,614

63,822

53,369

Depreciation and amortization (GAAP)

66,814

67,015

266,295

267,880

Interest expense, net of amounts capitalized (GAAP)

45,545

75,208

265,321

304,938

Loss on extinguishment of debt and credit facilities, net (GAAP)

-

-

132,726

7,206

Interest and investment (income) loss (GAAP)

(3,907)

4,620

(716)

(73,970)

Other (income) loss (GAAP)

(412)

(1,017)

226

(3,252)

Income tax expense (benefit) (GAAP)

15,626

4,328

(2,998,234)

14,234

Adjusted EBITDA

$           230,471

$           167,277

$           920,343

$           731,018

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 and share-based payment expense. We use this non-GAAP financial measure to manage our business, 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 three and twelve months ended December 31, 2012 and 2011:

Unaudited For the Three Months Ended December 31, 2012

(in thousands)

As Reported

Purchase Price Accounting Adjustments

Allocation of Share-based Payment Expense

Adjusted

Revenue:

Subscriber revenue

$                 774,466

$                          67

$                           -

$                 774,533

Advertising revenue, net of agency fees

22,438

-

-

22,438

Equipment revenue

22,273

-

-

22,273

Other revenue

73,238

1,813

-

75,051

Total revenue

$                 892,415

$                     1,880

$                           -

$                 894,295

Operating expenses

Cost of services:

Revenue share and royalties

141,641

38,532

-

180,173

Programming and content

73,795

4,781

(1,778)

76,798

Customer service and billing

82,346

-

(521)

81,825

Satellite and transmission

18,635

-

(918)

17,717

Cost of equipment

12,465

-

-

12,465

Subscriber acquisition costs

126,683

21,176

-

147,859

Sales and marketing

72,446

4,292

(2,966)

73,772

Engineering, design and development

16,374

-

(1,771)

14,603

General and administrative

68,120

-

(9,508)

58,612

Depreciation and amortization (a)

66,814

-

-

66,814

Share-based payment expense

-

-

17,462

17,462

Total operating expenses

$                 679,319

$                   68,781

$                           -

$                 748,100

(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 of Sirius and XM. The increased depreciation and amortization for the three months ended December 31, 2012 was $13,000.

Unaudited For the Three Months Ended December 31, 2011

(in thousands)

As Reported

Purchase Price Accounting Adjustments

Allocation of Share-based Payment Expense

Adjusted

Revenue:

Subscriber revenue

$               672,498

$                      145

$                         -

$               672,643

Advertising revenue, net of agency fees

20,077

-

-

20,077

Equipment revenue

22,658

-

-

22,658

Other revenue

68,505

1,813

-

70,318

Total revenue

$               783,738

$                   1,958

$                         -

$               785,696

Operating expenses

Cost of services:

Revenue share and royalties

130,436

33,581

-

164,017

Programming and content

70,367

12,527

(1,467)

81,427

Customer service and billing

67,052

-

(425)

66,627

Satellite and transmission

18,663

-

(811)

17,852

Cost of equipment

13,201

-

-

13,201

Subscriber acquisition costs

116,771

21,404

-

138,175

Sales and marketing

68,302

4,273

(2,539)

70,036

Engineering, design and development

14,186

-

(1,443)

12,743

General and administrative

63,270

-

(8,929)

54,341

Depreciation and amortization (a)

67,015

-

-

67,015

Share-based payment expense

-

-

15,614

15,614

Total operating expenses

$               629,263

$                 71,785

$                         -

$               701,048

(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 of Sirius and XM. The increased depreciation and amortization for the three months ended December 31, 2011 was $14,000. 

 

Unaudited For the Year Ended December 31, 2012

(in thousands)

As Reported

Purchase Price Accounting Adjustments

Allocation of Share-based Payment Expense

Adjusted

Revenue:

Subscriber revenue

$            2,962,665

$                      228

$                         -

$            2,962,893

Advertising revenue, net of agency fees

82,320

-

-

82,320

Equipment revenue

73,456

-

-

73,456

Other revenue

283,599

7,251

-

290,850

Total revenue

$            3,402,040

$                   7,479

$                         -

$            3,409,519

Operating expenses

Cost of services:

Revenue share and royalties

551,012

146,601

-

697,613

Programming and content

278,997

37,346

(6,120)

310,223

Customer service and billing

294,980

-

(1,847)

293,133

Satellite and transmission

72,615

-

(3,329)

69,286

Cost of equipment

31,766

-

-

31,766

Subscriber acquisition costs

474,697

90,503

-

565,200

Sales and marketing

248,905

14,828

(10,310)

253,423

Engineering, design and development

48,843

-

(6,238)

42,605

General and administrative

261,905

-

(35,978)

225,927

Depreciation and amortization (a)

266,295

-

-

266,295

Share-based payment expense

-

-

63,822

63,822

Total operating expenses

$            2,530,015

$               289,278

$                         -

$            2,819,293

(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 of Sirius and XM. The increased depreciation and amortization for the year ended December 31, 2012 was $53,000.

Unaudited For the Year Ended December 31, 2011

(in thousands)

As Reported

Purchase Price Accounting Adjustments

Allocation of Share-based Payment Expense

Adjusted

Revenue:

Subscriber revenue

$            2,595,414

$                   3,659

$                         -

$            2,599,073

Advertising revenue, net of agency fees

73,672

-

-

73,672

Equipment revenue

71,051

-

-

71,051

Other revenue

274,387

7,251

-

281,638

Total revenue

$            3,014,524

$                 10,910

$                         -

$            3,025,434

Operating expenses

Cost of services:

Revenue share and royalties

471,149

126,941

-

598,090

Programming and content

281,234

49,172

(6,212)

324,194

Customer service and billing

259,719

18

(1,502)

258,235

Satellite and transmission

75,902

313

(2,678)

73,537

Cost of equipment

33,095

-

-

33,095

Subscriber acquisition costs

434,482

85,491

-

519,973

Sales and marketing

222,773

15,233

(8,193)

229,813

Engineering, design and development

53,435

31

(4,851)

48,615

General and administrative

238,738

59

(29,933)

208,864

Depreciation and amortization (a)

267,880

-

-

267,880

Share-based payment expense (b)

-

-

53,369

53,369

Total operating expenses

$            2,338,407

$               277,258

$                         -

$            2,615,665

(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 of Sirius and XM. The increased depreciation and amortization for the year ended December 31, 2011 was $59,000.

(b) Amounts related to share-based payment expense included in operating expenses were as follows:

Programming and content

$                   6,185

$                        27

$                         -

$                   6,212

Customer service and billing

1,484

18

-

1,502

Satellite and transmission

2,659

19

-

2,678

Sales and marketing

8,166

27

-

8,193

Engineering, design and development

4,820

31

-

4,851

General and administrative

29,874

59

-

29,933

Total share-based payment expense

$                 53,188

$                      181

$                         -

$                 53,369

ARPU - is derived from total earned subscriber revenue, net advertising revenue and other subscription-related revenue, net of purchase price accounting adjustments, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. Other subscription-related revenue includes the U.S. Music Royalty Fee. Purchase price accounting adjustments include the recognition of deferred subscriber revenues not recognized in purchase price accounting associated with the merger of Sirius and XM. ARPU is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

Unaudited

For the Three Months Ended December 31,

For the Twelve Months Ended December 31,

2012

2011

2012

2011

Subscriber revenue (GAAP)

$               774,466

$           672,498

$         2,962,665

$         2,595,414

Add: net advertising revenue (GAAP)

22,438

20,077

82,320

73,672

Add: other subscription-related revenue (GAAP)

61,299

57,561

237,868

231,902

Add: purchase price accounting adjustments

67

145

228

3,659

$               858,270

$           750,281

$         3,283,081

$         2,904,647

Daily weighted average number of subscribers

23,612,076

21,542,690

22,794,170

20,903,908

ARPU

$                   12.12

$               11.61

$                12.00

$                11.58

Average self-pay monthly churn - is defined as the monthly average of self-pay deactivations for the period divided by the average number of self-pay subscribers for the period.

Customer service and billing expenses, per average subscriber - is derived from total customer service and billing expenses, excluding share-based payment expense and purchase price accounting adjustments associated with the merger of Sirius and XM, 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 given the significant variation in expense that can result from changes in the fair market value of our common stock, the effect of which is unrelated to the operational conditions that give rise to variations in the components of our customer service and billing expenses. Purchase price accounting adjustments associated with the merger of Sirius and XM include the elimination of the benefit associated with incremental share-based payment arrangements recognized at the merger date. Customer service and billing expenses, per average subscriber, is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

Unaudited

For the Three Months Ended December 31,

For the Twelve Months Ended December 31,

2012

2011

2012

2011

Customer service and billing expenses (GAAP)

$          82,346

$          67,052

$        294,980

$        259,719

Less: share-based payment expense, net of purchase price accounting adjustments

(521)

(425)

(1,847)

(1,502)

Add: purchase price accounting adjustments

-

-

-

18

81,825

66,627

293,133

258,235

Daily weighted average number of subscribers

23,612,076

21,542,690

22,794,170

20,903,908

Customer service and billing expenses, per average subscriber

$              1.16

$              1.03

$              1.07

$              1.03

Free cash flow - is derived from cash flow provided by operating activities, capital expenditures and restricted and other investment activity.  Free cash flow is calculated as follows (in thousands):

Unaudited

For the Three Months Ended December 31,

For the Twelve Months Ended December 31,

2012

2011

2012

2011

Cash Flow information

Net cash provided by operating activities

$          293,233

$          214,996

$          806,765

$          543,630

Net cash used in investing activities

(23,773)

(23,190)

(97,319)

(127,888)

Net cash used in financing activities

(304,785)

(22,408)

(962,491)

(228,443)

Free Cash Flow

Net cash provided by operating activities

$          293,233

$          214,996

$          806,765

$          543,630

Additions to property and equipment

(23,747)

(22,364)

(97,293)

(137,429)

Restricted and other investment activity

(26)

(826)

(26)

9,541

Free cash flow

$          269,460

$          191,806

$          709,446

$          415,742

New vehicle consumer conversion rate - is defined as the percentage of owners and lessees of new vehicles that receive our 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. Promotional periods generally include the period of trial service plus 30 days to handle the receipt and processing of payments. 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 gross subscriber addition - or SAC, per gross subscriber addition, is derived from subscriber acquisition costs and margins from the sale of radios and accessories, excluding share-based payment expense and purchase price accounting adjustments, divided by the number of gross subscriber additions for the period. Purchase price accounting adjustments associated with the merger of Sirius and XM include the elimination of the benefit of amortization of deferred credits on executory contracts recognized at the merger date attributable to an OEM. SAC, per gross subscriber addition, is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

Unaudited

For the Three Months Ended December 31,

For the Twelve Months Ended December 31,

2012

2011

2012

2011

Subscriber acquisition costs (GAAP)

$        126,683

$         116,771

$      474,697

$        434,482

Less: margin from direct sales of radios and accessories (GAAP)

(9,808)

(9,457)

(41,690)

(37,956)

Add: purchase price accounting adjustments

21,176

21,404

90,503

85,491

$        138,051

$         128,718

$      523,510

$        482,017

Gross subscriber additions

2,553,489

2,326,174

9,617,771

8,696,020

SAC, per gross subscriber addition

$                 54

$                  55

$               54

$                 55

About Sirius XM Radio

Sirius XM Radio Inc. is the world's largest radio broadcaster measured by revenue and has 23.9 million subscribers.  SiriusXM creates and broadcasts commercial-free music; premier sports talk and live events; comedy; news; exclusive talk and entertainment; and the most comprehensive Latin music, sports and talk programming in radio. SiriusXM is available in vehicles from every major car company in the U.S., from retailers nationwide, and online at siriusxm.com. SiriusXM programming is also available through the SiriusXM Internet Radio App for Android, Apple, and BlackBerry smartphones and other connected devices. SiriusXM also holds a minority interest in SiriusXM Canada which has more than 2 million subscribers.

This communication contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements include, but are not limited to, statements about future financial and operating results, our plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as "will likely result," "are expected to," "will continue," "is anticipated," "estimated," "believe," "intend," "plan," "projection," "outlook" or words of similar meaning.  Such forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control.  Actual results may differ materially from the results anticipated in these forward-looking statements. 

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:  our competitive position versus other forms of audio entertainment; our dependence upon automakers; general economic conditions; failure of our satellites, which, in most cases, are not insured; our ability to attract and retain subscribers at a profitable level; royalties we pay for music rights; the unfavorable outcome of pending or future litigation; failure of third parties to perform; and our substantial indebtedness.  Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our Annual Report on Form 10-K for the year ended December 31, 2011, which is filed with the Securities and Exchange Commission (the "SEC") and available at the SEC's Internet site (http://www.sec.gov).  The information set forth herein speaks only as of the date hereof, and we disclaim any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this communication.

Follow SiriusXM on Twitter or like the SiriusXM page on Facebook.

E-SIRI

Contact Information for Investors and Financial Media:

Investors: Hooper Stevens 212 901 6718 hooper.stevens@siriusxm.com

Media: Patrick Reilly 212 901 6646 patrick.reilly@siriusxm.com

SOURCE Sirius XM Radio



RELATED LINKS

http://www.siriusxm.com