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.
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
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