SiriusXM Reports Second Quarter 2013 Results

-- Record Revenue of $940 Million, Up 12% From Second Quarter of 2012

-- Net Income of $126 Million

-- Adjusted EBITDA Grows 19% to a Record $283 Million

-- Company Raises Full Year EBITDA Guidance to $1.14 Billion

-- Share Repurchase Program Approaches $1.3 Billion Year to Date

News provided by

Sirius XM Radio

Jul 25, 2013, 07:00 ET

NEW YORK, July 25, 2013 /PRNewswire/ -- Sirius XM Radio (NASDAQ: SIRI) today announced second quarter 2013 financial and operating results, including record revenue of $940 million, up 12% from the second quarter 2012 revenue of $838 million.  Net income for the second quarter 2013 and 2012 was $126 million and $3.1 billion, respectively.  Net income in the second quarter of 2012 benefitted from a $3 billion reversal of deferred income tax valuation allowances.

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

Income before income taxes rose 47% to $202 million in the second quarter compared to $138 million in the second quarter of 2012.  Adjusted EBITDA for the second quarter of 2013 reached a record $283 million, up 19% from $237 million in the second quarter of 2012.

"SiriusXM's second quarter results reflect record performance on almost every vital metric: the 25 million subscriber milestone, record revenue, adjusted EBITDA and adjusted EBITDA margin.  We grew our revenue at double digit rates for the sixth consecutive quarter while being very mindful of our costs as we invest in advanced IP and telematics platforms designed to provide more services to our subscribers and automakers," noted Jim Meyer, Chief Executive Officer, SiriusXM.

"Our increase in adjusted EBITDA guidance speaks to our excellent first half performance as well as our outlook for further growth later this year.  SiriusXM has now purchased 391 million shares of its common stock so far this year for nearly $1.3 billion, and we plan to continue using our growing free cash flow and strong balance sheet in a very disciplined way to reward our investors," added Meyer.

Additional highlights of the second quarter include:

  • Adjusted EBITDA Margin Reaches 30%.  Adjusted EBITDA climbed 19% from last year's second quarter to a record quarterly figure of $283 million, and a record adjusted EBITDA margin of 30%.
  • Subscribers Exceed 25 Million Amid Record Growth.  Net subscriber additions in the quarter were 715,762, up from 622,042 in the second quarter of 2012, marking the largest quarterly gain since the fourth quarter of 2007.  Our total paid subscriber base reached a record 25.1 million, up 9% from the prior year period.  Self-pay net subscriber additions were 423,076, while the self-pay subscriber base reached a record high of 20.3 million, up 9% from the prior year period. Total paid and unpaid trials grew by 528,000 from the first quarter 2013 to 6.7 million.
  • Free Cash Flow Reaches a Second Quarter Record.  Free cash flow was $237 million, up from $230 million in the second quarter of 2012.  Year-to-date free cash flow reached $379 million, an increase of 55% from the same period in 2012.

"During the second quarter, we repurchased 195 million shares of our common stock for $650 million.  We also repurchased approximately $130 million in principal amount of our outstanding debt during the second quarter.  Following our $1 billion debt issuance in May, the Company's outstanding debt was approximately 3.2x our trailing adjusted EBITDA, below our target leverage of 3.5x.  Combined with our strong cash position of $652 million and undrawn revolving credit facility of $1.25 billion, we have tremendous flexibility to continue pursuing capital returns, debt repurchases, and acquisitions," noted David Frear, SiriusXM's Executive Vice President and Chief Financial Officer. 

2013 GUIDANCE

After increasing its total net additions guidance on July 9, 2013, the Company today increased its 2013 guidance for adjusted EBITDA and reiterated guidance for subscriber growth, revenue, and free cash flow:

  • Self-pay net subscriber additions of approximately 1.6 million,
  • Total net subscriber additions of approximately 1.5 million,
  • Revenue of over $3.7 billion,
  • Adjusted EBITDA of approximately $1.14 billion, and
  • Free cash flow of approximately $915 million.

SECOND QUARTER 2013 RESULTS






SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)







For the Three Months Ended June 30,

For the Six Months Ended June 30,

(in thousands, except per share data)

2013

2012

2013

2012






Revenue:






Subscriber revenue

$               814,718

$               730,285

$            1,598,060

$            1,430,526

Advertising revenue

21,757

20,786

41,968

39,456

Equipment revenue

18,443

16,417

36,599

33,370

Other revenue

85,192

70,055

160,881

138,912

Total revenue

940,110

837,543

1,837,508

1,642,264

Operating expenses:






Cost of services:






Revenue share and royalties

155,859

135,426

304,390

267,537

Programming and content

70,381

65,169

144,991

135,265

Customer service and billing

80,290

68,679

160,684

134,866

Satellite and transmission

19,493

17,551

39,188

35,661

Cost of equipment

5,442

7,150

12,469

12,956

Subscriber acquisition costs

129,992

119,475

246,103

235,596

Sales and marketing

68,058

57,422

133,956

115,781

Engineering, design and development

15,052

6,272

29,894

18,962

General and administrative

60,392

65,664

116,732

125,550

Depreciation and amortization

67,415

66,793

134,433

132,910

Total operating expenses

672,374

609,601

1,322,840

1,215,084

Income from operations

267,736

227,942

514,668

427,180

Other income (expense):






Interest expense, net of amounts capitalized

(49,728)

(72,770)

(95,902)

(149,742)

Loss on extinguishment of debt and credit facilities, net

(16,377)

(15,650)

(16,377)

(25,621)

Interest and investment income (loss)

294

(1,728)

1,932

(2,871)

Other income (loss) 

256

(173)

502

(749)

Total other expense

(65,555)

(90,321)

(109,845)

(178,983)

Income before income taxes

202,181

137,621

404,823

248,197

Income tax (expense) benefit

(76,659)

2,996,549

(155,699)

2,993,747

Net income

$               125,522

$            3,134,170

$               249,124

$            3,241,944

Foreign currency translation adjustment, net of tax

(109)

18

(281)

(38)

Total comprehensive income

$               125,413

$            3,134,188

$               248,843

$            3,241,906

Net income per common share:






Basic

$                     0.02

$                     0.49

$                     0.04

$                     0.51

Diluted

$                     0.02

$                     0.48

$                     0.04

$                     0.50

Weighted average common shares outstanding:






Basic

6,354,755

3,765,573

6,307,541

3,766,508

Diluted

6,447,517

6,506,159

6,526,698

6,521,614














SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

June 30, 2013

December 31, 2012

(in thousands, except share and per share data)

(Unaudited)

ASSETS


Current assets:


Cash and cash equivalents

$                       651,769

$                       520,945

Accounts receivable, net

101,203

106,142

Receivables from distributors

111,288

104,425

Inventory, net

16,688

25,337

Prepaid expenses

149,408

122,157

Related party current assets

9,127

13,167

Deferred tax asset

894,303

923,972

Other current assets

10,177

12,037

    Total current assets

1,943,963

1,828,182

Property and equipment, net

1,523,615

1,571,922

Long-term restricted investments

3,999

3,999

Deferred financing fees, net

31,757

38,677

Intangible assets, net

2,494,474

2,519,610

Goodwill

1,815,365

1,815,365

Related party long-term assets

36,506

44,954

Long-term deferred tax asset

1,089,981

1,219,256

Other long-term assets

11,526

12,878

    Total assets

$                    8,951,186

$                    9,054,843

LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:


Accounts payable and accrued expenses

$                       550,959

$                       587,652

Accrued interest

37,822

33,954

Current portion of deferred revenue

1,539,841

1,474,138

Current portion of deferred credit on executory contracts

71,854

207,854

Current maturities of long-term debt

3,873

4,234

Related party current liabilities

7,927

6,756

    Total current liabilities

2,212,276

2,314,588

Deferred revenue

152,914

159,501

Deferred credit on executory contracts

3,285

5,175

Long-term debt

3,036,660

2,222,080

Long-term related party debt

209,244

208,906

Related party long-term liabilities

17,578

18,966

Other long-term liabilities

80,383

86,062

    Total liabilities

5,712,340

5,015,278


Stockholders' equity:


       Preferred stock, par value $0.001; 50,000,000 authorized at June 30, 2013 and December 31, 2012:


          Convertible perpetual preferred stock, series B-1 (liquidation preference of $0.001 per share); 0
                and 6,250,100 shares issued and outstanding at June 30, 2013 and December 31, 2012, 
                respectively

-

6

 Common stock, par value $0.001; 9,000,000,000 shares authorized; 6,257,721,498 and 5,262,440,085
       shares issued; 6,247,221,498 and 5,262,440,085 shares outstanding, at June 30, 2013 and December

 31, 2012, respectively

6,258

5,263

Accumulated other comprehensive (loss) income, net of tax

(161)

120

Additional paid-in capital

9,330,188

10,345,566

Treasury stock, at cost; 10,500,000 and 0 shares of common stock at June 30, 2013 and December 31, 2012, respectively

(35,173)

-

Accumulated deficit

(6,062,266)

(6,311,390)

    Total stockholders' equity

3,238,846

4,039,565

    Total liabilities and stockholders' equity

$                    8,951,186

$                    9,054,843






SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the Six Months Ended June 30,

(in thousands)

2013

2012

Cash flows from operating activities:


Net income

$                      249,124

$                   3,241,944

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


   Depreciation and amortization

134,433

132,910

   Non-cash interest expense, net of amortization of premium

10,932

21,031

   Provision for doubtful accounts

20,153

14,879

   Amortization of deferred income related to equity method investment

(1,388)

(1,388)

   Loss on extinguishment of debt and credit facilities, net

16,377

25,621

   (Gain) loss on unconsolidated entity investments, net

(1,382)

3,469

   Dividend received from unconsolidated entity investment

13,217

-

   Loss on disposal of assets

126

488

   Share-based payment expense

30,012

28,869

   Deferred income taxes

159,191

(2,995,542)

   Other non-cash purchase price adjustments

(137,889)

(147,328)

   Changes in operating assets and liabilities:


     Accounts receivable

(15,214)

(26,879)

     Receivables from distributors

(6,863)

(12,259)

     Inventory

8,649

(173)

     Related party assets

205

6,813

     Prepaid expenses and other current assets

(28,317)

(39,308)

     Other long-term assets

1,353

16,579

     Accounts payable and accrued expenses

(69,310)

(51,596)

     Accrued interest

3,868

(7,434)

     Deferred revenue

59,116

79,288

     Related party liabilities

1,171

1,501

     Other long-term liabilities

(5,543)

2,238

         Net cash provided by operating activities

442,021

293,723


Cash flows from investing activities:


Additions to property and equipment

(62,980)

(48,944)

      Net cash used in investing activities

(62,980)

(48,944)


Cash flows from financing activities:


Proceeds from exercise of stock options

21,658

38,671

Payment of premiums on redemption of debt

(14,719)

(19,211)

Repayment of long-term borrowings

(283,180)

(169,899)

Long-term borrowings, net of costs

1,136,640

-

Common stock repurchased and retired

(1,108,616)

-

      Net cash used in financing activities

(248,217)

(150,439)

Net increase in cash and cash equivalents

130,824

94,340

Cash and cash equivalents at beginning of period

520,945

773,990

Cash and cash equivalents at end of period

$                      651,769

$                      868,330


Subscriber Data and Operating Metrics          

The following table contains subscriber data and key operating metrics for the three and six months ended June 30, 2013 and 2012, respectively:


Unaudited

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2013

2012

2013

2012






Beginning subscribers

24,353,226

22,297,420

23,900,336

21,892,824

Gross subscriber additions

2,655,488

2,481,004

5,165,402

4,642,697

Deactivated subscribers

(1,939,726)

(1,858,962)

(3,996,750)

(3,616,059)

Net additions

715,762

622,042

1,168,652

1,026,638

Ending subscribers

25,068,988

22,919,462

25,068,988

22,919,462






  Self-pay

20,297,736

18,670,966

20,297,736

18,670,966

  Paid promotional

4,771,252

4,248,496

4,771,252

4,248,496

Ending subscribers

25,068,988

22,919,462

25,068,988

22,919,462






  Self-pay

423,076

462,876

727,462

762,224

  Paid promotional

292,686

159,166

441,190

264,414

Net additions

715,762

622,042

1,168,652

1,026,638






Daily weighted average number of subscribers

24,651,268

22,553,702

24,331,646

22,272,282






Average self-pay monthly churn

1.7%

1.9%

1.8%

1.9%






New vehicle consumer conversion rate

45%

45%

44%

45%






ARPU

$                        12.28

$                        11.97

$                        12.16

$                        11.87

SAC, per gross subscriber addition

$                             52

$                             54

$                             51

$                             57






Glossary

Adjusted EBITDA - EBITDA is defined as net income before interest and investment income (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) depreciation and amortization and (iii) 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 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 June 30,

For the Six Months Ended June 30,

2013

2012

2013

2012






Net income (GAAP):

$             125,522

$          3,134,170

$             249,124

$          3,241,944

Add back items excluded from Adjusted EBITDA:






Purchase price accounting adjustments:






    Revenues

1,813

1,867

3,626

3,747

    Operating expenses

(69,479)

(73,423)

(137,889)

(147,449)

Share-based payment expense (GAAP)

15,494

13,917

30,012

28,869

Depreciation and amortization (GAAP)

67,415

66,793

134,433

132,910

Interest expense, net of amounts capitalized (GAAP)

49,728

72,770

95,902

149,742

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

16,377

15,650

16,377

25,621

Interest and investment (income) loss (GAAP)

(294)

1,728

(1,932)

2,871

Other (income) loss (GAAP)

(256)

173

(502)

749

Income tax expense (benefit) (GAAP)

76,659

(2,996,549)

155,699

(2,993,747)

Adjusted EBITDA

$             282,979

$             237,096

$             544,850

$             445,257






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 six months ended June 30, 2013 and 2012:







Unaudited For the Three Months Ended June 30, 2013

(in thousands)

As Reported

Purchase Price Accounting Adjustments

Allocation of

 Share-based

 Payment Expense

Adjusted






Revenue:






Subscriber revenue

$                 814,718

$                           -

$                           -

$                 814,718

Advertising revenue

21,757

-

-

21,757

Equipment revenue

18,443

-

-

18,443

Other revenue

85,192

1,813

-

87,005

Total revenue

$                 940,110

$                     1,813

$                           -

$                 941,923

Operating expenses






Cost of services:






    Revenue share and royalties

$                 155,859

$                   40,831

$                           -

$                 196,690

    Programming and content

70,381

2,478

(1,639)

71,220

    Customer service and billing

80,290

-

(511)

79,779

    Satellite and transmission

19,493

-

(827)

18,666

    Cost of equipment

5,442

-

-

5,442

Subscriber acquisition costs

129,992

22,017

-

152,009

Sales and marketing

68,058

4,153

(3,182)

69,029

Engineering, design and development

15,052

-

(1,634)

13,418

General and administrative

60,392

-

(7,701)

52,691

Depreciation and amortization (a)

67,415

-

-

67,415

Share-based payment expense

-

-

15,494

15,494

Total operating expenses

$                 672,374

$                   69,479

$                           -

$                 741,853






(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 June 30, 2013 was $12,000.







Unaudited For the Three Months Ended June 30, 2012

(in thousands)

As Reported

Purchase Price Accounting Adjustments

Allocation of

 Share-based

 Payment Expense

Adjusted






Revenue:






   Subscriber revenue

$                 730,285

$                          54

$                           -

$                 730,339

   Advertising revenue

20,786

-

-

20,786

   Equipment revenue

16,417

-

-

16,417

   Other revenue

70,055

1,813

-

71,868

Total revenue

$                 837,543

$                     1,867

$                           -

$                 839,410

Operating expenses






   Cost of services:






    Revenue share and royalties

$                 135,426

$                   36,024

$                           -

$                 171,450

    Programming and content

65,169

10,431

(1,231)

74,369

    Customer service and billing

68,679

-

(388)

68,291

    Satellite and transmission

17,551

-

(688)

16,863

    Cost of equipment

7,150

-

-

7,150

Subscriber acquisition costs

119,475

23,530

-

143,005

Sales and marketing

57,422

3,438

(2,053)

58,807

Engineering, design and development

6,272

-

(1,282)

4,990

General and administrative

65,664

-

(8,275)

57,389

Depreciation and amortization (a)

66,793

-

-

66,793

Share-based payment expense

-

-

13,917

13,917

Total operating expenses

$                 609,601

$                   73,423

$                           -

$                 683,024






(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 June 30, 2012 was $14,000.







Unaudited For the Six Months Ended June 30, 2013

(in thousands)

As Reported

Purchase Price Accounting Adjustments

Allocation of

 Share-based

 Payment Expense

Adjusted






Revenue:






Subscriber revenue

$              1,598,060

$                           -

$                           -

$              1,598,060

Advertising revenue

41,968

-

-

41,968

Equipment revenue

36,599

-

-

36,599

Other revenue

160,881

3,626

-

164,507

Total revenue

$              1,837,508

$                     3,626

$                           -

$              1,841,134

Operating expenses






Cost of services:






   Revenue share and royalties

$                 304,390

$                   80,592

$                           -

$                 384,982

   Programming and content

144,991

4,956

(3,281)

146,666

   Customer service and billing

160,684

-

(981)

159,703

   Satellite and transmission

39,188

-

(1,677)

37,511

   Cost of equipment

12,469

-

-

12,469

Subscriber acquisition costs

246,103

44,022

-

290,125

Sales and marketing

133,956

8,319

(6,243)

136,032

Engineering, design and development

29,894

-

(3,281)

26,613

General and administrative

116,732

-

(14,549)

102,183

Depreciation and amortization (a)

134,433

-

-

134,433

Share-based payment expense 

-

-

30,012

30,012

Total operating expenses

$              1,322,840

$                 137,889

$                           -

$              1,460,729






(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 six months ended June 30, 2013 was $25,000.

Unaudited For the Six Months Ended June 30, 2012

(in thousands)

As Reported

Purchase Price Accounting Adjustments

Allocation of

Share-based

 Payment Expense

Adjusted






Revenue:






Subscriber revenue

$            1,430,526

$                      121

$                         -

$            1,430,647

Advertising revenue

39,456

-

-

39,456

Equipment revenue

33,370

-

-

33,370

Other revenue

138,912

3,626

-

142,538

Total revenue

$            1,642,264

$                   3,747

$                         -

$            1,646,011

Operating expenses






Cost of services:






   Revenue share and royalties

$               267,537

$                 70,870

$                         -

$               338,407

   Programming and content

135,265

22,134

(2,606)

154,793

   Customer service and billing

134,866

-

(815)

134,051

   Satellite and transmission

35,661

-

(1,473)

34,188

   Cost of equipment

12,956

-

-

12,956

Subscriber acquisition costs

235,596

47,616

-

283,212

Sales and marketing

115,781

6,829

(4,413)

118,197

Engineering, design and development

18,962

-

(2,714)

16,248

General and administrative

125,550

-

(16,848)

108,702

Depreciation and amortization (a)

132,910

-

-

132,910

Share-based payment expense

-

-

28,869

28,869

Total operating expenses

$            1,215,084

$               147,449

$                         -

$            1,362,533






(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 six months ended June 30, 2012 was $28,000.

ARPU - is derived from total earned subscriber revenue, 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 June 30,

For the Six Months Ended June 30,

2013

2012

2013

2012






Subscriber revenue (GAAP)

$               814,718

$           730,285

$            1,598,060

$            1,430,526

Add: advertising revenue (GAAP)

21,757

20,786

41,968

39,456

Add: other subscription-related revenue (GAAP)

71,648

58,753

135,785

116,474

Add: purchase price accounting adjustments

-

54

-

121

$               908,123

$           809,878

$            1,775,813

$            1,586,577






Daily weighted average number of subscribers

24,651,268

22,553,702

24,331,646

22,272,282






ARPU

$                   12.28

$               11.97

$                   12.16

$                   11.87

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, 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. 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 June 30,

For the Six Months Ended June 30,

2013

2012

2013

2012






Customer service and billing expenses (GAAP)

$               80,290

$               68,679

$             160,684

$             134,866

Less: share-based payment expense

(511)

(388)

(981)

(815)

$               79,779

$               68,291

$             159,703

$             134,051






Daily weighted average number of subscribers

24,651,268

22,553,702

24,331,646

22,272,282






Customer service and billing expenses, per average subscriber

$                   1.08

$                   1.01

$                   1.09

$                   1.00






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 June 30,

For the Six Months Ended June 30,

2013

2012

2013

2012

Cash Flow information






Net cash provided by operating activities

$             273,106

$             253,775

$             442,021

$             293,723

Net cash used in investing activities

$             (36,546)

$             (23,757)

$             (62,980)

$             (48,944)

Net cash provided by (used in) financing activities

$             208,482

$           (108,264)

$           (248,217)

$           (150,439)

Free Cash Flow






Net cash provided by operating activities

$             273,106

$             253,775

$             442,021

$             293,723

   Additions to property and equipment

(36,546)

(23,757)

(62,980)

(48,944)

Free cash flow

$             236,560

$             230,018

$             379,041

$             244,779

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 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 June 30,

For the Six Months Ended June 30,

2013

2012

2013

2012






Subscriber acquisition costs (GAAP)

$             129,992

$             119,475

$             246,103

$             235,596

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

(13,001)

(9,267)

(24,130)

(20,414)

Add: purchase price accounting adjustments

22,017

23,530

44,022

47,616

$             139,008

$             133,738

$             265,995

$             262,798






Gross subscriber additions

2,655,488

2,481,004

5,165,402

4,642,697






SAC, per gross subscriber addition

$                      52

$                      54

$                      51

$                      57

About Sirius XM Radio

Sirius XM Radio Inc. is the world's largest radio broadcaster measured by revenue and has more than 25 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.

On social media, join the SiriusXM community on Facebook, facebook.com/siriusxm, Twitter, twitter.com/siriusxm, Instagram, instagram.com/siriusxm, and YouTube at youtube.com/siriusxm.

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 radio and  audio services; 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; rapid technological and industry change; failure of third parties to perform; changes in consumer protection laws and their enforcement; 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, 2012, 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.

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