Investor Relations

SiriusXM Reports Second Quarter 2011 Results

- Subscribers Exceed 21 Million, an All-Time High
- Record Revenue of $744 Million, Up 6% Over Second Quarter 2010
- Record Adjusted EBITDA of $185 Million, Up 20% Over Second Quarter 2010
- Company Raises Guidance; 1.6 Million Net Subscriber Additions and Free Cash Flow Approaching $400 Million Expected in 2011

NEW YORK, Aug. 2, 2011 /PRNewswire/ -- Sirius XM Radio (NASDAQ: SIRI) today announced second quarter 2011 results, including revenue of $744 million, up 6% over second quarter 2010 revenue of $700 million, and adjusted EBITDA of $185 million, up 20% from $154 million in the second quarter of 2010.

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"Our results in the second quarter were strong, and we are proud of our record levels of subscribers, revenue, and adjusted EBITDA and growth in free cash flow.  SiriusXM continues to perform well, and we are pleased to raise our subscriber guidance and, for the second time this year, our free cash flow guidance," said Mel Karmazin, Chief Executive Officer, SiriusXM.

Highlights from the quarter include:

  • Subscriber growth continues. Auto sales growth and higher OEM penetration year-over-year drove ending subscribers as of June 30, 2011 to 21,016,175, up 8% from the 19,527,448 subscribers reported as of June 30, 2010. Self-pay net additions in the second quarter of 2011 were 362,663, up 19% from 304,043 in the second quarter of 2010.
  • Churn stable. Average self-pay monthly churn was 1.9% in the second quarter 2011, compared to 2.0% in the first quarter 2011 and 1.8% in the second quarter of 2010.
  • SAC improves. Subscriber acquisition cost (SAC) per gross subscriber addition was $54 in the second quarter of 2011, an 8% improvement from the $59 reported in the second quarter of 2010.  

"Demand for satellite radio continues to grow, with gross additions reaching the highest level of any quarter since the merger of Sirius and XM.  Our all-time high OEM penetration rate is a reflection of the automakers' satisfaction and their commitment to offer our service to their customers," said Karmazin.  "We intend to drive future growth through innovations to our satellite and internet platforms, with the goal of better delivering our unparalleled content to our valued customers.  We're also excited to launch a variety of additional new music and talk channels later this year."

Free cash flow in the second quarter of 2011 was $165 million, a 53% improvement from the $108 million reported in the second quarter 2010. These improvements were driven by cash received from the Canada merger, a decline in satellite capital expenditures, and improved adjusted EBITDA. Net income in the second quarters of 2011 and 2010 was $173 million and $15 million, respectively, or $0.03 and $0.00 per diluted share, respectively.

"We ended the second quarter with $528 million of cash and cash equivalents after using approximately $75 million to repurchase debt in the second quarter," said David Frear, SiriusXM's Executive Vice President and Chief Financial Officer.  "We continue to make steady progress toward reaching our leverage target. Our net debt to adjusted EBITDA declined to 3.7x at the end of the second quarter of 2011 from 5.2x at the end of the second quarter of 2010.  The company is examining ways to start efficiently returning capital to shareholders beginning in 2012," added Frear.

The discussion of adjusted EBITDA excludes the effects of stock-based compensation and certain purchase price accounting adjustments. A reconciliation of non-GAAP items to their nearest GAAP equivalent is contained in the financial supplements included with this release.

2011 GUIDANCE

"With the excellent subscriber performance recorded in the first half of 2011, we are now confident that we will exceed our previously announced 1.4 million net subscriber addition guidance for 2011.  Today we are raising our full-year guidance to a projected 1.6 million net subscriber additions," added Karmazin.  "After a strong first half, we now expect free cash flow in 2011 will approach $400 million, up from our prior guidance of approaching $350 million."

In 2011, the company continues to expect full-year revenue of approximately $3 billion. SiriusXM's adjusted EBITDA projection remains at approximately $715 million. Full year self-pay churn and conversion rates for 2011 should be broadly similar to those seen in 2010.

SECOND QUARTER 2011 RESULTS

Subscriber Data.

The following table contains actual subscriber data for the three and six months ended June 30, 2011 and 2010, respectively:


Unaudited


For the Three Months Ended June 30,


For the Six Months Ended June 30,


2011


2010


2011


2010









Beginning subscribers

20,564,028


18,944,199


20,190,964


18,772,758

Gross subscriber additions

2,179,348


2,020,507


4,231,715


3,741,355

Deactivated subscribers

(1,727,201)


(1,437,258)


(3,406,504)


(2,986,665)

Net additions

452,147


583,249


825,211


754,690

Ending subscribers

21,016,175


19,527,448


21,016,175


19,527,448









Self-pay

17,170,306


16,077,714


17,170,306


16,077,714

Paid promotional

3,845,869


3,449,734


3,845,869


3,449,734

Ending subscribers

21,016,175


19,527,448


21,016,175


19,527,448









Self-pay

362,663


304,043


483,507


373,782

Paid promotional

89,484


279,206


341,704


380,908

Net additions

452,147


583,249


825,211


754,690









Daily weighted average number of subscribers

20,715,630


19,139,926


20,475,720


18,962,580









Average self-pay monthly churn (1)

1.9%


1.8%


1.9%


1.9%









Conversion rate (2)

45.2%


46.7%


44.9%


45.9%



____________

See accompanying footnotes.

Subscribers. The improvement in the three months ended June 30, 2011 was due to the 8% increase in gross subscriber additions, primarily resulting from an increase in U.S. light vehicle sales, new vehicle penetration and returning activations.

Average Self-pay Monthly Churn increased in the three months ended June 30, 2011 due to changes in vehicle ownership which were offset by reductions in non-pay cancellation rates.

Conversion Rate. The decrease in the three months ended June 30, 2011 was primarily due to the changing mix of sales among auto manufacturers.

Metrics.

The following table contains our key operating metrics based on our unaudited adjusted results of operations for the three and six months ended June 30, 2011 and 2010, respectively:


Unaudited


For the Three Months Ended June 30,


For the Six Months Ended June 30,

(in thousands, except for per subscriber amounts)

2011


2010


2011


2010





ARPU (3)

$                    11.53


$                    11.81


$                    11.53


$                    11.65

SAC, per gross subscriber addition (4)

$                         54


$                         59


$                         56


$                         59

Customer service and billing expenses, per average








subscriber (5)

$                      1.00


$                      1.01


$                      1.04


$                      1.00

Free cash flow (6)

$                165,433


$                108,331


$                148,559


$                 (18,872)

Adjusted total revenue (8)

$                747,335


$                705,560


$             1,474,896


$             1,376,122

Adjusted EBITDA (7)

$                185,094


$                154,313


$                366,454


$                312,070



____________

See accompanying footnotes.

ARPU decreased in the three months ended June 30, 2011 by $0.28, primarily as a result of an increase in subscriber retention programs, the number of subscribers on OEM paid promotional plans and the decrease in the U.S. Music Royalty rate, partially offset by an increase in sales of premium services, including "Best of" programming, data services and streaming.

SAC, Per Gross Subscriber Addition, decreased in the three months ended June 30, 2011 primarily due to an 8% increase in gross subscriber additions and lower per radio subsidy rates for certain OEMs.

Customer Service and Billing Expenses, Per Average Subscriber, decreased in the three months ended June 30, 2011 primarily due to the 8% growth in daily weighted average subscribers relative to a 7% increase in customer service and billing expenses due to higher call volume and handle time per call and personnel costs.

Free Cash Flow increased in the three months ended June 30, 2011 principally as a result of improvements in net cash provided by operating activities and decreases in capital expenditures.  Net cash provided by operating activities increased $16 million to $195 million for the three months ended June 30, 2011, compared to the $179 million provided by operations for the three months ended June 30, 2010. The increase in net cash provided by operating activities was primarily the result of improved operating performance driving higher adjusted EBITDA, cash received from the Canada merger and higher collections from subscribers and distributors. Capital expenditures for property and equipment for the three months ended June 30, 2011 decreased $30 million to $40 million, compared to $70 million for the three months ended June 30, 2010. The decrease in capital expenditures for the three months ended June 30, 2011 was primarily the result of decreased satellite construction and launch expenditures due to the launch in the fourth quarter of 2010 of our XM-5 satellite. The increase in net cash from restricted and other investment activities was driven by the return of capital resulting from the Canada merger.

Adjusted Total Revenue. Set forth below are our adjusted total revenue for the three and six months ended June 30, 2011 and 2010, respectively. Our adjusted total revenue includes the recognition of deferred subscriber revenues acquired in the merger between SIRIUS and XM (the "Merger") that are not recognized in our results under purchase price accounting and the elimination of the benefit in earnings from deferred revenue associated with our investment in XM Canada acquired in the Merger.


Unaudited


For the Three Months Ended June 30,


For the Six Months Ended June 30,

(in thousands)

2011


2010


2011


2010





Revenue:




Subscriber revenue, including effects of rebates (GAAP)

$                639,642


$                601,630


$             1,262,080


$             1,181,139

Advertising revenue, net of agency fees (GAAP)

18,227


15,797


34,785


30,323

Equipment revenue (GAAP)

17,022


18,520


32,889


32,802

Other revenue (GAAP)

69,506


63,814


138,482


119,280

Total revenue (GAAP)

744,397


699,761


1,468,236


1,363,544

Purchase price accounting adjustments:








Subscriber revenue, including effects of rebates

1,125


3,986


3,034


8,952

Other revenue  

1,813


1,813


3,626


3,626

Adjusted total revenue

$                747,335


$                705,560


$             1,474,896


$             1,376,122



For the three months ended June 30, 2011, the increase in subscriber revenue was primarily attributable to an 8% increase in daily weighted average subscribers and an increase in sales of premium services, including "Best of" programming, data services and streaming. The increase in other revenue was driven by an increase in subscribers subject to the U.S. Music Royalty Fee and increased royalty revenue from Sirius Canada.

Adjusted EBITDA.  EBITDA is defined as net income (loss) before interest and investment income (loss); interest expense, net of amounts capitalized; income tax expense and depreciation and amortization.  Adjusted EBITDA removes the impact of other income and expense, losses on extinguishment of debt as well as certain other charges, such as goodwill impairment; restructuring, impairments and related costs; certain purchase price accounting adjustments and share-based payment expense.


Unaudited Adjusted


For the Three Months Ended June 30,


For the Six Months Ended June 30,


2011


2010


2011


2010









Total revenue

$                747,335


$                705,560


$             1,474,896


$             1,376,122

Operating expenses:








Revenue share and royalties

147,875


134,318


284,737


257,857

Programming and content

78,226


83,931


161,499


174,402

Customer service and billing

62,284


57,763


127,772