SIRIUS XM Radio Reports Third Quarter 2008 Results
- Pro Forma Revenue of $613 Million, Up 16% Year Over Year
- Total Subscribers of More Than 18.9 Million, Up 17% Year Over Year
- Self-Pay Customer Churn Remains Unchanged at 1.7%
- Pro Forma Adjusted Loss from Operations of $37 Million, Before Restructuring Costs, Improves 64% Year Over Year
NEW YORK, Nov. 10 /PRNewswire-FirstCall/ -- SIRIUS XM Radio (Nasdaq: SIRI) today announced third quarter 2008 results, including pro forma revenue of $613 million (up 16% over the year ago quarter), total subscribers of more than 18.9 million (up 17% from last year) and a 64% improvement in the pro forma adjusted loss from operations of $37 million before purchase accounting and restructuring costs.
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"SIRIUS XM third quarter results demonstrate strong revenue growth, solid cost control and most importantly a clear path to positive cash flow," said Mel Karmazin, CEO of SIRIUS. "Despite a continued tough economy and further weakening in auto sales, pro forma revenue grew 16% and ending subscribers grew 17% as compared with last year. In addition, self-pay monthly customer churn remained flat from last year at an impressive 1.7%."
"In the third quarter, total operating costs, less merger related expenses, decreased as compared with last year, leading to a 64% improvement in the pro forma adjusted loss from operations of $37 million before restructuring costs. In the first 60 days following the merger, SIRIUS XM is operationally very close to breakeven. As we realize the substantial synergies associated with the merger, we expect to quickly bring the company to positive EBITDA and free cash flow. We have provided new long term financial and operating projections based upon slower auto production and greater cost savings and we now anticipate positive free cash flow of $1 billion in 2012."
SIRIUS XM ended the third quarter 2008 with 18,920,911 subscribers up 17% from 16,234,070 subscribers at the end of the third quarter 2007. During the third quarter 2008, SIRIUS XM added 344,100 net subscribers.
Total pro forma revenue for the third quarter 2008 increased to $612.8 million, up 16% from third quarter 2007 pro forma total revenue of $529.3 million. Third quarter 2008 pro forma average monthly revenue per subscriber (ARPU) was $10.47. Third quarter 2008 average monthly self-pay customer churn was 1.7%. SAC per gross subscriber addition was $74 in the third quarter 2008, an improvement of 15% over third quarter 2007 SAC per gross subscriber addition of $87.
SIRIUS XM's pro forma net loss was ($217.0) million, or ($0.09) per share, for the third quarter of 2008, compared to a pro forma net loss of ($265.5 million), or ($0.18) per share, in the third quarter 2007.
The company's actual third quarter and nine-month results (attached hereto) include only two months of operations of XM from its July 28, 2008 acquisition. The company's actual results also include a $4.8 billion impairment charge to goodwill, principally related to the decline in the company's share price since the date of the Merger Agreement in February 2007. The company also said it will delay filing its Quarterly Reports on Form 10-Q for not more than five days in order to carefully review the required purchase accounting adjustments.
OPERATIONAL AND FINANCIAL PROJECTIONS
2009E 2010E 2011E 2012E 2013E
(Subscribers in millions; dollar amounts in billions)
Subscribers 20.6 22.1 24.0 26.2 28.4
Revenue $2.7 $3.0 $3.4 $3.8 $4.1
Adjusted
EBITDA* $0.3 $0.6 $0.9 $1.3 $1.5
Free Cash
Flow* $0.0 $0.4 $0.6 $1.0 $1.4
* Adjusted EBITDA is net income /(loss) from operations plus equity
expense and depreciation and amortization expense. Free cash flow is
derived from net change in cash and cash equivalents plus cash flow from
financing activities and other investment activity. Adjusted EBITDA and
Free Cash Flow are non-GAAP financial measures. A reconciliation of
these non-GAAP financial measures to their most comparable financial
measure calculated and presented in accordance with GAAP is attached to
this press release. The projections shown above do not give effect to
adjustments that will occur in respect of the valuation of XM's assets
and liabilities acquired in the merger.
Current economic conditions, particularly the dramatic and recent slowdown in auto sales, have negatively impacted subscriber growth for 2008 and 2009. The company expects to end 2008 with 19.1 million subscribers and end 2009 with 20.6 million subscribers. The company remains confident in its Revenue and Adjusted EBITDA guidance for 2008 and 2009, which remains unchanged.
RESULTS OF OPERATIONS
Pro forma results for the third quarter and first nine months exclude impairment charges, and stock-based compensation expense and assume a business combination as of January 1, 2007. Reconciliations of all non-GAAP measures to reported results have been included at the end of this press release.
Due principally to purchase accounting and the non-cash impairment charge related to the mark-to-market impairment test on our existing goodwill and intangible assets, reported GAAP results for the third quarter and nine months to date differ significantly from pro forma adjusted results.
The tables below represent the non-GAAP pro-forma results of operations for the three and nine months ended September 30, 2008 and 2007 and other related operating metrics as if the companies were consolidated as of January 1, 2007. A reconciliation of these amounts to their comparable GAAP amounts is included in the footnotes.
SIRIUS XM SATELLITE RADIO INC.
SUBSCRIBER DATA, METRICS
AND OTHER NON-GAAP FINANCIAL MEASURES
(Dollars in thousands, unless otherwise stated)
Pro Forma Pro Forma
Three months ended Nine months ended
September 30, September 30,
2008 2007 2008 2007
Beginning subscribers 18,576,830 15,394,319 17,348,622 13,653,107
Gross subscriber additions 1,846,996 1,950,842 5,999,714 5,751,123
Deactivated subscribers (1,502,915) (1,111,092) (4,427,425) (3,170,161)
Net additions 344,081 839,750 1,572,289 2,580,962
Ending subscribers 18,920,911 16,234,069 18,920,911 16,234,069
Retail 9,036,420 8,927,442 9,036,420 8,927,442
OEM 9,777,704 7,238,239 9,777,704 7,238,239
Rental 106,787 68,388 106,787 68,388
Ending subscribers 18,920,911 16,234,069 18,920,911 16,234,069
Retail (149,416) 46,730 (202,291) 472,996
OEM 492,215 783,400 1,744,432 2,068,732
Rental 1,282 9,620 30,148 39,234
Net additions 344,081 839,750 1,572,289 2,580,962
Pro Forma Pro Forma
Three months ended Nine months ended
September 30, September 30,
2008 2007 2008 2007
Average self-pay monthly
churn (1)(8) 1.7% 1.6% 1.7% 1.7%
Conversion rate (2) 47.0% 50.7% 49.2% 50.6%
ARPU (3)(8) $10.47 $10.75 $10.48 $10.69
SAC, as adjusted, per gross
subscriber addition (4) $74 $86 $76 $87
Customer service and billing
expenses, as adjusted,
per average subscriber(5)(8) $1.05 $1.09 $1.18 $1.14
Total revenue $612,776 $529,242 $1,792,632 $1,501,093
Free cash flow (8)(6) $(97,590) $(102,852) $(577,673) $(510,274)
Adjusted loss from
operations (6)(8) $(36,851) $(103,572) $(168,096) $(341,309)
Net loss $(217,010) $(265,515) $(653,867) $(842,592)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED RESULTS OF OPERATIONS
(Unaudited)
Pro Forma Pro Forma
Three months ended Nine months ended
(in thousands, except per September 30, September 30,
share data) 2008 2007 2008 2007
Total revenue $612,776 $529,242 $1,792,632 $1,501,093
Operating expenses:
Satellite and transmission 25,136 25,409 76,336 78,024
Programming and content 131,630 100,675 341,422 292,385
Revenue share and royalties 120,800 85,394 355,251 239,518
Customer service and billing 58,857 51,562 177,159 152,396
Cost of equipment 16,179 15,671 48,020 60,485
Sales and marketing 78,178 96,490 260,583 289,374
Subscriber acquisition costs 132,477 162,656 444,396 474,008
General and administrative 75,981 80,051 215,440 207,608
Engineering, design and
development 10,389 14,906 42,121 48,604
Impairment of goodwill - - - -
Depreciation and
amortization 64,111 72,474 196,051 218,931
Share-based payment expense 29,809 42,714 99,673 112,202
Restructuring and related
costs 7,430 - 7,457 -
Total operating expenses 750,977 748,002 2,263,909 2,173,535
Loss from operations (138,201) (218,760) (471,277) (672,442)
Other expense (77,086) (46,095) (178,777) (169,555)
Loss before income taxes (215,287) (264,855) (650,054) (841,997)
Income tax expense (1,723) (660) (3,813) (595)
Net loss $(217,010) $(265,515) $(653,867) $(842,592)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Actual Actual
Three months ended Nine months ended
(in thousands, except per September 30, September 30,
share data) 2008 2007 2008 2007
Revenue:
Subscriber revenue,
including effects of
rebates $456,357 $226,844 $978,516 $627,275
Advertising revenue, net
of agency fees 14,674 8,524 31,413 24,422
Equipment revenue 11,271 6,290 25,290 17,216
Other revenue 6,141 128 6,590 3,337
Total revenue 488,443 241,786 1,041,809 672,250
Operating expenses
(depreciation and
amortization shown
separately below)(1)
Cost of services:
Satellite and transmission 19,526 7,409 34,800 22,732
Programming and content 106,037 59,015 222,975 173,324
Revenue share and
royalties 85,592 32,978 177,635 89,953
Customer service and
billing 47,432 21,058 97,218 64,529
Cost of equipment 13,773 6,086 28,007 19,930
Sales and marketing 63,637 38,488 151,237 126,348
Subscriber acquisition
costs 86,616 101,798 257,832 307,580
General and administrative 57,310 44,837 148,555 118,651
Engineering, design and
development 10,434 9,736 28,091 33,397
Impairment of goodwill 4,750,859 - 4,750,859 -
Depreciation and
amortization 66,774 26,072 120,793 79,142
Restructuring and related
costs 7,430 - 7,457 -
Total operating expenses 5,315,420 347,477 6,025,459 1,035,586
Loss from operations (4,826,977) (105,691) (4,983,650) (363,336)
Other income (expense)
Interest and investment
income 4,940 5,604 9,167 16,399
Interest expense, net of
amounts capitalized (49,216) (19,499) (83,636) (50,441)
Equity in net loss of
equity method investment (3,089) - (3,089) -
Other (expense) income (3,870) 4 (3,935) 14
Total other expense (51,235) (13,891) (81,493) (34,028)
Loss before income taxes (4,878,212) (119,582) (5,065,143) (397,364)
Income tax expense (1,215) (555) (2,301) (1,665)
Net loss $(4,879,427) $(120,137) $(5,067,444) $(399,029)
Net loss per common share
(basic and diluted) $(1.93) $(0.08) $(2.76) $(0.27)
Weighted average common
shares outstanding
(basic and diluted) 2,527,692 1,464,147 1,836,834 1,461,200
(1) Amounts related to share-based payment expense included in operating
expenses were as follows:
Satellite and transmission $1,331 $557 $2,887 $1,834
Programming and content 3,529 2,707 7,477 6,857
Customer service and
billing 596 166 1,137 543
Sales and marketing 3,672 6,575 11,376 15,068
Subscriber acquisition
costs - 800 14 2,687
General and administrative 12,904 10,953 36,359 34,056
Engineering, design and
development 1,973 969 4,167 2,959
Total share-based payment
expense $24,005 $22,727 $63,417 $64,004
SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Actual
September 30, December 31,
(in thousands, except share and 2008 2007
per share data) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $359,657 $438,820
Accounts receivable, net of allowance
for doubtful accounts of $10,431 and
$4,608, respectively 76,284 44,068
Receivables from distributors 51,610 60,004
Inventory, net 31,935 29,537
Prepaid expenses 84,448 31,392
Related party current assets 109,734 -
Restricted investments - 35,000
Other current assets 25,096 40,036
Total current assets 738,764 678,857
Property and equipment, net 1,700,279 806,263
FCC licenses 2,083,654 83,654
Restricted investments, net of
current portion 141,250 18,000
Deferred financing fees, net 45,969 13,864
Intangible assets, net 694,212 -
Goodwill 1,875,645 -
Related party long-term assets, net
of current portion 129,351 -
Other long-term assets 93,950 93,511
Total assets $7,503,074 $1,694,149
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $823,022 $464,943
Accrued interest 51,084 24,772
Deferred revenue 881,710 548,330
Current maturities of long-term debt 572,646 35,801
Related party current liabilities 75,618 -
Total current liabilities 2,404,080 1,073,846
Long-term debt, net of current
portion 2,800,107 1,278,617
Deferred revenue, net of current
portion 287,067 110,525
Deferred credit on executory
contracts 1,091,599 -
Other long-term liabilities 904,472 23,898
Total liabilities 7,487,325 2,486,886
Commitments and contingencies - -
Stockholders' equity (deficit):
Series A convertible preferred stock,
par value $0.001 (liquidation
preference of $51,370 and $0 at
September 30, 2008 and December
31, 2007, respectively);
50,000,000 authorized at September
30, 2008 and December 31, 2007,
24,808,959 and zero shares issued and
outstanding at September 30, 2008
and December 31, 2007, respectively 25 -
Common stock, par value $0.001;
4,500,000,000 and 2,500,000,000
shares authorized at September 30,
2008 and December 31, 2007,
respectively;
3,250,404,357 and 1,471,143,570
shares issued and outstanding at
September 30, 2008 and December
31, 2007, respectively 3,250 1,471
Accumulated other comprehensive loss,
net of tax (764) -
Additional paid-in capital 9,479,654 3,604,764
Accumulated deficit (9,466,416) (4,398,972)
Total stockholders' equity
(deficit) 15,749 (792,737)
Total liabilities and
stockholders' equity $7,503,074 $1,694,149
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Actual
Nine months ended
September 30,
2008 2007
(in thousands)
Cash flows from operating activities:
Net loss $(5,067,444) $(399,029)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization 114,923 79,142
Goodwill Impairment 4,750,859 -
Non-cash interest expense, net of
amortization of premium (1,933) 2,452
Provision for doubtful accounts 11,125 6,663
Amortization of deferred income
related to equity method investment (471) -
Loss on disposal of assets 4,879 92
Equity in net loss of equity method
investment 3,089 -
Share-based payment expense 63,417 64,004
Deferred income taxes 2,301 1,665
Other 1,643 -
Changes in operating assets and
liabilities:
Accounts receivable 1,575 (6,627)
Inventory 2,952 (2,533)
Receivables from distributors 9,595 (9,032)
Related party assets (1,357) -
Prepaid expenses and other current
assets 3,528 14,571
Other long-term assets 37,110 (14,825)
Accounts payable and accrued expenses (137,442) (58,713)
Accrued interest (2,810) (7,826)
Deferred revenue 10,590 76,803
Related party liabilities 3,315 -
Other long-term liabilities and
deferred credits on executory
contracts (26,436) 759
Net cash used in operating
activities (216,992) (252,434)
Cash flows from investing activities:
Additions to property and equipment (102,705) (66,801)
Sales of property and equipment 105 116
Purchases of restricted and other
investments (3,000) (310)
Acquisition of acquired entity cash 819,521 -
Merger related costs (13,047) -
Sale of restricted and other
investments 65,642 35,842
Net cash used in investing
activities 766,516 (31,153)
Cash flows from financing activities:
Proceeds from exercise of warrants
and stock options 471 2,677
Long term borrowings, net of related
costs 533,941 245,199
Payment of premiums on redemption of
debt (18,693) -
Payments to minority interest holder (1,479) -
Repayment of long term borrowings (1,142,829) -
Other (98) -
Net cash (used in) provided by
financing activities (628,687) 247,876
Net decrease in cash and cash
equivalents (79,163) (35,711)
Cash and cash equivalents at
beginning of period 438,820 393,421
Cash and cash equivalents at end of
period $359,657 $357,710
A reconciliation of Adjusted EBITDA and Free Cash Flow contained in the company's projections to their most comparable financial measure calculated and presented in accordance with GAAP is set forth below:
Adjusted EBITDA
Reconciliation 2009E 2010E 2011E 2012E 2013E
Income / (Loss)
From
Operations ($0.1) $0.3 $0.5 $0.9 $1.1
Add: Equity
Expense $0.1 $0.1 $0.1 $0.1 $0.1
Add: Depreciation
& Amortization $0.2 $0.2 $0.3 $0.3 $0.3
Adjusted EBITDA $0.3 $0.6 $0.9 $1.3 $1.5
Free Cash Flow
Reconciliation
Net Change in
Cash & Cash
Equivalents $0.0 $0.3 $0.4 $0.8 $0.9
Add: Cash Flow
from Financing ($0.0) $0.0 $0.2 $0.2 $0.5
Add: Other
Investing ($0.0) $0.0 ($0.0) $0.0 $0.0
Free Cash Flow $0.0 $0.4 $0.6 $1.0 $1.4
In order to provide projections with respect to non-GAAP measures, we are required to estimate GAAP measures that are components of these reconciliations. The provision of these estimates is in no way meant to indicate that the company is explicitly or implicitly providing projections on those GAAP components of the reconciliations. In order to reconcile the non- GAAP financial measures to GAAP, the company has estimated the GAAP components that arithmetically add up to the non-GAAP financial measures. The company fully expects that the estimates used for the GAAP components will vary from actual results.
Footnotes
(1) Average self pay monthly churn represents the average of self pay
deactivations by the quarter divided by the average self pay
subscriber balance for the quarter.
(2) We measure the percentage of subscribers that receive the service and
convert to self-paying after the initial promotion period. We refer to
this as the "conversion rate." At the time of sale, vehicle owners
generally receive between three and twelve month prepaid trial
subscriptions and we receive a subscription fee from the OEM.
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. Based on our experience it may take up to 90 days after
the trial service ends for subscribers to respond to our marketing
communications and become self-paying subscribers.
(3) ARPU is derived from total earned subscriber revenue and net
advertising revenue divided by the daily weighted average number of
subscribers for the period. ARPU is calculated as follows (in
thousands, except for per subscriber amounts):
Pro Forma Pro Forma
Three months ended Nine months ended
September 30, September 30,
2008 2007 2008 2007
Subscriber revenue $569,591 $488,543 $1,661,800 $1,380,657
Net advertising
revenue 17,867 19,240 54,156 52,769
Total subscriber and
net advertising
revenue $587,458 $507,783 $1,715,956 $1,433,426
Daily weighted average
number of
subscribers 18,710,940 15,743,059 18,187,927 14,905,060
ARPU $10.47 $10.75 $10.48 $10.69
(4) SAC, as adjusted, per gross subscriber addition is derived from
subscriber acquisition costs and margins from the direct sale of
radios and accessories, excluding stock-based compensation divided by
the number of gross subscriber additions for the period. SAC, as
adjusted, per gross subscriber addition is calculated as follows (in
thousands, except for per subscriber amounts):
Pro Forma Pro Forma
Three months ended Nine months ended
September 30, September 30,
2008 2007 2008 2007
Subscriber acquisition
cost $132,477 $163,456 $444,410 $476,695
Less: stock-based
compensation granted
to third parties
and employees - (800) (14) (2,687)
Add: margin from direct
sales of radios
and accessories 3,323 5,071 9,333 28,004
SAC, as adjusted $135,800 $167,727 $453,729 502,012
Gross subscriber
additions 1,846,996 1,950,842 5,999,714 5,751,123
SAC, as adjusted, per
gross subscriber addition $74 $86 $76 $87
(5) Customer service and billing expenses, as adjusted, per average
subscriber is derived from total customer service and billing
expenses, excluding stock-based compensation, divided by the daily
weighted average number of subscribers for the period. Customer
service and billing expenses, as adjusted, per average subscriber is
calculated as follows (in thousands, except for per subscriber
amounts):
Pro Forma Pro Forma
Three months ended Nine months ended
September 30, September 30,
2008 2007 2008 2007
Customer service and
billing expenses $59,786 $52,454 $180,270 $154,602
Less: stock-based
compensation (929) (892) (3,111) (2,206)
Customer service and
billing expenses, as
adjusted $58,857 $51,562 $177,159 $152,396
Daily weighted average
number of
subscribers 18,710,940 15,743,059 18,187,927 14,905,060
Customer service and
billing expenses,
as adjusted, per
average subscriber $1.05 $1.09 $1.18 $1.14
(6) Free cash flow is calculated as follows (in thousands):
Pro Forma Pro Forma
Three months ended Nine months ended
September 30, September 30,
2008 2007 2008 2007
Net change in cash and
cash equivalents $(44,329) $ (111,244) $ (235,849) $ (22,740)
Cash flow from
financing activities (52,918) 8,407 (350,902) (476,576)
Other investing (343) (15) 9,078 (10,958)
Free cash flow $(97,590) $(102,852) $(577,673) $(510,274)
(7) Average monthly self-pay churn; conversion rate; ARPU; SAC, as
adjusted, per gross subscriber addition; customer service and billing
expenses, as adjusted, per average subscriber; and free cash flow are
not measures of financial performance under U.S. generally accepted
accounting principles ("GAAP"). We believe these non-GAAP financial
measures provide meaningful supplemental information regarding our
operating performance and are used by us for budgetary and planning
purposes; when publicly providing our business outlook; as a means to
evaluate period-to-period comparisons; and to compare our performance
to that of our competitors. We also believe that investors also use
our current and projected metrics to monitor the performance of our
business and to make investment decisions.
We believe the exclusion of stock-based compensation expense in our
calculations of SAC, as adjusted, per gross subscriber addition and
customer service and billing expenses, as adjusted, 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 subscriber
acquisition costs and customer service and billing expenses.
Specifically, the exclusion of stock-based compensation expense in our
calculation of SAC, as adjusted, per gross subscriber addition is
critical in being able to understand the economic impact of the direct
costs incurred to acquire a subscriber and the effect over time as
economies of scale are reached.
These non-GAAP financial measures are used in addition to and in
conjunction with results presented in accordance with GAAP. These non-
GAAP financial measures 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.
(8) We refer to net loss before taxes; other income (expense)-including
interest and investment income, interest expense, depreciation and
amortization, restructuring and related costs and impairment of
goodwill; and stock-based compensation expense as adjusted loss from
operations. Adjusted loss from operations is not a measure of
financial performance under U.S. GAAP. We believe adjusted loss from
operations is a useful measure of our operating performance. We use
adjusted loss from operations for budgetary and planning purposes; to
assess the relative profitability and on-going performance of our
consolidated operations; to compare our performance from period-to-
period; and to compare our performance to that of our competitors. We
also believe adjusted loss from operations is useful to investors to
compare our operating performance to the performance of other
communications, entertainment and media companies. We believe that
investors use current and projected adjusted loss from operations to
estimate our current or 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 interest and
depreciation expense. We believe adjusted loss from operations
provides useful information about the operating performance of our
business apart from the costs associated with our capital structure
and physical plant. The exclusion of interest and depreciation and
amortization expense is useful given fluctuations in interest rates
and significant variation in depreciation and amortization expense
that can result from the amount and timing of capital expenditures and
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 taxes is appropriate for
comparability purposes as the tax positions of companies can vary
because of their differing abilities to take advantage of tax benefits
and because of the tax policies of the various jurisdictions in which
they operate. We believe the exclusion of restructuring and related
costs and impairment of goodwill is useful given the one-time nature
of these transactions. We also believe the exclusion of stock-based
compensation expense is useful given the significant variation in
expense that can result from changes in the fair market value of our
common stock. To compensate for the exclusion of taxes, other income
(expense), depreciation and stock-based compensation expense, we
separately measure and budget for these items.
There are material limitations associated with the use of adjusted
loss from operations in evaluating our company compared with net loss,
which reflects overall financial performance, including the effects of
taxes, other income (expense), depreciation and amortization,
restructuring and related costs, impairment of goodwill and stock-
based compensation expense. We use adjusted loss from operations to
supplement GAAP results to provide a more complete understanding of
the factors and trends affecting the business than GAAP results alone.
Investors that wish to compare and evaluate our operating results
after giving effect for these costs, should refer to net loss as
disclosed in our unaudited consolidated statements of operations.
Since adjusted loss from operations is a non-GAAP financial measure,
our calculation of adjusted loss from operations 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 the pro forma unadjusted Net loss to the pro
forma Adjusted loss from operations is calculated as follows:
Three months ended Nine months ended
September 30, September 30,
(in thousands) 2008 2007 2008 2007
Reconciliation of
Net loss to
Adjusted loss
from operations:
Net loss as
reported $(217,010) $(265,515) $(653,867) $(842,592)
Add back Net loss
items excluded
from Adjusted loss
from operations:
Interest and
investment income (5,534) (9,099) (12,180) (27,676)
Interest expense,
net of amounts
capitalized 70,153 47,256 164,380 138,230
Income tax expense 1,723 660 3,813 595
Equity in net loss
of equity method
investment 4,924 4,546 13,474 12,723
Loss from redemption
of debt - - - 2,965
Loss from impairment
of investments 2,625 481 - 36,305
Other expense (income) 4,918 2,911 13,103 7,008
Loss from
operations (138,201) (218,760) (471,277) (672,442)
Restructuring and
related costs 7,430 - 7,457 -
Impairment of
goodwill - - - -
Depreciation and
amortization 64,111 72,474 196,051 218,931
Stock-based
compensation 29,809 42,714 99,673 112,202
Adjusted loss from
operations $(36,851) $(103,572) $(168,096) $(341,309)
There are material limitations associated with the use of a pro forma
unadjusted results of operations in evaluating our company compared
with our GAAP Results of operations, which reflects overall financial
performance. We use pro forma unadjusted results of operations to
supplement GAAP results to provide a more complete understanding of
the factors and trends affecting the business than GAAP results alone.
Investors that wish to compare and evaluate our operating results
after giving effect for these costs, should refer to Results of
operations as disclosed in our unaudited consolidated statements of
operations. Since pro forma unadjusted results of operations is a non-
GAAP financial measure, our 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.
About SIRIUS XM Radio
SIRIUS XM Radio is America's satellite radio company delivering The Best Radio on Radio(TM) to more than 18 million subscribers, including commercial free music, and premier sports, news, talk, entertainment, traffic and weather.
SIRIUS XM Radio has content relationships with an array of personalities and artists, including Howard Stern, Martha Stewart, Oprah Winfrey, Jimmy Buffett, Elvis, Jamie Foxx, Barbara Walters, Frank Sinatra, Opie & Anthony, The Grateful Dead, Willie Nelson, Bob Dylan, Dale Earnhardt Jr., Tom Petty, and Bob Edwards. SIRIUS XM Radio is the leader in sports programming as the Official Satellite Radio Partner of the NFL, Major League Baseball, NASCAR, NBA, NHL, and PGA TOUR, and broadcasts major college sports.
SIRIUS XM Radio has arrangements with every major automaker. SIRIUS XM Radio products are available at shop.sirius.com and shop.xmradio.com, and at retail locations nationwide, including Best Buy, Circuit City, RadioShack, Target, Sam's Club, and Wal-Mart.
SIRIUS XM Radio also offers SIRIUS Backseat TV, the first ever live in- vehicle rear seat entertainment featuring Nickelodeon, Disney Channel and Cartoon Network; XM NavTraffic(R) service for GPS navigation systems delivers real-time traffic information, including accidents and road construction, for more than 80 North American markets.
The projections contained herein were not prepared with a view toward compliance with published guidelines of the Securities and Exchange Commission, the American Institute of Certified Public Accountants or any other regulatory or professional agency or body, GAAP or consistency with audited financial statements previously published by the company. We do not intend to update or otherwise revise the projections even if any or all of their underlying assumptions do not prove to be valid. The company's projections contained herein are based upon a number of assumptions and estimates, including, among other things, important assumptions regarding:
-- general economic conditions,
-- continued consumer demand for the company's satellite radio services,
-- the level of subscriber turnover, or churn, the company will
experience,
-- the sale and lease of new vehicles, and
-- the synergies that are expected to be realized from the merger of
SIRIUS and XM.
While considered reasonable by the company when taken as a whole, the assumptions are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the company's control. In addition, the projections are based upon specific assumptions with respect to future business conditions, some or all of which will change. The company's independent registered public accounting firm has not examined or compiled the projections, expressed any conclusion or provided any form of assurance with respect to them and, accordingly, assumes no responsibility for them. The projections, like any forecast, are necessarily speculative in nature and it can be expected that the assumptions upon which the projections are based will not prove to be valid or will vary from actual results. Actual results will vary from the projections and the variations may be material. Consequently, the projections should not be regarded as a representation by us or any other person that the subscribers, revenue, adjusted EBITDA and free cash flow will actually be achieved. You are cautioned not to place undue reliance on these projections.
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 the benefits of the business combination transaction involving SIRIUS and XM, including potential synergies and cost savings and the timing thereof, future financial and operating results, the combined company's plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "will," "should," "may," or words of similar meaning. Such forward-looking statements are based upon the current beliefs and expectations of SIRIUS' and XM's management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond the control of SIRIUS and XM. 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 statement: general business and economic conditions; the performance of financial markets and interest rates; the ability to obtain governmental approvals of the transaction on a timely basis; the failure to realize synergies and cost-savings from the transaction or delay in realization thereof; the businesses of SIRIUS and XM may not be combined successfully, or such combination may take longer, be more difficult, time- consuming or costly to accomplish than expected; and operating costs and business disruption following the merger, including adverse effects on employee retention and on our business relationships with third parties, including manufacturers of radios, retailers, automakers and programming providers. Additional factors that could cause SIRIUS' and XM's results to differ materially from those described in the forward-looking statements can be found in SIRIUS' and XM's Annual Reports on Form 10-K for the year ended December 31, 2007 and their respective Quarterly Reports on Form 10-Q for the quarter ended June 30, 2008, which are 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 SIRIUS and XM 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
Contacts for SIRIUS XM Radio:
Contact Information for Investors and Financial Media:
Paul Blalock
SIRIUS XM Radio
212 584 5174
pblalock@siriusradio.com
Hooper Stevens
SIRIUS XM Radio
212 901 6718
hstevens@siriusradio.com
SOURCE SIRIUS XM Radio
Released November 10, 2008