Exhibit 99.1

(SIRIUSXM LOGO)

SiriusXM Reports Record 2010 Results

 

 

 

 

Subscribers Grow to Record 20.2 Million

 

Revenue of $2.82 Billion, Up 14% Over 2009

 

Adjusted EBITDA of $626 Million, Up 35% Over 2009

 

Free Cash Flow of $210 Million, Up 14% Over 2009

 

2011 Guidance Expects Continued Growth

NEW YORK – February 15, 2011 – Sirius XM Radio (NASDAQ: SIRI) today announced full year 2010 financial results, including revenue of $2.82 billion, up 14% over 2009 revenue of $2.47 billion, and adjusted EBITDA of $626 million, up 35% from $463 million in 2009.

“SiriusXM’s results in 2010 were exceptional, surpassing our guidance and achieving record revenues, adjusted EBITDA and free cash flow. Our unparalleled content and the continuing improvements in the economy helped us attain a record-high subscriber base of 20.2 million. Our laser-like focus on profitable growth delivered a 35% increase in adjusted EBITDA to $626 million, and produced free cash flow of more than $200 million,” noted Mel Karmazin, Chief Executive Officer, SiriusXM.

“Our renewed contracts with Howard Stern and the NFL, as well as investments in exciting new content, ensure that our subscribers will continue to enjoy the unparalleled entertainment that has made SiriusXM the largest subscription radio company in the world,” said Karmazin. “With the outlook for improving U.S. auto sales, declining capital expenditures and the expanded functionality coming with the launch of SiriusXM 2.0, we look forward to another year of growth and strong financial performance.”

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

Net subscriber additions in 2010 were 1,418,206, compared to a net subscriber loss in 2009 of 231,098. Ending subscribers as of December 31, 2010 were 20,190,964, up 8% from the 18,772,758 subscribers reported as of December 31, 2009. Subscriber acquisition cost (SAC) per gross subscriber addition was $59 in 2010, a 6%


improvement from the $63 reported in 2009. Average self-pay monthly customer churn was 1.9% in 2010, as compared with 2.0% in 2009.

Free cash flow in 2010 was $210 million, compared to $185 million in 2009. GAAP net income (loss) attributable to common stockholders for 2010 and 2009 was $43 million and ($538) million, respectively, or $0.01 and ($0.15) per diluted share, respectively. Excluding debt extinguishment and restructuring charges, our 2010 net income (loss) attributable to common stockholders for 2010 and 2009, would have been $227 million and ($238) million, respectively.

“Our strong incremental margins, combined with revenue growth and tight expense control have produced solid operating leverage, improving adjusted EBITDA by over $750 million from 2008 to 2010,” said David Frear, SiriusXM’s Executive Vice President and Chief Financial Officer. “We ended the year with $587 million of cash after the early retirement of approximately $38 million of our 3.25% Convertible Notes due 2011. Since the beginning of 2011, we have purchased another $131 million of our debt in the market. With only $104 million of debt maturing before 2013, declining capital expenditures and growing free cash flow, our financial strength and flexibility has never been better.”

FOURTH QUARTER 2010 RESULTS

Fourth quarter 2010 revenue of $736 million was up 9% from the $676 million in the fourth quarter of 2009, while fourth quarter 2010 adjusted EBITDA was $144 million, up 25% from the $115 million in the fourth quarter of 2009.

Net subscriber additions in the fourth quarter of 2010 were 328,789, versus net subscriber additions of 257,028 in the fourth quarter of 2009. Subscriber acquisition cost (SAC) per gross subscriber addition was $58 in the fourth quarter of 2010, a 9% improvement from the $64 reported in the fourth quarter of 2009. Average self-pay monthly customer churn was 1.9% in the fourth quarter of 2010, as compared with 2.0% in the fourth quarter of 2009.

Free cash flow in the fourth quarter of 2010 was $167 million, compared to $150 million in the fourth quarter of 2009. GAAP net (loss) income attributable to common stockholders for the fourth quarter of 2010 and 2009 was ($81) million and $12 million, respectively, or ($0.02) and $0.00 per diluted share, respectively. Excluding debt extinguishment and restructuring charges, our net income attributable to common stockholders for fourth quarter 2010 and 2009, would have been $64 million and $18 million, respectively.

2011 GUIDANCE

In 2011, we expect full-year revenue of approximately $3 billion. Our adjusted EBITDA is projected to approximate $715 million.

“With continuing improvements in auto sales, and self-pay churn and conversion rates for 2011 similar to our strong performance in 2010, we expect to grow our net new subscribers by another 1.4 million in 2011, continuing our track record of solid subscriber growth. We also expect this year’s free cash flow to approach $300 million,” said Karmazin.


          Subscriber Data.

          The following table contains actual subscriber data for the years ended December 31, 2010 and 2009, respectively:

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Years Ended December 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

 

Beginning subscribers

 

 

18,772,758

 

 

19,003,856

 

Gross subscriber additions

 

 

7,768,827

 

 

6,208,482

 

Deactivated subscribers

 

 

(6,350,621

)

 

(6,439,580

)

 

 



 



 

Net additions

 

 

1,418,206

 

 

(231,098

)

 

 



 



 

Ending subscribers

 

 

20,190,964

 

 

18,772,758

 

 

 



 



 

 

 

 

 

 

 

 

 

Retail

 

 

6,947,830

 

 

7,725,750

 

OEM

 

 

13,104,972

 

 

10,930,952

 

Rental

 

 

138,162

 

 

116,056

 

 

 



 



 

Ending subscribers

 

 

20,190,964

 

 

18,772,758

 

 

 



 



 

 

 

 

 

 

 

 

 

Self-pay

 

 

16,686,799

 

 

15,703,932

 

Paid promotional

 

 

3,504,165

 

 

3,068,826

 

 

 



 



 

Ending subscribers

 

 

20,190,964

 

 

18,772,758

 

 

 



 



 

 

 

 

 

 

 

 

 

Retail

 

 

(777,920

)

 

(1,179,452

)

OEM

 

 

2,174,020

 

 

935,114

 

Rental

 

 

22,106

 

 

13,240

 

 

 



 



 

Net additions

 

 

1,418,206

 

 

(231,098

)

 

 



 



 

 

 

 

 

 

 

 

 

Self-pay

 

 

982,867

 

 

154,275

 

Paid promotional

 

 

435,339

 

 

(385,373

)

 

 



 



 

Net additions

 

 

1,418,206

 

 

(231,098

)

 

 



 



 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

19,385,055

 

 

18,529,696

 

 

 



 



 

 

 

 

 

 

 

 

 

Average self-pay monthly churn (1)

 

 

1.9

%

 

2.0

%

 

 



 



 

 

 

 

 

 

 

 

 

Conversion rate (2)

 

 

46.2

%

 

45.4

%

 

 



 



 


 


 

See accompanying footnotes.

          Subscribers. The improvement was due to the 25% increase in gross subscriber additions, primarily resulting from increases in U.S. light vehicle sales, new vehicle penetration and returning activations.

          Average Self-pay Monthly Churn. The decrease was due to an improving economy, the success of retention and win-back programs and reductions in non-pay cancellation rates.


          Conversion Rate. The increase was primarily due to marketing to promotional period subscribers and an improving economy.

          Metrics.

          The following table contains our key operating metrics based on our unaudited adjusted results of operations for the years ended December 31, 2010 and 2009, respectively:

 

 

 

 

 

 

 

 

 

 

Unaudited Adjusted

 

 

 


 

 

 

For the Years Ended December 31,

 

 

 


 

(in thousands, except for per subscriber amounts)

 

2010

 

2009

 

 

 


 


 

 

 

 

 

 

 

ARPU (3)

 

$

11.73

 

$

10.95

 

SAC, per gross subscriber addition (4)

 

$

59

 

$

63

 

Customer service and billing expenses, per average subscriber (5)

 

$

1.03

 

$

1.05

 

Free cash flow (6)

 

$

210,481

 

$

185,319

 

Adjusted total revenue (8)

 

$

2,838,898

 

$

2,526,703

 

Adjusted EBITDA (7)

 

$

626,288

 

$

462,539

 


 


 

See accompanying footnotes.

          ARPU increased in the year ended December 31, 2010 primarily due to the full year impact of the U.S. Music Royalty Fee, which was introduced in the third quarter of 2009, increased revenues from the sale of “Best of” programming, decreases in discounts on multi-subscription and internet packages, and increased net advertising revenue, partially offset by an increase in the number of subscribers on promotional plans.

          SAC, Per Gross Subscriber Addition, decreased in the year ended December 31, 2010 primarily due to lower per radio subsidy rates for certain OEMs and growth in subscriber reactivations and royalties from radio manufacturers compared to the year ended December 31, 2009, partially offset by a 49% increase in OEM production with factory-installed satellite radios.

          Customer Service and Billing Expenses, Per Average Subscriber, decreased in the year ended December 31, 2010 primarily due to lower call center expenses as a result of moving calls to lower cost locations, partially offset by higher call volume.

          Free Cash Flow increased in the year ended December 31, 2010 principally as a result of improvements in net cash provided by operating activities, partially offset by increases in capital expenditures. Net cash provided by operating activities increased $79 million to $513 million for the year ended December 31, 2010 compared to the $434 million provided by operating activities for the year ended December 31, 2009. Capital expenditures for property and equipment for the year ended December 31, 2010 increased $63 million to $312 million compared to $249 million for the year ended


December 31, 2009. The increase in net cash provided by operating activities was primarily the result of growth in deferred revenue and changes in net assets. The increase in capital expenditures for the year ended December 31, 2010 was primarily the result of satellite construction and launch expenditures for our XM-5 and FM-6 satellites.

          Adjusted Total Revenue. Set forth below are our adjusted total revenue for the years ended December 31, 2010 and 2009, 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 Adjusted

 

 

 


 

 

 

For the Years Ended December 31,

 

 

 


 

(in thousands)

 

2010

 

2009

 

 

 


 


 

Revenue:

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates (GAAP)

 

$

2,414,174

 

$

2,287,503

 

Advertising revenue, net of agency fees (GAAP)

 

 

64,517

 

 

51,754

 

Equipment revenue (GAAP)

 

 

71,355

 

 

50,352

 

Other revenue (GAAP)

 

 

266,946

 

 

83,029

 

 

 



 



 

Total revenue (GAAP)

 

 

2,816,992

 

 

2,472,638

 

Purchase price accounting adjustments:

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates

 

 

14,655

 

 

46,814

 

Other revenue

 

 

7,251

 

 

7,251

 

 

 



 



 

Adjusted total revenue

 

$

2,838,898

 

$

2,526,703

 

 

 



 



 

For the year ended December 31, 2010, the increase in subscriber revenue was driven by the increase in subscribers and an increase in the sale of “Best of” programming and the decreases in discounts on multi-subscription and internet packages, partially offset by an increase in the number of subscribers on promotional plans. The increase in advertising revenue was driven by more effective sales efforts and improvements in the national market for advertising. The increase in equipment revenue was driven by royalties from a greater number of OEM installations. The increase in other revenue was driven by the U.S. Music Royalty Fee, which was introduced in the third quarter of 2009.

           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 Years Ended December 31,

 

 

 


 

(in thousands)

 

2010

 

2009

 

 

 


 


 

Total revenue

 

$

2,838,898

 

$

2,526,703

 

Operating expenses:

 

 

 

 

 

 

 

Revenue share and royalties

 

 

543,377

 

 

486,990

 

Programming and content

 

 

353,213

 

 

370,470

 

Customer service and billing

 

 

239,754

 

 

232,405

 

Satellite and transmission

 

 

78,720

 

 

82,170

 

Cost of equipment

 

 

35,281

 

 

40,188

 

Subscriber acquisition costs

 

 

492,480

 

 

401,670

 

Sales and marketing

 

 

220,014

 

 

232,199

 

Engineering, design and development

 

 

40,042

 

 

36,152

 

General and administrative

 

 

209,729

 

 

181,920

 

 

 



 



 

Total operating expenses

 

 

2,212,610

 

 

2,064,164

 

 

 



 



 

Adjusted EBITDA

 

$

626,288

 

$

462,539

 

 

 



 



 

For the year ended December 31, 2010, the increase in Adjusted EBITDA was primarily due to an increase in revenue, partially offset by an increase in expenses included in adjusted EBITDA. The increase in expenses was primarily driven by higher subscriber acquisition costs related to the 25% increase in gross additions and higher revenue share and royalty expenses associated with growth in revenues subject to revenue sharing and royalty arrangements.


          The following table contains actual subscriber data for the three months ended December 31, 2010 and 2009, respectively:

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended December 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

 

 

 

 

 

 

 

 

Beginning subscribers

 

 

19,862,175

 

 

18,515,730

 

Gross subscriber additions

 

 

2,075,418

 

 

1,882,950

 

Deactivated subscribers

 

 

(1,746,629

)

 

(1,625,922

)

 

 



 



 

Net additions

 

 

328,789

 

 

257,028

 

 

 



 



 

Ending subscribers

 

 

20,190,964

 

 

18,772,758

 

 

 



 



 

 

 

 

 

 

 

 

 

Retail

 

 

6,947,830

 

 

7,725,750

 

OEM

 

 

13,104,972

 

 

10,930,952

 

Rental

 

 

138,162

 

 

116,056

 

 

 



 



 

Ending subscribers

 

 

20,190,964

 

 

18,772,758

 

 

 



 



 

 

 

 

 

 

 

 

 

Self-pay

 

 

16,686,799

 

 

15,703,932

 

Paid promotional

 

 

3,504,165

 

 

3,068,826

 

 

 



 



 

Ending subscribers

 

 

20,190,964

 

 

18,772,758

 

 

 



 



 

 

 

 

 

 

 

 

 

Retail

 

 

(140,732

)

 

(200,154

)

OEM

 

 

474,509

 

 

442,422

 

Rental

 

 

(4,988

)

 

14,760

 

 

 



 



 

Net additions

 

 

328,789

 

 

257,028

 

 

 



 



 

 

 

 

 

 

 

 

 

Self-pay

 

 

350,980

 

 

247,182

 

Paid promotional

 

 

(22,191

)

 

9,846

 

 

 



 



 

Net additions

 

 

328,789

 

 

257,028

 

 

 



 



 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

19,990,447

 

 

18,576,151

 

 

 



 



 

 

 

 

 

 

 

 

 

Average self-pay monthly churn (1)

 

 

1.9

%

 

2.0

%

 

 



 



 

Conversion rate (2)

 

 

45.1

%

 

46.4

%

 

 



 



 


 


 

See accompanying footnotes.

          Subscribers. The improvement was due to the 10% increase in gross subscriber additions, primarily resulting from increases in U.S. light vehicle sales, new vehicle penetration and returning activations.

          Average Self-pay Monthly Churn. The decrease was due to an improving economy, the success of retention and win-back programs and reductions in non-pay cancellation rates.

          Conversion Rate. The decrease was primarily the result of the mix of vehicles transitioning to self-pay.


          Metrics.

          The following table contains our key operating metrics based on our unaudited adjusted results of operations for the three months ended December 31, 2010 and 2009, respectively:

 

 

 

 

 

 

 

 

 

 

Unaudited Adjusted

 

 

 


 

 

 

For the Three Months Ended December 31,

 

 

 


 

(in thousands, except for per subscriber amounts)

 

2010

 

2009

 

 

 


 


 

 

 

 

 

 

 

 

 

ARPU (9)

 

$

11.80

 

$

11.58

 

SAC, per gross subscriber addition (10)

 

$

58

 

$

64

 

Customer service and billing expenses, per average subscriber (11)

 

$

1.11

 

$

1.06

 

Free cash flow (12)

 

$

167,355

 

$

149,547

 

Adjusted total revenue (14)

 

$

740,239

 

$

683,779

 

Adjusted EBITDA (13)

 

$

144,493

 

$

115,339

 


 


 

See accompanying footnotes.

          ARPU increased in the three months ended December 31, 2010 primarily due to increased revenue from the U.S. Music Royalty Fee, increased revenues from the sale of “Best of” programming, decreases in discounts on multi-subscription and internet packages, and increased net advertising revenue, partially offset by an increase in the number of subscribers on promotional plans.

          SAC, Per Gross Subscriber Addition, decreased in the three months ended December 31, 2010 primarily due to lower per radio subsidy rates for certain OEMs and growth in subscriber reactivations and royalties from radio manufacturers compared to the three months ended December 31, 2009, partially offset by a 16% increase in OEM production with factory-installed satellite radios.

          Customer Service and Billing Expenses, Per Average Subscriber, increased in the three months ended December 31, 2010 primarily due higher call volume, partially offset by lower call center expenses as a result of moving calls to lower cost locations.

          Free Cash Flow increased in the three months ended December 31, 2010 principally as a result of improvements in net cash provided by operating activities, partially offset by increases in capital expenditures. Net cash provided by operating activities increased $41 million to $222 million for the three months ended December 31, 2010 compared to the $181 million provided by operations for the three months ended December 31, 2009. Capital expenditures for property and equipment for the three months ended December 31, 2010 increased $23 million to $54 million compared to $31 million for the three months ended December 31, 2009. The increase in net cash provided by operating activities was primarily the result of growth in deferred revenue and changes in net assets. The increase in capital expenditures for the three months


ended December 31, 2010 was primarily the result of satellite construction and launch expenditures for our XM-5 and FM-6 satellites.

          Adjusted Total Revenue. Set forth below are our adjusted total revenue for the three months ended December 31, 2010 and 2009, respectively.

 

 

 

 

 

 

 

 

 

 

Unaudited Adjusted

 

 

 


 

 

 

For the Three Months Ended December 31,

 

 

 


 

(in thousands)

 

2010

 

2009

 

 

 


 


 

Revenue:

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates (GAAP)

 

$

620,916

 

$

588,048

 

Advertising revenue, net of agency fees (GAAP)

 

 

18,221

 

 

14,467

 

Equipment revenue (GAAP)

 

 

20,730

 

 

19,008

 

Other revenue (GAAP)

 

 

76,032

 

 

54,650

 

 

 



 



 

Total revenue (GAAP)

 

 

735,899

 

 

676,173

 

Purchase price accounting adjustments:

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates

 

 

2,527

 

 

5,793

 

Other revenue

 

 

1,813

 

 

1,813

 

 

 



 



 

Adjusted total revenue

 

$

740,239

 

$

683,779

 

 

 



 



 

For the three months ended December 31, 2010, the increase in subscriber revenue was driven by the increase in subscribers as well as an increase in the sale of “Best of” programming and the decreases in discounts on multi-subscription and internet packages, partially offset by an increase in the number of subscribers on promotional plans. The increase in advertising revenue was driven by more effective sales efforts and improvements in the national market for advertising. The increase in equipment revenue was driven by royalties from increased OEM installations. The increase in other revenue was driven by the increase in revenue from the U.S. Music Royalty Fee.

          Adjusted EBITDA.

 

 

 

 

 

 

 

 

 

 

Unaudited Adjusted

 

 

 


 

 

 

For the Three Months Ended December 31,

 

 

 


 

(in thousands)

 

2010

 

2009

 

 

 


 


 

Total revenue

 

$

740,239

 

$

683,779

 

Operating expenses:

 

 

 

 

 

 

 

Revenue share and royalties

 

 

143,539

 

 

124,527

 

Programming and content

 

 

89,939

 

 

92,857

 

Customer service and billing

 

 

66,446

 

 

58,887

 

Satellite and transmission

 

 

20,075

 

 

25,094

 

Cost of equipment

 

 

13,095

 

 

12,200

 

Subscriber acquisition costs

 

 

127,879

 

 

127,588

 

Sales and marketing

 

 

60,782

 

 

80,161

 

Engineering, design and development

 

 

9,739

 

 

8,018

 

General and administrative

 

 

64,252

 

 

39,108

 

 

 



 



 

Total operating expenses

 

 

595,746

 

 

568,440

 

 

 



 



 

Adjusted EBITDA

 

$

144,493

 

$

115,339

 

 

 



 



 

For the three months ended December 31, 2010, the increase in Adjusted EBITDA was primarily due to an increase in revenue, partially offset by an increase in expenses included in adjusted EBITDA. The increase in expenses was primarily driven by higher general and administrative costs and higher revenue share and royalty expenses associated with growth in revenues subject to revenue sharing and royalty arrangements.


SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actual

 

 

 

For the Three Months
Ended December 31,

 

For the Twelve Months
Ended December 31,

 

 

 


 


 

(in thousands, except per share data)

 

2010

 

2009

 

2010

 

2009

 

 

 


 


 


 


 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates

 

$

620,916

 

$

588,048

 

$

2,414,174

 

$

2,287,503

 

Advertising revenue, net of agency fees

 

 

18,221

 

 

14,467

 

 

64,517

 

 

51,754

 

Equipment revenue

 

 

20,730

 

 

19,008

 

 

71,355

 

 

50,352

 

Other revenue

 

 

76,032

 

 

54,650

 

 

266,946

 

 

83,029

 

 

 



 



 



 



 

Total revenue

 

 

735,899

 

 

676,173

 

 

2,816,992

 

 

2,472,638

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

114,843

 

 

100,355

 

 

435,410

 

 

397,210

 

Programming and content

 

 

77,318

 

 

77,297

 

 

305,914

 

 

308,121

 

Customer service and billing

 

 

66,441

 

 

58,887

 

 

241,680

 

 

234,456

 

Satellite and transmission

 

 

20,002

 

 

24,597

 

 

80,947

 

 

84,033

 

Cost of equipment

 

 

13,095

 

 

12,200

 

 

35,281

 

 

40,188

 

Subscriber acquisition costs

 

 

107,295

 

 

109,733

 

 

413,041

 

 

340,506

 

Sales and marketing

 

 

58,640

 

 

76,308

 

 

215,454

 

 

228,956

 

Engineering, design and development

 

 

10,181

 

 

8,056

 

 

45,390

 

 

41,031

 

General and administrative

 

 

70,036

 

 

44,601

 

 

240,970

 

 

227,554

 

Depreciation and amortization

 

 

66,747

 

 

77,826

 

 

273,691

 

 

309,450

 

Restructuring, impairments and related costs

 

 

59,730

 

 

2,640

 

 

63,800

 

 

32,807

 

 

 



 



 



 



 

Total operating expenses

 

 

664,328

 

 

592,500

 

 

2,351,578

 

 

2,244,312

 

 

 



 



 



 



 

Income from operations

 

 

71,571

 

 

83,673

 

 

465,414

 

 

228,326

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of amounts capitalized

 

 

(72,414

)

 

(68,745

)

 

(295,643

)

 

(315,668

)

Loss on extinguishment of debt and credit facilities, net

 

 

(85,426

)

 

(3,879

)

 

(120,120

)

 

(267,646

)

Interest and investment income (loss)

 

 

1,822

 

 

2,517

 

 

(5,375

)

 

5,576

 

Other income

 

 

1,563

 

 

851

 

 

3,399

 

 

3,355

 

 

 



 



 



 



 

Total other expense

 

 

(154,455

)

 

(69,256

)

 

(417,739

)

 

(574,383

)

 

 



 



 



 



 

(Loss) income before income taxes

 

 

(82,884

)

 

14,417

 

 

47,675

 

 

(346,057

)

Income tax benefit (expense)

 

 

1,440

 

 

(2,637

)

 

(4,620

)

 

(5,981

)

 

 



 



 



 



 

Net (loss) income

 

 

(81,444

)

 

11,780

 

 

43,055

 

 

(352,038

)

Preferred stock beneficial conversion feature

 

 

 

 

 

 

 

 

(186,188

)

 

 



 



 



 



 

Net (loss) income attributable to common stockholders

 

$

(81,444

)

$

11,780

 

$

43,055

 

$

(538,226

)

 

 



 



 



 



 

Net (loss) income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.02

)

$

0.00

 

$

0.01

 

$

(0.15

)

 

 



 



 



 



 

Diluted

 

$

(0.02

)

$

0.00

 

$

0.01

 

$

(0.15

)

 

 



 



 



 



 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

3,725,500

 

 

3,642,475

 

 

3,693,259

 

 

3,585,864

 

 

 



 



 



 



 

Diluted

 

 

3,725,500

 

 

6,264,259

 

 

6,391,071

 

 

3,585,864

 

 

 



 



 



 



 




SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

As of December 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

(in thousands, except share and per share data)

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

586,691

 

$

383,489

 

Accounts receivable, net

 

 

121,658

 

 

113,580

 

Receivables from distributors

 

 

67,576

 

 

48,738

 

Inventory, net

 

 

21,918

 

 

16,193

 

Prepaid expenses

 

 

134,994

 

 

100,273

 

Related party current assets

 

 

6,719

 

 

106,247

 

Deferred tax asset

 

 

44,787

 

 

72,640

 

Other current assets

 

 

7,432

 

 

18,620

 

 

 



 



 

Total current assets

 

 

991,775

 

 

859,780

 

Property and equipment, net

 

 

1,761,274

 

 

1,711,003

 

Long-term restricted investments

 

 

3,396

 

 

3,400

 

Deferred financing fees, net

 

 

54,135

 

 

66,407

 

Intangible assets, net

 

 

2,629,200

 

 

2,695,115

 

Goodwill

 

 

1,834,856

 

 

1,834,856

 

Related party long-term assets

 

 

30,162

 

 

111,767

 

Other long-term assets

 

 

78,288

 

 

39,878

 

 

 



 



 

Total assets

 

$

7,383,086

 

$

7,322,206

 

 

 



 



 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

593,174

 

$

543,686

 

Accrued interest

 

 

72,453

 

 

74,566

 

Current portion of deferred revenue

 

 

1,201,346

 

 

1,083,430

 

Current portion of deferred credit on executory contracts

 

 

271,076

 

 

252,831

 

Current maturities of long-term debt

 

 

195,815

 

 

13,882

 

Related party current liabilities

 

 

15,845

 

 

108,246

 

 

 



 



 

Total current liabilities

 

 

2,349,709

 

 

2,076,641

 

Deferred revenue

 

 

273,973

 

 

255,149

 

Deferred credit on executory contracts

 

 

508,012

 

 

784,078

 

Long-term debt

 

 

2,695,856

 

 

2,799,702

 

Long-term related party debt

 

 

325,907

 

 

263,579

 

Deferred tax liability

 

 

914,637

 

 

940,182

 

Related party long-term liabilities

 

 

24,517

 

 

46,301

 

Other long-term liabilities

 

 

82,839

 

 

61,052

 

 

 



 



 

Total liabilities

 

 

7,175,450

 

 

7,226,684

 

 

 



 



 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock, par value $0.001; 50,000,000 authorized at December 31, 2010 and 2009:

 

 

 

 

 

 

 

Series A convertible preferred stock (liquidation preference of $0 at December 31, 2010 and $51,370 at December 31, 2009); no shares issued and outstanding at December 31, 2010 and 24,808,959 shares issued and outstanding at December 31, 2009

 

 

 

 

25

 

Convertible perpetual preferred stock, series B (liquidation preference of $13 at December 31, 2010 and 2009); 12,500,000 shares issued and outstanding at December 31, 2010 and 2009

 

 

13

 

 

13

 

Convertible preferred stock, series C junior; no shares issued and outstanding at December 31, 2010 and 2009, respectively

 

 

 

 

 

Common stock, par value $0.001; 9,000,000,000 shares authorized at December 31, 2010 and 2009; 3,933,195,112 and 3,882,659,087 shares issued and outstanding at December 31, 2010 and 2009, respectively

 

 

3,933

 

 

3,882

 

Accumulated other comprehensive loss, net of tax

 

 

(5,861

)

 

(6,581

)

Additional paid-in capital

 

 

10,420,604

 

 

10,352,291

 

Accumulated deficit

 

 

(10,211,053

)

 

(10,254,108

)

 

 



 



 

Total stockholders’ equity

 

 

207,636

 

 

95,522

 

 

 



 



 

Total liabilities and stockholders’ equity

 

$

7,383,086

 

$

7,322,206

 

 

 



 



 



SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

 

 

For the Years Ended December 31,

 

 

 


 

(in thousands)

 

2010

 

2009

 

 

 


 


 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income (loss)

 

$

43,055

 

$

(352,038

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

273,691

 

 

309,450

 

Non-cash interest expense, net of amortization of premium

 

 

42,841

 

 

43,066

 

Provision for doubtful accounts

 

 

32,379

 

 

30,602

 

Restructuring, impairments and related costs

 

 

66,731

 

 

26,964

 

Amortization of deferred income related to equity method investment

 

 

(2,776

)

 

(2,776

)

Loss on extinguishment of debt and credit facilities, net

 

 

120,120

 

 

267,646

 

Loss on investments, net

 

 

11,722

 

 

13,664

 

Loss on disposal of assets

 

 

1,017

 

 

 

Share-based payment expense

 

 

60,437

 

 

73,981

 

Deferred income taxes

 

 

2,308

 

 

5,981

 

Other non-cash purchase price adjustments

 

 

(250,727

)

 

(202,054

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

(39,236

)

 

(42,158

)

Receivables from distributors

 

 

(11,023

)

 

(2,788

)

Inventory

 

 

(5,725

)

 

8,269

 

Related party assets

 

 

(9,803

)

 

15,305

 

Prepaid expenses and other current assets

 

 

75,374

 

 

10,027

 

Other long-term assets

 

 

17,671

 

 

86,674

 

Accounts payable and accrued expenses

 

 

5,420

 

 

(46,645

)

Accrued interest

 

 

(884

)

 

2,429

 

Deferred revenue

 

 

133,444

 

 

93,578

 

Related party liabilities

 

 

(53,413

)

 

50,172

 

Other long-term liabilities

 

 

272

 

 

44,481

 

 

 



 



 

Net cash provided by operating activities

 

 

512,895

 

 

433,830

 

 

 



 



 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Additions to property and equipment

 

 

(311,868

)

 

(248,511

)

Sale of restricted and other investments

 

 

9,454

 

 

 

 

 



 



 

Net cash used in investing activities

 

 

(302,414

)

 

(248,511

)

 

 



 



 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from exercise of warrants and stock options

 

 

10,839

 

 

 

Preferred stock issuance, net of costs

 

 

 

 

(3,712

)

Long-term borrowings, net of costs

 

 

1,274,707

 

 

582,612

 

Related party long-term borrowings, net of costs

 

 

196,118

 

 

362,593

 

Payment of premiums on redemption of debt

 

 

(84,326

)

 

(17,075

)

Repayment of long-term borrowings

 

 

(1,262,396

)

 

(755,447

)

Repayment of related party long-term borrowings

 

 

(142,221

)

 

(351,247

)

 

 



 



 

Net cash used in financing activities

 

 

(7,279

)

 

(182,276

)

 

 



 



 

Net increase in cash and cash equivalents

 

 

203,202

 

 

3,043

 

Cash and cash equivalents at beginning of period

 

 

383,489

 

 

380,446

 

 

 



 



 

Cash and cash equivalents at end of period

 

$

586,691

 

$

383,489

 

 

 



 



 



Footnotes

          Average self-pay monthly churn; conversion rate; ARPU; SAC, per gross subscriber addition; customer service and billing expenses, per average subscriber; adjusted revenue; adjusted EBITDA and free cash flow are not measures of financial performance under GAAP. We believe these operational and Non-GAAP financial performance 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 believe that investors also use our current and projected metrics to monitor the performance of our business and to make investment decisions.

          These operational and Non-GAAP financial performance measures are used in addition to and in conjunction with results presented in accordance with GAAP. These Non-GAAP financial performance 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.

 

 

(1)

Average self-pay monthly churn represents the monthly average of self-pay deactivations for the quarter divided by the average number of self-pay subscribers for the quarter. Average self-pay churn for the year is the average of the quarterly average self-pay churn.

 

 

(2)

We measure 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. We refer to this as the “conversion rate.” 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.

 

 

(3)

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, which was initially charged to subscribers in the third quarter of 2009. Purchase price accounting adjustments include the recognition of deferred subscriber revenues not recognized in purchase price accounting associated with the Merger. ARPU is calculated as follows (in thousands, except for subscriber and per subscriber amounts):




 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Years Ended December 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

Subscriber revenue (GAAP)

 

$

2,414,174

 

$

2,287,503

 

Net advertising revenue (GAAP)

 

 

64,517

 

 

51,754

 

Other subscription-related revenue (GAAP)

 

 

234,148

 

 

48,679

 

Purchase price accounting adjustments

 

 

14,655

 

 

46,814

 

 

 



 



 

 

 

$

2,727,494

 

$

2,434,750

 

 

 



 



 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

19,385,055

 

 

18,529,696

 

 

 



 



 

 

 

 

 

 

 

 

 

ARPU

 

$

11.73

 

$

10.95

 

 

 



 



 


 

 

(4)

Subscriber acquisition cost, per gross subscriber addition (or SAC, per gross subscriber addition) is derived from subscriber acquisition costs and margins from the direct 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 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 Years Ended December 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

Subscriber acquisition costs (GAAP)

 

$

413,041

 

$

340,506

 

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

 

 

(36,074

)

 

(10,164

)

Add: purchase price accounting adjustments

 

 

79,439

 

 

61,164

 

 

 



 



 

 

 

$

456,406

 

$

391,506

 

 

 



 



 

 

 

 

 

 

 

 

 

Gross subscriber additions

 

 

7,768,827

 

 

6,208,482

 

 

 



 



 

 

 

 

 

 

 

 

 

SAC, per gross subscriber addition

 

$

59

 

$

63

 

 

 



 



 


 

 

(5)

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, 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 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 Years Ended December 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

Customer service and billing expenses (GAAP)

 

$

241,680

 

$

234,456

 

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

 

 

(2,207

)

 

(2,504

)

Add: purchase price accounting adjustments

 

 

281

 

 

453

 

 

 



 



 

 

 

$

239,754

 

$

232,405

 

 

 



 



 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

19,385,055

 

 

18,529,696

 

 

 



 



 

Customer service and billing expenses, per average subscriber

 

$

1.03

 

$

1.05

 

 

 



 



 


 

 

(6)

Free cash flow is calculated as follows (in thousands):


 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Years Ended December 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

Net cash provided by operating activities

 

$

512,895

 

$

433,830

 

Additions to property and equipment

 

 

(311,868

)

 

(248,511

)

Restricted and other investment activity

 

 

9,454

 

 

 

 

 



 



 

Free cash flow

 

$

210,481

 

$

185,319

 

 

 



 



 


 

 

(7)

EBITDA is defined as net income (loss) before interest and investment income (loss); interest expense, net of amounts capitalized; taxes 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, (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 market value of our common stock.

Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statement of operations of certain expenses, including share-based payment expense and certain purchase price accounting for the Merger. 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 (loss) as disclosed in our consolidated statements of operations. 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 (loss) to the adjusted EBITDA is calculated as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Years Ended December 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

Net income (loss) (GAAP):

 

$

43,055

 

$

(352,038

)

Add back items excluded from Adjusted EBITDA:

 

 

 

 

 

 

 

Purchase price accounting adjustments:

 

 

 

 

 

 

 

Revenues

 

 

21,906

 

 

54,065

 

Operating expenses

 

 

(261,832

)

 

(240,891

)

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

 

 

63,309

 

 

78,782

 

Depreciation and amortization (GAAP)

 

 

273,691

 

 

309,450

 

Restructuring, impairments and related costs (GAAP)

 

 

63,800

 

 

32,807

 

Interest expense, net of amounts capitalized (GAAP)

 

 

295,643

 

 

315,668

 

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

 

 

120,120

 

 

267,646

 

Interest and investment loss (income) (GAAP)

 

 

5,375

 

 

(5,576

)

Other (income) (GAAP)

 

 

(3,399

)

 

(3,355

)

Income tax expense (GAAP)

 

 

4,620

 

 

5,981

 

 

 



 



 

Adjusted EBITDA

 

$

626,288

 

$

462,539

 

 

 



 



 




 

 

(8)

The following tables reconcile our actual revenues and operating expenses to our adjusted revenues and operating expenses:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited For the Year Ended December 31, 2010

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates

 

$

2,414,174

 

$

14,655

 

$

 

$

2,428,829

 

Advertising revenue, net of agency fees

 

 

64,517

 

 

 

 

 

 

64,517

 

Equipment revenue

 

 

71,355

 

 

 

 

 

 

71,355

 

Other revenue

 

 

266,946

 

 

7,251

 

 

 

 

274,197

 

 

 



 



 



 



 

Total revenue

 

$

2,816,992

 

$

21,906

 

$

 

$

2,838,898

 

 

 



 



 



 



 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

435,410

 

 

107,967

 

 

 

 

543,377

 

Programming and content

 

 

305,914

 

 

57,566

 

 

(10,267

)

 

353,213

 

Customer service and billing

 

 

241,680

 

 

281

 

 

(2,207

)

 

239,754

 

Satellite and transmission

 

 

80,947

 

 

1,170

 

 

(3,397

)

 

78,720

 

Cost of equipment

 

 

35,281

 

 

 

 

 

 

35,281

 

Subscriber acquisition costs

 

 

413,041

 

 

79,439

 

 

 

 

492,480

 

Sales and marketing

 

 

215,454

 

 

13,983

 

 

(9,423

)

 

220,014

 

Engineering, design and development

 

 

45,390

 

 

520

 

 

(5,868

)

 

40,042

 

General and administrative

 

 

240,970

 

 

906

 

 

(32,147

)

 

209,729

 

Depreciation and amortization (a)

 

 

273,691

 

 

 

 

 

 

273,691

 

Restructuring, impairments and related costs

 

 

63,800

 

 

 

 

 

 

63,800

 

Share-based payment expense (b)

 

 

 

 

 

 

63,309

 

 

63,309

 

 

 



 



 



 



 

Total operating expenses

 

$

2,351,578

 

$

261,832

 

$

 

$

2,613,410

 

 

 



 



 



 



 


 

 

(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. The increased depreciation and amortization for the year ended December 31, 2010 was $68,000.

 

 

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


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Programming and content

 

$

9,817

 

$

450

 

$

 

$

10,267

 

Customer service and billing

 

 

1,926

 

 

281

 

 

 

 

2,207

 

Satellite and transmission

 

 

3,109

 

 

288

 

 

 

 

3,397

 

Sales and marketing

 

 

8,996

 

 

427

 

 

 

 

9,423

 

Engineering, design and development

 

 

5,348

 

 

520

 

 

 

 

5,868

 

General and administrative

 

 

31,241

 

 

906

 

 

 

 

32,147

 

 

 



 



 



 



 

Total share-based payment expense

 

$

60,437

 

$

2,872

 

$

 

$

63,309

 

 

 



 



 



 



 




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited For the Year Ended December 31, 2009

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates

 

$

2,287,503

 

$

46,814

 

$

 

$

2,334,317

 

Advertising revenue, net of agency fees

 

 

51,754

 

 

 

 

 

 

51,754

 

Equipment revenue

 

 

50,352

 

 

 

 

 

 

50,352

 

Other revenue

 

 

83,029

 

 

7,251

 

 

 

 

90,280

 

 

 



 



 



 



 

Total revenue

 

$

2,472,638

 

$

54,065

 

$

 

$

2,526,703

 

 

 



 



 



 



 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

397,210

 

 

89,780

 

 

 

 

486,990

 

Programming and content

 

 

308,121

 

 

72,069

 

 

(9,720

)

 

370,470

 

Customer service and billing

 

 

234,456

 

 

453

 

 

(2,504

)

 

232,405

 

Satellite and transmission

 

 

84,033

 

 

1,339

 

 

(3,202

)

 

82,170

 

Cost of equipment

 

 

40,188

 

 

 

 

 

 

40,188

 

Subscriber acquisition costs

 

 

340,506

 

 

61,164

 

 

 

 

401,670

 

Sales and marketing

 

 

228,956

 

 

13,507

 

 

(10,264

)

 

232,199

 

Engineering, design and development

 

 

41,031

 

 

977

 

 

(5,856

)

 

36,152

 

General and administrative

 

 

227,554

 

 

1,602

 

 

(47,236

)

 

181,920

 

Depreciation and amortization (a)

 

 

309,450

 

 

 

 

 

 

309,450

 

Restructuring, impairments and related costs

 

 

32,807

 

 

 

 

 

 

32,807

 

Share-based payment expense (b)

 

 

 

 

 

 

78,782

 

 

78,782

 

 

 



 



 



 



 

Total operating expenses

 

$

2,244,312

 

$

240,891

 

$

 

$

2,485,203

 

 

 



 



 



 



 


 

 

(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. The increased depreciation and amortization for the year ended December 31, 2009 was $106,000.

 

 

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


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Programming and content

 

$

9,064

 

$

656

 

$

 

$

9,720

 

Customer service and billing

 

 

2,051

 

 

453

 

 

 

 

2,504

 

Satellite and transmission

 

 

2,745

 

 

457

 

 

 

 

3,202

 

Sales and marketing

 

 

9,608

 

 

656

 

 

 

 

10,264

 

Engineering, design and development

 

 

4,879

 

 

977

 

 

 

 

5,856

 

General and administrative

 

 

45,634

 

 

1,602

 

 

 

 

47,236

 

 

 



 



 



 



 

Total share-based payment expense

 

$

73,981

 

$

4,801

 

$

 

$

78,782

 

 

 



 



 



 



 


 

 

(9)

ARPU is calculated as follows (in thousands, except for subscriber and per subscriber amounts):


 

 

 

 

 

 

 

 

 

Unaudited

 

 


 

 

For the Three Months Ended December 31,

 

 


 

 

2010

 

2009

 

 


 


Subscriber revenue (GAAP)

 

$

620,916

 

$

588,048

Net advertising revenue (GAAP)

 

 

18,221

 

 

14,467

Other subscription-related revenue (GAAP)

 

 

65,953

 

 

36,828

Purchase price accounting adjustments

 

 

2,527

 

 

5,793

 

 



 



 

 

$

707,617

 

$

645,136

 

 



 



 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

19,990,447

 

 

18,576,151

 

 



 



 

 

 

 

 

 

 

ARPU

 

$

11.80

 

$

11.58

 

 



 




 

 

(10)

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,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

Subscriber acquisition costs (GAAP)

 

$

107,295

 

$

109,733

 

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

 

 

(7,635

)

 

(6,808

)

Add: purchase price accounting adjustments

 

 

20,584

 

 

17,855

 

 

 



 



 

 

 

$

120,244

 

$

120,780

 

 

 



 



 

 

 

 

 

 

 

 

 

Gross subscriber additions

 

 

2,075,418

 

 

1,882,950

 

 

 



 



 

 

 

 

 

 

 

 

 

SAC, per gross subscriber addition

 

$

58

 

$

64

 

 

 



 



 


 

 

(11)

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,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

Customer service and billing expenses (GAAP)

 

$

66,441

 

$

58,887

 

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

 

 

(50

)

 

(94

)

Add: purchase price accounting adjustments

 

 

55

 

 

94

 

 

 



 



 

 

 

$

66,446

 

$

58,887

 

 

 



 



 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

19,990,447

 

 

18,576,151

 

 

 



 



 

Customer service and billing expenses, per average subscriber

 

$

1.11

 

$

1.06

 

 

 



 



 


 

 

(12)

Free cash flow is calculated as follows (in thousands):


 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended December 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

Net cash provided by operating activities

 

$

221,849

 

$

180,723

 

Additions to property and equipment

 

 

(54,494

)

 

(31,176

)

 

 



 



 

Free cash flow

 

$

167,355

 

$

149,547

 

 

 



 



 



 

 

(13)

The reconciliation of net income (loss) to the adjusted EBITDA is calculated as follows (in thousands):


 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended December 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

Net (loss) income (GAAP):

 

$

(81,444

)

$

11,780

 

Add back items excluded from Adjusted EBITDA:

 

 

 

 

 

 

 

Purchase price accounting adjustments:

 

 

 

 

 

 

 

Revenues

 

 

4,340

 

 

7,606

 

Operating expenses

 

 

(67,928

)

 

(63,886

)

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

 

 

10,033

 

 

7,480

 

Depreciation and amortization (GAAP)

 

 

66,747

 

 

77,826

 

Restructuring, impairments and related costs (GAAP)

 

 

59,730

 

 

2,640

 

Interest expense, net of amounts capitalized (GAAP)

 

 

72,414

 

 

68,745

 

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

 

 

85,426

 

 

3,879

 

Interest and investment (income) (GAAP)

 

 

(1,822

)

 

(2,517

)

Other (income) (GAAP)

 

 

(1,563

)

 

(851

)

Income tax (benefit) expense (GAAP)

 

 

(1,440

)

 

2,637

 

 

 



 



 

Adjusted EBITDA

 

$

144,493

 

$

115,339

 

 

 



 



 


 

 

(14)

The following tables reconcile our actual revenues and operating expenses to our adjusted revenues and operating expenses:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited For the Three Months Ended December 31, 2010

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates

 

$

620,916

 

$

2,527

 

$

 

$

623,443

 

Advertising revenue, net of agency fees

 

 

18,221

 

 

 

 

 

 

18,221

 

Equipment revenue

 

 

20,730

 

 

 

 

 

 

20,730

 

Other revenue

 

 

76,032

 

 

1,813

 

 

 

 

77,845

 

 

 



 



 



 



 

Total revenue

 

$

735,899

 

$

4,340

 

$

 

$

740,239

 

 

 



 



 



 



 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

114,843

 

 

28,696

 

 

 

 

143,539

 

Programming and content

 

 

77,318

 

 

14,762

 

 

(2,141

)

 

89,939

 

Customer service and billing

 

 

66,441

 

 

55

 

 

(50

)

 

66,446

 

Satellite and transmission

 

 

20,002

 

 

273

 

 

(200

)

 

20,075

 

Cost of equipment

 

 

13,095

 

 

 

 

 

 

13,095

 

Subscriber acquisition costs

 

 

107,295

 

 

20,584

 

 

 

 

127,879

 

Sales and marketing

 

 

58,640

 

 

3,290

 

 

(1,148

)

 

60,782

 

Engineering, design and development

 

 

10,181

 

 

93

 

 

(535

)

 

9,739

 

General and administrative

 

 

70,036

 

 

175

 

 

(5,959

)

 

64,252

 

Depreciation and amortization (a)

 

 

66,747

 

 

 

 

 

 

66,747

 

Restructuring, impairments and related costs

 

 

59,730

 

 

 

 

 

 

59,730

 

Share-based payment expense (b)

 

 

 

 

 

 

10,033

 

 

10,033

 

 

 



 



 



 



 

Total operating expenses

 

$

664,328

 

$

67,928

 

$

 

$

732,256

 

 

 



 



 



 



 

(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. The increased depreciation and amortization for the three months ended December 31, 2010 was $16,000.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Programming and content

 

$

2,059

 

$

82

 

$

 

$

2,141

 

Customer service and billing

 

 

(5

)

 

55

 

 

 

 

50

 

Satellite and transmission

 

 

148

 

 

52

 

 

 

 

200

 

Sales and marketing

 

 

1,066

 

 

82

 

 

 

 

1,148

 

Engineering, design and development

 

 

442

 

 

93

 

 

 

 

535

 

General and administrative

 

 

5,784

 

 

175

 

 

 

 

5,959

 

 

 



 



 



 



 

Total share-based payment expense

 

$

9,494

 

$

539

 

$

 

$

10,033

 

 

 



 



 



 



 




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited For the Three Months Ended December 31, 2009

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates

 

$

588,048

 

$

5,793

 

$

 

$

593,841

 

Advertising revenue, net of agency fees

 

 

14,467

 

 

 

 

 

 

14,467

 

Equipment revenue

 

 

19,008

 

 

 

 

 

 

19,008

 

Other revenue

 

 

54,650

 

 

1,813

 

 

 

 

56,463

 

 

 



 



 



 



 

Total revenue

 

$

676,173

 

$

7,606

 

$

 

$

683,779

 

 

 



 



 



 



 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

100,355

 

 

24,172

 

 

 

 

124,527

 

Programming and content

 

 

77,297

 

 

17,361

 

 

(1,801

)

 

92,857

 

Customer service and billing

 

 

58,887

 

 

94

 

 

(94

)

 

58,887

 

Satellite and transmission

 

 

24,597

 

 

327

 

 

170

 

 

25,094

 

Cost of equipment

 

 

12,200

 

 

 

 

 

 

12,200

 

Subscriber acquisition costs

 

 

109,733

 

 

17,855

 

 

 

 

127,588

 

Sales and marketing

 

 

76,308

 

 

3,522

 

 

331

 

 

80,161

 

Engineering, design and development

 

 

8,056

 

 

205

 

 

(243

)

 

8,018

 

General and administrative

 

 

44,601

 

 

350

 

 

(5,843

)

 

39,108

 

Depreciation and amortization (a)

 

 

77,826

 

 

 

 

 

 

77,826

 

Restructuring, impairments and related costs

 

 

2,640

 

 

 

 

 

 

2,640

 

Share-based payment expense (b)

 

 

 

 

 

 

7,480

 

 

7,480

 

 

 



 



 



 



 

Total operating expenses

 

$

592,500

 

$

63,886

 

$

 

$

656,386

 

 

 



 



 



 



 

(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. The increased depreciation and amortization for the three months ended December 31, 2009 was $20,000.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Programming and content

 

$

1,646

 

$

155

 

$

 

$

1,801

 

Customer service and billing

 

 

 

 

94

 

 

 

 

94

 

Satellite and transmission

 

 

(276

)

 

106

 

 

 

 

(170

)

Sales and marketing

 

 

(474

)

 

143

 

 

 

 

(331

)

Engineering, design and development

 

 

38

 

 

205

 

 

 

 

243

 

General and administrative

 

 

5,493

 

 

350

 

 

 

 

5,843

 

 

 



 



 



 



 

Total share-based payment expense

 

$

6,427

 

$

1,053

 

$

 

$

7,480

 

 

 



 



 



 



 

###

About Sirius XM Radio

Sirius XM Radio is America’s satellite radio company. SiriusXM broadcasts more than 135 channels of commercial-free music, and premier sports, news, talk, entertainment, traffic, weather, and data services to more than 20 million subscribers in cars, trucks, boats and aircraft, and through a wide range of mobile devices.

SiriusXM offers an array of content from some of the biggest names in entertainment, as well as from professional sports leagues, major colleges, and national news and talk providers. SiriusXM programming is also available at siriusxm.com, and on Apple iPhone and iPod touch, BlackBerry and Android-powered mobile devices using the SiriusXM Premium Online App.

SiriusXM has arrangements with every major automaker and its radio products are available at shop.siriusxm.com as well as retail locations nationwide.

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,” “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 statement: our dependence upon automakers and other third parties, our substantial indebtedness; the useful life of our satellites; and our competitive position versus other forms of audio and video entertainment. 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, 2009 and our Quarterly Report on Form 10-Q for the period ending September 30, 2010, 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 we disclaim any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this communication.

 

 

 

 

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Contact Information for Investors and Financial Media:

Investors:

William Prip
212 584 5289
william.prip@siriusxm.com

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

Media:

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