Exhibit 99.1

 

 

 

SiriusXM Reports Third Quarter 2013 Results

 

·Record Revenue of $962 Million, Up 11% From Third Quarter of 2012
·Net Income of $63 Million
·Adjusted EBITDA Grows 21% to a Record $296 Million
·Free Cash Flow Increases 26% to $245 Million
·Share Repurchase Program Reaches $1.6 Billion Year to Date
·Company Issues 2014 Financial Guidance

 

NEW YORK – October 24, 2013 – Sirius XM Radio (NASDAQ: SIRI) today announced third quarter 2013 financial and operating results, including record revenue of $962 million, up 11% from the third quarter 2012 revenue of $867 million. Net income for the third quarter of 2013 and 2012 was $63 million and $75 million, respectively, including losses on extinguishment of debt of $108 million and $107 million, respectively. Earnings per fully-diluted share were $0.01 each in the third quarter of 2013 and 2012.

 

Income before income taxes was $124 million in the third quarter 2013, an increase of 128% from $54 million in the third quarter of 2012. Adjusted EBITDA for the third quarter of 2013 reached a record $296 million, up 21% from $245 million in the third quarter of 2012.

 

“SiriusXM had a great quarter, with the 513,000 net subscriber additions and the 373,000 self-pay net additions setting post-merger records for the third quarter. We also saw double-digit growth in revenue for the seventh consecutive quarter, a new quarterly record for adjusted EBITDA and adjusted EBITDA margin, and significant growth in free cash flow. With continued growth in new automobile sales and an increasing number of existing self-pay subscribers selling their cars and rotating back into our trial funnel, we are increasing our guidance for net subscriber additions and reducing our guidance for self pay subscriber additions by equal amounts. We are also pleased to increase revenue guidance for 2013 and introduce new guidance for continued growth in 2014 in both revenue and adjusted EBITDA,” noted Jim Meyer, Chief Executive Officer, SiriusXM.

 

“We are proud of all we accomplished in the third quarter: strong operating results, significant improvements in our balance sheet, renewals of important long-term programming contracts, and the announced acquisition of the connected vehicle unit of Agero,” added Meyer.

 

Additional highlights of the third quarter include:

 

·Subscribers Reach Approximately 25.6 Million. Net subscriber additions in the quarter were 513,000, up from 446,000 in the third quarter of 2012. The total paid subscriber base reached a record 25.6 million, up 9% from the prior-year period. Self-pay net subscriber additions were 373,000, while the self-pay subscriber base reached a
 
record high of 20.7 million, up 9% from the prior year period. Total paid and unpaid trials grew by 247,000 from the second quarter of 2013 to 6.9 million.
·Adjusted EBITDA and Adjusted EBITDA Margin Achieve New Record Highs. Adjusted EBITDA climbed 21% from last year’s third quarter to a record quarterly figure of $296 million, and those results were accompanied by a record adjusted EBITDA margin of nearly 31%.
·Free Cash Flow Climbs 26% in the Third Quarter. Free cash flow in the third quarter of 2013 was $245 million, up 26% from $195 million in the third quarter of 2012. Free cash flow per fully-diluted share was 3.9 cents in the third quarter, up 31% from the third quarter of 2012. For the first nine months of the year, free cash flow climbed 42% to $624 million, and free cash flow per fully-diluted share was 9.7 cents, an increase of 51% over the same period in 2012.

 

We have taken significant steps over the past year to improve our balance sheet, lowering our average cost of debt from 9.2% last summer to just 5.5% following the redemption of the 7.625% Senior Notes due 2018. The new debt we have issued gives our Company greater flexibility to pursue capital returns and other strategic opportunities, said David Frear, SiriusXMs Executive Vice President and Chief Financial Officer.

 

During the third quarter, we repurchased approximately 124 million shares of our common stock for $459 million, bringing our year-to-date purchases to approximately 477 million shares for approximately $1.6 billion. We have approximately $2.4 billion remaining under our recently increased share repurchase authorization, and we anticipate using $500 million of this authorization to repurchase shares directly from Liberty Media in three installments beginning next month. At the end of the third quarter, and pro forma for the announced redemption of the 7.625% Senior Notes due 2018, our outstanding debt was a very conservative 3.0x trailing adjusted EBITDA, added Frear.

 

2013 AND 2014 GUIDANCE

 

The Company today increased its expectation for 2013 total net subscriber growth and revenue, reduced its estimate for 2013 self-pay net subscriber growth, and reiterated its existing guidance for adjusted EBITDA and free cash flow.

 

·Total net subscriber additions of approximately 1.6 million, up from previous guidance of 1.5 million,
·Self-pay net subscriber additions of approximately 1.5 million, down from previous guidance of approximately 1.6 million,
·Revenue of approximately $3.77 billion, up from previous guidance of over $3.7 billion,
·Adjusted EBITDA of approximately $1.14 billion, and
·Free cash flow of approximately $915 million.

 

The Company also provided initial guidance for 2014 revenue and adjusted EBITDA:

 

·Revenue of over $4.0 billion, and
·Adjusted EBITDA of approximately $1.38 billion.
 

THIRD QUARTER 2013 RESULTS

 

SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

   For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
(in thousands, except per share data)  2013   2012   2013   2012 
                 
Revenue:                    
Subscriber revenue  $834,053   $757,672   $2,432,113   $2,188,199 
Advertising revenue   21,918    20,426    63,886    59,881 
Equipment revenue   17,989    17,813    54,588    51,183 
Other revenue   87,549    71,449    248,430    210,362 
Total revenue   961,509    867,360    2,799,017    2,509,625 
Operating expenses:                    
Cost of services:                    
Revenue share and royalties   162,627    141,834    467,017    409,371 
Programming and content   72,322    69,938    217,313    205,203 
Customer service and billing   76,322    77,768    237,006    212,635 
Satellite and transmission   19,853    18,319    59,041    53,980 
Cost of equipment   5,340    6,345    17,809    19,301 
Subscriber acquisition costs   125,457    112,418    371,560    348,014 
Sales and marketing   75,638    60,676    209,594    176,457 
Engineering, design and development   13,007    13,507    42,901    32,468 
General and administrative   67,881    68,235    184,613    193,786 
Depreciation and amortization   58,533    66,571    192,966    199,481 
Total operating expenses   676,980    635,611    1,999,820    1,850,696 
Income from operations   284,529    231,749    799,197    658,929 
Other income (expense):                    
Interest expense, net of amounts capitalized   (54,629)   (70,035)   (150,531)   (219,777)
Loss on extinguishment of debt and credit facilities, net   (107,971)   (107,105)   (124,348)   (132,726)
Interest and investment income (loss)   1,716    (321)   3,648    (3,192)
Other income (loss)   407    113    909    (637)
Total other expense   (160,477)   (177,348)   (270,322)   (356,332)
Income before income taxes   124,052    54,401    528,875    302,597 
Income tax (expense) benefit   (61,158)   20,113    (216,857)   3,013,860 
Net income  $62,894   $74,514   $312,018   $3,316,457 
Foreign currency translation adjustment, net of tax   (11)       (292)   (38)
Total comprehensive income  $62,883   $74,514   $311,726   $3,316,419 
Net income per common share:                    
Basic  $0.01   $0.01   $0.05   $0.52 
Diluted  $0.01   $0.01   $0.05   $0.49 
Weighted average common shares outstanding:                    
Basic   6,184,216    4,034,122    6,265,981    3,870,031 
Diluted   6,287,353    6,577,654    6,446,082    6,848,230 
 

SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

   September 30, 2013   December 31, 2012 
(in thousands, except share and per share data)  (Unaudited)     
ASSETS          
Current assets:          
Cash and cash equivalents  $716,784   $520,945 
Accounts receivable, net   102,778    106,142 
Receivables from distributors   80,819    104,425 
Inventory, net   14,242    25,337 
Prepaid expenses   130,794    122,157 
Related party current assets   11,141    13,167 
Deferred tax asset   887,182    923,972 
Other current assets   7,525    12,037 
Total current assets   1,951,265    1,828,182 
Property and equipment, net   1,542,887    1,571,922 
Long-term restricted investments   5,718    3,999 
Deferred financing fees, net   29,377    38,677 
Intangible assets, net   2,482,367    2,519,610 
Goodwill   1,815,365    1,815,365 
Related party long-term assets   29,385    44,954 
Long-term deferred tax asset   1,036,708    1,219,256 
Other long-term assets   13,240    12,878 
Total assets  $8,906,312   $9,054,843 
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable and accrued expenses  $528,173   $587,652 
Accrued interest   53,918    33,954 
Current portion of deferred revenue   1,522,513    1,474,138 
Current portion of deferred credit on executory contracts   3,904    207,854 
Current maturities of long-term debt   489,492    4,234 
Current maturities of long-term related party debt   49,383     
Related party current liabilities   6,121    6,756 
Total current liabilities   2,653,504    2,314,588 
Deferred revenue   145,656    159,501 
Deferred credit on executory contracts   2,339    5,175 
Long-term debt   3,161,372    2,222,080 
Long-term related party debt   10,948    208,906 
Related party long-term liabilities   16,884    18,966 
Other long-term liabilities   80,941    86,062 
Total liabilities   6,071,644    5,015,278 
           
Stockholders’ equity:          
Preferred stock, par value $0.001; 50,000,000 authorized at September 30, 2013 and December 31, 2012:          
Convertible perpetual preferred stock, series B-1 (liquidation preference of $0.001 per share); 0 and 6,250,100 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively       6 
           
Common stock, par value $0.001; 9,000,000,000 shares authorized; 6,134,596,655 and 5,262,440,085 shares issued and outstanding, at September 30, 2013 and December 31, 2012, respectively   6,135    5,263 
Accumulated other comprehensive (loss) income, net of tax   (172)   120 
Additional paid-in capital   8,828,077    10,345,566 
Accumulated deficit   (5,999,372)   (6,311,390)
Total stockholders’ equity   2,834,668    4,039,565 
Total liabilities and stockholders’ equity  $8,906,312   $9,054,843 
 

SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   For the Nine Months Ended September 30, 
(in thousands)  2013   2012 
Cash flows from operating activities:          
Net income  $312,018   $3,316,457 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   192,966    199,481 
Non-cash interest expense, net of amortization of premium   16,506    30,786 
Provision for doubtful accounts   28,571    24,953 
Amortization of deferred income related to equity method investment   (2,082)   (2,082)
Loss on extinguishment of debt and credit facilities, net   124,348    132,726 
(Gain) loss on unconsolidated entity investments, net   (2,831)   4,014 
Dividend received from unconsolidated entity investment   17,707     
Loss on disposal of assets   128    567 
Share-based payment expense   49,774    46,361 
Deferred income taxes   219,184    (3,017,021)
Other non-cash purchase price adjustments   (206,786)   (220,336)
Changes in operating assets and liabilities:          
Accounts receivable   (25,207)   (26,211)
Receivables from distributors   23,606    (2,956)
Inventory   11,095    888 
Related party assets   2,077    6,905 
Prepaid expenses and other current assets   (6,665)   (26,367)
Other long-term assets   (363)   24,454 
Accounts payable and accrued expenses   (58,680)   (27,384)
Accrued interest   19,964    (5,940)
Deferred revenue   34,530    52,777 
Related party liabilities   (635)   (1,314)
Other long-term liabilities   (4,968)   2,774 
Net cash provided by operating activities   744,257    513,532 
           
Cash flows from investing activities:          
Additions to property and equipment   (118,235)   (73,546)
Purchases of restricted and other investments   (1,719)    
Net cash used in investing activities   (119,954)   (73,546)
           
Cash flows from financing activities:          
Proceeds from exercise of stock options   21,819    89,250 
Taxes paid in lieu of shares issued for stock-based compensation   (27,913)    
Proceeds from long-term borrowings and revolving credit facility, net of costs   2,532,137    393,687 
Payment of premiums on redemption of debt   (116,410)   (100,615)
Repayment of long-term borrowings and revolving credit facility   (1,085,737)   (914,028)
Repayment of related party long-term borrowings   (150,000)   (126,000)
Common stock repurchased and retired   (1,602,360)    
Net cash used in financing activities   (428,464)   (657,706)
Net increase (decrease) in cash and cash equivalents   195,839    (217,720)
Cash and cash equivalents at beginning of period   520,945    773,990 
Cash and cash equivalents at end of period  $716,784   $556,270 

 

Subscriber Data and Operating Metrics

 

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

 

   Unaudited 
   For the Three Months Ended September 30,   For the Nine Months Ended September 30, 
   2013   2012   2013   2012 
                 
Beginning subscribers   25,068,988    22,919,462    23,900,336    21,892,824 
Gross subscriber additions   2,561,175    2,421,586    7,726,577    7,064,282 
Deactivated subscribers   (2,048,097)   (1,975,665)   (6,044,847)   (5,591,723)
Net additions   513,078    445,921    1,681,730    1,472,559 
Ending subscribers   25,582,066    23,365,383    25,582,066    23,365,383 
                     
Self-pay   20,670,333    19,041,519    20,670,333    19,041,519 
Paid promotional   4,911,733    4,323,864    4,911,733    4,323,864 
Ending subscribers   25,582,066    23,365,383    25,582,066    23,365,383 
                     
Self-pay   372,597    370,553    1,100,059    1,132,777 
Paid promotional   140,481    75,368    581,671    339,782 
Net additions   513,078    445,921    1,681,730    1,472,559 
                     
Daily weighted average number of subscribers   25,267,241    23,008,693    24,646,938    22,519,544 
                     
Average self-pay monthly churn   1.8%   2.0%   1.8%   1.9%
                     
New vehicle consumer conversion rate   44%   44%   44%   45%
                     
ARPU  $12.29   $12.14   $12.21   $11.96 
SAC, per gross subscriber addition  $52   $51   $52   $55 

 

Glossary

 

Adjusted EBITDA - EBITDA is defined as net income before interest and investment income (loss); interest expense, net of amounts capitalized; income tax expense and depreciation and amortization. We adjust EBITDA to remove the impact of other income and expense, loss on extinguishment of debt as well as certain other charges discussed below. This measure is one of the primary Non-GAAP financial measures on which we (i) evaluate the performance of our businesses, (ii) base our internal budgets and (iii) compensate management. Adjusted EBITDA is a Non-GAAP financial performance measure that excludes (if applicable): (i) certain adjustments as a result of the purchase price accounting for the merger of Sirius and XM, (ii) depreciation and amortization and (iii) share-based payment expense. The purchase price accounting adjustments include: (i) the elimination of deferred revenue associated with the investment in XM Canada, (ii) recognition of deferred subscriber revenues not recognized in purchase price accounting, and (iii) elimination of the benefit of deferred credits on executory contracts, which are primarily attributable to third party arrangements with an OEM and programming providers. We believe adjusted EBITDA is a useful measure of the underlying trend of our operating performance, which provides useful information about our business apart from the costs associated with our physical plant, capital structure and purchase price accounting. We believe investors find this Non-GAAP financial measure useful when analyzing our results and comparing our operating performance to the performance of other communications, entertainment and media companies. We believe investors use current and projected adjusted EBITDA to estimate our current and prospective enterprise value and to make investment decisions. Because we fund and build-out our satellite radio system through the periodic raising and expenditure of large amounts of capital, our results of operations reflect significant charges for depreciation expense. The exclusion of depreciation and amortization expense is useful given significant variation in depreciation and amortization expense that can result from the potential variations in estimated useful lives, all of which can vary widely across different industries or among companies within the same industry. We also believe the exclusion of share-based payment expense is useful given the significant variation in expense that can result from changes in the fair value as determined using the Black-Scholes-Merton model

 

which varies based on assumptions used for the expected life, expected stock price volatility and risk-free interest rates.

 

Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statements of comprehensive income of certain expenses, including share-based payment expense and certain purchase price accounting for the merger of Sirius and XM. We endeavor to compensate for the limitations of the Non-GAAP measure presented by also providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the Non-GAAP measure. Investors that wish to compare and evaluate our operating results after giving effect for these costs, should refer to net income as disclosed in our consolidated statements of comprehensive income. Since adjusted EBITDA is a Non-GAAP financial performance measure, our calculation of adjusted EBITDA may be susceptible to varying calculations; may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP. The reconciliation of net income to the adjusted EBITDA is calculated as follows (in thousands):

 

   Unaudited 
   For the Three Months Ended September 30,   For the Nine Months Ended September 30, 
   2013   2012   2013   2012 
                 
Net income (GAAP):  $62,894   $74,514   $312,018   $3,316,457 
Add back items excluded from Adjusted EBITDA:                    
Purchase price accounting adjustments:                    
Revenues   1,813    1,854    5,438    5,599 
Operating expenses   (68,895)   (73,049)   (206,786)   (220,497)
Share-based payment expense (GAAP)   19,762    17,492    49,774    46,361 
Depreciation and amortization (GAAP)   58,533    66,571    192,966    199,481 
Interest expense, net of amounts capitalized (GAAP)   54,629    70,035    150,531    219,777 
Loss on extinguishment of debt and credit facilities, net (GAAP)   107,971    107,105    124,348    132,726 
Interest and investment (income) loss (GAAP)   (1,716)   321    (3,648)   3,192 
Other (income) loss (GAAP)   (407)   (113)   (909)   637 
Income tax expense (benefit) (GAAP)   61,158    (20,113)   216,857    (3,013,860)
Adjusted EBITDA  $295,742   $244,617   $840,589   $689,873 

 

Adjusted Revenues and Operating Expenses - We define this Non-GAAP financial measure as our actual revenues and operating expenses adjusted to exclude the impact of certain purchase price accounting adjustments and share-based payment expense. We use this Non-GAAP financial measure to manage our business, set operational goals and as a basis for determining performance-based compensation for our employees. The following tables reconcile our actual revenues and operating expenses to our adjusted revenues and operating expenses for the three and nine months ended September 30, 2013 and 2012:

 
   Unaudited For the Three Months Ended September 30, 2013 
(in thousands)  As Reported   Purchase Price
Accounting
Adjustments
   Allocation of
Share-based
Payment Expense
   Adjusted 
                 
Revenue:                    
Subscriber revenue  $834,053   $   $   $834,053 
Advertising revenue   21,918            21,918 
Equipment revenue   17,989            17,989 
Other revenue   87,549    1,813        89,362 
Total revenue  $961,509   $1,813   $   $963,322 
Operating expenses                    
Cost of services:                    
Revenue share and royalties  $162,627   $41,942   $   $204,569 
Programming and content   72,322    2,008    (2,232)   72,098 
Customer service and billing   76,322        (647)   75,675 
Satellite and transmission   19,853        (1,076)   18,777 
Cost of equipment   5,340            5,340 
Subscriber acquisition costs   125,457    20,342        145,799 
Sales and marketing   75,638    4,603    (3,871)   76,370 
Engineering, design and development   13,007        (2,177)   10,830 
General and administrative   67,881        (9,759)   58,122 
Depreciation and amortization (a)   58,533            58,533 
Share-based payment expense           19,762    19,762 
Total operating expenses  $676,980   $68,895   $   $745,875 

 

(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the merger of Sirius and XM. The increased depreciation and amortization for the three months ended September 30, 2013 was $12,000.

 

   Unaudited For the Three Months Ended September 30, 2012 
(in thousands)  As Reported   Purchase Price
Accounting Adjustments
   Allocation of
Share-based
Payment Expense
   Adjusted 
                 
Revenue:                    
Subscriber revenue  $757,672   $41   $   $757,713 
Advertising revenue   20,426            20,426 
Equipment revenue   17,813            17,813 
Other revenue   71,449    1,813        73,262 
Total revenue  $867,360   $1,854   $   $869,214 
Operating expenses                    
Cost of services:                    
Revenue share and royalties  $141,834   $37,199   $   $179,033 
Programming and content   69,938    10,431    (1,736)   78,633 
Customer service and billing   77,768        (512)   77,256 
Satellite and transmission   18,319        (938)   17,381 
Cost of equipment   6,345            6,345 
Subscriber acquisition costs   112,418    21,712        134,130 
Sales and marketing   60,676    3,707    (2,931)   61,452 
Engineering, design and development   13,507        (1,753)   11,754 
General and administrative   68,235        (9,622)   58,613 
Depreciation and amortization (a)   66,571            66,571 
Share-based payment expense           17,492    17,492 
Total operating expenses  $635,611   $73,049   $   $708,660 

 

(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the merger of Sirius and XM. The increased depreciation and amortization for the three months ended September 30, 2012 was $13,000.

 
   Unaudited For the Nine Months Ended September 30, 2013 
(in thousands)  As Reported   Purchase Price
Accounting
Adjustments
   Allocation of
Share-based
Payment Expense
   Adjusted 
                 
Revenue:                    
Subscriber revenue  $2,432,113   $   $   $2,432,113 
Advertising revenue   63,886            63,886 
Equipment revenue   54,588            54,588 
Other revenue   248,430    5,438        253,868 
Total revenue  $2,799,017   $5,438   $   $2,804,455 
Operating expenses                    
Cost of services:                    
Revenue share and royalties  $467,017   $122,534   $   $589,551 
Programming and content   217,313    6,965    (5,513)   218,765 
Customer service and billing   237,006        (1,628)   235,378 
Satellite and transmission   59,041        (2,753)   56,288 
Cost of equipment   17,809            17,809 
Subscriber acquisition costs   371,560    64,365        435,925 
Sales and marketing   209,594    12,922    (10,114)   212,402 
Engineering, design and development   42,901        (5,458)   37,443 
General and administrative   184,613        (24,308)   160,305 
Depreciation and amortization (a)   192,966            192,966 
Share-based payment expense           49,774    49,774 
Total operating expenses  $1,999,820   $206,786   $   $2,206,606 

 

(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the merger of Sirius and XM. The increased depreciation and amortization for the nine months ended September 30, 2013 was $37,000.

 

   Unaudited For the Nine Months Ended September 30, 2012 
(in thousands)  As Reported   Purchase Price
Accounting
Adjustments
   Allocation of
Share-based
Payment Expense
   Adjusted 
                 
Revenue:                    
Subscriber revenue  $2,188,199   $161   $   $2,188,360 
Advertising revenue   59,881            59,881 
Equipment revenue   51,183            51,183 
Other revenue   210,362    5,438        215,800 
Total revenue  $2,509,625   $5,599   $   $2,515,224 
Operating expenses                    
Cost of services:                    
Revenue share and royalties  $409,371   $108,069   $   $517,440 
Programming and content   205,203    32,565    (4,342)   233,426 
Customer service and billing   212,635        (1,327)   211,308 
Satellite and transmission   53,980        (2,411)   51,569 
Cost of equipment   19,301            19,301 
Subscriber acquisition costs   348,014    69,328        417,342 
Sales and marketing   176,457    10,535    (7,343)   179,649 
Engineering, design and development   32,468        (4,467)   28,001 
General and administrative   193,786        (26,471)   167,315 
Depreciation and amortization (a)   199,481            199,481 
Share-based payment expense           46,361    46,361 
Total operating expenses  $1,850,696   $220,497   $   $2,071,193 

 

(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the merger of Sirius and XM. The increased depreciation and amortization for the nine months ended September 30, 2012 was $41,000.

 

ARPU - is derived from total earned subscriber revenue, advertising revenue and other subscription-related revenue, net of purchase price accounting adjustments, divided by the

 

number of months in the period, divided by the daily weighted average number of subscribers for the period. Other subscription-related revenue includes the U.S. Music Royalty Fee. Purchase price accounting adjustments include the recognition of deferred subscriber revenues not recognized in purchase price accounting associated with the merger of Sirius and XM. ARPU is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

 

   Unaudited 
   For the Three Months Ended September 30,   For the Nine Months Ended September 30, 
   2013   2012   2013   2012 
                 
Subscriber revenue (GAAP)  $834,053   $757,672   $2,432,113   $2,188,199 
Add: advertising revenue (GAAP)   21,918    20,426    63,886    59,881 
Add: other subscription-related revenue (GAAP)   75,999    60,095    211,784    176,569 
Add: purchase price accounting adjustments       41        161 
   $931,970   $838,234   $2,707,783   $2,424,810 
                     
Daily weighted average number of subscribers   25,267,241    23,008,693    24,646,938    22,519,544 
                     
ARPU  $12.29   $12.14   $12.21   $11.96 

 

Average self-pay monthly churn - is defined as the monthly average of self-pay deactivations for the period divided by the average number of self-pay subscribers for the period.

 

Customer service and billing expenses, per average subscriber - is derived from total customer service and billing expenses, excluding share-based payment expense, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. We believe the exclusion of share-based payment expense in our calculation of customer service and billing expenses, per average subscriber, is useful given the significant variation in expense that can result from changes in the fair market value of our common stock, the effect of which is unrelated to the operational conditions that give rise to variations in the components of our customer service and billing expenses. Customer service and billing expenses, per average subscriber, is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

 

   Unaudited 
   For the Three Months Ended September 30,   For the Nine Months Ended September 30, 
   2013   2012   2013   2012 
                 
Customer service and billing expenses (GAAP)  $76,322   $77,768   $237,006   $212,635 
Less: share-based payment expense   (647)   (512)   (1,628)   (1,327)
   $75,675   $77,256   $235,378   $211,308 
                     
Daily weighted average number of subscribers   25,267,241    23,008,693    24,646,938    22,519,544 
                     
Customer service and billing expenses, per average subscriber  $1.00   $1.12   $1.06   $1.04 

 

Free cash flow - is derived from cash flow provided by operating activities, capital expenditures and restricted and other investment activity. The calculations for free cash flow and free cash flow per fully-diluted share are as follows (in thousands, except per share data):

 
   Unaudited 
   For the Three Months Ended September 30,   For the Nine Months Ended September 30, 
   2013   2012   2013   2012 
Cash Flow information                    
Net cash provided by operating activities  $302,236   $219,809   $744,257   $513,532 
Net cash used in investing activities  $(56,974)  $(24,602)  $(119,954)  $(73,546)
Net cash used in financing activities  $(180,247)  $(507,267)  $(428,464)  $(657,706)
Free Cash Flow                    
Net cash provided by operating activities  $302,236   $219,809   $744,257   $513,532 
Additions to property and equipment   (55,255)   (24,602)   (118,235)   (73,546)
Purchases of restricted and other investments   (1,719)       (1,719)    
Free cash flow  $245,262   $195,207   $624,303   $439,986 
                     
Diluted weighted average common shares outstanding   6,287,353    6,577,654    6,446,082    6,848,230 
                     
Free cash flow per fully-diluted share  $0.04   $0.03   $0.10   $0.06 

 

New vehicle consumer conversion rate - is defined as the percentage of owners and lessees of new vehicles that receive our service and convert to become self-paying subscribers after the initial promotion period. At the time satellite radio enabled vehicles are sold or leased, the owners or lessees generally receive trial subscriptions ranging from three to twelve months. Promotional periods generally include the period of trial service plus 30 days to handle the receipt and processing of payments. We measure conversion rate three months after the period in which the trial service ends. The metric excludes rental and fleet vehicles.

 

Subscriber acquisition cost, per gross subscriber addition - or SAC, per gross subscriber addition, is derived from subscriber acquisition costs and margins from the sale of radios and accessories, excluding purchase price accounting adjustments, divided by the number of gross subscriber additions for the period. Purchase price accounting adjustments associated with the merger of Sirius and XM include the elimination of the benefit of amortization of deferred credits on executory contracts recognized at the merger date attributable to an OEM. SAC, per gross subscriber addition, is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

 

   Unaudited 
   For the Three Months Ended September 30,   For the Nine Months Ended September 30, 
   2013   2012   2013   2012 
                 
Subscriber acquisition costs (GAAP)  $125,457   $112,418   $371,560   $348,014 
Less: margin from direct sales of radios and accessories (GAAP)   (12,649)   (11,468)   (36,779)   (31,882)
Add: purchase price accounting adjustments   20,342    21,712    64,365    69,328 
   $133,150   $122,662   $399,146   $385,460 
                     
Gross subscriber additions   2,561,175    2,421,586    7,726,577    7,064,282 
                     
SAC, per gross subscriber addition  $52   $51   $52   $55 

 

###

 

About Sirius XM Radio

 

Sirius XM Radio Inc. is the world’s largest radio broadcaster measured by revenue and has 25.6 million subscribers. SiriusXM creates and broadcasts commercial-free music; premier sports talk and live events; comedy; news; exclusive talk and entertainment; and the most comprehensive Latin music, sports and talk programming in radio. SiriusXM is available in vehicles from every major car company in the U.S. and from retailers nationwide as well as at shop.siriusxm.com. SiriusXM programming is available through the SiriusXM Internet Radio App for smartphones and other connected devices as well as online at siriusxm.com. SiriusXM also provides premium traffic, weather, data and information services for

 

subscribers in cars, trucks, RVs, boats and aircraft through SiriusXM Traffic™, SiriusXM Travel Link, NavTraffic®, NavWeather™, SiriusXM Aviation, SiriusXM Marine™, Sirius Marine Weather, XMWX Aviation™, and XMWX Marine™. SiriusXM holds a minority interest in SiriusXM Canada which has more than 2 million subscribers.

 

On social media, join the SiriusXM community on Facebook, Twitter, Instagram, and YouTube.

 

This communication contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements include, but are not limited to, statements about future financial and operating results, our plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “believe,” “intend,” “plan,” “projection,” “outlook” or words of similar meaning. Such forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control. Actual results may differ materially from the results anticipated in these forward-looking statements.

 

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: our competitive position versus other forms of radio and audio services; our dependence upon automakers; general economic conditions; failure of our satellites, which, in most cases, are not insured; our ability to attract and retain subscribers at a profitable level; royalties we pay for music rights; the unfavorable outcome of pending or future litigation; rapid technological and industry change; failure of third parties to perform; changes in consumer protection laws and their enforcement; and our substantial indebtedness.  Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our Annual Report on Form 10-K for the year ended December 31, 2012, which is filed with the Securities and Exchange Commission (the "SEC") and available at the SEC’s Internet site (http://www.sec.gov). The information set forth herein speaks only as of the date hereof, and we disclaim any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this communication.

 

E-SIRI

 

Contact Information for Investors and Financial Media:

 

Investors:

 

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

 

Media:

 

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