Exhibit 99.1
(GRAPHIC)
SiriusXM Reports First Quarter 2011 Results
    Subscribers Reach New High of 20.6 Million; 373,000 Net Subscriber Additions in First Quarter
 
    Revenue of $724 Million, Up 9% Over First Quarter 2010
 
    Record Adjusted EBITDA of $181 Million, Up 15% Over First Quarter 2010
 
    Free Cash Flow Improves $110 Million Year-Over-Year
NEW YORK – May 3, 2011 – Sirius XM Radio (NASDAQ: SIRI) today announced first quarter 2011 results, including revenue of $724 million, up 9% over first quarter 2010 revenue of $664 million, and adjusted EBITDA of $181 million, up 15% from $158 million in the first quarter of 2010.
“SiriusXM’s first quarter results have put us on track to attain our full year goals for subscriber, revenue, and adjusted EBITDA growth. Significantly, we are now in a position to raise our free cash flow estimate for the year,” said Mel Karmazin, Chief Executive Officer, SiriusXM. “Consumers are buying cars again and demand for our product is strong. Were it not for the OEM supply chain uncertainty resulting from the tragedy in Japan, we would be in a position to raise our subscriber guidance today.”
Other highlights from the quarter include:
  Subscriber growth accelerates. Strong auto sales drove net subscriber additions in the first quarter of 2011 to 373,064, up 118% from 171,441 in the first quarter of 2010. Ending subscribers as of March 31, 2011 were 20,564,028, up 9% from the 18,944,199 subscribers reported as of March 31, 2010.
  SAC improves. Subscriber acquisition cost (SAC) per gross subscriber addition was $57 in the first quarter of 2011, a 3% improvement from the $59 reported in the first quarter of 2010.
  Churn stable. Average self-pay monthly customer churn was 2.0% in the first quarter 2011, in-line with the first quarter 2010 monthly average of 2.0%.
“We operate in a highly competitive audio entertainment marketplace, where there are more choices than ever before, yet consumers continue to choose SiriusXM. We continue to invest in content, expand distribution and improve our technology to deliver

 


 

the most compelling value proposition possible to consumers across the country,” Karmazin added.
Free cash flow in the first quarter of 2011 was ($17) million, a $110 million improvement from the ($127) million recorded in the first quarter 2010. These improvements were driven by declines in satellite capital expenditures and improved adjusted EBITDA. Net income in the first quarters of 2011 and 2010 was $78 million and $42 million, respectively, or $0.01 per diluted share in each period.
“We ended the first quarter with $434 million of cash and cash equivalents after deploying approximately $135 million to repurchase debt. In April, we repurchased approximately $74 million of our 3.25% Convertible Notes due 2011 via a cash tender offer,” said David Frear, SiriusXM’s Executive Vice President and Chief Financial Officer. “We continue to make progress toward reaching our leverage target. Our net debt to adjusted EBITDA declined to 4.1x at the end of the first quarter of 2011 from 6.6x at the end of the first quarter of 2010.”
The discussion of adjusted EBITDA excludes the effects of stock-based compensation and certain purchase price accounting adjustments. A reconciliation of non-GAAP items to their nearest GAAP equivalent is contained in the financial supplements included with this release.
2011 GUIDANCE
In 2011, we continue to expect full-year revenue of approximately $3 billion. Our adjusted EBITDA projection remains at approximately $715 million. Full year self-pay churn and conversion rates for 2011 should be broadly similar to those seen in 2010, and we continue to expect to grow our net new subscribers by 1.4 million in 2011. Free cash flow in 2011 should approach $350 million as compared to previous guidance for free cash flow approaching $300 million.

 


 

FIRST QUARTER 2011 RESULTS
     Subscriber Data.
     The following table contains actual subscriber data for the three months ended March 31, 2011 and 2010, respectively:
                 
    Unaudited  
    For the Three Months Ended March 31,  
    2011     2010  
Beginning subscribers
    20,190,964       18,772,758  
Gross subscriber additions
    2,052,367       1,720,848  
Deactivated subscribers
    (1,679,303 )     (1,549,407 )
 
           
Net additions
    373,064       171,441  
 
           
Ending subscribers
    20,564,028       18,944,199  
 
           
 
               
Self-pay
    16,807,643       15,773,671  
Paid promotional
    3,756,385       3,170,528  
 
           
Ending subscribers
    20,564,028       18,944,199  
 
           
 
               
Self-pay
    120,844       69,739  
Paid promotional
    252,220       101,702  
 
           
Net additions
    373,064       171,441  
 
           
 
               
Daily weighted average number of subscribers
    20,233,144       18,783,263  
 
           
 
               
Average self-pay monthly churn (1)
    2.0 %     2.0 %
 
           
Conversion rate (2)
    44.7 %     45.2 %
 
           
See accompanying footnotes.
     Subscribers. The improvement was due to the 19% increase in gross subscriber additions, primarily resulting from an increase in U.S. light vehicle sales, new vehicle penetration and returning activations.
     Average Self-pay Monthly Churn. While churn remained flat, changes in vehicle ownership were offset by reductions in non-pay cancellation rates.
     Conversion Rate. The decrease was primarily due to changing mix of sales among auto manufacturers.

 


 

     Metrics.
     The following table contains our key operating metrics based on our unaudited adjusted results of operations for the three months ended March 31, 2011 and 2010, respectively:
                 
    Unaudited Adjusted  
    For the Three Months Ended March 31,  
(in thousands, except for per subscriber amounts)   2011     2010  
ARPU (3)
  $ 11.52     $ 11.48  
SAC, per gross subscriber addition (4)
  $ 57     $ 59  
Customer service and billing expenses, per average subscriber (5)
  $ 1.08     $ 0.99  
Free cash flow (6)
  $ (16,874 )   $ (127,203 )
Adjusted total revenue (8)
  $ 727,561     $ 670,563  
Adjusted EBITDA (7)
  $ 181,359     $ 157,757  
See accompanying footnotes.
     ARPU increased by $0.04, primarily driven by an increase in sales of premium services, including “Best of” programming, data services and streaming and an increase in other revenue due to additional subscribers subject to the U.S. Music Royalty Fee, partially offset by an increase in subscriber retention programs and in the number of subscribers on promotional plans.
     SAC, Per Gross Subscriber Addition, decreased primarily due to a 19% increase in gross subscribers, lower per radio subsidy rates for certain OEMs and growth in subscriber reactivations and royalties from radio manufacturers, partially offset by an increase in OEM production with factory-installed satellite radios compared to the three months ended March 31, 2010.
     Customer Service and Billing Expenses, Per Average Subscriber, increased primarily due to higher call volume and handle time per call, an increase to bad debt expense driven by an alignment of policies and personnel costs, partially offset by lower general operating costs.
     Free Cash Flow increased principally as a result of improvements in net cash provided by operating activities and decreases in capital expenditures. Net cash provided by operating activities increased $56 million to $18 million for the three months ended March 31, 2011, compared to the ($38 million) used in operations for the three months ended March 31, 2010. Capital expenditures for property and equipment for the three months ended March 31, 2011 decreased $64 million to $35 million, compared to $99 million for the three months ended March 31, 2010. The increase in net cash

 


 

provided by operating activities was primarily the result of higher collections of amounts due from subscribers, the timing of interest payments on our debt, and the early repayment in the first quarter of 2010 of liabilities deferred in 2009 that were scheduled to be repaid, at 15% interest, in monthly installments from April 2010 through March 2011. The decrease in capital expenditures for the three months ended March 31, 2011 was primarily the result of decreased satellite construction and launch expenditures due to the launch in the fourth quarter of 2010 of our XM-5 satellite.
     Adjusted Total Revenue. Set forth below are our adjusted total revenue for the three months ended March 31, 2011 and 2010, respectively. Our adjusted total revenue includes the recognition of deferred subscriber revenues acquired in the merger between SIRIUS and XM (the “Merger”) that are not recognized in our results under purchase price accounting and the elimination of the benefit in earnings from deferred revenue associated with our investment in XM Canada acquired in the Merger.
                 
    Unaudited  
    For the Three Months Ended March 31,  
(in thousands)   2011     2010  
Revenue:
               
Subscriber revenue, including effects of rebates (GAAP)
  $ 622,437     $ 579,509  
Advertising revenue, net of agency fees (GAAP)
    16,558       14,527  
Equipment revenue (GAAP)
    15,867       14,283  
Other revenue (GAAP)
    68,977       55,465  
 
           
Total revenue (GAAP)
    723,839       663,784  
Purchase price accounting adjustments:
               
Subscriber revenue
    1,909       4,966  
Other revenue
    1,813       1,813  
 
           
Adjusted total revenue
  $ 727,561     $ 670,563  
 
           
For the three months ended March 31, 2011, the increase in subscriber revenue was primarily attributable to a 8% increase in daily weighted average subscribers, an increase in sales of premium services, including “Best of” programming, data services and streaming. The increase in other revenue was driven by additional subscribers subject to the U.S. Music Royalty Fee and increased royalty revenue from Sirius Canada.
     Adjusted EBITDA. EBITDA is defined as net income (loss) before interest and investment income (loss); interest expense, net of amounts capitalized; income tax expense and depreciation and amortization. Adjusted EBITDA removes the impact of other income and expense, losses on extinguishment of debt as well as certain other charges, such as, goodwill impairment; certain purchase price accounting adjustments and share-based payment expense.

 


 

                 
    Unaudited Adjusted  
    For the Three Months Ended March 31,  
(in thousands)   2011     2010  
Total revenue
  $ 727,561     $ 670,563  
Operating expenses:
               
Revenue share and royalties
    136,862       123,539  
Programming and content
    83,273       90,471  
Customer service and billing
    65,487       55,577  
Satellite and transmission
    18,232       19,389  
Cost of equipment
    6,405       7,919  
Subscriber acquisition costs
    126,926       107,045  
Sales and marketing
    49,156       49,942  
Engineering, design and development
    10,024       9,826  
General and administrative
    49,837       49,098  
 
           
Total operating expenses
    546,202       512,806  
 
           
Adjusted EBITDA
  $ 181,359     $ 157,757  
 
           
For the three months ended March 31, 2011, the increase in adjusted EBITDA was primarily due to an increase of 9%, or $57 million, in adjusted revenues, partially offset by an increase of 7%, or $33 million, in expenses included in adjusted EBITDA. The increase in revenue was primarily due to the increase in our subscriber base and by additional subscribers subject to the U.S. Music Royalty Fee. The increase in expenses was primarily driven by higher subscriber acquisition costs related to the 19% increase in gross additions, higher revenue share and royalties expenses associated with growth in revenues subject to revenue sharing and royalty arrangements, and increased customer service and billing expenses associated with subscriber growth, partially offset by lower programming and content costs.

 


 

SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
                 
    Unaudited Actual  
    For the Three Months  
    Ended March 31,  
(in thousands, except per share data)   2011     2010  
Revenue:
               
Subscriber revenue
  $ 622,437     $ 579,509  
Advertising revenue, net of agency fees
    16,558       14,527  
Equipment revenue
    15,867       14,283  
Other revenue
    68,977       55,465  
 
           
Total revenue
    723,839       663,784  
Operating expenses:
               
Cost of services:
               
Revenue share and royalties
    106,929       98,184  
Programming and content
    72,959       78,434  
Customer service and billing
    65,836       56,211  
Satellite and transmission
    18,560       20,119  
Cost of equipment
    6,405       7,919  
Subscriber acquisition costs
    105,270       89,379  
Sales and marketing
    47,819       49,117  
Engineering, design and development
    11,135       11,436  
General and administrative
    56,354       57,580  
Depreciation and amortization
    68,400       70,265  
 
           
Total operating expenses
    559,667       538,644  
 
           
Income from operations
    164,172       125,140  
Other income (expense):
               
Interest expense, net of amounts capitalized
    (78,218 )     (77,868 )
Loss on extinguishment of debt and credit facilities, net
    (5,994 )     (2,450 )
Interest and investment loss
    (1,884 )     (3,270 )
Other income
    1,617       1,213  
 
           
Total other expense
    (84,479 )     (82,375 )
 
           
Income before income taxes
    79,693       42,765  
Income tax expense
    (1,572 )     (1,167 )
 
           
Net income
  $ 78,121     $ 41,598  
 
           
Net income per common share:
               
Basic
  $ 0.02     $ 0.01  
 
           
Diluted
  $ 0.01     $ 0.01  
 
           
Weighted average common shares outstanding:
               
Basic
    3,735,136       3,677,897  
 
           
Diluted
    6,481,384       6,335,114  
 
           

 


 

SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
                 
    March 31, 2011     December 31, 2010  
(in thousands, except share and per share data)   (unaudited)      
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 433,695     $ 586,691  
Accounts receivable, net
    100,744       121,658  
Receivables from distributors
    76,558       67,576  
Inventory, net
    29,248       21,918  
Prepaid expenses
    175,829       134,994  
Related party current assets
    5,943       6,719  
Deferred tax asset
    52,254       44,787  
Other current assets
    4,243       7,432  
 
           
Total current assets
    878,514       991,775  
Property and equipment, net
    1,744,539       1,761,274  
Long-term restricted investments
    3,396       3,396  
Deferred financing fees, net
    50,954       54,135  
Intangible assets, net
    2,617,385       2,632,688  
Goodwill
    1,834,856       1,834,856  
Related party long-term assets
    32,444       30,162  
Other long-term assets
    67,332       74,800  
 
           
Total assets
  $ 7,229,420     $ 7,383,086  
 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable and accrued expenses
  $ 483,530     $ 593,174  
Accrued interest
    80,577       72,453  
Current portion of deferred revenue
    1,252,144       1,201,346  
Current portion of deferred credit on executory contracts
    278,063       271,076  
Current maturities of long-term debt
    100,603       195,815  
Related party current liabilities
    16,583       15,845  
 
           
Total current liabilities
    2,211,500       2,349,709  
Deferred revenue
    263,230       273,973  
Deferred credit on executory contracts
    433,456       508,012  
Long-term debt
    2,666,202       2,695,856  
Long-term related party debt
    326,589       325,907  
Deferred tax liability
    923,272       914,637  
Related party long-term liabilities
    23,823       24,517  
Other long-term liabilities
    82,722       82,839  
 
           
Total liabilities
    6,930,794       7,175,450  
 
           
Commitments and contingencies
               
Stockholders’ equity:
               
Preferred stock, par value $0.001; 50,000,000 authorized at March 31, 2011 and December 31, 2010: Series A convertible preferred stock ; no shares issued and outstanding at March 31, 2011 and December 31, 2010
           
Convertible perpetual preferred stock, series B-1 (liquidation preference of $13 at March 31, 2011 and December 31, 2010); 12,500,000 shares issued and outstanding at March 31, 2011 and December 31, 2010
    13       13  
Convertible preferred stock, series C junior; no shares issued and outstanding at March 31, 2011 and December 31, 2010
           
Common stock, par value $0.001; 9,000,000,000 shares authorized at March 31, 2011 and December 31, 2010; 3,943,060,217 and 3,933,195,112 shares issued and outstanding at March 31, 2011 and December 31, 2010
    3,943       3,933  
Accumulated other comprehensive loss, net of tax
    (5,794 )     (5,861 )
Additional paid-in capital
    10,433,396       10,420,604  
Accumulated deficit
    (10,132,932 )     (10,211,053 )
 
           
Total stockholders’ equity
    298,626       207,636  
 
           
Total liabilities and stockholders’ equity
  $ 7,229,420     $ 7,383,086  
 
           

 


 

SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
                 
    Unaudited Actual  
    For the Three Months Ended March 31,  
(in thousands)   2011     2010  
Cash flows from operating activities:
               
Net income
  $ 78,121     $ 41,598  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
               
Depreciation and amortization
    68,400       70,265  
Non-cash interest expense, net of amortization of premium
    9,573       11,119  
Provision for doubtful accounts
    9,623       7,502  
Amortization of deferred income related to equity method investment
    (694 )     (2,194 )
Loss on extinguishment of debt and credit facilities, net
    5,994       2,450  
Loss on investments, net
    2,350       2,729  
Loss on disposal of assets
    266        
Share-based payment expense
    12,856       17,182  
Deferred income taxes
    1,111       1,167  
Other non-cash purchase price adjustments
    (66,743 )     (58,817 )
Changes in operating assets and liabilities:
               
Accounts receivable
    11,291       (9,792 )
Receivables from distributors
    (8,982 )     (6,037 )
Inventory
    (7,330 )     2,225  
Related party assets
    (3,686 )     1,285  
Prepaid expenses and other current assets
    (39,232 )     (14,690 )
Long-term restricted investments
          (10,160 )
Other long-term assets
    7,617       7,876  
Accounts payable and accrued expenses
    (110,400 )     (115,469 )
Accrued interest
    8,124       (11,373 )
Deferred revenue
    39,225       81,034  
Related party liabilities
    738       (57,207 )
Other long-term liabilities
    (113 )     1,619  
 
           
Net cash provided by (used in) operating activities
    18,109       (37,688 )
 
           
Cash flows from investing activities:
               
Additions to property and equipment
    (34,983 )     (98,965 )
Sale of restricted and other investments
          9,450  
 
           
Net cash used in investing activities
    (34,983 )     (89,515 )
 
           
Cash flows from financing activities:
               
Proceeds from exercise of warrants and stock options
    1,072        
Long-term borrowings, net of costs
          637,406  
Related party long-term borrowings, net of costs
          147,094  
Payment of premiums on redemption of debt
    (4,094 )      
Repayment of long-term borrowings
    (133,100 )     (248,183 )
Restricted cash used for the redemption of debt
          (524,065 )
 
           
Net cash (used in) provided by financing activities
    (136,122 )     12,252  
 
           
Net decrease in cash and cash equivalents
    (152,996 )     (114,951 )
Cash and cash equivalents at beginning of period
    586,691       383,489  
 
           
Cash and cash equivalents at end of period
  $ 433,695     $ 268,538  
 
           

 


 

 
Footnotes
(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.
 
(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. 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 Three Months Ended March 31,  
    2011     2010  
Subscriber revenue (GAAP)
  $ 622,437     $ 579,509  
Add: net advertising revenue (GAAP)
    16,558       14,527  
Add: other subscription-related revenue (GAAP)
    58,531       47,947  
Add: purchase price accounting adjustments
    1,909       4,966  
 
           
 
  $ 699,435     $ 646,949  
 
           
 
               
Daily weighted average number of subscribers
    20,233,144       18,783,263  
 
           
 
               
ARPU
  $ 11.52     $ 11.48  
 
           
 
(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 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 Three Months Ended March 31,  
    2011     2010  
Subscriber acquisition costs (GAAP)
  $ 105,270     $ 89,379  
Less: margin from direct sales of radios and accessories (GAAP)
    (9,462 )     (6,364 )
Add: purchase price accounting adjustments
    21,656       17,666  
 
           
 
  $ 117,464     $ 100,681  
 
           
 
               
Gross subscriber additions
    2,052,367       1,720,848  
 
           
 
               
SAC, per gross subscriber addition
  $ 57     $ 59  
 
           
 
(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 Three Months Ended March 31,  
    2011     2010  
Customer service and billing expenses (GAAP)
  $ 65,836     $ 56,211  
Less: share-based payment expense, net of purchase price accounting adjustments
    (367 )     (728 )
Add: purchase price accounting adjustments
    18       94  
 
           
 
  $ 65,487     $ 55,577  
 
           
Daily weighted average number of subscribers
    20,233,144       18,783,263  
 
           
 
               
Customer service and billing expenses, per average subscriber
  $ 1.08     $ 0.99  
 
           

 


 

 
(6)   Free cash flow is calculated as follows (in thousands):
                 
    Unaudited  
    For the Three Months Ended March 31,  
    2011     2010  
Net cash provided by (used in) operating activities
  $ 18,109     $ (37,688 )
Additions to property and equipment
    (34,983 )     (98,965 )
Restricted and other investment activity
          9,450  
 
           
Free cash flow
  $ (16,874 )   $ (127,203 )
 
           
 
(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 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 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 Three Months Ended March 31,  
    2011     2010  
Net income (GAAP):
  $ 78,121     $ 41,598  
Add back items excluded from Adjusted EBITDA:
               
Purchase price accounting adjustments:
               
Revenues
    3,722       6,779  
Operating expenses
    (67,972 )     (62,610 )
Share-based payment expense, net of purchase price accounting adjustments
    13,037       18,183  
Depreciation and amortization (GAAP)
    68,400       70,265  
Interest expense, net of amounts capitalized (GAAP)
    78,218       77,868  
Loss on extinguishment of debt and credit facilities, net (GAAP)
    5,994       2,450  
Interest and investment loss (GAAP)
    1,884       3,270  
Other income (GAAP)
    (1,617 )     (1,213 )
Income tax expense (GAAP)
    1,572       1,167  
 
           
Adjusted EBITDA
  $ 181,359     $ 157,757  
 
           

 


 

(8)   The following tables reconcile our actual revenues and operating expenses to our adjusted revenues and operating expenses for the three months ended March 31, 2011 and 2010:
                                 
    Unaudited For the Three Months Ended March 31, 2011  
            Purchase Price     Allocation of        
            Accounting     Share-based        
(in thousands)   As Reported     Adjustments     Payment Expense     Adjusted  
Revenue:
                               
Subscriber revenue, including effects of rebates
  $ 622,437     $ 1,909     $     $ 624,346  
Advertising revenue, net of agency fees
    16,558                   16,558  
Equipment revenue
    15,867                   15,867  
Other revenue
    68,977       1,813             70,790  
 
                       
Total revenue
  $ 723,839     $ 3,722     $     $ 727,561  
 
                       
Operating expenses
                               
Cost of services:
                               
Revenue share and royalties
    106,929       29,933             136,862  
Programming and content
    72,959       12,824       (2,510 )     83,273  
Customer service and billing
    65,836       18       (367 )     65,487  
Satellite and transmission
    18,560       239       (567 )     18,232  
Cost of equipment
    6,405                   6,405  
Subscriber acquisition costs
    105,270       21,656             126,926  
Sales and marketing
    47,819       3,212       (1,875 )     49,156  
Engineering, design and development
    11,135       31       (1,142 )     10,024  
General and administrative
    56,354       59       (6,576 )     49,837  
Depreciation and amortization (a)
    68,400                   68,400  
Share-based payment expense (b)
                13,037       13,037  
 
                       
Total operating expenses
  $ 559,667     $ 67,972     $     $ 627,639  
 
                       
 
(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 March 31, 2011 was $15,000.
 
(b)   Amounts related to share-based payment expense included in operating expenses were as follows:
                                 
Programming and content
  $ 2,483     $ 27     $     $ 2,510  
Customer service and billing
    349       18             367  
Satellite and transmission
    548       19             567  
Sales and marketing
    1,848       27             1,875  
Engineering, design and development
    1,111       31             1,142  
General and administrative
    6,517       59             6,576  
 
                       
Total share-based payment expense
  $ 12,856     $ 181     $     $ 13,037  
 
                       

 


 

                                 
    Unaudited For the Three Months Ended March 31, 2010  
            Purchase Price     Allocation of        
            Accounting     Share-based        
(in thousands)   As Reported     Adjustments     Payment Expense     Adjusted  
Revenue:
                               
Subscriber revenue, including effects of rebates
  $ 579,509     $ 4,966     $     $ 584,475  
Advertising revenue, net of agency fees
    14,527                   14,527  
Equipment revenue
    14,283                   14,283  
Other revenue
    55,465       1,813             57,278  
 
                       
Total revenue
  $ 663,784     $ 6,779     $     $ 670,563  
 
                       
Operating expenses
                               
Cost of services:
                               
Revenue share and royalties
    98,184       25,355             123,539  
Programming and content
    78,434       15,147       (3,110 )     90,471  
Customer service and billing
    56,211       94       (728 )     55,577  
Satellite and transmission
    20,119       323       (1,053 )     19,389  
Cost of equipment
    7,919                   7,919  
Subscriber acquisition costs
    89,379       17,666             107,045  
Sales and marketing
    49,117       3,525       (2,700 )     49,942  
Engineering, design and development
    11,436       186       (1,796 )     9,826  
General and administrative
    57,580       314       (8,796 )     49,098  
Depreciation and amortization (a)
    70,265                   70,265  
Share-based payment expense(b)
                18,183       18,183  
 
                       
Total operating expenses
  $ 538,644     $ 62,610     $     $ 601,254  
 
                       
 
(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 March 31, 2010 was $19,000.
 
(b)   Amounts related to share-based payment expense included in operating expenses were as follows:
                                 
Programming and content
  $ 2,950     $ 160     $     $ 3,110  
Customer service and billing
    634       94             728  
Satellite and transmission
    951       102             1,053  
Sales and marketing
    2,555       145             2,700  
Engineering, design and development
    1,610       186             1,796  
General and administrative
    8,482       314             8,796  
 
                       
Total share-based payment expense
  $ 17,182     $ 1,001     $     $ 18,183  
 
                       

 


 

###
About Sirius XM Radio
Sirius XM Radio is America’s satellite radio company. SiriusXM broadcasts more than 135 satellite radio channels of commercial-free music, and premier sports, news, talk, entertainment, traffic, weather, and data services to 20.6 million subscribers. SiriusXM offers an array of content from many of the biggest names in entertainment, as well as from professional sports leagues, major colleges, and national news and talk providers.
SiriusXM programming is available on more than 800 devices, including pre-installed and after-market radios in cars, trucks, boats and aircraft, smartphones and mobile devices, and consumer electronics products for homes and offices. SiriusXM programming is also available at siriusxm.com, and on Apple, BlackBerry and Android-powered mobile devices.
SiriusXM has arrangements with every major automaker and its radio products are available for sale 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 competitive position versus other forms of audio and video entertainment; our ability to retain subscribers and maintain our average monthly revenue per subscriber; our dependence upon automakers and other third parties; our substantial indebtedness; and the useful life of our satellites, which, in most cases, are not insured. 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, 2010, 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.
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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