Current Report


 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

_____________________

 

FORM 8-K

 

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

Date of Report (Date of earliest event reported): May 1, 2012

 

 

SIRIUS XM RADIO INC.

(Exact Name of Registrant as Specified in Charter)

 

 

Delaware 001-34295 52-1700207

(State or other Jurisdiction

of Incorporation)

(Commission File Number)

(I.R.S. Employer

Identification No.)

 

1221 Avenue of the Americas, 36th Fl., New York, NY 10020  
(Address of Principal Executive Offices) (Zip Code)

 

Registrant's telephone number, including area code: (212) 584-5100

 

_____________________________

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 


 

Item 2.02 Results of Operations and Financial Condition


On May 1, 2012, we reported our financial and operating results for the three months ended March 31, 2012. These results are discussed in the press release attached hereto as Exhibit 99.1, which is incorporated by reference in its entirety.


Item 9.01 Financial Statements and Exhibits


(d) Exhibits.


The Exhibit Index attached hereto is incorporated herein.

 

2

 


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

      SIRIUS XM RADIO INC.    
             
             
             
      By: /s/ Patrick L. Donnelly                   
             Patrick L. Donnelly    
             Executive Vice President, General    
             Counsel and Secretary    

 

 

Dated: May 1, 2012

 

3


 

EXHIBITS

 

Exhibit

Description of Exhibit

 

99.1 Press Release dated May 1, 2012

 

 

 

4


Exhibit 99.1

(SIRIUSXM LOGO)

SiriusXM Reports First Quarter 2012 Results

 

 

 

 

Subscribers Grow by 405,000 to a Record 22.3 Million

 

Record Quarterly Revenue of $805 Million, Up 11%

 

First Quarter 2012 Net Income of $108 Million, Up 38%

 

Adjusted EBITDA Reaches $208 Million, Up 15%

 

Company Raises Subscriber Guidance

NEW YORK – May 1, 2012 – Sirius XM Radio (NASDAQ: SIRI) today announced first quarter 2012 financial and operating results, including revenue of $805 million, up 11% over first quarter 2011 revenue of $724 million. Net income for the first quarters of 2012 and 2011 were $108 million and $78 million, respectively, or $0.02 and $0.01 per diluted share, respectively.

Adjusted EBITDA for the first quarter of 2012 was $208 million, up 15% from $181 million in the first quarter of 2011.

“SiriusXM is starting the year with tremendous operational momentum. We grew subscribers faster than any first quarter since our 2008 merger of Sirius and XM, and we improved our self-pay monthly churn rate to 1.9% despite implementing a price increase at the beginning of the year. Rising auto sales and our strong execution should enable us to exceed our prior 2012 subscriber growth guidance of 1.3 million, which today we are raising to 1.5 million,” noted Mel Karmazin, Chief Executive Officer, SiriusXM.

“In 2012, we continue to expect record revenue, adjusted EBITDA, and free cash flow, and our subscriber base will also finish this year at another all-time record high,” said Karmazin. “Our number one focus is on delivering the best possible content to our subscribers – we are rolling out more satellite channels via factory-installed 2.0 radios, and we are improving our online offering by delivering even more live sports coverage, updated apps with enhanced features, and later this year, on-demand content and personalized radio. There has never been a better time to be a SiriusXM subscriber, and we think our unparalleled audio product will produce strong operating and financial performance for our company in the years to come, which should result in great value to our stockholders.”

Additional highlights from the first quarter include:



 

 

 

 

Subscriber growth accelerates. Self-pay net subscriber additions improved by 148% to 299,348 and the subscriber base rose to an all-time high of 22.3 million subscribers. Strong auto sales helped lift total paid and unpaid trial inventory by more than 200,000 from year end to 5.7 million.

 

Churn improves. Self-pay monthly churn was 1.9% in the first quarter of 2012, an improvement from 2.0% in the first quarter of 2011. New vehicle consumer conversion rate was 45% in the first quarter of 2012, in-line with the first quarter of 2011.

 

Free cash flow grows. Free cash flow was $15 million in the first quarter of 2012, an improvement from the ($17) million recorded in the first quarter of 2011, and represented the first time SiriusXM has shown positive free cash flow in the first quarter of a year.

“We ended the first quarter with $747 million of cash, after the repurchase of approximately $57 million in aggregate principal amount of our debt during the first quarter. Our leverage at the end of the first quarter improved to 3.9 times our adjusted EBITDA on a gross basis and 2.9 times our adjusted EBITDA on a net basis,” said David Frear, SiriusXM’s Executive Vice President and Chief Financial Officer. “Our growing cash flow is reducing our leverage substantially, and this improving credit profile should benefit stockholders as we refinance or pay down more than $1 billion of high coupon debt over the next 15 months.”

2012 GUIDANCE

“With auto sales in the first quarter exceeding expectations and better than expected churn, we now expect to grow our net new subscribers by 1.5 million in 2012,” said Karmazin. The Company reiterates its existing 2012 revenue, adjusted EBITDA and free cash flow guidance:

 

 

 

 

Revenue of approximately $3.3 billion,

 

Adjusted EBITDA of approximately $875 million, and

 

Free cash flow of approximately $700 million.

FIRST QUARTER 2012 RESULTS



 

SIRIUS XM RADIO INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


 

 

 

 

 

 

 

 

 

 

For the Three Months
Ended March 31,

 

 

 


 

(in thousands, except per share data)

 

2012

 

2011

 

 

 


 


 

Revenue:

 

 

 

 

 

 

 

Subscriber revenue

 

$

700,242

 

$

622,437

 

Advertising revenue, net of agency fees

 

 

18,670

 

 

16,558

 

Equipment revenue

 

 

16,953

 

 

15,867

 

Other revenue

 

 

68,857

 

 

68,977

 

 

 



 



 

Total revenue

 

 

804,722

 

 

723,839

 

Operating expenses:

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

Revenue share and royalties

 

 

132,111

 

 

106,929

 

Programming and content

 

 

70,095

 

 

72,959

 

Customer service and billing

 

 

66,187

 

 

65,836

 

Satellite and transmission

 

 

18,110

 

 

18,560

 

Cost of equipment

 

 

5,806

 

 

6,405

 

Subscriber acquisition costs

 

 

116,121

 

 

105,270

 

Sales and marketing

 

 

58,361

 

 

47,819

 

Engineering, design and development

 

 

12,690

 

 

11,135

 

General and administrative

 

 

59,886

 

 

56,354

 

Depreciation and amortization

 

 

66,117

 

 

68,400

 

 

 



 



 

Total operating expenses

 

 

605,484

 

 

559,667

 

 

 



 



 

Income from operations

 

 

199,238

 

 

164,172

 

Other income (expense):

 

 

 

 

 

 

 

Interest expense, net of amounts capitalized

 

 

(76,971

)

 

(78,218

)

Loss on extinguishment of debt and credit facilities, net

 

 

(9,971

)

 

(5,994

)

Interest and investment loss

 

 

(1,142

)

 

(1,884

)

Other (loss) income

 

 

(578

)

 

1,617

 

 

 



 



 

Total other expense

 

 

(88,662

)

 

(84,479

)

 

 



 



 

Income before income taxes

 

 

110,576

 

 

79,693

 

Income tax expense

 

 

(2,802

)

 

(1,572

)

 

 



 



 

Net income

 

$

107,774

 

$

78,121

 

 

 



 



 

Foreign currency translation adjustment, net of tax

 

 

(56

)

 

67

 

 

 



 



 

Comprehensive income

 

$

107,718

 

$

78,188

 

 

 



 



 

Net income per common share:

 

 

 

 

 

 

 

Basic

 

$

0.03

 

$

0.02

 

 

 



 



 

Diluted

 

$

0.02

 

$

0.01

 

 

 



 



 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

 

3,767,443

 

 

3,735,136

 

 

 



 



 

Diluted

 

 

6,537,728

 

 

6,481,384

 

 

 



 



 



SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

(in thousands, except share and per share data)

 

March 31, 2012

 

December 31, 2011

 

 

 


 


 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

746,576

 

$

773,990

 

Accounts receivable, net

 

 

108,335

 

 

101,705

 

Receivables from distributors

 

 

96,037

 

 

84,817

 

Inventory, net

 

 

36,791

 

 

36,711

 

Prepaid expenses

 

 

177,515

 

 

125,967

 

Related party current assets

 

 

6,503

 

 

14,702

 

Deferred tax asset

 

 

144,798

 

 

132,727

 

Other current assets

 

 

20,539

 

 

6,335

 

 

 



 



 

Total current assets

 

 

1,337,094

 

 

1,276,954

 

Property and equipment, net

 

 

1,645,610

 

 

1,673,919

 

Long-term restricted investments

 

 

3,973

 

 

3,973

 

Deferred financing fees, net

 

 

38,848

 

 

42,046

 

Intangible assets, net

 

 

2,559,712

 

 

2,573,638

 

Goodwill

 

 

1,834,856

 

 

1,834,856

 

Related party long-term assets

 

 

54,229

 

 

54,953

 

Other long-term assets

 

 

27,402

 

 

35,657

 

 

 



 



 

Total assets

 

$

7,501,724

 

$

7,495,996

 

 

 



 



 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

454,748

 

$

543,193

 

Accrued interest

 

 

77,562

 

 

70,405

 

Current portion of deferred revenue

 

 

1,404,919

 

 

1,333,965

 

Current portion of deferred credit on executory contracts

 

 

281,270

 

 

284,108

 

Current maturities of long-term debt

 

 

1,540

 

 

1,623

 

Related party current liabilities

 

 

16,541

 

 

14,302

 

 

 



 



 

Total current liabilities

 

 

2,236,580

 

 

2,247,596

 

Deferred revenue

 

 

183,430

 

 

198,135

 

Deferred credit on executory contracts

 

 

147,012

 

 

218,199

 

Long-term debt

 

 

2,625,533

 

 

2,683,563

 

Long-term related party debt

 

 

329,576

 

 

328,788

 

Deferred tax liability

 

 

1,024,734

 

 

1,011,084

 

Related party long-term liabilities

 

 

21,048

 

 

21,741

 

Other long-term liabilities

 

 

84,232

 

 

82,745

 

 

 



 



 

Total liabilities

 

 

6,652,145

 

 

6,791,851

 

 

 



 



 

Commitments and contingencies

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock, par value $0.001; 50,000,000 authorized at March 31, 2012 and December 31, 2011:

 

 

 

 

 

 

 

Series A convertible preferred stock; no shares issued and outstanding at March 31, 2012 and December 31, 2011

 

 

 

 

 

Convertible perpetual preferred stock, series B-1 (liquidation preference of $0.001 at March 31, 2012 and December 31, 2011); 12,500,000 shares issued and outstanding at March 31, 2012 and December 31, 2011

 

 

13

 

 

13

 

Common stock, par value $0.001; 9,000,000,000 shares authorized at March 31, 2012 and December 31, 2011; 3,788,755,725 and 3,753,201,929 shares issued and outstanding at March 31, 2012 and December 31, 2011

 

 

3,789

 

 

3,753

 

Accumulated other comprehensive income, net of tax

 

 

15

 

 

71

 

Additional paid-in capital

 

 

10,522,080

 

 

10,484,400

 

Accumulated deficit

 

 

(9,676,318

)

 

(9,784,092

)

 

 



 



 

Total stockholders’ equity

 

 

849,579

 

 

704,145

 

 

 



 



 

Total liabilities and stockholders’ equity

 

$

7,501,724

 

$

7,495,996

 

 

 



 



 



SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

 

 

 


 

(in thousands)

 

2012

 

2011

 

 

 


 


 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

 

$

107,774

 

$

78,121

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

 

66,117

 

 

68,400

 

Non-cash interest expense, net of amortization of premium

 

 

10,647

 

 

9,573

 

Provision for doubtful accounts

 

 

6,208

 

 

9,623

 

Amortization of deferred income related to equity method investment

 

 

(694

)

 

(694

)

Loss on extinguishment of debt and credit facilities, net

 

 

9,971

 

 

5,994

 

Loss on unconsolidated entity investments, net

 

 

422

 

 

2,350

 

Loss on disposal of assets

 

 

 

 

266

 

Share-based payment expense

 

 

14,951

 

 

12,856

 

Deferred income taxes

 

 

1,572

 

 

1,111

 

Other non-cash purchase price adjustments

 

 

(73,956

)

 

(66,743

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

(12,838

)

 

11,291

 

Receivables from distributors

 

 

(11,220

)

 

(8,982

)

Inventory

 

 

(80

)

 

(7,330

)

Related party assets

 

 

8,347

 

 

(3,686

)

Prepaid expenses and other current assets

 

 

(65,753

)

 

(39,232

)

Other long-term assets

 

 

8,256

 

 

7,617

 

Accounts payable and accrued expenses

 

 

(96,859

)

 

(110,400

)

Accrued interest

 

 

7,157

 

 

8,124

 

Deferred revenue

 

 

56,182

 

 

39,225

 

Related party liabilities

 

 

2,239

 

 

738

 

Other long-term liabilities

 

 

1,505

 

 

(113

)

 

 



 



 

Net cash provided by operating activities

 

 

39,948

 

 

18,109

 

 

 



 



 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Additions to property and equipment

 

 

(25,187

)

 

(34,983

)

 

 



 



 

Net cash used in investing activities

 

 

(25,187

)

 

(34,983

)

 

 



 



 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

22,765

 

 

1,072

 

Payment of premiums on redemption of debt

 

 

(6,602

)

 

(4,094

)

Repayment of long-term borrowings

 

 

(58,338

)

 

(133,100

)

 

 



 



 

Net cash used in financing activities

 

 

(42,175

)

 

(136,122

)

 

 



 



 

Net decrease in cash and cash equivalents

 

 

(27,414

)

 

(152,996

)

Cash and cash equivalents at beginning of period

 

 

773,990

 

 

586,691

 

 

 



 



 

Cash and cash equivalents at end of period

 

$

746,576

 

$

433,695

 

 

 



 



 



          Subscriber Data and Operating Metrics

          The following table contains subscriber data and key operating metrics for the three months ended March 31, 2012 and 2011, respectively:

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended March 31,

 

 

 


 

 

 

2012

 

2011

 

 

 


 


 

 

 

 

 

 

 

Beginning subscribers

 

 

21,892,824

 

 

20,190,964

 

Gross subscriber additions

 

 

2,161,693

 

 

2,052,367

 

Deactivated subscribers

 

 

(1,757,097

)

 

(1,679,303

)

 

 


 


 

Net additions

 

 

404,596

 

 

373,064

 

 

 


 


 

Ending subscribers

 

 

22,297,420

 

 

20,564,028

 

 

 


 


 

 

 

 

 

 

 

 

 

Self-pay

 

 

18,208,090

 

 

16,807,643

 

Paid promotional

 

 

4,089,330

 

 

3,756,385

 

 

 


 


 

Ending subscribers

 

 

22,297,420

 

 

20,564,028

 

 

 


 


 

 

 

 

 

 

 

 

 

Self-pay

 

 

299,348

 

 

120,844

 

Paid promotional

 

 

105,248

 

 

252,220

 

 

 


 


 

Net additions

 

 

404,596

 

 

373,064

 

 

 


 


 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

21,990,863

 

 

20,233,144

 

 

 


 


 

 

 

 

 

 

 

 

 

Average self-pay monthly churn

 

 

1.9

%

 

2.0

%

 

 


 


 

New Vehicle Consumer Conversion rate

 

 

45

%

 

45

%

 

 


 


 

ARPU

 

$

11.77

 

$

11.52

 

SAC, per gross subscriber addition

 

$

60

 

$

57

 


 

 


 

          Subscribers. The improvement was due to the 5% increase in gross subscriber additions, primarily resulting from higher new vehicle shipments and light vehicle sales, as well as an increase in conversions from unpaid promotional trials and returning subscriber activations inclusive of previously owned vehicles. This increase in gross additions was partially offset by the 5% increase in deactivations. The increase in deactivations was primarily due to an increase in paid promotional trial deactivations stemming from the increase in volume of paid trials, along with growth in our subscriber base, partially offset by a decline in the self-pay churn rate.

          Average Self-pay Monthly Churn for the three months ended March 31, 2012 and 2011 was 1.9% and 2.0%, respectively. The decrease in the churn rate was driven by a reduction in the non-pay cancellation rate, as well as a favorable shift in the subscriber mix towards automotive vehicles, which churn at lower rates in comparison to aftermarket products.

          New Vehicle Consumer Conversion Rate for the three months ended March 31, 2012 and 2011 was 45%.


          ARPU increased primarily due to the increase in certain of our subscription rates beginning in January 2012, an increase in sales of premium services, including Premier packages, data services and streaming, partially offset by an increase in subscriber retention programs and in the number of subscribers on promotional plans and a decrease in the revenue from the U.S. Music Royalty Fee due to the December 2010 reduction in the rate from 15.3% to 10.8%.

           SAC, Per Gross Subscriber Addition, increased in the three months ended March 31, 2012 primarily due to higher subsidies related to increased OEM installations occurring in advance of acquiring the subscriber, partially offset by improved OEM subsidy rates per vehicle compared to the three months ended March 31, 2011.

Glossary

Adjusted EBITDA - EBITDA is defined as net income before interest and investment 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, (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 certain 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 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 comprehensive income of certain expenses, as discussed above. 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 March 31,

 

 

 




 

 

 

2012

 

2011

 

 

 


 


 

Net income (GAAP):

 

$

107,774

 

$

78,121

 

Add back items excluded from Adjusted EBITDA:

 

 

 

 

 

 

 

Purchase price accounting adjustments:

 

 

 

 

 

 

 

Revenues

 

 

1,880

 

 

3,722

 

Operating expenses

 

 

(74,024

)

 

(67,972

)

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

 

 

14,951

 

 

13,037

 

Depreciation and amortization (GAAP)

 

 

66,117

 

 

68,400

 

Interest expense, net of amounts capitalized (GAAP)

 

 

76,971

 

 

78,218

 

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

 

 

9,971

 

 

5,994

 

Interest and investment loss (GAAP)

 

 

1,142

 

 

1,884

 

Other (income) loss (GAAP)

 

 

578

 

 

(1,617

)

Income tax expense (GAAP)

 

 

2,802

 

 

1,572

 

 

 



 



 

Adjusted EBITDA

 

$

208,162

 

$

181,359

 

 

 



 



 

Adjusted Operating Expenses - We define this Non-GAAP financial measure as our actual 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 operating expenses to our adjusted operating expenses for the three months ended March 31, 2012 and 2011:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited For the Three Months Ended March 31, 2012

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

132,111

 

 

34,846

 

 

 

 

166,957

 

Programming and content

 

 

70,095

 

 

11,702

 

 

(1,374

)

 

80,423

 

Customer service and billing

 

 

66,187

 

 

 

 

(427

)

 

65,760

 

Satellite and transmission

 

 

18,110

 

 

 

 

(785

)

 

17,325

 

Cost of equipment

 

 

5,806

 

 

 

 

 

 

5,806

 

Subscriber acquisition costs

 

 

116,121

 

 

24,085

 

 

 

 

140,206

 

Sales and marketing

 

 

58,361

 

 

3,391

 

 

(2,360

)

 

59,392

 

Engineering, design and development

 

 

12,690

 

 

 

 

(1,432

)

 

11,258

 

General and administrative

 

 

59,886

 

 

 

 

(8,573

)

 

51,313

 

Depreciation and amortization (a)

 

 

66,117

 

 

 

 

 

 

66,117

 

Share-based payment expense

 

 

 

 

 

 

14,951

 

 

14,951

 

 

 



 



 



 



 

Total operating expenses

 

$

605,484

 

$

74,024

 

$

 

$

679,508

 

 

 



 



 



 



 

(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, 2012 was $14,000.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited For the Three Months Ended March 31, 2011

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

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

 

 

 



 



 



 



 

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,

 

 

 


 

 

 

2012

 

2011

 

 

 


 


 

Subscriber revenue (GAAP)

 

$

700,242

 

$

622,437

 

Add: net advertising revenue (GAAP)

 

 

18,670

 

 

16,558

 

Add: other subscription-related revenue (GAAP)

 

 

57,721

 

 

58,531

 

Add: purchase price accounting adjustments

 

 

67

 

 

1,909

 

 

 



 



 

 

 

$

776,700

 

$

699,435

 

 

 



 



 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

21,990,863

 

 

20,233,144

 

 

 



 



 

 

 

 

 

 

 

 

 

ARPU

 

$

11.77

 

$

11.52

 

 

 



 



 

Free cash flow - is derived from cash flow provided by operating activities, capital expenditures and restricted and other investment activity. Free cash flow is calculated as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended March 31,

 

 

 


 

 

 

2012

 

2011

 

 

 


 


 

Cash Flow information

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

39,948

 

$

18,109

 

Net cash used in investing activities

 

 

(25,187

)

 

(34,983

)

Net cash used in financing activities

 

 

(42,175

)

 

(136,122

)

Free Cash Flow

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

39,948

 

$

18,109

 

Additions to property and equipment

 

 

(25,187

)

 

(34,983

)

 

 



 



 

Free cash flow

 

$

14,761

 

$

(16,874

)

 

 



 



 

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 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 Three Months Ended March 31,

 

 

 


 

 

 

2012

 

2011

 

 

 


 


 

Subscriber acquisition costs (GAAP)

 

$

116,121

 

$

105,270

 

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

 

 

(11,147

)

 

(9,462

)

Add: purchase price accounting adjustments

 

 

24,085

 

 

21,656

 

 

 



 



 

 

 

$

129,059

 

$

117,464

 

 

 



 



 

 

 

 

 

 

 

 

 

Gross subscriber additions

 

 

2,161,693

 

 

2,052,367

 

 

 



 



 

 

 

 

 

 

 

 

 

SAC, per gross subscriber addition

 

$

60

 

$

57

 

 

 



 



 

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 over 22 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,” “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 audio entertainment; 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; failure of third parties to perform; 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, 2011, 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