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): November 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:

 

 

o

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

 

 

o

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

 

 

o

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

 

 

o

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 November 1, 2012, we reported our financial and operating results for the three and nine months ended September 30, 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: November 1, 2012

3


EXHIBITS

 

 

 

Exhibit

 

Description of Exhibit


 



99.1

 


Press Release dated November 1, 2012

4


Exhibit 99.1

(SIRIUSXM LOGO)

SiriusXM Reports Third Quarter 2012 Results

 

 

Subscribers Grow by 446,000 to a Record 23.4 Million

Record Revenue of $867 Million, Up 14%

Net Income of $75 Million, After Debt Extinguishment Charge of $107 Million

Adjusted EBITDA Grows 24% to a Record $245 Million

Free Cash Flow Grows 159% to $195 Million

NEW YORK – November 1, 2012 – Sirius XM Radio (NASDAQ: SIRI) today announced third quarter 2012 financial and operating results, including revenue of $867 million, up 14% from third quarter 2011 revenue of $763 million. Net income for the third quarter 2012 and 2011 was $75 million and $104 million, respectively, including a loss on extinguishment of debt of $107 million in the third quarter of 2012. Adjusted EBITDA for the third quarter of 2012 was $245 million, up 24% from $197 million in the third quarter of 2011.

“SiriusXM delivered a very strong third quarter for our shareholders, with 446,000 net subscriber additions, double-digit growth, and record levels of revenue, adjusted EBITDA, and free cash flow. The Company has produced more free cash flow in the first nine months of this year than in any full year in its history, and we’ve used this cash to reduce our debt to its lowest level since the merger of Sirius and XM,” noted Mel Karmazin, Chief Executive Officer, SiriusXM.

“We’re excited about the increase in subscriber guidance to 1.8 million net additions that we reported earlier this month, as we believe growth in the fourth quarter will continue. We continue to make investments across our business, particularly in R&D, customer care, infrastructure, and programming. We are also investing in new businesses, such as the telematics service we announced in the third quarter with Nissan, and we believe these investments will reward our shareholders in the years to come,” said Karmazin.

Additional highlights from the third quarter include:

 

 

 

 

Record subscriber growth. Self-pay net subscriber additions improved by 2% year-over-year to 371,000, pushing the self-pay subscriber base to an all-time high of 19.0 million subscribers. The total paid subscriber base rose to a record high 23.4 million subscribers. Strong auto sales helped lift total paid and unpaid trial inventory by approximately 115,000 from the second quarter of 2012 to 6.2 million.

 

Churn and conversion stable. Self-pay monthly churn was 2.0% in the third quarter of 2012, compared to 1.9% reported in the third quarter of 2011. New vehicle consumer conversion rate was 44% in the third quarter of 2012, unchanged from the third quarter of 2011.




 

 

 

 

Free cash flow grows to record level. Free cash flow was $195 million in the third quarter of 2012, an improvement of 159% from the $75 million recorded in the third quarter of 2011.

“Following the repurchase of approximately $868 million of our debt in the third quarter of 2012, SiriusXM ended the quarter with $556 million of cash. The company’s leverage has improved dramatically in the past year, ending the third quarter at just 2.8x our adjusted EBITDA, down from 4.3x at the end of the third quarter of 2011,” remarked David Frear, SiriusXM’s Executive Vice President and Chief Financial Officer. “By eliminating our two most expensive debt instruments in the third quarter, we will reduce our interest costs significantly, and with no debt maturing in the next two years we now have more flexibility to pursue strategic initiatives,” added Frear.

2012 GUIDANCE

“Our increased subscriber guidance of approximately 1.8 million net additions shows we remain confident about growth in the fourth quarter,” said Karmazin. “We were pleased to raise our subscriber guidance for the third time this year.”

The Company confirmed its 2012 subscriber, revenue, adjusted EBITDA and free cash flow guidance:

 

 

 

 

Net subscriber growth approaching 1.8 million,

 

Revenue approaching $3.4 billion,

 

Adjusted EBITDA of approximately $900 million, and

 

Free cash flow of approximately $700 million.



THIRD QUARTER 2012 RESULTS

SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended
September 30,

 

For the Nine Months Ended
September 30,

 

 

 


 


 

(in thousands, except per share data)

 

2012

 

2011

 

2012

 

2011

 

 

 


 


 


 


 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue

 

$

757,672

 

$

660,837

 

$

2,188,199

 

$

1,922,917

 

Advertising revenue, net of agency fees

 

 

20,426

 

 

18,810

 

 

59,881

 

 

53,595

 

Equipment revenue

 

 

17,813

 

 

15,504

 

 

51,183

 

 

48,392

 

Other revenue

 

 

71,449

 

 

67,399

 

 

210,362

 

 

205,882

 

 

 



 



 



 



 

Total revenue

 

 

867,360

 

 

762,550

 

 

2,509,625

 

 

2,230,786

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

141,834

 

 

117,043

 

 

409,371

 

 

340,713

 

Programming and content

 

 

69,938

 

 

70,509

 

 

205,203

 

 

210,867

 

Customer service and billing

 

 

77,768

 

 

64,239

 

 

212,635

 

 

192,667

 

Satellite and transmission

 

 

18,319

 

 

19,681

 

 

53,980

 

 

57,238

 

Cost of equipment

 

 

6,345

 

 

5,888

 

 

19,301

 

 

19,894

 

Subscriber acquisition costs

 

 

112,418

 

 

107,279

 

 

348,014

 

 

317,711

 

Sales and marketing

 

 

60,676

 

 

55,210

 

 

176,457

 

 

154,471

 

Engineering, design and development

 

 

13,507

 

 

14,175

 

 

32,468

 

 

39,249

 

General and administrative

 

 

68,235

 

 

58,635

 

 

193,786

 

 

175,469

 

Depreciation and amortization

 

 

66,571

 

 

65,403

 

 

199,481

 

 

200,865

 

 

 



 



 



 



 

Total operating expenses

 

 

635,611

 

 

578,062

 

 

1,850,696

 

 

1,709,144

 

 

 



 



 



 



 

Income from operations

 

 

231,749

 

 

184,488

 

 

658,929

 

 

521,642

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of amounts capitalized

 

 

(70,035

)

 

(75,316

)

 

(219,777

)

 

(229,730

)

Loss on extinguishment of debt and credit facilities, net

 

 

(107,105

)

 

 

 

(132,726

)

 

(7,206

)

Interest and investment (loss) income

 

 

(321

)

 

292

 

 

(3,192

)

 

78,590

 

Other income (loss)

 

 

113

 

 

435

 

 

(637

)

 

2,235

 

 

 



 



 



 



 

Total other expense

 

 

(177,348

)

 

(74,589

)

 

(356,332

)

 

(156,111

)

 

 



 



 



 



 

Income before income taxes

 

 

54,401

 

 

109,899

 

 

302,597

 

 

365,531

 

Income tax benefit (expense)

 

 

20,113

 

 

(5,714

)

 

3,013,860

 

 

(9,907

)

 

 



 



 



 



 

Net income

 

$

74,514

 

$

104,185

 

$

3,316,457

 

$

355,624

 

 

 



 



 



 



 

Realized loss on XM Canada investment foreign currency adjustment, net of tax

 

 

 

 

 

 

 

 

6,072

 

Foreign currency translation adjustment, net of tax

 

 

 

 

110

 

 

(38

)

 

187

 

 

 



 



 



 



 

Comprehensive income

 

$

74,514

 

$

104,295

 

$

3,316,419

 

$

361,883

 

 

 



 



 



 



 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.01

 

$

0.02

 

$

0.52

 

$

0.06

 

 

 



 



 



 



 

Diluted

 

$

0.01

 

$

0.02

 

$

0.49

 

$

0.05

 

 

 



 



 



 



 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

4,034,122

 

 

3,747,381

 

 

3,870,031

 

 

3,742,309

 

 

 



 



 



 



 

Diluted

 

 

6,577,654

 

 

6,507,370

 

 

6,848,230

 

 

6,500,819

 

 

 



 



 



 



 



SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

September 30, 2012

 

December 31, 2011

 

 

 


 


 

(in thousands, except share and per share data)

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

556,270

 

$

773,990

 

Accounts receivable, net

 

 

102,963

 

 

101,705

 

Receivables from distributors

 

 

87,773

 

 

84,817

 

Inventory, net

 

 

35,823

 

 

36,711

 

Prepaid expenses

 

 

150,397

 

 

125,967

 

Related party current assets

 

 

8,221

 

 

14,702

 

Deferred tax asset

 

 

913,010

 

 

132,727

 

Other current assets

 

 

8,271

 

 

6,335

 

 

 



 



 

Total current assets

 

 

1,862,728

 

 

1,276,954

 

Property and equipment, net

 

 

1,601,363

 

 

1,673,919

 

Long-term restricted investments

 

 

3,973

 

 

3,973

 

Deferred financing fees, net

 

 

32,546

 

 

42,046

 

Intangible assets, net

 

 

2,532,455

 

 

2,573,638

 

Goodwill

 

 

1,815,673

 

 

1,834,856

 

Related party long-term assets

 

 

50,104

 

 

54,953

 

Long-term deferred tax asset

 

 

1,244,996

 

 

 

Other long-term assets

 

 

11,204

 

 

35,657

 

 

 



 



 

Total assets

 

$

9,155,042

 

$

7,495,996

 

 

 



 



 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

514,479

 

$

543,193

 

Accrued interest

 

 

64,463

 

 

70,405

 

Current portion of deferred revenue

 

 

1,426,815

 

 

1,333,965

 

Current portion of deferred credit on executory contracts

 

 

275,567

 

 

284,108

 

Current maturities of long-term debt

 

 

4,326

 

 

1,623

 

Related party current liabilities

 

 

12,988

 

 

14,302

 

 

 



 



 

Total current liabilities

 

 

2,298,638

 

 

2,247,596

 

Deferred revenue

 

 

158,223

 

 

198,135

 

Deferred credit on executory contracts

 

 

6,243

 

 

218,199

 

Long-term debt

 

 

2,221,685

 

 

2,683,563

 

Long-term related party debt

 

 

208,742

 

 

328,788

 

Deferred tax liability

 

 

 

 

1,011,084

 

Related party long-term liabilities

 

 

19,660

 

 

21,741

 

Other long-term liabilities

 

 

85,676

 

 

82,745

 

 

 



 



 

Total liabilities

 

 

4,998,867

 

 

6,791,851

 

 

 



 



 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock, par value $0.001; 50,000,000 authorized at September 30, 2012 and December 31, 2011:

 

 

 

 

 

 

 

Series A convertible preferred stock; no shares issued and outstanding at September 30, 2012 and December 31, 2011

 

 

 

 

 

Convertible perpetual preferred stock, series B-1 (liquidation preference of $0.001 per share at September 30, 2012 and December 31, 2011); 6,250,100 and 12,500,000 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively

 

 

6

 

 

13

 

Common stock, par value $0.001; 9,000,000,000 shares authorized at September 30, 2012 and December 31, 2011; 5,192,364,730 and 3,753,201,929 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively

 

 

5,192

 

 

3,753

 

Accumulated other comprehensive income, net of tax

 

 

33

 

 

71

 

Additional paid-in capital

 

 

10,618,579

 

 

10,484,400

 

Accumulated deficit

 

 

(6,467,635

)

 

(9,784,092

)

 

 



 



 

Total stockholders’ equity

 

 

4,156,175

 

 

704,145

 

 

 



 



 

Total liabilities and stockholders’ equity

 

$

9,155,042

 

$

7,495,996

 

 

 



 



 



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

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended September 30,

 

 

 


 

(in thousands)

 

2012

 

2011

 

 

 


 


 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

 

$

3,316,457

 

$

355,624

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

199,481

 

 

200,865

 

Non-cash interest expense, net of amortization of premium

 

 

30,786

 

 

29,211

 

Provision for doubtful accounts

 

 

24,953

 

 

26,209

 

Amortization of deferred income related to equity method investment

 

 

(2,082

)

 

(2,082

)

Loss on extinguishment of debt and credit facilities, net

 

 

132,726

 

 

7,206

 

Gain on merger of unconsolidated entities

 

 

 

 

(84,855

)

Loss on unconsolidated entity investments, net

 

 

4,014

 

 

10,259

 

Loss on disposal of assets

 

 

567

 

 

269

 

Share-based payment expense

 

 

46,361

 

 

37,574

 

Deferred income taxes

 

 

(3,017,021

)

 

7,214

 

Other non-cash purchase price adjustments

 

 

(220,336

)

 

(203,630

)

Distribution from investment in unconsolidated entity

 

 

 

 

4,849

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

(26,211

)

 

(1,456

)

Receivables from distributors

 

 

(2,956

)

 

(12,358

)

Inventory

 

 

888

 

 

(14,278

)

Related party assets

 

 

6,905

 

 

30,300

 

Prepaid expenses and other current assets

 

 

(26,367

)

 

(11,028

)

Other long-term assets

 

 

24,454

 

 

23,969

 

Accounts payable and accrued expenses

 

 

(27,384

)

 

(100,502

)

Accrued interest

 

 

(5,940

)

 

6,472

 

Deferred revenue

 

 

52,777

 

 

19,653

 

Related party liabilities

 

 

(1,314

)

 

696

 

Other long-term liabilities

 

 

2,774

 

 

(1,547

)

 

 



 



 

Net cash provided by operating activities

 

 

513,532

 

 

328,634

 

 

 



 



 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Additions to property and equipment

 

 

(73,546

)

 

(115,065

)

Release of restricted investments

 

 

 

 

250

 

Return of capital from investment in unconsolidated entity

 

 

 

 

10,117

 

 

 



 



 

Net cash used in investing activities

 

 

(73,546

)

 

(104,698

)

 

 



 



 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

89,250

 

 

9,045

 

Long-term borrowings, net of costs

 

 

393,687

 

 

 

Payment of premiums on redemption of debt

 

 

(100,615

)

 

(5,020

)

Repayment of long-term borrowings

 

 

(914,028

)

 

(210,060

)

Repayment of related party long-term borrowings

 

 

(126,000

)

 

 

 

 



 



 

Net cash used in financing activities

 

 

(657,706

)

 

(206,035

)

 

 



 



 

Net (decrease) increase in cash and cash equivalents

 

 

(217,720

)

 

17,901

 

Cash and cash equivalents at beginning of period

 

 

773,990

 

 

586,691

 

 

 



 



 

Cash and cash equivalents at end of period

 

$

556,270

 

$

604,592

 

 

 



 



 



          Subscriber Data and Operating Metrics

The following table contains actual subscriber data and key operating metrics for the three and nine months ended September 30, 2012 and 2011, respectively:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended September 30,

 

For the Nine Months Ended September 30,

 

 

 


 


 

 

 

2012

 

2011

 

2012

 

2011

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning subscribers

 

 

22,919,462

 

 

21,016,175

 

 

21,892,824

 

 

20,190,964

 

Gross subscriber additions

 

 

2,421,586

 

 

2,138,131

 

 

7,064,282

 

 

6,369,846

 

Deactivated subscribers

 

 

(1,975,665

)

 

(1,804,448

)

 

(5,591,723

)

 

(5,210,952

)

 

 



 



 



 



 

Net additions

 

 

445,921

 

 

333,683

 

 

1,472,559

 

 

1,158,894

 

 

 



 



 



 



 

Ending subscribers

 

 

23,365,383

 

 

21,349,858

 

 

23,365,383

 

 

21,349,858

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Self-pay

 

 

19,041,519

 

 

17,534,310

 

 

19,041,519

 

 

17,534,310

 

Paid promotional

 

 

4,323,864

 

 

3,815,548

 

 

4,323,864

 

 

3,815,548

 

 

 



 



 



 



 

Ending subscribers

 

 

23,365,383

 

 

21,349,858

 

 

23,365,383

 

 

21,349,858

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Self-pay

 

 

370,553

 

 

364,004

 

 

1,132,777

 

 

847,511

 

Paid promotional

 

 

75,368

 

 

(30,321

)

 

339,782

 

 

311,383

 

 

 



 



 



 



 

Net additions

 

 

445,921

 

 

333,683

 

 

1,472,559

 

 

1,158,894

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

23,008,693

 

 

21,107,540

 

 

22,519,544

 

 

20,688,641

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average self-pay monthly churn

 

 

2.0

%

 

1.9

%

 

1.9

%

 

1.9

%

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New vehicle consumer conversion rate

 

 

44

%

 

44

%

 

45

%

 

45

%

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ARPU

 

$

12.14

 

$

11.66

 

$

11.96

 

$

11.57

 

SAC, per gross subscriber addition

 

$

51

 

$

55

 

$

55

 

$

55

 

          Subscribers. The improvement was due to the 13% increase in gross subscriber additions, primarily resulting from an increase in U.S. light vehicle sales, new vehicle shipments and returning subscriber activations, including previously owned car activations. This increase in gross additions was partially offset by the 9% 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. Net additions increased 34% driven by an increase of 106,000 paid promotional subscribers.

          Average Self-pay Monthly Churn for the three months ended September 30, 2012 and 2011 was 2.0% and 1.9%, respectively.

          New Vehicle Consumer Conversion Rate for the three months ended September 30, 2012 and 2011 was 44%.

          ARPU increased primarily due to the increase in certain subscription rates beginning in January 2012, an increase in sales of premium services, including Premier packages, data services and streaming, and an increase in other revenue due to additional subscribers subject to the U.S. Music Royalty Fee. The rise in ARPU was 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 a reduction in the rate in December 2010.

          SAC, Per Gross Subscriber Addition, improved to $51 for the three months ended September 30, 2012 from $55 for the same period in 2011. The decrease was driven by improved OEM subsidy rates per vehicle and a 13% increase in gross subscribers compared to the three months ended September 30, 2011, partially offset by higher subsidies related to increased OEM installations occurring in advance of acquiring a subscriber.


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 of Sirius and XM, (ii) goodwill impairment, (iii) restructuring, impairments, and related costs, (iv) depreciation and amortization and (v) share-based payment expense. The purchase price accounting adjustments include: (i) the elimination of deferred revenue associated with the investment in XM Canada, (ii) recognition of deferred subscriber revenues not recognized in purchase price accounting, and (iii) elimination of the benefit of deferred credits on executory contracts, which are primarily attributable to third party arrangements with an OEM and programming providers. We believe adjusted EBITDA is a useful measure of the underlying trend of our operating performance, which provides useful information about our business apart from the costs associated with our physical plant, capital structure and purchase price accounting. We believe investors find this non-GAAP financial measure useful when analyzing our results and comparing our operating performance to the performance of other communications, entertainment and media companies. We believe investors use current and projected adjusted EBITDA to estimate our current and prospective enterprise value and to make investment decisions. Because we fund and build-out our satellite radio system through the periodic raising and expenditure of large amounts of capital, our results of operations reflect significant charges for depreciation expense. The exclusion of depreciation and amortization expense is useful given significant variation in depreciation and amortization expense that can result from the potential variations in estimated useful lives, all of which can vary widely across different industries or among companies within the same industry. We believe the exclusion of restructuring, impairments and related costs is useful given the nature of these expenses. We also believe the exclusion of share-based payment expense is useful given the significant variation in expense that can result from changes in the fair 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,

 

 

 


 


 

 

 

2012

 

2011

 

2012

 

2011

 

 

 


 


 


 


 

 

Net income (GAAP):

 

$

74,514

 

$

104,185

 

$

3,316,457

 

$

355,624

 

Add back items excluded from Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase price accounting adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

1,854

 

 

2,292

 

 

5,599

 

 

8,951

 

Operating expenses

 

 

(73,049

)

 

(68,878

)

 

(220,497

)

 

(205,472

)

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

 

 

17,492

 

 

13,983

 

 

46,361

 

 

37,755

 

Depreciation and amortization (GAAP)

 

 

66,571

 

 

65,403

 

 

199,481

 

 

200,865

 

Interest expense, net of amounts capitalized (GAAP)

 

 

70,035

 

 

75,316

 

 

219,777

 

 

229,730

 

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

 

 

107,105

 

 

 

 

132,726

 

 

7,206

 

Interest and investment loss (income) (GAAP)

 

 

321

 

 

(292

)

 

3,192

 

 

(78,590

)

Other loss (income) (GAAP)

 

 

(113

)

 

(435

)

 

637

 

 

(2,235

)

Income tax (benefit) expense (GAAP)

 

 

(20,113

)

 

5,714

 

 

(3,013,860

)

 

9,907

 

 

 



 



 



 



 

Adjusted EBITDA

 

$

244,617

 

$

197,288

 

$

689,873

 

$

563,741

 

 

 



 



 



 



 

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, 2012 and 2011:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, net of agency fees

 

 

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 Three Months Ended September 30, 2011

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue

 

$

660,837

 

$

479

 

$

 

$

661,316

 

Advertising revenue, net of agency fees

 

 

18,810

 

 

 

 

 

 

18,810

 

Equipment revenue

 

 

15,504

 

 

 

 

 

 

15,504

 

Other revenue

 

 

67,399

 

 

1,813

 

 

 

 

69,212

 

 

 



 



 



 



 

Total revenue

 

$

762,550

 

$

2,292

 

$

 

$

764,842

 

 

 



 



 



 



 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

117,043

 

 

32,293

 

 

 

 

149,336

 

Programming and content

 

 

70,509

 

 

12,034

 

 

(1,275

)

 

81,268

 

Customer service and billing

 

 

64,239

 

 

 

 

(402

)

 

63,837

 

Satellite and transmission

 

 

19,681

 

 

 

 

(735

)

 

18,946

 

Cost of equipment

 

 

5,888

 

 

 

 

 

 

5,888

 

Subscriber acquisition costs

 

 

107,279

 

 

20,620

 

 

 

 

127,899

 

Sales and marketing

 

 

55,210

 

 

3,931

 

 

(2,165

)

 

56,976

 

Engineering, design and development

 

 

14,175

 

 

 

 

(1,291

)

 

12,884

 

General and administrative

 

 

58,635

 

 

 

 

(8,115

)

 

50,520

 

Depreciation and amortization (a)

 

 

65,403

 

 

 

 

 

 

65,403

 

Share-based payment expense (b)

 

 

 

 

 

 

13,983

 

 

13,983

 

 

 



 



 



 



 

Total operating expenses

 

$

578,062

 

$

68,878

 

$

 

$

646,940

 

 

 



 



 



 



 

(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, 2011 was $15,000.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Programming and content

 

$

1,275

 

$

 

$

 

$

1,275

 

Customer service and billing

 

 

402

 

 

 

 

 

 

402

 

Satellite and transmission

 

 

735

 

 

 

 

 

 

735

 

Sales and marketing

 

 

2,165

 

 

 

 

 

 

2,165

 

Engineering, design and development

 

 

1,291

 

 

 

 

 

 

1,291

 

General and administrative

 

 

8,115

 

 

 

 

 

 

8,115

 

 

 



 



 



 



 

Total share-based payment expense

 

$

13,983

 

$

 

$

 

$

13,983

 

 

 



 



 



 



 




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, net of agency fees

 

 

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.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited For the Nine Months Ended September 30, 2011

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue

 

$

1,922,917

 

$

3,513

 

$

 

$

1,926,430

 

Advertising revenue, net of agency fees

 

 

53,595

 

 

 

 

 

 

53,595

 

Equipment revenue

 

 

48,392

 

 

 

 

 

 

48,392

 

Other revenue

 

 

205,882

 

 

5,438

 

 

 

 

211,320

 

 

 



 



 



 



 

Total revenue

 

$

2,230,786

 

$

8,951

 

$

 

$

2,239,737

 

 

 



 



 



 



 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

340,713

 

 

93,359

 

 

 

 

434,072

 

Programming and content

 

 

210,867

 

 

36,645

 

 

(4,745

)

 

242,767

 

Customer service and billing

 

 

192,667

 

 

18

 

 

(1,077

)

 

191,608

 

Satellite and transmission

 

 

57,238

 

 

313

 

 

(1,867

)

 

55,684

 

Cost of equipment

 

 

19,894

 

 

 

 

 

 

19,894

 

Subscriber acquisition costs

 

 

317,711

 

 

64,086

 

 

 

 

381,797

 

Sales and marketing

 

 

154,471

 

 

10,961

 

 

(5,654

)

 

159,778

 

Engineering, design and development

 

 

39,249

 

 

31

 

 

(3,407

)

 

35,873

 

General and administrative

 

 

175,469

 

 

59

 

 

(21,005

)

 

154,523

 

Depreciation and amortization (a)

 

 

200,865

 

 

 

 

 

 

200,865

 

Share-based payment expense (b)

 

 

 

 

 

 

37,755

 

 

37,755

 

 

 



 



 



 



 

Total operating expenses

 

$

1,709,144

 

$

205,472

 

$

 

$

1,914,616

 

 

 



 



 



 



 

(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, 2011 was $45,000.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Programming and content

 

$

4,718

 

$

27

 

$

 

$

4,745

 

Customer service and billing

 

 

1,059

 

 

18

 

 

 

 

1,077

 

Satellite and transmission

 

 

1,848

 

 

19

 

 

 

 

1,867

 

Sales and marketing

 

 

5,627

 

 

27

 

 

 

 

5,654

 

Engineering, design and development

 

 

3,376

 

 

31

 

 

 

 

3,407

 

General and administrative

 

 

20,946

 

 

59

 

 

 

 

21,005

 

 

 



 



 



 



 

Total share-based payment expense

 

$

37,574

 

$

181

 

$

 

$

37,755

 

 

 



 



 



 



 

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 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,

 

 

 


 


 

 

 

2012

 

2011

 

2012

 

2011

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue (GAAP)

 

$

757,672

 

$

660,837

 

$

2,188,199

 

$

1,922,917

 

Add: net advertising revenue (GAAP)

 

 

20,426

 

 

18,810

 

 

59,881

 

 

53,595

 

Add: other subscription-related revenue (GAAP)

 

 

60,095

 

 

58,168

 

 

176,569

 

 

174,341

 

Add: purchase price accounting adjustments

 

 

41

 

 

479

 

 

161

 

 

3,513

 

 

 



 



 



 



 

 

 

$

838,234

 

$

738,294

 

$

2,424,810

 

$

2,154,366

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

23,008,693

 

 

21,107,540

 

 

22,519,544

 

 

20,688,641

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ARPU

 

$

12.14

 

$

11.66

 

$

11.96

 

$

11.57

 

 

 



 



 



 



 

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 and purchase price accounting adjustments associated with the merger of Sirius and XM, 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 of Sirius and XM 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
September 30,

 

For the Nine Months Ended
September 30,

 

 

 


 


 

 

 

2012

 

2011

 

2012

 

2011

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer service and billing expenses (GAAP)

 

$

77,768

 

$

64,239

 

$

212,635

 

$

192,667

 

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

 

 

(512

)

 

(402

)

 

(1,327

)

 

(1,077

)

Add: purchase price accounting adjustments

 

 

 

 

 

 

 

 

18

 

 

 



 



 



 



 

 

 

 

77,256

 

 

63,837

 

 

211,308

 

 

191,608

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

23,008,693

 

 

21,107,540

 

 

22,519,544

 

 

20,688,641

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer service and billing expenses, per average subscriber

 

$

1.12

 

$

1.01

 

$

1.04

 

$

1.03

 

 

 



 



 



 



 

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
September 30,

 

For the Nine Months Ended
September 30,

 

 

 


 


 

 

 

2012

 

2011

 

2012

 

2011

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flow information

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

219,809

 

$

115,144

 

$

513,532

 

$

328,634

 

Net cash used in investing activities

 

 

(24,602

)

 

(39,767

)

 

(73,546

)

 

(104,698

)

Net cash used in financing activities

 

 

(507,267

)

 

888

 

 

(657,706

)

 

(206,035

)

Free Cash Flow

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

219,809

 

$

115,144

 

$

513,532

 

$

328,634

 

    Additions to property and equipment

 

 

(24,602

)

 

(39,767

)

 

(73,546

)

 

(115,065

)

    Restricted and other investment activity

 

 

 

 

 

 

 

 

10,367

 

 

 



 



 



 



 

Free cash flow

 

$

195,207

 

$

75,377

 

$

439,986

 

$

223,936

 

 

 



 



 



 



 

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 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 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,

 

 

 


 


 

 

 

2012

 

2011

 

2012

 

2011

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber acquisition costs (GAAP)

 

$

112,418

 

$

107,279

 

$

348,014

 

$

317,711

 

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

 

 

(11,468

)

 

(9,616

)

 

(31,882

)

 

(28,498

)

Add: purchase price accounting adjustments

 

 

21,712

 

 

20,620

 

 

69,328

 

 

64,086

 

 

 



 



 



 



 

 

 

$

122,662

 

$

118,283

 

$

385,460

 

$

353,299

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross subscriber additions

 

 

2,421,586

 

 

2,138,131

 

 

7,064,282

 

 

6,369,846

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SAC, per gross subscriber addition

 

$

51

 

$

55

 

$

55

 

$

55

 

 

 



 



 



 



 

###


Sirius XM Radio Inc . is the world’s largest radio broadcaster measured by revenue and has 23.4 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., from retailers nationwide, and online at siriusxm.com . SiriusXM programming is also available through the SiriusXM Internet Radio App for Android , Apple , and BlackBerry smartphones and other connected devices. SiriusXM also holds a minority interest in SiriusXM Canada which has more than 2 million subscribers.

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