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): July 25, 2013

 

 

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 July 25, 2013, we reported our financial and operating results for the three and six months ended June 30, 2013. 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

 

(a) Not Applicable.

(b) Not Applicable.

(c) Not Applicable.

(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: July 25, 2013

 

3


EXHIBITS

 

Exhibit

Description of Exhibit

 

99.1 Press Release dated July 25, 2013.

 

4


Exhibit 99.1

 

 

 

SiriusXM Reports Second Quarter 2013 Results

 

· Record Revenue of $940 Million, Up 12% From Second Quarter of 2012
· Net Income of $126 Million
· Adjusted EBITDA Grows 19% to a Record $283 Million
· Company Raises Full Year EBITDA Guidance to $1.14 Billion
· Share Repurchase Program Approaches $1.3 Billion Year to Date

 

NEW YORK – July 25, 2013 – Sirius XM Radio (NASDAQ: SIRI) today announced second quarter 2013 financial and operating results, including record revenue of $940 million, up 12% from the second quarter 2012 revenue of $838 million. Net income for the second quarter 2013 and 2012 was $126 million and $3.1 billion, respectively. Net income in the second quarter of 2012 benefitted from a $3 billion reversal of deferred income tax valuation allowances.

 

Income before income taxes rose 47% to $202 million in the second quarter compared to $138 million in the second quarter of 2012. Adjusted EBITDA for the second quarter of 2013 reached a record $283 million, up 19% from $237 million in the second quarter of 2012.

 

“SiriusXM’s second quarter results reflect record performance on almost every vital metric: the 25 million subscriber milestone, record revenue, adjusted EBITDA and adjusted EBITDA margin. We grew our revenue at double digit rates for the sixth consecutive quarter while being very mindful of our costs as we invest in advanced IP and telematics platforms designed to provide more services to our subscribers and automakers, noted Jim Meyer, Chief Executive Officer, SiriusXM.

 

“Our increase in adjusted EBITDA guidance speaks to our excellent first half performance as well as our outlook for further growth later this year. SiriusXM has now purchased 391 million shares of its common stock so far this year for nearly $1.3 billion, and we plan to continue using our growing free cash flow and strong balance sheet in a very disciplined way to reward our investors,” added Meyer.

 

Additional highlights of the second quarter include:

 

· Adjusted EBITDA Margin Reaches 30%. Adjusted EBITDA climbed 19% from last year’s second quarter to a record quarterly figure of $283 million, and a record adjusted EBITDA margin of 30%.
· Subscribers Exceed 25 Million Amid Record Growth. Net subscriber additions in the quarter were 715,762, up from 622,042 in the second quarter of 2012, marking the largest quarterly gain since the fourth quarter of 2007. Our total paid subscriber base reached a record 25.1 million, up 9% from the prior year period. Self-pay net subscriber additions were 423,076, while the self-pay subscriber base reached a record high of
 

  20.3 million, up 9% from the prior year period. Total paid and unpaid trials grew by 528,000 from the first quarter 2013 to 6.7 million.
· Free Cash Flow Reaches a Second Quarter Record. Free cash flow was $237 million, up from $230 million in the second quarter of 2012. Year-to-date free cash flow reached $379 million, an increase of 55% from the same period in 2012.

 

During the second quarter, we repurchased 195 million shares of our common stock for $650 million. We also repurchased approximately $130 million in principal amount of our outstanding debt during the second quarter. Following our $1 billion debt issuance in May, the Company s outstanding debt was approximately 3.2x our trailing adjusted EBITDA, below our target leverage of 3.5x. Combined with our strong cash position of $652 million and undrawn revolving credit facility of $1.25 billion, we have tremendous flexibility to continue pursuing capital returns, debt repurchases, and acquisitions, noted David Frear, SiriusXM s Executive Vice President and Chief Financial Officer.

 

2013 GUIDANCE

 

After increasing its total net additions guidance on July 9, 2013, the Company today increased its 2013 guidance for adjusted EBITDA and reiterated guidance for subscriber growth, revenue, and free cash flow:

 

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

SECOND QUARTER 2013 RESULTS

 

SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

    For the Three Months Ended June 30,     For the Six Months Ended June 30,  
(in thousands, except per share data)   2013     2012     2013     2012  
                                 
Revenue:                                
Subscriber revenue   $ 814,718     $ 730,285     $ 1,598,060     $ 1,430,526  
Advertising revenue     21,757       20,786       41,968       39,456  
Equipment revenue     18,443       16,417       36,599       33,370  
Other revenue     85,192       70,055       160,881       138,912  
Total revenue     940,110       837,543       1,837,508       1,642,264  
Operating expenses:                                
Cost of services:                                
Revenue share and royalties     155,859       135,426       304,390       267,537  
Programming and content     70,381       65,169       144,991       135,265  
Customer service and billing     80,290       68,679       160,684       134,866  
Satellite and transmission     19,493       17,551       39,188       35,661  
Cost of equipment     5,442       7,150       12,469       12,956  
Subscriber acquisition costs     129,992       119,475       246,103       235,596  
Sales and marketing     68,058       57,422       133,956       115,781  
Engineering, design and development     15,052       6,272       29,894       18,962  
General and administrative     60,392       65,664       116,732       125,550  
Depreciation and amortization     67,415       66,793       134,433       132,910  
Total operating expenses     672,374       609,601       1,322,840       1,215,084  
Income from operations     267,736       227,942       514,668       427,180  
Other income (expense):                                
Interest expense, net of amounts capitalized     (49,728 )     (72,770 )     (95,902 )     (149,742 )
Loss on extinguishment of debt and credit facilities, net     (16,377 )     (15,650 )     (16,377 )     (25,621 )
Interest and investment income (loss)     294       (1,728 )     1,932       (2,871 )
Other income (loss)     256       (173 )     502       (749 )
Total other expense     (65,555 )     (90,321 )     (109,845 )     (178,983 )
Income before income taxes     202,181       137,621       404,823       248,197  
Income tax (expense) benefit     (76,659 )     2,996,549       (155,699 )     2,993,747  
Net income   $ 125,522     $ 3,134,170     $ 249,124     $ 3,241,944  
Foreign currency translation adjustment, net of tax     (109 )     18       (281 )     (38 )
Total comprehensive income   $ 125,413     $ 3,134,188     $ 248,843     $ 3,241,906  
Net income per common share:                                
Basic   $ 0.02     $ 0.49     $ 0.04     $ 0.51  
Diluted   $ 0.02     $ 0.48     $ 0.04     $ 0.50  
Weighted average common shares outstanding:                                
Basic     6,354,755       3,765,573       6,307,541       3,766,508  
Diluted     6,447,517       6,506,159       6,526,698       6,521,614  

 

SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

    June 30, 2013     December 31, 2012  
(in thousands, except share and per share data)   (Unaudited)        
ASSETS                
Current assets:                
Cash and cash equivalents   $ 651,769     $ 520,945  
Accounts receivable, net     101,203       106,142  
Receivables from distributors     111,288       104,425  
Inventory, net     16,688       25,337  
Prepaid expenses     149,408       122,157  
Related party current assets     9,127       13,167  
Deferred tax asset     894,303       923,972  
Other current assets     10,177       12,037  
Total current assets     1,943,963       1,828,182  
Property and equipment, net     1,523,615       1,571,922  
Long-term restricted investments     3,999       3,999  
Deferred financing fees, net     31,757       38,677  
Intangible assets, net     2,494,474       2,519,610  
Goodwill     1,815,365       1,815,365  
Related party long-term assets     36,506       44,954  
Long-term deferred tax asset     1,089,981       1,219,256  
Other long-term assets     11,526       12,878  
Total assets   $ 8,951,186     $ 9,054,843  
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable and accrued expenses   $ 550,959     $ 587,652  
Accrued interest     37,822       33,954  
Current portion of deferred revenue     1,539,841       1,474,138  
Current portion of deferred credit on executory contracts     71,854       207,854  
Current maturities of long-term debt     3,873       4,234  
Related party current liabilities     7,927       6,756  
Total current liabilities     2,212,276       2,314,588  
Deferred revenue     152,914       159,501  
Deferred credit on executory contracts     3,285       5,175  
Long-term debt     3,036,660       2,222,080  
Long-term related party debt     209,244       208,906  
Related party long-term liabilities     17,578       18,966  
Other long-term liabilities     80,383       86,062  
Total liabilities     5,712,340       5,015,278  
                 
Stockholders’ equity:                
Preferred stock, par value $0.001; 50,000,000 authorized at June 30, 2013 and December 31, 2012:                
Convertible perpetual preferred stock, series B-1 (liquidation preference of $0.001 per share); 0 and 6,250,100 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively           6  
Common stock, par value $0.001; 9,000,000,000 shares authorized; 6,257,721,498 and 5,262,440,085 shares issued; 6,247,221,498 and 5,262,440,085 shares outstanding, at June 30, 2013 and December 31, 2012, respectively     6,258       5,263  
Accumulated other comprehensive (loss) income, net of tax     (161 )     120  
Additional paid-in capital     9,330,188       10,345,566  
Treasury stock, at cost; 10,500,000 and 0 shares of common stock at June 30, 2013 and December 31, 2012, respectively     (35,173 )      
Accumulated deficit     (6,062,266 )     (6,311,390 )
Total stockholders’ equity     3,238,846       4,039,565  
Total liabilities and stockholders’ equity   $ 8,951,186     $ 9,054,843  
 

SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

    For the Six Months Ended June 30,  
(in thousands)   2013     2012  
Cash flows from operating activities:                
Net income   $ 249,124     $ 3,241,944  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     134,433       132,910  
Non-cash interest expense, net of amortization of premium     10,932       21,031  
Provision for doubtful accounts     20,153       14,879  
Amortization of deferred income related to equity method investment     (1,388 )     (1,388 )
Loss on extinguishment of debt and credit facilities, net     16,377       25,621  
(Gain) loss on unconsolidated entity investments, net     (1,382 )     3,469  
Dividend received from unconsolidated entity investment     13,217        
Loss on disposal of assets     126       488  
Share-based payment expense     30,012       28,869  
Deferred income taxes     159,191       (2,995,542 )
Other non-cash purchase price adjustments     (137,889 )     (147,328 )
Changes in operating assets and liabilities:                
Accounts receivable     (15,214 )     (26,879 )
Receivables from distributors     (6,863 )     (12,259 )
Inventory     8,649       (173 )
Related party assets     205       6,813  
Prepaid expenses and other current assets     (28,317 )     (39,308 )
Other long-term assets     1,353       16,579  
Accounts payable and accrued expenses     (69,310 )     (51,596 )
Accrued interest     3,868       (7,434 )
Deferred revenue     59,116       79,288  
Related party liabilities     1,171       1,501  
Other long-term liabilities     (5,543 )     2,238  
Net cash provided by operating activities     442,021       293,723  
                 
Cash flows from investing activities:                
Additions to property and equipment     (62,980 )     (48,944 )
Net cash used in investing activities     (62,980 )     (48,944 )
                 
Cash flows from financing activities:                
Proceeds from exercise of stock options     21,658       38,671  
Payment of premiums on redemption of debt     (14,719 )     (19,211 )
Repayment of long-term borrowings     (283,180 )     (169,899 )
Long-term borrowings, net of costs     1,136,640        
Common stock repurchased and retired     (1,108,616 )      
Net cash used in financing activities     (248,217 )     (150,439 )
Net increase in cash and cash equivalents     130,824       94,340  
Cash and cash equivalents at beginning of period     520,945       773,990  
Cash and cash equivalents at end of period   $ 651,769     $ 868,330  
 

Subscriber Data and Operating Metrics

 

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

 

    Unaudited  
    For the Three Months Ended June 30,     For the Six Months Ended June 30,  
    2013     2012     2013     2012  
                         
Beginning subscribers     24,353,226       22,297,420       23,900,336       21,892,824  
Gross subscriber additions     2,655,488       2,481,004       5,165,402       4,642,697  
Deactivated subscribers     (1,939,726 )     (1,858,962 )     (3,996,750 )     (3,616,059 )
Net additions     715,762       622,042       1,168,652       1,026,638  
Ending subscribers     25,068,988       22,919,462       25,068,988       22,919,462  
                                 
Self-pay     20,297,736       18,670,966       20,297,736       18,670,966  
Paid promotional     4,771,252       4,248,496       4,771,252       4,248,496  
Ending subscribers     25,068,988       22,919,462       25,068,988       22,919,462  
                                 
Self-pay     423,076       462,876       727,462       762,224  
Paid promotional     292,686       159,166       441,190       264,414  
Net additions     715,762       622,042       1,168,652       1,026,638  
                                 
Daily weighted average number of subscribers     24,651,268       22,553,702       24,331,646       22,272,282  
                                 
Average self-pay monthly churn     1.7 %     1.9 %     1.8 %     1.9 %
                                 
New vehicle consumer conversion rate     45 %     45 %     44 %     45 %
                                 
ARPU   $ 12.28     $ 11.97     $ 12.16     $ 11.87  
SAC, per gross subscriber addition   $ 52     $ 54     $ 51     $ 57  

 

Glossary

 

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

 

significant charges for depreciation expense. The exclusion of depreciation and amortization expense is useful given significant variation in depreciation and amortization expense that can result from the potential variations in estimated useful lives, all of which can vary widely across different industries or among companies within the same industry. We also believe the exclusion of share-based payment expense is useful given the significant variation in expense that can result from changes in the fair value as determined using the Black-Scholes-Merton model which varies based on assumptions used for the expected life, expected stock price volatility and risk-free interest rates.

 

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

 

    Unaudited  
    For the Three Months Ended June 30,     For the Six Months Ended June 30,  
    2013     2012     2013     2012  
                         
Net income (GAAP):   $ 125,522     $ 3,134,170     $ 249,124     $ 3,241,944  
Add back items excluded from Adjusted EBITDA:                                
Purchase price accounting adjustments:                                
Revenues     1,813       1,867       3,626       3,747  
Operating expenses     (69,479 )     (73,423 )     (137,889 )     (147,449 )
Share-based payment expense (GAAP)     15,494       13,917       30,012       28,869  
Depreciation and amortization (GAAP)     67,415       66,793       134,433       132,910  
Interest expense, net of amounts capitalized (GAAP)     49,728       72,770       95,902       149,742  
Loss on extinguishment of debt and credit facilities, net (GAAP)     16,377       15,650       16,377       25,621  
Interest and investment (income) loss (GAAP)     (294 )     1,728       (1,932 )     2,871  
Other (income) loss (GAAP)     (256 )     173       (502 )     749  
Income tax expense (benefit) (GAAP)     76,659       (2,996,549 )     155,699       (2,993,747 )
Adjusted EBITDA   $ 282,979     $ 237,096     $ 544,850     $ 445,257  

 

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 six months ended June 30, 2013 and 2012:

 
    Unaudited For the Three Months Ended June 30, 2013  
(in thousands)   As Reported     Purchase Price
Accounting
Adjustments
    Allocation of
Share-based
Payment Expense
    Adjusted  
                         
Revenue:                                
Subscriber revenue   $ 814,718     $     $     $ 814,718  
Advertising revenue     21,757                   21,757  
Equipment revenue     18,443                   18,443  
Other revenue     85,192       1,813             87,005  
Total revenue   $ 940,110     $ 1,813     $     $ 941,923  
Operating expenses                                
Cost of services:                                
Revenue share and royalties   $ 155,859     $ 40,831     $     $ 196,690  
Programming and content     70,381       2,478       (1,639 )     71,220  
Customer service and billing     80,290             (511 )     79,779  
Satellite and transmission     19,493             (827 )     18,666  
Cost of equipment     5,442                   5,442  
Subscriber acquisition costs     129,992       22,017             152,009  
Sales and marketing     68,058       4,153       (3,182 )     69,029  
Engineering, design and development     15,052             (1,634 )     13,418  
General and administrative     60,392             (7,701 )     52,691  
Depreciation and amortization (a)     67,415                   67,415  
Share-based payment expense                 15,494       15,494  
Total operating expenses   $ 672,374     $ 69,479     $     $ 741,853  

 

(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 June 30, 2013 was $12,000.

 

    Unaudited For the Three Months Ended June 30, 2012  
(in thousands)   As Reported     Purchase Price
Accounting
Adjustments
    Allocation of
Share-based
Payment Expense
    Adjusted  
                         
Revenue:                                
Subscriber revenue   $ 730,285     $ 54     $     $ 730,339  
Advertising revenue     20,786                   20,786  
Equipment revenue     16,417                   16,417  
Other revenue     70,055       1,813             71,868  
Total revenue   $ 837,543     $ 1,867     $     $ 839,410  
Operating expenses                                
Cost of services:                                
Revenue share and royalties   $ 135,426     $ 36,024     $     $ 171,450  
Programming and content     65,169       10,431       (1,231 )     74,369  
Customer service and billing     68,679             (388 )     68,291  
Satellite and transmission     17,551             (688 )     16,863  
Cost of equipment     7,150                   7,150  
Subscriber acquisition costs     119,475       23,530             143,005  
Sales and marketing     57,422       3,438       (2,053 )     58,807  
Engineering, design and development     6,272             (1,282 )     4,990  
General and administrative     65,664             (8,275 )     57,389  
Depreciation and amortization (a)     66,793                   66,793  
Share-based payment expense                 13,917       13,917  
Total operating expenses   $ 609,601     $ 73,423     $     $ 683,024  

 

(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 June 30, 2012 was $14,000.

 
    Unaudited For the Six Months Ended June 30, 2013  
(in thousands)   As Reported     Purchase Price
Accounting
Adjustments
    Allocation of
Share-based
Payment Expense
    Adjusted  
                         
Revenue:                                
Subscriber revenue   $ 1,598,060     $     $     $ 1,598,060  
Advertising revenue     41,968                   41,968  
Equipment revenue     36,599                   36,599  
Other revenue     160,881       3,626             164,507  
Total revenue   $ 1,837,508     $ 3,626     $     $ 1,841,134  
Operating expenses                                
Cost of services:                                
Revenue share and royalties   $ 304,390     $ 80,592     $     $ 384,982  
Programming and content     144,991       4,956       (3,281 )     146,666  
Customer service and billing     160,684             (981 )     159,703  
Satellite and transmission     39,188             (1,677 )     37,511  
Cost of equipment     12,469                   12,469  
Subscriber acquisition costs     246,103       44,022             290,125  
Sales and marketing     133,956       8,319       (6,243 )     136,032  
Engineering, design and development     29,894             (3,281 )     26,613  
General and administrative     116,732             (14,549 )     102,183  
Depreciation and amortization (a)     134,433                   134,433  
Share-based payment expense                 30,012       30,012  
Total operating expenses   $ 1,322,840     $ 137,889     $     $ 1,460,729  

 

(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 six months ended June 30, 2013 was $25,000.

 

    Unaudited For the Six Months Ended June 30, 2012  
(in thousands)   As Reported     Purchase Price
Accounting
Adjustments
    Allocation of
Share-based
Payment Expense
    Adjusted  
                         
Revenue:                                
Subscriber revenue   $ 1,430,526     $ 121     $     $ 1,430,647  
Advertising revenue     39,456                   39,456  
Equipment revenue     33,370                   33,370  
Other revenue     138,912       3,626             142,538  
Total revenue   $ 1,642,264     $ 3,747     $     $ 1,646,011  
Operating expenses                                
Cost of services:                                
Revenue share and royalties   $ 267,537     $ 70,870     $     $ 338,407  
Programming and content     135,265       22,134       (2,606 )     154,793  
Customer service and billing     134,866             (815 )     134,051  
Satellite and transmission     35,661             (1,473 )     34,188  
Cost of equipment     12,956                   12,956  
Subscriber acquisition costs     235,596       47,616             283,212  
Sales and marketing     115,781       6,829       (4,413 )     118,197  
Engineering, design and development     18,962             (2,714 )     16,248  
General and administrative     125,550             (16,848 )     108,702  
Depreciation and amortization (a)     132,910                   132,910  
Share-based payment expense                 28,869       28,869  
Total operating expenses   $ 1,215,084     $ 147,449     $     $ 1,362,533  

 

(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 six months ended June 30, 2012 was $28,000.

 

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

 

    Unaudited  
    For the Three Months Ended June 30,     For the Six Months Ended June 30,  
    2013     2012     2013     2012  
                         
Subscriber revenue (GAAP)   $ 814,718     $ 730,285     $ 1,598,060     $ 1,430,526  
Add: advertising revenue (GAAP)     21,757       20,786       41,968       39,456  
Add: other subscription-related revenue (GAAP)     71,648       58,753       135,785       116,474  
Add: purchase price accounting adjustments           54             121  
    $ 908,123     $ 809,878     $ 1,775,813     $ 1,586,577  
                                 
Daily weighted average number of subscribers     24,651,268       22,553,702       24,331,646       22,272,282  
                                 
ARPU   $ 12.28     $ 11.97     $ 12.16     $ 11.87  

 

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

 

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

 

    Unaudited  
    For the Three Months Ended June 30,     For the Six Months Ended June 30,  
    2013     2012     2013     2012  
                         
Customer service and billing expenses (GAAP)   $ 80,290     $ 68,679     $ 160,684     $ 134,866  
Less: share-based payment expense     (511 )     (388 )     (981 )     (815 )
    $ 79,779     $ 68,291     $ 159,703     $ 134,051  
                                 
Daily weighted average number of subscribers     24,651,268       22,553,702       24,331,646       22,272,282  
                                 
Customer service and billing expenses, per average subscriber   $ 1.08     $ 1.01     $ 1.09     $ 1.00  

 

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 June 30,     For the Six Months Ended June 30,  
    2013     2012     2013     2012  
Cash Flow information                                
Net cash provided by operating activities   $ 273,106     $ 253,775     $ 442,021     $ 293,723  
Net cash used in investing activities   $ (36,546 )   $ (23,757 )   $ (62,980 )   $ (48,944 )
Net cash provided by (used in) financing activities   $ 208,482     $ (108,264 )   $ (248,217 )   $ (150,439 )
Free Cash Flow                                
Net cash provided by operating activities   $ 273,106     $ 253,775     $ 442,021     $ 293,723  
Additions to property and equipment     (36,546 )     (23,757 )     (62,980 )     (48,944 )
Free cash flow   $ 236,560     $ 230,018     $ 379,041     $ 244,779  

 

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

 

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

 

    Unaudited  
    For the Three Months Ended June 30,     For the Six Months Ended June 30,  
    2013     2012     2013     2012  
                         
Subscriber acquisition costs (GAAP)   $ 129,992     $ 119,475     $ 246,103     $ 235,596  
Less: margin from direct sales of radios and accessories (GAAP)     (13,001 )     (9,267 )     (24,130 )     (20,414 )
Add: purchase price accounting adjustments     22,017       23,530       44,022       47,616  
    $ 139,008     $ 133,738     $ 265,995     $ 262,798  
                                 
Gross subscriber additions     2,655,488       2,481,004       5,165,402       4,642,697  
                                 
SAC, per gross subscriber addition   $ 52     $ 54     $ 51     $ 57  

 

###

 

About Sirius XM Radio

 

Sirius XM Radio Inc . is the world’s largest radio broadcaster measured by revenue and has more than 25 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.

 

On social media, join the SiriusXM community on Facebook, facebook.com/siriusxm , Twitter, twitter.com/siriusxm , Instagram, instagram.com/siriusxm , and YouTube at youtube.com/siriusxm .

 

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

 

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

 

E-SIRI

 

Contact Information for Investors and Financial Media:

 

Investors:

 

Hooper Stevens

212 901 6718

hooper.stevens@siriusxm.com

 

Media:

 

Patrick Reilly

212 901 6646

patrick.reilly@siriusxm.com