SiriusXM Reports 2012 Results - Subscribers Grow to a Record 23.9 Million - Record Revenue of $3.4 Billion, Up 13% - Net Income of $3.5 Billion Includes an Income Tax Benefit of $3.0 Billion - Adjusted EBITDA Reaches a Record $920 Million, Up 26% - Free Cash Flow Grows 71% to a Record $709 Million PR Newswire NEW YORK, Feb. 5, 2013 NEW YORK, Feb. 5, 2013 /PRNewswire/ -- Sirius XM Radio (NASDAQ: SIRI) today announced fourth quarter and full year 2012 financial and operating results, including 2012 revenue of $3.4 billion, up 13% from 2011 revenue of $3.0 billion. Net income for 2012 and 2011 was $3.5 billion and $427 million, respectively, or $0.51 and $0.07 per diluted share, respectively. Net income for 2012 included a $3.0 billion income tax benefit and $133 million loss on extinguishment of debt. Adjusted EBITDA in 2012 was $920 million, up 26% from $731 million in 2011. (Logo: http://photos.prnewswire.com/prnh/20101014/NY82093LOGO ) "Thanks to the outstanding team at SiriusXM, we capped a great 2012 with a strong fourth quarter, adding more than 500,000 net new subscribers and attaining outstanding revenue, adjusted EBITDA, and free cash flow. SiriusXM also returned capital to shareholders for the first time in the history of satellite radio through a $327 million special cash dividend in December. We are confident in our guidance for growth in 2013 and continue to be sharply focused on enhancing shareholder value, including through our recently announced common stock repurchase program that we are initiating this year," said Jim Meyer, Chief Executive Officer, SiriusXM. "We continue to broaden our Internet capabilities to expand the user experience and strengthen our in-vehicle technologies. We are thrilled to announce that our personalized radio feature, MySXM, is now in public beta testing and will be available to our Internet subscribers in the near future. We are committed to ensuring SiriusXM's long-term leadership in audio and data services, particularly in vehicles, and we will do that by continuing to innovate and improve our technology, programming, and customer care," noted Meyer. Additional 2012 highlights include: oRecord post-merger subscriber growth. Net subscriber additions of 2.0 million in 2012 were higher than in any year since 2007, before the 2008 merger of Sirius and XM. Self-pay net subscriber additions improved by 36% year-over-year to nearly 1.7 million, resulting in an all-time high self-pay subscriber base of nearly 19.6 million. The total paid subscriber base rose to a record high 23.9 million. Total paid and unpaid trials were 6.1 million at year-end 2012. oChurn and conversion remains stable. Self-pay monthly churn was 1.9% in 2012, unchanged from 2011. New vehicle consumer conversion rate was 45% in 2012, also unchanged from 2011. oFree cash flow grows to record level. Free cash flow was $709 million in 2012, an increase of 71% from $416 million in 2011. This figure represents the highest annual free cash flow attained in the history of the Company. FOURTH QUARTER 2012 HIGHLIGHTS Revenue in the fourth quarter of 2012 was up 14% to $892 million from $784 million in the fourth quarter of 2011. Net income for the fourth quarters of 2012 and 2011 was $156 million and $71 million, respectively, or $0.02 and $0.01 per diluted share, respectively. Adjusted EBITDA was $230 million for the fourth quarter of 2012, up 38%. Additional fourth quarter 2012 highlights include: oRamping self-pay subscriber growth. Self-pay net subscriber additions improved by 41% to approximately 529,000 in the fourth quarter of 2012 from approximately 374,000 in the fourth quarter of 2011. oSelf-pay churn improves. Self-pay monthly churn was 1.8% in the fourth quarter of 2012, an improvement from 1.9% in the fourth quarter of 2011 and 2.0% in the third quarter of 2012. New vehicle consumer conversion rate was 44% in the fourth quarter of 2012, unchanged from the fourth quarter of 2011. oSubstantial free cash flow improvement. Free cash flow grew by 40% to $269 million in the fourth quarter of 2012, a record amount for a single quarter, from $192 million in the fourth quarter of 2011. "In 2012, we took significant steps to strengthen SiriusXM's balance sheet. We paid down more than $1 billion of short maturity, high-coupon debt and replaced it with $400 million of 10 year, 5.25% debt and a $1.25 billion undrawn revolving credit facility. We ended the year with more than $520 million of cash after paying a special cash dividend in December that totaled $327 million. With debt to adjusted EBITDA falling from 4.1x at December 2011 to under 2.7x at December 2012, we are below our leverage target and have ample liquidity to pursue strategic opportunities and return capital to stockholders through our $2 billion stock buyback program," remarked David Frear, SiriusXM's Executive Vice President and Chief Financial Officer. 2013 GUIDANCE The Company affirmed its 2013 subscriber, revenue, adjusted EBITDA and free cash flow guidance: oSelf-pay net subscriber additions of approximately 1.6 million, oTotal net subscriber additions of approximately 1.4 million, oRevenue of over $3.7 billion, oAdjusted EBITDA of over $1.1 billion, and oFree cash flow approaching $900 million. STOCK REPURCHASE PROGRAM As SiriusXM commences its previously announced $2 billion share repurchase program, the Company expects to repurchase shares of common stock from time to time on the open market and in privately negotiated transactions. Liberty Media Corporation, the beneficial owner of approximately 50.2% of the Company's stock, is no longer required to participate in the share repurchase program on a pro rata basis and has indicated it may or may not do so in the future. 2012 RESULTS SIRIUS XM RADIO INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Three Months Ended For the Twelve Months December 31, Ended December 31, (in thousands, except 2012 2011 2012 2011 per share data) (Unaudited) (Unaudited) Revenue: Subscriber revenue $ $ $ $ 774,466 672,498 2,962,665 2,595,414 Advertising revenue, 22,438 20,077 82,320 73,672 net of agency fees Equipment revenue 22,273 22,658 73,456 71,051 Other revenue 73,238 68,505 283,599 274,387 Total revenue 892,415 783,738 3,402,040 3,014,524 Operating expenses: Cost of services: Revenue share and 141,641 130,436 551,012 471,149 royalties Programming and 73,795 70,367 278,997 281,234 content Customer service and 82,346 67,052 294,980 259,719 billing Satellite and 18,635 18,663 72,615 75,902 transmission Cost of equipment 12,465 13,201 31,766 33,095 Subscriber acquisition 126,683 116,771 474,697 434,482 costs Sales and marketing 72,446 68,302 248,905 222,773 Engineering, design 16,374 14,186 48,843 53,435 and development General and 68,120 63,270 261,905 238,738 administrative Depreciation and 66,814 67,015 266,295 267,880 amortization Total operating 679,319 629,263 2,530,015 2,338,407 expenses Income from operations 213,096 154,475 872,025 676,117 Other income (expense): Interest expense, net (45,545) (75,208) (265,321) (304,938) of amounts capitalized Loss on extinguishment of debt and credit - - (132,726) (7,206) facilities, net Interest and investment income 3,907 (4,620) 716 73,970 (loss) Other income (loss) 412 1,017 (226) 3,252 Total other expense (41,226) (78,811) (397,557) (234,922) Income before income 171,870 75,664 474,468 441,195 taxes Income tax (expense) (15,626) (4,328) 2,998,234 (14,234) benefit Net income $ $ $ $ 156,244 71,336 3,472,702 426,961 Realized loss on XM Canada investment - - - 6,072 foreign currency adjustment Foreign currency translation 87 (327) 49 (140) adjustment, net of tax Comprehensive income $ $ $ $ 156,331 71,009 3,472,751 432,893 Net income per common share: Basic $ $ $ $ 0.02 0.01 0.55 0.07 Diluted $ $ $ $ 0.02 0.01 0.51 0.07 Weighted average common shares outstanding: Basic 5,218,827 3,751,423 4,209,073 3,744,606 Diluted 6,634,911 6,501,014 6,873,786 6,500,822 SIRIUS XM RADIO INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, 2012 2011 (in thousands, except share and per share data) ASSETS Current assets: Cash and cash equivalents $ $ 520,945 773,990 Accounts receivable, net 106,142 101,705 Receivables from distributors 104,425 84,817 Inventory, net 25,337 36,711 Prepaid expenses 122,157 125,967 Related party current assets 13,167 14,702 Deferred tax asset 923,972 132,727 Other current assets 12,037 6,335 Total current assets 1,828,182 1,276,954 Property and equipment, net 1,571,922 1,673,919 Long-term restricted investments 3,999 3,973 Deferred financing fees, net 38,677 42,046 Intangible assets, net 2,519,610 2,573,638 Goodwill 1,815,365 1,834,856 Related party long-term assets 44,954 54,953 Long-term deferred tax asset 1,219,256 - Other long-term assets 12,878 35,657 Total assets $ $ 9,054,843 7,495,996 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued $ $ expenses 587,652 543,193 Accrued interest 33,954 70,405 Current portion of deferred revenue 1,474,138 1,333,965 Current portion of deferred credit 207,854 284,108 on executory contracts Current maturities of long-term debt 4,234 1,623 Related party current liabilities 6,756 14,302 Total current liabilities 2,314,588 2,247,596 Deferred revenue 159,501 198,135 Deferred credit on executory 5,175 218,199 contracts Long-term debt 2,222,080 2,683,563 Long-term related party debt 208,906 328,788 Deferred tax liability 69 1,011,084 Related party long-term liabilities 18,966 21,741 Other long-term liabilities 85,993 82,745 Total liabilities 5,015,278 6,791,851 Stockholders' equity: Preferred stock, par value $0.001; 50,000,000 authorized at December 31, 2012 and 2011: Series A convertible preferred stock; no shares issued and - - outstanding at December 31, 2012 and 2011 Convertible perpetual preferred stock, series B-1 (liquidation preference of $0.001 per share at December 31, 2012 and 2011); 6 13 6,250,100 and 12,500,000 shares issued and outstanding at December 31, 2012 and 2011, respectively Common stock, par value $0.001; 9,000,000,000 shares authorized at December 31, 2012 and 2011; 5,262,440,085 and 3,753,201,929 5,263 3,753 shares issued and outstanding at December 31, 2012 and 2011, respectively Accumulated other comprehensive 120 71 income, net of tax Additional paid-in capital 10,345,566 10,484,400 Accumulated deficit (6,311,390) (9,784,092) Total stockholders' equity 4,039,565 704,145 Total liabilities and stockholders' $ $ equity 9,054,843 7,495,996 SIRIUS XM RADIO INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, (in thousands) 2012 2011 Cash flows from operating activities: Net income $ $ 3,472,702 426,961 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 266,295 267,880 Non-cash interest expense, net of 35,924 39,515 amortization of premium Provision for doubtful accounts 34,548 33,164 Amortization of deferred income related to equity method (2,776) (2,776) investment Loss on extinguishment of debt and 132,726 7,206 credit facilities, net Gain on merger of unconsolidated - (75,768) entities Loss on unconsolidated entity 420 6,520 investments, net Dividend received from 1,185 - unconsolidated entity investment Loss on disposal of assets 657 269 Share-based payment expense 63,822 53,190 Deferred income taxes (3,001,818) 8,264 Other non-cash purchase price (289,050) (275,338) adjustments Distribution from investment in - 4,849 unconsolidated entity Changes in operating assets and liabilities: Accounts receivable (38,985) (13,211) Receivables from distributors (19,608) (17,241) Inventory 11,374 (14,793) Related party assets 9,523 30,036 Prepaid expenses and other current 647 8,525 assets Other long-term assets 22,779 36,490 Accounts payable and accrued 46,043 (32,010) expenses Accrued interest (36,451) (2,048) Deferred revenue 101,311 55,336 Related party liabilities (7,545) (1,542) Other long-term liabilities 3,042 152 Net cash provided by operating 806,765 543,630 activities Cash flows from investing activities: Additions to property and (97,293) (137,429) equipment Purchase of restricted and other (26) (826) investments Release of restricted investments - 250 Return of capital from investment - 10,117 in unconsolidated entity Net cash used in investing (97,319) (127,888) activities Cash flows from financing activities: Proceeds from exercise of stock 123,369 11,553 options Payment of premiums on redemption (100,615) (5,020) of debt Repayment of long-term borrowings (915,824) (234,976) Repayment of related party (126,000) - long-term borrowings Long-term borrowings, net of costs 383,641 - Dividends paid (327,062) - Net cash used in financing (962,491) (228,443) activities Net (decrease) increase in cash (253,045) 187,299 and cash equivalents Cash and cash equivalents at 773,990 586,691 beginning of period Cash and cash equivalents at end $ $ of period 520,945 773,990 Subscriber Data and Operating Metrics The following table contains subscriber data and key operating metrics for the three and twelve months ended December 31, 2012 and 2011, respectively: Unaudited For the Three Months Ended For the Twelve Months Ended December 31, December 31, 2012 2011 2012 2011 Beginning 23,365,383 21,349,858 21,892,824 20,190,964 subscribers Gross subscriber 2,553,489 2,326,174 9,617,771 8,696,020 additions Deactivated (2,018,536) (1,783,208) (7,610,259) (6,994,160) subscribers Net additions 534,953 542,966 2,007,512 1,701,860 Ending subscribers 23,900,336 21,892,824 23,900,336 21,892,824 Self-pay 19,570,274 17,908,742 19,570,274 17,908,742 Paid 4,330,062 3,984,082 4,330,062 3,984,082 promotional Ending subscribers 23,900,336 21,892,824 23,900,336 21,892,824 Self-pay 528,755 374,432 1,661,532 1,221,943 Paid 6,198 168,534 345,980 479,917 promotional Net additions 534,953 542,966 2,007,512 1,701,860 Daily weighted average number of 23,612,076 21,542,690 22,794,170 20,903,908 subscribers Average self-pay 1.8% 1.9% 1.9% 1.9% monthly churn New vehicle consumer 44% 44% 45% 45% conversion rate $ $ $ $ ARPU 12.12 11.61 12.00 11.58 SAC, per gross $ $ $ $ subscriber addition 54 55 54 55 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 For the Twelve Months Ended Ended December 31, December 31, 2012 2011 2012 2011 Net income (GAAP): $ $ $ $ 156,244 71,336 3,472,702 426,961 Add back items excluded from Adjusted EBITDA: Purchase price accounting adjustments: Revenues 1,880 1,958 7,479 10,910 Operating expenses (68,781) (71,785) (289,278) (277,258) Share-based payment expense, net of 17,462 15,614 63,822 53,369 purchase price accounting adjustments Depreciation and 66,814 67,015 266,295 267,880 amortization (GAAP) Interest expense, net of amounts capitalized 45,545 75,208 265,321 304,938 (GAAP) Loss on extinguishment of debt and credit - - 132,726 7,206 facilities, net (GAAP) Interest and investment (3,907) 4,620 (716) (73,970) (income) loss (GAAP) Other (income) loss (412) (1,017) 226 (3,252) (GAAP) Income tax expense 15,626 4,328 (2,998,234) 14,234 (benefit) (GAAP) Adjusted EBITDA $ $ $ $ 230,471 167,277 920,343 731,018 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 twelve months ended December 31, 2012 and 2011: Unaudited For the Three Months Ended December 31, 2012 Purchase Price Allocation of (in thousands) As Reported Accounting Share-based Adjusted Adjustments Payment Expense Revenue: $ $ $ $ Subscriber revenue 774,466 67 - 774,533 Advertising revenue, net of 22,438 - - 22,438 agency fees Equipment revenue 22,273 - - 22,273 Other revenue 73,238 1,813 - 75,051 $ $ $ $ Total revenue 892,415 1,880 - 894,295 Operating expenses Cost of services: Revenue share and 141,641 38,532 - 180,173 royalties Programming and 73,795 4,781 (1,778) 76,798 content Customer service 82,346 - (521) 81,825 and billing Satellite and 18,635 - (918) 17,717 transmission Cost of equipment 12,465 - - 12,465 Subscriber 126,683 21,176 - 147,859 acquisition costs Sales and 72,446 4,292 (2,966) 73,772 marketing Engineering, design and 16,374 - (1,771) 14,603 development General and 68,120 - (9,508) 58,612 administrative Depreciation and 66,814 - - 66,814 amortization (a) Share-based - - 17,462 17,462 payment expense Total operating $ $ $ $ expenses 679,319 68,781 - 748,100 (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 December 31, 2012 was $13,000. Unaudited For the Three Months Ended December 31, 2011 Purchase Price Allocation of (in thousands) As Reported Accounting Share-based Adjusted Adjustments Payment Expense Revenue: $ $ $ $ Subscriber revenue 672,498 145 - 672,643 Advertising revenue, net of 20,077 - - 20,077 agency fees Equipment revenue 22,658 - - 22,658 Other revenue 68,505 1,813 - 70,318 $ $ $ $ Total revenue 783,738 1,958 - 785,696 Operating expenses Cost of services: Revenue share and 130,436 33,581 - 164,017 royalties Programming and 70,367 12,527 (1,467) 81,427 content Customer service 67,052 - (425) 66,627 and billing Satellite and 18,663 - (811) 17,852 transmission Cost of equipment 13,201 - - 13,201 Subscriber 116,771 21,404 - 138,175 acquisition costs Sales and 68,302 4,273 (2,539) 70,036 marketing Engineering, design and 14,186 - (1,443) 12,743 development General and 63,270 - (8,929) 54,341 administrative Depreciation and 67,015 - - 67,015 amortization (a) Share-based - - 15,614 15,614 payment expense Total operating $ $ $ $ expenses 629,263 71,785 - 701,048 (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 December 31, 2011 was $14,000. Unaudited For the Year Ended December 31, 2012 Purchase Price Allocation of (in thousands) As Reported Accounting Share-based Adjusted Adjustments Payment Expense Revenue: Subscriber revenue $ $ $ $ 2,962,665 228 - 2,962,893 Advertising revenue, net of 82,320 - - 82,320 agency fees Equipment revenue 73,456 - - 73,456 Other revenue 283,599 7,251 - 290,850 Total revenue $ $ $ $ 3,402,040 7,479 - 3,409,519 Operating expenses Cost of services: Revenue share and 551,012 146,601 - 697,613 royalties Programming and 278,997 37,346 (6,120) 310,223 content Customer service 294,980 - (1,847) 293,133 and billing Satellite and 72,615 - (3,329) 69,286 transmission Cost of equipment 31,766 - - 31,766 Subscriber 474,697 90,503 - 565,200 acquisition costs Sales and 248,905 14,828 (10,310) 253,423 marketing Engineering, design and 48,843 - (6,238) 42,605 development General and 261,905 - (35,978) 225,927 administrative Depreciation and 266,295 - - 266,295 amortization (a) Share-based - - 63,822 63,822 payment expense Total operating $ $ $ $ expenses 2,530,015 289,278 - 2,819,293 (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 year ended December 31, 2012 was $53,000. Unaudited For the Year Ended December 31, 2011 Purchase Allocation of (in thousands) As Reported Price Share-based Adjusted Accounting Payment Adjustments Expense Revenue: Subscriber revenue $ $ $ $ 2,595,414 3,659 - 2,599,073 Advertising revenue, net of 73,672 - - 73,672 agency fees Equipment revenue 71,051 - - 71,051 Other revenue 274,387 7,251 - 281,638 Total revenue $ $ $ $ 3,014,524 10,910 - 3,025,434 Operating expenses Cost of services: Revenue share and 471,149 126,941 - 598,090 royalties Programming and 281,234 49,172 (6,212) 324,194 content Customer service 259,719 18 (1,502) 258,235 and billing Satellite and 75,902 313 (2,678) 73,537 transmission Cost of equipment 33,095 - - 33,095 Subscriber 434,482 85,491 - 519,973 acquisition costs Sales and marketing 222,773 15,233 (8,193) 229,813 Engineering, design 53,435 31 (4,851) 48,615 and development General and 238,738 59 (29,933) 208,864 administrative Depreciation and 267,880 - - 267,880 amortization (a) Share-based payment - - 53,369 53,369 expense (b) Total operating $ $ $ $ expenses 2,338,407 277,258 - 2,615,665 (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 year ended December 31, 2011 was $59,000. (b) Amounts related to share-based payment expense included in operating expenses were as follows: Programming and $ $ $ $ content 6,185 27 - 6,212 Customer service 1,484 18 - 1,502 and billing Satellite and 2,659 19 - 2,678 transmission Sales and marketing 8,166 27 - 8,193 Engineering, design 4,820 31 - 4,851 and development General and 29,874 59 - 29,933 administrative Total share-based $ $ $ $ payment expense 53,188 181 - 53,369 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 For the Twelve Months December 31, Ended December 31, 2012 2011 2012 2011 Subscriber revenue $ $ $ $ (GAAP) 774,466 672,498 2,962,665 2,595,414 Add: net advertising 22,438 20,077 82,320 73,672 revenue (GAAP) Add: other subscription-related 61,299 57,561 237,868 231,902 revenue (GAAP) Add: purchase price 67 145 228 3,659 accounting adjustments $ $ $ $ 858,270 750,281 3,283,081 2,904,647 Daily weighted average 23,612,076 21,542,690 22,794,170 20,903,908 number of subscribers ARPU $ $ $ $ 12.12 11.61 12.00 11.58 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 For the Twelve Months Ended December 31, December 31, 2012 2011 2012 2011 Customer service $ $ $ $ and billing 82,346 67,052 294,980 259,719 expenses (GAAP) Less: share-based payment expense, net of purchase (521) (425) (1,847) (1,502) price accounting adjustments Add: purchase price accounting - - - 18 adjustments 81,825 66,627 293,133 258,235 Daily weighted average number of 23,612,076 21,542,690 22,794,170 20,903,908 subscribers Customer service and billing $ $ $ $ expenses, per 1.16 1.03 1.07 1.03 average subscriber 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 For the Twelve Months Ended December 31, December 31, 2012 2011 2012 2011 Cash Flow information Net cash provided by $ $ $ $ operating activities 293,233 214,996 806,765 543,630 Net cash used in (23,773) (23,190) (97,319) (127,888) investing activities Net cash used in (304,785) (22,408) (962,491) (228,443) financing activities Free Cash Flow Net cash provided by $ $ $ $ operating activities 293,233 214,996 806,765 543,630 Additions to property (23,747) (22,364) (97,293) (137,429) and equipment Restricted and other (26) (826) (26) 9,541 investment activity Free cash flow $ $ $ $ 269,460 191,806 709,446 415,742 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 For the Twelve Months Ended December 31, December 31, 2012 2011 2012 2011 Subscriber $ $ $ $ acquisition costs 126,683 116,771 474,697 434,482 (GAAP) Less: margin from direct sales of (9,808) (9,457) (41,690) (37,956) radios and accessories (GAAP) Add: purchase price accounting 21,176 21,404 90,503 85,491 adjustments $ $ $ $ 138,051 128,718 523,510 482,017 Gross subscriber 2,553,489 2,326,174 9,617,771 8,696,020 additions SAC, per gross $ $ $ $ subscriber addition 54 55 54 55 About Sirius XM Radio Sirius XM Radio Inc. is the world's largest radio broadcaster measured by revenue and has 23.9 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. Follow SiriusXM on Twitter orlike the SiriusXM page on Facebook. E-SIRI Contact Information for Investors and Financial Media: Investors: Hooper Stevens 212 901 6718 email@example.com Media: Patrick Reilly 212 901 6646 firstname.lastname@example.org SOURCE Sirius XM Radio Website: http://www.siriusxm.com
SiriusXM Reports 2012 Results
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