SiriusXM Reports 2012 Results
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:
o Record 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.
o Churn 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.
o Free 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:
o Ramping 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.
o Self-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.
o Substantial 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:
o Self-pay net subscriber additions of approximately 1.6 million,
o Total net subscriber additions of approximately 1.4 million,
o Revenue of over $3.7 billion,
o Adjusted EBITDA of over $1.1 billion, and
o Free 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 or like the SiriusXM page on Facebook.
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
SOURCE Sirius XM Radio
Website: http://www.siriusxm.com
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