Investor Relations

SIRIUS Satellite Radio Announces Fourth Quarter and Year-End 2004 Financial and Operating Results

  • Company Exceeded Year-End Subscriber Target and Reports More Than 1.24 Million Subscribers Today
  • Revenue Up 419% Over 2003
  • Costs to Add New Customers Down Significantly
  • Strong Cash and Low Debt Position Maintained
  • Company Increases 2005 Subscriber Guidance to Over 2.5 Million

    NEW YORK - January 26, 2005 - SIRIUS Satellite Radio (NASDAQ: SIRI)today announced strong fourth quarter and year-end 2004 financial and operating results , driven by better-than-expected subscriber growth.

    On December 31, 2004, SIRIUS had 1,143,258 subscribers, beating its year-end target of 1 million, and had over 1.24 million subscribers as of January 24, 2005. The company attributed much of the better-than-expected year-end number to robust holiday sales and an increase in its automotive channel business, driving revenue to $66.9 million, a 419% increase over the previous year.

    As a result of a strong start to 2005, the company is raising its 2005 year-end subscriber estimate to over 2.5 million.

    The fourth quarter subscriber figure reflects net additions of 480,969 subscribers, a 332% increase from net additions in the fourth quarter of 2003. SIRIUS had 521,479 gross subscriber additions in the fourth quarter of 2004, and reported average monthly churn of 1.6% for the full year 2004, the company's best-reported churn rate to date and below previous guidance. The company reported subscriber acquisition costs (SAC) per gross subscriber addition of $177 for the full year 2004, a significant improvement over $293 for 2003 and well inside 2004 guidance of below $200.

    In the fourth quarter of 2004, SIRIUS continued to experience significant gains in the retail market, fueled by strong holiday sales of its products, broader distribution - including over 25,000 sales outlets - and growing consumer awareness of its brand, plus an increased preference for its superior programming. According to The NPD Group, SIRIUS' retail market share reached 51% in November 2004, SIRIUS' highest level on record.

    During the fourth quarter of 2004, SIRIUS added 348,711 subscribers from its retail channel, a 302% increase from retail additions in the year ago quarter. The company also added 130,881 net subscribers from its automotive, trucking and boating relationships, a 444% increase in net additions from those channels in the year ago quarter.

    SIRIUS' exclusive automotive partners, DaimlerChrysler and BMW, continue to roll out factory installation programs for SIRIUS Satellite Radio.

    Ford recently announced that it plans to include SIRIUS as a factory option in up to 21 models, and expects to generate up to one million SIRIUS subscribers over the next two model years - 2006 and 2007.

    In December 2004, DaimlerChrysler announced that its factory installations of SIRIUS were on track to produce an estimated 550,000 subscribers over the 2005 and 2006 model years.

    "2004 was a turning point for SIRIUS, and a strong indicator of what we believe the future holds for a new entertainment category still in its early days," said Mel Karmazin, CEO of SIRIUS. "Not only did we greatly exceed our estimated subscriber target for the year, but we also beat estimates in subscriber acquisition costs and monthly churn. The fourth quarter produced blow-out sales, heavily fueled by the holidays, and solid numbers in our automotive channel, which we believe will be a major contributor to our subscriber growth in 2005. Our strong start this year, along with an expanding slate of compelling programming, the introduction of third generation products later this year, and the anticipated arrival of Howard Stern next January, all contribute to our enthusiasm for the growth prospects of SIRIUS."

    Guidance for 2005:

    In view of a strong start to 2005, SIRIUS is raising guidance for 2005 net subscriber additions to 1.4 million, implying a year-end 2005 subscriber target of over 2.5 million, up from approximately 2.3 million year-end 2005 subscribers suggested by previous guidance. Estimated average monthly churn is expected to be in the range of 1.6% to 1.7% during 2005. SAC per gross subscriber addition should also drop to below $145 for the year, with further declines expected in 2006.

    SIRIUS expects to generate approximately $210 million of total revenue in 2005. The company expects to generate an adjusted loss from operations of approximately $(480) million in 2005. Total operating cash uses, capital expenditures and purchases of restricted investments, are expected to be approximately $(350) million in 2005, as compared to approximately $(452) million in 2004.

    SIRIUS ended 2004 with approximately $759 million in cash, cash equivalents and marketable securities, which it believes is sufficient to reach cash flow breakeven under its current business plan.

    Conference Call Information:

    SIRIUS will hold a conference call today at 8am ET to discuss operating and financial results. The public, members of the investment community and the press will have live access to the conference call via the company's website sirius.com and on the SIRIUS service by tuning to SIRIUS Channel [131]. A replay of the call will also be available on the SIRIUS website.

    FOURTH QUARTER 2004 VERSUS FOURTH QUARTER 2003

    For the fourth quarter of 2004, SIRIUS recognized total revenue of $25.2 million, compared with $5.0 million for the fourth quarter of 2003, a 409% year-over-year increase. This increase in revenue was driven by a net increase in the company's subscriber base of 882,197 subscribers, or 338%, from December 31, 2003 to December 31, 2004.

    The company's adjusted loss from operations increased by $63.6 million, to $(155.2) million in 2004 (refer to the reconciliation table of loss from operations to adjusted loss from operations) . This increase was driven in part by $37.1 million of increased subscriber acquisition costs, as SIRIUS' gross subscriber additions exceeded last year's fourth quarter gross subscriber additions by nearly 396,000 subscribers .

    In addition, programming and content expenses increased by $17.5 million, to $26.0 million for the fourth quarter of 2004, from $8.5 million for the fourth quarter of 2003. The increase in programming and content expenses was primarily attributable to an increase in costs to create, produce and acquire content, specifically costs associated with sports related programming initiatives, such as the NFL.

    Sales and marketing expenses also increased by $15.7 million, to $50.7 million for the fourth quarter of 2004, from $35.0 million for the fourth quarter of 2003. The increase in sales and marketing expenses was primarily a result of media advertising during the holiday selling season and personnel-related costs to support the continued growth of the company.

    Finally, the company incurred increases in customer service and billing expenses, and general and administrative expenses. Customer service and billing expenses increased by $5.7 million, to $8.6 million for the fourth quarter of 2004, from $2.9 million for the fourth quarter of 2003. This increase was a direct result of the growth of our subscriber base. General and administrative expenses increased by $5.5 million to $13.0 million for the fourth quarter of 2004, from $7.5 million for the fourth quarter of 2003, primarily as a result of overhead expansion to support the continued growth of the business.

    SIRIUS reported a net loss applicable to common stockholders of $(261.9) million, or $(0.21) per share, for the fourth quarter of 2004, compared with a net loss applicable to common stockholders of $(147.8) million, or $(0.14) per share, for the fourth quarter of 2003.

    YEAR ENDED DECEMBER 31, 2004 VERSUS YEAR ENDED DECEMBER 31, 2003

    For 2004, SIRIUS recognized total revenue of $66.9 million, compared with $12.9 million for 2003, a 419% year-over-year increase. This $54.0 million increase in revenue was driven by a net increase in the company's subscriber base of 882,197 subscribers, or 338%, from December 31, 2003 to December 31, 2004.

    The company's adjusted loss from operations increased by $126.1 million, to $(456.2) million for 2004 (refer to the reconciliation table of loss from operations to adjusted loss from operations) . This increase was driven in part by $98.8 million of increased subscriber acquisition costs, as SIRIUS' gross subscriber additions exceeded last year's additions by over 730,000 subscribers .

    In addition, programming and content expenses increased by $33.7 million, to $63.9 million for 2004, from $30.2 million for 2003. The increase in programming and content expenses was primarily attributable to an increase in costs to create, produce and acquire content, specifically costs associated with sports related programming initiatives, such as the NFL.

    Sales and marketing expenses also increased by $33.1 million, to $153.9 million for 2004, from $120.8 million for 2003. The increase in sales and marketing expenses was primarily a result of increased media advertising to market the SIRIUS service and the NFL season coverage, costs associated with the expansion of the company's retail distribution channel, including the company's national rollout in RadioShack stores, and personnel-related costs to support the continued growth of the company.

    Finally, the company incurred increases in general and administrative expenses, and engineering, design and development expenses. General and administrative expenses increased by $7.8 million, to $44.0 million for 2004, from $36.2 million for 2003, primarily as a result of overhead expansion to support the continued growth of the business, offset in part by a legal settlement in 2003 associated with the termination of a contract with the company's prior subscriber management provider. Engineering, design and development expenses increased $6.0 million, to $30.5 million for 2004, from $24.5 million for 2003. This increase was primarily attributable to additional personnel-related costs to support research and development efforts, and costs associated with tooling and manufacturing upgrades at DaimlerChrysler and Ford in preparation for SIRIUS factory installations, offset in part by reduced chipset development costs.

    SIRIUS reported a net loss applicable to common stockholders of $(712.2) million, or $(0.57) per share, for 2004, compared with a net loss applicable to common stockholders of $(314.4) million, or $(0.38) per share, for 2003.

    SIRIUS maintains a strong cash position, ending 2004 with $759.2 million in cash, cash equivalents and marketable securities compared to $550.0 million on December 31, 2003. The increase in cash, cash equivalents and marketable securities was primarily a result of offerings of the company's common stock and convertible notes for net proceeds of $614.4 million and the addition of 986,556 gross new subscribers from whom approximately nine months of prepaid revenue was received upon activation. Such increases were offset by cash outflows to fund the company's adjusted loss from operations, capital expenditures and purchases of restricted investments in 2004.

    (Selected financial information follows).

    SIRIUS defines adjusted loss from operations as loss from operations before depreciation expense and equity granted to third parties and employees. SIRIUS believes adjusted loss from operations is useful to investors because it represents operating expenses of the company excluding the effects of non-cash items.

    SIRIUS defines average monthly revenue per subscriber, or ARPU, as the total earned subscription revenue and activation revenue during the period, over the daily weighted average number of subscribers for the period.

    SIRIUS defines subscriber acquisition costs, or SAC, as costs of incentives for the purchase, installation, and activation of SIRIUS radios, as well as subsidies paid to radio and chip set manufacturers, automakers and retailers and the negative margin on equipment sales.

    Adjusted loss from operations, ARPU and SAC are not measures of financial performance under U.S. generally accepted accounting principles. As a result, these metrics 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 or as a substitute for measures of performance prepared in accordance with U.S. generally accepted accounting principles.

    Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, future events or performance with respect to SIRIUS Satellite Radio Inc. are not historical facts and may be forward-looking and, accordingly, such statements involve estimates, assumptions and uncertainties which could cause actual results to differ materially from those expressed in any forward-looking statements. Accordingly, any such statements are qualified in their entirety by reference to the factors discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2003 filed with the Securities and Exchange Commission. Among the key factors that have a direct bearing on the company's results of operations are: the company's dependence upon third parties to manufacture, distribute, market and sell SIRIUS radios and components for those radios; the unproven market for SIRIUS service; SIRIUS' competitive position; changes to our business plan or strategy and any events which affect the useful life of the company's satellites.