SIRIUS XM Radio Reports Third Quarter 2008 Results
Pro Forma Revenue of $613 Million, Up 16% Year Over Year
Pro Forma Revenue of $613 Million, Up 16% Year Over Year
NEW YORK - November 10, 2008 - SIRIUS XM Radio (NASDAQ: SIRI) today announced third quarter 2008 results, including pro forma revenue of $613 million (up 16% over the year ago quarter), total subscribers of more than 18.9 million (up 17% from last year) and a 64% improvement in the pro forma adjusted loss from operations of $37 million before purchase accounting and restructuring costs.
"SIRIUS XM third quarter results demonstrate strong revenue growth, solid cost control and most importantly a clear path to positive cash flow," said Mel Karmazin, CEO of SIRIUS. "Despite a continued tough economy and further weakening in auto sales, pro forma revenue grew 16% and ending subscribers grew 17% as compared with last year. In addition, self-pay monthly customer churn remained flat from last year at an impressive 1.7%."
"In the third quarter, total operating costs, less merger related expenses, decreased as compared with last year, leading to a 64% improvement in the pro forma adjusted loss from operations of $37 million before restructuring costs. In the first 60 days following the merger, SIRIUS XM is operationally very close to breakeven. As we realize the substantial synergies associated with the merger, we expect to quickly bring the company to positive EBITDA and free cash flow. We have provided new long term financial and operating projections based upon slower auto production and greater cost savings and we now anticipate positive free cash flow of $1 billion in 2012."
SIRIUS XM ended the third quarter 2008 with 18,920,911 subscribers up 17% from 16,234,070 subscribers at the end of the third quarter 2007. During the third quarter 2008, SIRIUS XM added 344,100 net subscribers.
Total pro forma revenue for the third quarter 2008 increased to $612.8 million, up 16% from third quarter 2007 pro forma total revenue of $529.3 million. Third quarter 2008 pro forma average monthly revenue per subscriber (ARPU) was $10.47. Third quarter 2008 average monthly self-pay customer churn was 1.7%. SAC per gross subscriber addition was $74 in the third quarter 2008, an improvement of 15% over third quarter 2007 SAC per gross subscriber addition of $87.
SIRIUS XM's pro forma net loss was ($217.0) million, or ($0.09) per share, for the third quarter of 2008, compared to a pro forma net loss of ($265.5 million), or ($0.18) per share, in the third quarter 2007.
The company's actual third quarter and nine-month results (attached hereto) include only two months of operations of XM from its July 28, 2008 acquisition. The company's actual results also include a $4.8 billion impairment charge to goodwill, principally related to the decline in the company's share price since the date of the Merger Agreement in February 2007. The company also said it will delay filing its Quarterly Reports on Form 10-Q for not more than five days in order to carefully review the required purchase accounting adjustments.
OPERATIONAL AND FINANCIAL PROJECTIONS
*Adjusted EBITDA is net income /(loss) from operations plus equity expense and depreciation and amortization expense. Free cash flow is derived from net change in cash and cash equivalents plus cash flow from financing activities and other investment activity. Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to their most comparable financial measure calculated and presented in accordance with GAAP is attached to this press release. The projections shown above do not give effect to adjustments that will occur in respect of the valuation of XM's assets and liabilities acquired in the merger.
Current economic conditions, particularly the dramatic and recent slowdown in auto sales, have negatively impacted subscriber growth for 2008 and 2009. The company expects to end 2008 with 19.1 million subscribers and end 2009 with 20.6 million subscribers. The company remains confident in its Revenue and Adjusted EBITDA guidance for 2008 and 2009, which remains unchanged.
RESULTS OF OPERATIONS
Pro forma results for the third quarter and first nine months exclude impairment charges, and stock-based compensation expense and assume a business combination as of January 1, 2007. Reconciliations of all non-GAAP measures to reported results have been included at the end of this press release.
Due principally to purchase accounting and the non-cash impairment charge related to the mark-to-market impairment test on our existing goodwill and intangible assets, reported GAAP results for the third quarter and nine months to date differ significantly from pro forma adjusted results.
The tables below represent the non-GAAP pro-forma results of operations for the three and nine months ended September 30, 2008 and 2007 and other related operating metrics as if the companies were consolidated as of January 1, 2007. A reconciliation of these amounts to their comparable GAAP amounts is included in the footnotes.
About SIRIUS XM Radio
SIRIUS XM Radio is America's satellite radio company delivering The Best Radio on Radio™ to more than 18 million subscribers, including commercial free music, and premier sports, news, talk, entertainment, traffic and weather.
SIRIUS XM Radio has content relationships with an array of personalities and artists, including Howard Stern, Martha Stewart, Oprah Winfrey, Jimmy Buffett, Elvis, Jamie Foxx, Barbara Walters, Frank Sinatra, Opie & Anthony, The Grateful Dead, Willie Nelson, Bob Dylan, Dale Earnhardt Jr., Tom Petty, and Bob Edwards. SIRIUS XM Radio is the leader in sports programming as the Official Satellite Radio Partner of the NFL, Major League Baseball, NASCAR, NBA, NHL, and PGA TOUR, and broadcasts major college sports.
SIRIUS XM Radio has arrangements with every major automaker. SIRIUS XM Radio products are available at shop.sirius.com and shop.xmradio.com, and at retail locations nationwide, including Best Buy, Circuit City, RadioShack, Target, Sam's Club, and Wal-Mart.
SIRIUS XM Radio also offers SIRIUS Backseat TV, the first ever live in-vehicle rear seat entertainment featuring Nickelodeon, Disney Channel and Cartoon Network; XM NavTraffic® service for GPS navigation systems delivers real-time traffic information, including accidents and road construction, for more than 80 North American markets.
The projections contained herein were not prepared with a view toward compliance with published guidelines of the Securities and Exchange Commission, the American Institute of Certified Public Accountants or any other regulatory or professional agency or body, GAAP or consistency with audited financial statements previously published by the company. We do not intend to update or otherwise revise the projections even if any or all of their underlying assumptions do not prove to be valid. The company's projections contained herein are based upon a number of assumptions and estimates, including, among other things, important assumptions regarding:
While considered reasonable by the company when taken as a whole, the assumptions are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the company's control. In addition, the projections are based upon specific assumptions with respect to future business conditions, some or all of which will change. The company's independent registered public accounting firm has not examined or compiled the projections, expressed any conclusion or provided any form of assurance with respect to them and, accordingly, assumes no responsibility for them. The projections, like any forecast, are necessarily speculative in nature and it can be expected that the assumptions upon which the projections are based will not prove to be valid or will vary from actual results. Actual results will vary from the projections and the variations may be material. Consequently, the projections should not be regarded as a representation by us or any other person that the subscribers, revenue, adjusted EBITDA and free cash flow will actually be achieved. You are cautioned not to place undue reliance on these projections.
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 the benefits of the business combination transaction involving SIRIUS and XM, including potential synergies and cost savings and the timing thereof, future financial and operating results, the combined company's plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "will," "should," "may," or words of similar meaning. Such forward-looking statements are based upon the current beliefs and expectations of SIRIUS' and XM's management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond the control of SIRIUS and XM. 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 statement: general business and economic conditions; the performance of financial markets and interest rates; the ability to obtain governmental approvals of the transaction on a timely basis; the failure to realize synergies and cost-savings from the transaction or delay in realization thereof; the businesses of SIRIUS and XM may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected; and operating costs and business disruption following the merger, including adverse effects on employee retention and on our business relationships with third parties, including manufacturers of radios, retailers, automakers and programming providers. Additional factors that could cause SIRIUS' and XM's results to differ materially from those described in the forward-looking statements can be found in SIRIUS' and XM's Annual Reports on Form 10-K for the year ended December 31, 2007 and their respective Quarterly Reports on Form 10-Q for the quarter ended June 30, 2008, which are 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 SIRIUS and XM disclaim any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this communication.
Contacts for SIRIUS XM Radio:
Contact Information for Investors and Financial Media:
SIRIUS XM Radio
212 584 5174
SIRIUS XM Radio
212 901 6718