Investor Relations

SIRIUS XM Radio Reports First Quarter 2010 Results

- Pro Forma Revenue of $670.6 Million, Up 11% Year Over Year - Record Pro Forma Adjusted Income From Operations, up 45% Year Over Year to $157.8 Million - Net Income Per Common Share of $0.01 Versus ($0.07) a Year Ago

NEW YORK, May 4, 2010 /PRNewswire via COMTEX News Network/ -- SIRIUS XM Radio (Nasdaq: SIRI) today announced first quarter 2010 financial and operating results, including $670.6 million in pro forma revenue, up 11% over first quarter 2009 pro forma revenue of $605.5 million; and $157.8 million in first quarter 2010 pro forma adjusted income from operations, an increase of 45% over first quarter 2009 pro forma adjusted income from operations of $108.8 million.

(Logo: http://www.newscom.com/cgi-bin/prnh/20080819/NYTU044LOGO )

"Continued positive subscriber growth, double-digit growth in revenue, and a sharp focus on costs resulted in the highest quarterly adjusted operating income in the company's history," said Mel Karmazin, Chief Executive Officer, SIRIUS XM Radio. "As the leader in audio entertainment, these results show the tremendous appeal of our service and the strength of our business model. The continuing recovery of the automotive sector and expanding signs of increased consumer spending are encouraging signs for the company's growth prospects."

SIRIUS XM ended first quarter 2010 with 18,944,199 subscribers, up 344,765 from 18,599,434 subscribers at the end of first quarter 2009. Net subscriber additions of 171,441 in the first quarter of 2010 improved significantly from a loss of 404,422 subscribers in the first quarter of 2009. In the first quarter 2010, pro forma average revenue per subscriber (ARPU), which includes the U.S. Music Royalty Fee, was $11.48, an increase of 10% from pro forma ARPU of $10.48 in the first quarter 2009. The company's self-pay monthly customer churn rate was 2.0% in the first quarter 2010, as compared with self-pay monthly customer churn of 2.2% in the first quarter 2009.

Free cash flow in the first quarter 2010 was ($127.2) million compared to ($3.6) million in the first quarter of 2009. Net Income plus non cash operating activities increased by $43.7 million, or 89%, to $93 million in the first quarter of 2010 from $49.3 million in the first quarter of 2009. This increase was offset by changes in operating assets and liabilities as a result of the early repayment of approximately $61 million deferred in 2009 that was scheduled to be repaid, at 15% interest, in monthly installments from April 2010 through March 2011, a lump sum programming payment in the first quarter of 2010 that was paid over the course of the year in 2009 and the payment of 2009 bonuses in cash as opposed to stock in the prior year resulting in an increase in net cash used in operating activities of $104.6 million. In addition, capital expenditures in the first quarter of 2010 increased by $28 million over the prior quarter period primarily due to increased satellite spending.

The company previously announced it will redeem all of the remaining $114 million of XM's outstanding 10% Senior PIK Secured Notes due 2011 on Tuesday, June 1, 2010. "Our strong cash position, strong year-to-date subscriber growth and the improving outlook for the economy have put us in position to retire $175 million of high cost obligations a year ahead of schedule," said David Frear, SIRIUS XM's Chief Financial Officer. "The early retirement of the PIK Notes and the deferred payments will reduce interest expense and increase our free cash flow."

On a GAAP basis, first quarter 2010 revenue was $663.8 million, and first quarter 2010 net income was $41.6 million, or $0.01 per share.

2010 OUTLOOK

SIRIUS XM continues to project net subscriber additions of over 500,000 for the full year. The company continues to expect to record over $2.7 billion of pro forma revenue in 2010 and to achieve pro forma adjusted income from operations of approximately $550 million. Free cash flow is expected to remain positive for the full year.

PRO FORMA RESULTS OF OPERATIONS

The discussion of operating results below is based upon pro forma comparisons as if the merger of SIRIUS and XM occurred on January 1, 2007 and excludes the effects of stock-based compensation and purchase accounting adjustments.

FIRST QUARTER 2010 VERSUS FIRST QUARTER 2009

For the first quarter of 2010, SIRIUS XM recognized total revenue of $670.6 million compared to $605.5 million for the first quarter 2009. This 11%, or $65.1 million, increase in revenue was driven by the U.S. Music Royalty Fee introduced in the third quarter of 2009, the sale of "Best of" programming, and rate increases to the company's multi-subscription and Internet packages.

Total ARPU for the three months ended March 31, 2010 was $11.48, compared to $10.48 for the three months ended March 31, 2009. The increase was driven mainly by the addition of the U.S. Music Royalty Fee introduced in July 2009 and increased revenues from the "Best of" programming, multi-subscription rate increases, Internet streaming, and advertising.

In the first quarter of 2010, the company grew pro forma adjusted income from operations to $157.8 million compared to pro forma adjusted income from operations of $108.8 million for the first quarter of 2009 (refer to the reconciliation table of net income (loss) to adjusted income from operations). The improvement was driven by an 11% increase in total revenue, or $65.1 million, partially offset by an increase of 3%, or $16.2 million, in total expenses included in adjusted income from operations.

Revenue share and royalties increased 2%, or $2.3 million, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009 primarily due to an increase in the company's revenues and an increase in the statutory royalty rate for the performance of sound recordings. The amounts were partially offset by a decrease in a royalty rate with an automaker.

Programming and content costs decreased 6%, or $6.2 million, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009 due mainly to savings on certain content agreements and production costs, partially offset by increases in personnel costs and general operating expenses.

Customer service and billing costs decreased 7%, or $4.1 million, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009 primarily due to lower call center expenses as a result of savings realized from relocating certain operations.

Satellite and transmission costs decreased 2%, or $0.4 million, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009 due to reductions in personnel costs and repeater maintenance costs, partially offset by increased satellite insurance expense.

Cost of equipment decreased 1%, or $0.1 million, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009 as a result of lower inventory write-downs, partially offset by increased component sales to manufacturers and distributors.

Subscriber acquisition costs increased 28%, or $23.3 million, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. The increase was driven by the 29% increase in gross additions and higher OEM installations, partially offset by lower per unit OEM subsidies, improved chip set costs and lower aftermarket acquisition costs.

Sales and marketing costs decreased 1%, or $0.7 million, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009 due to lower cooperative marketing, event marketing and third party distribution support expenses, partially offset by increased personnel costs and consumer advertising.

Engineering, design and development costs increased 17%, or $1.4 million, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009 mainly due to higher personnel costs.

General and administrative costs increased 1%, or $0.5 million, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009 mainly due to higher personnel costs, partially offset by lower legal, consulting and accounting expenses.

Other expenses decreased 17%, or $16.9 million, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009 driven mainly by a decrease in loss on extinguishment of debt and credit facilities, net, of $15.4 million.

The following tables contain unaudited actual and pro forma subscriber and key operating metrics for the three months ended March 31, 2010 and 2009, respectively.



                                         Unaudited Actual
                                         ----------------
                                       For the Three Months
                                               Ended
                                            March 31,
                                            ---------
                                           2010             2009
                                           ----             ----

    Beginning subscribers            18,772,758       19,003,856
    Gross subscriber additions        1,720,848        1,338,961
    Deactivated subscribers          (1,549,407)      (1,743,383)
    Net additions                       171,441         (404,422)
                                        -------         --------
    Ending subscribers               18,944,199       18,599,434
                                     ==========       ==========

        Retail                        7,420,203        8,537,171
        OEM                          11,391,439        9,958,234
        Rental                          132,557          104,029
                                        -------          -------
    Ending subscribers               18,944,199       18,599,434
                                     ==========       ==========

        Retail                         (305,547)        (368,031)
        OEM                             460,487          (37,604)
        Rental                           16,501            1,213
                                         ------            -----
    Net additions                       171,441         (404,422)
                                        =======         ========

        Self-pay                     15,773,671       15,436,410
        Paid promotional              3,170,528        3,163,024
    Ending subscribers               18,944,199       18,599,434
                                     ==========       ==========

        Self-pay                         69,739         (113,247)
        Paid promotional                101,702         (291,175)
    Net additions                       171,441         (404,422)
                                        =======         ========

    Daily weighted average number
     of subscribers                  18,783,263       18,713,485
                                     ==========       ==========



                                            Unaudited Pro Forma
                                            -------------------
                                            For the Three Months
                                                    Ended
                                                 March 31,
                                                 ---------
    (in thousands, except for per
     subscriber amounts)                       2010          2009
                                               ----          ----

    Average self-pay monthly churn
     (1)(7)                                     2.0%          2.2%
    Conversion rate (2)(7)                     45.2%         44.6%
    ARPU (3)(7)                              $11.48        $10.48
    SAC, as adjusted, per gross
     subscriber addition (4)(7)                 $59           $61
    Customer service and billing
     expenses, as adjusted,
      per average subscriber (5)(7)           $0.99         $1.06
    Total revenue                          $670,563      $605,480
    Free cash flow (6)(7)                 $(127,203)      $(3,646)
    Adjusted income from operations
     (8)                                   $157,757      $108,841
    Net income (loss)                        $4,454      $(65,114)


             SIRIUS XM RADIO INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF OPERATIONS


                                            Unaudited Pro Forma
                                            -------------------
                                            For the Three Months
                                                   Ended
                                                 March 31,
                                            2010            2009
                                            ----            ----

    Revenue:
        Subscriber revenue, including
         effects of rebates             $584,475        $576,078
        Advertising revenue, net of
         agency fees                      14,527          12,304
        Equipment revenue                 14,283           9,909
        Other revenue                     57,278           7,189
                                          ------           -----
    Total revenue                        670,563         605,480

    Operating expenses:
        Revenue share and royalties      123,539         121,261
        Programming and content           90,471          96,678
        Customer service and billing      55,577          59,669
        Satellite and transmission        19,389          19,741
        Cost of equipment                  7,919           7,993
        Subscriber acquisition costs     107,045          83,710
        Sales and marketing               49,942          50,601
        Engineering, design and
         development                       9,826           8,411
        General and administrative        49,098          48,575
        Depreciation and amortization     51,578          51,483
        Restructuring, impairments and
         related costs                         -             614
        Share-based payment expense       18,183          21,500
    Total operating expenses             582,567         570,236
                                         -------         -------
    Income from operations                87,996          35,244
        Other expense                   (82,375)         (99,243)
                                         -------         -------
    Income (loss) before income taxes      5,621         (63,999)
        Income tax expense                (1,167)         (1,115)

    Net income (loss)                     $4,454        $(65,114)
                                          ======        ========


                 SIRIUS XM RADIO INC. AND SUBSIDIARIES
            UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                         Actual
                                                         ------
                                                  For the Three Months
                                                     Ended March 31,
                                                     ---------------
    (in thousands, except share and
     per share data)                               2010             2009
                                                   ----

    Revenue:
        Subscriber revenue, including
         effects of rebates                    $579,509         $559,389
        Advertising revenue, net of agency
         fees                                    14,527           12,304
        Equipment revenue                        14,283            9,909
        Other revenue                            55,465            5,377
                                                 ------            -----
    Total revenue                               663,784          586,979
    Operating expenses (depreciation
     and amortization
        shown separately below):
        Cost of services:
           Revenue share and royalties           98,184          100,466
           Programming and content               78,434           80,408
           Customer service and billing          56,211           60,208
           Satellite and transmission            20,119           20,279
           Cost of equipment                      7,919            7,993
        Subscriber acquisition costs             89,379           73,068
        Sales and marketing                      49,117           51,423
        Engineering, design and
         development                             11,436            9,778
        General and administrative               57,580           59,314
        Depreciation and amortization            70,265           82,367
        Restructuring, impairments and
         related costs                                -              614
                                                    ---              ---
    Total operating expenses                    538,644          545,918
                                                -------          -------
        Income from operations                  125,140           41,061
    Other income (expense):
        Interest expense, net of amounts
         capitalized                            (77,868)         (67,980)
        Loss on extinguishment of debt and
         credit facilities, net                  (2,566)         (17,957)
        Interest and investment loss             (3,270)          (7,168)
        Other income                              1,329              511
    Total other expense                         (82,375)         (92,594)
                                                -------          -------
        Income (loss) before income taxes        42,765          (51,533)
        Income tax expense                       (1,167)          (1,115)

           Net income (loss)                     41,598          (52,648)
        Preferred stock beneficial
         conversion feature                           -         (186,188)
           Net income (loss) attributable to
            common stockholders                 $41,598        $(238,836)
                                                =======        =========
    Net income (loss) per common
     share:
        Basic                                     $0.01           $(0.07)
                                                  =====           ======
        Diluted                                   $0.01           $(0.07)
                                                  =====           ======

    Weighted average common shares
     outstanding:
        Basic                                 3,677,897        3,523,888
                                              =========        =========
        Diluted                               6,335,114        3,523,888
                                              =========        =========


                   SIRIUS XM RADIO INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS


                                                              December
                                                March 31,        31,
                                                ---------    ---------
                                                       2010         2009
                                                       ----         ----
    (in thousands, except share and per
     share data)                               (unaudited)
                       ASSETS
    Current assets:
      Cash and cash equivalents                    $268,538     $383,489
      Accounts receivable, net                      115,870      113,580
      Receivables from distributors                  54,775       48,738
      Inventory, net                                 13,968       16,193
      Prepaid expenses                              119,185      100,273
      Related party current assets                  108,453      106,247
      Restricted cash                               534,225            -
      Deferred tax asset                             75,022       72,640
      Other current assets                           14,849       18,620
                                                     ------       ------
         Total current assets                     1,304,885      859,780
    Property and equipment, net                   1,730,141    1,711,003
    Long-term restricted investments                  3,400        3,400
    Deferred financing fees, net                     61,887       66,407
    Intangible assets, net                        2,677,819    2,695,115
    Goodwill                                      1,834,856    1,834,856
    Related party long-term assets                  107,745      111,767
    Other long-term assets                           19,621       39,878
                                                     ------       ------
           Total assets                          $7,740,354   $7,322,206
                                                 ==========   ==========
        LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable and accrued expenses        $396,877     $543,686
      Accrued interest                               63,193       74,566
      Current portion of deferred revenue         1,152,916    1,083,430
      Current portion of deferred credit on
       executory contracts                          259,325      252,831
      Current maturities of long-term debt          452,874       13,882
      Current maturities of long-term
       related party debt                            54,874            -
      Related party current liabilities              68,547      108,246
                                                     ------      -------
           Total current liabilities              2,448,606    2,076,641
    Deferred revenue                                269,267      255,149
    Deferred credit on executory
     contracts                                      716,197      784,078
    Long-term debt                                2,764,305    2,799,702
    Long-term related party debt                    356,895      263,579
    Deferred tax liability                          943,794      940,182
    Related party long-term liabilities              26,599       46,301
    Other long-term liabilities                      62,672       61,052
                                                     ------       ------
           Total liabilities                      7,588,335    7,226,684
                                                  ---------    ---------

    Commitments and contingencies
    Stockholders' equity:
        Preferred stock, par value $0.001;
         50,000,000 authorized at March 31,
         2010 and December 31, 2009:
        Series A convertible preferred stock
         (liquidation preference of $51,370
         at March 31, 2010 and
        December 31, 2009); 24,808,959 shares
         issued and outstanding at March 31,
         2010
        and December 31, 2009                            25           25
        Convertible perpetual preferred
         stock, series B (liquidation
         preference of $13 at March 31, 2010
        and December 31, 2009); 12,500,000
         shares issued and outstanding at
         March 31, 2010
        and December 31, 2009                            13           13
        Convertible preferred stock, series C
         junior; no shares issued and
         outstanding at
        March 31, 2010 and December 31, 2009              -            -
        Common stock, par value $0.001;
         9,000,000,000 shares authorized at
         March 31, 2010 and
        December 31, 2009; 3,885,195,021 and
         3,882,659,087 shares issued and
         outstanding
        at March 31, 2010 and December 31,
         2009, respectively                           3,885        3,882
      Accumulated other comprehensive loss,
       net of tax                                    (5,976)      (6,581)
      Additional paid-in capital                 10,366,582   10,352,291
      Accumulated deficit                       (10,212,510) (10,254,108)
                                                -----------  -----------
           Total stockholders' equity               152,019       95,522
                                                    -------       ------
           Total liabilities and stockholders'
            equity                               $7,740,354   $7,322,206
                                                 ==========   ==========


                     SIRIUS XM RADIO INC. AND SUBSIDIARIES
                UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                    For the Three
                                                        Months
                                                   Ended March 31,
                                                   ---------------
    (in thousands)                                  2010            2009
                                                    ----            ----

    Cash flows from operating
     activities:
        Net income (loss)                        $41,598        $(52,648)
        Adjustments to reconcile
         net income (loss) to net
         cash (used in) provided
         by operating activities:
           Depreciation and
            amortization                          70,265          82,367
           Non-cash interest
            expense, net of
            amortization of premium               11,119           6,666
           Provision for doubtful
            accounts                               7,502           7,575
           Amortization of deferred
            income related to equity
            method investment                     (2,194)           (694)
           Loss on extinguishment of
            debt and credit
            facilities, net                        2,450          17,957
           Loss on investments                     2,729           7,906
           Share-based payment
            expense                               17,182          20,179
           Deferred income taxes                   1,167           1,115
           Other non-cash purchase
            price adjustments                    (58,817)        (41,150)
           Changes in operating
            assets and liabilities:
              Accounts receivable                 (9,792)           (344)
              Inventory                            2,225           4,573
              Receivables from
               distributors                       (6,037)           (276)
              Related party assets                 1,285           8,880
              Prepaid expenses and other
               current assets                    (14,690)         22,104
              Restricted cash                    (10,160)              -
              Other long-term assets               7,876          21,995
              Accounts payable and
               accrued expenses                 (115,469)        (53,339)
              Accrued interest                   (11,373)        (18,087)
              Deferred revenue                    81,034          46,927
              Related party liabilities          (57,207)         (7,081)
              Other long-term
               liabilities                         1,619          (7,754)
                                                   -----          ------
                     Net cash (used in)
                      provided by operating
                      activities                 (37,688)         66,871
                                                 -------          ------


    Cash flows from investing
     activities:
        Additions to property and
         equipment                               (98,965)        (71,140)
        Merger related costs                           -             623
        Sale of restricted and
         other investments                         9,450               -
                                                   -----             ---
                     Net cash used in investing
                      activities                 (89,515)        (70,517)
                                                 -------         -------



    Cash flows from financing
     activities:
        Preferred stock issuance
         costs, net of costs                           -          (3,712)
        Long-term borrowings, net
         of costs                                637,406               -
        Related party long-term
         borrowings, net of costs                147,094         211,463
        Payment of premiums on
         redemption of debt                            -         (10,072)
        Repayment of long-term
         borrowings                             (248,183)       (198,993)
        Restricted cash to be used
         for the redemption of
         debt                                   (524,065)              -
                                                --------             ---
                     Net cash provided by (used
                      in) financing activities    12,252          (1,314)
                                                  ------          ------
    Net decrease in cash and
     cash equivalents                           (114,951)         (4,960)
    Cash and cash equivalents
     at beginning of period                      383,489         380,446
    Cash and cash equivalents
     at end of period                           $268,538        $375,486
                                                ========        ========


FOOTNOTES TO PRESS RELEASE AND TABLES FOR NON-GAAP FINANCIAL MEASURES

(1) Average self-pay monthly churn represents the monthly average of self-pay deactivations by the quarter divided by the average self-pay subscriber balance for the quarter.

(2) We measure the percentage of vehicle owners and lessees that receive our service and convert to self-paying after the initial promotion period. We refer to this as the "conversion rate." At the time of sale, vehicle owners and lessees generally receive between three and twelve month trial subscriptions. 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. Based on our experience it may take up to 90 days after the trial service ends for vehicle owners and lessees to respond to our marketing communications and become self-paying subscribers.

(3) ARPU is derived from total earned subscriber revenue, net advertising revenue and other subscription-related revenue divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. See footnote 9 for a reconciliation of the pro forma amounts to their respective GAAP amounts. ARPU is calculated as follows (in thousands, except for subscriber and per subscriber amounts):



                                                        Unaudited Pro Forma
                                                        -------------------
                                                        For the Three Months
                                                               Ended
                                                             March 31,
                                                             ---------
                                                          2010            2009
                                                          ----            ----

    Subscriber revenue                                $584,475        $576,078
    Net advertising revenue                             14,527          12,304
    Other subscription-related revenue                  47,947               -
        Total subscriber, net advertising and other
         subscription-related revenue                 $646,949        $588,382
                                                      ========        ========

    Daily weighted average number of subscribers    18,783,263      18,713,485
    ARPU                                                $11.48          $10.48


Other subscription-related revenue includes amounts recognized on account of the U.S. Music Royalty Fee instituted in July 2009.

(4) SAC, as adjusted, per gross subscriber addition is derived from subscriber acquisition costs and margins from the direct sale of radios and accessories, divided by the number of gross subscriber additions for the period. See footnote 9 for a reconciliation of the pro forma amounts to their respective GAAP amounts. SAC, as adjusted, per gross subscriber addition is calculated as follows (in thousands, except for subscriber and per subscriber amounts):



                                            Unaudited Pro Forma
                                            -------------------
                                            For the Three Months
                                                   Ended
                                                 March 31,
                                                 ---------
                                              2010          2009
                                              ----          ----

    Subscriber acquisition costs          $107,045       $83,710
    Less: margin from direct sales of
     radios and accessories                 (6,364)       (1,916)
    SAC, as adjusted                      $100,681       $81,794
                                          ========       =======

    Gross subscriber additions           1,720,848     1,338,961
    SAC, as adjusted, per gross
     subscriber addition                       $59           $61


(5) Customer service and billing expenses, as adjusted, per average subscriber is derived from total customer service and billing expenses, excluding share-based payment expense, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. See footnote 9 for a reconciliation of the pro forma amounts to their respective GAAP amounts. Customer service and billing expenses, as adjusted, per average subscriber is calculated as follows (in thousands, except for subscriber and per subscriber amounts):



                                          Unaudited Pro Forma
                                          -------------------
                                          For the Three Months
                                                  Ended
                                               March 31,
                                               ---------
                                             2010           2009
                                             ----           ----

    Customer service and billing
     expenses                             $56,305        $60,325
    Less: share-based payment expense        (728)          (656)
    Customer service and billing
     expenses, as adjusted                $55,577        $59,669
                                          =======        =======

    Daily weighted average number of
     subscribers                       18,783,263     18,713,485
    Customer service and billing
     expenses, as adjusted,
        per average subscriber              $0.99          $1.06


(6) Free cash flow is calculated as follows (in thousands):



                                         Unaudited Pro Forma
                                         -------------------
                                         For the Three Months
                                                 Ended
                                              March 31,
                                              ---------
                                            2010          2009
                                            ----          ----

    Net cash (used in) provided by
     operating activities               $(37,688)      $66,871
    Additions to property and
     equipment                           (98,965)      (71,140)
    Merger related costs                       -           623
    Restricted and other investment
     activity                              9,450             -
    Free cash flow                     $(127,203)      $(3,646)
                                       =========       =======


(7) Average self-pay monthly churn; conversion rate; ARPU; SAC, as adjusted, per gross subscriber addition; customer service and billing expenses, as adjusted, per average subscriber; and free cash flow are not measures of financial performance under U.S. generally accepted accounting principles ("GAAP"). We believe these non-GAAP financial measures provide meaningful supplemental information regarding our operating performance and are used by us for budgetary and planning purposes; when publicly providing our business outlook; as a means to evaluate period-to-period comparisons; and to compare our performance to that of our competitors. We also believe that investors also use our current and projected metrics to monitor the performance of our business and to make investment decisions.

We believe the exclusion of share-based payment expense in our calculations of customer service and billing expenses, as adjusted, 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.

These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. These non-GAAP financial measures 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.

(8) We refer to net income (loss) before interest and investment income (loss); interest expense, net of amounts capitalized; income tax expense; loss on extinguishment of debt and credit facilities, net; other expense (income); restructuring, impairments and related costs; depreciation and amortization; and share-based payment expense as adjusted income from operations. Adjusted income from operations is not a measure of financial performance under GAAP. We believe adjusted income from operations is a useful measure of our operating performance. We use adjusted income from operations for budgetary and planning purposes; to assess the relative profitability and on-going performance of our consolidated operations; to compare our performance from period-to-period; and to compare our performance to that of our competitors. We also believe adjusted income from operations is useful to investors to compare our operating performance to the performance of other communications, entertainment and media companies. We believe that investors use current and projected adjusted income from operations to estimate our current or 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 interest and depreciation expense. We believe adjusted income from operations provides useful information about the operating performance of our business apart from the costs associated with our capital structure and physical plant. The exclusion of interest and depreciation and amortization expense is useful given fluctuations in interest rates and significant variation in depreciation and amortization expense that can result from the amount and timing of capital expenditures and 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 taxes is appropriate for comparability purposes as the tax positions of companies can vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the various jurisdictions in which they operate. We believe the exclusion of restructuring, impairments and related costs is useful given the non-recurring 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 market value of our common stock. To compensate for the exclusion of taxes, other expense (income), depreciation and amortization and share-based payment expense, we separately measure and budget for these items.

There are material limitations associated with the use of adjusted income from operations in evaluating our company compared with net loss, which reflects overall financial performance, including the effects of taxes, other (income) expense, depreciation and amortization, restructuring, impairments and related costs and share-based payment expense. We use adjusted income from operations to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Investors that wish to compare and evaluate our operating results after giving effect for these costs, should refer to net loss as disclosed in our consolidated statements of operations. Since adjusted income from operations is a non-GAAP financial measure, our calculation of adjusted income from operations 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.

See footnote 9 for a reconciliation of the pro forma amounts to their respective GAAP amounts. The reconciliation of the pro forma unadjusted net income (loss) to the pro forma adjusted income from operations is calculated as follows (in thousands):



                                             Unaudited Pro Forma
                                             -------------------
                                             For the Three Months
                                                     Ended
                                                  March 31,
                                                  ---------
                                              2010           2009
                                              ----           ----

    Reconciliation of Net income (loss)
     to Adjusted income
      from operations:
      Net income (loss)                     $4,454       $(65,114)
    Add back Net income (loss) items
     excluded from Adjusted
      income from operations:
      Income tax expense                     1,167          1,115
      Interest expense, net of amounts
       capitalized                          77,868         74,629
      Loss on extinguishment of debt and
       credit facilities, net                2,566         17,957
      Interest and investment loss           3,270          7,168
      Other income                          (1,329)          (511)
        Income from operations              87,996         35,244
      Restructuring, impairments and
       related costs                             -            614
      Depreciation and amortization         51,578         51,483
      Share-based payment expense           18,183         21,500

    Adjusted income from operations       $157,757       $108,841
                                          ========       ========


There are material limitations associated with the use of a pro forma unadjusted results of operations in evaluating our company compared with our GAAP results of operations, which reflects overall financial performance. We use pro forma unadjusted results of operations to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Investors that wish to compare and evaluate our operating results after giving effect for these costs, should refer to results of operations as disclosed in our consolidated statements of operations. Since pro forma unadjusted results of operations is a non-GAAP financial measure, our 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.

(9) The following tables reconcile our GAAP results of operations to our non-GAAP pro forma unadjusted results of operations (in thousands):



                                Unaudited For the Three Months Ended March
                                          31, 2010
                                ------------------------------------------
                                   As            Purchase
                                   ---           --------
                                Reported           Price
                                --------           -----
                                                Accounting
                                                ----------
                                                Adjustments
                                                -----------

    Revenue:
        Subscriber revenue,
         including effects of
         rebates                 $579,509            $4,966
        Advertising revenue,
         net of agency fees        14,527                 -
        Equipment revenue          14,283                 -
        Other revenue              55,465             1,813
                                   ------             -----
    Total revenue                 663,784             6,779
    Operating expenses
     (depreciation and
     amortization
        shown separately
         below) (1)
        Cost of services:
           Revenue share and
            royalties              98,184            25,355
           Programming and
            content                78,434            15,147
           Customer service and
            billing                56,211                94
           Satellite and
            transmission           20,119               323
           Cost of equipment        7,919                 -
        Subscriber acquisition
         costs                     89,379            17,666
        Sales and marketing        49,117             3,525
        Engineering, design
         and development           11,436               186
        General and
         administrative            57,580               314
        Depreciation and
         amortization              70,265           (18,687)
        Restructuring,
         impairments and
         related costs                  -                 -
        Share-based payment
         expense                        -                 -
    Total operating
     expenses                     538,644            43,923
                                  -------            ------
        Income (loss) from
         operations               125,140           (37,144)
    Other income (expense)
        Interest expense, net
         of amounts
         capitalized              (77,868)                -
        Loss on extinguishment
         of debt and credit
         facilities, net           (2,566)                -
        Interest and
         investment loss           (3,270)                -
        Other income                1,329                 -
                                    -----               ---
    Total other expense           (82,375)                -
                                  -------               ---
        Income (loss) before
         income taxes              42,765           (37,144)
        Income tax expense         (1,167)                -
                                   ------               ---
           Net income (loss)      $41,598          $(37,144)
                                  =======          ========

    (1) Amounts related to
     share-based payment
     expense included in
     operating expenses
     were as follows:

    Programming and
     content                       $2,950              $160
    Customer service and
     billing                          634                94
    Satellite and
     transmission                     951               102
    Sales and marketing             2,555               145
    Engineering, design
     and development                1,610               186
    General and
     administrative                 8,482               314


    Total share-based
     payment expense              $17,182            $1,001
                                  =======            ======



                                Unaudited For the Three Months Ended March
                                   31, 2010
                                ------------------------------------------
                                Allocation         Pro
                                ----------         ---
                                of Share-         Forma
                                ---------         -----
                                  based
                                  -----
                                 Payment
                                 -------
                                 Expense
                                 -------

    Revenue:
        Subscriber revenue,
         including effects of
         rebates                        $-      $584,475
        Advertising revenue,
         net of agency fees              -        14,527
        Equipment revenue                -        14,283
        Other revenue                    -        57,278
                                       ---        ------
    Total revenue                        -       670,563
    Operating expenses
     (depreciation and
     amortization
        shown separately
         below) (1)
        Cost of services:
           Revenue share and
            royalties                    -       123,539
           Programming and
            content                 (3,110)       90,471
           Customer service and
            billing                   (728)       55,577
           Satellite and
            transmission            (1,053)       19,389
           Cost of equipment             -         7,919
        Subscriber acquisition
         costs                           -       107,045
        Sales and marketing         (2,700)       49,942
        Engineering, design
         and development            (1,796)        9,826
        General and
         administrative             (8,796)       49,098
        Depreciation and
         amortization                    -        51,578
        Restructuring,
         impairments and
         related costs                   -             -
        Share-based payment
         expense                    18,183        18,183
    Total operating
     expenses                            -       582,567
                                       ---       -------
        Income (loss) from
         operations                      -        87,996
    Other income (expense)
        Interest expense, net
         of amounts
         capitalized                     -      (77,868)
        Loss on extinguishment
         of debt and credit
         facilities, net                 -        (2,566)
        Interest and
         investment loss                 -        (3,270)
        Other income                     -         1,329
                                       ---         -----
    Total other expense                  -      (82,375)
                                       ---       -------
        Income (loss) before
         income taxes                    -         5,621
        Income tax expense               -        (1,167)
                                       ---        ------
           Net income (loss)            $-        $4,454
                                       ===        ======

    (1) Amounts related to
     share-based payment
     expense included in
     operating expenses
     were as follows:

    Programming and
     content                            $-        $3,110
    Customer service and
     billing                             -           728
    Satellite and
     transmission                        -         1,053
    Sales and marketing                  -         2,700
    Engineering, design
     and development                     -         1,796
    General and
     administrative                      -         8,796


    Total share-based
     payment expense                    $-       $18,183
                                       ===       =======



                                 Unaudited For the Three Months Ended March
                                          31, 2009
                                 ------------------------------------------
                                   As            Purchase
                                   ---           --------
                                Reported           Price
                                --------           -----
                                                Accounting
                                                ----------
                                                Adjustments
                                                -----------

    Revenue:
        Subscriber revenue,
         including effects of
         rebates                 $559,389           $16,689
        Advertising revenue,
         net of agency fees        12,304                 -
        Equipment revenue           9,909                 -
        Other revenue               5,377             1,812
                                    -----             -----
    Total revenue                 586,979            18,501
    Operating expenses
     (depreciation and
     amortization
        shown separately
         below) (1)
        Cost of services:
           Revenue share and
            royalties             100,466            20,795
           Programming and
            content                80,408            18,890
           Customer service and
            billing                60,208               117
           Satellite and
            transmission           20,279               327
           Cost of equipment        7,993                 -
        Subscriber
         acquisition costs         73,068            10,642
        Sales and marketing        51,423             3,658
        Engineering, design
         and development            9,778               301
        General and
         administrative            59,314               472
        Depreciation and
         amortization              82,367           (30,884)
        Restructuring,
         impairments and
         related costs                614                 -
        Share-based payment
         expense                        -                 -
                                      ---               ---
    Total operating
     expenses                     545,918            24,318
                                  -------            ------
        Income (loss) from
         operations                41,061            (5,817)
    Other income
     (expense)
        Interest expense, net
         of amounts
         capitalized              (67,980)           (6,649)
        Loss on
         extinguishment of
         debt and credit
         facilities, net          (17,957)                -
        Interest and
         investment loss           (7,168)                -
        Other income                  511                 -
                                      ---               ---
    Total other expense           (92,594)           (6,649)
                                  -------            ------
        Loss before income
         taxes                    (51,533)          (12,466)
        Income tax expense         (1,115)                -
                                   ------               ---
           Net loss              $(52,648)         $(12,466)
                                 ========          ========

    (1) Amounts related
     to share-based
     payment expense
     included in
     operating expenses
     were as follows:

    Programming and
     content                       $2,489              $131
    Customer service and
     billing                          539               117
    Satellite and
     transmission                     758               107
    Sales and marketing             4,287               193
    Engineering, design
     and development                1,367               301
    General and
     administrative                10,739               472


    Total share-based
     payment expense              $20,179            $1,321
                                  =======            ======



                                Unaudited For the Three Months Ended March
                                   31, 2009
                                ------------------------------------------
                                Allocation         Pro
                                ----------         ---
                                of Share-         Forma
                                ---------         -----
                                  based
                                  -----
                                 Payment
                                 -------
                                 Expense
                                 -------

    Revenue:
        Subscriber revenue,
         including effects of
         rebates                        $-       $576,078
        Advertising revenue,
         net of agency fees              -         12,304
        Equipment revenue                -          9,909
        Other revenue                    -          7,189
                                       ---          -----
    Total revenue                        -        605,480
    Operating expenses
     (depreciation and
     amortization
        shown separately
         below) (1)
        Cost of services:
           Revenue share and
            royalties                    -        121,261
           Programming and
            content                 (2,620)        96,678
           Customer service and
            billing                   (656)        59,669
           Satellite and
            transmission              (865)        19,741
           Cost of equipment             -          7,993
        Subscriber acquisition
         costs                           -         83,710
        Sales and marketing         (4,480)        50,601
        Engineering, design
         and development            (1,668)         8,411
        General and
         administrative            (11,211)        48,575
        Depreciation and
         amortization                    -         51,483
        Restructuring,
         impairments and
         related costs                   -            614
        Share-based payment
         expense                    21,500         21,500
                                    ------         ------
    Total operating
     expenses                            -        570,236
                                       ---        -------
        Income (loss) from
         operations                      -         35,244
    Other income (expense)
        Interest expense, net
         of amounts
         capitalized                     -        (74,629)
        Loss on extinguishment
         of debt and credit
         facilities, net                 -        (17,957)
        Interest and
         investment loss                 -         (7,168)
        Other income                     -            511
                                       ---            ---
    Total other expense                  -        (99,243)
                                       ---        -------
        Loss before income
         taxes                           -        (63,999)
        Income tax expense               -         (1,115)
                                       ---         ------
           Net loss                     $-       $(65,114)
                                       ===       ========

    (1) Amounts related to
     share-based payment
     expense included in
     operating expenses
     were as follows:

    Programming and
     content                            $-         $2,620
    Customer service and
     billing                             -            656
    Satellite and
     transmission                        -            865
    Sales and marketing                  -          4,480
    Engineering, design
     and development                     -          1,668
    General and
     administrative                      -         11,211


    Total share-based
     payment expense                    $-        $21,500
                                       ===        =======


(10) The following table reconciles our GAAP Net income (loss) per common share (basic and diluted) to our non-GAAP Net income (loss) per common share (basic and diluted) excluding the following charges: (a) preferred stock beneficial conversion feature, and (b) loss on extinguishment of debt and credit facilities, net.



                                                        Unaudited
                                                        ---------
                                                   For the Three Months
                                                     Ended March 31,
                                                     ---------------
    (per share data includes basic and diluted)      2010            2009
                                                     ----            ----

    Net income (loss) per common share              $0.01          $(0.07)
    Less: Preferred stock beneficial conversion
     feature                                            -           (0.05)
                                                      ---           -----
    Net income (loss) per common share excluding
     preferred stock beneficial conversion feature   0.01           (0.01)
    Less: Loss on extinguishment of debt and
     credit facilities, net                             -           (0.01)
                                                      ---           -----
    Net income (loss) per common share, excluding
     charges                                        $0.01          $(0.01)
                                                    =====          ======


(11) The following table reconciles our GAAP Net cash (used in) provided by operating activities to our Net income plus non cash operating activities:



                                                         Unaudited
                                                         ---------
                                                        For the Three
                                                           Months
                                                      Ended March 31,
                                                      ---------------
    (In thousands)                                     2010           2009
                                                       ----           ----

        Net cash (used in) provided by operating
         activities                                $(37,688)       $66,871
        Less: Changes in operating assets and
         liabilities, net                           130,689        (17,598)
                                                    -------        -------
           Net income plus non cash operating
            activities                              $93,001        $49,273
                                                    =======        =======


About SIRIUS XM Radio

SIRIUS XM Radio is America's satellite radio company delivering to subscribers commercial-free music channels, premier sports, news, talk, entertainment, and traffic and weather.

SIRIUS XM Radio has content relationships with an array of personalities and artists, including Howard Stern, Martha Stewart, Oprah Winfrey, Rosie O'Donnell, Jamie Foxx, Barbara Walters, Opie & Anthony, Bubba the Love Sponge(R), Bob Edwards, Chris "Mad Dog" Russo, Jimmy Buffett, The Grateful Dead, Willie Nelson, Bob Dylan and Tom Petty. SIRIUS XM Radio is the leader in sports programming as the Official Satellite Radio Partner of the NFL, Major League Baseball(R), NASCAR(R), NBA, NHL(R), and PGA TOUR(R) and 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, RadioShack, Wal-Mart and independent retailers.

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(R) service for GPS navigation systems delivers real-time traffic information, including accidents and road construction, for more than 80 North American markets.

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, 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 "will likely result," " are expected to," "anticipate," "believe," "plan," "estimate," "intend," "will," "should," "may," or words of similar meaning. Such forward-looking statements are based upon the current beliefs and expectations of SIRIUS 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 economic conditions; our dependence upon automakers and other third parties, the substantial indebtedness of SIRIUS and XM; the useful life of our satellites; and our competitive position versus other forms of audio and video entertainment. 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' Annual Report on Form 10-K for the year ended December 31, 2009 and XM's Annual Report on Form 10-K for the year ended December 31, 2009, 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.

E-SIRI



    Contact Information for Investors and Financial Media:

    Investors:

    William Prip
    212 584 5289
    william.prip@siriusxm.com

    Hooper Stevens
    212 901 6718
    hooper.stevens@siriusxm.com

    Media:

    Patrick Reilly
    212 901 6646
    patrick.reilly@siriusxm.com



SOURCE SIRIUS XM Radio

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