November 4, 2010

SIRIUS XM Radio Reports Third Quarter 2010 Results

- Adj. Revenue Up 15% Year-Over-Year to a Record $723 Million
- Record Adj. EBITDA of $170 Million, Up 60% Year-Over-Year
- Net Subscriber Additions Exceed 334,000
- Company Raises 2010 Financial Guidance

NEW YORK, Nov. 4, 2010 /PRNewswire-FirstCall/ -- SIRIUS XM Radio (Nasdaq: SIRI) today announced third quarter 2010 financial and operating results, including:

  • Adjusted revenue of $722.5 million in the third quarter 2010, up 15% from the third quarter 2009 adjusted revenue of $629.6 million;
  • Adjusted EBITDA of $169.7 million in the third quarter 2010, an increase of 60% over the third quarter 2009 adjusted EBITDA of $106.1 million;
  • Free cash flow of $62.0 million, a 132% increase from $26.7 million in the third quarter of 2009;
  • Net subscriber additions of 334,727 in the third quarter of 2010 compared to 102,295 in the third quarter of 2009; and
  • Net income (loss) attributable to common stockholders for the third quarter of 2010 and 2009 was $67.6 million and ($151.5) million, respectively, or $0.01 and ($0.04) per diluted share.

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The discussion of adjusted operating results, including adjusted revenue and adjusted EBITDA, excludes the effects of stock-based compensation and certain purchase price accounting adjustments.  A reconciliation of the non-GAAP items to their nearest GAAP equivalent is contained in the financial supplements included with this release.

"We continued our positive momentum in the third quarter, improved our churn and conversion rates, and attained a record high subscriber count.  We delivered record adjusted revenue and adjusted EBITDA, increased our free cash flow, and we are now raising our financial guidance for the full year," said Mel Karmazin, Chief Executive Officer, SIRIUS XM.

Karmazin added, "We will continue to increase and diversify our content offerings with new shows, new celebrity hosts and specialty programming with fantastic appeal to new and existing subscribers.  By growing subscribers and revenue, tightly managing costs, and improving our balance sheet, we are positioned well for long term free cash flow growth."

SIRIUS XM ended third quarter 2010 with 19,862,175 subscribers, an increase of more than 1.3 million subscribers compared to the end of the third quarter 2009. Net subscriber additions of 334,727 in the third quarter of 2010 improved from 102,295 subscribers in the third quarter of 2009.  In the third quarter 2010, average revenue per subscriber (ARPU) was $11.81, an increase of 6% from ARPU of $11.09 in the third quarter 2009.  The company's self-pay monthly customer churn rate was 1.9% in the third quarter 2010, as compared with a self-pay monthly customer churn rate of 2.0% in the third quarter 2009.  The conversion rate of trial subscribers into self-pay subscribers climbed to 48.1% in the third quarter 2010, up from 46.2% in the third quarter of 2009.  Subscriber acquisition cost (SAC) per gross addition was $59 in the third quarter 2010, a 14% improvement from $69 in the third quarter 2009.

On a GAAP basis, net income (loss) attributable to common stockholders for the third quarter of 2010 and 2009 was $67.6 million and ($151.5) million, respectively, or $0.01 and ($0.04) per diluted share, on revenue of $717.5 million and $618.7 million, respectively.  The company's reported net income (loss) attributable to common stockholders included losses on extinguishment of debt in the third quarter of 2010 and 2009 of $0.3 million and $138.1 million, respectively.  For the nine months ended September 30, 2010 and 2009, net income (loss) attributable to common stockholders was $124.5 million and ($550.0) million, respectively, or $0.02 and ($0.15) per diluted share, on revenue of $2.08 billion and $1.80 billion, respectively.

In October, XM completed an offering of $700 million of 7.625% Senior Notes due 2018.  XM used a portion of the proceeds of the offering to repurchase $489,065,000 aggregate principal amount of its outstanding 11.25% Senior Secured Notes due 2013 pursuant to its previously announced tender offer and consent solicitation.

INCREASED 2010 OUTLOOK

The company projects full-year 2010 adjusted EBITDA of approximately $600 million versus previous guidance of approximately $575 million.  The company now expects adjusted revenue for 2010 will exceed $2.8 billion and free cash flow will exceed $150 million.  SIRIUS XM expects to end the year with approximately 20.1 million subscribers, consistent with its increase in subscriber guidance on October 1, 2010.

Subscriber Data.

The following table contains actual subscriber data for the three and nine months ended September 30, 2010 and 2009, respectively:


For the Three Months Ended

For the Nine Months Ended


September 30,


September 30,


2010


2009


2010


2009









Beginning subscribers

19,527,448


18,413,435


18,772,758


19,003,856

Gross subscriber additions

1,952,054


1,606,446


5,693,409


4,325,532

Deactivated subscribers

(1,617,327)


(1,504,151)


(4,603,992)


(4,813,658)

Net additions

334,727


102,295


1,089,417


(488,126)

Ending subscribers

19,862,175


18,515,730


19,862,175


18,515,730









Retail

7,088,562


7,925,904


7,088,562


7,925,904

OEM

12,630,463


10,488,530


12,630,463


10,488,530

Rental

143,150


101,296


143,150


101,296

Ending subscribers

19,862,175


18,515,730


19,862,175


18,515,730









Self-pay

16,335,819


15,456,748


16,335,819


15,456,748

Paid promotional

3,526,356


3,058,982


3,526,356


3,058,982

Ending subscribers

19,862,175


18,515,730


19,862,175


18,515,730









Retail

(188,884)


(309,972)


(637,188)


(979,298)

OEM

529,798


407,131


1,699,511


492,692

Rental

(6,187)


5,136


27,094


(1,520)

Net additions

334,727


102,295


1,089,417


(488,126)









Self-pay

258,105


35,405


631,887


(92,838)

Paid promotional

76,622


66,890


457,530


(395,288)

Net additions

334,727


102,295


1,089,417


(488,126)









Daily weighted average number of subscribers

19,610,837


18,393,678


19,181,040


18,514,041









Average self-pay monthly churn (1)

1.9%


2.0%


1.9%


2.1%









Conversion rate (2)

48.1%


46.2%


46.6%


45.0%



____________

See accompanying footnotes.

Subscribers. The improvement was due to the 22% increase in gross subscriber additions, primarily resulting from an increase in new vehicle penetration along with an increase in returning activations, partially offset by an 8% increase in deactivations resulting from higher promotional churn due to an increase in the volume of trial subscriptions.

Average Self-pay Monthly Churn decreased in the three months ended September 30, 2010 due to an improving economy, the success of retention and win-back programs and reductions in non-pay cancellation rates.

Conversion Rate increased in the three months ended September 30, 2010 primarily due to marketing to promotional period subscribers and an improving economy.

Metrics.

The following table contains key operating metrics based on the company's adjusted results of operations for the three and nine months ended September 30, 2010 and 2009, respectively:


Unaudited Adjusted


For the Three Months Ended

For the Nine Months Ended


September 30,


September 30,

(in thousands, except for per subscriber amounts)

2010


2009


2010


2009



ARPU (3)

$     11.81


$     11.09


$        11.70


$        10.74

SAC, per gross subscriber addition (4)

$          59


$          69


$             59


$             63

Customer service and billing expenses, per average








subscriber (5)

$       1.02


$       1.01


$          1.00


$          1.04

Free cash flow (6)

$   61,998


$   26,724


$      43,126


$      35,772

Adjusted total revenue (8)

$ 722,537


$ 629,607


$ 2,098,659


$ 1,842,924

Adjusted EBITDA (7)

$ 169,727


$ 106,140


$    481,799


$    347,198



____________

See accompanying footnotes.

ARPU increased in the three months ended September 30, 2010 primarily due to the introduction of the U.S. Music Royalty Fee in the third quarter of 2009, increased revenues from the sale of "Best of" programming, decreases in discounts on multi-subscription and internet packages, and increased net advertising revenue, partially offset by an increase in the number of subscribers on promotional plans.

SAC, Per Gross Subscriber Addition, decreased in the three months ended September 30, 2010 due to lower per radio subsidy rates for certain OEMs and growth in subscriber reactivations and royalties from radio manufacturers compared to the three months ended September 30, 2009, partially offset a 33% increase in OEM production with factory-installed satellite radios.

Customer Service and Billing Expenses, Per Average Subscriber, increased in the three months ended September 30, 2010 primarily due to higher call volume, partially offset by lower call center expenses as a result of moving calls to lower cost locations.

Free Cash Flow increased in the three months ended September 30, 2010 principally as a result of improvements in our adjusted EBITDA  and increases in cash flows from operations resulting from higher collections of amounts due from subscribers and distributors during the three months ended September 30, 2010 as compared to the three months ended September 30, 2009, partially offset by decreases in cash flows from operations resulting from the periodic payment of related party liabilities in the current period compared to a deferral of such payments in the three months ended September 30, 2009 and the routine amortization of prepaid programming costs and release of credit card hold-backs included in other long-term assets in the three months ended September 30, 2009. As a result of these transactions, net cash provided by operating activities increased $33,811 to $150,059 in the three months ended September 30, 2010 compared to the $116,248 provided by operations in the three months ended September 30, 2009. In addition, capital expenditures in the three months ended September 30, 2010 decreased $1,463 to $88,061 compared to $89,524 expended in the three months ended September 30, 2009 , primarily due to decreased satellite and related launch vehicle spending.

Adjusted Total Revenue. Set forth below are our adjusted total revenue for the three and nine months ended September 30, 2010 and 2009. Our adjusted total revenue includes the recognition of deferred subscriber revenues acquired in the merger between  SIRIUS and XM (the "Merger") that are not recognized in our results under purchase price accounting and the elimination of the benefit in earnings from deferred revenue associated with our investment in XM Canada acquired in the Merger.


Unaudited


For the Three Months Ended

For the Nine Months Ended


September 30,


September 30,

(in thousands)

2010


2009


2010


2009



Revenue:



Subscriber revenue, including effects of rebates (GAAP)

$612,119


$578,304


$1,793,258


$1,699,455

Advertising revenue, net of agency fees (GAAP)

15,973


12,418


46,296


37,287

Equipment revenue (GAAP)

17,823


10,506


50,625


31,343

Other revenue (GAAP)

71,633


17,428


190,914


28,379

Total revenue (GAAP)

717,548


618,656


2,081,093


1,796,464

Purchase price accounting adjustments:








Subscriber revenue

3,176


9,138


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