November 1, 2011

SiriusXM Reports Record Third Quarter 2011 Results

-- Subscribers Exceed 21.3 Million, Net Adds of 334,000
-- Record Revenue of $763 Million, Up 6%
-- Record Adjusted EBITDA of $197 Million, Up 16%
-- Free Cash Flow of $75 Million, Up 22%
-- Net Income of $104 Million, Up 54%

NEW YORK, Nov. 1, 2011 /PRNewswire/ -- Sirius XM Radio (NASDAQ: SIRI) today announced third quarter 2011 results, including 21.3 million subscribers, net subscriber additions of 334,000, revenue of $763 million, up 6% over third quarter 2010 revenue of $718 million, and adjusted EBITDA of $197 million, up 16% from $170 million in the third quarter of 2010.

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"In the third quarter, we once again delivered record levels of subscribers, revenue and adjusted EBITDA, and we are confident our positive momentum will continue in the fourth quarter.  This has been an exciting year for SiriusXM, but I'm even more excited by the many opportunities awaiting us in 2012.  We plan to accelerate our revenue and adjusted EBITDA growth, deliver more free cash flow than ever before, and we are thrilled to offer exciting new content and innovations to our existing and future subscribers," said Mel Karmazin, Chief Executive Officer, SiriusXM.  

Highlights from the quarter include:

  • Free cash flow improves.  Free cash flow in the third quarter of 2011 was $75 million, a 22% improvement from the $62 million reported in the third quarter of 2010.
  • Subscribers reach new record high. Subscribers increased by 7% year-over-year to 21,349,858 at September 30, 2011. Self-pay net additions in the third quarter of 2011 were 364,004, up 41% from 258,105 in the third quarter of 2010, and the self-pay subscriber base reached an all-time high of 17,534,310, up 7% year-over-year.
  • Churn stable.  Average self-pay monthly churn was 1.9% in the third quarter of 2011, in-line with 1.9% in the second quarter of 2011 and the third quarter of 2010.  
  • Cost Efficient Growth.  Total cash operating expenses increased only 2.7% over the prior year quarter, while revenues increased 6% over the prior year quarter, resulting in an expansion of our adjusted EBITDA margin to a record 25.8%.

Net income in the third quarters of 2011 and 2010 was $104 million and $68 million, respectively, or $0.02 and $0.01 per diluted share, respectively.

"We ended the third quarter with more than $600 million of cash and cash equivalents," said David Frear, SiriusXM's Executive Vice President and Chief Financial Officer.  "Our ratio of net debt to adjusted EBITDA declined to 3.4x at the end of the third quarter of 2011 from 4.5x at the end of the third quarter of 2010.  Our free cash flow for the first nine months of 2011 of $224 million exceeded the $210 million of free cash flow generated for the entire year of 2010.  With the seasonally strong cash flow of the fourth quarter ahead of us, declining capital expenditures, the anticipated substantial 2012 growth in EBITDA and free cash flow, and declining debt maturities in 2012 our liquidity will continue to rapidly improve," added Frear.

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

2011 AND 2012 GUIDANCE

SiriusXM reiterated the following subscriber and financial guidance for 2011:

  • Net subscriber additions of 1.6 million,
  • Full year self-pay churn and conversion rates for 2011 should be broadly similar to those seen in 2010,
  • Revenue of approximately $3 billion,
  • Adjusted EBITDA of approximately $715 million, and
  • Free cash flow approaching $400 million.

For 2012, the company reiterates its existing financial guidance:

  • Revenue growth of 10% to approximately $3.3 billion,
  • Adjusted EBITDA growth of 20% to approximately $860 million, and
  • Free cash flow growth of 75% to approximately $700 million.

THIRD QUARTER 2011 RESULTS

Subscriber Data.

The following table contains actual subscriber data for the three and nine months ended September 30, 2011 and 2010, respectively:


Unaudited


For the Three Months Ended September 30,


For the Nine Months Ended September 30,


2011


2010


2011


2010









Beginning subscribers

21,016,175


19,527,448


20,190,964


18,772,758

Gross subscriber additions

2,138,131


1,952,054


6,369,846


5,693,409

Deactivated subscribers

(1,804,448)


(1,617,327)


(5,210,952)


(4,603,992)

Net additions

333,683


334,727


1,158,894


1,089,417

Ending subscribers

21,349,858


19,862,175


21,349,858


19,862,175









Self-pay

17,534,310


16,335,819


17,534,310


16,335,819

Paid promotional

3,815,548


3,526,356


3,815,548


3,526,356

Ending subscribers

21,349,858


19,862,175


21,349,858


19,862,175









Self-pay

364,004


258,105


847,511


631,887

Paid promotional

(30,321)


76,622


311,383


457,530

Net additions

333,683


334,727


1,158,894


1,089,417









Daily weighted average number of subscribers

21,107,540


19,610,837


20,688,641


19,181,040









Average self-pay monthly churn (1)

1.9%


1.9%


1.9%


1.9%









Conversion rate (2)

44.4%


48.1%


44.7%


46.6%



____________

See accompanying footnotes.

Subscribers. The improvement in the three months ended September 30, 2011 was due to the 10% increase in gross subscriber additions, primarily resulting from an increase in U.S. light vehicle sales, new vehicle penetration and returning activations.  

Average Self-pay Monthly Churn remained flat at 1.9% for all periods presented.

Conversion Rate. The decrease in the three months ended September 30, 2011 was primarily due to the changing mix of sales among OEMs and operational issues impacting the timing of the receipt of customer information and prompt marketing communications with buyers and lessees of vehicles.

Metrics.

The following table contains our key operating metrics based on our unaudited adjusted results of operations for the three and nine months ended September 30, 2011 and 2010, respectively:


Unaudited


For the Three Months Ended September 30,


For the Nine Months Ended September 30,

(in thousands, except for per subscriber amounts)

2011


2010


2011


2010





ARPU (3)

$     11.66


$     11.81


$        11.57


$        11.70

SAC, per gross subscriber addition (4)

$          55


$          59


$             55


$             59

Customer service and billing expenses, per average








subscriber (5)

$       1.01


$       1.02


$          1.03


$          1.00

Free cash flow (6)

$   75,377


$   61,998


$    223,936


$      43,126

Adjusted total revenue (8)

$ 764,842


$ 722,537


$ 2,239,737


$ 2,098,659

Adjusted EBITDA (7)

$ 197,288


$ 169,727


$    563,741


$    481,799



____________

See accompanying footnotes.

ARPU decreased in the three months ended September 30, 2011 by $0.15, driven primarily by an increase in subscription discounts offered through customer acquisition and retention programs, the number of subscribers on OEM paid promotional plans and the decrease in the U.S. Music Royalty Fee, partially offset by an increase in sales of our premium services, including Premier packages, data services and streaming.

SAC, Per Gross Subscriber Addition, decreased in the three months ended September 30, 2011 primarily due to lower per radio subsidy rates for certain OEMs and growth in subscriber reactivations and royalties from radio manufacturers, partially offset by an increase in OEM production with factory-installed satellite radios compared to the three months ended September 30, 2010.

Customer Service and Billing Expenses, Per Average Subscriber, decreased in the three months ended September 30, 2011 primarily due to lower operating costs, partially offset by higher call volume, handle time per call, increased agent rates and personnel costs associated with the 8% growth in daily weighted average subscribers.

Free Cash Flow increased in the three months ended September 30, 2011 principally as a result of improvements in adjusted EBITDA and decreases in capital expenditures.  Net cash provided by operating activities decreased $35 million to $115 million for the three months ended September 30, 2011 compared to the $150 million provided by operations for the three months ended September 30, 2010. Capital expenditures for property and equipment for the three months ended September 30, 2011 decreased $48 million to $40 million compared to $88 million for the three months ended September 30, 2010. The decrease in net cash provided by operating activities was primarily the result of the timing of prepayments made to content providers, partially offset by improved operating performance driving higher adjusted EBITDA. The decrease in capital expenditures for the three months ended September 30, 2011 was primarily the result of decreased satellite construction and launch expenditures due to the launch in the fourth quarter of 2010 of our XM-5 satellite.

Adjusted Total Revenue. Set forth below are our adjusted total revenue for the three and nine months ended September 30, 2011 and 2010, respectively. 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 September 30,


For the Nine Months Ended September 30,

(in thousands)

2011


2010


2011


2010





Revenue:




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