International Entertainment News: SiriusXM Reports Second Quarter 2011 Results

SiriusXM Reports Second Quarter 2011 Results

- Subscribers Exceed 21 Million, an All-Time High

- Record Revenue of $744 Million, Up 6% Over Second Quarter 2010

- Record Adjusted EBITDA of $185 Million, Up 20% Over Second Quarter 2010

- Company Raises Guidance; 1.6 Million Net Subscriber Additions and Free Cash Flow Approaching $400 Million Expected in 2011

NEW YORK, Aug. 2, 2011/PRNewswire/ -- Sirius XM Radio (NASDAQ: SIRI) today announced second quarter 2011 results, including revenue of $744 million, up 6% over second quarter 2010 revenue of $700 million, and adjusted EBITDA of $185 million, up 20% from $154 million in the second quarter of 2010.

(Logo: http://photos.prnewswire.com/prnh/20101014/NY82093LOGO )

"Our results in the second quarter were strong, and we are proud of our record levels of subscribers, revenue, and adjusted EBITDA and growth in free cash flow. SiriusXM continues to perform well, and we are pleased to raise our subscriber guidance and, for the second time this year, our free cash flow guidance," said Mel Karmazin, Chief Executive Officer, SiriusXM.

Highlights from the quarter include:

-- Subscriber growth continues. Auto sales growth and higher OEM
penetration year-over-year drove ending subscribers as of June 30, 2011
to 21,016,175, up 8% from the 19,527,448 subscribers reported as of June
30, 2010. Self-pay net additions in the second quarter of 2011 were
362,663, up 19% from 304,043 in the second quarter of 2010.
-- Churn stable. Average self-pay monthly churn was 1.9% in the second
quarter 2011, compared to 2.0% in the first quarter 2011 and 1.8% in the
second quarter of 2010.
-- SAC improves. Subscriber acquisition cost (SAC) per gross subscriber
addition was $54 in the second quarter of 2011, an 8% improvement from
the $59 reported in the second quarter of 2010.

"Demand for satellite radio continues to grow, with gross additions reaching the highest level of any quarter since the merger of Sirius and XM. Our all-time high OEM penetration rate is a reflection of the automakers' satisfaction and their commitment to offer our service to their customers," said Karmazin. "We intend to drive future growth through innovations to our satellite and internet platforms, with the goal of better delivering our unparalleled content to our valued customers. We're also excited to launch a variety of additional new music and talk channels later this year."

Free cash flow in the second quarter of 2011 was $165 million, a 53% improvement from the $108 million reported in the second quarter 2010. These improvements were driven by cash received from the Canada merger, a decline in satellite capital expenditures, and improved adjusted EBITDA. Net income in the second quarters of 2011 and 2010 was $173 million and $15 million, respectively, or $0.03 and $0.00 per diluted share, respectively.

"We ended the second quarter with $528 million of cash and cash equivalents after using approximately $75 million to repurchase debt in the second quarter," said David Frear, SiriusXM's Executive Vice President and Chief Financial Officer. "We continue to make steady progress toward reaching our leverage target. Our net debt to adjusted EBITDA declined to 3.7x at the end of the second quarter of 2011 from 5.2x at the end of the second quarter of 2010. The company is examining ways to start efficiently returning capital to shareholders beginning in 2012," 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 GUIDANCE

"With the excellent subscriber performance recorded in the first half of 2011, we are now confident that we will exceed our previously announced 1.4 million net subscriber addition guidance for 2011. Today we are raising our full-year guidance to a projected 1.6 million net subscriber additions," added Karmazin. "After a strong first half, we now expect free cash flow in 2011 will approach $400 million, up from our prior guidance of approaching $350 million."

In 2011, the company continues to expect full-year revenue of approximately $3 billion. SiriusXM's adjusted EBITDA projection remains at approximately $715 million. Full year self-pay churn and conversion rates for 2011 should be broadly similar to those seen in 2010.

SECOND QUARTER 2011 RESULTS

Subscriber Data.

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

Unaudited
---------
For the Three Months Ended
June 30,
---------------------------
2011 2010
---- ----

Beginning subscribers 20,564,028 18,944,199
Gross subscriber additions 2,179,348 2,020,507
Deactivated subscribers (1,727,201) (1,437,258)
Net additions 452,147 583,249
------- -------
Ending subscribers 21,016,175 19,527,448
========== ==========

Self-pay 17,170,306 16,077,714
Paid promotional 3,845,869 3,449,734
Ending subscribers 21,016,175 19,527,448
========== ==========

Self-pay 362,663 304,043
Paid promotional 89,484 279,206
Net additions 452,147 583,249
======= =======

Daily weighted average number
of subscribers 20,715,630 19,139,926
========== ==========

Average self-pay monthly
churn (1) 1.9% 1.8%
=== ===

Conversion rate (2) 45.2% 46.7%
==== ====

Unaudited
---------
For the Six Months Ended June
30,
------------------------------
2011 2010
---- ----

Beginning subscribers 20,190,964 18,772,758
Gross subscriber additions 4,231,715 3,741,355
Deactivated subscribers (3,406,504) (2,986,665)
Net additions 825,211 754,690
------- -------
Ending subscribers 21,016,175 19,527,448
========== ==========

Self-pay 17,170,306 16,077,714
Paid promotional 3,845,869 3,449,734
Ending subscribers 21,016,175 19,527,448
========== ==========

Self-pay 483,507 373,782
Paid promotional 341,704 380,908
Net additions 825,211 754,690
======= =======

Daily weighted average number
of subscribers 20,475,720 18,962,580
========== ==========

Average self-pay monthly
churn (1) 1.9% 1.9%
=== ===

Conversion rate (2) 44.9% 45.9%
==== ====

____________

See accompanying footnotes.

Subscribers. The improvement in the three months ended June 30, 2011 was due to the 8% 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 increased in the three months ended June 30, 2011 due to changes in vehicle ownership which were offset by reductions in non-pay cancellation rates.

Conversion Rate. The decrease in the three months ended June 30, 2011 was primarily due to the changing mix of sales among auto manufacturers.

Metrics.

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

Unaudited
---------
For the Three Months Ended For the Six Months Ended June
June 30, 30,
--------------------------- ------------------------------
(in
thousands,
except for
per
subscriber
amounts) 2011 2010 2011 2010
---- ---- ---- ----

ARPU (3) $11.53 $11.81 $11.53 $11.65
SAC, per
gross
subscriber
addition
(4) $54 $59 $56 $59
Customer
service
and
billing
expenses,
per
average
subscriber
(5) $1.00 $1.01 $1.04 $1.00
Free cash
flow (6) $165,433 $108,331 $148,559 $(18,872)
Adjusted
total
revenue
(8) $747,335 $705,560 $1,474,896 $1,376,122
Adjusted
EBITDA (7) $185,094 $154,313 $366,454 $312,070

____________

See accompanying footnotes.

ARPU decreased in the three months ended June 30, 2011 by $0.28, primarily as a result of an increase in subscriber retention programs, the number of subscribers on OEM paid promotional plans and the decrease in the U.S. Music Royalty rate, partially offset by an increase in sales of premium services, including "Best of" programming, data services and streaming.

SAC, Per Gross Subscriber Addition, decreased in the three months ended June 30, 2011 primarily due to an 8% increase in gross subscriber additions and lower per radio subsidy rates for certain OEMs.

Customer Service and Billing Expenses, Per Average Subscriber, decreased in the three months ended June 30, 2011 primarily due to the 8% growth in daily weighted average subscribers relative to a 7% increase in customer service and billing expenses due to higher call volume and handle time per call and personnel costs.

Free Cash Flow increased in the three months ended June 30, 2011 principally as a result of improvements in net cash provided by operating activities and decreases in capital expenditures. Net cash provided by operating activities increased $16 million to $195 million for the three months ended June 30, 2011, compared to the $179 million provided by operations for the three months ended June 30, 2010. The increase in net cash provided by operating activities was primarily the result of improved operating performance driving higher adjusted EBITDA, cash received from the Canada merger and higher collections from subscribers and distributors. Capital expenditures for property and equipment for the three months ended June 30, 2011 decreased $30 million to $40 million, compared to $70 million for the three months ended June 30, 2010. The decrease in capital expenditures for the three months ended June 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. The increase in net cash from restricted and other investment activities was driven by the return of capital resulting from the Canada merger.

Adjusted Total Revenue. Set forth below are our adjusted total revenue for the three and six months ended June 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
June 30,
---------------------------
(in thousands) 2011 2010
---- ----

Revenue:
Subscriber revenue, including
effects of rebates (GAAP) $639,642 $601,630
Advertising revenue, net of agency
fees (GAAP) 18,227 15,797
Equipment revenue (GAAP) 17,022 18,520
Other revenue (GAAP) 69,506 63,814
------ ------
Total revenue (GAAP) 744,397 699,761
Purchase price accounting
adjustments:
Subscriber revenue, including
effects of rebates 1,125 3,986
Other revenue 1,813 1,813
Adjusted total revenue $747,335 $705,560
======== ========

Unaudited
---------
For the Six Months Ended June
30,
------------------------------
(in thousands) 2011 2010
---- ----

Revenue:
Subscriber revenue, including
effects of rebates (GAAP) $1,262,080 $1,181,139
Advertising revenue, net of agency
fees (GAAP) 34,785 30,323
Equipment revenue (GAAP) 32,889 32,802
Other revenue (GAAP) 138,482 119,280
------- -------
Total revenue (GAAP) 1,468,236 1,363,544
Purchase price accounting
adjustments:
Subscriber revenue, including
effects of rebates 3,034 8,952
Other revenue 3,626 3,626
Adjusted total revenue $1,474,896 $1,376,122
========== ==========

For the three months ended June 30, 2011, the increase in subscriber revenue was primarily attributable to an 8% increase in daily weighted average subscribers and an increase in sales of premium services, including "Best of" programming, data services and streaming. The increase in other revenue was driven by an increase in subscribers subject to the U.S. Music Royalty Fee and increased royalty revenue from Sirius Canada.

Adjusted EBITDA. EBITDA is defined as net income (loss) before interest and investment income (loss); interest expense, net of amounts capitalized; income tax expense and depreciation and amortization. Adjusted EBITDA removes the impact of other income and expense, losses on extinguishment of debt as well as certain other charges, such as goodwill impairment; restructuring, impairments and related costs; certain purchase price accounting adjustments and share-based payment expense.

Unaudited Adjusted
------------------
For the Three Months Ended
June 30,
---------------------------
2011 2010
---- ----

Total revenue $747,335 $705,560
Operating expenses:
Revenue share and royalties 147,875 134,318
Programming and content 78,226 83,931
Customer service and
billing 62,284 57,763
Satellite and transmission 18,507 19,235
Cost of equipment 7,601 7,805
Subscriber acquisition
costs 126,972 130,683
Sales and marketing 53,646 57,076
Engineering, design and
development 12,965 9,635
General and administrative 54,165 50,801
Total operating expenses 562,241 551,247
------- -------
Adjusted EBITDA $185,094 $154,313
======== ========

Unaudited Adjusted
------------------
For the Six Months Ended June
30,
------------------------------
2011 2010
---- ----

Total revenue $1,474,896 $1,376,122
Operating expenses:
Revenue share and royalties 284,737 257,857
Programming and content 161,499 174,402
Customer service and
billing 127,772 113,340
Satellite and transmission 36,739 38,622
Cost of equipment 14,006 15,724
Subscriber acquisition
costs 253,898 237,728
Sales and marketing 102,802 107,018
Engineering, design and
development 22,988 19,462
General and administrative 104,001 99,899
Total operating expenses 1,108,442 1,064,052
--------- ---------
Adjusted EBITDA $366,454 $312,070
======== ========

For the three months ended June 30, 2011, the increase in adjusted EBITDA was primarily due to an increase of 6%, or $42 million, in adjusted revenues, partially offset by an increase of 2%, or $11 million, in expenses included in adjusted EBITDA. The increase in adjusted revenue was primarily due to the increase in our subscriber base and by the additional subscribers subject to the U.S. Music Royalty Fee. The increase in expenses was primarily driven by higher revenue share and royalties expenses associated with growth in revenues and increased customer service and billing expenses associated with subscriber growth, partially offset by lower subscriber acquisition costs, sales and marketing expenses, and programming and content costs.

SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited Actual
----------------
For the Three Months Ended June 30,
-----------------------------------
(in thousands, except per
share data) 2011 2010
---- ----

Revenue:
Subscriber revenue $639,642 $601,630
Advertising revenue, net of
agency fees 18,227 15,797
Equipment revenue 17,022 18,520
Other revenue 69,506 63,814
------ ------
Total revenue 744,397 699,761
Operating expenses:
Cost of services:
Revenue share and royalties 116,741 107,901
Programming and content 67,399 72,019
Customer service and
billing 62,592 58,414
Satellite and transmission 18,998 19,982
Cost of equipment 7,601 7,805
Subscriber acquisition
costs 105,162 110,383
Sales and marketing 51,442 56,177
Engineering, design and
development 13,939 11,247
General and administrative 60,479 59,166
Depreciation and
amortization 67,062 69,230

Restructuring, impairments
and related costs - 1,803

Total operating expenses 571,415 574,127
------- -------
Income from operations 172,982 125,634
Other income (expense):
Interest expense, net of
amounts capitalized (76,196) (76,802)
Loss on extinguishment of
debt and credit
facilities, net (1,212) (31,987)
Interest and investment
income (loss) 80,182 378
Other income (loss) 183 (485)
Total other income
(expense) 2,957 (108,896)
----- --------
Income before income taxes 175,939 16,738
Income tax expense (2,620) (1,466)

Net income $173,319 $15,272
======== =======
Net income per common
share:
Basic $0.05 $0.00
===== =====
Diluted $0.03 $0.00
===== =====

Weighted average common
shares outstanding:
Basic 3,744,375 3,683,595
========= =========
Diluted 6,804,297 6,363,955
========= =========

Unaudited Actual
----------------
For the Six Months Ended June 30,
---------------------------------
(in thousands, except per
share data) 2011 2010
---- ----

Revenue:
Subscriber revenue $1,262,080 $1,181,139
Advertising revenue, net of
agency fees 34,785 30,323
Equipment revenue 32,889 32,802
Other revenue 138,482 119,280
------- -------
Total revenue 1,468,236 1,363,544
Operating expenses:
Cost of services:
Revenue share and royalties 223,670 206,085
Programming and content 140,358 150,452
Customer service and billing 128,429 114,625
Satellite and transmission 37,558 40,100
Cost of equipment 14,006 15,724
Subscriber acquisition costs 210,432 199,762
Sales and marketing 99,261 105,294
Engineering, design and
development 25,074 22,684
General and administrative 116,831 116,746
Depreciation and amortization 135,462 139,495

Restructuring, impairments
and related costs - 1,803

Total operating expenses 1,131,081 1,112,770
--------- ---------
Income from operations 337,155 250,774
Other income (expense):
Interest expense, net of
amounts capitalized (154,414) (154,670)
Loss on extinguishment of
debt and credit facilities,
net (7,206) (34,437)
Interest and investment
income (loss) 78,298 (2,892)
Other income (loss) 1,799 728
Total other income (expense) (81,523) (191,271)
------- --------
Income before income taxes 255,632 59,503
Income tax expense (4,192) (2,633)

Net income $251,440 $56,870
======== =======
Net income per common share:
Basic $0.07 $0.02
===== =====
Diluted $0.04 $0.01
===== =====

Weighted average common
shares outstanding:
Basic 3,739,731 3,682,750
========= =========
Diluted 6,790,729 6,357,507
========= =========

SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31,
June 30, 2011 2010
------------- -------------
(unaudited)
(in thousands, except share and
per share data)
ASSETS
Current assets:
Cash and cash equivalents $528,327 $586,691
Accounts receivable, net 100,834 121,658
Receivables from distributors 81,014 67,576
Inventory, net 32,317 21,918
Prepaid expenses 156,530 134,994
Related party current assets 6,264 6,719
Deferred tax asset 54,828 44,787
Other current assets 5,167 7,432
----- -----
Total current assets 965,281 991,775
Property and equipment, net 1,722,673 1,761,274
Long-term restricted investments 3,146 3,396
Deferred financing fees, net 48,062 54,135
Intangible assets, net 2,602,425 2,632,688
Goodwill 1,834,856 1,834,856
Related party long-term assets 71,323 33,475
Other long-term assets 56,019 71,487
------ ------
Total assets $7,303,785 $7,383,086
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable and accrued
expenses $481,977 $593,174
Accrued interest 70,565 72,453
Current portion of deferred
revenue 1,295,653 1,201,346
Current portion of deferred
credit on executory contracts 281,071 271,076
Current maturities of long-term
debt 25,894 195,815
Related party current liabilities 15,802 15,845
------ ------
Total current liabilities 2,170,962 2,349,709
Deferred revenue 244,573 273,973
Deferred credit on executory
contracts 361,899 508,012
Long-term debt 2,671,770 2,695,856
Long-term related party debt 327,296 325,907
Deferred tax liability 927,120 914,637
Related party long-term
liabilities 23,129 24,517
Other long-term liabilities 82,425 82,839
------ ------
Total liabilities 6,809,174 7,175,450
--------- ---------

Commitments and contingencies
Stockholders' equity:
Preferred stock, par value
$0.001; 50,000,000 authorized at
June 30, 2011 and December 31,
2010:
Series A convertible preferred
stock; no shares issued and
outstanding at June 30, 2011
and December 31, 2010 - -
Convertible perpetual preferred
stock, series B-1 (liquidation
preference of $13 at June 30,
2011
and December 31, 2010);
12,500,000 shares issued and
outstanding at June 30, 2011 and
December 31, 2010 13 13
Convertible preferred stock,
series C junior; no shares
issued and outstanding at
June 30, 2011 and December 31,
2010 - -
Common stock, par value $0.001;
9,000,000,000 shares authorized
at June 30, 2011 and
December 31, 2010; 3,948,913,078
and 3,933,195,112 shares issued
and outstanding at
June 30, 2011 and December 31,
2010, respectively 3,949 3,933
Accumulated other comprehensive
income (loss), net of tax 288 (5,861)
Additional paid-in capital 10,449,974 10,420,604
Accumulated deficit (9,959,613) (10,211,053)
---------- -----------
Total stockholders' equity 494,611 207,636
------- -------
Total liabilities and
stockholders' equity $7,303,785 $7,383,086
========== ==========

SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited Actual
----------------
For the Six Months Ended June
30,
------------------------------
(in thousands) 2011 2010
---- ----

Cash flows from
operating activities:
Net income $251,440 $56,870
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization 135,462 139,495
Non-cash interest
expense, net of
amortization of
premium 19,234 22,294
Provision for doubtful
accounts 17,744 15,756
Restructuring,
impairments and
related costs - 1,803
Amortization of
deferred income
related to equity
method investment (1,388) (2,137)
Loss on extinguishment
of debt and credit
facilities, net 7,206 34,437
Gain on merger of
unconsolidated
entities (83,718) -
Loss on unconsolidated
entity investments,
net 6,045 6,065
Loss on disposal of
assets 269 (18)
Share-based payment
expense 23,591 33,083
Deferred income taxes 2,223 2,633
Other non-cash
purchase price
adjustments (134,862) (120,706)
Distribution from
investment in
unconsolidated entity 4,849 -
Changes in operating
assets and
liabilities:
Accounts receivable 3,080 (14,296)
Receivables from
distributors (13,438) (26,655)
Inventory (10,399) 2,467
Related party assets 31,076 (701)
Prepaid expenses and
other current assets (20,871) 10,245
Other long-term
assets 15,974 10,947
Accounts payable and
accrued expenses (101,552) (76,144)
Accrued interest (1,888) (4,796)
Deferred revenue 63,649 105,004
Related party
liabilities (42) (54,978)
Other long-term
liabilities (194) 319
---- ---
Net cash provided by
operating activities 213,490 140,987
------- -------

Cash flows from
investing activities:
Additions to property
and equipment (75,298) (169,313)
Sale of restricted and
other investments - 9,454
Release of restricted
investments 250 -
Return of capital from
investment in
unconsolidated entity 10,117 -
Net cash used in
investing activities (64,931) (159,859)
------- --------

Cash flows from
financing activities:
Proceeds from exercise
of stock options 6,921 -
Long-term borrowings,
net of costs - 637,406
Related party long-
term borrowings, net
of costs - 147,094
Payment of premiums on
redemption of debt (5,020) (24,065)
Repayment of long-
term borrowings (208,824) (810,977)
Repayment of related
party long-term
borrowings - (55,221)
--- -------
Net cash used in
financing activities (206,923) (105,763)
-------- --------
Net decrease in cash
and cash equivalents (58,364) (124,635)
Cash and cash
equivalents at
beginning of period 586,691 383,489
Cash and cash
equivalents at end of
period $528,327 $258,854
======== ========

Footnotes

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

(2) We measure the percentage of owners and lessees of new vehicles that receive our service and convert to become self-paying subscribers after the initial promotion period. We refer to this as the "conversion rate." At the time satellite radio enabled vehicles are sold or leased, the owners or lessees generally receive trial subscriptions ranging from three to twelve months. 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.

(3) ARPU is derived from total earned subscriber revenue, net advertising revenue and other subscription-related revenue, net of purchase price accounting adjustments, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. Other subscription-related revenue includes the U.S. Music Royalty Fee. Purchase price accounting adjustments include the recognition of deferred subscriber revenues not recognized in purchase price accounting associated with the Merger. ARPU is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

Unaudited
---------
For the Three Months Ended
June 30,
---------------------------
2011 2010
---- ----

Subscriber revenue (GAAP) $639,642 $601,630
Add: net advertising revenue
(GAAP) 18,227 15,797
Add: other subscription-
related revenue (GAAP) 57,642 56,694
Add: purchase price accounting
adjustments 1,125 3,986
----- -----
$716,636 $678,107
======== ========

Daily weighted average number
of subscribers 20,715,630 19,139,926
========== ==========

ARPU $11.53 $11.81
====== ======

Unaudited
---------
For the Six Months Ended June
30,
------------------------------
2011 2010
---- ----

Subscriber revenue (GAAP) $1,262,080 $1,181,139
Add: net advertising revenue
(GAAP) 34,785 30,323
Add: other subscription-
related revenue (GAAP) 116,173 104,641
Add: purchase price accounting
adjustments 3,034 8,952
----- -----
$1,416,072 $1,325,055
========== ==========

Daily weighted average number
of subscribers 20,475,720 18,962,580
========== ==========

ARPU $11.53 $11.65
====== ======

(4) Subscriber acquisition cost, per gross subscriber addition (or SAC, per gross subscriber addition) is derived from subscriber acquisition costs and margins from the direct sale of radios and accessories, excluding purchase price accounting adjustments, divided by the number of gross subscriber additions for the period. Purchase price accounting adjustments associated with the Merger include the elimination of the benefit of amortization of deferred credits on executory contracts recognized at the Merger date attributable to an OEM. SAC, per gross subscriber addition, is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

Unaudited
---------
For the Three Months Ended
June 30,
---------------------------
2011 2010
---- ----

Subscriber acquisition costs (GAAP) $105,162 $110,383
Less: margin from direct sales of radios
and accessories (GAAP) (9,421) (10,715)
Add: purchase price accounting
adjustments 21,810 20,300
------ ------
$117,551 $119,968
======== ========

Gross subscriber additions 2,179,348 2,020,507
========= =========

SAC, per gross subscriber addition $54 $59
=== ===

Unaudited
---------
For the Six Months Ended June
30,
------------------------------
2011 2010
---- ----

Subscriber acquisition costs (GAAP) $210,432 $199,762
Less: margin from direct sales of radios
and accessories (GAAP) (18,883) (17,078)
Add: purchase price accounting
adjustments 43,466 37,966
------ ------
$235,015 $220,650
======== ========

Gross subscriber additions 4,231,715 3,741,355
========= =========

SAC, per gross subscriber addition $56 $59
=== ===

(5) Customer service and billing expenses, per average subscriber, is derived from total customer service and billing expenses, excluding share-based payment expense and purchase price accounting adjustments associated with the Merger, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. We believe the exclusion of share-based payment expense in our calculation of customer service and billing expenses, 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. Purchase price accounting adjustments associated with the Merger include the elimination of the benefit associated with incremental share-based payment arrangements recognized at the Merger date. Customer service and billing expenses, per average subscriber, is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

Unaudited
---------
For the Three Months Ended
June 30,
---------------------------
2011 2010
---- ----

Customer service and billing expenses
(GAAP) $62,592 $58,414
Less: share-based payment expense, net
of purchase
price accounting adjustments (308) (729)
Add: purchase price accounting
adjustments - 78
--- ---
$62,284 $57,763
======= =======

Daily weighted average number of
subscribers 20,715,630 19,139,926
========== ==========

Customer service and billing expenses,
per average subscriber $1.00 $1.01
===== =====

Unaudited
---------
For the Six Months Ended June
30,
------------------------------
2011 2010
---- ----

Customer service and billing expenses
(GAAP) $128,429 $114,625
Less: share-based payment expense, net
of purchase
price accounting adjustments (675) (1,457)
Add: purchase price accounting
adjustments 18 172
--- ---
$127,772 $113,340
======== ========

Daily weighted average number of
subscribers 20,475,720 18,962,580
========== ==========

Customer service and billing expenses,
per average subscriber $1.04 $1.00
===== =====

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

Unaudited
---------
For the Three Months Ended
June 30,
---------------------------
2011 2010
---- ----

Net cash provided by
operating activities $195,381 $178,675
Additions to property and
equipment (40,315) (70,348)
Restricted and other
investment activity 10,367 4
Free cash flow $165,433 $108,331
======== ========

Unaudited
---------
For the Six Months Ended June
30,
------------------------------
2011 2010
---- ----

Net cash provided by
operating activities $213,490 $140,987
Additions to property and
equipment (75,298) (169,313)
Restricted and other
investment activity 10,367 9,454
Free cash flow $148,559 $(18,872)
======== ========

(7) EBITDA is defined as net income before interest and investment income (loss); interest expense, net of amounts capitalized; taxes expense and depreciation and amortization. We adjust EBITDA to remove the impact of other income and expense, loss on extinguishment of debt as well as certain other charges discussed below. This measure is one of the primary Non-GAAP financial measures on which we (i) evaluate the performance of our businesses, (ii) base our internal budgets and (iii) compensate management. Adjusted EBITDA is a Non-GAAP financial performance measure that excludes (if applicable): (i) certain adjustments as a result of the purchase price accounting for the Merger, (ii) goodwill impairment, (iii) restructuring, impairments, and related costs, (iv) depreciation and amortization and (v) share-based payment expense. The purchase price accounting adjustments include: (i) the elimination of deferred revenue associated with the investment in XM Canada, (ii) recognition of deferred subscriber revenues not recognized in purchase price accounting, and (iii) elimination of the benefit of deferred credits on executory contracts, which are primarily attributable to third party arrangements with an OEM and programming providers. We believe adjusted EBITDA is a useful measure of the underlying trend of our operating performance, which provides useful information about our business apart from the costs associated with our physical plant, capital structure and purchase price accounting. We believe investors find this Non-GAAP financial measure useful when analyzing our results and comparing our operating performance to the performance of other communications, entertainment and media companies. We believe investors use current and projected adjusted EBITDA to estimate our current and 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 depreciation expense. The exclusion of depreciation and amortization expense is useful given significant variation in depreciation and amortization expense that can result from the 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 restructuring, impairments and related costs is useful given the 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 value as determined using the Black-Scholes-Merton model which varies based on assumptions used for the expected life, expected stock price volatility and risk-free interest rates.

Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statement of operations of certain expenses, including share-based payment expense and certain purchase price accounting for the Merger. We endeavor to compensate for the limitations of the Non-GAAP measure presented by also providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the Non-GAAP measure. Investors that wish to compare and evaluate our operating results after giving effect for these costs, should refer to net income as disclosed in our consolidated statements of operations. Since adjusted EBITDA is a Non-GAAP financial performance measure, our calculation of adjusted EBITDA 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. The reconciliation of net income to the adjusted EBITDA is calculated as follows (in thousands):

Unaudited
---------
For the Three Months Ended
June 30,
---------------------------
2011 2010
---- ----

Net income (GAAP): $173,319 $15,272
Add back items excluded from Adjusted
EBITDA:
Purchase price accounting adjustments:
Revenues 2,938 5,799
Operating expenses (68,623) (64,857)
Share-based payment expense, net of
purchase price
accounting adjustments 10,735 16,704
Depreciation and amortization (GAAP) 67,062 69,230
Restructuring, impairments and related
costs - 1,803
Interest expense, net of amounts
capitalized (GAAP) 76,196 76,802
Loss on extinguishment of debt and credit
facilities, net (GAAP) 1,212 31,987
Interest and investment (income) loss
(GAAP) (80,182) (378)
Other (income) loss (GAAP) (183) 485
Income tax expense (GAAP) 2,620 1,466

Adjusted EBITDA $185,094 $154,313
======== ========

Unaudited
---------
For the Six Months Ended June
30,
------------------------------
2011 2010
---- ----

Net income (GAAP): $251,440 $56,870
Add back items excluded from
Adjusted EBITDA:
Purchase price accounting
adjustments:
Revenues 6,660 12,578
Operating expenses (136,595) (127,467)
Share-based payment expense, net
of purchase price
accounting adjustments 23,772 34,887
Depreciation and amortization
(GAAP) 135,462 139,495
Restructuring, impairments and
related costs - 1,803
Interest expense, net of amounts
capitalized (GAAP) 154,414 154,670
Loss on extinguishment of debt and
credit facilities, net (GAAP) 7,206 34,437
Interest and investment (income)
loss (GAAP) (78,298) 2,892
Other (income) loss (GAAP) (1,799) (728)
Income tax expense (GAAP) 4,192 2,633

Adjusted EBITDA $366,454 $312,070
======== ========

(8) The following tables reconcile our actual revenues and operating expenses to our adjusted revenues and operating expenses for the three and six months ended June 30, 2011 and 2010:

Unaudited For the Three Months Ended June 30, 2011
--------------------------------------------------
(in thousands) As Reported Purchase Price
----------- --------------
Accounting
----------
Adjustments
-----------

Revenue:
Subscriber
revenue,
including
effects of
rebates $639,642 $1,125
Advertising
revenue, net
of agency
fees 18,227 -
Equipment
revenue 17,022 -
Other revenue 69,506 1,813
------ -----
Total revenue $744,397 $2,938
======== ======
Operating
expenses
Cost of
services:
Revenue share
and royalties 116,741 31,134
Programming
and content 67,399 11,787
Customer
service and
billing 62,592 -
Satellite and
transmission 18,998 74
Cost of
equipment 7,601 -
Subscriber
acquisition
costs 105,162 21,810
Sales and
marketing 51,442 3,818
Engineering,
design and
development 13,939 -
General and
administrative 60,479 -
Depreciation
and
amortization
(a) 67,062 -
Restructuring,
impairments
and related
costs - -
Share-based
payment
expense (b) - -
Total
operating
expenses $571,415 $68,623
======== =======

(a) Purchase
price
accounting
adjustments
included
above exclude
the
incremental
depreciation
and
amortization
associated
with the
$785,000
stepped up
basis in
property,
equipment and
intangible
assets as a
result of the
Merger. The
increased
depreciation
and
amortization
for the three
months ended
June 30, 2011
was $15,000.

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

Programming
and content $960 $-
Customer
service and
billing 308 -
Satellite and
transmission 565 -
Sales and
marketing 1,614 -
Engineering,
design and
development 974 -
General and
administrative 6,314 -

Total share-
based payment
expense $10,735 $-
======= ===

Unaudited For the Three Months Ended June 30, 2011
--------------------------------------------------
(in thousands) Allocation of Adjusted
------------- --------
Share-based
-----------
Payment
Expense
--------

Revenue:
Subscriber
revenue,
including
effects of
rebates $- $640,767
Advertising
revenue, net
of agency
fees - 18,227
Equipment
revenue - 17,022
Other revenue - 71,319
--- ------
Total revenue $- $747,335
=== ========
Operating
expenses
Cost of
services:
Revenue share
and royalties - 147,875
Programming
and content (960) 78,226
Customer
service and
billing (308) 62,284
Satellite and
transmission (565) 18,507
Cost of
equipment - 7,601
Subscriber
acquisition
costs - 126,972
Sales and
marketing (1,614) 53,646
Engineering,
design and
development (974) 12,965
General and
administrative (6,314) 54,165
Depreciation
and
amortization
(a) - 67,062
Restructuring,
impairments
and related
costs - -
Share-based
payment
expense (b) 10,735 10,735
Total
operating
expenses $- $640,038
=== ========

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

Programming
and content $- $960
Customer
service and
billing - 308
Satellite and
transmission - 565
Sales and
marketing - 1,614
Engineering,
design and
development - 974
General and
administrative - 6,314

Total share-
based payment
expense $- $10,735
=== =======

Unaudited For the Three Months Ended June 30, 2010
--------------------------------------------------
Purchase
(in thousands) As Reported Price
----------- ---------
Accounting
----------
Adjustments
-----------

Revenue:
Subscriber
revenue,
including
effects of
rebates $601,630 $3,986
Advertising
revenue, net of
agency fees 15,797 -
Equipment
revenue 18,520 -
Other revenue 63,814 1,813
------ -----
Total revenue $699,761 $5,799
======== ======
Operating
expenses
Cost of
services:
Revenue share
and royalties 107,901 26,417
Programming and
content 72,019 13,702
Customer service
and billing 58,414 78
Satellite and
transmission 19,982 303
Cost of
equipment 7,805 -
Subscriber
acquisition
costs 110,383 20,300
Sales and
marketing 56,177 3,661
Engineering,
design and
development 11,247 148
General and
administrative 59,166 248
Depreciation and
amortization
(a) 69,230 -
Restructuring,
impairments and
related costs 1,803 -
Share-based
payment expense
(b) - -
--- ---
Total operating
expenses $574,127 $64,857
======== =======

(a) Purchase
price
accounting
adjustments
included above
exclude the
incremental
depreciation
and
amortization
associated with
the $785,000
stepped up
basis in
property,
equipment and
intangible
assets as a
result of the
Merger. The
increased
depreciation
and
amortization
for the three
months ended
June 30, 2010
was $17,000.

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

Programming and
content $1,662 $128
Customer service
and billing 651 78
Satellite and
transmission 968 82
Sales and
marketing 2,643 119
Engineering,
design and
development 1,612 148
General and
administrative 8,365 248

Total share-
based payment
expense $15,901 $803
======= ====

Unaudited For the Three Months Ended June 30, 2010
--------------------------------------------------
(in thousands) Allocation of Adjusted
------------- --------
Share-based
-----------
Payment
Expense
--------

Revenue:
Subscriber
revenue,
including
effects of
rebates $- $605,616
Advertising
revenue, net of
agency fees - 15,797
Equipment
revenue - 18,520
Other revenue - 65,627
--- ------
Total revenue $- $705,560
=== ========
Operating
expenses
Cost of
services:
Revenue share
and royalties - 134,318
Programming and
content (1,790) 83,931
Customer service
and billing (729) 57,763
Satellite and
transmission (1,050) 19,235
Cost of
equipment - 7,805
Subscriber
acquisition
costs - 130,683
Sales and
marketing (2,762) 57,076
Engineering,
design and
development (1,760) 9,635
General and
administrative (8,613) 50,801
Depreciation and
amortization
(a) - 69,230
Restructuring,
impairments and
related costs - 1,803
Share-based
payment expense
(b) 16,704 16,704
------ ------
Total operating
expenses $- $638,984
=== ========

(a) Purchase
price
accounting
adjustments
included above
exclude the
incremental
depreciation
and
amortization
associated with
the $785,000
stepped up
basis in
property,
equipment and
intangible
assets as a
result of the
Merger. The
increased
depreciation
and
amortization
for the three
months ended
June 30, 2010
was $17,000.

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

Programming and
content $- $1,790
Customer service
and billing - 729
Satellite and
transmission - 1,050
Sales and
marketing - 2,762
Engineering,
design and
development - 1,760
General and
administrative - 8,613

Total share-
based payment
expense $- $16,704
=== =======

Unaudited For the Six Months Ended June 30, 2011
------------------------------------------------
Purchase
(in thousands) As Reported Price
----------- ---------
Accounting
----------
Adjustments
-----------

Revenue:
Subscriber
revenue,
including effects
of rebates $1,262,080 $3,034
Advertising
revenue, net of
agency fees 34,785 -
Equipment revenue 32,889 -
Other revenue 138,482 3,626
------- -----
Total revenue $1,468,236 $6,660
========== ======
Operating expenses
Cost of services:
Revenue share and
royalties 223,670 61,067
Programming and
content 140,358 24,611
Customer service
and billing 128,429 18
Satellite and
transmission 37,558 313
Cost of equipment 14,006 -
Subscriber
acquisition costs 210,432 43,466
Sales and
marketing 99,261 7,030
Engineering,
design and
development 25,074 31
General and
administrative 116,831 59
Depreciation and
amortization (a) 135,462 -
Restructuring,
impairments and
related costs - -
Share-based
payment expense
(b) - -
Total operating
expenses $1,131,081 $136,595
========== ========

(a) Purchase price
accounting
adjustments
included above
exclude the
incremental
depreciation and
amortization
associated with
the $785,000
stepped up basis
in property,
equipment and
intangible assets
as a result of
the Merger. The
increased
depreciation and
amortization for
the six months
ended June 30,
2011 was $30,000.

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

Programming and
content $3,443 $27
Customer service
and billing 657 18
Satellite and
transmission 1,113 19
Sales and
marketing 3,462 27
Engineering,
design and
development 2,086 31
General and
administrative 12,830 59

Total share-based
payment expense $23,591 $181
======= ====

Unaudited For the Six Months Ended June 30, 2011
------------------------------------------------
(in thousands) Allocation of Adjusted
------------- --------
Share-based
-----------
Payment
Expense
--------

Revenue:
Subscriber
revenue,
including effects
of rebates $- $1,265,114
Advertising
revenue, net of
agency fees - 34,785
Equipment revenue - 32,889
Other revenue - 142,108
--- -------
Total revenue $- $1,474,896
=== ==========
Operating expenses
Cost of services:
Revenue share and
royalties - 284,737
Programming and
content (3,470) 161,499
Customer service
and billing (675) 127,772
Satellite and
transmission (1,132) 36,739
Cost of equipment - 14,006
Subscriber
acquisition costs - 253,898
Sales and
marketing (3,489) 102,802
Engineering,
design and
development (2,117) 22,988
General and
administrative (12,889) 104,001
Depreciation and
amortization (a) - 135,462
Restructuring,
impairments and
related costs - -
Share-based
payment expense
(b) 23,772 23,772
Total operating
expenses $- $1,267,676
=== ==========

(a) Purchase price
accounting
adjustments
included above
exclude the
incremental
depreciation and
amortization
associated with
the $785,000
stepped up basis
in property,
equipment and
intangible assets
as a result of
the Merger. The
increased
depreciation and
amortization for
the six months
ended June 30,
2011 was $30,000.

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

Programming and
content $- $3,470
Customer service
and billing - 675
Satellite and
transmission - 1,132
Sales and
marketing - 3,489
Engineering,
design and
development - 2,117
General and
administrative - 12,889

Total share-based
payment expense $- $23,772
=== =======

Unaudited For the Six Months Ended June 30, 2010
------------------------------------------------
Purchase
(in thousands) As Reported Price
----------- ---------
Accounting
----------
Adjustments
-----------

Revenue:
Subscriber
revenue,
including effects
of rebates $1,181,139 $8,952
Advertising
revenue, net of
agency fees 30,323 -
Equipment revenue 32,802 -
Other revenue 119,280 3,626
------- -----
Total revenue $1,363,544 $12,578
========== =======
Operating expenses
Cost of services:
Revenue share and
royalties 206,085 51,772
Programming and
content 150,452 28,850
Customer service
and billing 114,625 172
Satellite and
transmission 40,100 626
Cost of equipment 15,724 -
Subscriber
acquisition costs 199,762 37,966
Sales and
marketing 105,294 7,186
Engineering,
design and
development 22,684 334
General and
administrative 116,746 561
Depreciation and
amortization (a) 139,495 -
Restructuring,
impairments and
related costs 1,803 -
Share-based
payment expense
(b) - -
--- ---
Total operating
expenses $1,112,770 $127,467
========== ========

(a) Purchase price
accounting
adjustments
included above
exclude the
incremental
depreciation and
amortization
associated with
the $785,000
stepped up basis
in property,
equipment and
intangible assets
as a result of
the Merger. The
increased
depreciation and
amortization for
the six months
ended June 30,
2010 was $36,000.

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

Programming and
content $4,612 $288
Customer service
and billing 1,285 172
Satellite and
transmission 1,919 185
Sales and
marketing 5,198 264
Engineering,
design and
development 3,222 334
General and
administrative 16,847 561

Total share-based
payment expense $33,083 $1,804
======= ======

Unaudited For the Six Months Ended June 30, 2010
------------------------------------------------
(in thousands) Allocation of Adjusted
------------- --------
Share-based
-----------
Payment
Expense
--------

Revenue:
Subscriber
revenue,
including effects
of rebates $- $1,190,091
Advertising
revenue, net of
agency fees - 30,323
Equipment revenue - 32,802
Other revenue - 122,906
--- -------
Total revenue $- $1,376,122
=== ==========
Operating expenses
Cost of services:
Revenue share and
royalties - 257,857
Programming and
content (4,900) 174,402
Customer service
and billing (1,457) 113,340
Satellite and
transmission (2,104) 38,622
Cost of equipment - 15,724
Subscriber
acquisition costs - 237,728
Sales and
marketing (5,462) 107,018
Engineering,
design and
development (3,556) 19,462
General and
administrative (17,408) 99,899
Depreciation and
amortization (a) - 139,495
Restructuring,
impairments and
related costs - 1,803
Share-based
payment expense
(b) 34,887 34,887
------ ------
Total operating
expenses $- $1,240,237
=== ==========

(a) Purchase price
accounting
adjustments
included above
exclude the
incremental
depreciation and
amortization
associated with
the $785,000
stepped up basis
in property,
equipment and
intangible assets
as a result of
the Merger. The
increased
depreciation and
amortization for
the six months
ended June 30,
2010 was $36,000.

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

Programming and
content $- $4,900
Customer service
and billing - 1,457
Satellite and
transmission - 2,104
Sales and
marketing - 5,462
Engineering,
design and
development - 3,556
General and
administrative - 17,408

Total share-based
payment expense $- $34,887
=== =======

About Sirius XM Radio

Sirius XM Radio is America's satellite radio company. SiriusXM broadcasts more than 135 satellite radio channels of commercial-free music, and premier sports, news, talk, entertainment, traffic, weather, and data services to over 21 million subscribers. SiriusXM offers an array of content from many of the biggest names in entertainment, as well as from professional sports leagues, major colleges, and national news and talk providers.

SiriusXM programming is available on more than 800 devices, including pre-installed and after-market radios in cars, trucks, boats and aircraft, smartphones and mobile devices, and consumer electronics products for homes and offices. SiriusXM programming is also available at siriusxm.com, and on Apple, BlackBerry and Android-powered mobile devices.

SiriusXM has arrangements with every major automaker and its radio products are available for sale at shop.siriusxm.com as well as retail locations nationwide.

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, our 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," "will continue," "is anticipated," "estimated," "intend," "plan," "projection," "outlook" or words of similar meaning. Such forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control. 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: our competitive position versus other forms of audio and video entertainment; our ability to retain subscribers and maintain our average monthly revenue per subscriber; our dependence upon automakers and other third parties; the first quarter tragedy in Japan, which may have certain adverse effects on automakers, radio manufacturers and other third parties; our substantial indebtedness; and the useful life of our satellites, which, in most cases, are not insured. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our Annual Report on Form 10-K for the year ended December 31, 2010, which is 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 we disclaim any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this communication.

Follow SiriusXM on Twitter or like the SiriusXM page on Facebook.

E - SIRI

Contact Information for Investors and Financial Media:

Investors:

Hooper Stevens212 901 6718hooper.stevens@siriusxm.com

Media:

Patrick Reilly212 901 6646patrick.reilly@siriusxm.com

SOURCE Sirius XM Radio

Photo:http://photos.prnewswire.com/prnh/20101014/NY82093LOGO
http://photoarchive.ap.org/
Sirius XM Radio

Web Site: http://www.siriusxm.com

-------
Profile: intent