International Entertainment News: SiriusXM Reports Record Third Quarter 2011 Results

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 For the Nine Months
Ended September 30, 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 For the Nine Months Ended
September 30, 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 For the Nine Months
Ended September 30, Ended September 30,
--------------------- --------------------
(in
thousands) 2011 2010 2011 2010
---- ---- ---- ----

Revenue:
Subscriber
revenue
(GAAP) $660,837 $612,119 $1,922,917 $1,793,258
Advertising
revenue, net
of agency
fees (GAAP) 18,810 15,973 53,595 46,296
Equipment
revenue
(GAAP) 15,504 17,823 48,392 50,625
Other revenue
(GAAP) 67,399 71,633 205,882 190,914
------ ------ ------- -------
Total revenue
(GAAP) 762,550 717,548 2,230,786 2,081,093
Purchase
price
accounting
adjustments:
Subscriber
revenue 479 3,176 3,513 12,128
Other revenue 1,813 1,813 5,438 5,438
Adjusted
total
revenue $764,842 $722,537 $2,239,737 $2,098,659
======== ======== ========== ==========

For the three months ended September 30, 2011, the increase in subscriber revenue was primarily attributable to an increase of 8% in daily weighted average subscribers and an increase in sales of premium services, including Premier packages, data services and streaming, partially offset by the impact of subscription discounts offered through customer acquisition and retention programs. The increase in advertising revenue was primarily due to more effective sales efforts and greater demand for audio advertising resulting in increases in the number of advertising spots sold as well as the rate charged per spot. The decrease in equipment revenue was driven by a reduction in aftermarket hardware subsidies earned. The decrease in other revenue was primarily due to a reduction in the U.S. Music Royalty Fee, which was partially offset by increased royalty revenue from Sirius XM Canada and an increase in subscribers subject to the U.S. Music Royalty Fee.

Adjusted EBITDA. EBITDA is defined as net income 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 For the Nine Months
Ended September 30, Ended September 30,
--------------------- --------------------
2011 2010 2011 2010
---- ---- ---- ----

Total
revenue $764,842 $722,537 $2,239,737 $2,098,659
Operating
expenses:
Revenue
share and
royalties 149,336 141,981 434,072 399,838
Programming
and
content 81,268 88,869 242,767 263,271
Customer
service
and
billing 63,837 59,967 191,608 173,307
Satellite
and
transmission 18,946 20,023 55,684 58,645
Cost of
equipment 5,888 6,463 19,894 22,187
Subscriber
acquisition
costs 127,899 126,873 381,797 364,600
Sales and
marketing 56,976 52,213 159,778 159,231
Engineering,
design
and
development 12,884 10,843 35,873 30,304
General
and
administrative 50,520 45,578 154,523 145,477
Total
operating
expenses 567,554 552,810 1,675,996 1,616,860
------- ------- --------- ---------
Adjusted
EBITDA $197,288 $169,727 $563,741 $481,799
======== ======== ======== ========

For the three months ended September 30, 2011, the increase in adjusted EBITDA was primarily due to a 6% increase or $42 million, in adjusted revenues, partially offset by an increase of nearly 3%, or $15 million, in expenses included in adjusted EBITDA. The increase in adjusted revenues was primarily due to the increase in our subscriber base. 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 attributable to subscriber growth, partially offset by lower programming and content costs.

SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited Actual
----------------
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- --------------------
(in thousands, except
per share data) 2011 2010 2011 2010
---- ---- ---- ----

Revenue:
Subscriber revenue $660,837 $612,119 $1,922,917 $1,793,258
Advertising revenue,
net of agency fees 18,810 15,973 53,595 46,296
Equipment revenue 15,504 17,823 48,392 50,625
Other revenue 67,399 71,633 205,882 190,914
------ ------ ------- -------
Total revenue 762,550 717,548 2,230,786 2,081,093
Operating expenses:
Cost of services:
Revenue share and
royalties 117,043 114,482 340,713 320,567
Programming and
content 70,509 78,143 210,867 228,595
Customer service and
billing 64,239 60,613 192,667 175,238
Satellite and
transmission 19,681 20,844 57,238 60,944
Cost of equipment 5,888 6,463 19,894 22,187
Subscriber acquisition
costs 107,279 105,984 317,711 305,745
Sales and marketing 55,210 51,519 154,471 156,813
Engineering, design
and development 14,175 12,526 39,249 35,209
General and
administrative 58,635 54,188 175,469 170,935
Depreciation and
amortization 65,403 67,450 200,865 206,945
Restructuring,
impairments and
related costs - 2,267 - 4,071
Total operating
expenses 578,062 574,479 1,709,144 1,687,249
------- ------- --------- ---------
Income from operations 184,488 143,069 521,642 393,844
Other income
(expense):
Interest expense, net
of amounts
capitalized (75,316) (68,559) (229,730) (223,230)
Loss on extinguishment
of debt and credit
facilities, net - (256) (7,206) (34,695)
Interest and
investment income
(loss) 292 (4,305) 78,590 (7,197)
Other income 435 1,108 2,235 1,837
Total other expense (74,589) (72,012) (156,111) (263,285)
------- ------- -------- --------
Income before income
taxes 109,899 71,057 365,531 130,559
Income tax expense (5,714) (3,428) (9,907) (6,060)

Net income $104,185 $67,629 $355,624 $124,499
======== ======= ======== ========
Net income per common
share:
Basic $0.03 $0.02 $0.10 $0.03
===== ===== ===== =====
Diluted $0.02 $0.01 $0.05 $0.02
===== ===== ===== =====

Weighted average
common shares
outstanding:
Basic 3,747,381 3,689,245 3,742,309 3,686,312
========= ========= ========= =========
Diluted 6,507,370 6,369,831 6,500,819 6,361,090
========= ========= ========= =========

SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2011 2010
-------------- -------------
(unaudited)
(in thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents $604,592 $586,691
Accounts receivable, net 96,905 121,658
Receivables from distributors 79,934 67,576
Inventory, net 36,196 21,918
Prepaid expenses 146,946 134,994
Related party current assets 5,228 6,719
Deferred tax asset 58,493 44,787
Other current assets 4,908 7,432
----- -----
Total current assets 1,033,202 991,775
Property and equipment, net 1,702,566 1,761,274
Long-term restricted investments 3,146 3,396
Deferred financing fees, net 45,093 54,135
Intangible assets, net 2,587,855 2,632,688
Goodwill 1,834,856 1,834,856
Related party long-term assets 69,943 33,475
Other long-term assets 48,176 71,487
------ ------
Total assets $7,324,837 $7,383,086
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $473,472 $593,174
Accrued interest 78,925 72,453
Current portion of deferred revenue 1,276,996 1,201,346
Current portion of deferred credit on executory
contracts 286,056 271,076
Current maturities of long-term debt 25,588 195,815
Related party current liabilities 16,541 15,845
------ ------
Total current liabilities 2,157,578 2,349,709
Deferred revenue 219,344 273,973
Deferred credit on executory contracts 288,036 508,012
Long-term debt 2,677,550 2,695,856
Long-term related party debt 328,029 325,907
Deferred tax liability 935,805 914,637
Related party long-term liabilities 22,435 24,517
Other long-term liabilities 81,048 82,839
------ ------
Total liabilities 6,709,825 7,175,450
--------- ---------

Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $0.001; 50,000,000
authorized at September 30, 2011 and December 31,
2010:
Series A convertible preferred stock; no shares
issued and outstanding at September 30, 2011
and December 31, 2010 - -
Convertible perpetual preferred stock, series B-1
(liquidation preference of $0.001 at September 30,
2011
and December 31, 2010); 12,500,000 shares issued and
outstanding at September 30, 2011 and
December 31, 2010 13 13
Convertible preferred stock, series C junior; no
shares issued and outstanding at
September 30, 2011 and December 31, 2010 - -
Common stock, par value $0.001; 9,000,000,000 shares
authorized at September 30, 2011 and
December 31, 2010; 3,951,945,992 and 3,933,195,112
shares issued and outstanding at
September 30, 2011 and December 31, 2010,
respectively 3,952 3,933
Accumulated other comprehensive income (loss), net
of tax 398 (5,861)
Additional paid-in capital 10,466,078 10,420,604
Accumulated deficit (9,855,429) (10,211,053)
---------- -----------
Total stockholders' equity 615,012 207,636
------- -------
Total liabilities and stockholders' equity $7,324,837 $7,383,086
========== ==========

SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited Actual
----------------
For the Nine
Months Ended
September 30,
-------------
(in thousands) 2011 2010
---- ----

Cash flows from operating
activities:
Net income $355,624 $124,499
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 200,865 206,945
Non-cash interest expense, net of
amortization of premium 29,211 32,983
Provision for doubtful accounts 26,209 23,300
Restructuring, impairments and
related costs - 4,071
Amortization of deferred income
related to equity method
investment (2,082) (2,081)
Loss on extinguishment of debt and
credit facilities, net 7,206 34,695
Gain on merger of unconsolidated
entities (84,855) -
Loss on unconsolidated entity
investments, net 10,259 8,990
Loss on disposal of assets 269 927
Share-based payment expense 37,574 50,944
Deferred income taxes 7,214 6,060
Other non-cash purchase price
adjustments (203,630) (184,703)
Distribution from investment in
unconsolidated entity 4,849 -
Changes in operating assets and
liabilities:
Accounts receivable (1,456) (18,890)
Receivables from distributors (12,358) (22,430)
Inventory (14,278) (1,843)
Related party assets 30,300 (2,654)
Prepaid expenses and other current
assets (11,028) 41,794
Other long-term assets 23,969 11,765
Accounts payable and accrued
expenses (100,502) (69,629)
Accrued interest 6,472 5,244
Deferred revenue 19,653 92,864
Related party liabilities 696 (50,940)
Other long-term liabilities (1,547) (865)
------ ----
Net cash provided by operating
activities 328,634 291,046
------- -------

Cash flows from investing
activities:
Additions to property and
equipment (115,065) (257,374)
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 (104,698) (247,920)
-------- --------

Cash flows from financing
activities:
Proceeds from exercise of stock
options 9,045 4,906
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) (24,321)
Repayment of long-term borrowings (210,060) (820,224)
Repayment of related party long-
term borrowings - (55,221)
--- -------
Net cash used in financing
activities (206,035) (110,360)
-------- --------
Net increase (decrease) in cash
and cash equivalents 17,901 (67,234)
Cash and cash equivalents at
beginning of period 586,691 383,489
Cash and cash equivalents at end
of period $604,592 $316,255
======== ========

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 For the Nine Months Ended
September 30, September 30,
--------------------------- --------------------------
2011 2010 2011 2010
---- ---- ---- ----

Subscriber
revenue
(GAAP) $660,837 $612,119 $1,922,917 $1,793,258
Add: net
advertising
revenue
(GAAP) 18,810 15,973 53,595 46,296
Add: other
subscription-
related
revenue
(GAAP) 58,168 63,554 174,341 168,195
Add:
purchase
price
accounting
adjustments 479 3,176 3,513 12,128
--- ----- ----- ------
$738,294 $694,822 $2,154,366 $2,019,877
======== ======== ========== ==========

Daily
weighted
average
number of
subscribers 21,107,540 19,610,837 20,688,641 19,181,040
========== ========== ========== ==========

ARPU $11.66 $11.81 $11.57 $11.70
====== ====== ====== ======

(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 For the Nine Months Ended
September 30, September 30,
--------------------------- --------------------------
2011 2010 2011 2010
---- ---- ---- ----

Subscriber
acquisition
costs
(GAAP) $107,279 $105,984 $317,711 $305,745
Less:
margin
from
direct
sales of
radios
and
accessories
(GAAP) (9,616) (11,360) (28,498) (28,438)
Add:
purchase
price
accounting
adjustments 20,620 20,889 64,086 58,855
------ ------ ------ ------
$118,283 $115,513 $353,299 $336,162
======== ======== ======== ========

Gross
subscriber
additions 2,138,131 1,952,054 6,369,846 5,693,409
========= ========= ========= =========

SAC, per
gross
subscriber
addition $55 $59 $55 $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 For the Nine Months Ended
September 30, September 30,
--------------------------- --------------------------
2011 2010 2011 2010
---- ---- ---- ----

Customer
service
and
billing
expenses
(GAAP) $64,239 $60,613 $192,667 $175,238
Less:
share-
based
payment
expense,
net of
purchase
price
accounting
adjustments (402) (700) (1,077) (2,157)
Add:
purchase
price
accounting
adjustments - 54 18 226
--- --- --- ---
$63,837 $59,967 $191,608 $173,307
======= ======= ======== ========

Daily
weighted
average
number of
subscribers 21,107,540 19,610,837 20,688,641 19,181,040
========== ========== ========== ==========

Customer
service
and
billing
expenses,
per
average
subscriber $1.01 $1.02 $1.03 $1.00
===== ===== ===== =====

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

Unaudited
---------
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- --------------------
2011 2010 2011 2010
---- ---- ---- ----

Net cash provided
by operating
activities $115,144 $150,059 $328,634 $291,046
Additions to
property and
equipment (39,767) (88,061) (115,065) (257,374)
Restricted and
other investment
activity - - 10,367 9,454
Free cash flow $75,377 $61,998 $223,936 $43,126
======= ======= ======== =======

(7) EBITDA is defined as net income before interest and investment income (loss); interest expense, net of amounts capitalized; income tax 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 For the Nine Months Ended
September 30, September 30,
--------------------------- --------------------------
2011 2010 2011 2010
---- ---- ---- ----

Net
income
(GAAP): $104,185 $67,629 $355,624 $124,499
Add back
items
excluded
from
Adjusted
EBITDA:
Purchase
price
accounting
adjustments:
Revenues 2,292 4,989 8,951 17,566
Operating
expenses (68,878) (66,438) (205,472) (193,904)
Share-
based
payment
expense,
net of
purchase
price
accounting
adjustments 13,983 18,390 37,755 53,277
Depreciation
and
amortization
(GAAP) 65,403 67,450 200,865 206,945
Restructuring,
impairments
and
related
costs - 2,267 - 4,071
Interest
expense,
net of
amounts
capitalized
(GAAP) 75,316 68,559 229,730 223,230
Loss on
extinguishment
of debt
and
credit
facilities,
net
(GAAP) - 256 7,206 34,695
Interest
and
investment
(income)
loss
(GAAP) (292) 4,305 (78,590) 7,197
Other
income
(GAAP) (435) (1,108) (2,235) (1,837)
Income
tax
expense
(GAAP) 5,714 3,428 9,907 6,060

Adjusted
EBITDA $197,288 $169,727 $563,741 $481,799
======== ======== ======== ========

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

Unaudited For the Three Months Ended
September 30, 2011
------------------------------------
(in As Purchase Allocation
thousands) Reported Price of Adjusted
--------- --------- ----------- --------
Share-
Accounting based
---------- -------
Payment
Adjustments Expense
----------- --------

Revenue:
Subscriber
revenue $660,837 $479 $- $661,316
Advertising
revenue,
net
of
agency
fees 18,810 - - 18,810
Equipment
revenue 15,504 - - 15,504
Other
revenue 67,399 1,813 - 69,212
------ ----- --- ------
Total
revenue $762,550 $2,292 $- $764,842
======== ====== === ========
Operating
expenses
Cost of
services:
Revenue
share
and
royalties 117,043 32,293 - 149,336
Programming
and
content 70,509 12,034 (1,275) 81,268
Customer
service
and
billing 64,239 - (402) 63,837
Satellite
and
transmission 19,681 - (735) 18,946
Cost
of
equipment 5,888 - - 5,888
Subscriber
acquisition
costs 107,279 20,620 - 127,899
Sales
and
marketing 55,210 3,931 (2,165) 56,976
Engineering,
design
and
development 14,175 - (1,291) 12,884
General
and
administrative 58,635 - (8,115) 50,520
Depreciation
and
amortization
(a) 65,403 - - 65,403
Restructuring,
impairments
and
related
costs - - - -
Share-
based
payment
expense
(b) - - 13,983 13,983
Total
operating
expenses $578,062 $68,878 $- $646,940
======== ======= === ========

(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
September 30, 2011 was $15,000.

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

Programming
and
content $1,275 $- $- $1,275
Customer
service
and
billing 402 - - 402
Satellite
and
transmission 735 - - 735
Sales
and
marketing 2,165 - - 2,165
Engineering,
design
and
development 1,291 - - 1,291
General
and
administrative 8,115 - - 8,115

Total
share-
based
payment
expense $13,983 $- $- $13,983
======= === === =======

Unaudited For the Three Months Ended September
30, 2010
----------------------------------------------
(in As Purchase Allocation
thousands) Reported Price of Adjusted
--------- --------- ----------- --------
Share-
Accounting based
---------- -------
Payment
Adjustments Expense
----------- --------

Revenue:
Subscriber
revenue $612,119 $3,176 $- $615,295
Advertising
revenue,
net
of
agency
fees 15,973 - - 15,973
Equipment
revenue 17,823 - - 17,823
Other
revenue 71,633 1,813 - 73,446
------ ----- --- ------
Total
revenue $717,548 $4,989 $- $722,537
======== ====== === ========
Operating
expenses
Cost of
services:
Revenue
share
and
royalties 114,482 27,499 - 141,981
Programming
and
content 78,143 13,955 (3,229) 88,869
Customer
service
and
billing 60,613 54 (700) 59,967
Satellite
and
transmission 20,844 272 (1,093) 20,023
Cost
of
equipment 6,463 - - 6,463
Subscriber
acquisition
costs 105,984 20,889 - 126,873
Sales
and
marketing 51,519 3,506 (2,812) 52,213
Engineering,
design
and
development 12,526 93 (1,776) 10,843
General
and
administrative 54,188 170 (8,780) 45,578
Depreciation
and
amortization
(a) 67,450 - - 67,450
Restructuring,
impairments
and
related
costs 2,267 - - 2,267
Share-
based
payment
expense
(b) - - 18,390 18,390
--- --- ------ ------
Total
operating
expenses $574,479 $66,438 $- $640,917
======== ======= === ========

(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 September 30, 2010 was $16,000.

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

Programming
and
content $3,148 $81 $- $3,229
Customer
service
and
billing 646 54 - 700
Satellite
and
transmission 1,042 51 - 1,093
Sales
and
marketing 2,732 80 - 2,812
Engineering,
design
and
development 1,683 93 - 1,776
General
and
administrative 8,610 170 - 8,780

Total
share-
based
payment
expense $17,861 $529 $- $18,390
======= ==== === =======

Unaudited For the Nine Months Ended September
30, 2011
---------------------------------------------
(in As Purchase Allocation
thousands) Reported Price of Adjusted
--------- --------- ----------- --------
Share-
Accounting based
---------- -------
Payment
Adjustments Expense
----------- --------

Revenue:
Subscriber
revenue $1,922,917 $3,513 $- $1,926,430
Advertising
revenue,
net
of
agency
fees 53,595 - - 53,595
Equipment
revenue 48,392 - - 48,392
Other
revenue 205,882 5,438 - 211,320
------- ----- --- -------
Total
revenue $2,230,786 $8,951 $- $2,239,737
========== ====== === ==========
Operating
expenses
Cost of
services:
Revenue
share
and
royalties 340,713 93,359 - 434,072
Programming
and
content 210,867 36,645 (4,745) 242,767
Customer
service
and
billing 192,667 18 (1,077) 191,608
Satellite
and
transmission 57,238 313 (1,867) 55,684
Cost
of
equipment 19,894 - - 19,894
Subscriber
acquisition
costs 317,711 64,086 - 381,797
Sales
and
marketing 154,471 10,961 (5,654) 159,778
Engineering,
design
and
development 39,249 31 (3,407) 35,873
General
and
administrative 175,469 59 (21,005) 154,523
Depreciation
and
amortization
(a) 200,865 - - 200,865
Restructuring,
impairments
and
related
costs - - - -
Share-
based
payment
expense
(b) - - 37,755 37,755
Total
operating
expenses $1,709,144 $205,472 $- $1,914,616
========== ======== === ==========

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

Programming
and
content $4,718 $27 $- $4,745
Customer
service
and
billing 1,059 18 - 1,077
Satellite
and
transmission 1,848 19 - 1,867
Sales
and
marketing 5,627 27 - 5,654
Engineering,
design
and
development 3,376 31 - 3,407
General
and
administrative 20,946 59 - 21,005

Total
share-
based
payment
expense $37,574 $181 $- $37,755
======= ==== === =======

Unaudited For the Nine Months Ended September
30, 2010
---------------------------------------------
(in As Purchase Allocation
thousands) Reported Price of Adjusted
--------- --------- ----------- --------
Share-
Accounting based
---------- -------
Payment
Adjustments Expense
----------- --------

Revenue:
Subscriber
revenue $1,793,258 $12,128 $- $1,805,386
Advertising
revenue,
net
of
agency
fees 46,296 - - 46,296
Equipment
revenue 50,625 - - 50,625
Other
revenue 190,914 5,438 - 196,352
------- ----- --- -------
Total
revenue $2,081,093 $17,566 $- $2,098,659
========== ======= === ==========
Operating
expenses
Cost of
services:
Revenue
share
and
royalties 320,567 79,271 - 399,838
Programming
and
content 228,595 42,805 (8,129) 263,271
Customer
service
and
billing 175,238 226 (2,157) 173,307
Satellite
and
transmission 60,944 897 (3,196) 58,645
Cost
of
equipment 22,187 - - 22,187
Subscriber
acquisition
costs 305,745 58,855 - 364,600
Sales
and
marketing 156,813 10,692 (8,274) 159,231
Engineering,
design
and
development 35,209 427 (5,332) 30,304
General
and
administrative 170,935 731 (26,189) 145,477
Depreciation
and
amortization
(a) 206,945 - - 206,945
Restructuring,
impairments
and
related
costs 4,071 - - 4,071
Share-
based
payment
expense
(b) - - 53,277 53,277
--- --- ------ ------
Total
operating
expenses $1,687,249 $193,904 $- $1,881,153
========== ======== === ==========

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

Programming
and
content $7,760 $369 $- $8,129
Customer
service
and
billing 1,931 226 - 2,157
Satellite
and
transmission 2,960 236 - 3,196
Sales
and
marketing 7,930 344 - 8,274
Engineering,
design
and
development 4,905 427 - 5,332
General
and
administrative 25,458 731 - 26,189

Total
share-
based
payment
expense $50,944 $2,333 $- $53,277
======= ====== === =======

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

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