SiriusXM Reports 2011 Results

SiriusXM Reports 2011 Results

- Subscribers Grow to Record 21.9 Million

- Record Revenue of $3.01 Billion, Up 7% Over 2010

- Adjusted EBITDA Reaches Record $731 Million, Up 17% Over 2010

- Record Free Cash Flow of $416 Million, Up 98% Over 2010

- 2012 Adjusted EBITDA Guidance Raised to $875 Million

- Company Projects 1.3 Million Net Subscriber Additions in 2012

NEW YORK, Feb. 9, 2012/PRNewswire/ -- Sirius XM Radio (NASDAQ: SIRI) today announced full year 2011 financial and operating results, including revenue of $3.01 billion, up 7% over 2010 revenue of $2.82 billion, and adjusted EBITDA of $731 million, up 17% from $626 million in 2010.

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

"We are proud to announce that SiriusXM delivered another record-setting year in 2011, meeting or exceeding all of our guidance. Our strong content and subscriber focus helped set a post-merger record of 1.7 million net subscriber additions, and we achieved record levels of revenue, adjusted EBITDA and free cash flow. We expanded our adjusted EBITDA margins to 24% by tightly controlling costs and growing our revenue. Our improved profitability, coupled with lower capital expenditures, contributed to a substantial increase in our free cash flow," noted Mel Karmazin, Chief Executive Officer, SiriusXM.

"In 2012, we expect to accelerate our revenue and adjusted EBITDA growth, and we project our free cash flow will jump by approximately 70% to $700 million. Our subscriber base will once again end this year at another all-time record high," said Karmazin. "We continue to invest in improving the subscriber experience, all with the goal of keeping our subscribers engaged and entertained. All of us here at SiriusXM look forward to another fantastic year of subscriber growth and improved financial performance."

Additional highlights from 2011 include:

-- Subscriber growth continues. Gross additions climbed 12% to an all-time
high of 8.7 million, net subscriber additions improved by 20% to 1.7
million from 1.4 million in 2010, and the subscriber base rose to an
all-time high of 21.9 million subscribers at year-end. Self-pay net
additions were 1.2 million in 2011, up 24% from 1.0 million in 2010.
-- Stable churn. Self-pay churn was 1.9% in 2011, in-line with 2010's
results. New vehicle consumer conversion rate was 45% in 2011 compared
to 46% in 2010.
-- Strong cost controls. Total cash operating expenses rose 3.7%, while
fixed expenses declined by 1.9%.
-- SAC per gross addition declined. Subscriber acquisition costs (SAC) per
gross addition improved by 7% to $55 in 2011 from $59 in 2010.
-- Free cash flow grew. Free cash flow climbed to $416 million, up 98%
from the $210 million generated in 2010 due to higher operating cash
flow and lower capital expenditures.
GAAP net income for 2011 and 2010 was $427 million and $43 million, respectively, or $0.07 and $0.01 per diluted share, respectively.

"We ended the year with $774 million of cash, even after reducing our long-term debt by over $200 million in 2011. Our leverage at year-end improved to 4.1x our adjusted EBITDA on a gross basis and 3.1x on a net basis," said David Frear, SiriusXM's Executive Vice President and Chief Financial Officer. "With no debt maturities due this year and our growing free cash flow, we expect to end 2012 with nearly $1.5 billion of cash."

FOURTH QUARTER 2011 HIGHLIGHTS

Fourth quarter 2011 revenue of $784 million was up 7% from the $736 million in the fourth quarter of 2010, while adjusted EBITDA was $167 million in the fourth quarter of 2011, up 16% from the $144 million in the fourth quarter of 2010.

Highlights from the fourth quarter include:

-- Net subscriber additions climb. Net subscriber additions were 542,966,
up 65% compared to the fourth quarter of 2010. Net self-pay subscriber
additions were 374,432, an increase of 7% versus the fourth quarter of
2010.
-- SAC per gross addition improves. Subscriber acquisition cost (SAC) per
gross subscriber addition was $55 in the fourth quarter of 2011, a 5%
improvement from the $58 reported in the fourth quarter of 2010.
-- Churn remained stable. Average self-pay monthly customer churn was 1.9%
in the fourth quarter of 2011, in-line with the 1.9% reported in the
fourth quarter of 2010. New vehicle consumer conversion rate was 44% in
the fourth quarter of 2011 compared to 45% in the fourth quarter of
2010.
-- Free cash flow rises. Free cash flow in the fourth quarter of 2011 was
$192 million, an increase of 15% compared to $167 million in the fourth
quarter of 2010.
GAAP net income (loss) for the fourth quarter of 2011 and 2010 was $71 million and ($81) million, respectively, or $0.01 and ($0.02) per diluted share, respectively.

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.

2012 GUIDANCE

The Company expects its subscriber base to grow by approximately 1.3 million net subscribers and end the year at approximately 23.2 million. The company now expects adjusted EBITDA in 2012 of approximately $875 million, an increase from prior guidance of $860 million. The Company reiterates its existing 2012 revenue and free cash flow guidance:

-- Revenue of approximately $3.3 billion, and
-- Free cash flow of approximately $700 million.
"With auto sales expected to rise in 2012, and what appears to be only a modest increase in churn associated with our January price increase, we expect to grow our net new subscribers by roughly 1.3 million in 2012, continuing our strong multi-year track record of subscriber growth," said Karmazin.

2011 RESULTS

Subscriber Data.

The following table contains actual subscriber data for the three and twelve months ended December 31, 2011 and 2010, respectively:

Unaudited
---------
For the Three Months Ended For the Twelve Months Ended
December 31, December 31,
--------------------------- ----------------------------
2011 2010 2011 2010
---- ---- ---- ----

Beginning
subscribers 21,349,858 19,862,175 20,190,964 18,772,758
Gross subscriber
additions 2,326,174 2,075,418 8,696,020 7,768,827
Deactivated
subscribers (1,783,208) (1,746,629) (6,994,160) (6,350,621)
Net additions 542,966 328,789 1,701,860 1,418,206
------- ------- --------- ---------
Ending
subscribers 21,892,824 20,190,964 21,892,824 20,190,964
========== ========== ========== ==========

Self-pay 17,908,742 16,686,799 17,908,742 16,686,799
Paid promotional 3,984,082 3,504,165 3,984,082 3,504,165
Ending
subscribers 21,892,824 20,190,964 21,892,824 20,190,964
========== ========== ========== ==========

Self-pay 374,432 350,980 1,221,943 982,867
Paid promotional 168,534 (22,191) 479,917 435,339
Net additions 542,966 328,789 1,701,860 1,418,206
======= ======= ========= =========

Daily weighted
average number
of subscribers 21,542,690 19,990,447 20,903,908 19,385,055
========== ========== ========== ==========

Average self-pay
monthly churn 1.9% 1.9% 1.9% 1.9%
=== === === ===

New vehicle
consumer
conversion rate 44% 45% 45% 46%
=== === === ===

____________
See accompanying glossary of terms.

Subscribers. The improvement in the twelve months ended December 31, 2011 was due to the 12% increase in gross subscriber additions, primarily resulting from an increase in U.S. light vehicle sales, new vehicle penetration, and returning subscriber activations, including those from previously owned vehicles. This increase in gross additions was partially offset by the 10% increase in deactivations, which was primarily due to an increase in paid promotional trial volumes along with growth in the subscriber base.

Average Self-pay Monthly Churn remained flat at 1.9% for all periods presented. The consistent churn rate exhibits stability in the continued demand for and satisfaction with our service from existing subscribers.

New Vehicle Consumer Conversion Rate. The decrease in the twelve months ended December 31, 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 twelve months ended December 31, 2011 and 2010, respectively:

Unaudited Adjusted
For the Three Months Ended For the Twelve Months Ended
December 31, December 31,
-------------------------- ---------------------------
(in thousands, except
for per subscriber
amounts) 2011 2010 2011 2010
---- ---- ---- ----

ARPU $11.61 $11.80 $11.58 $11.73
SAC, per gross
subscriber addition $55 $58 $55 $59
Customer service and billing
expenses, per average
subscriber $1.03 $1.11 $1.03 $1.03
Free cash flow $191,806 $167,355 $415,742 $210,481
Adjusted total revenue $785,696 $740,239 $3,025,434 $2,838,898
Adjusted EBITDA $167,277 $144,493 $731,018 $626,288

____________
See accompanying glossary of terms.

ARPU decreased in the twelve months ended December 31, 2011. The decrease of $0.15 was driven primarily by an increase in subscription discounts offered through customer acquisition and retention programs 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 Internet subscriptions.

SAC, Per Gross Subscriber Addition, decreased in the twelve months ended December 31, 2011 primarily due to lower per radio subsidy rates for certain OEMs and growth in subscriber reactivations and royalties from radio manufacturers compared to the twelve months ended December 31, 2010.

Customer Service and Billing Expenses, Per Average Subscriber, remained flat in the twelve months ended December 31, 2011, as a result of lower operating costs 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 for the twelve months ended December 31, 2011 increased principally as a result of improvements in adjusted EBITDA and decreases in capital expenditures. Net cash provided by operating activities increased $31 million to $544 million for the year ended December 31, 2011 compared to the $513 million provided by operations for the year ended December 31, 2010. Capital expenditures for property and equipment for the year ended December 31, 2011 decreased $175 million to $137 million compared to $312 million for the year ended December 31, 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 merger of Sirius Canada and Canadian Satellite Radio, higher collections from subscribers and distributors, and the repayment in the first quarter of 2010 of liabilities deferred in 2009. The decrease in capital expenditures for the year ended December 31, 2011 was primarily the result of decreased satellite construction and launch expenditures due to the launch in 2010 of our XM-5 satellite. The increase in restricted and other investment activities was driven by the return of capital resulting from the merger of Sirius Canada and Canadian Satellite Radio, partially offset by proceeds from the sale of investment securities in the year ended December 31, 2010.

Adjusted Total Revenue. Set forth below are our adjusted total revenue for the three and twelve months ended December 31, 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 Adjusted
------------------
For the Three Months For the Twelve Months
Ended December 31, Ended December 31,
--------------------- ---------------------
(in thousands) 2011 2010 2011 2010
---- ---- ---- ----

Revenue:
Subscriber
revenue (GAAP) $672,498 $620,916 $2,595,414 $2,414,174
Advertising
revenue, net
of agency fees
(GAAP) 20,077 18,221 73,672 64,517
Equipment
revenue (GAAP) 22,658 20,730 71,051 71,355
Other revenue
(GAAP) 68,505 76,032 274,387 266,946
------ ------ ------- -------
Total revenue
(GAAP) 783,738 735,899 3,014,524 2,816,992
Purchase price
accounting
adjustments:
Subscriber
revenue 145 2,527 3,659 14,655
Other revenue 1,813 1,813 7,251 7,251
Adjusted total
revenue $785,696 $740,239 $3,025,434 $2,838,898
======== ======== ========== ==========

For the twelve months ended December 31, 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 Internet subscriptions, partially offset by the impact of subscription discounts offered through customer acquisition and retention programs. The increase in advertising revenue was primarily due to 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 primarily due to a reduction in aftermarket hardware subsidies earned, partially offset by increased royalties from higher OEM production. The increase in other revenue was due to increased royalty revenue from Sirius XM Canada, which was partially offset by a reduction in 2010 to the U.S. Music Royalty Fee charged on primary subscriptions.

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 Twelve Months
Ended December 31, Ended December 31,
-------------------- ---------------------
(in thousands) 2011 2010 2011 2010
---- ---- ---- ----

Total revenue $785,696 $740,239 $3,025,434 $2,838,898
Operating expenses:
Revenue share and
royalties 164,017 143,539 598,090 543,377
Programming and
content 81,427 89,939 324,194 353,213
Customer service and
billing 66,627 66,446 258,235 239,754
Satellite and
transmission 17,852 20,075 73,537 78,720
Cost of equipment 13,201 13,095 33,095 35,281
Subscriber
acquisition costs 138,175 127,879 519,973 492,480
Sales and marketing 70,036 60,782 229,813 220,014
Engineering, design
and development 12,743 9,739 48,615 40,042
General and
administrative 54,341 64,252 208,864 209,729
Total operating
expenses 618,419 595,746 2,294,416 2,212,610
------- ------- --------- ---------
Adjusted EBITDA $167,277 $144,493 $731,018 $626,288
======== ======== ======== ========

For the twelve months ended December 31, 2011, the increase was primarily due to an increase of 7%, or $187 million, in adjusted revenues, partially offset by an increase of 4%, or $82 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, increased customer service and billing expenses associated with subscriber growth and higher subscriber acquisition costs related to the 12% increase in gross additions, partially offset by lower programming and content costs.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

Actual
------
For the Three Months For the Twelve Months
Ended December 31, Ended December 31,
------------------ ------------------
(in thousands, except
per share data) 2011 2010 2011 2010
---- ---- ---- ----
(Unaudited) (Unaudited)
Revenue:
Subscriber revenue $672,498 $620,916 $2,595,414 $2,414,174
Advertising revenue,
net of agency fees 20,077 18,221 73,672 64,517
Equipment revenue 22,658 20,730 71,051 71,355
Other revenue 68,505 76,032 274,387 266,946
------ ------ ------- -------
Total revenue 783,738 735,899 3,014,524 2,816,992
Operating expenses:

Cost of services:
Revenue share and
royalties 130,436 114,843 471,149 435,410
Programming and content 70,367 77,318 281,234 305,914
Customer service and
billing 67,052 66,441 259,719 241,680
Satellite and
transmission 18,663 20,002 75,902 80,947
Cost of equipment 13,201 13,095 33,095 35,281
Subscriber acquisition
costs 116,771 107,295 434,482 413,041
Sales and marketing 68,302 58,640 222,773 215,454
Engineering, design and
development 14,186 10,181 53,435 45,390
General and
administrative 63,270 70,036 238,738 240,970
Depreciation and
amortization 67,015 66,747 267,880 273,691

Restructuring,
impairments and
related costs - 59,730 - 63,800
--- ------ --- ------
Total operating
expenses 629,263 664,328 2,338,407 2,351,578
------- ------- --------- ---------
Income from operations 154,475 71,571 676,117 465,414
Other income (expense):
Interest expense, net
of amounts capitalized (75,208) (72,414) (304,938) (295,643)
Loss on extinguishment
of debt and credit
facilities, net - (85,426) (7,206) (120,120)
Interest and investment
(loss) income (4,620) 1,822 73,970 (5,375)
Other income 1,017 1,563 3,252 3,399
Total other expense (78,811) (154,455) (234,922) (417,739)
------- -------- -------- --------
Income (loss) before
income taxes 75,664 (82,884) 441,195 47,675
Income tax (expense)
benefit (4,328) 1,440 (14,234) (4,620)

Net income (loss) $71,336 $(81,444) $426,961 $43,055
======= ======== ======== =======
Net income (loss) per
common share:
Basic $0.02 $(0.02) $0.11 $0.01
===== ====== ===== =====
Diluted $0.01 $(0.02) $0.07 $0.01
===== ====== ===== =====

Weighted average common
shares outstanding:
Basic 3,751,423 3,725,500 3,744,606 3,693,259
========= ========= ========= =========
Diluted 6,501,014 3,725,500 6,500,822 6,391,071
========= ========= ========= =========

SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

As of December 31,
------------------
2011 2010
---- ----
(in thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents $773,990 $586,691
Accounts receivable, net 101,705 121,658
Receivables from distributors 84,817 67,576
Inventory, net 36,711 21,918
Prepaid expenses 125,967 134,994
Related party current assets 14,702 6,719
Deferred tax asset 132,727 44,787
Other current assets 6,335 7,432
----- -----
Total current assets 1,276,954 991,775
Property and equipment, net 1,673,919 1,761,274
Long-term restricted investments 3,973 3,396
Deferred financing fees, net 42,046 54,135
Intangible assets, net 2,573,638 2,632,688
Goodwill 1,834,856 1,834,856
Related party long-term assets 54,953 33,475
Other long-term assets 35,657 71,487
------ ------
Total assets $7,495,996 $7,383,086
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $543,193 $593,174
Accrued interest 70,405 72,453
Current portion of deferred revenue 1,333,965 1,201,346
Current portion of deferred credit on executory contracts 284,108 271,076
Current maturities of long-term debt 1,623 195,815
Related party current liabilities 14,302 15,845
------ ------
Total current liabilities 2,247,596 2,349,709
Deferred revenue 198,135 273,973
Deferred credit on executory contracts 218,199 508,012
Long-term debt 2,683,563 2,695,856
Long-term related party debt 328,788 325,907
Deferred tax liability 1,011,084 914,637
Related party long-term liabilities 21,741 24,517
Other long-term liabilities 82,745 82,839
------ ------
Total liabilities 6,791,851 7,175,450
--------- ---------

Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $0.001; 50,000,000 authorized at
December 31, 2011 and 2010:
Series A convertible preferred stock; no shares issued and
outstanding at December 31, 2011 and 2010 - -
Convertible perpetual preferred stock, series B-1 (liquidation
preference of $0.001 per share at December 31, 2011
and 2010); 12,500,000 shares issued and outstanding at December
31, 2011 and 2010 13 13
Convertible preferred stock, series C junior; no shares issued
and outstanding at
December 31, 2011 and 2010 - -
Common stock, par value $0.001; 9,000,000,000 shares authorized
at December 31, 2011 and 2010;
3,753,201,929 and 3,933,195,112 shares issued and outstanding
at December 31, 2011 and 2010, respectively 3,753 3,933
Accumulated other comprehensive income (loss), net of tax 71 (5,861)
Additional paid-in capital 10,484,400 10,420,604
Accumulated deficit (9,784,092) (10,211,053)
---------- -----------
Total stockholders' equity 704,145 207,636
------- -------
Total liabilities and stockholders' equity $7,495,996 $7,383,086
========== ==========

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

For the Years Ended
December 31,
--------------------
(in thousands) 2011 2010
---- ----

Cash flows from operating activities:
Net income $426,961 $43,055
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 267,880 273,691
Non-cash interest expense, net of
amortization of premium 39,515 42,841
Provision for doubtful accounts 33,164 32,379
Restructuring, impairments and
related costs - 66,731
Amortization of deferred income
related to equity method investment (2,776) (2,776)
Loss on extinguishment of debt and
credit facilities, net 7,206 120,120
Gain on merger of unconsolidated
entities (75,768) -
Loss on unconsolidated entity
investments, net 6,520 11,722
Loss on disposal of assets 269 1,017
Share-based payment expense 53,190 60,437
Deferred income taxes 8,264 2,308
Other non-cash purchase price
adjustments (275,338) (250,727)
Distribution from investments in
unconsolidated entity 4,849 -
Changes in operating assets and
liabilities:
Accounts receivable (13,211) (39,236)
Receivables from distributors (17,241) (11,023)
Inventory (14,793) (5,725)
Related party assets 30,036 (9,803)
Prepaid expenses and other current
assets 8,525 75,374
Other long-term assets 36,490 17,671
Accounts payable and accrued expenses (32,010) 5,420
Accrued interest (2,048) (884)
Deferred revenue 55,336 133,444
Related party liabilities (1,542) (53,413)
Other long-term liabilities 152 272
--- ---
Net cash provided by operating
activities 543,630 512,895
------- -------

Cash flows from investing activities:
Additions to property and equipment (137,429) (311,868)
Purchase of restricted and other
investments (826) -
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 (127,888) (302,414)
-------- --------

Cash flows from financing activities:
Proceeds from exercise of warrants
and stock options 11,553 10,839
Long-term borrowings, net of costs - 1,274,707
Related party long-term borrowings,
net of costs - 196,118
Payment of premiums on redemption of
debt (5,020) (84,326)
Repayment of long-term borrowings (234,976) (1,262,396)
Repayment of related party long-term
borrowings - (142,221)
--- --------
Net cash used in financing activities (228,443) (7,279)
-------- ------
Net increase in cash and cash
equivalents 187,299 203,202
Cash and cash equivalents at
beginning of period 586,691 383,489
Cash and cash equivalents at end of
period $773,990 $586,691
======== ========

Glossary

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. 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 Twelve Months Ended
December 31, December 31,
--------------------------- ----------------------------
2011 2010 2011 2010
---- ---- ---- ----

Net income (loss) (GAAP): $71,336 $(81,444) $426,961 $43,055
Add back items excluded from
Adjusted EBITDA:
Purchase price accounting
adjustments:
Revenues 1,958 4,340 10,910 21,906
Operating expenses (71,785) (67,928) (277,258) (261,832)
Share-based payment expense,
net of purchase price
accounting adjustments (GAAP) 15,614 10,033 53,369 63,309
Depreciation and amortization
(GAAP) 67,015 66,747 267,880 273,691
Restructuring, impairments
and related costs (GAAP) - 59,730 - 63,800
Interest expense, net of
amounts capitalized (GAAP) 75,208 72,414 304,938 295,643
Loss on extinguishment of
debt and credit facilities,
net (GAAP) - 85,426 7,206 120,120
Interest and investment loss
(income) (GAAP) 4,620 (1,822) (73,970) 5,375
Other (income) (GAAP) (1,017) (1,563) (3,252) (3,399)
Income tax expense (GAAP) 4,328 (1,440) 14,234 4,620

Adjusted EBITDA $167,277 $144,493 $731,018 $626,288
======== ======== ======== ========

Adjusted Revenues and Operating Expenses - We define this Non-GAAP financial measure as our actual revenues and operating expenses adjusted to exclude the impact of certain purchase price accounting adjustments and share-based payment expense. We use this Non-GAAP financial measure to manage our business, set operational goals and as a basis for determining performance-based compensation for our employees. The following tables reconcile our actual revenues and operating expenses to our adjusted revenues and operating expenses for the three and twelve months ended December 31, 2011 and 2010:

Unaudited For the Three Months Ended December 31,
2011
--------------------------------------------------
As Purchase
(in thousands) Reported Price Allocation of Adjusted
--------- Accounting Share-based --------
Payment
Adjustments Expense
----------- --------

Revenue:
Subscriber revenue $672,498 $145 $- $672,643
Advertising revenue, net of
agency fees 20,077 - - 20,077
Equipment revenue 22,658 - - 22,658
Other revenue 68,505 1,813 - 70,318
------ ----- --- ------
Total revenue $783,738 $1,958 $- $785,696
======== ====== === ========
Operating expenses
Cost of services:
Revenue share and royalties 130,436 33,581 - 164,017
Programming and content 70,367 12,527 (1,467) 81,427
Customer service and
billing 67,052 - (425) 66,627
Satellite and transmission 18,663 - (811) 17,852
Cost of equipment 13,201 - - 13,201
Subscriber acquisition
costs 116,771 21,404 - 138,175
Sales and marketing 68,302 4,273 (2,539) 70,036
Engineering, design and
development 14,186 - (1,443) 12,743
General and administrative 63,270 - (8,929) 54,341
Depreciation and
amortization (a) 67,015 - - 67,015
Restructuring, impairments
and related costs - - - -
Share-based payment
expense (b) - - 15,614 15,614
--- --- ------ ------
Total operating expenses $629,263 $71,785 $- $701,048
======== ======= === ========

(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 December 31, 2011 was $14,000.

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

Programming and content $1,467 $- $- $1,467
Customer service and
billing 425 - - 425
Satellite and transmission 811 - - 811
Sales and marketing 2,539 - - 2,539
Engineering, design and
development 1,443 - - 1,443
General and administrative 8,929 - - 8,929

Total share-based payment
expense $15,614 $- $- $15,614
======= === === =======

Unaudited For the Three Months Ended December 31,
2010
--------------------------------------------------
Purchase Allocation
(in thousands) As Reported Price of Adjusted
----------- Accounting Share-based --------
Payment
Adjustments Expense
----------- --------

Revenue:
Subscriber revenue $620,916 $2,527 $- $623,443
Advertising revenue, net of
agency fees 18,221 - - 18,221
Equipment revenue 20,730 - - 20,730
Other revenue 76,032 1,813 - 77,845
------ ----- --- ------
Total revenue $735,899 $4,340 $- $740,239
======== ====== === ========
Operating expenses
Cost of services:
Revenue share and royalties 114,843 28,696 - 143,539
Programming and content 77,318 14,762 (2,141) 89,939
Customer service and
billing 66,441 55 (50) 66,446
Satellite and transmission 20,002 273 (200) 20,075
Cost of equipment 13,095 - - 13,095
Subscriber acquisition
costs 107,295 20,584 - 127,879
Sales and marketing 58,640 3,290 (1,148) 60,782
Engineering, design and
development 10,181 93 (535) 9,739
General and administrative 70,036 175 (5,959) 64,252
Depreciation and
amortization (a) 66,747 - - 66,747
Restructuring, impairments
and related costs 59,730 - - 59,730
Share-based payment
expense (b) - - 10,033 10,033
Total operating expenses $664,328 $67,928 $- $732,256
======== ======= === ========

(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 December 31,
2010 was $16,000.

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

Programming and content $2,059 $82 $- $2,141
Customer service and
billing (5) 55 - 50
Satellite and transmission 148 52 - 200
Sales and marketing 1,066 82 - 1,148
Engineering, design and
development 442 93 - 535
General and administrative 5,784 175 - 5,959

Total share-based payment
expense $9,494 $539 $- $10,033
====== ==== === =======

Unaudited For the Year Ended December 31, 2011
----------------------------------------------
As Purchase Allocation
(in thousands) Reported Price of Adjusted
--------- Accounting Share-based --------
Payment
Adjustments Expense
----------- --------

Revenue:
Subscriber revenue $2,595,414 $3,659 $- $2,599,073
Advertising revenue, net of
agency fees 73,672 - - 73,672
Equipment revenue 71,051 - - 71,051
Other revenue 274,387 7,251 - 281,638
------- ----- --- -------
Total revenue $3,014,524 $10,910 $- $3,025,434
========== ======= === ==========
Operating expenses
Cost of services:
Revenue share and royalties 471,149 126,941 - 598,090
Programming and content 281,234 49,172 (6,212) 324,194
Customer service and
billing 259,719 18 (1,502) 258,235
Satellite and transmission 75,902 313 (2,678) 73,537
Cost of equipment 33,095 - - 33,095
Subscriber acquisition
costs 434,482 85,491 - 519,973
Sales and marketing 222,773 15,233 (8,193) 229,813
Engineering, design and
development 53,435 31 (4,851) 48,615
General and administrative 238,738 59 (29,933) 208,864
Depreciation and
amortization (a) 267,880 - - 267,880
Restructuring, impairments
and related costs - - - -
Share-based payment
expense (b) - - 53,369 53,369
--- --- ------ ------
Total operating expenses $2,338,407 $277,258 $- $2,615,665
========== ======== === ==========

(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 year ended December 31, 2011
was $59,000.

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

Programming and content $6,185 $27 $- $6,212
Customer service and
billing 1,484 18 - 1,502
Satellite and transmission 2,659 19 - 2,678
Sales and marketing 8,166 27 - 8,193
Engineering, design and
development 4,820 31 - 4,851
General and administrative 29,874 59 - 29,933

Total share-based payment
expense $53,188 $181 $- $53,369
======= ==== === =======

Unaudited For the Year Ended December 31, 2010
----------------------------------------------
Purchase Allocation
(in thousands) As Reported Price of Adjusted
----------- Accounting Share-based --------
Payment
Adjustments Expense
----------- --------

Revenue:
Subscriber revenue $2,414,174 $14,655 $- $2,428,829
Advertising revenue, net of
agency fees 64,517 - - 64,517
Equipment revenue 71,355 - - 71,355
Other revenue 266,946 7,251 - 274,197
------- ----- --- -------
Total revenue $2,816,992 $21,906 $- $2,838,898
========== ======= === ==========
Operating expenses
Cost of services:
Revenue share and royalties 435,410 107,967 - 543,377
Programming and content 305,914 57,566 (10,267) 353,213
Customer service and
billing 241,680 281 (2,207) 239,754
Satellite and transmission 80,947 1,170 (3,397) 78,720
Cost of equipment 35,281 - - 35,281
Subscriber acquisition
costs 413,041 79,439 - 492,480
Sales and marketing 215,454 13,983 (9,423) 220,014
Engineering, design and
development 45,390 520 (5,868) 40,042
General and administrative 240,970 906 (32,147) 209,729
Depreciation and
amortization (a) 273,691 - - 273,691
Restructuring, impairments
and related costs 63,800 - - 63,800
Share-based payment
expense (b) - - 63,309 63,309
Total operating expenses $2,351,578 $261,832 $- $2,613,410
========== ======== === ==========

(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 year ended December 31, 2010
was $68,000.

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

Programming and content $9,817 $450 $- $10,267
Customer service and
billing 1,926 281 - 2,207
Satellite and transmission 3,109 288 - 3,397
Sales and marketing 8,996 427 - 9,423
Engineering, design and
development 5,348 520 - 5,868
General and administrative 31,241 906 - 32,147

Total share-based payment
expense $60,437 $2,872 $- $63,309
======= ====== === =======

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, which was initially charged to subscribers in the third quarter of 2009. 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 Twelve Months Ended
December 31, December 31,
--------------------------- ----------------------------
2011 2010 2011 2010
---- ---- ---- ----

Subscriber
revenue
(GAAP) $672,497 $620,916 $2,595,414 $2,414,174
Net
advertising
revenue
(GAAP) 20,077 18,221 73,672 64,517
Other
subscription-
related
revenue
(GAAP) 57,561 65,953 231,902 234,148
Purchase
price
accounting
adjustments 145 2,527 3,659 14,655
--- ----- ----- ------
$750,280 $707,617 $2,904,647 $2,727,494
======== ======== ========== ==========

Daily
weighted
average
number
of
subscribers 21,542,690 19,990,447 20,903,908 19,385,055
========== ========== ========== ==========

ARPU $11.61 $11.80 $11.58 $11.73
====== ====== ====== ======

Average self-pay monthly churn - is defined as the monthly average of self-pay deactivations for the period divided by the average number of self-pay subscribers for the period. Average self-pay churn for the year is the average of the quarterly average self-pay churn.

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 Twelve Months Ended
December 31, December 31,
--------------------------- ----------------------------
2011 2010 2011 2010
---- ---- ---- ----

Customer service and
billing expenses
(GAAP) $67,052 $66,441 $259,719 $241,680
Less: share-based
payment expense, net
of purchase
price accounting
adjustments (GAAP) (425) (50) (1,502) (2,207)
Add: purchase price
accounting adjustments - 55 18 281
--- --- --- ---
$66,627 $66,446 $258,235 $239,754
======= ======= ======== ========

Daily weighted average
number of subscribers 21,542,690 19,990,447 20,903,908 19,385,055
========== ========== ========== ==========
Customer service and
billing expenses, per
average
subscriber $1.03 $1.11 $1.03 $1.03
===== ===== ===== =====

Free cash flow - is derived from cash flow provided by operating activities, capital expenditures and restricted and other investment activity. Free cash flow is calculated as follows (in thousands):

Unaudited
---------
For the Three Months Ended For the Twelve Months Ended
December 31, December 31,
--------------------------- ----------------------------
2011 2010 2011 2010
---- ---- ---- ----

Net cash
provided
by
operating
activities $214,996 $221,849 $543,630 $512,895
Additions
to
property
and
equipment (22,364) (54,494) (137,429) (311,868)
Restricted
and
other
investment
activity (826) - 9,541 9,454
Free
cash
flow $191,806 $167,355 $415,742 $210,481
======== ======== ======== ========

New vehicle consumer conversion rate - is defined as 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. 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.

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 share-based payment expense and 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 Twelve Months Ended
December 31, December 31,
--------------------------- ----------------------------
2011 2010 2011 2010
---- ---- ---- ----

Subscriber acquisition
costs (GAAP) $116,771 $107,295 $434,482 $413,041
Less: margin from direct
sales of radios and
accessories (GAAP) (9,457) (7,635) (37,956) (36,074)
Add: purchase price
accounting adjustments 21,404 20,584 85,491 79,439
------ ------ ------ ------
$128,718 $120,244 $482,017 $456,406
======== ======== ======== ========

Gross subscriber
additions 2,326,174 2,075,418 8,696,020 7,768,827
========= ========= ========= =========

SAC, per gross subscriber
addition $55 $58 $55 $59
=== === === ===

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; potential economic recessionary trends and uncertain economic outlook; 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