SiriusXM Reports Second Quarter 2012 Results

SiriusXM Reports Second Quarter 2012 Results

- Subscribers Grow by 622,000 to a Record 22.9 Million

- Record Revenue of $838 Million, Up 13%

- Net Income of $3.1 Billion Includes a $3.0 Billion Income Tax Benefit

- Adjusted EBITDA Grows 28% to a Record $237 Million

- Free Cash Flow Grows 39% to a Record $230 Million

- Company Raises 2012 Adjusted EBITDA Guidance to Approximately $900 Million

NEW YORK, Aug. 7, 2012 /PRNewswire/ -- Sirius XM Radio (NASDAQ: SIRI) today announced second quarter 2012 financial and operating results, including revenue of $838 million, up 13% over second quarter 2011 revenue of $744 million. Net income for the second quarter 2012 and 2011 was $3.1 billion and $173 million, respectively. Adjusted EBITDA for the second quarter of 2012 was $237 million, up 28% from $185 million in the second quarter of 2011.

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

"SiriusXM continued its exceptional performance in the second quarter, adding over 600,000 subscribers, which represents a post-merger record, despite the mixed macroeconomic trends. We also attained a record-level free cash flow of $230 million - the highest single quarterly free cash flow figure in SiriusXM's history. We are very pleased with the strong operating results we have delivered since the merger, especially our performance in 2012, as we have grown revenue, tightly controlled expenses, and produced substantial growth in adjusted EBITDA and free cash flow," remarked Mel Karmazin, Chief Executive Officer, SiriusXM.

"We've also raised our subscriber, revenue, and adjusted EBITDA guidance as the Company exceeds its targets and as subscribers demonstrate how much they love our great content. We are excited to deliver our new SiriusXM On-Demand service to our subscribers via the internet and smartphones, and our program to launch a personalized music feature via these same channels by the end of the year is on track. We intend to provide more innovative ways for our subscribers to access our best-in-class content, and we believe this focus on satisfying subscribers will also satisfy our shareholders," said Karmazin.

Additional highlights from the second quarter include:


-- Record subscriber growth. Self-pay net subscriber additions improved by
28% year-over-year to 463,000, pushing the self-pay subscriber base to
an all-time high of 18.7 million subscribers. The total paid subscriber
base rose to a record high 22.9 million subscribers. Strong auto sales
helped lift total paid and unpaid trial inventory by approximately
400,000 from the first quarter to 6.1 million.
-- Churn and conversion stable. Self-pay monthly churn was 1.9% in the
second quarter of 2012, unchanged from the 1.9% reported in the second
quarter of 2011. The new vehicle consumer conversion rate was 45% in the
second quarter of 2012, also unchanged from the second quarter of 2011.
-- Free cash flow grows to record level. Free cash flow was $230 million in
the second quarter of 2012, an improvement of 39% from the $165 million
recorded in the second quarter of 2011, and SiriusXM attained an
all-time record for free cash flow generated in a single quarter in the
history of satellite radio.
-- Significant net income items. Included in the second quarter 2012 net
income was an income tax benefit of approximately $3.0 billion related
to a reversal of substantially all of the Company's deferred income tax
valuation allowance. On a comparative basis, the second quarter 2011 net
income included a gain of $84 million associated with the Canadian
merger of Sirius and XM.
"We ended the second quarter with $868 million of cash, after the repurchase of approximately $101 million in aggregate principal amount of our debt during the quarter. Our leverage at the end of the second quarter of 2012 improved to 3.6x our adjusted EBITDA," said David Frear, SiriusXM's Executive Vice President and Chief Financial Officer. "We called the remaining $186 million of our 9.75% Senior Secured Notes due 2015 for redemption on September 1, 2012. Following the repayment of these notes, our gross debt will stand at approximately $2.7 billion and our leverage, based upon our 2012 adjusted EBITDA guidance, will be at our 3.0x target, a significant improvement from 4.4x one year ago."

2012 GUIDANCE

"Our increase in adjusted EBITDA guidance to approximately $900 million indicates strong confidence in our ability to continue to execute in the back half of the year," said Karmazin. "We were also pleased to raise our subscriber guidance for the second time this year just last month."

The Company's 2012 subscriber, revenue, adjusted EBITDA and free cash flow guidance are as follows:


-- Net subscriber growth approaching 1.6 million,
-- Revenue approaching $3.4 billion,
-- Adjusted EBITDA of approximately $900 million, and
-- Free cash flow of approximately $700 million.
SECOND QUARTER 2012 RESULTS


SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------- --------------
(in thousands, except per
share data) 2012 2011 2012 2011
---- ---- ---- ----
Revenue:
Subscriber revenue $730,285 $639,642 $1,430,526 $1,262,080
Advertising revenue, net
of agency fees 20,786 18,227 39,456 34,785
Equipment revenue 16,417 17,022 33,370 32,889
Other revenue 70,055 69,506 138,912 138,482
------ ------ ------- -------
Total revenue 837,543 744,397 1,642,264 1,468,236
Operating expenses:
Cost of services:
Revenue share and
royalties 135,426 116,741 267,537 223,670
Programming and content 65,169 67,399 135,265 140,358
Customer service and
billing 68,679 62,592 134,866 128,429
Satellite and
transmission 17,551 18,998 35,661 37,558
Cost of equipment 7,150 7,601 12,956 14,006
Subscriber acquisition
costs 119,475 105,162 235,596 210,432
Sales and marketing 57,422 51,442 115,781 99,261
Engineering, design and
development 6,272 13,939 18,962 25,074
General and
administrative 65,664 60,479 125,550 116,831
Depreciation and
amortization 66,793 67,062 132,910 135,462
Total operating expenses 609,601 571,415 1,215,084 1,131,081
------- ------- --------- ---------
Income from operations 227,942 172,982 427,180 337,155
Other income (expense):
Interest expense, net of
amounts capitalized (72,770) (76,196) (149,742) (154,414)
Loss on extinguishment of
debt and credit
facilities, net (15,650) (1,212) (25,621) (7,206)
Interest and investment
(loss) income (1,728) 80,182 (2,871) 78,298
Other (loss) income (173) 183 (749) 1,799
Total other (expense)
income (90,321) 2,957 (178,983) (81,523)
------- ----- -------- -------
Income before income
taxes 137,621 175,939 248,197 255,632
Income tax benefit
(expense) 2,996,549 (2,620) 2,993,747 (4,192)
Net income $3,134,170 $173,319 $3,241,944 $251,440
========== ======== ========== ========
Realized loss on XM
Canada investment
foreign currency
adjustment, net of tax - 6,072 - 6,072
Foreign currency
translation adjustment,
net of tax 18 10 (38) 77
Comprehensive income $3,134,188 $179,401 $3,241,906 $257,589
========== ======== ========== ========
Net income per common
share:
Basic $0.83 $0.05 $0.86 $0.07
===== ===== ===== =====
Diluted $0.48 $0.03 $0.50 $0.04
===== ===== ===== =====
Weighted average common
shares outstanding:
Basic 3,765,573 3,744,375 3,766,508 3,739,731
========= ========= ========= =========
Diluted 6,506,159 6,804,297 6,521,614 6,790,729
========= ========= ========= =========





SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2012 December 31, 2011
------------- -----------------
(in thousands, except share
and per share data) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents $868,330 $773,990
Accounts receivable, net 113,705 101,705
Receivables from distributors 97,076 84,817
Inventory, net 36,884 36,711
Prepaid expenses 163,009 125,967
Related party current assets 7,326 14,702
Deferred tax asset 899,485 132,727
Other current assets 8,600 6,335
----- -----
Total current assets 2,194,415 1,276,954
Property and equipment, net 1,631,110 1,673,919
Long-term restricted
investments 3,973 3,973
Deferred financing fees, net 35,552 42,046
Intangible assets, net 2,546,061 2,573,638
Goodwill 1,815,673 1,834,856
Related party long-term assets 51,827 54,953
Long-term deferred tax asset 1,237,393 -
Other long-term assets 19,077 35,657
Total assets $9,535,081 $7,495,996
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable and accrued
expenses $491,704 $543,193
Accrued interest 62,971 70,405
Current portion of deferred
revenue 1,440,983 1,333,965
Current portion of deferred
credit on executory contracts 278,401 284,108
Current maturities of long-
term debt 5,158 1,623
Related party current
liabilities 15,803 14,302
------ ------
Total current liabilities 2,295,020 2,247,596
Deferred revenue 170,525 198,135
Deferred credit on executory
contracts 76,458 218,199
Long-term debt 2,543,249 2,683,563
Long-term related party debt 330,393 328,788
Deferred tax liability - 1,011,084
Related party long-term
liabilities 20,354 21,741
Other long-term liabilities 85,492 82,745
Total liabilities 5,521,491 6,791,851
--------- ---------

Stockholders' equity:
Preferred stock, par value
$0.001; 50,000,000 authorized
at June 30, 2012 and December
31, 2011:
Series A convertible preferred
stock; no shares issued and
outstanding at June 30, 2012
and December 31, 2011 - -
Convertible perpetual
preferred stock, series B-1
(liquidation preference of
$0.001 per share at June 30,
2012 and December 31, 2011);
12,500,000 shares issued and
outstanding at June 30, 2012
and December 31, 2011 13 13
Common stock, par value
$0.001; 9,000,000,000 shares
authorized at June 30, 2012
and December 31, 2011;
3,824,178,762 and
3,753,201,929 shares issued
and outstanding at June 30,
2012 and December 31, 2011,
respectively 3,824 3,753
Accumulated other
comprehensive income, net of
tax 33 71
Additional paid-in capital 10,551,868 10,484,400
Accumulated deficit (6,542,148) (9,784,092)
---------- ----------
Total stockholders' equity 4,013,590 704,145
--------- -------
Total liabilities and
stockholders' equity $9,535,081 $7,495,996
========== ==========



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

For the Six Months Ended June 30,
---------------------------------
(in thousands) 2012 2011
---- ----
Cash flows from
operating activities:
Net income $3,241,944 $251,440
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 132,910 135,462
Non-cash interest
expense, net of
amortization of premium 21,031 19,234
Provision for doubtful
accounts 14,879 17,744
Amortization of deferred
income related to
equity method
investment (1,388) (1,388)
Loss on extinguishment
of debt and credit
facilities, net 25,621 7,206
Gain on merger of
unconsolidated entities - (83,718)
Loss on unconsolidated
entity investments, net 3,469 6,045
Loss on disposal of
assets 488 269
Share-based payment
expense 28,869 23,591
Deferred income taxes (2,995,542) 2,223
Other non-cash purchase
price adjustments (147,328) (134,862)
Distribution from
investment in
unconsolidated entity - 4,849
Changes in operating
assets and liabilities:
Accounts receivable (26,879) 3,080
Receivables from
distributors (12,259) (13,438)
Inventory (173) (10,399)
Related party assets 6,813 31,076
Prepaid expenses and
other current assets (39,308) (20,871)
Other long-term assets 16,579 15,974
Accounts payable and
accrued expenses (51,596) (101,552)
Accrued interest (7,434) (1,888)
Deferred revenue 79,288 63,649
Related party
liabilities 1,501 (42)
Other long-term
liabilities 2,238 (194)
Net cash provided by
operating activities 293,723 213,490
------- -------

Cash flows from
investing activities:
Additions to property
and equipment (48,944) (75,298)
Release of restricted
investments - 250
Return of capital from
investment in
unconsolidated entity - 10,117
Net cash used in
investing activities (48,944) (64,931)
------- -------

Cash flows from
financing activities:
Proceeds from exercise
of stock options 38,671 6,921
Payment of premiums on
redemption of debt (19,211) (5,020)
Repayment of long-term
borrowings (169,899) (208,824)
Net cash used in
financing activities (150,439) (206,923)
-------- --------
Net increase (decrease)
in cash and cash
equivalents 94,340 (58,364)
Cash and cash
equivalents at
beginning of period 773,990 586,691
Cash and cash
equivalents at end of
period $868,330 $528,327
======== ========


Subscriber Data and Operating Metrics

The following table contains actual subscriber data and key operating metrics for the three and six months ended June 30, 2012 and 2011, respectively:


Unaudited
---------
For the Three Months Ended June 30, For the Six Months Ended June 30,
----------------------------------- ---------------------------------
2012 2011 2012 2011
---- ---- ---- ----

Beginning
subscribers 22,297,420 20,564,028 21,892,824 20,190,964
Gross
subscriber
additions 2,481,004 2,179,348 4,642,697 4,231,715
Deactivated
subscribers (1,858,962) (1,727,201) (3,616,059) (3,406,504)
Net additions 622,042 452,147 1,026,638 825,211
------- ------- --------- -------
Ending
subscribers 22,919,462 21,016,175 22,919,462 21,016,175
========== ========== ========== ==========

Self-pay 18,670,966 17,170,306 18,670,966 17,170,306
Paid
promotional 4,248,496 3,845,869 4,248,496 3,845,869
Ending
subscribers 22,919,462 21,016,175 22,919,462 21,016,175
========== ========== ========== ==========

Self-pay 462,876 362,663 762,224 483,507
Paid
promotional 159,166 89,484 264,414 341,704
Net additions 622,042 452,147 1,026,638 825,211
======= ======= ========= =======

Daily weighted
average number
of subscribers 22,553,702 20,715,630 22,272,282 20,475,720
========== ========== ========== ==========

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

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

ARPU $11.97 $11.53 $11.87 $11.53
SAC, per gross
subscriber
addition $54 $54 $57 $56


Subscribers. The improvement was due to the 14% increase in gross subscriber additions, primarily resulting from new vehicle shipments and light vehicle sales, as well as an increase in conversions from unpaid promotional trials and returning subscriber activations including consumers in previously owned cars. This increase in gross additions was partially offset by an increase in deactivations. The increase in deactivations was primarily due to paid promotional trial deactivations stemming from the growth of paid trials, along with growth in our subscriber base. Self-pay net additions increased 28% as trial conversions increased and the self-pay churn rate declined.

Average Self-pay Monthly Churn for the three months ended June 30, 2012 and 2011 was 1.9%.

New Vehicle Consumer Conversion Rate for the three months ended June 30, 2012 and 2011 was 45%.

ARPU increased primarily due to the increase in certain subscription rates beginning in January 2012 and an increase in sales of premium services, including Premier packages, data services and streaming. These factors were partially offset by an increase in subscriber retention programs, the number of subscribers on promotional plans and a decrease in the contribution from the U.S. Music Royalty Fee due to the December 2010 reduction in the rate from 15.3% to 10.8%.

SAC, Per Gross Subscriber Addition, remained flat at $54 for the three months ended June 30, 2012 and 2011. Higher subsidies related to increased OEM installations occurring in advance of acquiring the subscriber were offset by improved OEM subsidy rates per vehicle and a 14% increase in gross subscribers compared to the three months ended June 30, 2011.

Glossary

Adjusted EBITDA - EBITDA is defined as net income before interest and investment 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 statements of comprehensive income 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 comprehensive income. 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 Six Months Ended
June 30, June 30,
-------- --------
2012 2011 2012 2011
---- ---- ---- ----

Net income (GAAP): $3,134,170 $173,319 $3,241,944 $251,440
Add back items excluded
from Adjusted EBITDA:
Purchase price accounting
adjustments:
Revenues 1,867 2,938 3,747 6,660
Operating expenses (73,423) (68,623) (147,449) (136,595)
Share-based payment
expense, net of purchase
price accounting
adjustments 13,917 10,735 28,869 23,772
Depreciation and
amortization (GAAP) 66,793 67,062 132,910 135,462
Interest expense, net of
amounts capitalized
(GAAP) 72,770 76,196 149,742 154,414
Loss on extinguishment of
debt and credit
facilities, net (GAAP) 15,650 1,212 25,621 7,206
Interest and investment
loss (income) (GAAP) 1,728 (80,182) 2,871 (78,298)
Other loss (income)
(GAAP) 173 (183) 749 (1,799)
Income tax (benefit)
expense (GAAP) (2,996,549) 2,620 (2,993,747) 4,192
Adjusted EBITDA $237,096 $185,094 $445,257 $366,454
======== ======== ======== ========


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 six months ended June 30, 2012 and 2011:


Unaudited For the Three Months Ended June 30, 2012
--------------------------------------------------
(in thousands) As Reported Purchase Allocation of Adjusted
Price Accounting Adjustments Share-based
Payment
Expense
---

Revenue:
Subscriber revenue $730,285 $54 $ - $730,339
Advertising revenue, net of
agency fees 20,786 - - 20,786
Equipment revenue 16,417 - - 16,417
Other revenue 70,055 1,813 - 71,868
Total revenue $837,543 $1,867 $ - $839,410
======== ====== ===================== ========
Operating expenses
Cost of services:
Revenue share and royalties 135,426 36,024 - 171,450
Programming and content 65,169 10,431 (1,231) 74,369
Customer service and billing 68,679 - (388) 68,291
Satellite and transmission 17,551 - (688) 16,863
Cost of equipment 7,150 - - 7,150
Subscriber acquisition costs 119,475 23,530 - 143,005
Sales and marketing 57,422 3,438 (2,053) 58,807
Engineering, design and
development 6,272 - (1,282) 4,990
General and administrative 65,664 - (8,275) 57,389
Depreciation and amortization
(a) 66,793 - - 66,793
Share-based payment expense - - 13,917 13,917
Total operating expenses $609,601 $73,423 $ - $683,024
======== ======= ===================== ========

(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a
result of the Merger. The increased depreciation and amortization for the three months ended June 30, 2012 was $14,000.







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

Revenue:
Subscriber revenue $639,642 $1,125 $ - $640,767
Advertising revenue, net of
agency fees 18,227 - - 18,227
Equipment revenue 17,022 - - 17,022
Other revenue 69,506 1,813 - 71,319
Total revenue $744,397 $2,938 $ - $747,335
======== ====== =================== ========
Operating expenses
Cost of services:
Revenue share and royalties 116,741 31,134 - 147,875
Programming and content 67,399 11,787 (960) 78,226
Customer service and billing 62,592 - (308) 62,284
Satellite and transmission 18,998 74 (565) 18,507
Cost of equipment 7,601 - - 7,601
Subscriber acquisition costs 105,162 21,810 - 126,972
Sales and marketing 51,442 3,818 (1,614) 53,646
Engineering, design and
development 13,939 - (974) 12,965
General and administrative 60,479 - (6,314) 54,165
Depreciation and amortization
(a) 67,062 - - 67,062
Share-based payment expense
(b) - - 10,735 10,735
Total operating expenses $571,415 $68,623 $ - $640,038
======== ======= =================== ========

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

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

Programming and content $960 $ - $ - $960
Customer service and billing 308 - - 308
Satellite and transmission 565 - - 565
Sales and marketing 1,614 - - 1,614
Engineering, design and
development 974 - - 974
General and administrative 6,314 - - 6,314
Total share-based payment
expense $10,735 $ - $ - $10,735
======= =================== =================== =======





Unaudited For the Six Months Ended June 30, 2012
------------------------------------------------
(in thousands) As Reported Purchase Allocation of Adjusted
Price Accounting Adjustments Share-based
Payment
Expense
---

Revenue:
Subscriber revenue $1,430,526 $121 $ - $1,430,647
Advertising revenue, net of
agency fees 39,456 - - 39,456
Equipment revenue 33,370 - - 33,370
Other revenue 138,912 3,626 - 142,538
Total revenue $1,642,264 $3,747 $ - $1,646,011
========== ====== ===================== ==========
Operating expenses
Cost of services:
Revenue share and royalties 267,537 70,870 - 338,407
Programming and content 135,265 22,134 (2,606) 154,793
Customer service and billing 134,866 - (815) 134,051
Satellite and transmission 35,661 - (1,473) 34,188
Cost of equipment 12,956 - - 12,956
Subscriber acquisition costs 235,596 47,616 - 283,212
Sales and marketing 115,781 6,829 (4,413) 118,197
Engineering, design and
development 18,962 - (2,714) 16,248
General and administrative 125,550 - (16,848) 108,702
Depreciation and amortization
(a) 132,910 - - 132,910
Share-based payment expense - - 28,869 28,869
Total operating expenses $1,215,084 $147,449 $ - $1,362,533
========== ======== ===================== ==========

(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a
result of the Merger. The increased depreciation and amortization for the six months ended June 30, 2012 was $28,000.



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

Revenue:
Subscriber revenue $1,262,080 $3,034 $ - $1,265,114
Advertising revenue, net of
agency fees 34,785 - - 34,785
Equipment revenue 32,889 - - 32,889
Other revenue 138,482 3,626 - 142,108
Total revenue $1,468,236 $6,660 $ - $1,474,896
========== ====== =================== ==========
Operating expenses
Cost of services:
Revenue share and royalties 223,670 61,067 - 284,737
Programming and content 140,358 24,611 (3,470) 161,499
Customer service and billing 128,429 18 (675) 127,772
Satellite and transmission 37,558 313 (1,132) 36,739
Cost of equipment 14,006 - - 14,006
Subscriber acquisition costs 210,432 43,466 - 253,898
Sales and marketing 99,261 7,030 (3,489) 102,802
Engineering, design and
development 25,074 31 (2,117) 22,988
General and administrative 116,831 59 (12,889) 104,001
Depreciation and amortization
(a) 135,462 - - 135,462
Share-based payment expense
(b) - - 23,772 23,772
Total operating expenses $1,131,081 $136,595 $ - $1,267,676
========== ======== =================== ==========

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

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

Programming and content $3,443 $27 $ - $3,470
Customer service and billing 657 18 - 675
Satellite and transmission 1,113 19 - 1,132
Sales and marketing 3,462 27 - 3,489
Engineering, design and
development 2,086 31 - 2,117
General and administrative 12,830 59 - 12,889
Total share-based payment
expense $23,591 $181 $ - $23,772
======= ==== =================== =======


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 Six Months Ended
June 30, June 30,
-------- --------
2012 2011 2012 2011
---- ---- ---- ----

Subscriber
revenue
(GAAP) $730,285 $639,642 $1,430,526 $1,262,080
Add:
net
advertising
revenue
(GAAP) 20,786 18,227 39,456 34,785
Add:
other
subscription-
related
revenue
(GAAP) 58,753 57,642 116,474 116,173
Add:
purchase
price
accounting
adjustments 54 1,125 121 3,034
$809,878 $716,636 $1,586,577 $1,416,072
======== ======== ========== ==========

Daily
weighted
average
number
of
subscribers 22,553,702 20,715,630 22,272,282 20,475,720
========== ========== ========== ==========

ARPU $11.97 $11.53 $11.87 $11.53
====== ====== ====== ======


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.

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 Six Months Ended
June 30, June 30,
-------- --------
2012 2011 2012 2011
---- ---- ---- ----

Customer
service
and
billing
expenses
(GAAP) $68,679 $62,592 $134,866 $128,429
Less:
share-
based
payment
expense,
net
of
purchase
price
accounting
adjustments (388) (308) (815) (675)
Add:
purchase
price
accounting
adjustments - - - 18
68,291 62,284 134,051 127,772
====== ====== ======= =======

Daily
weighted
average
number
of
subscribers 22,553,702 20,715,630 22,272,282 20,475,720
========== ========== ========== ==========

Customer
service
and
billing
expenses,
per
average
subscriber $1.01 $1.00 $1.00 $1.04
===== ===== ===== =====


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 Six Months Ended
June 30, June 30,
-------- --------
2012 2011 2012 2011
---- ---- ---- ----

Cash Flow
information
Net cash
provided
by
operating
activities $253,775 $195,381 $293,723 $213,490
Net cash
used in
investing
activities (23,757) (29,948) (48,944) (64,931)
Net cash
used in
financing
activities (108,264) (70,801) (150,439) (206,923)
Free Cash
Flow
Net cash
provided
by
operating
activities $253,775 $195,381 $293,723 $213,490
Additions
to
property
and
equipment (23,757) (40,315) (48,944) (75,298)
Restricted
and
other
investment
activity - 10,367 - 10,367
Free cash
flow $230,018 $165,433 $244,779 $148,559
======== ======== ======== ========


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. The metric excludes rental and fleet vehicles.

Subscriber acquisition cost, per gross subscriber addition - or SAC, per gross subscriber addition, is derived from subscriber acquisition costs and margins from the 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 Six Months Ended
June 30, June 30,
-------- --------
2012 2011 2012 2011
---- ---- ---- ----

Subscriber
acquisition
costs
(GAAP) $119,475 $105,162 $235,596 $210,432
Less:
margin
from
direct
sales
of
radios
and
accessories
(GAAP) (9,267) (9,421) (20,414) (18,883)
Add:
purchase
price
accounting
adjustments 23,530 21,810 47,616 43,466
$133,738 $117,551 $262,798 $235,015
======== ======== ======== ========

Gross
subscriber
additions 2,481,004 2,179,348 4,642,697 4,231,715
========= ========= ========= =========

SAC,
per
gross
subscriber
addition $54 $54 $57 $56
=== === === ===


About Sirius XM Radio

Sirius XM Radio Inc. is the world's largest radio broadcaster measured by revenue and has nearly 23 million subscribers. SiriusXM creates and broadcasts commercial-free music; premier sports talk and live events; comedy; news; exclusive talk and entertainment; and the most comprehensive Latin music, sports and talk programming in radio. SiriusXM is available in vehicles from every major car company in the U.S., from retailers nationwide, and online at siriusxm.com. SiriusXM programming is also available through the SiriusXM Internet Radio App for Android, Apple, and BlackBerry smartphones and other connected devices. SiriusXM also holds a minority interest in SiriusXM Canada which has more than 2 million subscribers.

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," "believe," "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 statements: our competitive position versus other forms of audio entertainment; our dependence upon automakers; general economic conditions; failure of our satellites, which, in most cases, are not insured; our ability to attract and retain subscribers at a profitable level; royalties we pay for music rights; the unfavorable outcome of pending or future litigation; failure of third parties to perform; and our substantial indebtedness. 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, 2011, 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 Stevens

212 901 6718
hooper.stevens@siriusxm.com

Media:

Patrick Reilly

212 901 6646
patrick.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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