SiriusXM Reports Third Quarter 2014 Results

SiriusXM Reports Third Quarter 2014 Results

NEW YORK, Oct. 28, 2014 /PRNewswire/ --


-- Revenue Increases 10% to a Record $1.1 Billion
-- Net Income of $136 Million, Up 117%
-- Adjusted EBITDA Climbed 29% to a Record $381 Million
-- Share Repurchases Total Nearly $2.1 Billion Year-to-Date
-- 2014 Subscriber, Revenue and Free Cash Flow Guidance Raised
SiriusXM today reported its third quarter 2014 financial and operating results, including revenue of $1.057 billion, up 10% from $962 million in the third quarter of 2013. Net income was $136 million, or $0.02 per diluted share, in the third quarter of 2014, an increase of 117% from $63 million, or $0.01 per diluted share, in the third quarter of 2013.

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Adjusted EBITDA climbed 29% to a record $381 million in the third quarter of 2014 from $296 million in the third quarter of 2013.

"We are very pleased with the performance of SiriusXM in the third quarter, and we are entering the fourth quarter with tremendous momentum. So far this year we have added nearly 1.2 million subscribers, grown our Adjusted EBITDA margin by more than five percentage points, and increased free cash flow by 32%," said Jim Meyer, Chief Executive Officer, SiriusXM.

Additional third quarter 2014 financial and operating highlights:


-- Strong subscriber growth. Net subscriber additions in the third quarter
were 432,817, bringing total subscribers up nearly 5% to 26.7 million.
Self-pay net subscriber additions in the third quarter were 379,598,
bringing the self-pay subscriber base up nearly 7% to 22.0 million.
Total trials underway at the end of the third quarter of 2014 were
approximately 7.4 million, the largest in SiriusXM's history, up from
approximately 6.9 million at the end of the third quarter of 2013.
-- Subscriber acquisition costs fall. Subscriber acquisition costs, per
installation, fell 22% from $45 in the third quarter of 2013 to $35 in
the third quarter of 2014.
-- Tight expense management. Adjusted cash operating expenses grew just
1.5% in the third quarter of 2014 to $677.6 million from $667.6 million
in the third quarter of 2013.
-- Adjusted EBITDA margins reach new record high. Adjusted EBITDA as a
percentage of revenue climbed approximately 530 basis points, from 30.7%
in the third quarter of 2013 to 36.0% in the third quarter of 2014,
which is the highest in the company's history.
-- Free cash flow per share climbs. Following a 9% increase in free cash
flow and a 5% reduction in weighted average diluted common shares
outstanding, free cash flow per diluted share climbed 15% to 4.5 cents
in the third quarter 2014 from 3.9 cents in the third quarter of 2013.
"Share repurchases in 2014 total almost $2.1 billion, 2.5 times the $825 million of free cash flow we generated in the first nine months of the year. With the company's leverage at 3.4 times before the anticipated conversion of our 7% Exchangeable Notes in early December and over $1 billion of undrawn capacity under our revolving credit facility, we retain substantial balance sheet flexibility to continue our capital returns and to capitalize on strategic opportunities that may arise," said David Frear, Chief Financial Officer, SiriusXM.

2014 GUIDANCE

SiriusXM also raised its 2014 revenue, free cash flow and total net subscriber additions guidance and reaffirmed its other financial and subscriber guidance:


-- Net self-pay subscriber additions of approximately 1.25 million,
-- Total net subscriber additions of approximately 1.5 million,
-- Revenue of approximately $4.150 billion,
-- Adjusted EBITDA of approximately $1.425 billion, and
-- Free cash flow of approximately $1.120 billion.


THIRD QUARTER 2014 RESULTS





SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


For the Three Months Ended For the Nine Months
September 30, Ended September 30,
------------- -------------------

(in thousands, except per share data) 2014 2013 2014 2013
---- ---- ---- ----

Revenue:

Subscriber revenue $902,514 $834,053 $2,632,110 $2,432,113

Advertising revenue 25,300 21,918 73,012 63,886

Equipment revenue 23,129 17,989 74,723 54,588

Other revenue 106,144 87,549 310,298 248,430
------- ------ ------- -------

Total revenue 1,057,087 961,509 3,090,143 2,799,017

Operating expenses:

Cost of services:

Revenue share and royalties 204,307 162,627 599,939 467,017

Programming and content 74,920 72,322 219,360 217,313

Customer service and billing 93,013 76,322 274,174 237,006

Satellite and transmission 21,794 19,853 64,446 59,041

Cost of equipment 9,485 5,340 29,319 17,809

Subscriber acquisition costs 119,778 125,457 367,207 371,560

Sales and marketing 83,906 75,638 237,992 209,594

Engineering, design and development 16,136 13,007 47,677 42,901

General and administrative 75,170 67,881 223,995 184,613

Depreciation and amortization 64,550 58,533 200,021 192,966

Total operating expenses 763,059 676,980 2,264,130 1,999,820
------- ------- --------- ---------

Income from operations 294,028 284,529 826,013 799,197

Other income (expense):

Interest expense, net of amounts capitalized (75,416) (54,629) (197,029) (150,531)

Loss on extinguishment of debt and credit facilities, net - (107,971) - (124,348)

Interest and investment income 6,305 1,716 9,588 3,648

Loss on change in value of derivatives - - (34,485) -

Other income (loss) 297 407 (1,354) 909

Total other expense (68,814) (160,477) (223,280) (270,322)
------- -------- -------- --------

Income before income taxes 225,214 124,052 602,733 528,875

Income tax expense (89,044) (61,158) (252,614) (216,857)

Net income $136,170 $62,894 $350,119 $312,018
======== ======= ======== ========

Foreign currency translation adjustment, net of tax (58) (11) 20 (292)

Total comprehensive income $136,112 $62,883 $350,139 $311,726
======== ======= ======== ========

Net income per common share:

Basic $0.02 $0.01 $0.06 $0.05
===== ===== ===== =====

Diluted $0.02 $0.01 $0.06 $0.05
===== ===== ===== =====

Weighted average common shares outstanding:

Basic 5,626,078 6,184,216 5,860,248 6,265,981
========= ========= ========= =========

Diluted 5,974,047 6,287,353 6,208,569 6,446,082
========= ========= ========= =========




SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


As of September 30, As of December 31,
------------------- ------------------

2014 2013
---- ----

(in thousands, except share and per share data) (Unaudited)

ASSETS

Current assets:

Cash and cash equivalents $103,585 $134,805

Accounts receivable, net 102,646 103,937

Receivables from distributors 104,147 88,975

Inventory, net 24,350 13,863

Prepaid expenses 126,131 110,530

Related party current assets 4,006 9,145

Deferred tax asset 784,143 937,598

Other current assets 10,444 20,160
------ ------

Total current assets 1,259,452 1,419,013

Property and equipment, net 1,522,635 1,594,574

Long-term restricted investments 5,922 5,718

Deferred financing fees, net 12,679 12,604

Intangible assets, net 2,658,476 2,700,062

Goodwill 2,205,107 2,204,553

Related party long-term assets 1,679 30,164

Long-term deferred tax asset 775,147 868,057

Other long-term assets 8,260 10,035

Total assets $8,449,357 $8,844,780
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued expenses $552,412 $578,333

Accrued interest 75,984 42,085

Current portion of deferred revenue 1,612,388 1,586,611

Current portion of deferred credit on executory contracts 2,339 3,781

Current maturities of long-term debt 498,433 496,815

Current maturities of long-term related party debt 10,992 10,959

Related party current liabilities 3,268 20,320
----- ------

Total current liabilities 2,755,816 2,738,904

Deferred revenue 148,474 149,026

Deferred credit on executory contracts - 1,394

Long-term debt 4,259,646 3,093,821

Related party long-term liabilities 14,345 16,337

Other long-term liabilities 97,661 99,556

Total liabilities 7,275,942 6,099,038
--------- ---------

Stockholders' equity:

Preferred stock, undesignated, par value $0.001 (liquidation preference of $0.001 per share); - -
50,000,000 shares authorized and 0 shares issued and outstanding at September 30, 2014
and December 31, 2013

Common stock, par value $0.001; 9,000,000,000 shares authorized; 5,542,621,493 and 5,543 6,096
6,096,220,526 shares issued; 5,538,190,736 and 6,096,220,526 outstanding at September 30,
2014 and December 31, 2013, respectively

Accumulated other comprehensive loss, net of tax (288) (308)

Additional paid-in capital 6,767,781 8,674,129

Treasury stock, at cost; 4,430,757 and 0 shares of common stock at September 30, 2014 and (15,565) -
December 31, 2013, respectively

Accumulated deficit (5,584,056) (5,934,175)
---------- ----------

Total stockholders' equity 1,173,415 2,745,742
--------- ---------

Total liabilities and stockholders' equity $8,449,357 $8,844,780
========== ==========




SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


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

(in thousands) 2014 2013
---- ----

Cash flows from operating activities:

Net income $350,119 $312,018

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 200,021 192,966

Non-cash interest expense, net of amortization of premium 16,515 16,506

Provision for doubtful accounts 32,875 28,571

Amortization of deferred income related to equity method investment (2,081) (2,082)

Loss on extinguishment of debt and credit facilities, net - 124,348

Gain on unconsolidated entity investments, net (2,677) (2,831)

Dividend received from unconsolidated entity investment 12,873 17,707

Loss on disposal of assets 217 128

Loss on change in value of derivatives 34,485 -

Share-based payment expense 57,832 49,774

Deferred income taxes 244,667 219,184

Other non-cash purchase price adjustments (2,836) (206,786)

Changes in operating assets and liabilities:

Accounts receivable (31,584) (25,207)

Receivables from distributors (15,172) 23,606

Inventory (10,487) 11,095

Related party assets (995) 2,077

Prepaid expenses and other current assets (16,319) (6,665)

Other long-term assets 1,567 (363)

Accounts payable and accrued expenses (36,861) (58,680)

Accrued interest 33,899 19,964

Deferred revenue 25,225 34,530

Related party liabilities (1,261) (635)

Other long-term liabilities (1,854) (4,968)

Net cash provided by operating activities 888,168 744,257
------- -------


Cash flows from investing activities:

Additions to property and equipment (87,244) (118,235)

Purchases of restricted and other investments - (1,719)

Acquisition of business, net of cash acquired 1,144 -

Return of capital from investment in unconsolidated entity 24,178 -

Net cash used in investing activities (61,922) (119,954)
------- --------


Cash flows from financing activities:

Proceeds from exercise of stock options 331 21,819

Taxes paid in lieu of shares issued for stock-based compensation (24,781) (27,913)

Proceeds from long-term borrowings and revolving credit facility, net of costs 2,151,205 2,532,137

Payment of premiums on redemption of debt - (116,410)

Repayment of long-term borrowings and revolving credit facility (993,772) (1,085,737)

Repayment of related party long-term borrowings - (150,000)

Common stock repurchased and retired (1,990,449) (1,602,360)

Net cash used in financing activities (857,466) (428,464)
-------- --------

Net (decrease) increase in cash and cash equivalents (31,220) 195,839

Cash and cash equivalents at beginning of period 134,805 520,945

Cash and cash equivalents at end of period $103,585 $716,784
======== ========


Key Operating Metrics

The following table contains our key operating metrics for the three and nine months ended September 30, 2014 and 2013, respectively. Subscribers to our connected vehicle services are not included in our subscriber count:





Unaudited
---------

(in thousands, except subscriber, per subscriber For the Three Months Ended For the Nine Months
and per installation amounts) September 30, Ended September 30,
------------- -------------------

2014 2013 2014 2013
---- ---- ---- ----


Self-pay subscribers 22,014,606 20,670,333 22,014,606 20,670,333

Paid promotional subscribers 4,719,792 4,911,733 4,719,792 4,911,733

Ending subscribers 26,734,398 25,582,066 26,734,398 25,582,066
========== ========== ========== ==========


Self-pay subscribers 379,598 372,597 932,789 1,100,059

Paid promotional subscribers 53,219 140,481 242,299 581,671

Net additions 432,817 513,078 1,175,088 1,681,730
======= ======= ========= =========


Daily weighted average number of subscribers 26,487,969 25,267,241 26,035,178 24,646,938
========== ========== ========== ==========


Average self-pay monthly churn 1.9% 1.8% 1.9% 1.8%
=== === === ===


New vehicle consumer conversion rate 41% 44% 42% 44%
=== === === ===


ARPU $12.47 $12.29 $12.34 $12.21

SAC, per installation $35 $45 $34 $46

Customer service and billing expenses, per average subscriber $1.07 $1.00 $1.07 $1.06

Free cash flow $267,269 $245,262 $825,102 $624,303

Adjusted EBITDA $381,251 $295,742 $1,086,469 $840,589


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 exclude the impact of other income and expense, loss on extinguishment of debt, loss on change in value of derivatives 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 of Sirius and XM, (ii) depreciation and amortization and (iii) 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 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 of Sirius and XM. 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 unaudited 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 Nine Months Ended
September 30, September 30,
------------- -------------

2014 2013 2014 2013
---- ---- ---- ----


Net income (GAAP): $136,170 $62,894 $350,119 $312,018

Add back items excluded from Adjusted EBITDA:

Purchase price accounting adjustments:

Revenues 1,813 1,813 5,438 5,438

Operating expenses (945) (68,895) (2,835) (206,786)

Share-based payment expense (GAAP) 21,805 19,762 57,832 49,774

Depreciation and amortization (GAAP) 64,550 58,533 200,021 192,966

Interest expense, net of amounts capitalized (GAAP) 75,416 54,629 197,029 150,531

Loss on extinguishment of debt and credit facilities, net (GAAP) - 107,971 - 124,348

Interest and investment income (GAAP) (6,305) (1,716) (9,588) (3,648)

Loss on change in value of derivatives (GAAP) - - 34,485 -

Other (income) loss (GAAP) (297) (407) 1,354 (909)

Income tax expense (GAAP) 89,044 61,158 252,614 216,857

Adjusted EBITDA $381,251 $295,742 $1,086,469 $840,589
======== ======== ========== ========


Adjusted Net Income - We define this Non-GAAP financial measure as our actual net income adjusted to exclude the impact of certain purchase price accounting adjustments and the loss on change in value of derivatives, net of income tax expense. The following table reconciles our actual income before income taxes to our adjusted net income for the three and nine months ended September 30, 2014 and 2013 (in thousands):





Unaudited
---------

For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------- -------------

2014 2013 2014 2013
---- ---- ---- ----


Income before income taxes (GAAP): $225,214 $124,052 $602,733 $528,875

Add back items excluded from adjusted net income:

Purchase price accounting adjustments:

Revenues 1,813 1,813 5,438 5,438

Operating expenses (945) (68,895) (2,835) (206,786)

Loss on change in value of derivatives (GAAP) - - 34,485 -

Adjusted income before income taxes $226,082 $56,970 $639,821 $327,527

Allocable income tax expense (87,946) (22,218) (248,890) (127,736)

Adjusted net income $138,136 $34,752 $390,931 $199,791
======== ======= ======== ========


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 from the merger of Sirius and XM and share-based payment expense. We use this Non-GAAP financial measure to manage our business, to 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 nine months ended September 30, 2014 and 2013:





Unaudited For the Three Months Ended September 30, 2014
-------------------------------------------------------

(in thousands) As Reported Purchase Price Allocation of Adjusted
Accounting Share-based
Adjustments Payment Expense
---


Revenue:

Subscriber revenue $902,514 $ - $ - $902,514

Advertising revenue 25,300 - - 25,300

Equipment revenue 23,129 - - 23,129

Other revenue 106,144 1,813 - 107,957

Total revenue $1,057,087 $1,813 $ - $1,058,900
========== ====== =========================== ==========

Operating expenses

Cost of services:

Revenue share and royalties $204,307 $ - $ - $204,307

Programming and content 74,920 945 (2,434) 73,431

Customer service and billing 93,013 - (868) 92,145

Satellite and transmission 21,794 - (1,185) 20,609

Cost of equipment 9,485 - - 9,485

Subscriber acquisition costs 119,778 - - 119,778

Sales and marketing 83,906 - (4,265) 79,641

Engineering, design and development 16,136 - (2,559) 13,577

General and administrative 75,170 - (10,494) 64,676

Depreciation and amortization (a) 64,550 - - 64,550

Share-based payment expense - - 21,805 21,805

Total operating expenses $763,059 $945 $ - $764,004
======== ==== =========================== ========


(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 of Sirius and XM. The increased depreciation and
amortization for the three months ended September 30, 2014 was $9,000.




Unaudited For the Three Months Ended September 30, 2013
-------------------------------------------------------

(in thousands) As Reported Purchase Price Allocation of Adjusted
Accounting Share-based
Adjustments Payment Expense
---


Revenue:

Subscriber revenue $834,053 $ - $ - $834,053

Advertising revenue 21,918 - - 21,918

Equipment revenue 17,989 - - 17,989

Other revenue 87,549 1,813 - 89,362

Total revenue $961,509 $1,813 $ - $963,322
======== ====== =========================== ========

Operating expenses

Cost of services:

Revenue share and royalties $162,627 $41,942 $ - $204,569

Programming and content 72,322 2,008 (2,232) 72,098

Customer service and billing 76,322 - (647) 75,675

Satellite and transmission 19,853 - (1,076) 18,777

Cost of equipment 5,340 - - 5,340

Subscriber acquisition costs 125,457 20,342 - 145,799

Sales and marketing 75,638 4,603 (3,871) 76,370

Engineering, design and development 13,007 - (2,177) 10,830

General and administrative 67,881 - (9,759) 58,122

Depreciation and amortization (a) 58,533 - - 58,533

Share-based payment expense - - 19,762 19,762

Total operating expenses $676,980 $68,895 $ - $745,875
======== ======= =========================== ========


(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 of Sirius and XM. The increased depreciation and
amortization for the three months ended September 30, 2013 was $12,000.




Unaudited For the Nine Months Ended September 30, 2014
------------------------------------------------------

(in thousands) As Reported Purchase Price Allocation of Adjusted
Accounting Share-based
Adjustments Payment Expense
---


Revenue:

Subscriber revenue $2,632,110 $ - $ - $2,632,110

Advertising revenue 73,012 - - 73,012

Equipment revenue 74,723 - - 74,723

Other revenue 310,298 5,438 - 315,736

Total revenue $3,090,143 $5,438 $ - $3,095,581
========== ====== =========================== ==========

Operating expenses

Cost of services:

Revenue share and royalties $599,939 $ - $ - $599,939

Programming and content 219,360 2,835 (6,903) 215,292

Customer service and billing 274,174 - (2,032) 272,142

Satellite and transmission 64,446 - (3,087) 61,359

Cost of equipment 29,319 - - 29,319

Subscriber acquisition costs 367,207 - - 367,207

Sales and marketing 237,992 - (11,238) 226,754

Engineering, design and development 47,677 - (6,422) 41,255

General and administrative 223,995 - (28,150) 195,845

Depreciation and amortization (a) 200,021 - - 200,021

Share-based payment expense - - 57,832 57,832

Total operating expenses $2,264,130 $2,835 $ - $2,266,965
========== ====== =========================== ==========


(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 of Sirius and XM. The increased depreciation and
amortization for the nine months ended September 30, 2014 was $29,000.




Unaudited For the Nine Months Ended September 30, 2013
------------------------------------------------------

(in thousands) As Reported Purchase Price Allocation of Adjusted
Accounting Share-based
Adjustments Payment Expense
---


Revenue:

Subscriber revenue $2,432,113 $ - $ - $2,432,113

Advertising revenue 63,886 - - 63,886

Equipment revenue 54,588 - - 54,588

Other revenue 248,430 5,438 - 253,868

Total revenue $2,799,017 $5,438 $ - $2,804,455
========== ====== =========================== ==========

Operating expenses

Cost of services:

Revenue share and royalties $467,017 $122,534 $ - $589,551

Programming and content 217,313 6,965 (5,513) 218,765

Customer service and billing 237,006 - (1,628) 235,378

Satellite and transmission 59,041 - (2,753) 56,288

Cost of equipment 17,809 - - 17,809

Subscriber acquisition costs 371,560 64,365 - 435,925

Sales and marketing 209,594 12,922 (10,114) 212,402

Engineering, design and development 42,901 - (5,458) 37,443

General and administrative 184,613 - (24,308) 160,305

Depreciation and amortization (a) 192,966 - - 192,966

Share-based payment expense - - 49,774 49,774

Total operating expenses $1,999,820 $206,786 $ - $2,206,606
========== ======== =========================== ==========


(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 of Sirius and XM. The increased depreciation and
amortization for the nine months ended September 30, 2013 was $37,000.


Adjusted Cash Operating Expenses - We define this Non-GAAP financial measure as our actual operating expenses adjusted to exclude the impact of certain purchase price accounting adjustments from the merger of Sirius and XM, depreciation and amortization expense, and share-based payment expense. The following table reconciles our actual operating expenses to our adjusted cash operating expenses for the three and nine months ended September 30, 2014 and 2013:





Unaudited
---------

For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------- -------------

2014 2013 2014 2013
---- ---- ---- ----


Operating expenses (GAAP): $763,059 $676,980 $2,264,130 $1,999,820

Items excluded from adjusted cash operating expenses:

Purchase price accounting adjustments 945 68,895 2,835 206,786

Share-based payment expense (GAAP) (21,805) (19,762) (57,832) (49,774)

Depreciation and amortization (GAAP) (64,550) (58,533) (200,021) (192,966)
------- ------- -------- --------

Adjusted cash operating expenses $677,649 $667,580 $2,009,112 $1,963,866
======== ======== ========== ==========


ARPU - is derived from total earned subscriber revenue, advertising revenue and other subscription-related revenue, excluding revenue associated with our connected vehicle business, 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. 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,
------------- -------------

2014 2013 2014 2013
---- ---- ---- ----


Subscriber revenue, excluding connected vehicle (GAAP) $880,093 $834,053 $2,568,742 $2,432,113

Add: advertising revenue (GAAP) 25,300 21,918 73,012 63,886

Add: other subscription-related revenue (GAAP) 85,380 75,999 249,138 211,784

$990,773 $931,970 $2,890,892 $2,707,783
======== ======== ========== ==========


Daily weighted average number of subscribers 26,487,969 25,267,241 26,035,178 24,646,938
========== ========== ========== ==========


ARPU $12.47 $12.29 $12.34 $12.21
====== ====== ====== ======


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 connected vehicle customer service and billing expenses and share-based payment expense, 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. 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,
------------- -------------

2014 2013 2014 2013
---- ---- ---- ----


Customer service and billing expenses, excluding connected $85,868 $76,322 $252,677 $237,006
vehicle (GAAP)

Less: share-based payment expense (GAAP) (868) (647) (2,032) (1,628)

$85,000 $75,675 $250,645 $235,378
======= ======= ======== ========


Daily weighted average number of subscribers 26,487,969 25,267,241 26,035,178 24,646,938
========== ========== ========== ==========


Customer service and billing expenses, per average subscriber $1.07 $1.00 $1.07 $1.06
===== ===== ===== =====


Free cash flow - is derived from cash flow provided by operating activities, capital expenditures and restricted and other investment activity. The calculation for free cash flow and free cash flow per diluted share are as follows (in thousands, except per share data):





Unaudited
---------

For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------- -------------

2014 2013 2014 2013
---- ---- ---- ----


Cash Flow information

Net cash provided by operating activities $296,096 $302,236 $888,168 $744,257

Net cash used in investing activities $(28,827) $(56,974) $(61,922) $(119,954)

Net cash used in financing activities $(333,664) $(180,247) $(857,466) $(428,464)

Free Cash Flow

Net cash provided by operating activities $296,096 $302,236 $888,168 $744,257

Additions to property and equipment (28,827) (55,255) (87,244) (118,235)

Purchases of restricted and other investments - (1,719) - (1,719)

Return of capital from investment in unconsolidated entity - - 24,178 -

Free cash flow $267,269 $245,262 $825,102 $624,303
======== ======== ======== ========


Diluted weighted average common shares outstanding 5,974,047 6,287,353 6,208,569 6,446,082
========= ========= ========= =========


Free cash flow per diluted share $0.04 $0.04 $0.13 $0.10
===== ===== ===== =====


New vehicle consumer conversion rate - is defined as the percentage of owners and lessees of new vehicles that receive our satellite radio 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. 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 installation - or SAC, per installation, is derived from subscriber acquisition costs and margins from the sale of radios and accessories, excluding purchase price accounting adjustments, divided by the number of satellite radio installations in new vehicles and shipments of aftermarket radios for the period. Purchase price accounting adjustments associated with the merger of Sirius and XM 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 installation, is calculated as follows (in thousands, except for installation amounts):





Unaudited
---------

For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------- -------------

2014 2013 2014 2013
---- ---- ---- ----


Subscriber acquisition costs (GAAP) $119,778 $125,457 $367,207 $371,560

Less: margin from direct sales of radios and accessories (GAAP) (13,644) (12,649) (45,404) (36,779)

Add: purchase price accounting adjustments - 20,342 - 64,365

$106,134 $133,150 $321,803 $399,146
======== ======== ======== ========


Installations 3,038,041 2,973,681 9,396,115 8,657,841
========= ========= ========= =========


SAC, per installation $35 $45 $34 $46
=== === === ===


About SiriusXM

Sirius XM Holdings Inc. (NASDAQ: SIRI) is the world's largest radio broadcaster measured by revenue and has 26.7 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. and from retailers nationwide as well as at shop.siriusxm.com. SiriusXM programming is available through the SiriusXM Internet Radio App for smartphones and other connected devices as well as online at siriusxm.com. SiriusXM also provides premium traffic, weather, data and information services for subscribers in cars, trucks, RVs, boats and aircraft through SiriusXM Traffic(TM), SiriusXM Travel Link, NavTraffic®, NavWeather(TM), SiriusXM Aviation, SiriusXM Marine(TM), Sirius Marine Weather, XMWX Aviation(TM), and XMWX Marine(TM). SiriusXM holds a minority interest in SiriusXM Canada which has more than 2 million subscribers.

On social media, join the SiriusXM community on Facebook, Twitter, Instagram, and YouTube.

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 radio and audio entertainment providers; our ability to attract and retain subscribers, which is uncertain; our dependence upon the auto industry; general economic conditions; failure of our satellites, which, in most cases, are not insured; the interruption or failure of our information and communications systems; the security of the personal information about our customers; royalties we pay for music rights, which increase over time; the unfavorable outcome of pending or future litigation; our failure to realize benefits of acquisitions; rapid technological and industry change; failure of third parties to perform; changes in consumer protection laws and their enforcement; failure to comply with FCC requirements and other government regulations; and our 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, 2013, 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.

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

Logo - http://photos.prnewswire.com/prnh/20101014/NY82093LOGO

SOURCE Sirius XM Holdings Inc.

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

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


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