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2008-08-07 06:00:00
SIRIUS XM Radio Reports Second Quarter 2008 Results
- Revenue of $283 Million, Up 25% Year Over Year
- Total Subscribers of More Than 8.9 Million, Up 25% Year Over Year
- Record Second Quarter Gross Additions
- Adjusted Loss from Operations Improves 70% Year Over Year
NEW YORK, Aug. 7 /EMWNews/ -- SIRIUS XM Radio (Nasdaq:
SIRI) today announced stand alone SIRIUS Satellite Radio second quarter
2008 financial results, including a 25% increase in revenue to $283.0
million, total subscribers in excess of 8.9 million and a 70% decrease in
the adjusted loss from operations.
"Second quarter stand-alone SIRIUS results once again demonstrated that
we achieved strong revenue growth and solid cost control," said Mel
Karmazin, CEO of SIRIUS. "Despite a tough economy and weak auto sales,
gross additions set a new second quarter record. In the second quarter both
revenue and subscribers grew 25% as compared with last year, while cash
costs remained essentially flat leading to a 70% reduction in our second
quarter EBITDA loss."
"The combined company now has an annualized revenue run-rate of over
$2.4 billion, making SIRIUS XM Radio one of the fastest growing and best
positioned subscription media businesses. With rapid integration efforts
underway, we started realizing synergies on Day 1. We expect to realize
$400 million in synergies next year and see this figure growing
substantially beyond 2009."
SIRIUS ended the second quarter 2008 with 8,924,139 subscribers up 25%
from 7,142,538 subscribers at the end of the second quarter 2007. Retail
subscribers increased 7% in the second quarter 2008 to 4,676,814 from
4,364,646 at the end of the second quarter 2007. OEM subscribers increased
53% in the second quarter 2008 to 4,247,325 from 2,777,892 at the end of
second quarter 2007. During the second quarter 2008, SIRIUS added 279,820
net subscribers.
Total revenue for the second quarter 2008 increased to $283.0 million,
up 25% from second quarter 2007 total revenue of $226.4 million. Second
quarter 2008 average monthly self-pay customer churn rate was 1.6%. The
second quarter 2008 conversion rate was approximately 48%. SAC per gross
subscriber addition was $78 in the second quarter 2008, an improvement of
27% over second quarter 2007 SAC per gross subscriber addition of $107.
RESULTS OF OPERATIONS
The discussion of operating expenses below excludes the effects of
stock-based compensation. SIRIUS believes this presentation improves the
transparency of disclosure and is consistent with the way operating results
are evaluated by management.
SECOND QUARTER 2008 VERSUS SECOND QUARTER 2007
For the second quarter of 2008, SIRIUS recognized total revenue of
$283.0 million compared to $226.4 million for the second quarter of 2007.
This 25%, or $56.6 million, increase in revenue was driven by a $56.9
million increase in subscriber revenue resulting from the net increase in
subscribers of 1,781,601 from the second quarter of 2007.
The company's adjusted loss from operations decreased $55.5 million to
($23.8) million for the second quarter of 2008 from ($79.3) million for the
second quarter of 2007 (refer to the reconciliation table of net loss to
adjusted loss from operations). This decrease was primarily driven by the
increase in total revenue of $56.6 million and a $24.3 million improvement
in subscriber acquisition costs which more than offset an increase in
revenue share and royalties.
Satellite and transmission expenses for the second quarter 2008
remained consistent with the second quarter of 2007 at $6.7 million.
Programming and content expenses increased $1.0 million to $54.1
million for the second quarter of 2008 from $53.1 million for the second
quarter of 2007. The increase was primarily attributable to license fees
associated with new programming and higher compensation-related costs for
additions to headcount.
Revenue share and royalties increased $19.9 million to $49.7 million
for the second quarter of 2008 from $29.8 million for the second quarter of
2007. The increase was attributable to the determination by the Copyright
Royalty Board in January 2008 of the royalty rate under the statutory
license covering the performance of sound recordings. The 25% growth in the
company's revenues also contributed to the increase in revenue share and
royalties.
Customer service and billing expenses increased $1.2 million to $22.6
million for the second quarter of 2008 from $21.4 million for the second
quarter of 2007. The increase was primarily attributable to call center
operating costs necessary to accommodate the increase in our subscriber
base and respective transaction fees. Customer service and billing
expenses, as adjusted, per average subscriber declined 18% to $0.86 for the
second quarter of 2008 from $1.05 for the second quarter of 2007, due to
efficiencies across a larger subscriber base.
Sales and marketing expenses increased $2.7 million to $46.7 million
for the second quarter of 2008 from $44.0 million for the second quarter of
2007. This increase was primarily attributable to equipment related
retention costs associated with efforts to retain existing subscribers that
we believe will result in higher revenue and lower churn. This was offset
by lower consumer advertising and reduced cooperative marketing spend with
the company's channel partners.
Subscriber acquisition costs (SAC) decreased $24.3 million or 23% to
$81.4 million for the second quarter of 2008 from $105.7 million for the
second quarter of 2007. This decrease was primarily attributable to lower
retail and OEM subsidies due to better product economics.
SAC per gross subscriber addition decreased 27% to $78 for the second
quarter of 2008 from $107 for the second quarter of 2007. This decrease was
primarily attributable to lower retail and OEM subsidies due to better
product economics.
General and administrative expenses increased $3.7 million to $31.0
million for the second quarter of 2008 from $27.3 million for the second
quarter of 2007. The increase was primarily the result of higher litigation
costs and compensation-related costs to support the growth of the business.
Engineering, design and development expenses decreased $2.3 million to
$8.0 million for the second quarter of 2008 from $10.3 million for the
second quarter of 2007. This decrease was attributable to reduced OEM and
product developments costs.
SIRIUS reported a net loss of ($83.9) million, or ($0.06) per share,
for the second quarter of 2008, compared to a net loss of ($134.1) million,
or ($0.09) per share, in the second quarter of 2007. The adjusted net loss
per share, or net loss per share excluding stock-based compensation was
($0.05) in the second quarter of 2008 as compared to an adjusted net loss
per share of ($0.08) in the second quarter of 2007 (refer to the
reconciliation table of net loss per share to adjusted net loss per share).
SIX MONTHS ENDED JUNE 30, 2008 VERSUS SIX MONTHS ENDED JUNE 30, 2007
For the six months ended June 30, 2008, SIRIUS recognized total revenue
of $553.4 million compared with $430.5 million for the six months ended
June 30, 2007. This 29%, or $122.9 million increase in revenue, was
primarily driven by a $121.7 million increase in subscriber revenue,
resulting from the net increase in subscribers of 1,781,601 from the end of
the second quarter of 2007.
The company's adjusted loss from operations decreased $100.1 million to
($63.2) million for the six months ended June 30, 2008 from ($163.3)
million for the six months ended June 30, 2007 (refer to the reconciliation
table of net loss to adjusted loss from operations). This decrease was
driven by a 29%, or $122.9 million, increase in total revenue which more
than offset the 3%, or $21.9 million, increase in operating expenses.
Satellite and transmission expenses decreased $0.3 million to $13.7
million for the six months ended June 30, 2008 from $14.0 million for the
six months ended June 30, 2007.
Programming and content expenses increased $2.8 million to $113.0
million for the six months ended June 30, 2008 from $110.2 million for the
six months ended June 30, 2007. The increase was primarily attributable to
license fees associated with new programming and higher
compensation-related costs for additions to headcount.
Revenue share, royalties and residuals increased $35.0 million to $92.0
million for the six months ended June 30, 2008 from $57.0 million for the
six months ended June 30, 2007.
The increase was attributable to the determination by the Copyright
Royalty Board in January 2008 of the royalty rate under the statutory
license covering the performance of sound recordings. The 29% growth in the
company's revenues also contributed to the increase in revenue share and
royalties.
Customer service and billing expenses increased $6.1 million to $49.2
million for the six months ended June 30, 2008 from $43.1 million for the
six months ended June 30, 2007. The increase was primarily attributable to
call center operating costs necessary to accommodate the increase in our
subscriber base. Customer service and billing expenses, as adjusted, per
average subscriber declined 13% to $0.96 for the six months ended June 30,
2008 from $1.10 for the six months ended June 30, 2007, due to efficiencies
across a larger subscriber base.
Sales and marketing expenses increased $0.5 million to $79.9 million
for the six months ended June 30, 2008 from $79.4 million for the six
months ended June 30, 2007.
This increase was primarily attributable to equipment related retention
costs associated with efforts to retain existing subscribers that we
believe will result in higher revenue and lower churn. This was offset by
lower consumer advertising and reduced cooperative marketing spend with the
company's channel partners.
Subscriber acquisition costs (SAC) decreased $32.7 million to $171.2
million for the six months ended June 30, 2008 from $203.9 million for the
six months ended June 30, 2007. This decrease was primarily attributable to
lower retail and OEM subsidies due to better product economics.
SAC per gross subscriber addition decreased 19% to $84 for the six
months ended June 30, 2008 from $104 for the six months ended June 2007.
This decrease was primarily driven by lower retail and OEM subsidies due to
better product economics.
General and administrative expenses increased $17.1 million to $67.8
million for the six months ended June 30, 2008 from $50.7 million for the
six months ended June 30, 2007. The increase was primarily a result of
higher litigation related costs and compensation-related costs to support
the growth of the business.
Engineering, design and development expenses decreased $6.2 million to
$15.5 million for the six months ended June 30, 2008 from $21.7 million for
the six months ended June 30, 2007. This decrease was attributable to
reduced OEM and product developments costs.
SIRIUS reported a net loss of ($188.0) million, or ($0.13) per share,
for the six months ended June 30, 2008, compared with a net loss of
($278.9) million, or ($0.19) per share, for the six months ended June 30,
2007. The adjusted net loss per share, or net loss per share excluding
stock-based compensation was ($0.10) for the six months ended June 30, 2008
compared with an adjusted net loss per share excluding stock based
compensation of ($0.16) for the six months ended June 30, 2007 (refer to
the reconciliation table of net loss per share to adjusted net loss per
share).
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARIES
SUBSCRIBER DATA, METRICS
AND OTHER NON-GAAP FINANCIAL MEASURES
(Dollars in thousands, unless otherwise stated)
(Unaudited)
Subscriber Data:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Beginning subscribers 8,644,319 6,581,045 8,321,785 6,024,555
Net additions 279,820 561,493 602,354 1,117,983
Ending subscribers 8,924,139 7,142,538 8,924,139 7,142,538
Retail 4,676,814 4,364,646 4,676,814 4,364,646
OEM 4,231,428 2,758,639 4,231,428 2,758,639
Hertz 15,897 19,253 15,897 19,253
Ending subscribers 8,924,139 7,142,538 8,924,139 7,142,538
Retail 33,599 129,843 36,105 322,821
OEM 244,610 434,955 565,796 799,629
Hertz 1,611 (3,305) 453 (4,467)
Net additions 279,820 561,493 602,354 1,117,983
Metrics:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Gross subscriber
additions 1,029,287 1,002,145 2,032,709 1,990,603
Deactivated subscribers 749,467 440,652 1,430,355 872,620
Average monthly churn
(1)(6) 2.8% 2.1% 2.8% 2.2%
SAC per gross subscriber
addition (2)(6) $78 $107 $84 $104
Customer service and
billing expenses per
average subscriber
(3)(6) $0.86 $1.05 $0.96 $1.10
Total revenue $283,017 $226,427 $553,367 $430,464
Free cash flow (4)(6) $(31,087) $(80,031) $(217,622) $(226,746)
Monthly ARPU: (5)(6)
Average monthly
subscriber revenue per
subscriber before the
effects of Hertz
subscribers and
rebates $10.14 $10.24 $10.12 $10.26
Effects of Hertz
subscribers 0.06 0.05 0.05 0.05
Effects of rebates (0.03) (0.03) (0.04) (0.13)
Average monthly
subscriber revenue per
subscriber 10.17 10.26 10.13 10.18
Average monthly net
advertising revenue
per subscriber 0.32 0.45 0.32 0.41
ARPU $10.49 $10.71 $10.45 $10.59
SIRIUS XM RADIO INC. AND SUBSIDIARIES
SUBSCRIBER DATA, METRICS
AND OTHER NON-GAAP FINANCIAL MEASURES - CONTINUED
(Dollars in thousands, unless otherwise stated)
(Unaudited)
Adjusted Loss from Operations:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Net loss $(83,899) $(134,147) $(188,017) $(278,892)
Depreciation 27,113 26,284 54,019 53,070
Stock-based
compensation 17,151 17,017 39,413 41,277
Other income
and expense 15,307 10,992 30,258 20,137
Income tax
expense 543 555 1,086 1,110
Adjusted loss
from
operations (7) $(23,785) $(79,299) $(63,241) $(163,298)
Adjusted Net Loss and Adjusted Net Loss per Share:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Net loss $(83,899) $(134,147) $(188,017) $(278,892)
Stock-based
compensation 17,151 17,017 39,413 41,277
Adjusted net
loss $(66,748) $(117,130) $(148,604) $(237,615)
Net loss per
share (basic
and diluted) $(0.06) $(0.09) $(0.13) $(0.19)
Stock-based
compensation 0.01 0.01 0.03 0.03
Adjusted net
loss per
share (basic
and diluted) (8) $(0.05) $(0.08) $(0.10) $(0.16)
Weighted average
common shares
outstanding
(basic and
diluted) 1,499,723 1,462,362 1,487,610 1,459,701
SIRIUS XM RADIO INC. AND SUBSIDIARIES
SUBSCRIBER DATA, METRICS
AND OTHER NON-GAAP FINANCIAL MEASURES - CONTINUED
(Dollars in thousands, unless otherwise stated)
(Unaudited)
Condensed Consolidated Statements of Operations:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Total revenue $283,017 $226,427 $553,367 $430,464
Operating expenses
(excludes depreciation
and stock-based
compensation shown
separately below):
Satellite and
transmission 6,692 6,716 13,719 14,046
Programming and content 54,087 53,096 112,991 110,159
Revenue share and
royalties 49,723 29,841 92,043 56,975
Customer service and
billing 22,600 21,440 49,245 43,094
Cost of equipment 6,647 7,386 14,234 13,843
Sales and marketing 46,669 44,015 79,895 79,368
Subscriber acquisition
costs 81,392 105,658 171,202 203,895
General and
administrative 31,010 27,308 67,790 50,711
Engineering, design and
development 7,982 10,266 15,489 21,671
Depreciation 27,113 26,284 54,019 53,070
Stock-based
compensation 17,151 17,017 39,413 41,277
Total operating expenses 351,066 349,027 710,040 688,109
Loss from operations (68,049) (122,600) (156,673) (257,645)
Other income (expense) (15,307) (10,992) (30,258) (20,137)
Loss before income taxes (83,356) (133,592) (186,931) (277,782)
Income tax expense (543) (555) (1,086) (1,110)
Net loss $(83,899) $(134,147) $(188,017) $(278,892)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share amounts)
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Revenue:
Subscriber revenue,
including effects of
rebates $266,518 $209,635 $522,158 $400,431
Advertising revenue,
net of agency fees 8,332 9,177 16,740 15,898
Equipment revenue 7,956 6,255 14,019 10,926
Other revenue 211 1,360 450 3,209
Total revenue 283,017 226,427 553,367 430,464
Operating expenses
(excludes depreciation
shown separately
below) (1):
Cost of services:
Satellite and
transmission 7,451 7,337 15,275 15,323
Programming and
content 55,247 54,311 116,939 114,309
Revenue share and
royalties 49,723 29,841 92,043 56,975
Customer service
and billing 22,865 21,618 49,786 43,471
Cost of equipment 6,647 7,386 14,234 13,843
Sales and marketing 49,133 46,864 87,598 87,861
Subscriber acquisition
costs 81,392 105,665 171,216 205,782
General and
administrative 42,467 38,471 91,246 73,814
Engineering, design
and development 9,028 11,250 17,684 23,661
Depreciation 27,113 26,284 54,019 53,070
Total operating expenses 351,066 349,027 710,040 688,109
Loss from operations (68,049) (122,600) (156,673) (257,645)
Other income (expense):
Interest and
investment income 1,425 4,753 4,227 10,795
Interest expense, net
of amounts
capitalized (16,745) (15,750) (34,421) (30,942)
Other income 13 5 (64) 10
Total other income
(expense) (15,307) (10,992) (30,258) (20,137)
Loss before income
taxes (83,356) (133,592) (186,931) (277,782)
Income tax expense (543) (555) (1,086) (1,110)
Net loss $(83,899) $(134,147) $(188,017) $(278,892)
Net loss per share
(basic and diluted) $(0.06) $ (0.09) $(0.13) $(0.19)
Weighted average common
shares outstanding
(basic and diluted) 1,499,723 1,462,362 1,487,610 1,459,701
(1) Amounts related to stock-based compensation included in other
operating expenses were as follows:
Satellite and transmission $759 $621 $1,555 $1,277
Programming and content 1,160 1,215 3,949 4,150
Customer service and
billing 265 178 541 377
Sales and marketing 2,464 2,849 7,704 8,493
Subscriber acquisition
costs - 7 14 1,887
General and administrative 11,457 11,163 23,455 23,103
Engineering, design and
development 1,046 984 2,195 1,990
Total equity granted to
third parties and
employees $17,151 $17,017 $39,413 $41,277
SIRIUS XM RADIO INC. AND SUBSIDIARIES
BALANCE SHEET DATA
(In Thousands)
As of
June 30, December 31,
2008 2007
(Unaudited)
Cash, cash equivalents and
marketable securities $220,598 $439,289
Restricted investments 56,000 53,000
Working capital (822,338) (394,989)
Total assets 1,456,485 1,694,149
Total debt 1,279,867 1,314,418
Total liabilities 2,363,604 2,486,886
Accumulated deficit (4,586,989) (4,398,972)
Stockholders' deficit (907,119) (792,737)
SIRIUS XM RADIO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Cash flows from operating
activities:
Net loss $(83,899) $(134,147) $(188,017) $(278,892)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation 27,113 26,284 54,019 53,070
Non-cash interest expense 967 805 1,971 1,559
Provision for doubtful
accounts 2,488 2,266 5,048 4,354
(Gain) loss on disposal of
assets - 110 - 106
Stock-based compensation 17,151 17,017 39,413 41,277
Deferred income taxes 543 555 1,086 1,110
Changes in operating assets
and liabilities:
Accounts receivable (6,931) (12,029) 11,834 (5,390)
Inventory 1,728 (6,962) 5,921 (7,435)
Receivables from
distributors (1,114) (5,943) (11,102) (13,512)
Prepaid expenses and other
current assets 338 18,752 14,594 9,579
Other long-term assets 2,143 (11,855) 5,399 (14,779)
Accounts payable and
accrued expenses 19,278 (3,300) (97,463) (51,111)
Accrued interest 11,938 12,466 53 703
Deferred revenue 12,163 38,538 26,875 60,269
Other long-term
liabilities 4,305 1,543 (712) 9,245
Net cash provided by
(used in) operating
activities 8,211 (55,900) (131,081) (189,847)
Cash flows from investing
activities:
Additions to property and
equipment (34,473) (24,131) (73,698) (36,589)
Sales of property and
equipment - 1 - 97
Purchases of restricted and
other investments - - (3,000) (310)
Sale of investments - - 5,000 -
Merger related costs (4,825) - (14,843) -
Sales of available-for-sale
securities (4) (4) 4 10,846
Net cash (used in)
investing activities (39,302) (24,134) (86,537) (25,956)
Cash flows from financing
activities:
Long term borrowings (625) 250,000 (1,250) 250,000
Debt issuance costs - (4,801) - (4,801)
Proceeds from exercise of
stock options (659) 422 181 1,932
Net cash (used in)
provided by financing
activities (1,284) 245,621 (1,069) 247,131
Net (decrease) increase in
cash and cash equivalents (32,375) 165,587 (218,687) 31,328
Cash and cash equivalents at
the beginning of period 252,508 259,162 438,820 393,421
Cash and cash equivalents at
the end of period $220,133 $424,749 $220,133 $424,749
FOOTNOTES TO PRESS RELEASE AND TABLES FOR NON-GAAP FINANCIAL MEASURES
This press release, including the selected financial information above,
includes the following non-GAAP financial measures: average monthly churn;
SAC per gross subscriber addition; customer service and billing expenses
per average subscriber; free cash flow; average monthly revenue per
subscriber, or ARPU; adjusted loss from operations; adjusted net loss; and
adjusted net loss per share. The definitions and usefulness of such
non-GAAP financial measures are as follows (dollars in thousands, unless
otherwise stated):
(1) SIRIUS defines average monthly churn as the average amount of
deactivations for the quarter divided by the average subscriber balance for
the quarter.
(2) SIRIUS defines SAC per gross subscriber addition as subscriber
acquisition costs and margins from the direct sale of SIRIUS radios and
accessories, excluding stock-based compensation, divided by the number of
gross subscriber additions for the period. SAC per gross subscriber
addition is calculated as follows:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Subscriber acquisition
costs $81,392 $105,665 $171,216 $205,782
Less: stock-based
compensation - (7) (14) (1,887)
Add: margin from
direct sales of SIRIUS
radios and accessories (1,309) 1,131 215 2,917
SAC $80,083 $106,789 $171,417 $206,812
Gross subscriber
additions 1,029,287 1,002,145 2,032,709 1,990,603
SAC per gross
subscriber $78 $107 $84 $104
(3) SIRIUS defines customer service and billing expenses per average
subscriber as total customer service and billing expenses, excluding
stock-based compensation, divided by the daily weighted average number of
subscribers for the period. Customer service and billing expenses per
average subscriber is calculated as follows:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Customer service and
billing expenses $22,865 $21,618 $49,786 $43,471
Less: stock-based
compensation (265) (178) (541) (377)
Customer service and
billing expenses,
as adjusted $22,600 $21,440 $49,245 $43,094
Daily weighted average
number of subscribers 8,739,766 6,811,750 8,593,054 6,554,943
Customer service and
billing expenses,
as adjusted, per
average subscriber $0.86 $1.05 $0.96 $1.10
(4) SIRIUS defines free cash flow as cash flow from operating
activities, capital expenditures and restricted and other investment
activity. Free cash flow is calculated as follows:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Net cash provided by (used
in) operating activities $8,211 $(55,900) $(131,081) $(189,847)
Additions to property and
equipment (34,473) (24,131) (73,698) (36,589)
Merger related costs (4,825) - (14,843) -
Sales of investments - - 5,000 -
Restricted and other
investment activity - - (3,000) (310)
Free cash flow $(31,087) $(80,031) $(217,622) $(226,746)
(5) SIRIUS defines ARPU as the total earned subscriber revenue and net
advertising revenue divided by the daily weighted average number of
subscribers for the period. ARPU is calculated as follows:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Subscriber revenue $266,518 $209,635 $522,158 $400,431
Net advertising revenue 8,332 9,177 16,740 15,898
Total subscriber and net
advertising revenue $274,850 $218,812 $538,898 $416,329
Daily weighted average
number of subscribers 8,739,766 6,811,750 8,593,054 6,554,943
ARPU $10.49 $10.71 $10.45 $10.59
(6) SIRIUS believes average monthly churn; SAC per gross subscriber
addition; customer service and billing expenses per average subscriber;
free cash flow; and ARPU provide meaningful information regarding operating
performance and liquidity and are used for internal management purposes;
when publicly providing the business outlook; as a means to evaluate
period-to- period comparisons; and to compare the company's performance to
that of its competitors. SIRIUS also believes that investors use current
and projected metrics to monitor performance of the business and make
investment decisions.
SIRIUS believes the exclusion of stock-based compensation expense in
the calculations of SAC per gross subscriber addition and 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 SIRIUS common stock, the effect of which is unrelated to the operational
conditions that give rise to variations in the components of subscriber
acquisition costs and customer service and billing expenses. Specifically,
the exclusion of stock-based compensation expense in the calculation of SAC
per gross subscriber addition is critical in being able to understand the
economic impact of the direct costs incurred to acquire a subscriber and
the effect over time as economies of scale are reached.
These non-GAAP financial measures are used in addition to and in
conjunction with results presented in accordance with GAAP. These non- GAAP
financial measures 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 for, or superior to measures of
financial performance prepared in accordance with GAAP.
(7) SIRIUS refers to net loss before taxes; other income (expense) --
including interest and investment income, interest expense, depreciation;
and stock-based compensation expense as adjusted loss from operations.
Adjusted loss from operations is not a measure of financial performance
under GAAP. The company believes adjusted loss from operations is a useful
measure of its operating performance. The company uses adjusted loss from
operations for budgetary and planning purposes; to assess the relative
profitability and on- going performance of consolidated operations; to
compare performance from period to period; and to compare performance to
that of its competitors. The company also believes adjusted loss from
operations is useful to investors to compare operating performance to the
performance of other communications, entertainment and media companies. The
company believes that investors use current and projected adjusted loss
from operations to estimate the current or prospective enterprise value and
make investment decisions.
Because the company funds and builds-out its satellite radio system
through the periodic raising and expenditure of large amounts of capital,
results of operations reflect significant charges for interest and
depreciation expense. The company believes adjusted loss from operations
provides useful information about the operating performance of the business
apart from the costs associated with the capital structure and physical
plant. The exclusion of interest expense and depreciation is useful given
fluctuations in interest rates and significant variation in depreciation
expense that can result from the amount and timing of capital expenditures
and potential variations in estimated useful lives, all of which can vary
widely across different industries or among companies within the same
industry. The company believes the exclusion of taxes is appropriate for
comparability purposes as the tax positions of companies can vary because
of their differing abilities to take advantage of tax benefits and because
of the tax policies of the various jurisdictions in which they operate. The
company also believes the exclusion of stock-based compensation expense is
useful given the significant variation in expense that can result from
changes in the fair market value of the company's common stock. To
compensate for the exclusion of taxes, other income (expense),
depreciation, and stock- based compensation expense, the company separately
measures and budgets for these items.
There are material limitations associated with the use of adjusted loss
from operations in evaluating the company compared with net loss, which
reflects overall financial performance, including the effects of taxes,
other income (expense), depreciation, and stock-based compensation expense.
The company uses adjusted loss from operations to supplement GAAP results
to provide a more complete understanding of the factors and trends
affecting the business than GAAP results alone. Investors that wish to
compare and evaluate the operating results after giving effect for these
costs, should refer to net loss as disclosed in the unaudited consolidated
statements of operations. Since adjusted loss from operations is a non-GAAP
financial measure, the calculation of adjusted loss from operations 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 in accordance with GAAP.
(8) SIRIUS refers to adjusted net loss as net loss per share excluding
stock-based compensation expense. Adjusted net loss is not a measure of
financial performance under GAAP. The company believes adjusted net loss is
useful to investors to compare its operating performance to the performance
of other communications, entertainment and media companies. The company
also believes the exclusion of stock-based compensation expense is useful
given the significant variation in expense that can result from changes in
the fair market value of the company's common stock.
There are material limitations associated with the use of adjusted net
loss in evaluating the company compared with net loss, which reflects
overall financial performance, including the effects of stock-based
compensation expense. The company uses adjusted net loss to supplement GAAP
results to provide a more complete understanding of the factors and trends
affecting the business than GAAP results alone. Investors that wish to
compare and evaluate the operating results after giving effect for these
costs, should refer to net loss as disclosed in the unaudited consolidated
financial statements of operations. Since adjusted net loss is a non-GAAP
financial measure, the calculation of adjusted net loss 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.
About SIRIUS XM Radio
SIRIUS XM Radio is America's satellite radio company delivering the
"The Best Radio on Radio" to more than 18 million subscribers, including
100% commercial free music, and premier sports, news, talk, entertainment,
traffic and weather.
SIRIUS XM Radio has exclusive content relationships with an array of
personalities and artists, including Howard Stern, Oprah, Martha Stewart,
Jimmy Buffett, Elvis, Jamie Foxx, Barbara Walters, Frank Sinatra, Opie &
Anthony, The Grateful Dead, Willie Nelson, Bob Dylan, Dale Earnhardt Jr.,
Tom Petty, and Bob Edwards. SIRIUS XM Radio is the leader in sports
programming as the Official Satellite Radio Partner of the NFL, Major
League Baseball, NASCAR, NHL, and PGA Tour, and broadcasts major college
sports.
SIRIUS XM Radio has exclusive arrangements with every major automaker.
SIRIUS XM Radio products are available at shop.sirius.com and
shop.xmradio.com, and at retail locations nationwide, including Best Buy,
Circuit City, RadioShack, Target, Sam's Club, and Wal-Mart.
SIRIUS XM Radio also offers SIRIUS Backseat TV, the first ever live
in-vehicle rear seat entertainment featuring Nickelodeon, Disney Channel
and Cartoon Network; XM NavTraffic service for GPS navigation systems
delivers real-time traffic information, including accidents and road
construction, for more than 80 North American markets.
The guidance contained herein are based upon a number of assumptions
and estimates that, while considered reasonable by us when taken as a
whole, are inherently subject to significant business, economic and
competitive uncertainties and contingencies, many of which are beyond our
control. In addition, the guidance is based upon specific assumptions with
respect to future business conditions, some or all of which will change.
The guidance, like any forecast, is necessarily speculative in nature and
it can be expected that the assumptions upon which the guidance is based
will not prove to be valid or will vary from actual results. Actual results
will vary from the guidance and the variations may be material.
Consequently, the guidance should not be regarded as a representation by
SIRIUS or any other person that the synergies, adjusted EBITDA and free
cash flow will actually be achieved. You are cautioned not to place undue
reliance on this information.
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 the benefits
of the business combination transaction involving Sirius Satellite Radio
Inc. and XM Satellite Radio Holdings Inc., including potential synergies
and cost savings and the timing thereof, future financial and operating
results, the combined company's plans, objectives, expectations and
intentions with respect to future operations, products and services; and
other statements identified by words such as "anticipate," "believe,"
"plan," "estimate," "expect," "intend," "will," "should," "may," or words
of similar meaning. Such forward- looking statements are based upon the
current beliefs and expectations of SIRIUS' and XM's management and are
inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are difficult to predict and
generally beyond the control of SIRIUS and XM. 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: general business and economic
conditions; the performance of financial markets and interest rates; the
ability to obtain governmental approvals of the transaction on a timely
basis; the failure to realize synergies and cost-savings from the
transaction or delay in realization thereof; the businesses of SIRIUS and
XM may not be combined successfully, or such combination may take longer,
be more difficult, time-consuming or costly to accomplish than expected;
and operating costs and business disruption following the merger, including
adverse effects on employee retention and on our business relationships
with third parties, including manufacturers of radios, retailers,
automakers and programming providers. Additional factors that could cause
SIRIUS' and XM's results to differ materially from those described in the
forward-looking statements can be found in SIRIUS' and XM's Annual Reports
on Form 10-K for the year ended December 31, 2007, which are 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 SIRIUS and XM 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:
Paul Blalock
SIRIUS XM Radio
212 584 5174
[email protected]
Hooper Stevens
SIRIUS XM Radio
212 901 6718
[email protected]
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