Exhibit 99.1

 

 

 

SiriusXM Reports Third Quarter 2013 Results

 

·

Record Revenue of $962 Million, Up 11% From Third Quarter of 2012

·

Net Income of $63 Million

·

Adjusted EBITDA Grows 21% to a Record $296 Million

·

Free Cash Flow Increases 26% to $245 Million

·

Share Repurchase Program Reaches $1.6 Billion Year to Date

·

Company Issues 2014 Financial Guidance

 

NEW YORK – October 24, 2013 – Sirius XM Radio (NASDAQ: SIRI) today announced third quarter 2013 financial and operating results, including record revenue of $962 million, up 11% from the third quarter 2012 revenue of $867 million. Net income for the third quarter of 2013 and 2012 was $63 million and $75 million, respectively, including losses on extinguishment of debt of $108 million and $107 million, respectively. Earnings per fully-diluted share were $0.01 each in the third quarter of 2013 and 2012.

 

Income before income taxes was $124 million in the third quarter 2013, an increase of 128% from $54 million in the third quarter of 2012. Adjusted EBITDA for the third quarter of 2013 reached a record $296 million, up 21% from $245 million in the third quarter of 2012.

 

“SiriusXM had a great quarter, with the 513,000 net subscriber additions and the 373,000 self-pay net additions setting post-merger records for the third quarter. We also saw double-digit growth in revenue for the seventh consecutive quarter, a new quarterly record for adjusted EBITDA and adjusted EBITDA margin, and significant growth in free cash flow. With continued growth in new automobile sales and an increasing number of existing self-pay subscribers selling their cars and rotating back into our trial funnel, we are increasing our guidance for net subscriber additions and reducing our guidance for self pay subscriber additions by equal amounts. We are also pleased to increase revenue guidance for 2013 and introduce new guidance for continued growth in 2014 in both revenue and adjusted EBITDA,” noted Jim Meyer, Chief Executive Officer, SiriusXM.

 

“We are proud of all we accomplished in the third quarter: strong operating results, significant improvements in our balance sheet, renewals of important long-term programming contracts, and the announced acquisition of the connected vehicle unit of Agero,” added Meyer.

 

Additional highlights of the third quarter include:

 

·

Subscribers Reach Approximately 25.6 Million. Net subscriber additions in the quarter were 513,000, up from 446,000 in the third quarter of 2012. The total paid subscriber base reached a record 25.6 million, up 9% from the prior-year period. Self-pay net subscriber additions were 373,000, while the self-pay subscriber base reached a

record high of 20.7 million, up 9% from the prior year period. Total paid and unpaid trials grew by 247,000 from the second quarter of 2013 to 6.9 million.

·

Adjusted EBITDA and Adjusted EBITDA Margin Achieve New Record Highs. Adjusted EBITDA climbed 21% from last year’s third quarter to a record quarterly figure of $296 million, and those results were accompanied by a record adjusted EBITDA margin of nearly 31%.

·

Free Cash Flow Climbs 26% in the Third Quarter. Free cash flow in the third quarter of 2013 was $245 million, up 26% from $195 million in the third quarter of 2012. Free cash flow per fully-diluted share was 3.9 cents in the third quarter, up 31% from the third quarter of 2012. For the first nine months of the year, free cash flow climbed 42% to $624 million, and free cash flow per fully-diluted share was 9.7 cents, an increase of 51% over the same period in 2012.

 

“We have taken significant steps over the past year to improve our balance sheet, lowering our average cost of debt from 9.2% last summer to just 5.5% following the redemption of the 7.625% Senior Notes due 2018. The new debt we have issued gives our Company greater flexibility to pursue capital returns and other strategic opportunities,” said David Frear, SiriusXM’s Executive Vice President and Chief Financial Officer.

 

“During the third quarter, we repurchased approximately 124 million shares of our common stock for $459 million, bringing our year-to-date purchases to approximately 477 million shares for approximately $1.6 billion. We have approximately $2.4 billion remaining under our recently increased share repurchase authorization, and we anticipate using $500 million of this authorization to repurchase shares directly from Liberty Media in three installments beginning next month. At the end of the third quarter, and pro forma for the announced redemption of the 7.625% Senior Notes due 2018, our outstanding debt was a very conservative 3.0x trailing adjusted EBITDA,” added Frear.

 

2013 AND 2014 GUIDANCE

 

The Company today increased its expectation for 2013 total net subscriber growth and revenue, reduced its estimate for 2013 self-pay net subscriber growth, and reiterated its existing guidance for adjusted EBITDA and free cash flow.

 

·

Total net subscriber additions of approximately 1.6 million, up from previous guidance of 1.5 million,

·

Self-pay net subscriber additions of approximately 1.5 million, down from previous guidance of approximately 1.6 million,

·

Revenue of approximately $3.77 billion, up from previous guidance of over $3.7 billion,

·

Adjusted EBITDA of approximately $1.14 billion, and

·

Free cash flow of approximately $915 million.

 

The Company also provided initial guidance for 2014 revenue and adjusted EBITDA:

 

·

Revenue of over $4.0 billion, and

·

Adjusted EBITDA of approximately $1.38 billion.

THIRD QUARTER 2013 RESULTS

 

SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
(in thousands, except per share data)		2013				2012				2013				2012
Revenue:
Subscriber revenue		$	834,053			$	757,672			$	2,432,113			$	2,188,199
Advertising revenue			21,918				20,426				63,886				59,881
Equipment revenue			17,989				17,813				54,588				51,183
Other revenue			87,549				71,449				248,430				210,362
Total revenue			961,509				867,360				2,799,017				2,509,625
Operating expenses:
Cost of services:
Revenue share and royalties			162,627				141,834				467,017				409,371
Programming and content			72,322				69,938				217,313				205,203
Customer service and billing			76,322				77,768				237,006				212,635
Satellite and transmission			19,853				18,319				59,041				53,980
Cost of equipment			5,340				6,345				17,809				19,301
Subscriber acquisition costs			125,457				112,418				371,560				348,014
Sales and marketing			75,638				60,676				209,594				176,457
Engineering, design and development			13,007				13,507				42,901				32,468
General and administrative			67,881				68,235				184,613				193,786
Depreciation and amortization			58,533				66,571				192,966				199,481
Total operating expenses			676,980				635,611				1,999,820				1,850,696
Income from operations			284,529				231,749				799,197				658,929
Other income (expense):
Interest expense, net of amounts capitalized			(54,629	)			(70,035	)			(150,531	)			(219,777	)
Loss on extinguishment of debt and credit facilities, net			(107,971	)			(107,105	)			(124,348	)			(132,726	)
Interest and investment income (loss)			1,716				(321	)			3,648				(3,192	)
Other income (loss)			407				113				909				(637	)
Total other expense			(160,477	)			(177,348	)			(270,322	)			(356,332	)
Income before income taxes			124,052				54,401				528,875				302,597
Income tax (expense) benefit			(61,158	)			20,113				(216,857	)			3,013,860
Net income		$	62,894			$	74,514			$	312,018			$	3,316,457
Foreign currency translation adjustment, net of tax			(11	)			—				(292	)			(38	)
Total comprehensive income		$	62,883			$	74,514			$	311,726			$	3,316,419
Net income per common share:
Basic		$	0.01			$	0.01			$	0.05			$	0.52
Diluted		$	0.01			$	0.01			$	0.05			$	0.49
Weighted average common shares outstanding:
Basic			6,184,216				4,034,122				6,265,981				3,870,031
Diluted			6,287,353				6,577,654				6,446,082				6,848,230

SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

		September 30, 2013				December 31, 2012
(in thousands, except share and per share data)		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	716,784			$	520,945
Accounts receivable, net			102,778				106,142
Receivables from distributors			80,819				104,425
Inventory, net			14,242				25,337
Prepaid expenses			130,794				122,157
Related party current assets			11,141				13,167
Deferred tax asset			887,182				923,972
Other current assets			7,525				12,037
Total current assets			1,951,265				1,828,182
Property and equipment, net			1,542,887				1,571,922
Long-term restricted investments			5,718				3,999
Deferred financing fees, net			29,377				38,677
Intangible assets, net			2,482,367				2,519,610
Goodwill			1,815,365				1,815,365
Related party long-term assets			29,385				44,954
Long-term deferred tax asset			1,036,708				1,219,256
Other long-term assets			13,240				12,878
Total assets		$	8,906,312			$	9,054,843
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses		$	528,173			$	587,652
Accrued interest			53,918				33,954
Current portion of deferred revenue			1,522,513				1,474,138
Current portion of deferred credit on executory contracts			3,904				207,854
Current maturities of long-term debt			489,492				4,234
Current maturities of long-term related party debt			49,383				—
Related party current liabilities			6,121				6,756
Total current liabilities			2,653,504				2,314,588
Deferred revenue			145,656				159,501
Deferred credit on executory contracts			2,339				5,175
Long-term debt			3,161,372				2,222,080
Long-term related party debt			10,948				208,906
Related party long-term liabilities			16,884				18,966
Other long-term liabilities			80,941				86,062
Total liabilities			6,071,644				5,015,278
Stockholders’ equity:
Preferred stock, par value $0.001; 50,000,000 authorized at September 30, 2013 and December 31, 2012:
Convertible perpetual preferred stock, series B-1 (liquidation preference of $0.001 per share); 0 and 6,250,100 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively			—				6
Common stock, par value $0.001; 9,000,000,000 shares authorized; 6,134,596,655 and 5,262,440,085 shares issued and outstanding, at September 30, 2013 and December 31, 2012, respectively			6,135				5,263
Accumulated other comprehensive (loss) income, net of tax			(172	)			120
Additional paid-in capital			8,828,077				10,345,566
Accumulated deficit			(5,999,372	)			(6,311,390	)
Total stockholders’ equity			2,834,668				4,039,565
Total liabilities and stockholders’ equity		$	8,906,312			$	9,054,843

SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

		For the Nine Months Ended September 30,
(in thousands)		2013				2012
Cash flows from operating activities:
Net income		$	312,018			$	3,316,457
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			192,966				199,481
Non-cash interest expense, net of amortization of premium			16,506				30,786
Provision for doubtful accounts			28,571				24,953
Amortization of deferred income related to equity method investment			(2,082	)			(2,082	)
Loss on extinguishment of debt and credit facilities, net			124,348				132,726
(Gain) loss on unconsolidated entity investments, net			(2,831	)			4,014
Dividend received from unconsolidated entity investment			17,707				—
Loss on disposal of assets			128				567
Share-based payment expense			49,774				46,361
Deferred income taxes			219,184				(3,017,021	)
Other non-cash purchase price adjustments			(206,786	)			(220,336	)
Changes in operating assets and liabilities:
Accounts receivable			(25,207	)			(26,211	)
Receivables from distributors			23,606				(2,956	)
Inventory			11,095				888
Related party assets			2,077				6,905
Prepaid expenses and other current assets			(6,665	)			(26,367	)
Other long-term assets			(363	)			24,454
Accounts payable and accrued expenses			(58,680	)			(27,384	)
Accrued interest			19,964				(5,940	)
Deferred revenue			34,530				52,777
Related party liabilities			(635	)			(1,314	)
Other long-term liabilities			(4,968	)			2,774
Net cash provided by operating activities			744,257				513,532
Cash flows from investing activities:
Additions to property and equipment			(118,235	)			(73,546	)
Purchases of restricted and other investments			(1,719	)			—
Net cash used in investing activities			(119,954	)			(73,546	)
Cash flows from financing activities:
Proceeds from exercise of stock options			21,819				89,250
Taxes paid in lieu of shares issued for stock-based compensation			(27,913	)			—
Proceeds from long-term borrowings and revolving credit facility, net of costs			2,532,137				393,687
Payment of premiums on redemption of debt			(116,410	)			(100,615	)
Repayment of long-term borrowings and revolving credit facility			(1,085,737	)			(914,028	)
Repayment of related party long-term borrowings			(150,000	)			(126,000	)
Common stock repurchased and retired			(1,602,360	)			—
Net cash used in financing activities			(428,464	)			(657,706	)
Net increase (decrease) in cash and cash equivalents			195,839				(217,720	)
Cash and cash equivalents at beginning of period			520,945				773,990
Cash and cash equivalents at end of period		$	716,784			$	556,270

 

Subscriber Data and Operating Metrics

 

The following table contains subscriber data and key operating metrics for the three and nine months ended September 30, 2013 and 2012, respectively:  

		Unaudited
		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2013				2012				2013				2012
Beginning subscribers			25,068,988				22,919,462				23,900,336				21,892,824
Gross subscriber additions			2,561,175				2,421,586				7,726,577				7,064,282
Deactivated subscribers			(2,048,097	)			(1,975,665	)			(6,044,847	)			(5,591,723	)
Net additions			513,078				445,921				1,681,730				1,472,559
Ending subscribers			25,582,066				23,365,383				25,582,066				23,365,383
Self-pay			20,670,333				19,041,519				20,670,333				19,041,519
Paid promotional			4,911,733				4,323,864				4,911,733				4,323,864
Ending subscribers			25,582,066				23,365,383				25,582,066				23,365,383
Self-pay			372,597				370,553				1,100,059				1,132,777
Paid promotional			140,481				75,368				581,671				339,782
Net additions			513,078				445,921				1,681,730				1,472,559
Daily weighted average number of subscribers			25,267,241				23,008,693				24,646,938				22,519,544
Average self-pay monthly churn			1.8	%			2.0	%			1.8	%			1.9	%
New vehicle consumer conversion rate			44	%			44	%			44	%			45	%
ARPU		$	12.29			$	12.14			$	12.21			$	11.96
SAC, per gross subscriber addition		$	52			$	51			$	52			$	55

 

Glossary

 

Adjusted EBITDA - EBITDA is defined as net income before interest and investment income (loss); interest expense, net of amounts capitalized; income tax expense and depreciation and amortization. We adjust EBITDA to remove the impact of other income and expense, loss on extinguishment of debt as well as certain other charges discussed below. This measure is one of the primary Non-GAAP financial measures on which we (i) evaluate the performance of our businesses, (ii) base our internal budgets and (iii) compensate management. Adjusted EBITDA is a Non-GAAP financial performance measure that excludes (if applicable): (i) certain adjustments as a result of the purchase price accounting for the merger 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 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 September 30,								For the Nine Months Ended September 30,
		2013				2012				2013				2012
Net income (GAAP):		$	62,894			$	74,514			$	312,018			$	3,316,457
Add back items excluded from Adjusted EBITDA:
Purchase price accounting adjustments:
Revenues			1,813				1,854				5,438				5,599
Operating expenses			(68,895	)			(73,049	)			(206,786	)			(220,497	)
Share-based payment expense (GAAP)			19,762				17,492				49,774				46,361
Depreciation and amortization (GAAP)			58,533				66,571				192,966				199,481
Interest expense, net of amounts capitalized (GAAP)			54,629				70,035				150,531				219,777
Loss on extinguishment of debt and credit facilities, net (GAAP)			107,971				107,105				124,348				132,726
Interest and investment (income) loss (GAAP)			(1,716	)			321				(3,648	)			3,192
Other (income) loss (GAAP)			(407	)			(113	)			(909	)			637
Income tax expense (benefit) (GAAP)			61,158				(20,113	)			216,857				(3,013,860	)
Adjusted EBITDA		$	295,742			$	244,617			$	840,589			$	689,873

 

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 nine months ended September 30, 2013 and 2012:

		Unaudited For the Three Months Ended September 30, 2013
(in thousands)		As Reported				Purchase Price Accounting Adjustments				Allocation of Share-based Payment Expense				Adjusted
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 Three Months Ended September 30, 2012
(in thousands)		As Reported				Purchase Price Accounting Adjustments				Allocation of Share-based Payment Expense				Adjusted
Revenue:
Subscriber revenue		$	757,672			$	41			$	—			$	757,713
Advertising revenue			20,426				—				—				20,426
Equipment revenue			17,813				—				—				17,813
Other revenue			71,449				1,813				—				73,262
Total revenue		$	867,360			$	1,854			$	—			$	869,214
Operating expenses
Cost of services:
Revenue share and royalties		$	141,834			$	37,199			$	—			$	179,033
Programming and content			69,938				10,431				(1,736	)			78,633
Customer service and billing			77,768				—				(512	)			77,256
Satellite and transmission			18,319				—				(938	)			17,381
Cost of equipment			6,345				—				—				6,345
Subscriber acquisition costs			112,418				21,712				—				134,130
Sales and marketing			60,676				3,707				(2,931	)			61,452
Engineering, design and development			13,507				—				(1,753	)			11,754
General and administrative			68,235				—				(9,622	)			58,613
Depreciation and amortization (a)			66,571				—				—				66,571
Share-based payment expense			—				—				17,492				17,492
Total operating expenses		$	635,611			$	73,049			$	—			$	708,660

 

(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, 2012 was $13,000.

		Unaudited For the Nine Months Ended September 30, 2013
(in thousands)		As Reported				Purchase Price Accounting Adjustments				Allocation of Share-based Payment Expense				Adjusted
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.

 

		Unaudited For the Nine Months Ended September 30, 2012
(in thousands)		As Reported				Purchase Price Accounting Adjustments				Allocation of Share-based Payment Expense				Adjusted
Revenue:
Subscriber revenue		$	2,188,199			$	161			$	—			$	2,188,360
Advertising revenue			59,881				—				—				59,881
Equipment revenue			51,183				—				—				51,183
Other revenue			210,362				5,438				—				215,800
Total revenue		$	2,509,625			$	5,599			$	—			$	2,515,224
Operating expenses
Cost of services:
Revenue share and royalties		$	409,371			$	108,069			$	—			$	517,440
Programming and content			205,203				32,565				(4,342	)			233,426
Customer service and billing			212,635				—				(1,327	)			211,308
Satellite and transmission			53,980				—				(2,411	)			51,569
Cost of equipment			19,301				—				—				19,301
Subscriber acquisition costs			348,014				69,328				—				417,342
Sales and marketing			176,457				10,535				(7,343	)			179,649
Engineering, design and development			32,468				—				(4,467	)			28,001
General and administrative			193,786				—				(26,471	)			167,315
Depreciation and amortization (a)			199,481				—				—				199,481
Share-based payment expense			—				—				46,361				46,361
Total operating expenses		$	1,850,696			$	220,497			$	—			$	2,071,193

 

(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, 2012 was $41,000.

 

ARPU - is derived from total earned subscriber revenue, 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 of Sirius and XM. ARPU is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

 

		Unaudited
		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2013				2012				2013				2012
Subscriber revenue (GAAP)		$	834,053			$	757,672			$	2,432,113			$	2,188,199
Add: advertising revenue (GAAP)			21,918				20,426				63,886				59,881
Add: other subscription-related revenue (GAAP)			75,999				60,095				211,784				176,569
Add: purchase price accounting adjustments			—				41				—				161
		$	931,970			$	838,234			$	2,707,783			$	2,424,810
Daily weighted average number of subscribers			25,267,241				23,008,693				24,646,938				22,519,544
ARPU		$	12.29			$	12.14			$	12.21			$	11.96

 

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, 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 September 30,								For the Nine Months Ended September 30,
		2013				2012				2013				2012
Customer service and billing expenses (GAAP)		$	76,322			$	77,768			$	237,006			$	212,635
Less: share-based payment expense			(647	)			(512	)			(1,628	)			(1,327	)
		$	75,675			$	77,256			$	235,378			$	211,308
Daily weighted average number of subscribers			25,267,241				23,008,693				24,646,938				22,519,544
Customer service and billing expenses, per average subscriber		$	1.00			$	1.12			$	1.06			$	1.04

 

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

		Unaudited
		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2013				2012				2013				2012
Cash Flow information
Net cash provided by operating activities		$	302,236			$	219,809			$	744,257			$	513,532
Net cash used in investing activities		$	(56,974	)		$	(24,602	)		$	(119,954	)		$	(73,546	)
Net cash used in financing activities		$	(180,247	)		$	(507,267	)		$	(428,464	)		$	(657,706	)
Free Cash Flow
Net cash provided by operating activities		$	302,236			$	219,809			$	744,257			$	513,532
Additions to property and equipment			(55,255	)			(24,602	)			(118,235	)			(73,546	)
Purchases of restricted and other investments			(1,719	)			—				(1,719	)			—
Free cash flow		$	245,262			$	195,207			$	624,303			$	439,986
Diluted weighted average common shares outstanding			6,287,353				6,577,654				6,446,082				6,848,230
Free cash flow per fully-diluted share		$	0.04			$	0.03			$	0.10			$	0.06

 

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 purchase price accounting adjustments, divided by the number of gross subscriber additions 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 gross subscriber addition, is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

 

		Unaudited
		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2013				2012				2013				2012
Subscriber acquisition costs (GAAP)		$	125,457			$	112,418			$	371,560			$	348,014
Less: margin from direct sales of radios and accessories (GAAP)			(12,649	)			(11,468	)			(36,779	)			(31,882	)
Add: purchase price accounting adjustments			20,342				21,712				64,365				69,328
		$	133,150			$	122,662			$	399,146			$	385,460
Gross subscriber additions			2,561,175				2,421,586				7,726,577				7,064,282
SAC, per gross subscriber addition		$	52			$	51			$	52			$	55

 

###

 

About Sirius XM Radio

 

Sirius XM Radio Inc. is the world’s largest radio broadcaster measured by revenue and has 25.6 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™, SiriusXM Travel Link, NavTraffic®, NavWeather™, SiriusXM Aviation, SiriusXM Marine™, Sirius Marine Weather, XMWX Aviation™, and XMWX Marine™. 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 forms of radio and audio services; 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; rapid technological and industry change; failure of third parties to perform; changes in consumer protection laws and their enforcement; 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, 2012, 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