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SIRIUS Reports Fourth Quarter and Full Year 2007 Results- 2007 Revenue Increases 45% to $922 Million- Highest Annual Gross Subscriber Additions in Satellite Radio History- Full-Year Self-Pay Monthly Churn of 1.6%- Achieves Positive Free Cash Flow for Fourth Quarter and Second Half 2007
NEW YORK, Feb. 26 /PRNewswire-FirstCall/ -- SIRIUS Satellite Radio NASDAQ: SIRI today announced full year and fourth quarter 2007 financial results driven by the highest annual gross subscriber additions in satellite radio history. The company also reported positive free cash flow for the fourth quarter and for the second half of 2007. (Logo: http://www.newscom.com/cgi-bin/prnh/19991118/NYTH125 ) "In 2007, SIRIUS achieved our financial goals and solidified our position as one of the fastest growing media companies in the world," said Mel Karmazin, CEO of SIRIUS. "Revenue grew 45% to $922.1 million driven by 4.2 million gross subscriber additions - an annual record for satellite radio. More importantly, SIRIUS demonstrated positive operating leverage in the business through solid cost control by limiting growth in total expenses, excluding non-cash items, to under 9% for the year. SIRIUS achieved positive free cash flow for the second half of the year and $75.9 million in positive free cash flow for the fourth quarter 2007." "The pending merger with XM will offer unprecedented choice for consumers and create tremendous value for stockholders. We have made a very strong case for the merger to the government, received broad support from leading organizations and prominent individuals, and we look forward to a fast positive ruling from the government." SIRIUS ended 2007 with 8,321,785 subscribers, up 38% from 6,024,555 subscribers at the end of 2006. Retail subscribers increased 15% in 2007 to 4,640,709 from 4,041,826 at the end of 2006. OEM subscribers increased 87% in 2007 to 3,665,632 from 1,959,009 at the end of 2006. During the fourth quarter 2007, SIRIUS added 654,309 net subscribers and, according to the NPD Group, SIRIUS achieved a 68% share of aftermarket satellite radio sales, its highest ever share. Total revenue for 2007 increased to $922.1 million, up 45% from 2006 total revenue of $637.2 million. Fourth quarter 2007 total revenue increased 29% to $249.8 million from fourth quarter 2006 revenue of $193.4 million. Average monthly revenue per subscriber (or "ARPU") was $10.46 in 2007 and $10.05 for the fourth quarter 2007. Average self-pay monthly churn was 1.6% in 2007 and all-in average monthly churn for 2007 was 2.2%. For the fourth quarter 2007 average self-pay monthly churn was 1.7% and all-in churn was 2.3%. SAC per gross subscriber addition was $101 for 2007 improving 11% over 2006's SAC per gross subscriber addition of $114. In the fourth quarter 2007, SAC per gross subscriber addition was $90. SIRIUS reported a net loss of ($565.3) million, or ($0.39) per share, for 2007, an improvement of 49% over the 2006 net loss of ($1.1) billion, or ($0.79) per share. For the fourth quarter 2007 the net loss was ($166.2) million, or ($0.11) per share, as compared with the fourth quarter 2006 net loss of ($245.6) million, or ($0.17) per share. The adjusted loss from operations for 2007 improved to ($327.4) million, as compared to the adjusted loss from operations of ($513.1) million in 2006. For the fourth quarter 2007, the adjusted loss from operations was ($107.2) million, an improvement of 36% as compared with the ($166.8) million adjusted loss from operations in the fourth quarter 2006. SIRIUS reported a full-year 2007 free cash flow loss of ($218.6), a 56% improvement over the 2006 free cash flow loss of ($500.7) million. The company posted positive free cash flow in the fourth quarter of 2007 of $75.9 million, up 150% from the $30.4 million in positive free cash flow reported in the fourth quarter of 2006. For the first time in the company's history, SIRIUS also posted positive free cash flow of $8.1 million for the second half of the year. 2008 OUTLOOK Following approval of the pending merger by the government, SIRIUS will provide guidance for 2008. 2007 HIGHLIGHTS SIRIUS extended its exclusive relationship with Ford until 2016. The agreement covers all Ford brands. In addition, the Ford and Mercury brands are targeting approximately 70% factory penetration of SIRIUS radios beginning with the 2009 model year vehicles. In February 2008, SIRIUS also extended its exclusive agreement with Chrysler LLC until 2017. This agreement covers all Chrysler LLC brands. Chrysler included SIRIUS radios as a factory- installed feature in more than 70% of its 2008 model year vehicles. The company also recently launched the critically acclaimed, SIRIUS Travel Link service, at the LA and Detroit auto shows. SIRIUS Travel Link is expected to be offered in 2008 on select Ford, Lincoln and Mercury brand vehicles. SIRIUS Travel Link offers real-time traffic data with speed/flow and incident information, national weather information, fuel prices, sports scores and movie listings. SIRIUS also launched SIRIUS Backseat TV in select 2008 model year Chrysler and Dodge vehicles. It is the first ever live in-vehicle rear seat entertainment featuring three channels of children's programming. In 2007, SIRIUS also introduced the Stiletto 2, the company's second satellite radio to provide live reception in portable mode. The Stiletto 2 allows users to capture, store and replay live SIRIUS content and MP3/WMA files. SPORTS, MUSIC, TALK AND ENTERTAINMENT LEADER 2007 was an unprecedented year for new and exclusive programming from SIRIUS including: the first full year of NASCAR coverage, the launch of the Grateful Dead channel, Siriusly Sinatra, E Street Radio with Bruce Springsteen, African-American political commentator Mark Thompson, Barbara Walters new exclusive radio show (her first call-in show ever), and The Foxxhole presented by Jamie Foxx. SIRIUS also announced the upcoming launch of "Doctor Radio" Powered by NYU Medical Center, an exclusive, pioneering, 24/7 radio channel featuring easily accessible information on health, wellness, and medical issues, brought to you by world-class doctors. SIRIUS reaffirmed its position as the leading provider of sports radio programming, broadcasting play-by-play action from more than 350 professional and college teams. SIRIUS is the only company to air every NFL game, every NASCAR race and every NBA game. For Super Bowl XLII, SIRIUS offered expanded coverage carrying twelve live broadcasts of the game in eight different languages. SIRIUS also airs European soccer, college sports, the Wimbledon Championships, every game of the NCAA(R) Division I Men's Basketball Championship, Arena Football League, World Cup skiing, National Lacrosse League and horse racing. In 2007, SIRIUS became the Official Satellite Radio Partner of NASCAR and introduced unprecedented coverage of the sport that includes live broadcasts of every NASCAR race, additional Driver2Crew Chatter(TM) channels that carry in-car audio of NASCAR's top drivers, and SIRIUS NASCAR Radio, channel 128, the only 24-hour radio channel dedicated entirely to NASCAR. SIRIUS launched a new all-sports channel, SIRIUS Sports Central, channel 123, which features exclusive talk programs as well as Sporting News Radio programming. SIRIUS also collaborated with ESPN on a new, enhanced ESPN- dedicated channel showcasing an exclusive ESPN The Magazine talk show, and for the first time on national radio, exclusive simulcasts of some of ESPN's television shows, including SportsCenter. 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. FOURTH QUARTER 2007 VERSUS FOURTH QUARTER 2006 For the fourth quarter of 2007, SIRIUS recognized total revenue of $249.8 million compared to $193.4 million for the fourth quarter of 2006. This 29.2%, or $56.4 million, increase in revenue was driven by a $60.4 million increase in subscriber revenue resulting from the net increase in subscribers of 2,297,230 from the fourth quarter of 2006. The company's adjusted loss from operations decreased $59.6 million to ($107.2) million for the fourth quarter of 2007 from ($166.8) million for the fourth quarter of 2006 (refer to the reconciliation table of net loss to adjusted loss from operations). This decrease was driven by the increase in total revenue of $56.4 million and a $3.2 million decrease in expenses. Satellite and transmission expenses decreased $2.4 million to $4.8 million for the fourth quarter of 2007 compared to $7.2 million for the fourth quarter of 2006 as a result of sales of certain satellite parts and lower maintenance and utility expenses in the fourth of quarter 2007. Programming and content expenses increased $4.2 million to $60.0 million for the fourth quarter of 2007 from $55.8 million for the fourth quarter of 2006. The increase was primarily attributable to license fees associated with new programming agreements including NASCAR and compensation-related costs. Revenue share and royalties increased $35.7 million, or 169.2%, to $56.8 million for the fourth quarter of 2007 from $21.1 million for the fourth quarter of 2006. This increase was primarily attributable to the determination of the royalty rate in December 2007 under the statutory license covering the performance of sound recordings. The 2007 royalty rate of 6% of gross revenue resulted in royalty expense of approximately $48.1 million, of which approximately $25.9 million was recorded in the fourth quarter. The growth in the company's revenues and increase in the company's OEM subscriber base also contributed to the increase in revenue share and royalties. Customer service and billing expenses increased $3.4 million to $29.1 million for the fourth quarter of 2007 from $25.7 million for the fourth quarter of 2006. The increase was primarily attributable to higher call center operating costs necessary to accommodate the increase in the company's subscriber base. Customer service and billing expenses per average subscriber per month declined 23.1% to $1.23 for the fourth quarter of 2007 from $1.60 for the fourth quarter of 2006. Sales and marketing expenses decreased $20.0 million to $53.1 million for the fourth quarter of 2007 from $73.1 million for the fourth quarter of 2006. This decrease was primarily attributable to lower consumer marketing and advertising and reduced cooperative marketing spend with the company's distributors compared to the year-ago fourth quarter. Subscriber acquisition costs (SAC) decreased $21.1 million, or 17.4%, to $99.9 million for the fourth quarter of 2007 from $121.0 million for the fourth quarter of 2006. This decrease was primarily attributable to lower chipset subsidies and commissions and a higher mix of OEM gross additions. SAC per gross subscriber addition decreased 12.6% to $90 for the fourth quarter of 2007 from $103 for the fourth quarter of 2006 driven by lower product costs, offset by a higher mix of OEM gross additions. General and administrative expenses increased $5.6 million to $27.0 million for the fourth quarter of 2007 from $21.4 million for the fourth quarter of 2006. The increase was primarily the result of higher legal fees and compensation-related costs. Engineering, design and development expenses decreased $5.5 million to $7.3 million for the fourth quarter of 2007 from $12.8 million for the fourth quarter of 2006. This decrease was primarily attributable to reduced OEM tooling and manufacturing upgrades associated with the factory installation of SIRIUS radios in additional vehicle models. SIRIUS reported a net loss of ($166.2) million, or ($0.11) per share, for the fourth quarter of 2007 compared to a net loss of ($245.6) million, or ($0.17) per share, for the fourth quarter of 2006. The adjusted net loss per share, or net loss per share excluding stock-based compensation, was ($0.10) per share for the fourth quarter of 2007 as compared to an adjusted net loss per share of ($0.14) per share for the fourth quarter of 2006 (refer to the reconciliation table of net loss per share to adjusted net loss per share). YEAR ENDED DECEMBER 31, 2007 VERSUS YEAR ENDED DECEMBER 31, 2006 For the year ended December 31, 2007, SIRIUS recognized total revenue of $922.1 million compared with $637.2 million for the year ended December 31, 2006. This 44.7%, or $284.9 million, increase in revenue was primarily driven by a $279.5 million increase in subscriber revenue resulting from the net increase in subscribers of 2,297,230 during 2007. The company's adjusted loss from operations decreased ($185.7) million to ($327.4) million for the year ended December 31, 2007 from ($513.1) million for the year ended December 31, 2006 (refer to the reconciliation table of net loss to adjusted loss from operations). This decrease was driven by a 44.7%, or $284.9 million, increase in total revenue which more than offset the 8.6%, or $99.1 million, increase in expenses. Satellite and transmission expenses decreased $13.5 million to $25.7 million for the year ended December 31, 2007 from $39.2 million for the year ended December 31, 2006 as a result of sales of certain satellite parts and lower maintenance and utility expense in the fourth quarter 2007. In addition, the 2006 expenses include a $10.9 million non-recurring impairment charge associated with certain satellite long-lead time parts that were no longer needed. Programming and content expenses increased $27.7 million to $226.4 million for the year ended December 31, 2007 from $198.7 million for the year ended December 31, 2006. The increase was primarily attributable to license fees associated with new programming agreements, including NASCAR, and compensation-related costs. Revenue share and royalties increased $76.8 million, or 109.9%, to $146.7 million for the year ended December 31, 2007 from $69.9 million for the year ended December 31, 2006. This increase was primarily attributable to the determination of the royalty rate under the statutory license covering the performance of sound recordings. The 2007 royalty rate of 6% of gross revenue resulted in royalty expense of approximately $48.1 million, of which approximately $25.9 million was recorded in the fourth quarter. The growth in the company's revenues and increase in the company's OEM subscriber base also contributed to the increase. Customer service and billing expenses increased $17.4 million to $93.1 million for the year ended December 31, 2007 from $75.7 million for the year ended December 31, 2006. The increase was primarily attributable to higher call center operating costs and higher credit card fees necessary to accommodate the increase in the company's subscriber base. Customer service and billing expenses per average subscriber per month declined 19.7% to $1.10 for the year ended December 31, 2007 from $1.37 for the year ended December 31, 2006. Sales and marketing expenses decreased $26.1 million to $158.0 million for the year ended December 31, 2007 from $184.1 million for the year ended December 31, 2006. This decrease was primarily attributable to lower consumer marketing and advertising and reduced cooperative marketing spend with the company's distributors offset by higher compensation-related costs. Subscriber acquisition costs decreased $14.9 million to $404.8 million for the year ended December 31, 2007 from $419.7 million for the year ended December 31, 2006. This decrease was primarily attributable to lower chipset subsidies and commission costs offset by higher OEM hardware subsidies and a higher mix of OEM gross additions. SAC per gross subscriber addition decreased 11.4% to $101 for the year ended December 31, 2007 from $114 for the year ended December 31, 2006. The improvement was driven by lower product costs offset by a higher mix of OEM gross additions. General and administrative expenses increased $31.5 million to $111.5 million for the year ended December 31, 2007 from $80.0 million for the year ended December 31, 2006. The increase was primarily a result of higher legal fees and compensation-related costs. Engineering, design and development expenses decreased $20.9 million to $37.8 million for the year ended December 31, 2007 from $58.7 million for the year ended December 31, 2006. This decrease was primarily attributable to reduced OEM tooling and manufacturing upgrades associated with the factory installation of SIRIUS radios in additional vehicle models offset by higher compensation-related costs. SIRIUS reported a net loss of ($565.3) million, or ($0.39) per share, for the year ended December 31, 2007, including a ($0.05) per share impact from stock-based compensation, compared with a net loss of ($1.1) billion, or ($0.79) per share, for the year ended December 31, 2006, including a ($0.01) per share impact from the impairment loss and ($0.31) per share impact from stock-based compensation. The adjusted net loss per share, or net loss per share excluding stock-based compensation, was ($0.34) for the year ended December 31, 2007 compared with an adjusted net loss per share excluding the impairment loss and stock based compensation of ($0.47) for the year ended December 31, 2006 (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)
Subscribers Data:
For the Three Months For the Years
Ended December 31, Ended December 31,
2007 2006 2007 2006
Beginning subscribers 7,667,476 5,119,308 6,024,555 3,316,560
Net additions 654,309 905,247 2,297,230 2,707,995
Ending subscribers 8,321,785 6,024,555 8,321,785 6,024,555
Retail 4,640,709 4,041,826 4,640,709 4,041,826
OEM 3,665,632 1,959,009 3,665,632 1,959,009
Hertz 15,444 23,720 15,444 23,720
Ending subscribers 8,321,785 6,024,555 8,321,785 6,024,555
Additions
Retail 211,962 559,312 598,883 1,576,463
OEM 444,244 348,935 1,706,623 1,135,316
Hertz (1,897) (3,000) (8,276) (3,784)
Net additions 654,309 905,247 2,297,230 2,707,995
Metrics:
For the Three Months For the Years
Ended December 31, Ended December 31,
2007 2006 2007 2006
Gross subscriber
additions 1,194,014 1,234,576 4,183,901 3,758,163
Deactivated subscribers 539,705 329,329 1,886,671 1,050,168
Average monthly churn
(1)(6) 2.3% 2.0% 2.2% 1.9%
SAC per gross subscriber
addition (3)(6) $90 $103 $101 $114
Customer service and
billing expenses per
average subscriber
(3)(6) $1.23 $1.60 $1.10 $1.37
Total revenue $249,816 $193,380 $922,066 $637,235
Free cash flow (4)(6) $75,921 $30,409 $(218,624) $(500,715)
Monthly ARPU:
Average monthly
subscriber revenue per
subscriber before
the effects of Hertz
subscribers and
rebates $10.19 $10.48 $10.24 $10.63
Effects of Hertz
subscribers 0.04 0.05 0.05 0.05
Effects of rebates (0.59) (0.14) (0.23) (0.23)
Average monthly
subscriber revenue per
subscriber 9.64 10.39 10.06 10.45
Average monthly net
advertising revenue
per subscriber 0.41 0.53 0.40 0.56
ARPU $10.05 $10.92 $10.46 $11.01
SIRIUS SATELLITE 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 Years
Ended December 31, Ended December 31,
2007 2006 2007 2006
Net loss $(166,223) $(245,597) $(565,252) $(1,104,867)
Impairment loss - - - 10,917
Depreciation 27,638 27,495 106,780 105,749
Stock-based
compensation 14,896 42,625 78,900 437,918
Other income and
expense 15,699 8,512 49,727 35,078
Income tax expense 770 156 2,435 2,065
Adjusted loss from
operations (7) $(107,220) $(166,809) $(327,410) $(513,140)
Adjusted Net Loss and
Adjusted Net Loss per Share:
For the Three Months For the Years
Ended December 31, Ended December 31,
2007 2006 2007 2006
Net loss $(166,223) $(245,597) $(565,252) $(1,104,867)
Impairment loss - - - 10,917
Stock-based
compensation 14,896 42,625 78,900 437,918
Adjusted net loss $(151,327) $(202,972) $(486,352) $(656,032)
Net loss per share
(basic and diluted) $(0.11) $(0.17) $(0.39) $(0.79)
Impairment loss - - - 0.01
Stock-based
compensation 0.01 0.03 0.05 0.31
Adjusted net loss per
share (basic and
diluted) (8) $(0.10) $(0.14) $(0.34) $(0.47)
Weighted average common
shares outstanding
(basic and diluted) 1,468,210 1,413,866 1,462,967 1,402,619
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARIES
SUBSCRIBER DATA, METRICS
AND OTHER NON-GAAP FINANCIAL MEASURES - CONTINUED
(Dollars in thousands, unless otherwise stated)
Condensed Consolidated Statements of Operations:
For the Three Months For the Years
Ended December 31, Ended December 31,
2007 2006 2007 2006
Total revenue $249,816 $193,380 $922,066 $637,235
Operating expenses
(excludes depreciation
and stock-based
compensation shown
separately below):
Satellite and
transmission 4,811 7,152 25,709 39,229
Programming and
content 59,949 55,779 226,416 198,650
Revenue share and
royalties 56,762 21,062 146,715 69,918
Customer service and
billing 29,123 25,745 93,109 75,650
Cost of equipment 19,070 22,105 45,458 35,233
Sales and marketing 53,143 73,115 157,965 184,139
Subscriber
acquisition costs 99,906 121,046 404,799 419,716
General and
administrative 26,951 21,398 111,546 80,025
Engineering, design
and development 7,321 12,787 37,759 58,732
Depreciation 27,638 27,495 106,780 105,749
Stock-based
compensation 14,896 42,625 78,900 437,918
Total operating
expenses 399,570 430,309 1,435,156 1,704,959
Loss from operations (149,754) (236,929) (513,090) (1,067,724)
Other expense (15,699) (8,512) (49,727) (35,078)
Loss before income taxes (165,453) (245,441) (562,817) (1,102,802)
Income tax expense (770) (156) (2,435) (2,065)
Net loss $(166,223) $(245,597) $(565,252) $(1,104,867)
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
For the Three Months For the Years
Ended December 31, Ended December 31,
2007 2006 2007 2006
Revenue:
Subscriber revenue,
including effects of
rebates $227,658 $167,210 $854,933 $575,404
Advertising revenue,
net of agency fees 9,770 8,451 34,192 31,044
Equipment revenue, net
of discounts and
rebates 12,065 16,431 29,281 26,798
Other revenue 323 1,288 3,660 3,989
Total revenue 249,816 193,380 922,066 637,235
Operating expenses
(excludes depreciation
shown separately
below) (1):
Cost of services:
Satellite and
transmission 5,175 7,518 27,907 41,797
Programming and
content 62,735 80,414 236,059 520,424
Revenue share and
royalties 56,762 21,062 146,715 69,918
Customer service and
billing 29,288 25,912 93,817 76,462
Cost of equipment 19,070 22,105 45,458 35,233
Sales and marketing 53,682 77,780 173,572 203,682
Subscriber acquisition
costs 100,062 122,196 407,642 451,614
General and
administrative 37,212 32,379 155,863 129,953
Engineering, design and
development 7,946 13,448 41,343 70,127
Depreciation 27,638 27,495 106,780 105,749
Total operating expenses 399,570 430,309 1,435,156 1,704,959
Loss from operations (149,754) (236,929) (513,090) (1,067,724)
Other income (expense):
Interest and investment
income 4,171 6,760 20,570 33,320
Interest expense, net of
amounts capitalized (19,887) (15,327) (70,328) (64,032)
Loss from redemption of
debt - - - -
Equity in net loss of
affiliate - - - (4,445)
Other income 17 55 31 79
Total other income
(expense) (15,699) (8,512) (49,727) (35,078)
Loss before income
taxes (165,453) (245,441) (562,817) (1,102,802)
Income tax expense (770) (156) (2,435) (2,065)
Net loss $(166,223) $(245,597) $(565,252) $(1,104,867)
Net loss per share (basic
and diluted) $(0.11) $(0.17) $(0.39) $(0.79)
Weighted average common
shares outstanding
(basic and diluted) 1,468,210 1,413,866 1,462,967 1,402,619
(1) Amounts related to
stock-based compensation
included in other
operating expenses were as
follows:
Satellite and transmission $364 $366 $2,198 $2,568
Programming and content 2,786 24,635 9,643 321,774
Customer service and
billing 165 167 708 812
Sales and marketing 539 4,665 15,607 19,543
Subscriber acquisition costs 156 1,150 2,843 31,898
General and administrative 10,261 10,981 44,317 49,928
Engineering, design and
development 625 661 3,584 11,395
Total equity granted to
third parties and
employees $14,896 $42,625 $78,900 $437,918
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARIES
BALANCE SHEET DATA
(Dollars in thousands)
As of
December 31, December 31,
2007 2006
Cash, cash equivalents and
marketable securities $439,289 $408,921
Restricted investments 53,000 77,850
Working capital (394,989) (257,799)
Total assets 1,694,149 1,658,528
Long-term debt 1,278,617 1,068,249
Total liabilities 2,486,886 2,047,599
Accumulated deficit (4,398,972) (3,833,720)
Stockholders' deficit (792,737) (389,071)
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
For the Three Months For the Years
Ended December 31, Ended December 31,
2007 2006 2007 2006
Cash flows from operating
activities:
Net loss $(166,223) (245,597) $(565,252) $(1,104,867)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation 27,638 27,495 106,780 105,749
Non-cash interest
expense 1,817 775 4,269 3,107
Provision for doubtful
accounts 2,339 1,826 9,002 9,370
Non-cash equity in net
loss of affiliate - - - 4,445
Gain/(Loss) on disposal
of assets (520) 772 (428) 1,661
Impairment loss - - - 10,917
Stock-based compensation 14,896 42,625 78,900 437,918
Deferred income taxes 770 156 2,435 2,065
Changes in operating
assets and liabilities:
Accounts receivable (22,254) (8,724) (28,881) (1,871)
Inventory 7,498 10,477 4,965 (20,246)
Receivables from
distributors (4,147) (28,146) (13,179) (20,312)
Prepaid expenses and
other current assets (3,112) 31 11,459 (42,367)
Other long-term assets (205) 2,343 12,109 (19,331)
Accounts payable and
accrued expenses 129,257 102,299 66,169 26,366
Accrued interest 7,820 11,699 (8,920) 1,239
Deferred revenue 93,102 105,334 169,905 181,003
Other long-term
liabilities 1,142 11,503 1,901 3,452
Net cash (used in)
provided by operating
activities 89,818 34,868 (148,766) (421,702)
Cash flows from investing
activities:
Additions to property and
equipment (7,377) (5,459) (65,264) (92,674)
Sales of property and
equipment 525 4 641 127
Merger related costs (6,680) - (29,444) -
Purchases of restricted
and other investments - - (310) (12,339)
Release of restricted
investments 160 1,000 25,160 26,000
Purchases of available-
for-sale securities - (5,000) - (123,500)
Sales of available-for-
sale securities 4,189 28,375 15,031 229,715
Net cash (used in)
provided by investing
activities (9,183) 18,920 (54,186) 27,329
Cash flows from financing
activities:
Long term borrowings, net
of related costs (320) - 244,879 -
Repayment of long term
borrowings (625) - (625) -
Proceeds from exercise of
stock options 1,420 21,757 4,097 25,787
Net cash provided by
financing activities 475 21,757 248,351 25,787
Net increase (decrease) in
cash and cash equivalents 81,110 75,545 45,399 (368,586)
Cash and cash equivalents at
the beginning of period 357,710 317,876 393,421 762,007
Cash and cash equivalents at
the end of period $438,820 $393,421 $438,820 $393,421
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 number of deactivated
subscribers divided by average quarterly subscribers.
(2) SIRIUS defines SAC per gross subscriber addition as subscriber
acquisition costs, excluding stock-based compensation, and margins
from the direct sale of SIRIUS radios and accessories 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 Years
Ended December 31, Ended December 31,
2007 2006 2007 2006
Subscriber acquisition costs $100,062 $122,196 $407,642 $451,614
Less: stock-based
compensation (156) (1,150) (2,843) (31,898)
Add: margin from direct
sales of SIRIUS radios and
accessories 7,005 5,674 16,177 8,435
SAC $106,911 $126,720 $420,976 $428,151
Gross subscriber
additions 1,194,014 1,234,576 4,183,901 3,758,163
SAC per gross subscriber
addition $90 $103 $101 $114
(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 Years
Ended December 31, Ended December 31,
2007 2006 2007 2006
Customer service and
billing expenses $29,288 $25,912 $93,817 $76,462
Less: stock-based
compensation (165) (167) (708) (812)
Customer service and
billing expenses,
as adjusted $29,123 $25,745 $93,109 $75,650
Daily weighted average
number of subscribers 7,878,574 5,361,322 7,082,927 4,591,693
Customer service and
billing expenses,
as adjusted, per
average subscriber $1.23 $1.60 $1.10 $1.37
(4) SIRIUS defines free cash flow as cash flow from operating activities,
capital expenditures, merger related costs and restricted and other
investment activity. Free cash flow is calculated as follows:
For the Three Months For the Years
Ended December 31, Ended December 31,
2007 2006 2007 2006
Net cash used in operating
activities $89,818 $34,868 $(148,766) $(421,702)
Additions to property and
equipment (7,377) (5,459) (65,264) (92,674)
Merger related costs (6,680) - (29,444) -
Restricted and other
investment activity 160 1,000 24,850 13,661
Free cash flow $75,921 $30,409 $(218,624) $(500,715)
(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 Years
Ended December 31, Ended December 31,
2007 2006 2007 2006
Subscriber revenue $227,658 $167,210 $854,933 $575,404
Net advertising revenue 9,770 8,451 34,192 31,044
Total subscriber and net
advertising revenue $237,428 $175,661 $889,125 $606,448
Daily weighted average
number of subscribers 7,878,574 5,361,322 7,082,927 4,591,693
ARPU $10.05 $10.92 $10.46 $11.01
(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, equity in
net loss of affiliate; depreciation; impairment charges; 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. Finally, the company believes that the
exclusion of equity in net loss of affiliate (SIRIUS Canada, Inc.) is
useful to assess the performance of its core consolidated operations
in the continental United States. To compensate for the exclusion of
taxes, other income (expense), depreciation, impairment charges 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, impairment charges 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 and adjusted net loss per share as
net loss per share excluding impairment charges and stock-based
compensation expense. Adjusted net loss and adjusted net loss per
share are not measures of financial performance under GAAP. The
company believes adjusted net loss and adjusted net loss per share are
useful to investors to compare its operating performance to the
performance of other communications, entertainment and media
companies. The company believes the exclusion of impairment charges is
appropriate for comparability purposes as the existence, amount and
timing of impairment charges can vary from period to period and can
vary widely across different industries or among companies within the
same industry. 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 and adjusted net loss per share in evaluating the company
compared with net loss and net loss per share, which reflects overall
financial performance, including the effects of impairment charges and
stock-based compensation expense. The company uses adjusted net loss
and adjusted net loss per share 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 and net loss per share as disclosed in the
unaudited consolidated financial statements of operations. Since
adjusted net loss and adjusted net loss per share are non-GAAP
financial measures, the calculation of adjusted net loss and adjusted
net loss per share 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 SIRIUS, "The Best Radio on Radio," delivers more than 130 channels of the best programming in all of radio. SIRIUS is the original and only home of 100% commercial free music channels in satellite radio, offering 69 music channels. SIRIUS also delivers 65 channels of sports, news, talk, entertainment, traffic, weather and data. SIRIUS is the Official Satellite Radio Partner of the NFL, NASCAR, NBA, and broadcasts live play-by-play games of the NFL, NBA, as well as live NASCAR races. All SIRIUS programming is available for a monthly subscription fee of only $12.95. SIRIUS Internet Radio (SIR) is an Internet-only version of the SIRIUS radio service, without the use of a radio, for the monthly subscription fee of $12.95. SIR delivers more than 80 channels of talk, entertainment, sports, and 100% commercial free music. SIRIUS Backseat TV (TM) is the first ever live in-vehicle rear seat entertainment featuring three channels of children's programming, including Nickelodeon, Disney Channel and Cartoon Network, for the subscription fee of $6.99 plus applicable audio subscription fee. SIRIUS products for the car, truck, home, RV and boat are available at shop.sirius.com and in more than 20,000 retail locations, including Best Buy, Circuit City, Crutchfield, Target, Wal-Mart, Sam's Club and RadioShack. As of December 31, 2007, SIRIUS radios were available as a factory and dealer-installed option in 116 vehicle models and as a dealer only-installed option in 37 vehicle models. SIRIUS has agreements with Aston Martin, Audi, Bentley, BMW, Chrysler, Dodge, Ford, Jaguar, Jeep, Kia, Land Rover, Lincoln, Maybach, Mazda, Mercedes- Benz, Mercury, MINI, Mitsubishi, Rolls-Royce, Volvo, and Volkswagen to offer SIRIUS radios as factory or dealer-installed equipment in their vehicles. SIRIUS has relationships with Toyota and Scion to offer SIRIUS radios as dealer-installed equipment, and a relationship with Subaru to offer SIRIUS radios as factory or dealer-installed equipment. SIRIUS radios are also offered to renters of Hertz vehicles at airport locations nationwide. Click on www.sirius.com to listen to SIRIUS live, or to purchase a SIRIUS radio and subscription. 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, 2006, and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2007, June 30, 2007, and September 30, 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 disclaims any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this communication.
CONTACT INFORMATION FOR INVESTORS AND FINANCIAL MEDIA:
Paul Blalock
SIRIUS
212.584.5174
pblalock@siriusradio.com
Hooper Stevens
SIRIUS
212.901.6718
hstevens@siriusradio.com
Website: http://www.sirius.com// |
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