SIRI

Sirius XM Holdings Inc. (SIRI)

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SIRIUS XM Radio (SIRI)

Q4 2008 Earnings Call

March 12, 2009 8:00 am ET

Executives

Paul Blalock - Senior Vice President Investor Relations

Mel Karmazin – CEO

Jim Meyer - President, Operations and Sales

David Frear - EVP and CFO

Analysts

David Bank - RBC Capital Markets

David Joyce - Miller Tabak & Co.

Tuna Amobi - Standard & Poor's

Joe Stauff - CRT Capital

Ned Zachar – KLS

Barton Crockett – Lazard Capital

Presentation

Operator

(Operator Instructions) Welcome to the SIRIUS XM Radio Fourth Quarter 2008 Earnings Conference Call. At this time, I would like to turn the conference over to Mr. Paul Blalock, Senior Vice President of Investor Relations.

Paul Blalock

Welcome to SIRIUS XM Radio's Earnings Conference Call. Today, Mel Karmazin, our CEO will be joined by Jim Meyer, President, Operations and sales along with David Frear our EVP and CFO and review SIRIUS XM's fourth quarter and full year 2008 financial results. Scott Greenstein is traveling today and will not be joining us. At the conclusion of our prepared remarks, management will be glad to take your questions.

First, I would like to remind everyone that certain statements made during this call might be forward looking as that term is defined in the Private Securities Litigation Reform Act of 1995. These and all forward looking statements are based on management's current beliefs and expectations and necessarily depend upon assumptions, data and methods that may be incorrect or imprecise.

Such forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially. For information about those risks and uncertainties more information is contained in SIRIUS XM's SEC filings. We caution listeners not to rely unduly on forward looking statements and disclaim any intent or obligation to update them.

As we began, I would like to caution our listeners today, that results may include discussions of both actual results and pro forma results. Listeners are cautioned to take special accuracy ensuring that they’re looking at the correct results.

I'll now hand the call over to David Frear.

David Frear

SIRIUS XM’s first full quarter as the combined company demonstrated the rapid progress we made toward integrating the businesses and obtaining the very significant synergies we outlined when we proposed the merger. Our strong Q4 performance under very difficult economic conditions underscores the strength of our business model and is at the core of the investment opportunity Liberty Media saw enabling us to achieve a very positive refinancing result for all of our stakeholders in the midst of what has to be viewed as an incredibly unhealthy credit market.

The results I will discuss today will be based on pro forma combined company figures without any purchase price accounting adjustments as if the companies had been combined as of the beginning of 2007. We believe this represents the best way to observe the core trends underlying the business. Additionally, I’m going to focus my remarks primarily on the fourth quarter since the prior quarter and full year pro forma’s precede obviously the merger and therefore the synergy initiatives that we have begun.

As you’ll see in our fourth quarter figures these post merger efforts have rapidly and demonstrably transformed our financial performance. Total subs grew 10% or 1.7 million for the full year despite fourth quarter growth additional falling approximately 27% due to an absolutely awful automotive and retail environment which both Jim and Mel will comment on later. SIRIUS XM added 83,000 net subscriptions in the quarter.

Our fourth quarter self pay churn rate of 1.8% remained consistent with our historical range of 1.6% to 1.8%. ARPU at $10.60 was up 2% from the fourth quarter 2007 due to the introduction of our new Best Of programming packages and a lower impact from rebate activity in the marketplace. Top line revenue growth rose approximately 16% or $87 million versus the same period a year ago bringing revenues to $644 million for the quarter, primarily driven by 13% growth in average subscribers and the 2% growth in ARPU.

For the first time, SIRIUS XM had positive adjusted EBITDA reaching $32 million compared to a negative $224 million in the fourth quarter 2007. We are happy to have delivered such a strong number despite being so early on in the process of integrating the companies. The adjusted EBITDA improved by $256 million not only as a result of the $87 million increase in revenue but really driven by cash operating expense improvements of 22% versus the fourth quarter of last year.

Our SAC per gross add improved by 16% to $70 driven primarily by efficiency gains in our OEM channel where we saw improved economics arising from cheaper integrated head units as well as improved equipment margins in the after market. We continue to see improvements in customer service and billing costs with a 9% improvement to $1.18 per subscriber per month.

Cost efficiencies are a big part of the operating story for this quarter. Total operating expenses before non-cash depreciation and stock comp were $612 million down 22%. The fourth quarter of 2007 included a $52 million one time catch up in the royalty costs excluding the effects of that total cash OpEx is still down 16% in the quarter. Variable costs again adjusting for that prior year one time royalty charge were down 3% despite the strong increase in revenues, fixed costs which include everything but SAC and variable costs, were down 19% in the fourth quarter versus the prior year.

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