SIRI

Sirius XM Holdings Inc. (SIRI)

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SIRIUS XM Radio (SIRI)

Q4 2012 Earnings Conference Call

February 5, 2013, 8:00 am ET

Executives

Hooper Stevens – VP of IR

Jim Meyer – CEO

David Frear – EVP, CFO

Analysts

Barton Crockett – Lazard Capital Markets

Benjamin Swinburne – Morgan Stanley

Matthew Niknam – Goldman Sachs

Jessica Reif Cohen – Bank of America Merrill Lynch

Bryan Kraft – Evercore Partners

John Tinker – Maxim

David Joyce – ISI Group

Presentation

Operator

Good morning and welcome to the SIRIUS XM Radio’s full-year and fourth quarter 2012 earnings conference call. Today’s conference is being recorded. A question-and-answer session will be conducted following the presentation. (Operator Instructions)

At this time, I would like to turn the call over to Hooper Stevens, Vice President Investor Relations Finance. Mr. Stevens, please go ahead.

Hooper Stevens

Thank you, (Shelly), and good morning, everyone. Welcome to SIRIUS XM Radio’s earnings conference call. Today Jim Meyer, our Chief Executive Officer, will be joined by David Frear, our Executive Vice President and Chief Financial Officer. At the conclusion of our prepared remarks, management will be glad to take your questions. Scott Greenstein, our President and Chief Content Officer, will also be available for the Q&A portion of the call.

First, I would like to remind everyone that certain statements made during the call might be forward-looking statements as the 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 or 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 more information about those risks and uncertainties, please view SIRIUS XM’s SEC filings.

We advise listeners not to rely unduly on forward-looking statements and disclaim any intent or obligation to update them.

As we begin, I would like to advise listeners that today’s results will include discussions about both actual results and adjusted results. All discussions of adjusted operating results exclude the effects of stock-based compensation and certain purchase price accounting adjustments.

With that, I will now hand the call over to Jim Meyer.

Jim Meyer

Thank you, Hooper. Good morning. 2012 was a great year for SIRIUS XM as we reached a number of records and milestones and earlier this year we issued guidance for meaningful growth in 2013 to our subscriber base and financial performance.

In 2012, we added more than 2 million net new subscribers, the largest number of new subscribers in a single year since 2007. At 1.7 million net additions, our 2012 self-pay subscriber growth was up 36% over 2011 and 69% over 2010’s self-pay net additions.

Self-pay churn and conversion rates were steady at 1.9% and 45% respectively despite and increase in our base price, notably, the first core price increase ever at SIRIUS and only the second one ever at the XM base.

We believe these statistics indicate strong demand for and satisfaction with our service and I believe this bodes very well for the future.

These 2 million net additions exceeded our original guidance on the strength of lower-than-expected churn, higher auto sales and improved used car additions. We exceeded all of our 2012 financial guidance as well.

Revenue was a record high, up 13% to just over $3.4 billion versus our guidance of approximately $3.4 billion. Adjusted EBITDA climbed 26% and reached a record $920 million compared to guidance of approximately $900 million. And free cash flow jumped a massive 71% to $709 million, beating guidance of approximately $700 million.

Auto sales certainly provided a tailwind to our growth in 2012 with SAR climbing 12% in the fourth quarter to around $15 million and growing about 13% to $14.4 million for the full year.

Consensus estimates call for auto sales to rise at a slower rate in 2013, just under 5% to $15.1 million.

Earlier this year, we announced that Toyota is increasing its penetration rate of satellite radio over the next two to three years. Every Toyota that features the In Tune Multimedia System will also feature satellite radio.

I think this is an important indication that auto makers see multiple technologies coexisting in the vehicle for a very long time. And rising penetration of the Japanese OEMs like Toyota will mean that we should see less variability in our penetration rate due to market share shifts among the OEMs.

Our overall penetration rate was 68% in the fourth quarter and 67% for the full year 2012. We expect to be in this range over the next few years as OEMs remain very committed to satellite radio, including the deployment of our new 2.0 radios in additional models as well as at additional OEMs.

SIRIUS XM ended 2012 with approximately 50 million satellite-equipped vehicles in operation in the United States, roughly a 20% penetration rate of all registered vehicles on the road and up from about 40 million vehicles at the end of 2011.

This trend just keeps going. Driven by rising auto sales and our strong new car penetration rate, we expect the number of enabled vehicles to approximately double in the next five years.

The rising number of pre-owned vehicles on the road combined with our marketing initiatives are certainly boosting our subscriber additions for previously-owned cars.

Our used car trial program has now been implemented at over 8000 dealer locations across the country, including all of those run by many large retailers such as CarMax, AutoNation and Penske.

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