SIRI

Sirius XM Holdings Inc. (SIRI)

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SIRIUS XM Radio (SIRI)

Q4 2009 Earnings Call

February 25, 2010 8:00 am ET

Executives

William Prip – Senior Vice President, Treasurer and Investor Relations

Mel Karmazin - Chief Executive Officer

David J. Frear - Executive Vice President, Chief Financial Officer

James E. Meyer - President, Operations and Sales

Scott A. Greenstein - President, Chief Content Officer

Analysts

David Bank - RBC Capital Markets

Barton Crockett – Lazard Capital Markets

Mike Pace – JP Morgan

Jim Goss - Barrington Research

Presentation

Operator

Welcome to SIRIUS XM Radio’s fourth quarter 2009 earnings conference. (Operator Instructions) At this time, I would like to turn the conference over to William Prip, Senior Vice President, Treasurer and Investor Relations.

William Prip

Thank you. Good morning, everyone and welcome to SIRIUS XM Radio's earnings conference call. Today Mel Karmazin, our CEO, will be joined by David Frear, our EVP and CFO. The will discuss SIRIUS XM’s fourth quarter and full-year 2009 financial results. At the conclusion of the prepared remarks management will be glad to your questions. James Meyer, President of Operations and Sales and Scott Greenstein, 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 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 more information about those risks and uncertainties please see 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 begin, I would like to caution our listeners today’s results may include discussions of both actual results and pro forma results. Listeners are cautioned to take special care to ensure accuracy in looking at today’s report.

I will now hand the call over to Mel Karmazin.

Mel Karmazin

Thanks, Will. Welcome everyone to our earnings call. What a year 2009 was. We began the year with a tremendous sense of uncertainty. The economy appeared to be in shambles with the labor market experiencing severe contraction and the auto industry and financial markets faring even worse. But by the end of the year the economy was beginning to show signs of recovery.

At SIRIUS XM we too began the year with a great sense of uncertainty stemming from the fact we were facing near-term maturities with neither the cash on hand to satisfy those maturities nor a functioning capital market to provide us the opportunity to extend them. We also felt a sense of frustration because we knew the company would thrive and not just survive if given a liquidity lifeline. We were anxious to validate our superior business model as a result of the recently consummated merger.

Fortunately, Liberty Media saw our situation in the same way we did and provided us with the liquidity we needed to meet our financial obligations in February. This allowed management to focus on the company’s operations and the results were worthy of our hopes and expectations.

As we announced in our press release this morning we had a banner year. Operational and financial metrics have improved year-over-year or over the course of the year and collectively they demonstrate the strength of our differentiated business model; the paid subscriber business model works well in radio and SIRIUS XM’s business model in particular is strong and resilient.

David will provide more details and insights on our financial and operational metrics but I also want to address a few of them. First, the company���s revenue grew 4% in 2009 which was a year which many people might have expected our revenue to decline given the hostile macroeconomic environment we experienced overlaid with the unique challenge facing the auto industry. As a matter of fact, we had record revenue.

Second, we grew pro forma adjusted income from operations, adjusted EBITDA, by nearly $600 million in 2009 to $463 million from negative $136 million in 2008. This represents the first year that the company has generated positive pro forma adjusted income from operations. In March 2009 our original guidance for 2009 was just over $300 million in adjusted EBITDA. Producing $300 million in adjusted EBITDA in 2009 compared to a negative $136 million in 2008 would have been great performance. Delivering $463 million compared to the loss of $136 million was extraordinary performance.

One more time, negative $136 million to positive $460 million in adjusted EBITDA in just one year.

Third, we grew free cash flow by over $700 million in 2009 to $185 million from negative $550 million in 2008. This too represents a first for the company; the first full year of positive free cash flow and as we have previously stated free cash flow is a key metric for creating value for shareholders.

I also want to discuss a few operational metrics that highlight the strength of our business. We experienced better subscriber performance in the second half of the year clawing back 359,000 subscribers in Q3 and Q4 of the 590,000 subscribers we lost in the first half of the year. While this improvement in our overall subscriber base over the course of 2009 was obviously welcome I was extremely gratified that our self pay subscriber base turned around even more quickly and ultimately resulted in us ending the year with more self-pay subscribers than we had at the beginning; 154,000 more to be precise.

Read the rest of this transcript for free on seekingalpha.com