XM Radio 2009 Annual Report Download - page 112

2009 2008 2007
For the Years Ended December 31,
Unaudited Pro Forma
Average self-pay monthly churn(1)(7) ...................... 2.0% 1.8% 1.7%
Conversion rate(2)(7)................................... 45.4% 47.5% 50.9%
ARPU(7)(10) ........................................ $ 10.73 $ 10.56 $ 10.66
SAC, as adjusted, per gross subscriber addition(7)(11) .......... $ 63 $ 74 $ 86
Customer service and billing expenses, as adjusted, per average
subscriber(7)(12) .................................... $ 1.05 $ 1.11 $ 1.18
Total revenue ........................................ $2,526,703 $2,436,740 $ 2,058,608
Free cash flow(7)(13) .................................. $ 185,319 $ (551,771) $ (504,869)
Adjusted income (loss) from operations(14) .................. $ 462,539 $ (136,298) $ (565,452)
Net loss ............................................ $ (441,333) $ (902,335) $(1,247,633)
Note: See pages 32 through 46 for footnotes.
Subscribers. At December 31, 2009, we had 18,772,758 subscribers, a decrease of 231,098 subscribers, or
1%, from the 19,003,856 subscribers as of December 31, 2008. The decrease was principally the result of 385,373
fewer paid promotional trials compared to December 31, 2008 due to the decline in North American auto sales. This
decline was partially offset by an increase of 154,275 in self-pay subscribers compared to December 31, 2008.
Deactivation rates for self-pay subscriptions in the year increased to 2.0% per month reflecting reductions in
consumer discretionary spending, subscriber response to our increase in prices for multi-subscription accounts,
channel line-up changes in 2008, the institution of a monthly charge for our upgraded streaming service and the
introduction of the U.S. Music Royalty Fee.
We ended 2008 with 19,003,856 subscribers, an increase of 1,655,234, or 10%, from the 17,348,622
subscribers as of December 31, 2007. Net subscriber additions decreased 2,040,281, or 55% during 2008 from
2007. Deactivation rates for self-pay subscriptions in the year increased slightly to 1.8%; deactivations due to non-
conversions of subscribers in paid promotional trial periods increased as production penetration rates increased.
ARPU. For the years ended December 31, 2009 and 2008, total ARPU was $10.73 and $10.56, respectively.
Increases in subscriber revenue were driven mainly by the sale of “Best of” programming, increased rates on our
multi-subscription packages and revenues earned on our internet packages, partially offset by lower advertising
revenue.
For the years ended December 31, 2008 and 2007, total ARPU was $10.56 and $10.66, respectively. The
decrease was driven by a change in the mix of discounted OEM promotional subscriptions, subscriber win-back
programs, second subscribers and a decline in net advertising revenue per average subscriber.
SAC, As Adjusted, Per Gross Subscriber Addition. For the years ended December 31, 2009 and 2008, SAC, as
adjusted, per gross subscriber addition was $63 and $74, respectively. The decrease was primarily driven by lower
OEM subsidies, fewer OEM installations relative to gross subscriber additions and lower aftermarket inventory
charges in the year ended December 31, 2009 compared to 2008.
For the years ended December 31, 2008 and 2007, SAC, as adjusted, per gross subscriber addition was $74 and
$86, respectively. The decrease was primarily driven by lower retail and OEM subsidies due to better product
economics and improved equipment margin.
Customer Service and Billing Expenses, As Adjusted, Per Average Subscriber. For the years ended
December 31, 2009 and 2008, customer service and billing expenses, as adjusted, per average subscriber was
$1.05 and $1.11, respectively. The decline was primarily due to decreases in personnel costs and customer call
center expenses.
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