XM Radio 2009 Annual Report Download - page 2

Dear Fellow Stockholders:
April 21, 2010
Despite economic headwinds and a devastated auto
industry, our 2009 financial results are impressive:
•Record Revenues. Pro forma 2009 revenue was
$2.53 billion, up 4% over 2008. SIRIUS XM was the
only major U.S. radio company to grow revenues in
the last year.
•First Year of Positive Pro Forma Adjusted
Income from Operations. Pro Forma Adjusted
Income from Operations improved by almost
$600 million in 2009 to $463 million versus
($136) million in 2008.
•First Year of Free Cash Flow. We achieved over
$185 million in free cash flow for 2009 — a dra-
matic increase when you consider that we had pro
forma negative free cash flow of ($552) million in
2008.
Focusing on Subscribers and Increasing
Operational Efficiency
SIRIUS XM is the world’s largest pure-play audio
entertainment company. In 2009, our subscriber base
decreased slightly from approximately 19 million sub-
scribers to approximately 18.8 million subscribers. In
the first half of the year we suffered from the chal-
lenging climate for auto sales and difficult economic
conditions, but subscriber growth returned in the sec-
ond half of the year. In the fourth quarter alone, we
added 257,000 net subscribers. Today, we are one of
the largest subscription media companies in United
States.
Our subscribers love our product. We are consistently
delivering a customer satisfaction rating of 90%,
which is incredibly high. Significantly, we are con-
tinuing to satisfy our customers in the face of growing
competition from internet radio streaming, iPods and
HD radio. Customer satisfaction is one of our great
strengths — a competitive advantage we intend to
build upon by continuing to look for opportunities
to improve our content and enhance our customer care
experience.
We have a laser-like focus on reducing subscriber
churn. In 2009, our monthly churn averaged 2.0%
in a very difficult economy for consumers. We have
also been successful at increasing the value of our
customers. In the last year, our average revenue per
user (ARPU) increased by 2.0% — from $10.56 to
$10.73. We have room to improve churn and further
increase our ARPU, but are pleased with our progress.
Bringing SIRIUS XM to More Listeners on More
Platforms than Ever Before
The last year has been a defining one in terms of access
to our product. We have diversified our offerings and
platforms. We can now definitively say that however
they want to listen, we have the means to bring our
subscribers “the best radio on radio.”
SIRIUS XM is available through every major auto-
maker as factory or dealer-installed equipment in new
cars. Our penetration across vehicles sold in the
U.S. market is at 55%, up from 44% in 2008, 32%
in 2007 and 21% in 2006.
This year, we are moving aggressively into the pre-
owned market, opening up an entirely new channel of
customers. We have a newly created internal team
dedicated to growing our presence in the pre-owned
market.
As of year-end 2009, there were approximately 27 mil-
lion satellite radios installed in cars, with only
11.6 million that were active. The number of vehicles
on the road with SIRIUS or XM factory-installed
radios could approach 70 million in the next five years.
This creates a huge opportunity we didn’t have access
to before, with tremendous up-side potential. We have
the opportunity to remarket to non-subscribers with
the device already in their cars, as well as new owners
in the secondary market.
We are expanding our reach into the auto market, but
we are not solely dependent on it. While listening in
vehicles remains the core of our business, SIRIUS XM
is more accessible and more mobile than ever before.
SIRIUS XM is now available through both the iPhone
and iPod touch. We also launched an application for
Blackberry and will be offering additional applications
for other popular devices in the exploding U.S. smart-
phone market. We expect to have widespread coverage
in the U.S. smartphone market in the years ahead.