XM Radio 2012 Annual Report Download - page 4

In addition to our core satellite radio business, we
continue to focus on expanding our streaming and
infotainment offerings, bringing an even better, more
tailored listening experience to our subscribers. We
are delivering an expanded and exclusive streaming
programming lineup, including 20 Latin music and
talk channels online, as well as continuously updating
our mobile apps for Android and Apple devices, and
adding new listening features for subscribers on our
streaming platform. Our streaming efforts will be a
growth opportunity for SiriusXM, as we have the
ability to provide unique, original content across
multiple platforms, while strengthening our in-
vehicle technologies. Having both a satellite
connection and a streaming connection into vehicles
will prove to be a durable advantage for us versus
streaming-only competitors in the connected car. In
particular, we are excited about our MySXM product,
which allows subscribers to create personalized
commercial-free channels for online and mobile
listening. Subscribers do not need to recreate music
libraries to use this product. Instead, MySXM allows
users to create personalized versions of their already
curated commercial free favorite channels.
Our connection to the car is not only through our
SiriusXM entertainment service. We are the largest
provider of traffic and weather services, with more
than 2.4 million vehicles on the road today. Our
commitment to deliver premium telematics services
— such as 24/7 emergency support for accidents,
stolen vehicle tracking and roadside assistance — for
drivers of Nissan vehicles is another example of
leveraging our trusted relationships with automakers
to grow new sources of revenue in the years to come.
We continue to support our product through the
strength of our scalable business model, which
generated our best results ever. Our unique and
powerful business model, based on recurring
subscription revenue with low marginal costs, is
unmatched by any of our competitors in the audio
entertainment space. We produce significant
operating leverage by monetizing our listeners better
than any other audio service on terrestrial or internet
radio, generating incremental margins and tightly
controlling fixed costs, resulting in record financial
results in 2012, which exceeded expectations:
• Total subscribers grew to a new all-time high of
23.9 million;
• Revenue for the year exceeded our guidance, total-
ing $3.4 billion;
• Adjusted EBITDA reached a record of $920 mil-
lion, representing an increase of 26% over 2011;
and
• Free cash flow increased 71% to $709 million,
from $416 million in 2011.
We added 2 million new subscribers in 2012 and
were able to keep our churn to a steady, low level of
1.9%. Our goal is to keep our subscribers happy by
providing the content and offerings they want to hear.
We base our business decisions on the potential
effect to the subscriber experience, and we believe
that by satisfying our subscribers, we can reward our
stockholders.
Our strong financial performance allowed us to
secure a $1.25 billion revolving credit facility, to
announce a plan to repurchase up to $2 billion of our
common stock, and to declare a special cash dividend
of $0.05 per share to all of our stockholders, which
we paid in December. As of December 31, 2012, we
were very conservatively leveraged at 2.6 times
adjusted EBITDA and we retain plenty of capital to
continue our long-term investments in our business,
programming and R&D for new initiatives. We are
also well-positioned to pursue strategic opportunities
that may arise. Our long term growth prospects and
strong focus on free cash flow growth will allow us
to continue returning capital to stockholders.
Looking to 2013, we expect to build upon our
strengths and continue to grow by focusing on
several important goals:
•Adding subscribers and growing revenue:We
believe that SiriusXM has room to grow by attract-
ing new subscribers and identifying new outlets for
revenue growth. We will continue delivering
products, programing, and services that satisfy a
demanding and growing subscriber base, but we
will also look to expand our brand and penetrate
further in the auto market. We ended 2012 with
SiriusXM units installed in approximately
50 million operating vehicles across the US. While
this is a large population, it only represents about
20% of all registered vehicles on the road, signify-
ing a significant opportunity for growth. As auto
sales increase, our growth receives a meaningful
tailwind, but we do not want to limit our focus to
new cars. We’ve launched subscriber programs for
customers at large used car retailers, such as
CarMax, AutoNation and Penske, and now have
reached over 8,000 dealer locations. With this