XM Radio 2008 Annual Report Download - page 4

the year ended December 31, 2007. Pro forma fourth
quarter 2008 revenue was $644 million, up 16%, while
total cash operating expenses declined by 22%, prov-
ing our focus on improving profitability. Our subscrib-
ers grew by 10% from 2007 to more than 19 million at
the end of 2008. In 2008, we also increased the factory
installation of satellite radio in new vehicles. Over the
course of 2007, we estimate that satellite radio was
factory installed in approximately 32% of the vehicles
built for sale in the United States. In contrast, over the
course of 2008, approximately 45% of those vehicles
included satellite radio. Given the current environ-
ment, we were pleased to see our monthly self-pay
customer churn rate was 1.8% in the fourth quarter
2008, as compared with 1.7% in the fourth quarter
2007.
Successfully Navigated 2009 Liquidity Challenges
One of our most significant accomplishments was one
that just last year would have been routine for any
company like ours. The closing of our merger in July
2008 necessitated refinancing much of SIRIUS and
XM’s debt. The credit markets were tightening, at the
same time opponents of our merger were threatening
to prevent our closing, so we moved quickly to refi-
nance approximately $1.250 billion of XM debt. But,
even after these successful refinancings, we were left
with over $1 billion of debt maturing in 2009.
The credit markets then deteriorated to the point that
very few companies had any access to capital. In a
show of extraordinary confidence in our future, we
were able to execute an agreement with Liberty Media,
which strengthened our capital structure and enhanced
our financial flexibility. With this investment, we have
addressed the uncertainty related to our debt maturing
in 2009, allowing us to turn our focus to back to our
business and to providing our subscribers with the
great content and innovative programming they know
and love.
Liberty Media is a strong partner and we are pleased to
welcome their investment and new colleagues to our
Board of Directors. In addition to capital, they bring an
extraordinary amount of expertise in the media industry.
Looking to the Future
We are following events in the auto market very
closely. The decline in auto sales is concerning. How-
ever, cars are still being sold and, as a result of the
merger, we have penetration into every major auto
manufacturer. We are working closely with each of the
major automakers and exploring new options to entice
more drivers to add satellite radio to their auto pur-
chase. We are also looking at pre-owned vehicles as a
source for additional subscribers, and are focusing our
efforts to be successful in that channel.
The retail aftermarket, including direct sales to new
and existing customers, continues to be an important
source of subscribers for us. We are determined to use
our experience in this market to develop products and
messages that attract subscribers. In addition, our
video, navigation and traffic services have been very
well received and are continuing to garner interest
from consumers and automakers. We are also excited
about the iPhone application we are introducing
shortly. The iPhone app is slick, easy to use, adds to
our exposure to a new large consumer audience, and
broadens access to our great content.
Whether it is in the car, home, office or while on the
go, as consumer confidence returns and spending
increases, we believe that SIRIUS XM is well-poised
for success. Given the new reality we are operating in,
when measured by subscribers, we are still one of the
largest subscription media businesses in the U.S. We
have a first-rate management team; exclusive pro-
gramming offered through innovative packages; oper-
ations that are increasingly efficient; and the financial
structure we need to be successful.
Our accomplishments in the last year are a result of the
passion and dedication of our employees. They have
seamlessly navigated a great deal of change and have
done so while continuing to put our valued subscribers
first. We are incredibly grateful.
Likewise, on behalf of the Board of Directors, I’d like
to thank you, our stockholders, for your support. We
appreciate your confidence and hope to see it rewarded
in an improved share price. The last year was not
without its challenges, but I believe we have demon-
strated our company’s resilience and that we will see
the benefits.
I hope you share my confidence in what lies ahead for
SIRIUS XM.
Sincerely,
MEL KARMAZIN
CEO
SIRIUS XM Radio
2