XM Radio 2010 Annual Report Download - page 31

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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Introduction
This Compensation Discussion and Analysis, or “CD&A,” describes and analyzes our executive compen-
sation program for our Chief Executive Officer, our Chief Financial Officer and the four other officers named
in our Summary Compensation Table for 2011. We refer to these six officers throughout the CD&A and the
accompanying tables as our “named executive officers.”
Executive Summary
Our compensation program for our named executive officers is designed to (1) recruit and retain highly
qualified and effective executive talent with the skills and experience necessary to enhance stockholder value,
(2) provide incentives to our executives to support our corporate strategy and business by rewarding
performance that meets our key business objectives, and (3) align the interests of our executives with the
interests of our stockholders.
We achieve these objectives through an executive compensation program consisting primarily of three
elements: base salary; performance-based annual bonus and long-term equity compensation. We believe that
these three elements, when taken together, provide an optimum mix of fixed compensation and short- and
long-term incentives, and therefore serve as the most effective means of attracting, retaining and motivating
executives with the skills and experience necessary to achieve our business goals and enhance stockholder
value.
Fiscal Year 2010 Performance Summary
We had a very successful year in 2010 in light of ongoing challenges raised by the U.S. and global
economy and we continued to invest in infrastructure, high-quality programming and our brand. In the face of
the prevailing economic conditions, our performance was exceptional.
Our financial results exceeded our projections and were reflected in a 172% increase in our
year-over-year stock price. These results are highlighted by the following:
• achieving adjusted EBITDA growth of 35% to over $626 million in 2010;
• increasing our 2010 revenue by 13.9% over 2009;
• growing average monthly revenue per user (“ARPU”) by 7% as compared to 2009; and
• increasing free cash flow by 14% to $210 million despite capital expenditures in 2010 that were
$63 million above 2009 levels.
In addition, 2010 was marked by key subscriber and content-based achievements and other measures that
contributed to our continued growth and success, including:
• increasing our net subscriber additions by over 1.4 million as compared to a loss of approximately
230,000 subscribers in 2009;
• reducing our average monthly subscriber churn to 1.9%, down from 2.0% in 2009;
• increasing our conversion rate, the percentage of owners and lessees of new vehicles that receive our
service and convert to become self-paying subscribers after an initial promotional period, to 46.2% as
compared to 45.4% in 2009;
• negotiating new long-term programming agreements with Howard Stern and the NFL;
• adding compelling content to our service while reducing programming expenses; and
• successfully constructing, launching and commissioning of our XM-5 satellite.
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