XM Radio 2011 Annual Report Download - page 3

Dear Fellow Stockholders,
April 2012
We closed on the merger of Sirius and XM just over
three years ago and are understandably proud about
our achievements since then. The merger has deliv-
ered extraordinary benefits to the company and its
stockholders. Our execution delivered the benefits we
promised when we announced the merger in early
2007 and consummated the transaction in the late
summer of 2008. Today, we are the largest radio
company in the world ranked by revenue.
The combination of the two companies has not only
allowed us to achieve record financial and operating
results, but it has permitted us to focus on product
innovations, enhance the creative content of our
audio entertainment service, and increase our rev-
enue. Since the transaction closed, we have realized
cost savings throughout the company. The efficien-
cies of the merger were real and we continue to
uncover savings in the two companies’ operations.
The savings from the elimination of redundancies
alone were significant.
The foundation of our business continues to be our
premium content. We are constantly on the lookout
for creative and innovative audio content and talent
to add to our service; and we continue to set the stan-
dard in programming. In 2011, we added 33 new,
full-time channels to our service. We added several
new music channels, a number of news, talk and
entertainment channels, expanded the individual
shows that make up our existing lineup of great pro-
gramming, and added significantly to our online
offering. We added diverse, new talk programming
from Dr. Laura, Howard University, BYU Radio,
Korea Today, and entertainment shows from TMZ,
while also increasing our comedy channels on satel-
lite and online. We also produced live broadcasts of
our exclusive subscriber concert with Tim McGraw
and our Studio 54 event, as well as exclusive “Town
Hall” specials with Tom Petty, Nirvana and Cold-
play. We also created pop-up channels with Cold-
play, Beastie Boys, Simon & Garfunkel, Metallica,
Wilco, Randy Travis, and Lady Antebellum, among
other music stars and icons. In addition to 85 chan-
nels of commercial-free music available online and
as part of our satellite service, we are the Official
Satellite Radio Partner of the National Football
League, Major League Baseball, NASCAR, the
National Basketball Association, the National
Hockey League and the PGA TOUR and our sports
offerings continue to include content that covers
every major league, college football and basketball,
and other events of interest to our subscribers. We
also added SiriusXM Latino, a suite of Spanish lan-
guage programming, and numerous comedy, music
and sports programming channels which are available
through our new Edge and Lynx radios and online.
Even with all of these great additions, our program-
ming expenses in the aggregate declined on a year-
over-year basis. In short, we continue to offer the
best radio on radio.
Our record-breaking results reflect the strength of our
business model, content and subscriber focus. In
2011, our results met or exceeded all of our expect-
ations:
• Subscribers grew to an all-time high, totaling
almost 21.9 million by the end of 2011;
• Year-over-year free cash flow essentially doubled
to $416 million;
• Revenue exceeded $3 billion; and
• Adjusted EBITDA reached $731 million, up 17%
over 2010.
In addition, in 2011 we saw our highest subscriber
growth since our merger, adding 1.7 million net new
subscribers, which drove top-line revenue growth.
I am particularly pleased with our free cash flow
growth, which continues to be a point of emphasis. I
have long believed that free cash flow is one of the
most important measures of a company’s perform-
ance. It enables a company to invest in the growth of
its business, to pay down debt, make acquisitions, or
return capital to stockholders.
Our growth and performance have also contributed to
our improved balance sheet. At December 31, 2011,
our net debt to Adjusted EBITDA ratio was approx-
imately 3.1x. And our efforts are being rewarded. In