Financial Guidance at Meeting

Hey all:

Well after reading through the slide presentation, a few things stick out.

They are estimating -$32M in EBITDA for Q4. This implies it will not be a positive cash flow period. Also, when mentioning JP Morgan and Evercore are handling the liquidity issues, they stated that they hope to have something finalized by March 1.

This begs the question as to what they are intending to do for the Feb `09 maturities?

One would assume that 2009 Q1 will also be a net negative to the cash balance. Somewhere lost in the presentation is if the company is planning on using its cash reserves to retire the Feb debt.

Overall, I am pleased with the slideshow. It's nice to know we are still on track to hit our year end estimates. I do like how they slipped in the year end 1.77% churn rate estimate (I believe it was 1.7% previously). I'm sure the analysts will jump all over that number trend (even though it amounts to only an additional 10k or so subs...a mere pittence when compared to cost savings)

I sure wish I was there at the meeting, if anyone has any logical insight I would love to discuss!

Thanks for the info Jason! Where did you see the "slides" --- I have been looking for info on the co site but no uck so far! Love to see / digest the info myself! Can u help?

Rick. I posted a link to them in the second article down today

sirius.com ---> investor relations ---> SEC Filings ----> 8K Current Report Dated Dec. 18

As always ---- THANKS bunches guys!!!:)

SiriusXM - Jason, I read that also, but what I think you forget is that SIRI was 82 million FCF positive in the 4th quarter of 2007. Now while XMSR was about even (because they paid off the last satellite in the 4th Q) that still means that they combined (I believe thats what they mean by "pro forma") had a about 80 million FCF positive for the 4th quarter of 2007. All that while the combined company (pro forma) had a EBITDA of (224) million, for 2007.


This is from the slide show:

"Guidance implies 4Q08 adjusted EBITDA of ($32) mm versus pro forma 4Q07 of ($224) mm, an 86% improvement"


So I look at that comparison and say they will have a large FCF positive number. I could be reading this wrong, if so please tell me.

john, I think you are correct. I do not think FCF is the same as EBITDA. EBITDA is a GAAP measure, while FCF is not.

Edit: Apparently EBITDA is a non-gaap measure as well. See below

hmmm. I don't have the cash flow figures for `07 but I do know the comparison figure mentioned in the slides of ($224)M EBITDA was for JUST the 4th Quarter of 2007...and yes, that is the pro forma number (meaning a combination of the two companies results)

My interpretation of a balance sheet, however, (given my "minimal" experience of 7 years of trading and having just finished up a few finance classes this semester) is that a company can not generate free cash flow from a negative EBITDA number.

ie:
Gross Sales
- Cost of goods sold
= Net income
- Operations expense
= Operating Income (EBITDA)

Depreciation and amoritization are not cash events. You don't pay taxes on negative earnings. That leaves interest payments. The remainder of this equation, I BELIEVE, is the shareholder equity or APPROXAMATELY the cash flow.

This would imply a negative cash flow of more than the EBITDA loss of $32M.

If anyone has any logical input on this I would love to be affirmed or corrected.

BUT !! This all goes out the window if in fact the -$32M EBITDA number is accurate. The slideshow shows paratheses around the (32), implying a negative number. The latest AP article said it was a positive 32. That's a huge difference.

** They just revised their article to confirm it is a $32M loss **

From the Q3 CC:

Quote:

---

Adjusted EBITDA is net income /(loss) from operations plus equity expense and
depreciation and amortization expense. Free cash flow is derived from net change in
cash and cash equivalents plus cash flow from financing activities and other investment
activity. Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures.

---

Net loss = (217,010)
Equity Expense = 3,089
Dep & Amort = 64,111 EQUALS
EBITDA of (149,810)

Pro Forma cash flow was (97,590)

EBITDA is worse than free cash flow.

Quote:

---

Originally Posted by SiriusXM - Jason

a company can not generate free cash flow from a negative EBITDA number.

---

Earnings statement (where EBITDA is derrived from) and Cash Flow statement(where FCF is derrived from), are two completely different measurements.

There are other "non-cash" items in the EBITDA measurement that are not removed for the calculation of EBITDA. Sirius and XM used to also give out an "adjusted" EBITDA amount -- they now refer to this as "Adjusted loss from operations".

An example of how it is possible to have positive FCF and negative EBITDA... Q4 of 2007... Sirius had an adjusted EBITDA loss of $107 million; however they have $75 million in positive FCF.

With the adjusted loss from operations coming in at $32 million here in Q4 -- I expect the positive FCF to be well over $50 million here in Q4 this year.



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homer, I thought SIRI had 82 million in the 4th Q of 2007. (Could have swore that was it, but went from memory so I will go with your number.) I believe that FCF number will be over 200 million (pro forma) just going from the prior years of both increasing FCF numbers in their 4th Q. (While XMSR did not do as well as SIRI last year, in their conference call XMSR said that; the cost of the satellite was the main reason, and that that kind of cost will not be there again for a long time and that number will increase greatly going forward.) Now we know that cost for both have been brought down over 2008, not as much as 2007 was and more so for SIRI then XMSR (until the merger). Just going from year over year increases in positive FCF number in the 4th Q is what brings me to my conclusion of at least 200 million.

John...

Yes, XM had an extaordinary amount of extra items in Q4 last year that killed their cashflow... and I agree that cashflow should improve even more this year. However, there was a high number of contract buyouts and severence offered to employees let go.

Sirius XM let go over 450 employees in the last 180 days -- severence to all of them will be expensive. IMHO, cashflow really won't improve as much as people think here in Q4... I expect to see more improvements next quarter -- and then a huge improvement to cashflow in Q2 next year as severence to those employees winds down.


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homer, You may be right. But I still think most were let go in the 3rd quarter and severence is given soon after letting them go. Now while many of the contract buyouts were in the 4th quarter. I still believe there were still more savings in the 4th quarter then cost. As an example look at the 100 million less in loss they just came up with. That all gos to the bottom line. Like I said I just think the savings in the 4th Q will well out weigh the cost. Even if it didn't, there is still the fact both would have had about 150 million in FCF last year if XMSR did not have all the extra cost they wont have this quarter. I also expext a jump like they had in FCF in 2007 over 2006, or at least half of that which would put it at about 25 million for SIRI at least. We will find out shortly though.