SiriusXM Reports Third Quarter 2015 Results

Oct 22, 2015

- Record Third Quarter Revenue Up 11% to $1.17 Billion
- Third Quarter Net Income Climbs 22% to $167 Million
- Adjusted EBITDA Climbs 17% to a Record $447 Million
- Free Cash Flow Per Fully-Diluted Share Increases 54% to 6.9 Cents
- Cumulative Share Repurchases Now Exceed $6 Billion
- Company Increases Subscriber, Revenue, and Adjusted EBITDA Guidance

NEW YORK, Oct. 22, 2015 /PRNewswire/ -- SiriusXM today announced third quarter 2015 operating and financial results, including record third quarter revenue of $1.17 billion, up 11% versus the third quarter of 2014.

SIRIUS XM logo

Net income in the third quarter of 2015 was $167 million versus $136 million in the third quarter of 2014.  Net income per diluted common share was $0.03 in the third quarter of 2015 versus $0.02 in the year ago period.  Adjusted EBITDA was $447 million in the third quarter of 2015, a quarterly record high and up 17% from $381 million in the third quarter of 2014.

"With subscribers at an all-time high of nearly 29 million and record adjusted EBITDA and adjusted EBITDA margin, our third quarter was one of the strongest performances in our company's history.  We are confident of our continued success in the fourth quarter, and we are increasing our guidance for self-pay and total net subscriber additions, revenue, and adjusted EBITDA," said Jim Meyer, Chief Executive Officer, SiriusXM.

"SiriusXM's diverse bundle of valuable content is our biggest single competitive advantage.  Since the start of the third quarter, we extended our long-standing relationship with the NFL for another six years. We also successfully launched an exclusive channel created with Andy Cohen; and we launched our new and exclusive 24/7 original headline news channel with FOX News.  Stay tuned for more announcements as we continue our non-stop efforts to add and retain differentiated, exclusive content to our bundle," added Meyer.

Free cash flow and free cash flow per share for the third quarter of 2015 exclude the effect of SiriusXM's settlement of certain pre-1972 recordings litigation.

THIRD QUARTER 2015 HIGHLIGHTS

  • Strong subscriber growth continues. SiriusXM added 525,000 net new subscribers in the third quarter, a 21% increase from the 433,000 net new subscribers added in the third quarter of 2014. Self-pay net subscriber additions were 381,000 in the third quarter of 2015, in-line with growth in the third quarter of 2014. Total paid subscribers climbed 8% to approximately 29.0 million, and self-pay subscribers also increased 8% to 23.8 million, both record highs.
  • Third quarter adjusted EBITDA rises 17% to a new record. Adjusted EBITDA of $447 million in the third quarter of 2015 was the highest quarterly amount in the company's history, an increase of 17% over the $381 million reported in the third quarter of 2014. Adjusted EBITDA margin was a record high of 38%, an increase from 36% in the third quarter of 2014.
  • Free cash flow per diluted share increases 54%. Free cash flow of $369 million was up 38% from $267 million in the third quarter of 2014. With increased cash flow and an 11% lower average diluted share count from the company's share repurchase program, free cash flow per diluted share climbed 54% to 6.9 cents in the third quarter of 2015, up from 4.5 cents in the third quarter of 2014.

"We repurchased 144 million shares for $553 million during the third quarter, and this year through yesterday we have repurchased 456 million shares for approximately $1.7 billion. Cumulatively, our stock repurchase plan has now delivered more than $6 billion into the hands of our stockholders in less than three years. With leverage of just 3.3 times adjusted EBITDA and growing cash flow, we are confident of our ability to continue returning capital to stockholders while maintaining operational and strategic flexibility," remarked David Frear, Chief Financial Officer, SiriusXM.

2015 GUIDANCE

"With our excellent results in the first nine months of the year, we are on track to meet or beat our best year for net subscriber growth since the merger of Sirius and XM in 2008, and we are increasing our guidance for net subscriber growth, revenue, and adjusted EBITDA," added Frear.

Our new full-year 2015 guidance is as follows:

  • Net self-pay subscriber additions of more than 1.6 million,
  • Total net subscriber additions of approximately 2.0 million,
  • Revenue of approximately $4.53 billion,
  • Adjusted EBITDA of approximately $1.65 billion, and
  • Free cash flow of approximately $1.3 billion.

THIRD QUARTER 2015 RESULTS  

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)










For the Three Months Ended
September 30,


For the Nine Months Ended
September 30,

(in thousands, except per share data)

2015


2014


2015


2014

Revenue:








Subscriber revenue

$  974,471


$  902,514


$ 2,826,018


$ 2,632,110

Advertising revenue

33,131


25,300


88,843


73,012

Equipment revenue

25,875


23,129


79,979


74,723

Other revenue

136,235


106,144


379,072


310,298

Total revenue

1,169,712


1,057,087


3,373,912


3,090,143

Operating expenses:








Cost of services:








Revenue share and royalties

238,620


204,307


783,115


599,939

Programming and content

75,707


74,920


216,223


219,360

Customer service and billing

94,492


93,013


278,521


274,174

Satellite and transmission

22,743


21,794


65,761


64,446

Cost of equipment

9,246


9,485


29,021


29,319

Subscriber acquisition costs

133,009


119,778


391,773


367,207

Sales and marketing

90,541


83,906


255,778


237,992

Engineering, design and development

16,132


16,136


47,180


47,677

General and administrative

67,234


75,170


219,194


223,995

Depreciation and amortization

70,404


64,550


202,527


200,021

Total operating expenses

818,128


763,059


2,489,093


2,264,130

Income from operations

351,584


294,028


884,819


826,013

Other income (expense):








Interest expense, net of amounts capitalized

(76,624)


(75,416)


(221,912)


(197,029)

Loss on change in value of derivatives

-


-


-


(34,485)

Other income

4,133


6,602


9,077


8,234

Total other expense

(72,491)


(68,814)


(212,835)


(223,280)

Income before income taxes

279,093


225,214


671,984


602,733

Income tax expense

(112,543)


(89,044)


(296,893)


(252,614)

Net income

$  166,550


$  136,170


$    375,091


$    350,119

Foreign currency translation adjustment, net of tax

(91)


(58)


(100)


20

Total comprehensive income

$  166,459


$  136,112


$    374,991


$    350,139

Net income per common share:








Basic

$        0.03


$        0.02


$          0.07


$          0.06

Diluted

$        0.03


$        0.02


$          0.07


$          0.06

Weighted average common shares outstanding:








Basic

5,297,797


5,626,078


5,436,378


5,860,248

Diluted

5,346,438


5,974,047


5,487,116


6,208,569

 

 

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


As of September 30,


As of December 31,


2015


2014

(in thousands, except per share data)

(unaudited)



ASSETS




Current assets:




Cash and cash equivalents

$                    152,545


$                   147,724

Receivables, net

237,200


220,579

Inventory, net

26,743


19,397

Related party current assets

8,725


4,344

Deferred tax asset

801,052


1,038,603

Prepaid expenses and other current assets

189,857


119,099

Total current assets

1,416,122


1,549,746

Property and equipment, net

1,440,368


1,510,112

Long-term restricted investments

9,888


5,922

Deferred financing fees, net

14,767


12,021

Intangible assets, net

2,605,978


2,645,046

Goodwill

2,205,107


2,205,107

Related party long-term assets

-


3,000

Long-term deferred tax asset

389,809


437,736

Other long-term assets

58,842


6,819

Total assets

$                 8,140,881


$                8,375,509

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued expenses

$                    606,393


$                   587,755

Accrued interest

95,363


80,440

Current portion of deferred revenue

1,711,435


1,632,381

Current portion of deferred credit on executory contracts

-


1,394

Current maturities of long-term debt

5,646


7,482

Related party current liabilities

3,013


4,340

Total current liabilities

2,421,850


2,313,792

Deferred revenue

154,473


151,901

Long-term debt

5,400,321


4,493,863

Related party long-term liabilities

11,505


13,635

Other long-term liabilities

91,820


92,481

Total liabilities

8,079,969


7,065,672

Stockholders' equity:




Common stock, par value $0.001; 9,000,000 shares authorized; 5,240,619 and 5,653,529 shares issued; 5,233,869 and 5,646,119 outstanding at September 30, 2015 and December 31, 2014, respectively

5,240


5,653

Accumulated other comprehensive loss, net of tax

(502)


(402)

Additional paid-in capital

5,147,121


6,771,554

Treasury stock, at cost; 6,750 and 7,410 shares of common stock at September 30, 2015 and December 31, 2014, respectively

(25,104)


(26,034)

Accumulated deficit

(5,065,843)


(5,440,934)

Total stockholders' equity

60,912


1,309,837

Total liabilities and stockholders' equity

$                 8,140,881


$                8,375,509

 

 

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


For the Nine Months Ended September 30,

(in thousands)

2015


2014

Cash flows from operating activities:




Net income

$   375,091


$   350,119

Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

202,527


200,021

Non-cash interest expense, net of amortization of premium

5,851


16,515

Provision for doubtful accounts

34,031


32,875

Amortization of deferred income related to equity method investment

(2,082)


(2,081)

Gain on unconsolidated entity investments, net

-


(2,677)

Dividend received from unconsolidated entity investment

11,260


12,873

Loss on change in value of derivatives

-


34,485

Share-based payment expense

62,334


57,832

Deferred income taxes

285,478


244,667

Other non-cash purchase price adjustments

(1,394)


(2,836)

Changes in operating assets and liabilities:




Receivables

(50,651)


(46,756)

Inventory

(7,346)


(10,487)

Related party, net 

(14,020)


(2,256)

Prepaid expenses and other current assets

(70,758)


(16,319)

Other long-term assets

(51,842)


1,784

Accounts payable and accrued expenses

26,584


(36,861)

Accrued interest

14,923


33,899

Deferred revenue

81,626


25,225

Other long-term liabilities

(658)


(1,854)

Net cash provided by operating activities

900,954


888,168

Cash flows from investing activities:




Additions to property and equipment

(90,943)


(87,244)

Purchases of restricted and other investments

(3,966)


-

Acquisition of business, net of cash acquired 

-


1,144

Return of capital from investment in unconsolidated entity

-


24,178

Net cash used in investing activities

(94,909)


(61,922)

Cash flows from financing activities:




Proceeds from exercise of stock options

259


331

Taxes paid in lieu of shares issued for stock-based compensation

(39,622)


(24,781)

Proceeds from long-term borrowings and revolving credit facility, net of costs

1,579,323


2,151,205

Repayment of long-term borrowings and revolving credit facility

(693,456)


(993,772)

Common stock repurchased and retired

(1,647,728)


(1,990,449)

Net cash used in financing activities

(801,224)


(857,466)

Net increase (decrease) in cash and cash equivalents

4,821


(31,220)

Cash and cash equivalents at beginning of period

147,724


134,805

Cash and cash equivalents at end of period

$   152,545


$   103,585

 

Key Operating Metrics              

The following table contains our key operating metrics based on our adjusted results of operations for the three and nine months ended September 30, 2015 and 2014, respectively. Subscribers and subscription related revenues and expenses associated with our connected vehicle services are not included in our subscriber count or subscriber-based operating metrics:


Unaudited

(in thousands, except per subscriber and per installation amounts)

For the Three Months Ended September 30,


For the Nine Months Ended September 30,

2015


2014


2015


2014

Self-pay subscribers

23,816


22,015


23,816


22,015

Paid promotional subscribers

5,143


4,720


5,143


4,720

Ending subscribers (a)

28,960


26,734


28,960


26,734









Self-pay subscribers

381


380


1,293


933

Paid promotional subscribers

145


53


355


242

Net additions (a)

525


433


1,649


1,175









Daily weighted average number of subscribers

28,649


26,488


28,033


26,035









Average self-pay monthly churn

1.9%


1.9%


1.8%


1.9%









New vehicle consumer conversion rate

41%


41%


41%


42%









ARPU

$     12.67


$     12.47


$        12.45


$        12.34

SAC, per installation

$          34


$          35


$             33


$             34

Customer service and billing expenses, per average subscriber

$       1.00


$       1.07


$          1.00


$          1.07

Free cash flow

$ 368,899


$ 267,269


$ 1,016,045


$    825,102

Adjusted EBITDA

$ 447,194


$ 381,251


$ 1,261,382


$ 1,086,469

(a)Note: Amounts may not sum as a result of rounding.








 

Glossary

Adjusted EBITDA – EBITDA is defined as net income before interest expense, net of amounts capitalized; income tax expense and depreciation and amortization. We adjust EBITDA to exclude the impact of other income, loss on change in value of derivatives as well as certain other charges discussed below. This measure is one of the primary Non-GAAP financial measures on which we (i) evaluate the performance of our on-going core operating results period over period, (ii) base our internal budgets and (iii) compensate management. As such, adjusted EBITDA is a Non-GAAP financial performance measure that excludes (if applicable):  (i) certain adjustments as a result of the purchase price accounting for the Merger, (ii) depreciation and amortization, (iii) share-based payment expense and (iv) other significant operating expense (income) that do not relate to the on-going performance of our business.  The purchase price accounting adjustments include: (i) the elimination of deferred revenue associated with the investment in XM Canada, (ii) recognition of deferred subscriber revenues not recognized in purchase price accounting, and (iii) elimination of the benefit of deferred credits on executory contracts, which are primarily attributable to third party arrangements with programming providers.  We believe adjusted EBITDA is a useful measure of the underlying trend of our operating performance, which provides useful information about our business apart from the costs associated with our physical plant, capital structure and purchase price accounting. We believe investors find this Non-GAAP financial measure useful when analyzing our results and comparing our operating performance to the performance of other communications, entertainment and media companies. We believe investors use current and projected adjusted EBITDA to estimate our current and prospective enterprise value and to make investment decisions. Because we fund and build-out our satellite radio system through the periodic raising and expenditure of large amounts of capital, our results of operations reflect significant charges for depreciation expense. The exclusion of depreciation and amortization expense is useful given significant variation in depreciation and amortization expense that can result from the potential variations in estimated useful lives, all of which can vary widely across different industries or among companies within the same industry. We believe the exclusion of share-based payment expense is useful given share-based payment expense is not directly related to the operational conditions of our business.  We also believe the exclusion of the portion of the pre-1972 sound recordings legal settlement recognized in June 2015 is useful as it does not represent an expense incurred as part of normal operations for the period.  The portion of the pre-1972 sound recordings legal settlement related to the period of July 2015 through December 2017 is not excluded from adjusted EBITDA as the royalty expense relates to the on-going performance of our business.

Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statements of comprehensive income of certain expenses, including share-based payment expense and certain purchase price accounting for the Merger. We endeavor to compensate for the limitations of the Non-GAAP measure presented by also providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the Non-GAAP measure.  Investors that wish to compare and evaluate our operating results after giving effect for these costs, should refer to net income as disclosed in our unaudited consolidated statements of comprehensive income. Since adjusted EBITDA is a Non-GAAP financial performance measure, our calculation of adjusted EBITDA may be susceptible to varying calculations; may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP. The reconciliation of net income to the adjusted EBITDA is calculated as follows:


Unaudited


For the Three Months Ended
September 30,


For the Nine Months Ended
September 30,

(in thousands)

2015


2014


2015


2014









Net income (GAAP):

$       166,550


$       136,170


$     375,091


$      350,119

Add back items excluded from Adjusted EBITDA:








Purchase price accounting adjustments:








Revenues

1,813


1,813


5,438


5,438

Operating expenses

-


(945)


(1,394)


(2,835)

Pre-1972 sound recordings legal settlement (GAAP)

-


-


107,658


-

Share-based payment expense (GAAP)

23,393


21,805


62,334


57,832

Depreciation and amortization (GAAP)

70,404


64,550


202,527


200,021

Interest expense, net of amounts capitalized (GAAP)

76,624


75,416


221,912


197,029

Loss on change in value of derivatives (GAAP)

-


-


-


34,485

Other income (GAAP)

(4,133)


(6,602)


(9,077)


(8,234)

Income tax expense (GAAP)

112,543


89,044


296,893


252,614

Adjusted EBITDA

$       447,194


$       381,251


$  1,261,382


$   1,086,469









 

Adjusted Net Income and Adjusted Earnings Per Share - We define these Non-GAAP financial measures as our actual net income adjusted to exclude the impact of certain purchase price accounting adjustments, the loss on change in value of derivatives, and the pre-1972 sound recordings legal settlement, net of income tax expense. Adjusted earnings per share is derived from adjusted net income divided by our weighted average common shares outstanding. The following table reconciles our actual income before income taxes to our adjusted net income for the three and nine months ended September 30, 2015 and 2014:


Unaudited


For the Three Months Ended
September 30,


For the Nine Months Ended
September 30,

(in thousands)

2015


2014


2015


2014









Income before income taxes (GAAP):

$  279,093


$  225,214


$  671,984


$  602,733

Add back items excluded from adjusted net income:








Purchase price accounting adjustments:








Revenues

1,813


1,813


5,438


5,438

Operating expenses

-


(945)


(1,394)


(2,835)

Loss on change in value of derivatives (GAAP)

-


-


-


34,485

Pre-1972 sound recordings legal settlement (GAAP)

-


-


107,658


-

Adjusted income before income taxes

$  280,906


$  226,082


$  783,686


$  639,821

Allocable income tax expense

(113,231)


(87,946)


(339,262)


(248,890)

Adjusted net income

$  167,675


$  138,136


$  444,424


$  390,931

Adjusted net income per common share:








Basic

$        0.03


$        0.02


$        0.08


$        0.07

Diluted

$        0.03


$        0.02


$        0.08


$        0.06

Weighted average common shares outstanding:








Basic

5,297,797


5,626,078


5,436,378


5,860,248

Diluted

5,346,438


5,974,047


5,487,116


6,208,569









 

Adjusted Revenues and Operating Expenses - We define this Non-GAAP financial measure as our actual revenues and operating expenses adjusted to exclude the impact of certain purchase price accounting adjustments from the merger of Sirius and XM and share-based payment expense. We use this Non-GAAP financial measure to manage our business, to set operational goals and as a basis for determining performance-based compensation for our employees.  The following tables reconcile our actual revenues and operating expenses to our adjusted revenues and operating expenses for the three and nine months ended September 30, 2015 and 2014:


Unaudited For the Three Months Ended September 30, 2015

(in thousands)

As Reported


Purchase Price
Accounting
Adjustments


Allocation of
Share-based
Payment Expense


Adjusted









Revenue:








Subscriber revenue

$        974,471


$                  -


$                     -


$          974,471

Advertising revenue

33,131


-


-


33,131

Equipment revenue

25,875


-


-


25,875

Other revenue

136,235


1,813


-


138,048

Total revenue

$     1,169,712


$           1,813


$                     -


$       1,171,525

Operating expenses








Cost of services:








Revenue share and royalties

$        238,620


$                  -


$                     -


$          238,620

Programming and content

75,707


-


(2,899)


72,808

Customer service and billing

94,492


-


(793)


93,699

Satellite and transmission

22,743


-


(1,244)


21,499

Cost of equipment

9,246


-


-


9,246

Subscriber acquisition costs

133,009


-


-


133,009

Sales and marketing

90,541


-


(5,288)


85,253

Engineering, design and development

16,132


-


(2,801)


13,331

General and administrative

67,234


-


(10,368)


56,866

Depreciation and amortization (a)

70,404


-


-


70,404

Share-based payment expense

-


-


23,393


23,393

Total operating expenses

$        818,128


$                  -


$                     -


$          818,128









(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the merger of Sirius and XM. The increased depreciation and amortization for the three months ended September 30, 2015 was $9,000. 





Unaudited For the Three Months Ended September 30, 2014

(in thousands)

As Reported


Purchase Price
Accounting
Adjustments


Allocation of
Share-based
Payment Expense


Adjusted









Revenue:








Subscriber revenue

$        902,514


$                      -


$                      -


$        902,514

Advertising revenue

25,300


-


-


25,300

Equipment revenue

23,129


-


-


23,129

Other revenue

106,144


1,813


-


107,957

Total revenue

$     1,057,087


$               1,813


$                      -


$     1,058,900

Operating expenses








Cost of services:








Revenue share and royalties

$        204,307


$                      -


$                      -


$        204,307

Programming and content

74,920


945


(2,434)


73,431

Customer service and billing

93,013


-


(868)


92,145

Satellite and transmission

21,794


-


(1,185)


20,609

Cost of equipment

9,485


-


-


9,485

Subscriber acquisition costs

119,778


-


-


119,778

Sales and marketing

83,906


-


(4,265)


79,641

Engineering, design and development

16,136


-


(2,559)


13,577

General and administrative

75,170


-


(10,494)


64,676

Depreciation and amortization (a)

64,550


-


-


64,550

Share-based payment expense

-


-


21,805


21,805

Total operating expenses

$        763,059


$                  945


$                      -


$        764,004









(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the merger of Sirius and XM. The increased depreciation and amortization for the three months ended September 30, 2014 was $9,000.





Unaudited For the Nine Months Ended September 30, 2015

(in thousands)

As Reported


Purchase Price
Accounting
Adjustments


Allocation of
Share-based
Payment Expense


Adjusted









Revenue:








Subscriber revenue

$     2,826,018


$                   -


$                     -


$       2,826,018

Advertising revenue

88,843


-


-


88,843

Equipment revenue

79,979


-


-


79,979

Other revenue

379,072


5,438


-


384,510

Total revenue

$     3,373,912


$           5,438


$                     -


$       3,379,350

Operating expenses








Cost of services:








Revenue share and royalties

$        783,115


$                  -


$                     -


$          783,115

Programming and content

216,223


1,394


(7,245)


210,372

Customer service and billing

278,521


-


(2,164)


276,357

Satellite and transmission

65,761


-


(3,156)


62,605

Cost of equipment

29,021


-


-


29,021

Subscriber acquisition costs

391,773


-


-


391,773

Sales and marketing

255,778


-


(13,056)


242,722

Engineering, design and development

47,180


-


(7,063)


40,117

General and administrative

219,194


-


(29,650)


189,544

Depreciation and amortization (a)

202,527


-


-


202,527

Share-based payment expense

-


-


62,334


62,334

Total operating expenses

$     2,489,093


$            1,394


$                     -


$       2,490,487









(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the merger of Sirius and XM. The increased depreciation and amortization for the nine months ended September 30, 2015 was $27,000.





Unaudited For the Nine Months Ended September 30, 2014

(in thousands)

As Reported


Purchase Price
Accounting
Adjustments


Allocation of
Share-based
Payment Expense


Adjusted









Revenue:








Subscriber revenue

$     2,632,110


$                    -


$                    -


$      2,632,110

Advertising revenue

73,012


-


-


73,012

Equipment revenue

74,723


-


-


74,723

Other revenue

310,298


5,438


-


315,736

Total revenue

$     3,090,143


$              5,438


$                    -


$      3,095,581

Operating expenses








Cost of services:








Revenue share and royalties

$        599,939


$                    -


$                    -


$         599,939

Programming and content

219,360


2,835


(6,903)


215,292

Customer service and billing

274,174


-


(2,032)


272,142

Satellite and transmission

64,446


-


(3,087)


61,359

Cost of equipment

29,319


-


-


29,319

Subscriber acquisition costs

367,207


-


-


367,207

Sales and marketing

237,992


-


(11,238)


226,754

Engineering, design and development

47,677


-


(6,422)


41,255

General and administrative

223,995


-


(28,150)


195,845

Depreciation and amortization (a)

200,021


-


-


200,021

Share-based payment expense

-


-


57,832


57,832

Total operating expenses

$     2,264,130


$              2,835


$                    -


$      2,266,965









(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the merger of Sirius and XM. The increased depreciation and amortization for the nine months ended September 30, 2014 was $29,000.

 

 

Adjusted Cash Operating Expenses - We define this Non-GAAP financial measure as our actual operating expenses adjusted to exclude the impact of certain purchase price accounting adjustments from the merger of Sirius and XM, depreciation and amortization expense, share-based payment expense, and the pre-1972 sound recordings legal settlement. The following table reconciles our actual operating expenses to our adjusted cash operating expenses for the three and nine months ended September 30, 2015 and 2014:


Unaudited


For the Three Months Ended
September 30,


For the Nine Months Ended
September 30,

(in thousands)

2015


2014


2015


2014

Operating expenses (GAAP):

$       818,128


$       763,059


$    2,489,093


$    2,264,130

Items excluded from adjusted cash operating expenses:








Purchase price accounting adjustments

-


945


1,394


2,835

Pre-1972 sound recordings legal settlement (GAAP)

-


-


(107,658)


-

Share-based payment expense (GAAP)

(23,393)


(21,805)


(62,334)


(57,832)

Depreciation and amortization (GAAP)

(70,404)


(64,550)


(202,527)


(200,021)

Adjusted cash operating expenses

$       724,331


$       677,649


$    2,117,968


$    2,009,112









 

ARPU - is derived from total earned subscriber revenue, advertising revenue and other subscription-related revenue, excluding revenue associated with our connected vehicle business, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. Other subscription-related revenue includes the U.S. Music Royalty Fee.  ARPU is calculated as follows (in thousands, except per subscriber amounts):


Unaudited


For the Three Months Ended
September 30,


For the Nine Months Ended
September 30,


2015


2014


2015


2014

Subscriber revenue, excluding connected vehicle (GAAP)

$        949,301


$        880,093


$     2,752,993


$     2,568,742

Add: advertising revenue (GAAP)

33,131


25,300


88,843


73,012

Add: other subscription-related revenue (GAAP)

106,483


85,380


299,437


249,138


$     1,088,915


$        990,773


$     3,141,273


$     2,890,892









Daily weighted average number of subscribers

28,649


26,488


28,033


26,035









ARPU

$            12.67


$            12.47


$            12.45


$            12.34

 

Average self-pay monthly churn - is defined as the monthly average of self-pay deactivations for the period divided by the average number of self-pay subscribers for the period.

Customer service and billing expenses, per average subscriber - is derived from total customer service and billing expenses, excluding connected vehicle customer service and billing expenses and share-based payment expense, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. We believe the exclusion of share-based payment expense in our calculation of customer service and billing expenses, per average subscriber, is useful as share-based payment expense is not directly related to the operational conditions that give rise to variations in the components of our customer service and billing expenses. Customer service and billing expenses, per average subscriber, is calculated as follows (in thousands, except per subscriber amounts):


Unaudited


For the Three Months Ended September 30,


For the Nine Months Ended September 30,


2015


2014


2015


2014









Customer service and billing expenses, excluding connected vehicle (GAAP)

$          86,840


$          85,868


$        255,105


$        252,677

Less: share-based payment expense (GAAP)

(793)


(868)


(2,164)


(2,032)


$          86,047


$          85,000


$        252,941


$        250,645









Daily weighted average number of subscribers

28,649


26,488


28,033


26,035









Customer service and billing expenses, per average subscriber

$              1.00


$              1.07


$              1.00


$              1.07









 

Free cash flow and free cash flow per diluted share - are derived from cash flow provided by operating activities, net of additions to property and equipment, and restricted and other investment activity, and excluding the $210,000 pre-1972 sound recordings legal settlement payment. The calculation for free cash flow and free cash flow per diluted share are as follows (in thousands, except per share data):


Unaudited


For the Three Months Ended September 30,


For the Nine Months Ended September 30,


2015


2014


2015


2014









Cash Flow information








Net cash provided by operating activities

$  188,613


$  296,096


$    900,954


$  888,168

Net cash used in investing activities

$   (29,714)


$   (28,827)


$    (94,909)


$   (61,922)

Net cash used in financing activities

$ (300,407)


$ (333,664)


$  (801,224)


$ (857,466)

Free Cash Flow








Net cash provided by operating activities

$  188,613


$  296,096


$    900,954


$  888,168

Additions to property and equipment

(29,714)


(28,827)


(90,943)


(87,244)

Purchases of restricted and other investments

-


-


(3,966)


-

Return of capital from investment in unconsolidated entity

-


-


-


24,178

Pre-1972 sound recordings legal settlement

210,000


-


210,000


-

Free cash flow

$  368,899


$  267,269


$ 1,016,045


$  825,102









Diluted weighted average common shares outstanding

5,346,438


5,974,047


5,487,116


6,208,569









Free cash flow per diluted share

$        0.07


$        0.04


$          0.19


$        0.13

 

New vehicle consumer conversion rate - is defined as the percentage of owners and lessees of new vehicles that receive our satellite radio service and convert to become self-paying subscribers after the initial promotion period. At the time satellite radio enabled vehicles are sold or leased, the owners or lessees generally receive trial subscriptions ranging from three to twelve months. We measure conversion rate three months after the period in which the trial service ends. The metric excludes rental and fleet vehicles.

Subscriber acquisition cost, per installation - or SAC, per installation, is derived from subscriber acquisition costs and margins from the sale of radios and accessories, divided by the number of satellite radio installations in new vehicles and shipments of aftermarket radios for the period. SAC, per installation, is calculated as follows (in thousands, except per installation amounts):


Unaudited


For the Three Months Ended September 30,


For the Nine Months Ended September 30,


2015


2014


2015


2014









Subscriber acquisition costs (GAAP)

$     133,009


$    119,778


$       391,773


$       367,207

Less: margin from direct sales of radios and accessories (GAAP)

(16,629)


(13,644)


(50,958)


(45,404)


$     116,380


$    106,134


$       340,815


$       321,803









Installations

3,429


3,038


10,305


9,396









SAC, per installation

$              34


$            35


$                33


$                34

 

About SiriusXM

 

Sirius XM Holdings Inc. (NASDAQ: SIRI) is the world's largest radio broadcaster measured by revenue and has 29 million subscribers.  SiriusXM creates and broadcasts commercial-free music; premier sports talk and live events; comedy; news; exclusive talk and entertainment, and a wide-range of Latin music, sports and talk programming.  SiriusXM is available in vehicles from every major car company in the U.S. and on smartphones and other connected devices as well as online at siriusxm.com. SiriusXM radios and accessories are available from retailers nationwide and at shop.siriusxm.com.  SiriusXM also provides premium traffic, weather, data and information services for subscribers in cars, trucks, and RVs through SiriusXM Traffic™, SiriusXM Travel Link, NavTraffic®, NavWeather™.  SiriusXM delivers critical weather, data and information services to aircraft and boats through SiriusXM Aviation, SiriusXM Marine™, Sirius Marine Weather, XMWX Aviation™, XMWX Weather, and XMWX Marine™.  In addition, SiriusXM Music for Business provides commercial-free music to a variety of businesses.  SiriusXM holds a minority interest in SiriusXM Canada which has more than 2.6 million subscribers. SiriusXM is also a leading provider of connected vehicles services to major automakers, giving customers access to a suite of safety, security, and convenience services including automatic crash notification, stolen vehicle recovery assistance, enhanced roadside assistance and turn-by-turn navigation.

On social media, join the SiriusXM community on Facebook, Twitter, Instagram, and YouTube. To view and download SiriusXM logos and artwork, please visit SiriusXM.com/LogosAndPhotos

 

This communication contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements include, but are not limited to, statements about future financial and operating results, our plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as "will likely result," "are expected to," "will continue," "is anticipated," "estimated," "believe," "intend," "plan," "projection," "outlook" or words of similar meaning.  Such forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control.  Actual results may differ materially from the results anticipated in these forward-looking statements. 

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:  our competitive position versus other radio and audio entertainment providers; our ability to attract and retain subscribers, which is uncertain; our dependence upon the auto industry; general economic conditions; failure of our satellites, which, in most cases, are not insured; the interruption or failure of our information and communications systems; the security of the personal information about our customers; royalties we pay for music rights, which increase over time; the unfavorable outcome of pending or future litigation; our failure to realize benefits of acquisitions; rapid technological and industry change; failure of third parties to perform; changes in consumer protection laws and their enforcement; failure to comply with FCC requirements and other government regulations; and our indebtedness.  Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our Annual Report on Form 10-K for the year ended December 31, 2014, which is filed with the Securities and Exchange Commission (the "SEC") and available at the SEC's Internet site (http://www.sec.gov).  The information set forth herein speaks only as of the date hereof, and we disclaim any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this communication.

Source: SiriusXM

Contact Information for Investors and Financial Media:

Investors:

Hooper Stevens
212 901 6718
hooper.stevens@siriusxm.com

Media:

Patrick Reilly
212 901 6646
patrick.reilly@siriusxm.com

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To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/siriusxm-reports-third-quarter-2015-results-300164348.html

SOURCE Sirius XM Holdings Inc.