NEW YORK, July 30, 2019 /PRNewswire/ -- SiriusXM today announced second quarter 2019 operating and financial results. Total revenue of $2.0 billion increased 38% compared to the prior year period, boosted by the acquisition of Pandora Media on February 1, 2019. On a pro forma basis, revenue climbed 9% from $1.8 billion in the second quarter of 2018. The Company's net income totaled $263 million in the second quarter, compared to $293 million in the prior year period. Net income per diluted common share was $0.06 in the second quarter and the prior year period.

Adjusted EBITDA grew 22% to a record $618 million in the second quarter and resulted in an adjusted EBITDA margin of 31.2%, growing approximately 330 basis points from 27.9% in the second quarter 2018. The adjusted EBITDA margin in the quarter was driven primarily by revenue growth across the combined businesses and cost efficiencies in subscriber acquisition costs and revenue share and royalties.

"Our company produced outstanding financial and operating results once again this quarter, and I'm pleased by the quick progress we've made in integrating Pandora. Revenues and adjusted EBITDA each reached records in the period. We're thrilled with the results in the first half of the year, and we are raising 2019 guidance for revenue and adjusted EBITDA and reiterating our guidance for net subscriber additions and free cash flow," said Jim Meyer, Chief Executive Officer, SiriusXM.

"We continue to offer outstanding new programming across comedy, sports, talk and music, with some of the best brands in all of media. Lady Gaga played a once-in-a-lifetime show for SiriusXM subscribers and Pandora listeners in late June at Harlem's Apollo Theater, marking the first-ever combined SiriusXM and Pandora event. We debuted "Netflix Is A Joke Radio," a full-time comedy channel with Netflix, and announced plans for a new music channel with SoulCycle. We launched a new jam band channel with Phish, and special pop-up channels with Madonna, Cher, Dave Matthews Band and the music of Pavarotti. And, last week, we were thrilled to announce a groundbreaking and unprecedented collaboration with platinum-selling recording artist Drake — our content is a true competitive advantage," added Meyer.

Pro forma figures assume the Pandora acquisition closed on January 1, 2018.

SECOND QUARTER 2019 HIGHLIGHTS

SiriusXM operates two complementary audio entertainment businesses — our SiriusXM business and our Pandora business. Further information regarding these two segments will be contained in the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2019. The pro forma financial and operating highlights of these two segments are presented separately below and exclude the impact of share-based payment expense.

SIRIUSXM

• Self-Pay Subscribers Top 29.3 Million. SiriusXM added 290 thousand net new self-pay subscribers in the second quarter to end with more than 29.3 million self-pay subscribers. Total net subscriber additions in the second quarter were 174 thousand, resulting in more than 34.3 million total SiriusXM subscribers at the end of the period. Paid promotional subscribers decreased due to declines in shipments from automakers offering paid promotional subscriptions. Self-pay monthly churn for the quarter was 1.7%, compared to 1.6% in the second quarter of 2018.
• Record SiriusXM Revenue Over $1.5 Billion. Second quarter revenue of $1.5 billion grew 7% compared to the prior year period. This growth was driven by a 3% increase in total SiriusXM subscribers and 4% growth in SiriusXM's average revenue per user (ARPU) to $13.83.
• Gross Profit Grows 7%. Total cost of services at SiriusXM increased 7% to $594 million in the second quarter, driven primarily by higher revenue share and royalties and programming and content. Gross profit at SiriusXM in the quarter totaled $944 million, increasing 7% over the second quarter of 2018, and produced a gross margin of 61%, flat compared to the prior year period.
• Major App Upgrades; Streaming Now Included for 30 Million Subs. SiriusXM Select subscribers now have unlimited streaming access to the hundreds of SiriusXM music, sports, talk, news and entertainment channels, at no additional cost, outside the car on a phone, at home and online. With this new streaming, customers will also get access to over 100 recently launched Xtra Music Channels and an expanded preview of SiriusXM Video. With the launch of Personalized Stations Powered by Pandora, subscribers to the SiriusXM All Access and SiriusXM Premier Streaming packages will now be able to create their own customized commercial-free music stations within the SiriusXM app.

PANDORA

• Advertising Revenue Grows 13%. Ad revenue at Pandora reached a second quarter record of $306 million, growing 13% over the second quarter of 2018. Ad revenue was driven by record second quarter monetization of $80 per thousand hours, growing 17% over the second quarter 2018. Strength in audio and video programmatic and engagement-based video as well as the expansion of off-platform efforts and fees generated on the AdsWizz platform drove revenue growth. Total revenue for Pandora grew 15% to $441 million in the quarter, aided in part by an 18% increase in subscriber revenue to $135 million.
• Total Ad Supported Listener Hours of 3.49 Billion. Monthly Active Users (MAUs) at Pandora were 64.9 million in the second quarter, down from 71.4 million in the prior year period. Total ad supported listener hours were 3.49 billion in the period, down from 3.86 billion in the second quarter of 2018.
• Self-Pay Net Adds of 64 Thousand. Pandora added 64 thousand net new self-pay subscribers in the second quarter to end with over 6.2 million self-pay subscribers. Total Pandora subscribers were 7.0 million at the end of the period, an increase of 16% over the second quarter 2018.
• Gross Profit Grows 40%. Total cost of services at Pandora in the second quarter 2019 of $284 million increased 4% compared with the second quarter 2018. This resulted in gross profit at Pandora of $157 million, up 40% over the second quarter 2018, and produced a gross margin in the quarter of 36%, growing approximately 700 basis points from 29% in the prior year period. This expansion was driven primarily by lower revenue share and royalties and customer service and billing expenses as a percentage of revenue.

Second quarter net income of $263 million declined 10% over the prior year period due primarily to a one-time $86 million benefit to other income last year driven by unrealized gains from the Company's investment in Pandora. The Company's effective tax rate for the second quarter 2019 was 22.4%, compared to 19.4% in the prior year period, with the change driven primarily by lower recognition of excess tax benefits related to share-based compensation.

"SiriusXM repurchased $898 million of its stock in the quarter. Total capital returned to stockholders, including dividends, is nearly $1.9 billion so far this year. Since the announcement of the Pandora acquisition, we have repurchased all of the common stock issued as part of that transaction. During the quarter, we issued $1.25 billion of 10-year 5.50% Senior Notes due 2029 to pay down our revolving credit facility balance. In early July, we issued $1.5 billion of 5-year 4.625% Senior Notes due 2024, the proceeds of which we used to redeem SiriusXM's outstanding 6.00% Senior Notes due 2024. At quarter-end, our debt to adjusted EBITDA was 3.3 times and we had cash on hand of $215 million with our entire $1.75 billion revolver available. We will continue to use our strong financial position and ample liquidity to invest in our business, make strategic investments and return capital to stockholders," noted David Frear, Chief Financial Officer, SiriusXM.

2019 GUIDANCE

The Company is reiterating its existing full-year 2019 guidance for SiriusXM self-pay net subscriber additions and free cash flow, and increasing guidance for pro forma revenue and adjusted EBITDA. The company's increased full-year guidance for the combined company, including Pandora, is as follows:

• SiriusXM self-pay net subscriber additions approaching 1 million,
• Pro forma revenue of approaching $7.8 billion,
• Adjusted EBITDA of approaching $2.35 billion, and
• Free cash flow of approximately $1.6 billion.

CAPITAL RETURN PROGRAM

Shares of common stock may be purchased from time to time on the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act of 1934, as amended, in privately negotiated transactions, including in accelerated stock repurchase transactions and transactions with Liberty Media and its affiliates, or otherwise. The Company expects to fund the repurchases through a combination of cash on hand, cash generated by operations and future borrowings. The size and timing of these purchases will be based on a number of factors, including price and business and market conditions.

The Company's dividend policy may change at any time without notice to stockholders. The declaration and payment of dividends is at the discretion of the Company's Board of Directors in accordance with applicable law after taking into account various factors, including the Company's financial condition, operating results, current and anticipated cash needs, limitations imposed by its indebtedness, legal requirements and other factors that the Board of Directors deems relevant.

SECOND QUARTER 2019 RESULTS

 

 

Unaudited Pro Forma Results

Set forth below are our pro forma results of operations for the three months ended June 30, 2019 compared with the three months ended June 30, 2018.  These pro forma results are based on estimates and assumptions, which we believe are reasonable.  They are not the results that would have been realized had the Pandora Acquisition actually occurred on January 1, 2018 and are not indicative of our consolidated results of operations in future periods.  The pro forma results primarily include adjustments related to amortization of acquired intangible assets, depreciation of property and equipment, acquisition costs and associated tax impacts.  Please refer to the Footnotes to Results of Operations.

Footnotes to Results of Operations

The following tables reconcile our results of operations as reported to our pro forma results of operations for the three months ended June 30, 2019 and 2018 which includes the Pandora pre-acquisition financial information for the applicable periods and the effects of purchase price accounting.  These pro forma results are based on estimates and assumptions, which we believe are reasonable.  They are not the results that would have been realized had the Pandora Acquisition actually occurred on January 1, 2018 and are not indicative of our consolidated results of operations in future periods.  The pro forma results primarily include adjustments related to amortization of acquired intangible assets, depreciation of property and equipment, acquisition costs and associated tax impacts.

 

 

 

 

 

Key Financial and Operating Performance Metrics

Subscribers and subscription related revenues and expenses associated with our connected vehicle services and Sirius XM Canada are not included in Sirius XM's subscriber count or subscriber-based operating metrics.

Set forth below are our subscriber balances as of June 30, 2019 compared to June 30, 2018:

The following table contains our Non-GAAP financial and operating performance measures which are based on our adjusted results of operations for the three and six months ended June 30, 2019 and 2018:

Glossary

Active users - the number of distinct registered users on the Pandora services, including subscribers, that have consumed content within the trailing 30 days to the end of the final calendar month of the period. The number of active users on the Pandora services may overstate the number of unique individuals who actively use our Pandora service, as one individual may use multiple accounts. To become a registered user on the Pandora services, a person must sign-up using an email address or phone number, or access our service using a device with a unique identifier, which we use to create an account for our service. Prior to the second quarter of 2018, Pandora defined active users as the number of distinct registered users, including subscribers, that have requested audio from Pandora's servers during the trailing 30 days to the end of the final calendar month of the period.

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

Adjusted EBITDA - EBITDA is defined as net income before interest expense, income tax expense and depreciation and amortization.  We adjust EBITDA to exclude the impact of other expense (income) as well as certain other charges discussed below.  Adjusted EBITDA is a Non-GAAP financial measure that excludes or adjusts for (if applicable): (i) certain adjustments as a result of the purchase price accounting for the XM Merger and the Pandora Acquisition, (ii) predecessor net income adjusted for certain expenses, including depreciation and amortization, other income (loss), and share-based payment expense for January 2019 and the six months ended June 30, 2018, (iii) share-based payment expense and (iv) other significant operating expense (income) that do not relate to the on-going performance of our business.  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 capital structure and purchase price accounting.  We believe investors find this Non-GAAP financial measure useful when analyzing our past operating performance with our current performance and comparing our operating performance to the performance of other communications, entertainment and media companies.  We believe investors use adjusted EBITDA to estimate our current enterprise value and to make investment decisions.  As a result of large capital investments in our satellite radio system, our results of operations reflect significant charges for depreciation expense.  We believe the exclusion of share-based payment expense is useful as it is not directly related to the operational conditions of our business.  We also believe the exclusion of the legal settlements and reserves, acquisition related costs, loss on extinguishment of debt and loss on disposal of assets, to the extent they occur during the period, is useful as they are significant expenses not incurred as part of our normal operations for the period.

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 XM Merger and the Pandora Acquisition.  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:   

Free cash flow - is derived from cash flow provided by operating activities, net of additions to property and equipment and purchases of other investments.  Free cash flow is a metric that our management and board of directors use to evaluate the cash generated by our operations, net of capital expenditures and other investment activity.  In a capital intensive business, with significant investments in satellites, we look at our operating cash flow, net of these investing cash outflows, to determine cash available for future subscriber acquisition and capital expenditures, to repurchase or retire debt, to acquire other companies and to evaluate our ability to return capital to stockholders.  We exclude from free cash flow certain items that do not relate to the on-going performance of our business, such as cash flows for acquisitions, strategic and short-term investments, and net loan activity with related parties and other equity investees.  We believe free cash flow is an indicator of the long-term financial stability of our business. Free cash flow, which is reconciled to "Net cash provided by operating activities," is a Non-GAAP financial measure. This measure can be calculated by deducting amounts under the captions "Additions to property and equipment" and deducting or adding Restricted and other investment activity from "Net cash provided by operating activities" from the unaudited consolidated statements of cash flows.  Free cash flow should be used in conjunction with other GAAP financial performance measures and may not be comparable to free cash flow measures presented by other companies. Free cash flow should be viewed as a supplemental measure rather than an alternative measure of cash flows from operating activities, as determined in accordance with GAAP. Free cash flow is limited and does not represent remaining cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt maturities.  We believe free cash flow provides useful supplemental information to investors regarding our current cash flow, along with other GAAP measures (such as cash flows from operating and investing activities), to determine our financial condition, and to compare our operating performance to other communications, entertainment and media companies.  Free cash flow is calculated as follows:

ARPU - Sirius XM ARPU is derived from total earned subscriber revenue (excluding revenue associated with our connected vehicle services), advertising revenue, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period.  Pandora ARPU is defined as average monthly subscriber revenue per paid subscriber on our Pandora subscription services. 

Subscriber acquisition cost, per installation - or SAC, per installation, is derived from subscriber acquisition costs and margins from the sale of radios and accessories (excluding connected vehicle services), 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:

Ad supported listener hours - is based on the total bytes served over our advertising supported platforms for each track that is requested and served from our Pandora servers, as measured by our internal analytics systems, whether or not a listener listens to the entire track. For non-music content such as podcasts, episodes are divided into approximately track-length parts, which are treated as tracks. To the extent that third-party measurements of advertising hours are not calculated using a similar server-based approach, the third-party measurements may differ from our measurements.

RPM - is calculated by dividing advertising revenue, excluding AdsWizz and other off-platform revenue, by the number of thousands of listener hours on our Pandora advertising-based service.

LPM - is calculated by dividing advertising licensing costs by the number of thousands of listener hours on our Pandora advertising-based service.

LPU - is calculated by dividing subscriber licensing costs by the number of paid subscribers on our Pandora subscription services.

About SiriusXM

Sirius XM Holdings Inc. (NASDAQ: SIRI) is the world's largest audio entertainment company, and the premier programmer and platform for subscription- and advertising-supported audio products. With the recent addition of Pandora, the largest streaming music provider in the U.S., SiriusXM reaches more than 100 million people with its audio products. For more about the new SiriusXM, please go to: www.siriusxm.com.

FORWARD-LOOKING STATEMENTS

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 and the timing of events may differ materially from the results anticipated in these forward-looking statements.

The following factors, among others, could cause actual results and the timing of events to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: our substantial competition, which is likely to increase over time; our ability to attract and retain subscribers and listeners, which is uncertain; the effectiveness of our marketing efforts; our ability to attract advertisers to our platform and maintain revenue growth; interference to our service from wireless operations; consumer protection laws and their enforcement; unfavorable outcomes of pending or future litigation; the market for music rights, which is changing and subject to uncertainties; our dependence upon the auto industry; general economic conditions; the security of the personal information about our customers; existing or future government laws and regulations could harm our business; failure of our satellites would significantly damage our business; the interruption or failure of our information technology and communications systems; our failure to realize benefits of acquisitions or other strategic initiatives; rapid technological and industry changes; failure of third parties to perform; our failure to comply with FCC requirements; modifications to our business plan; our indebtedness; our principal stockholder has significant influence over our affairs and over actions requiring stockholder approval and its interests may differ from interests of other holders of our common stock; impairment of our business by third-party intellectual property rights; and changes to our dividend policies which could occur at any time. 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, 2018, 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 for SiriusXM:
Hooper Stevens
212-901-6718
Hooper.stevens@siriusxm.com

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

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SOURCE Sirius XM Holdings Inc.