SiriusXM Reports Second Quarter 2015 Results and Increases Guidance

NEW YORK, July 28, 2015 /PRNewswire/ --

  • Self-pay Net Additions Increase 37% to 519,000
  • Record Second Quarter Revenue up 8% to $1.12 Billion
  • Net Income of $103 Million, Including a Pre-tax $108 Million Settlement
  • Adjusted EBITDA Climbs 12% to a Record $415 Million
  • Free Cash Flow Reaches $371 Million, up 11%
  • GAAP EPS of $0.02; Adjusted EPS of $0.03, Excluding Settlement

SiriusXM today announced second quarter 2015 operating and financial results, including record second quarter revenue of $1.12 billion, up 8% versus the second quarter of 2014.

SIRIUS XM logo

Net income in the second quarter of 2015 was $103 million, including a pre-tax $108 million charge to settle certain royalty litigation, versus $120 million in the second quarter of 2014. Net income per diluted common share was $0.02 in the second quarter of 2015 and 2014. Adjusted EBITDA was $415 million in the second quarter of 2015, up 12% from $370 million in the second quarter of 2014.

Adjusted net income was $170 million in the second quarter of 2015, up 29% from $131 million in the second quarter of 2014. Adjusted net income per diluted common share was $0.03 in the second quarter of 2015 compared to $0.02 in the second quarter of 2014. Adjusted net income excludes the impact of the settlement of certain royalty litigation during the second quarter of 2015.

"After another quarter of exceptional execution and subscriber growth, we are increasing our subscriber guidance for the second time this year to approximately 1.8 million net additions. We are also increasing guidance for revenue, adjusted EBITDA and free cash flow. Self-pay net additions of 519,000 were the strongest second quarter result since 2007, and our quarterly self-pay churn rate of 1.6% was outstanding. The economy continues to get stronger, our execution has never been better, and demand for our differentiated content bundle remains very high," said Jim Meyer, Chief Executive Officer, SiriusXM.

"We are focused on delivering the best, most compelling and most entertaining audio content available. Listeners are attracted to our diverse and exclusive content, such as our broadcasts of the Grateful Dead's historic concerts in Chicago, our two live exclusive subscriber concerts by Pitbull and James Taylor, and broadcasts of leading music festivals including Coachella, Bonnaroo, and The Electric Daisy Carnival. This fall we will bring our subscribers an exclusive channel created with the talented Andy Cohen, and launch our new exclusive 24/7 original headline news channel with FOX News," added Meyer.

SECOND QUARTER 2015 HIGHLIGHTS

  • Strong subscriber growth continues. SiriusXM added 692,000 net new subscribers in the second quarter, a 46% increase from the 475,000 net new subscribers added in the second quarter of 2014. Self-pay net subscriber additions were 519,000 in the second quarter of 2015 compared to 380,000 in the second quarter of 2014, which made it the largest second quarter for self-pay subscriber growth since 2007. Total paid subscribers reached 28.4 million, and self-pay subscribers reached 23.4 million, both record highs.
  • Record-low post-merger churn rate of 1.6%. The self-pay churn rate of 1.6% in the second quarter was the best on record since Sirius and XM were combined in 2008, a decrease from 1.8% in the prior year period. This trend demonstrates the strong, sustainable demand for satellite radio.
  • Second quarter adjusted EBITDA rises 12%. Adjusted EBITDA of $415 million in the second quarter of 2015 was the highest quarterly amount in the company's history, an increase of 12% over the $370 million reported in the second quarter of 2014. Adjusted EBITDA margin was 37%, equal to the record high margin set in the first quarter of 2015.
  • Free cash flow per diluted share increases 25%. Free cash flow of $371 million was up 11% from $335 million in the second quarter of 2014. With increased cash flow and a lower share count from the company's share repurchase program, free cash flow per diluted share climbed 25% to 6.7 cents in the second quarter of 2015, up from 5.4 cents in the second quarter of 2014.
  • Revolving credit facility increased to $1.75 billion and extended to 2020. In the second quarter the company amended its revolving credit facility, increasing it from $1.25 billion to $1.75 billion and extending its maturity from 2017 to 2020.
  • Pre-72 litigation settlement. The company entered into an agreement to settle certain outstanding litigation relating to the use of recordings fixed prior to February 15, 1972. These plaintiffs have represented that they own or control approximately 80% of the pre-1972 recordings the company has historically used. Pursuant to the settlement, the company will pay the plaintiffs $210 million for past claims and the continued use of their recordings through 2017. As part of the settlement, the company has the right to enter into a license with each plaintiff to broadcast its pre-1972 recordings from 2018 through 2022. The royalty rate for each license will be determined by negotiation or, if necessary, binding arbitration.

"We repurchased 144 million shares for $560 million during the second quarter, and this year through yesterday we have repurchased 338 million shares for approximately $1.3 billion. Our growing free cash flow, low leverage and undrawn credit facility allow us to continue investing in growth, while providing flexibility to pursue strategic opportunities and return capital to shareholders," noted David Frear, Chief Financial Officer, SiriusXM.

INCREASED 2015 GUIDANCE

"Our performance in the first half has been phenomenal on all fronts," Frear added. "As a result, we are increasing guidance across the board for subscribers, revenue, adjusted EBITDA, and free cash flow. Our adjusted EBITDA guidance includes approximately $19 million of incremental expense from the reported royalty litigation settlement that will be reflected in the second half of 2015. Reported free cash flow in the second half of 2015 will exclude the cash payment we expect to make this month under the settlement."

Our full year 2015 guidance is as follows:


  • Net self-pay subscriber additions of approximately 1.6 million,
  • Total net subscriber additions of approximately 1.8 million,
  • Revenue of approximately $4.5 billion,
  • Adjusted EBITDA of approximately $1.62 billion, and
  • Free cash flow of approximately $1.3 billion.

SECOND QUARTER 2015 RESULTS

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)










For the Three Months Ended June 30,


For the Six Months Ended June 30,

(in thousands, except per share data)

2015


2014


2015


2014

Revenue:








Subscriber revenue

$             940,077


$             878,160


$          1,851,547


$          1,729,596

Advertising revenue

28,839


25,498


55,712


47,712

Equipment revenue

29,263


27,616


54,104


51,594

Other revenue

125,031


104,071


242,837


204,154

Total revenue

1,123,210


1,035,345


2,204,200


2,033,056

Operating expenses:








Cost of services:








Revenue share and royalties

331,517


200,221


544,495


395,632

Programming and content

69,370


69,570


140,516


144,440

Customer service and billing

91,932


90,092


184,029


181,161

Satellite and transmission

21,714


21,272


43,018


42,651

Cost of equipment

10,930


12,030


19,775


19,834

Subscriber acquisition costs

136,504


124,407


258,764


247,429

Sales and marketing

86,493


77,759


165,237


154,086

Engineering, design and development

16,088


15,630


31,048


31,541

General and administrative

72,137


72,582


151,960


148,825

Depreciation and amortization

67,096


67,204


132,123


135,471

Total operating expenses

903,781


750,767


1,670,965


1,501,070

Income from operations

219,429


284,578


533,235


531,986

Other income (expense):








Interest expense, net of amounts capitalized

(75,380)


(67,521)


(145,288)


(121,613)

Interest and investment income (loss)

4,032


(1,066)


5,013


3,283

Loss on change in value of derivatives

-


(7,463)


-


(34,485)

Other income (loss) 

189


(1,745)


(69)


(1,652)

Total other expense

(71,159)


(77,795)


(140,344)


(154,467)

Income before income taxes

148,270


206,783


392,891


377,519

Income tax expense

(45,421)


(86,822)


(184,350)


(163,570)

Net income

$             102,849


$             119,961


$             208,541


$             213,949

Foreign currency translation adjustment, net of tax

(9)


(40)


(9)


78

Total comprehensive income

$             102,840


$             119,921


$             208,532


$             214,027

Net income per common share:








Basic

$                   0.02


$                   0.02


$                   0.04


$                   0.04

Diluted

$                   0.02


$                   0.02


$                   0.04


$                   0.04

Weighted average common shares outstanding:








Basic

5,443,590


5,865,032


5,506,818


5,979,273

Diluted

5,507,601


6,210,078


5,570,445


6,054,771

 

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


As of June30,


As of December 31,


2015


2014

(in thousands, except per share data)

(unaudited)



ASSETS




Current assets:




Cash and cash equivalents

$                       294,053


$                       147,724

Receivables, net

240,325


220,579

Inventory, net

24,599


19,397

Prepaid expenses

122,996


116,336

Related party current assets

4,097


4,344

Deferred tax asset

903,376


1,038,603

Other current assets

40,920


2,763

Total current assets

1,630,366


1,549,746

Property and equipment, net

1,463,827


1,510,112

Long-term restricted investments

9,888


5,922

Deferred financing fees, net

15,377


12,021

Intangible assets, net

2,618,802


2,645,046

Goodwill

2,205,107


2,205,107

Related party long-term assets

-


3,000

Long-term deferred tax asset

395,224


437,736

Other long-term assets

69,480


6,819

Total assets

$                    8,408,071


$                    8,375,509

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued expenses

$                       787,040


$                       587,755

Accrued interest

97,243


80,440

Current portion of deferred revenue

1,694,232


1,632,381

Current portion of deferred credit on executory contracts

-


1,394

Current maturities of long-term debt

8,074


7,482

Related party current liabilities

4,687


4,340

Total current liabilities

2,591,276


2,313,792

Deferred revenue

156,229


151,901

Long-term debt

5,108,336


4,493,863

Related party long-term liabilities

12,215


13,635

Other long-term liabilities

92,751


92,481

Total liabilities

7,960,807


7,065,672

Stockholders' equity:




Common stock, par value $0.001; 9,000,000 shares authorized; 5,379,798 and 5,653,529 shares issued; 5,370,298 and 5,646,119 outstanding at June 30, 2015 and December 31, 2014, respectively

5,379


5,653

Accumulated other comprehensive loss, net of tax

(411)


(402)

Additional paid-in capital

5,710,484


6,771,554

Treasury stock, at cost; 9,500 and 7,410 shares of common stock at June 30, 2015 and December 31, 2014, respectively

(35,795)


(26,034)

Accumulated deficit

(5,232,393)


(5,440,934)

Total stockholders' equity

447,264


1,309,837

Total liabilities and stockholders' equity

$                    8,408,071


$                    8,375,509





 

 

 

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


For the Six Months Ended June 30,

(in thousands)

2015


2014

Cash flows from operating activities:




Net income

$                      208,541


$                      213,949

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




Depreciation and amortization

132,123


135,471

Non-cash interest expense, net of amortization of premium

3,868


10,779

Provision for doubtful accounts

21,919


21,287

Amortization of deferred income related to equity method investment

(1,388)


(1,388)

Gain on unconsolidated entity investments, net

-


(966)

Dividend received from unconsolidated entity investment

7,677


8,554

Loss on change in value of derivatives

-


34,485

Share-based payment expense

38,941


36,027

Deferred income taxes

177,739


157,965

Other non-cash purchase price adjustments

(1,394)


(1,890)

Changes in operating assets and liabilities:




Receivables

(41,665)


(30,651)

Inventory

(5,202)


(7,692)

Related party, net 

(4,117)


2,837

Prepaid expenses and other current assets

(44,821)


(1,057)

Other long-term assets

(62,663)


1,238

Accounts payable and accrued expenses

199,532


(40,098)

Accrued interest

16,803


12,943

Deferred revenue

66,179


44,981

Other long-term liabilities

269


(4,702)

Net cash provided by operating activities

712,341


592,072

Cash flows from investing activities:




Additions to property and equipment

(61,229)


(58,417)

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

(65,195)


(33,095)

Cash flows from financing activities:




Proceeds from exercise of stock options

-


260

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

(15,420)


(7,313)

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

1,259,346


1,921,230

Repayment of long-term borrowings and revolving credit facility

(660,549)


(905,815)

Common stock repurchased and retired

(1,084,194)


(1,532,164)

Net cash used in financing activities

(500,817)


(523,802)

Net increase in cash and cash equivalents

146,329


35,175

Cash and cash equivalents at beginning of period

147,724


134,805

Cash and cash equivalents at end of period

$                      294,053


$                      169,980

 

Key Operating Metrics              

The following table contains our key operating metrics based on our adjusted results of operations for the three and six months ended June 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 June 30,


For the Six Months Ended June 30,

2015


2014


2015


2014

     Self-pay subscribers

23,436


21,635


23,436


21,635

     Paid promotional subscribers

4,999


4,667


4,999


4,667

Ending subscribers (a)

28,434


26,302


28,434


26,302









     Self-pay subscribers

519


380


913


553

     Paid promotional subscribers

173


96


210


189

Net additions (a)

692


475


1,123


742









Daily weighted average number of subscribers

28,031


26,006


27,720


25,805









Average self-pay monthly churn

1.6%


1.8%


1.7%


1.9%









New vehicle consumer conversion rate

41%


42%


41%


42%









ARPU

$                        12.42


$                        12.36


$                        12.34


$                        12.27

SAC, per installation

$                             32


$                             33


$                             33


$                             34

Customer service and billing expenses, per average subscriber

$                          0.99


$                          1.05


$                          1.00


$                          1.07

Free cash flow

$                    370,914


$                    335,044


$                    647,146


$                    557,833

Adjusted EBITDA

$                    414,962


$                    370,437


$                    814,189


$                    705,220

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

 

Glossary

Adjusted EBITDA – EBITDA is defined as net income before interest and investment income (loss); interest expense, net of amounts capitalized; income tax expense and depreciation and amortization. We adjust EBITDA to exclude the impact of other income and expense, loss on extinguishment of debt, 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 Sirius and XM merger, (ii) depreciation and amortization, (iii) share-based payment expense and (iv) other significant operating expense (income) that does 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 pre-1972 sound recordings legal settlement 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 future period of July 2015 through December 2017 will not be excluded from adjusted EBITDA in future periods as the royalty expense will relate 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 Sirius and XM 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 June 30,


For the Six Months Ended June 30,

(in thousands)

2015


2014


2015


2014









Net income (GAAP):

$             102,849


$             119,961


$           208,541


$           213,949

Add back items excluded from Adjusted EBITDA:








Purchase price accounting adjustments:








Revenues

1,813


1,813


3,626


3,626

Operating expenses

(558)


(945)


(1,394)


(1,890)

Pre-1972 sound recordings legal settlement (GAAP)

107,658


-


107,658


-

Share-based payment expense (GAAP)

19,524


17,787


38,941


36,027

Depreciation and amortization (GAAP)

67,096


67,204


132,123


135,471

Interest expense, net of amounts capitalized (GAAP)

75,380


67,521


145,288


121,613

Interest and investment (income) loss (GAAP)

(4,032)


1,066


(5,013)


(3,283)

Loss on change in value of derivatives (GAAP)

-


7,463


-


34,485

Other (income) loss (GAAP)

(189)


1,745


69


1,652

Income tax expense (GAAP)

45,421


86,822


184,350


163,570

Adjusted EBITDA

$             414,962


$             370,437


$           814,189


$           705,220









 

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 six months ended June 30, 2015 and 2014:


Unaudited


For the Three Months Ended June 30,


For the Six Months Ended June 30,

(in thousands)

2015


2014


2015


2014









Income before income taxes (GAAP):

$             148,270


$             206,783


$             392,891


$             377,519

Add back items excluded from adjusted net income:








Purchase price accounting adjustments:








Revenues

1,813


1,813


3,626


3,626

Operating expenses

(558)


(945)


(1,394)


(1,890)

Loss on change in value of derivatives (GAAP)

-


7,463


-


34,485

Pre-1972 sound recordings legal settlement (GAAP)

107,658


-


107,658


-

Adjusted income before income taxes

$             257,183


$             215,114


$             502,781


$             413,740

Allocable income tax expense

(87,135)


(83,679)


(226,438)


(160,945)

Adjusted net income

$             170,048


$             131,435


$             276,343


$             252,795

Adjusted net income per common share:








Basic

$                   0.03


$                   0.02


$                   0.05


$                   0.04

Diluted

$                   0.03


$                   0.02


$                   0.05


$                   0.04

Weighted average common shares outstanding:








Basic

5,443,590


5,865,032


5,506,818


5,979,273

Diluted

5,507,601


6,210,078


5,570,445


6,054,771

 

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 six months ended June 30, 2015 and 2014:


Unaudited For the Three Months Ended June 30, 2015

(in thousands)

As Reported


Purchase Price Accounting Adjustments


Allocation of Share-based Payment Expense


Adjusted









Revenue:








Subscriber revenue

$               940,077


$                         -


$                         -


$               940,077

Advertising revenue

28,839


-


-


28,839

Equipment revenue

29,263


-


-


29,263

Other revenue

125,031


1,813


-


126,844

Total revenue

$            1,123,210


$                   1,813


$                         -


$            1,125,023

Operating expenses








Cost of services:








Revenue share and royalties

$               331,517


$                         -


$                         -


$               331,517

Programming and content

69,370


558


(2,119)


67,809

Customer service and billing

91,932


-


(676)


91,256

Satellite and transmission

21,714


-


(975)


20,739

Cost of equipment

10,930


-


-


10,930

Subscriber acquisition costs

136,504


-


-


136,504

Sales and marketing

86,493


-


(4,024)


82,469

Engineering, design and development

16,088


-


(2,128)


13,960

General and administrative

72,137


-


(9,602)


62,535

Depreciation and amortization (a)

67,096


-


-


67,096

Share-based payment expense

-


-


19,524


19,524

Total operating expenses

$               903,781


$                      558


$                         -


$               904,339









(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 June 30, 2015 was $9,000. 

 

 

 


Unaudited For the Three Months Ended June 30, 2014

(in thousands)

As Reported


Purchase Price Accounting Adjustments


Allocation of Share-based Payment Expense


Adjusted









Revenue:








Subscriber revenue

$               878,160


$                         -


$                         -


$               878,160

Advertising revenue

25,498


-


-


25,498

Equipment revenue

27,616


-


-


27,616

Other revenue

104,071


1,813


-


105,884

Total revenue

$            1,035,345


$                   1,813


$                         -


$            1,037,158

Operating expenses








Cost of services:








Revenue share and royalties

$               200,221


$                         -


$                         -


$               200,221

Programming and content

69,570


945


(2,254)


68,261

Customer service and billing

90,092


-


(587)


89,505

Satellite and transmission

21,272


-


(956)


20,316

Cost of equipment

12,030


-


-


12,030

Subscriber acquisition costs

124,407


-


-


124,407

Sales and marketing

77,759


-


(3,407)


74,352

Engineering, design and development

15,630


-


(1,937)


13,693

General and administrative

72,582


-


(8,646)


63,936

Depreciation and amortization (a)

67,204


-


-


67,204

Share-based payment expense

-


-


17,787


17,787

Total operating expenses

$               750,767


$                      945


$                         -


$               751,712









(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 June 30, 2014 was $10,000.

 

 

 


Unaudited For the Six Months Ended June 30, 2015

(in thousands)

As Reported


Purchase Price Accounting Adjustments


Allocation of Share-based Payment Expense


Adjusted









Revenue:








Subscriber revenue

$            1,851,547


$                         -


$                         -


$            1,851,547

Advertising revenue

55,712


-


-


55,712

Equipment revenue

54,104


-


-


54,104

Other revenue

242,837


3,626


-


246,463

Total revenue

$            2,204,200


$                   3,626


$                         -


$            2,207,826

Operating expenses








Cost of services:








Revenue share and royalties

$               544,495


$                         -


$                         -


$               544,495

Programming and content

140,516


1,394


(4,346)


137,564

Customer service and billing

184,029


-


(1,371)


182,658

Satellite and transmission

43,018


-


(1,912)


41,106

Cost of equipment

19,775


-


-


19,775

Subscriber acquisition costs

258,764


-


-


258,764

Sales and marketing

165,237


-


(7,768)


157,469

Engineering, design and development

31,048


-


(4,262)


26,786

General and administrative

151,960


-


(19,282)


132,678

Depreciation and amortization (a)

132,123


-


-


132,123

Share-based payment expense

-


-


38,941


38,941

Total operating expenses

$            1,670,965


$                   1,394


$                         -


$            1,672,359









(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 six months ended June 30, 2015 was $18,000.

 

 


Unaudited For the Six Months Ended June 30, 2014

(in thousands)

As Reported


Purchase Price Accounting Adjustments


Allocation of Share-based Payment Expense


Adjusted









Revenue:








Subscriber revenue

$            1,729,596


$                         -


$                         -


$            1,729,596

Advertising revenue

47,712


-


-


47,712

Equipment revenue

51,594


-


-


51,594

Other revenue

204,154


3,626


-


207,780

Total revenue

$            2,033,056


$                   3,626


$                         -


$            2,036,682

Operating expenses








Cost of services:








Revenue share and royalties

$               395,632


$                         -


$                         -


$               395,632

Programming and content

144,440


1,890


(4,469)


141,861

Customer service and billing

181,161


-


(1,164)


179,997

Satellite and transmission

42,651


-


(1,902)


40,749

Cost of equipment

19,834


-


-


19,834

Subscriber acquisition costs

247,429


-


-


247,429

Sales and marketing

154,086


-


(6,973)


147,113

Engineering, design and development

31,541


-


(3,863)


27,678

General and administrative

148,825


-


(17,656)


131,169

Depreciation and amortization (a)

135,471


-


-


135,471

Share-based payment expense

-


-


36,027


36,027

Total operating expenses

$            1,501,070


$                   1,890


$                         -


$            1,502,960









(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 six months ended June 30, 2014 was $20,000.

 

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 six months ended June 30, 2015 and 2014:


Unaudited


For the Three Months Ended June 30,


For the Six Months Ended June 30,

(in thousands)

2015


2014


2015


2014

Operating expenses (GAAP):

$             903,781


$             750,767


$          1,670,965


$          1,501,070

Items excluded from adjusted cash operating expenses:








Purchase price accounting adjustments

558


945


1,394


1,890

Pre-1972 sound recordings legal settlement (GAAP)

(107,658)


-


(107,658)


-

Share-based payment expense (GAAP)

(19,524)


(17,787)


(38,941)


(36,027)

Depreciation and amortization (GAAP)

(67,096)


(67,204)


(132,123)


(135,471)

Adjusted cash operating expenses

$             710,061


$             666,721


$          1,393,637


$          1,331,462









 

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
June 30,


For the Six Months Ended
June 30,


2015


2014


2015


2014

Subscriber revenue, excluding connected vehicle (GAAP)

$        915,311


$        855,846


$     1,803,692


$     1,688,649

Add: advertising revenue (GAAP)

28,839


25,498


55,712


47,712

Add: other subscription-related revenue (GAAP)

100,300


82,990


192,954


163,758


$     1,044,450


$        964,334


$     2,052,358


$     1,900,119









Daily weighted average number of subscribers

28,031


26,006


27,720


25,805









ARPU

$            12.42


$            12.36


$            12.34


$            12.27

 

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
June 30,


For the Six Months Ended
June 30,


2015


2014


2015


2014









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

$          84,203


$          82,705


$        168,264


$        166,809

Less: share-based payment expense (GAAP)

(676)


(587)


(1,371)


(1,164)


$          83,527


$          82,118


$        166,893


$        165,645









Daily weighted average number of subscribers

28,031


26,006


27,720


25,805









Customer service and billing expenses, per average subscriber

$              0.99


$              1.05


$              1.00


$              1.07









 

Free cash flow and free cash flow per diluted share - are derived from cash flow provided by operating activities, capital expenditures and restricted and other investment activity. 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 June 30,


For the Six Months Ended June 30,


2015


2014


2015


2014









Cash Flow information








Net cash provided by operating activities

$             402,312


$             340,682


$             712,341


$             592,072

Net cash used in investing activities

$             (31,398)


$               (5,638)


$             (65,195)


$             (33,095)

Net cash used in financing activities

$           (558,904)


$           (286,235)


$           (500,817)


$           (523,802)

Free Cash Flow








Net cash provided by operating activities

$             402,312


$             340,682


$             712,341


$             592,072

Additions to property and equipment

(31,398)


(29,816)


(61,229)


(58,417)

Purchases of restricted and other investments

-


-


(3,966)


-

Return of capital from investment in unconsolidated entity

-


24,178


-


24,178

Free cash flow

$             370,914


$             335,044


$             647,146


$             557,833









Diluted weighted average common shares outstanding

5,507,601


6,210,078


5,570,445


6,054,771









Free cash flow per diluted share

$                   0.07


$                   0.05


$                   0.12


$                   0.09









 

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 June 30,


For the Six Months Ended June 30,


2014


2013


2014


2013









Subscriber acquisition costs (GAAP)

$             136,504


$             124,407


$             258,764


$             247,429

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

(18,333)


(15,586)


(34,329)


(31,760)


$             118,171


$             108,821


$             224,435


$             215,669









Installations

3,655


3,280


6,876


6,358









SAC, per installation

$                      32


$                      33


$                      33


$                      34









 

About SiriusXM

Sirius XM Holdings Inc. (NASDAQ: SIRI) is the world's largest radio broadcaster measured by revenue and has 28.4 million subscribers.  SiriusXM creates and broadcasts commercial-free music; premier sports talk and live events; comedy; news; exclusive talk and entertainment; and the most comprehensive Latin music, sports and talk programming in radio. SiriusXM is available in vehicles from every major car company in the U.S. and from retailers nationwide as well as at shop.siriusxm.com. SiriusXM programming is available through the SiriusXM Internet Radio App for smartphones and other connected devices as well as online at siriusxm.com. SiriusXM also provides premium traffic, weather, data and information services for subscribers in cars, trucks, RVs, boats and aircraft through SiriusXM Traffic™, SiriusXM Travel Link, NavTraffic®, NavWeather™, SiriusXM Aviation, SiriusXM Marine™, Sirius Marine Weather, XMWX Aviation™, and XMWX Marine™.  SiriusXM holds a minority interest in SiriusXM Canada which has more than 2 million subscribers.

On social media, join the SiriusXM community on Facebook, Twitter, Instagram, and YouTube.

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.

E - SIRI

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

Logo - https://photos.prnewswire.com/prnh/20101014/NY82093LOGO

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/siriusxm-reports-second-quarter-2015-results-and-increases-guidance-300119389.html

SOURCE Sirius XM Holdings Inc.