• | First Quarter Revenue Increases to $1.7 Billion; Pro Forma Revenue (As If Pandora Acquisition Closed Jan. 1, 2018) Increases 10% to $1.9 Billion |
• | Net Income Declines 44% to $162 Million on Acquisition and Other Charges of $76 Million; Diluted EPS of $0.03 Reported |
• | Adjusted EBITDA Climbs 27% to $567 Million |
• | Company Capital Returns Approach $900 Million Year-to-Date |
• | Completes Acquisition of Pandora Media; Issues Combined 2019 Guidance |
• | Self-Pay Subscribers Top 29 Million. SiriusXM added 131 thousand net new self-pay subscribers in the first quarter to end with nearly 29.1 million self-pay subscribers. Total net subscriber additions in the first quarter were 132 thousand, resulting in more than 34.2 million total SiriusXM subscribers at the end of the period. Self-pay monthly churn for the quarter was 1.8%, flat compared to the first quarter of 2018. |
• | SiriusXM Revenue of $1.5 Billion. First quarter revenue of $1.5 billion grew 8% compared to the prior year period. This growth was driven by a 3% increase in SiriusXM subscribers and 4% growth in SiriusXM's average revenue per user (ARPU) to $13.52. |
• | Gross Profit Grows 8%. Total cost of services at SiriusXM increased 9% to $569 million in the first quarter, driven primarily by higher revenue share and royalties. Gross profit at SiriusXM in the quarter totaled $926 million, increasing 8% over the first quarter of 2018, and produced a gross margin of 62%, approximately flat compared to the prior year period. |
• | Exclusive Performances, Legendary Artists. SiriusXM continued to demonstrate its ability to "go deep" with seminal artists with a special limited-time channel KISS Army Radio — accompanied by a subscriber concert on LA’s Sunset Strip — as well as exclusively broadcasting a series of live concerts by country star Eric Church on The Highway channel and a special Twenty One Pilots performance on Alt Nation for an audience of SiriusXM subscribers. |
• | Ad Revenue Hit Q1 Record. Advertising revenue at Pandora reached a first quarter record of $231 million, growing 7% over the first quarter of 2018. Ad revenue was driven by record first quarter monetization of $62.60 per thousand hours, growing 13% over the first quarter 2018. Revenue growth was attributed to 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. Total revenue for Pandora grew 14% to $365 million in the quarter, driven by a 29% increase in subscriber revenue to $134 million. |
• | Total Ad Supported Listener Hours of 3.42 Billion. Monthly Active Users (MAUs) at Pandora were 66.0 million in the first quarter, down from 72.3 million in the prior year period. This resulted in total ad supported listener hours of 3.4 billion in the period, down from 3.8 billion in the first quarter of 2018. |
• | Self-Pay Net Adds of 246 Thousand. Pandora added 246 thousand net new self-pay subscribers in the first quarter to end with nearly 6.2 million self-pay subscribers. Total Pandora subscribers were 6.9 million at the end of the period. |
• | Gross Profit Grows 73%. Total cost of services at Pandora in the first quarter of 2019 of $254 million were relatively flat compared with the first quarter 2018, with lower revenue share and royalties offsetting slightly higher programming and content and customer service and billing expenses. Gross profit at Pandora totaled $111 million, increasing 73% over the first quarter of 2018. This produced a gross margin for Pandora in the quarter of 30%, growing approximately 1,000 basis points from 20% in the prior year period. |
• | Sound On: Spring Campaign and New Features. Pandora launched its Sound On brand campaign in iconic locations across Nashville, San Francisco, Oakland, NYC, Miami and Atlanta, featuring some of the season’s most high-profile artists including Jonas Brothers, Maren Morris, Bebe Rexha, Khalid, 2 Chainz, John Legend and Becky G. During the quarter, Pandora also launched new features like Stories, which combine the best of podcasts and music playlists and Modes, which allows the user to select a more “lean forward” or “lean back” experience. |
• | SiriusXM self-pay net subscriber additions approaching 1 million, |
• | Pro forma revenue of approximately $7.7 billion, |
• | Adjusted EBITDA of approximately $2.3 billion, and |
• | Free cash flow of approximately $1.6 billion. |
For the Three Months Ended March 31, | |||||||
(in millions, except per share data) | 2019 | 2018 | |||||
Revenue: | |||||||
Subscriber revenue | $ | 1,458 | $ | 1,258 | |||
Advertising revenue | 209 | 42 | |||||
Equipment revenue | 41 | 35 | |||||
Other revenue | 36 | 40 | |||||
Total revenue | 1,744 | 1,375 | |||||
Operating expenses: | |||||||
Cost of services: | |||||||
Revenue share and royalties | 492 | 310 | |||||
Programming and content | 106 | 101 | |||||
Customer service and billing | 113 | 94 | |||||
Transmission | 31 | 22 | |||||
Cost of equipment | 6 | 7 | |||||
Subscriber acquisition costs | 108 | 123 | |||||
Sales and marketing | 183 | 107 | |||||
Engineering, design and development | 54 | 31 | |||||
General and administrative | 135 | 85 | |||||
Depreciation and amortization | 107 | 72 | |||||
Acquisition and other related costs | 76 | — | |||||
Total operating expenses | 1,411 | 952 | |||||
Income from operations | 333 | 423 | |||||
Other income (expense): | |||||||
Interest expense | (90 | ) | (90 | ) | |||
Loss on extinguishment of debt | (1 | ) | — | ||||
Other income | 1 | 36 | |||||
Total other expense | (90 | ) | (54 | ) | |||
Income before income taxes | 243 | 369 | |||||
Income tax expense | (81 | ) | (80 | ) | |||
Net income | $ | 162 | $ | 289 | |||
Foreign currency translation adjustment, net of tax | 7 | (9 | ) | ||||
Total comprehensive income | $ | 169 | $ | 280 | |||
Net income per common share: | |||||||
Basic | $ | 0.04 | $ | 0.06 | |||
Diluted | $ | 0.03 | $ | 0.06 | |||
Weighted average common shares outstanding: | |||||||
Basic | 4,571 | 4,491 | |||||
Diluted | 4,678 | 4,586 | |||||
Dividends declared per common share | $ | 0.0121 | $ | 0.0110 |
(in millions, except per share data) | March 31, 2019 | December 31, 2018 | |||||
ASSETS | (unaudited) | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 62 | $ | 54 | |||
Receivables, net | 592 | 233 | |||||
Inventory, net | 20 | 22 | |||||
Related party current assets | 12 | 11 | |||||
Prepaid expenses and other current assets | 221 | 158 | |||||
Total current assets | 907 | 478 | |||||
Property and equipment, net | 1,586 | 1,513 | |||||
Intangible assets, net | 3,581 | 2,501 | |||||
Goodwill | 3,831 | 2,290 | |||||
Related party long-term assets | 448 | 960 | |||||
Deferred tax assets | 298 | 293 | |||||
Operating lease right-of-use assets | 428 | — | |||||
Other long-term assets | 146 | 138 | |||||
Total assets | $ | 11,225 | $ | 8,173 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | 1,072 | $ | 736 | |||
Accrued interest | 86 | 128 | |||||
Current portion of deferred revenue | 1,994 | 1,932 | |||||
Current maturities of debt | 4 | 3 | |||||
Operating lease current liabilities | 46 | — | |||||
Related party current liabilities | 4 | 4 | |||||
Total current liabilities | 3,206 | 2,803 | |||||
Long-term deferred revenue | 145 | 149 | |||||
Long-term debt | 7,181 | 6,885 | |||||
Related party long-term liabilities | 3 | 4 | |||||
Deferred tax liabilities | 48 | 47 | |||||
Operating lease liabilities | 397 | — | |||||
Other long-term liabilities | 91 | 102 | |||||
Total liabilities | 11,071 | 9,990 | |||||
Stockholders’ (deficit) equity: | |||||||
Common stock, par value $0.001 per share; 9,000 shares authorized; 4,650 and 4,346 shares issued; 4,645 and 4,346 outstanding at March 31, 2019 and December 31, 2018, respectively | 5 | 4 | |||||
Accumulated other comprehensive income (loss), net of tax | 1 | (6 | ) | ||||
Additional paid-in capital | 2,071 | 242 | |||||
Treasury stock, at cost; 5 and 0 shares of common stock at March 31, 2019 and December 31, 2018, respectively | (28 | ) | — | ||||
Accumulated deficit | (1,895 | ) | (2,057 | ) | |||
Total stockholders’ equity (deficit) | 154 | (1,817 | ) | ||||
Total liabilities and stockholders’ equity (deficit) | $ | 11,225 | $ | 8,173 |
For the Three Months Ended March 31, | |||||||
(in millions) | 2019 | 2018 | |||||
Cash flows from operating activities: | |||||||
Net income | $ | 162 | $ | 289 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 107 | 72 | |||||
Non-cash interest expense, net of amortization of premium | 4 | 2 | |||||
Provision for doubtful accounts | 14 | 11 | |||||
Amortization of deferred income related to equity method investment | (1 | ) | (1 | ) | |||
Loss on extinguishment of debt | 1 | — | |||||
Loss (gain) on unconsolidated entity investments, net | 4 | (1 | ) | ||||
Gain on fair value instrument | — | (31 | ) | ||||
Dividend received from unconsolidated entity investment | — | 1 | |||||
Share-based payment expense | 70 | 34 | |||||
Deferred income taxes | 77 | 72 | |||||
Changes in operating assets and liabilities: | |||||||
Receivables | (13 | ) | (14 | ) | |||
Inventory | 2 | 3 | |||||
Related party, net | (1 | ) | (2 | ) | |||
Prepaid expenses and other current assets | (31 | ) | (8 | ) | |||
Other long-term assets | 1 | 6 | |||||
Operating lease right-of-use assets | 19 | — | |||||
Accounts payable and accrued expenses | 15 | (38 | ) | ||||
Accrued interest | (42 | ) | (53 | ) | |||
Deferred revenue | 20 | 66 | |||||
Operating lease liabilities | (17 | ) | — | ||||
Other long-term liabilities | 5 | 7 | |||||
Net cash provided by operating activities | 396 | 415 | |||||
Cash flows from investing activities: | |||||||
Additions to property and equipment | (90 | ) | (81 | ) | |||
Purchases of other investments | (6 | ) | (7 | ) | |||
Cash received from Pandora Acquisition | 313 | — | |||||
Sale of short-term investments | 72 | — | |||||
Investments in related parties and other equity investees | (5 | ) | — | ||||
Repayment from related party | — | 3 | |||||
Net cash provided by (used in) investing activities | 284 | (85 | ) | ||||
Cash flows from financing activities: | |||||||
Taxes paid from net share settlements for stock-based compensation | (33 | ) | (23 | ) | |||
Revolving credit facility, net of deferred financing costs | 143 | 65 | |||||
Proceeds from sale of capped call security | 3 | — | |||||
Principal payments of long-term borrowings | (152 | ) | (4 | ) | |||
Common stock repurchased and retired | (576 | ) | (309 | ) | |||
Dividends paid | (57 | ) | (49 | ) | |||
Net cash used in financing activities | (672 | ) | (320 | ) | |||
Net decrease in cash, cash equivalents and restricted cash | 8 | 10 | |||||
Cash, cash equivalents and restricted cash at beginning of period | 65 | 79 | |||||
Cash, cash equivalents and restricted cash at end of period(1) | $ | 73 | $ | 89 |
(1) | The following table reconciles cash, cash equivalents and restricted cash per the statement of cash flows to the balance sheet. The restricted cash balances are primarily due to letters of credit which have been issued to the landlords of leased office space. The terms of the letters of credit primarily extend beyond one year. |
(in millions) | March 31, 2019 | December 31, 2018 | March 31, 2018 | December 31, 2017 | |||||||||||
Cash and cash equivalents | $ | 62 | $ | 54 | $ | 79 | $ | 69 | |||||||
Restricted cash included in Other long-term assets | 11 | 11 | 10 | 10 | |||||||||||
Total cash, cash equivalents and restricted cash at end of period | $ | 73 | $ | 65 | $ | 89 | $ | 79 |
For the Three Months Ended March 31, | 2019 vs 2018 Change | |||||||||||||
(in millions) | 2019 | 2018 | Amount | % | ||||||||||
Revenue | (Pro Forma) | (Pro Forma) | ||||||||||||
Sirius XM: | ||||||||||||||
Subscriber revenue | $ | 1,370 | $ | 1,258 | $ | 112 | 9 | % | ||||||
Advertising revenue | 46 | 42 | 4 | 10 | % | |||||||||
Equipment revenue | 41 | 35 | 6 | 17 | % | |||||||||
Other revenue | 38 | 43 | (5 | ) | (12 | )% | ||||||||
Total Sirius XM revenue | 1,495 | 1,378 | 117 | 8 | % | |||||||||
Pandora: | ||||||||||||||
Subscriber revenue | 134 | 104 | 30 | 29 | % | |||||||||
Advertising revenue | 231 | 215 | 16 | 7 | % | |||||||||
Total Pandora revenue | 365 | 319 | 46 | 14 | % | |||||||||
Total consolidated revenue | 1,860 | 1,697 | 163 | 10 | % | |||||||||
Cost of services | ||||||||||||||
Sirius XM: | ||||||||||||||
Revenue share and royalties | 347 | 310 | 37 | 12 | % | |||||||||
Programming and content | 102 | 101 | 1 | 1 | % | |||||||||
Customer service and billing | 98 | 94 | 4 | 4 | % | |||||||||
Transmission | 25 | 22 | 3 | 14 | % | |||||||||
Cost of equipment | 6 | 7 | (1 | ) | (14 | )% | ||||||||
Total Sirius XM cost of services | 578 | 534 | 44 | 8 | % | |||||||||
Pandora: | ||||||||||||||
Revenue share and royalties | 217 | 222 | (5 | ) | (2 | )% | ||||||||
Programming and content | 4 | 2 | 2 | 100 | % | |||||||||
Customer service and billing | 23 | 20 | 3 | 15 | % | |||||||||
Transmission | 11 | 12 | (1 | ) | (8 | )% | ||||||||
Total Pandora cost of services | 255 | 256 | (1 | ) | — | % | ||||||||
Total consolidated cost of services | 833 | 790 | 43 | 5 | % | |||||||||
Subscriber acquisition costs | 108 | 123 | (15 | ) | (12 | )% | ||||||||
Sales and marketing | 219 | 206 | 13 | 6 | % | |||||||||
Engineering, design and development | 68 | 62 | 6 | 10 | % | |||||||||
General and administrative | 151 | 129 | 22 | 17 | % | |||||||||
Depreciation and amortization | 122 | 113 | 9 | 8 | % | |||||||||
Total operating expenses | 1,501 | 1,423 | 78 | 5 | % | |||||||||
Income from operations | 359 | 274 | 85 | 31 | % | |||||||||
Other income (expense): | ||||||||||||||
Interest expense | (92 | ) | (97 | ) | (5 | ) | (5 | )% | ||||||
Loss on extinguishment of debt | (1 | ) | (2 | ) | (1 | ) | (50 | )% | ||||||
Other income | 2 | 38 | (36 | ) | (95 | )% | ||||||||
Total other expense | (91 | ) | (61 | ) | 30 | 49 | % | |||||||
Income before income taxes | 268 | 213 | 55 | 26 | % | |||||||||
Income tax expense | (87 | ) | (41 | ) | (46 | ) | (112 | )% | ||||||
Net income | $ | 181 | $ | 172 | $ | 9 | 5 | % | ||||||
Adjusted EBITDA | $ | 567 | $ | 447 | $ | 120 | 27 | % |
Unaudited for the Three Months Ended March 31, 2019 | |||||||||||||||||
As Reported | Pandora Pre-Acquisition Financial Information (a) | Purchase Price Accounting and Pro Forma Adjustments | Ref | Pro Forma | |||||||||||||
Revenue | |||||||||||||||||
Sirius XM: | |||||||||||||||||
Subscriber revenue | $ | 1,370 | $ | — | $ | — | $ | 1,370 | |||||||||
Advertising revenue | 46 | — | — | 46 | |||||||||||||
Equipment revenue | 41 | — | — | 41 | |||||||||||||
Other revenue | 36 | — | 2 | (b) | 38 | ||||||||||||
Total Sirius XM revenue | 1,493 | — | 2 | 1,495 | |||||||||||||
Pandora: | |||||||||||||||||
Subscriber revenue | 88 | 46 | — | 134 | |||||||||||||
Advertising revenue | 163 | 68 | — | 231 | |||||||||||||
Total Pandora revenue | 251 | 114 | — | 365 | |||||||||||||
Total consolidated revenue | 1,744 | 114 | 2 | 1,860 | |||||||||||||
Cost of services | |||||||||||||||||
Sirius XM: | |||||||||||||||||
Revenue share and royalties | 347 | — | — | 347 | |||||||||||||
Programming and content | 102 | — | — | 102 | |||||||||||||
Customer service and billing | 98 | — | — | 98 | |||||||||||||
Transmission | 25 | — | — | 25 | |||||||||||||
Cost of equipment | 6 | — | — | 6 | |||||||||||||
Total Sirius XM cost of services | 578 | — | — | 578 | |||||||||||||
Pandora: | |||||||||||||||||
Revenue share and royalties | 145 | 71 | 1 | (c) | 217 | ||||||||||||
Programming and content | 4 | — | — | 4 | |||||||||||||
Customer service and billing | 15 | 8 | — | 23 | |||||||||||||
Transmission | 6 | 5 | — | 11 | |||||||||||||
Total Pandora cost of services | 170 | 84 | 1 | 255 | |||||||||||||
Total consolidated cost of services | 748 | 84 | 1 | 833 | |||||||||||||
Subscriber acquisition costs | 108 | — | — | 108 | |||||||||||||
Sales and marketing | 183 | 36 | — | 219 | |||||||||||||
Engineering, design and development | 54 | 14 | — | 68 | |||||||||||||
General and administrative | 135 | 16 | — | 151 | |||||||||||||
Depreciation and amortization | 107 | 6 | 9 | (d) | 122 | ||||||||||||
Acquisition and other related costs | 76 | 1 | (77 | ) | (e) | — | |||||||||||
Total operating expenses | 1,411 | 157 | (67 | ) | 1,501 | ||||||||||||
Income (loss) from operations | 333 | (43 | ) | 69 | 359 | ||||||||||||
Other income (expense): | |||||||||||||||||
Interest expense | (90 | ) | (2 | ) | — | (92 | ) | ||||||||||
Loss on extinguishment of debt | (1 | ) | — | — | (1 | ) | |||||||||||
Other income | 1 | 1 | — | 2 | |||||||||||||
Total other expense | (90 | ) | (1 | ) | — | (91 | ) | ||||||||||
Income (loss) before income taxes | 243 | (44 | ) | 69 | 268 | ||||||||||||
Income tax expense | (81 | ) | — | (6 | ) | (f) | (87 | ) | |||||||||
Net income | $ | 162 | $ | (44 | ) | $ | 63 | $ | 181 |
(a) | Represents Pandora’s results for the period January 1, 2019 through January 31, 2019. |
(b) | This adjustment eliminates the impact of additional revenue associated with certain programming agreements recorded as part of the XM Merger. |
(c) | This adjustment includes the impact of additional expense associated with minimum guarantee royalty contracts recorded as part of the Pandora Acquisition. |
(d) | This adjustment includes the impact of the additional amortization associated with the acquired intangible assets recorded as part of the Pandora Acquisition that are subject to amortization, partially offset by normal depreciation associated with assets revalued in purchase accounting. |
(e) | This adjustment eliminates the impact of acquisition and other related costs. |
(f) | This adjustment to income taxes was calculated by applying Sirius XM's statutory tax rate at March 31, 2019 to the pro forma adjustments of $69 and Pandora's pre-acquisition loss before income tax of $(44). |
Unaudited for the Three Months Ended March 31, 2018 | |||||||||||||||||
As Reported | Pandora Pre-Acquisition Financial Information (g) | Purchase Price Accounting and Pro Forma Adjustments | Ref | Pro Forma | |||||||||||||
Revenue | |||||||||||||||||
Sirius XM: | |||||||||||||||||
Subscriber revenue | $ | 1,258 | $ | — | $ | — | $ | 1,258 | |||||||||
Advertising revenue | 42 | — | — | 42 | |||||||||||||
Equipment revenue | 35 | — | — | 35 | |||||||||||||
Other revenue | 40 | — | 3 | (h) | 43 | ||||||||||||
Total Sirius XM revenue | 1,375 | — | 3 | 1,378 | |||||||||||||
Pandora: | |||||||||||||||||
Subscriber revenue | — | 104 | — | 104 | |||||||||||||
Advertising revenue | — | 215 | — | 215 | |||||||||||||
Total Pandora revenue | — | 319 | — | 319 | |||||||||||||
Total consolidated revenue | 1,375 | 319 | 3 | 1,697 | |||||||||||||
Cost of services | |||||||||||||||||
Sirius XM: | |||||||||||||||||
Revenue share and royalties | 310 | — | — | 310 | |||||||||||||
Programming and content | 101 | — | — | 101 | |||||||||||||
Customer service and billing | 94 | — | — | 94 | |||||||||||||
Transmission | 22 | — | — | 22 | |||||||||||||
Cost of equipment | 7 | — | — | 7 | |||||||||||||
Total Sirius XM cost of services | 534 | — | — | 534 | |||||||||||||
Pandora: | |||||||||||||||||
Revenue share and royalties | — | 222 | — | 222 | |||||||||||||
Programming and content | — | 2 | — | 2 | |||||||||||||
Customer service and billing | — | 20 | — | 20 | |||||||||||||
Transmission | — | 12 | — | 12 | |||||||||||||
Total Pandora cost of services | — | 256 | — | 256 | |||||||||||||
Total consolidated cost of services | 534 | 256 | — | 790 | |||||||||||||
Subscriber acquisition costs | 123 | — | — | 123 | |||||||||||||
Sales and marketing | 107 | 99 | — | 206 | |||||||||||||
Engineering, design and development | 31 | 31 | — | 62 | |||||||||||||
General and administrative | 85 | 44 | — | 129 | |||||||||||||
Depreciation and amortization | 72 | 14 | 27 | (i) | 113 | ||||||||||||
Total operating expenses | 952 | 444 | 27 | 1,423 | |||||||||||||
Income from operations | 423 | (125 | ) | (24 | ) | 274 | |||||||||||
Other income (expense): | |||||||||||||||||
Interest expense | (90 | ) | (7 | ) | — | (97 | ) | ||||||||||
Loss on extinguishment of debt | — | (2 | ) | — | (2 | ) | |||||||||||
Other income | 36 | 2 | — | 38 | |||||||||||||
Total other expense | (54 | ) | (7 | ) | — | (61 | ) | ||||||||||
Income before income taxes | 369 | (132 | ) | (24 | ) | 213 | |||||||||||
Income tax expense | (80 | ) | — | 39 | (j) | (41 | ) | ||||||||||
Net income | $ | 289 | $ | (132 | ) | $ | 15 | $ | 172 |
(g) | Represents Pandora’s results for the period January 1, 2018 through March 31, 2018. |
(h) | This adjustment eliminates the impact of additional revenue associated with certain programming agreements recorded as part of the XM Merger. |
(i) | This adjustment includes the impact of the additional amortization associated with the acquired intangible assets recorded as part of the Pandora Acquisition that are subject to amortization, partially offset by normal depreciation associated with assets revalued in purchase accounting. |
(j) | This adjustment to income taxes was calculated by applying Sirius XM's statutory tax rate at March 31, 2018 to the pro forma adjustments of $(24) and Pandora's loss before income tax of $(132). |
(in millions) | For the Three Months Ended March 31, | 2019 vs 2018 Change | ||||||||||||
Sirius XM: | 2019 | 2018 | Amount | % | ||||||||||
Revenue | (Pro Forma) | (Pro Forma) | ||||||||||||
Subscriber revenue | $ | 1,370 | $ | 1,258 | $ | 112 | 9 | % | ||||||
Advertising revenue | 46 | 42 | 4 | 10 | % | |||||||||
Equipment revenue | 41 | 35 | 6 | 17 | % | |||||||||
Other revenue | 38 | 43 | (5 | ) | (12 | )% | ||||||||
Total Sirius XM revenue | 1,495 | 1,378 | 117 | 8 | % | |||||||||
Cost of services | ||||||||||||||
Revenue share and royalties | 347 | 310 | 37 | 12 | % | |||||||||
Programming and content (a) | 95 | 93 | 2 | 2 | % | |||||||||
Customer service and billing (a) | 97 | 93 | 4 | 4 | % | |||||||||
Transmission (a) | 24 | 21 | 3 | 14 | % | |||||||||
Cost of equipment | 6 | 7 | (1 | ) | (14 | )% | ||||||||
Total Sirius XM cost of services | 569 | 524 | 45 | 9 | % | |||||||||
Gross Profit | $ | 926 | $ | 854 | $ | 72 | 8 | % | ||||||
Gross Margin % | 62 | % | 62 | % | — | % | — | % |
(a) | For the three months ended March 31, 2019 share-based compensation expense includes $7 related to programming and content, $1 related to customer service and billing and $1 related to transmission. For the three months ended March 31, 2018 share-based compensation expense includes $8 related to programming and content, $1 related to customer service and billing and $1 related to transmission. |
(in millions) | For the Three Months Ended March 31, | 2019 vs 2018 Change | ||||||||||||
Pandora: | 2019 | 2018 | Amount | % | ||||||||||
Revenue | (Pro Forma) | (Pro Forma) | ||||||||||||
Subscriber revenue | $ | 134 | $ | 104 | $ | 30 | 29 | % | ||||||
Advertising revenue | 231 | 215 | 16 | 7 | % | |||||||||
Total Pandora revenue | 365 | 319 | 46 | 14 | % | |||||||||
Cost of services | ||||||||||||||
Revenue share and royalties | 217 | 222 | (5 | ) | (2 | )% | ||||||||
Programming and content | 4 | 2 | 2 | 100 | % | |||||||||
Customer service and billing | 23 | 20 | 3 | 15 | % | |||||||||
Transmission (b) | 10 | 11 | (1 | ) | (9 | )% | ||||||||
Total Pandora cost of services | 254 | 255 | (1 | ) | — | % | ||||||||
Gross Profit | $ | 111 | $ | 64 | $ | 47 | 73 | % | ||||||
Gross Margin % | 30 | % | 20 | % | 10 | % | 50 | % |
(b) | For the three months ended March 31, 2019 share-based compensation expense includes $1 related to transmission. For the three months ended March 31, 2018 share-based compensation expense includes $1 related to transmission. |
As of March 31, | 2019 vs 2018 Change | ||||||||||
(subscribers in thousands) | 2019 | 2018 (1) | Amount | % | |||||||
Sirius XM | |||||||||||
Self-pay subscribers | 29,046 | 27,720 | 1,326 | 5 | % | ||||||
Paid promotional subscribers | 5,125 | 5,347 | (222 | ) | (4 | )% | |||||
Ending subscribers (2) | 34,171 | 33,066 | 1,105 | 3 | % | ||||||
Traffic users | 8,849 | 7,753 | 1,096 | 14 | % | ||||||
Sirius XM Canada subscribers | 2,658 | 2,627 | 31 | 1 | % | ||||||
Pandora | |||||||||||
Active users - all services | 66,035 | 72,286 | (6,251 | ) | (9 | )% | |||||
Self-pay subscribers | 6,160 | 5,626 | 534 | 9 | % | ||||||
Paid promotional subscribers | 736 | — | 736 | nm | |||||||
Ending subscribers | 6,896 | 5,626 | 1,270 | 23 | % |
(1) | Includes Pandora's results as of March 31, 2018. |
(2) | Amounts may not sum as a result of rounding. |
For the Three Months Ended March 31, | 2019 vs 2018 Change | |||||||||||||
(subscribers in thousands) | 2019 (1) | 2018 (2) | Amount | % | ||||||||||
Sirius XM | ||||||||||||||
Self-pay subscribers | 131 | 206 | (75 | ) | (36 | )% | ||||||||
Paid promotional subscribers | 1 | 124 | (123 | ) | (99 | )% | ||||||||
Net additions | 132 | 330 | (198 | ) | (60 | )% | ||||||||
Weighted average number of subscribers | 34,015 | 32,828 | 1,187 | 4 | % | |||||||||
Average self-pay monthly churn | 1.8 | % | 1.8 | % | — | — | % | |||||||
ARPU (3) | $ | 13.52 | $ | 12.95 | $ | 0.57 | 4 | % | ||||||
Pandora | ||||||||||||||
Self-pay subscribers | 246 | 148 | 98 | 66 | % | |||||||||
Paid promotional subscribers | (20 | ) | — | (20 | ) | nm | ||||||||
Net additions (4) | 227 | 148 | 79 | 53 | % | |||||||||
Weighted average number of subscribers | 6,709 | 5,524 | 1,185 | 21 | % | |||||||||
ARPU | $ | 6.70 | $ | 6.30 | $ | 0.40 | 6 | % | ||||||
Ad supported listener hours (in billions) | 3.42 | 3.85 | (0.43 | ) | (11 | )% | ||||||||
Advertising revenue per thousand listener hours (RPM) | $ | 62.60 | $ | 55.52 | $ | 7.08 | 13 | % | ||||||
Licensing costs per thousand listener hours (LPM) | $ | 36.64 | $ | 36.35 | $ | 0.29 | 1 | % | ||||||
Licensing costs per paid subscriber (LPU) | $ | 3.97 | $ | 4.65 | $ | (0.68 | ) | (15 | )% | |||||
Total Company | ||||||||||||||
Adjusted EBITDA | $ | 567 | $ | 447 | 120 | 27 | % | |||||||
Free cash flow | $ | 300 | $ | 327 | (27 | ) | (8 | )% |
(1) | Includes Pandora's results for the three month period, inclusive of pre-acquisition results for the period January 1, 2019 through January 31, 2019. |
(2) | Includes Pandora's pre-acquisition results for the period January 1, 2018 through March 31, 2018. |
(3) | ARPU for Sirius XM excludes subscriber revenue from our connected vehicle services of $36 and $25 for the three months ended March 31, 2019 and 2018, respectively. |
(4) | Amounts may not sum as a result of rounding. |
For the Three Months Ended March 31, | |||||||
(in millions) | 2019 | 2018 | |||||
Net income: | $ | 162 | $ | 289 | |||
Add back items excluded from Adjusted EBITDA: | |||||||
Legal settlements and reserves | 25 | — | |||||
Acquisition and other related costs (1) | 76 | — | |||||
Share-based payment expense (3) | 49 | 34 | |||||
Depreciation and amortization | 107 | 72 | |||||
Interest expense | 90 | 90 | |||||
Loss on extinguishment of debt | 1 | — | |||||
Other (income) expense | (1 | ) | (36 | ) | |||
Income tax expense | 81 | 80 | |||||
Purchase price accounting adjustments: | |||||||
Revenues | 2 | 3 | |||||
Operating expenses | (1 | ) | — | ||||
Pro forma adjustment (2) | (24 | ) | (85 | ) | |||
Adjusted EBITDA | $ | 567 | $ | 447 |
(1) | Acquisition and other related costs include $21 of share-based compensation expense. |
(2) | Pro forma adjustment for the three months ended March 31, 2019 includes Pandora's January 2019 Net income of $(44) plus Depreciation and amortization of $6, Share-based payment expense of $11, Acquisition and other related costs of $1, and Interest expense of $2 offset by Other income of $1, plus purchase price accounting impacts of $1. Pro forma adjustment for three months ended March 31, 2018 includes Pandora's Net income for the three months ended March 31, 2018 of $(132) plus Depreciation and amortization of $14, Share-based payment expense of $26, Loss on extinguishment of debt of $2, and Interest expense of $7 offset by Other income of $2. |
(3) | Allocation of share-based payment expense: |
For the Three Months Ended March 31, | |||||||
(in millions) | 2019 | 2018 | |||||
Programming and content | $ | 7 | $ | 8 | |||
Customer service and billing | 1 | 1 | |||||
Transmission | 1 | 1 | |||||
Sales and marketing | 15 | 6 | |||||
Engineering, design and development | 9 | 4 | |||||
General and administrative | 16 | 14 | |||||
Total share-based payment expense | $ | 49 | $ | 34 |
For the Three Months Ended March 31, | |||||||
(in millions) | 2019 | 2018 | |||||
Cash Flow information | |||||||
Net cash provided by operating activities | $ | 396 | $ | 415 | |||
Net cash provided by (used in) investing activities | $ | 284 | $ | (85 | ) | ||
Net cash used in financing activities | $ | (672 | ) | $ | (320 | ) | |
Free Cash Flow | |||||||
Net cash provided by operating activities | $ | 396 | $ | 415 | |||
Additions to property and equipment | (90 | ) | (81 | ) | |||
Purchases of other investments | (6 | ) | (7 | ) | |||
Free cash flow | $ | 300 | $ | 327 |