Exhibit 99.1

 

 

 

SiriusXM Reports Third Quarter 2015 Results

 

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

 

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

 

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

 

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

 

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

 

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

 

THIRD QUARTER 2015 HIGHLIGHTS

 

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

 

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

 

2015 GUIDANCE

 

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

 

Our new full-year 2015 guidance is as follows:

 

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

THIRD QUARTER 2015 RESULTS

 

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

 

   For the Three Months Ended
September 30,
  For the Nine Months Ended
September 30,
 
(in thousands, except per share data)  2015   2014   2015   2014 
Revenue:                    
Subscriber revenue  $974,471   $902,514   $2,826,018   $2,632,110 
Advertising revenue   33,131    25,300    88,843    73,012 
Equipment revenue   25,875    23,129    79,979    74,723 
Other revenue   136,235    106,144    379,072    310,298 
Total revenue   1,169,712    1,057,087    3,373,912    3,090,143 
Operating expenses:                    
Cost of services:                    
Revenue share and royalties   238,620    204,307    783,115    599,939 
Programming and content   75,707    74,920    216,223    219,360 
Customer service and billing   94,492    93,013    278,521    274,174 
Satellite and transmission   22,743    21,794    65,761    64,446 
Cost of equipment   9,246    9,485    29,021    29,319 
Subscriber acquisition costs   133,009    119,778    391,773    367,207 
Sales and marketing   90,541    83,906    255,778    237,992 
Engineering, design and development   16,132    16,136    47,180    47,677 
General and administrative   67,234    75,170    219,194    223,995 
Depreciation and amortization   70,404    64,550    202,527    200,021 
Total operating expenses   818,128    763,059    2,489,093    2,264,130 
Income from operations   351,584    294,028    884,819    826,013 
Other income (expense):                    
Interest expense, net of amounts capitalized   (76,624)   (75,416)   (221,912)   (197,029)
Loss on change in value of derivatives   -    -    -    (34,485)
Other income   4,133    6,602    9,077    8,234 
Total other expense   (72,491)   (68,814)   (212,835)   (223,280)
Income before income taxes   279,093    225,214    671,984    602,733 
Income tax expense   (112,543)   (89,044)   (296,893)   (252,614)
Net income  $166,550   $136,170   $375,091   $350,119 
Foreign currency translation adjustment, net of tax   (91)   (58)   (100)   20 
Total comprehensive income  $166,459   $136,112   $374,991   $350,139 
Net income per common share:                    
Basic  $0.03   $0.02   $0.07   $0.06 
Diluted  $0.03   $0.02   $0.07   $0.06 
Weighted average common shares outstanding:                    
Basic   5,297,797    5,626,078    5,436,378    5,860,248 
Diluted   5,346,438    5,974,047    5,487,116    6,208,569 
 

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 

   As of September 30,  As of December 31,
   2015  2014
(in thousands, except per share data)  (unaudited)     
ASSETS          
Current assets:          
Cash and cash equivalents  $152,545   $147,724 
Receivables, net   237,200    220,579 
Inventory, net   26,743    19,397 
Related party current assets   8,725    4,344 
Deferred tax asset   801,052    1,038,603 
Prepaid expenses and other current assets   189,857    119,099 
Total current assets   1,416,122    1,549,746 
Property and equipment, net   1,440,368    1,510,112 
Long-term restricted investments   9,888    5,922 
Deferred financing fees, net   14,767    12,021 
Intangible assets, net   2,605,978    2,645,046 
Goodwill   2,205,107    2,205,107 
Related party long-term assets   -    3,000 
Long-term deferred tax asset   389,809    437,736 
Other long-term assets   58,842    6,819 
Total assets  $8,140,881   $8,375,509 
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable and accrued expenses  $606,393   $587,755 
Accrued interest   95,363    80,440 
Current portion of deferred revenue   1,711,435    1,632,381 
Current portion of deferred credit on executory contracts   -    1,394 
Current maturities of long-term debt   5,646    7,482 
Related party current liabilities   3,013    4,340 
Total current liabilities   2,421,850    2,313,792 
Deferred revenue   154,473    151,901 
Long-term debt   5,400,321    4,493,863 
Related party long-term liabilities   11,505    13,635 
Other long-term liabilities   91,820    92,481 
Total liabilities   8,079,969    7,065,672 
Stockholders’ equity:          
Common stock, par value $0.001; 9,000,000 shares authorized; 5,240,619 and 5,653,529 shares issued; 5,233,869 and 5,646,119 outstanding at September 30, 2015 and December 31, 2014, respectively   5,240    5,653 
Accumulated other comprehensive loss, net of tax   (502)   (402)
Additional paid-in capital   5,147,121    6,771,554 
Treasury stock, at cost; 6,750 and 7,410 shares of common stock at September 30, 2015 and December 31, 2014, respectively   (25,104)   (26,034)
Accumulated deficit   (5,065,843)   (5,440,934)
Total stockholders’ equity   60,912    1,309,837 
Total liabilities and stockholders’ equity  $8,140,881   $8,375,509 
 

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

 

   For the Nine Months Ended September 30, 
(in thousands)  2015   2014 
Cash flows from operating activities:          
Net income  $375,091   $350,119 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   202,527    200,021 
Non-cash interest expense, net of amortization of premium   5,851    16,515 
Provision for doubtful accounts   34,031    32,875 
Amortization of deferred income related to equity method investment   (2,082)   (2,081)
Gain on unconsolidated entity investments, net   -    (2,677)
Dividend received from unconsolidated entity investment   11,260    12,873 
Loss on change in value of derivatives   -    34,485 
Share-based payment expense   62,334    57,832 
Deferred income taxes   285,478    244,667 
Other non-cash purchase price adjustments   (1,394)   (2,836)
Changes in operating assets and liabilities:          
Receivables   (50,651)   (46,756)
Inventory   (7,346)   (10,487)
Related party, net   (14,020)   (2,256)
Prepaid expenses and other current assets   (70,758)   (16,319)
Other long-term assets   (51,842)   1,784 
Accounts payable and accrued expenses   26,584    (36,861)
Accrued interest   14,923    33,899 
Deferred revenue   81,626    25,225 
Other long-term liabilities   (658)   (1,854)
Net cash provided by operating activities   900,954    888,168 
Cash flows from investing activities:          
Additions to property and equipment   (90,943)   (87,244)
Purchases of restricted and other investments   (3,966)   - 
Acquisition of business, net of cash acquired   -    1,144 
Return of capital from investment in unconsolidated entity   -    24,178 
Net cash used in investing activities   (94,909)   (61,922)
Cash flows from financing activities:          
Proceeds from exercise of stock options   259    331 
Taxes paid in lieu of shares issued for stock-based compensation   (39,622)   (24,781)
Proceeds from long-term borrowings and revolving credit facility, net of costs   1,579,323    2,151,205 
Repayment of long-term borrowings and revolving credit facility   (693,456)   (993,772)
Common stock repurchased and retired   (1,647,728)   (1,990,449)
Net cash used in financing activities   (801,224)   (857,466)
Net increase (decrease) in cash and cash equivalents   4,821    (31,220)
Cash and cash equivalents at beginning of period   147,724    134,805 
Cash and cash equivalents at end of period  $152,545   $103,585 

 

Key Operating Metrics

 

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

 
   Unaudited 
  For the Three Months Ended September 30,   For the Nine Months Ended September 30, 
(in thousands, except per subscriber and per installation amounts)   2015    2014   2015   2014 
Self-pay subscribers   23,816    22,015    23,816    22,015 
Paid promotional subscribers   5,143    4,720    5,143    4,720 
Ending subscribers (a)   28,960    26,734    28,960    26,734 
                     
Self-pay subscribers   381    380    1,293    933 
Paid promotional subscribers   145    53    355    242 
Net additions (a)   525    433    1,649    1,175 
                     
Daily weighted average number of subscribers   28,649    26,488    28,033    26,035 
                     
Average self-pay monthly churn   1.9%   1.9%   1.8%   1.9%
                     
New vehicle consumer conversion rate   41%   41%   41%   42%
                     
ARPU  $12.67   $12.47   $12.45   $12.34 
SAC, per installation  $34   $35   $33   $34 
Customer service and billing expenses, per average subscriber  $1.00   $1.07   $1.00   $1.07 
Free cash flow  $368,899   $267,269   $1,016,045   $825,102 
Adjusted EBITDA  $447,194   $381,251   $1,261,382   $1,086,469 

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

 

Glossary

 

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

 

through December 2017 is not excluded from adjusted EBITDA as the royalty expense relates to the on-going performance of our business.

 

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

 

   Unaudited 
   For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
(in thousands)  2015   2014   2015   2014 
                 
Net income (GAAP):  $166,550   $136,170   $375,091   $350,119 
Add back items excluded from Adjusted EBITDA:                    
Purchase price accounting adjustments:                    
Revenues   1,813    1,813    5,438    5,438 
Operating expenses   -    (945)   (1,394)   (2,835)
Pre-1972 sound recordings legal settlement (GAAP)   -    -    107,658    - 
Share-based payment expense (GAAP)   23,393    21,805    62,334    57,832 
Depreciation and amortization (GAAP)   70,404    64,550    202,527    200,021 
Interest expense, net of amounts capitalized (GAAP)   76,624    75,416    221,912    197,029 
Loss on change in value of derivatives (GAAP)   -    -    -    34,485 
Other income (GAAP)   (4,133)   (6,602)   (9,077)   (8,234)
Income tax expense (GAAP)   112,543    89,044    296,893    252,614 
Adjusted EBITDA  $447,194   $381,251   $1,261,382   $1,086,469 

 

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

 
   Unaudited 
   For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
(in thousands)  2015   2014   2015   2014 
                 
Income before income taxes (GAAP):  $279,093   $225,214   $671,984   $602,733 
Add back items excluded from adjusted net income:                    
Purchase price accounting adjustments:                    
Revenues   1,813    1,813    5,438    5,438 
Operating expenses   -    (945)   (1,394)   (2,835)
Loss on change in value of derivatives (GAAP)   -    -    -    34,485 
Pre-1972 sound recordings legal settlement (GAAP)   -    -    107,658    - 
Adjusted income before income taxes  $280,906   $226,082   $783,686   $639,821 
Allocable income tax expense   (113,231)   (87,946)   (339,262)   (248,890)
Adjusted net income  $167,675   $138,136   $444,424   $390,931 
Adjusted net income per common share:                    
Basic  $0.03   $0.02   $0.08   $0.07 
Diluted  $0.03   $0.02   $0.08   $0.06 
Weighted average common shares outstanding:                    
Basic   5,297,797    5,626,078    5,436,378    5,860,248 
Diluted   5,346,438    5,974,047    5,487,116    6,208,569 

 

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

 

   Unaudited For the Three Months Ended September 30, 2015 
(in thousands)  As Reported   Purchase Price
Accounting
Adjustments
   Allocation of
Share-based
Payment Expense
   Adjusted 
                 
Revenue:                    
Subscriber revenue  $974,471   $-   $-   $974,471 
Advertising revenue   33,131    -    -    33,131 
Equipment revenue   25,875    -    -    25,875 
Other revenue   136,235    1,813    -    138,048 
Total revenue  $1,169,712   $1,813   $-   $1,171,525 
Operating expenses                    
Cost of services:                    
Revenue share and royalties  $238,620   $-   $-   $238,620 
Programming and content   75,707    -    (2,899)   72,808 
Customer service and billing   94,492    -    (793)   93,699 
Satellite and transmission   22,743    -    (1,244)   21,499 
Cost of equipment   9,246    -    -    9,246 
Subscriber acquisition costs   133,009    -    -    133,009 
Sales and marketing   90,541    -    (5,288)   85,253 
Engineering, design and development   16,132    -    (2,801)   13,331 
General and administrative   67,234    -    (10,368)   56,866 
Depreciation and amortization (a)   70,404    -    -    70,404 
Share-based payment expense   -    -    23,393    23,393 
Total operating expenses  $818,128   $-   $-   $818,128 

 

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

 
   Unaudited For the Three Months Ended September 30, 2014
(in thousands)  As Reported  Purchase Price
Accounting
Adjustments
  Allocation of
Share-based
Payment Expense
  Adjusted
             
Revenue:                    
Subscriber revenue  $902,514   $-   $-   $902,514 
Advertising revenue   25,300    -    -    25,300 
Equipment revenue   23,129    -    -    23,129 
Other revenue   106,144    1,813    -    107,957 
Total revenue  $1,057,087   $1,813   $-   $1,058,900 
Operating expenses                    
Cost of services:                    
Revenue share and royalties  $204,307   $-   $-   $204,307 
Programming and content   74,920    945    (2,434)   73,431 
Customer service and billing   93,013    -    (868)   92,145 
Satellite and transmission   21,794    -    (1,185)   20,609 
Cost of equipment   9,485    -    -    9,485 
Subscriber acquisition costs   119,778    -    -    119,778 
Sales and marketing   83,906    -    (4,265)   79,641 
Engineering, design and development   16,136    -    (2,559)   13,577 
General and administrative   75,170    -    (10,494)   64,676 
Depreciation and amortization (a)   64,550    -    -    64,550 
Share-based payment expense   -    -    21,805    21,805 
Total operating expenses  $763,059   $945   $-   $764,004 

 

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

 

   Unaudited For the Nine Months Ended September 30, 2015
(in thousands)  As Reported  Purchase Price
Accounting
Adjustments
  Allocation of
Share-based
Payment Expense
  Adjusted
             
Revenue:                    
Subscriber revenue  $2,826,018   $-   $-   $2,826,018 
Advertising revenue   88,843    -    -    88,843 
Equipment revenue   79,979    -    -    79,979 
Other revenue   379,072    5,438    -    384,510 
Total revenue  $3,373,912   $5,438   $-   $3,379,350 
Operating expenses                    
Cost of services:                    
Revenue share and royalties  $783,115   $-   $-   $783,115 
Programming and content   216,223    1,394    (7,245)   210,372 
Customer service and billing   278,521    -    (2,164)   276,357 
Satellite and transmission   65,761    -    (3,156)   62,605 
Cost of equipment   29,021    -    -    29,021 
Subscriber acquisition costs   391,773    -    -    391,773 
Sales and marketing   255,778    -    (13,056)   242,722 
Engineering, design and development   47,180    -    (7,063)   40,117 
General and administrative   219,194    -    (29,650)   189,544 
Depreciation and amortization (a)   202,527    -    -    202,527 
Share-based payment expense   -    -    62,334    62,334 
Total operating expenses  $2,489,093   $1,394   $-   $2,490,487 

 

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

 
   Unaudited For the Nine Months Ended September 30, 2014
(in thousands)  As Reported  Purchase Price
Accounting
Adjustments
  Allocation of
Share-based
Payment Expense
  Adjusted
             
Revenue:                    
Subscriber revenue  $2,632,110   $-   $-   $2,632,110 
Advertising revenue   73,012    -    -    73,012 
Equipment revenue   74,723    -    -    74,723 
Other revenue   310,298    5,438    -    315,736 
Total revenue  $3,090,143   $5,438   $-   $3,095,581 
Operating expenses                    
Cost of services:                    
Revenue share and royalties  $599,939   $-   $-   $599,939 
Programming and content   219,360    2,835    (6,903)   215,292 
Customer service and billing   274,174    -    (2,032)   272,142 
Satellite and transmission   64,446    -    (3,087)   61,359 
Cost of equipment   29,319    -    -    29,319 
Subscriber acquisition costs   367,207    -    -    367,207 
Sales and marketing   237,992    -    (11,238)   226,754 
Engineering, design and development   47,677    -    (6,422)   41,255 
General and administrative   223,995    -    (28,150)   195,845 
Depreciation and amortization (a)   200,021    -    -    200,021 
Share-based payment expense   -    -    57,832    57,832 
Total operating expenses  $2,264,130   $2,835   $-   $2,266,965 

 

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

 

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

 

   Unaudited
   For the Three Months Ended
September 30,
  For the Nine Months Ended
September 30,
(in thousands)  2015  2014  2015  2014
Operating expenses (GAAP):  $818,128   $763,059   $2,489,093   $2,264,130 
Items excluded from adjusted cash operating expenses:                    
Purchase price accounting adjustments   -    945    1,394    2,835 
Pre-1972 sound recordings legal settlement (GAAP)   -    -    (107,658)   - 
Share-based payment expense (GAAP)   (23,393)   (21,805)   (62,334)   (57,832)
Depreciation and amortization (GAAP)   (70,404)   (64,550)   (202,527)   (200,021)
Adjusted cash operating expenses  $724,331   $677,649   $2,117,968   $2,009,112 

 

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

 
   Unaudited
   For the Three Months Ended
September 30,
  For the Nine Months Ended
September 30,
   2015  2014  2015  2014
Subscriber revenue, excluding connected vehicle (GAAP)  $949,301   $880,093   $2,752,993   $2,568,742 
Add: advertising revenue (GAAP)   33,131    25,300    88,843    73,012 
Add: other subscription-related revenue (GAAP)   106,483    85,380    299,437    249,138 
   $1,088,915   $990,773   $3,141,273   $2,890,892 
                     
Daily weighted average number of subscribers   28,649    26,488    28,033    26,035 
                     
ARPU  $12.67   $12.47   $12.45   $12.34 

 

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

 

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

 

   Unaudited
   For the Three Months Ended
September 30,
  For the Nine Months Ended
September 30,
   2015  2014  2015  2014
Customer service and billing expenses, excluding connected vehicle (GAAP)  $86,840   $85,868   $255,105   $252,677 
Less: share-based payment expense (GAAP)   (793)   (868)   (2,164)   (2,032)
   $86,047   $85,000   $252,941   $250,645 
                     
Daily weighted average number of subscribers   28,649    26,488    28,033    26,035 
                     
Customer service and billing expenses, per average subscriber  $1.00   $1.07   $1.00   $1.07 

 

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

 
   Unaudited
   For the Three Months Ended
September 30,
  For the Nine Months Ended
September 30,
   2015  2014  2015  2014
Cash Flow information                    
Net cash provided by operating activities  $188,613   $296,096   $900,954   $888,168 
Net cash used in investing activities  $(29,714)  $(28,827)  $(94,909)  $(61,922)
Net cash used in financing activities  $(300,407)  $(333,664)  $(801,224)  $(857,466)
Free Cash Flow                    
Net cash provided by operating activities  $188,613   $296,096   $900,954   $888,168 
Additions to property and equipment   (29,714)   (28,827)   (90,943)   (87,244)
Purchases of restricted and other investments   -    -    (3,966)   - 
Return of capital from investment in unconsolidated entity   -    -    -    24,178 
Pre-1972 sound recordings legal settlement   210,000    -    210,000    - 
Free cash flow  $368,899   $267,269   $1,016,045   $825,102 
                     
Diluted weighted average common shares outstanding   5,346,438    5,974,047    5,487,116    6,208,569 
                     
Free cash flow per diluted share  $0.07   $0.04   $0.19   $0.13 

 

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

 

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

 

   Unaudited
   For the Three Months Ended
September 30,
  For the Nine Months Ended
September 30,
   2015  2014  2015  2014
Subscriber acquisition costs (GAAP)  $133,009   $119,778   $391,773   $367,207 
Less: margin from direct sales of radios and accessories (GAAP)   (16,629)   (13,644)   (50,958)   (45,404)
   $116,380   $106,134   $340,815   $321,803 
                     
Installations   3,429    3,038    10,305    9,396 
                     
SAC, per installation  $34   $35   $33   $34 

 

###

 

About SiriusXM

 

Sirius XM Holdings Inc. (NASDAQ: SIRI) is the world’s largest radio broadcaster measured by revenue and has 29 million subscribers. SiriusXM creates and broadcasts commercial-free music; premier sports talk and live events; comedy; news; exclusive talk and entertainment, and a wide-range of Latin music, sports and talk programming. SiriusXM is available in vehicles from every major car company in the U.S. and on smartphones and other connected devices as well as online at siriusxm.com. SiriusXM radios and accessories are available from retailers nationwide and at shop.siriusxm.com. SiriusXM also provides premium traffic, weather, data and information services for subscribers in cars, trucks, and RVs through SiriusXM Traffic™, SiriusXM Travel Link, NavTraffic®, NavWeather™. SiriusXM delivers critical weather, data and information services to aircraft and boats through SiriusXM Aviation, SiriusXM Marine™, Sirius

 

Marine Weather, XMWX Aviation™, XMWX Weather, and XMWX Marine™. In addition, SiriusXM Music for Business provides commercial-free music to a variety of businesses. SiriusXM holds a minority interest in SiriusXM Canada which has more than 2.6 million subscribers. SiriusXM is also a leading provider of connected vehicles services to major automakers, giving customers access to a suite of safety, security, and convenience services including automatic crash notification, stolen vehicle recovery assistance, enhanced roadside assistance and turn-by-turn navigation.

 

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

 

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

 

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

 

Source: SiriusXM

 

Contact Information for Investors and Financial Media:

 

Investors:

 

Hooper Stevens

212 901 6718

hooper.stevens@siriusxm.com

 

Media:

 

Patrick Reilly

212 901 6646

patrick.reilly@siriusxm.com