NEW YORK, July 29, 2014 /PRNewswire/ --
- Revenue Exceeds $1.0 Billion, Up
10% From Second Quarter of 2013
- Net Income of $120 Million
- Adjusted EBITDA Grows 31% to a Record $370 Million
- Free Cash Flow Increases 42% to a Record $335 Million
- Share Repurchases Exceed $1.6
Billion in 2014
- 2014 Financial Guidance Raised
SiriusXM announced second quarter 2014 financial and operating
results, including revenue of $1.035
billion, up 10% from the second quarter 2013. Net
income was $120 million, or
$0.02 per diluted share, in the
second quarter of 2014.
Adjusted net income climbed 60% to $131
million in the second quarter of 2014 from $82 million in the second quarter of 2013.
Adjusted EBITDA for the second quarter of 2014 reached a record
$370 million, up 31% from
$283 million in the second quarter of
2013.
"SiriusXM once again posted outstanding results in the second
quarter by adding 475,000 total net new subscribers, including
380,000 net new self-pay subscribers. We set new records for
trial conversions to self-pay, adjusted EBITDA and adjusted EBITDA
margin in the quarter, and we are raising our 2014 guidance for
revenue, adjusted EBITDA, and free cash flow," stated Jim Meyer, Chief Executive Officer,
SiriusXM.
"Our extraordinary operating performance supported the buyback
of over 350 million shares in the quarter, or approximately 6% of
our outstanding stock. Perhaps more importantly, we improved
our superior content by adding even more channels and shows created
with major brands and personalities, such as Joel Osteen, NBC's TODAY Show, and YouTube, and
we expanded the range and depth of our commercial-free music
programming with the introduction of three new channels in the
categories of country, women's pop, and dance," added Meyer. "As
the leader in audio entertainment, we never rest in searching for
new content that our subscribers will love."
Additional financial and operating highlights of the second
quarter include:
- Subscribers Exceed 26.3 Million. Net subscriber
additions in the second quarter of 2014 were 475,472. The
total paid subscriber base reached a record 26.3 million, up 5%
from a year earlier. Self-pay net subscriber additions were
379,711, and the self-pay subscriber base reached a record high of
21.6 million, up 7% from the second quarter of 2013. Paid and
unpaid trials combined to produce a total trial funnel of 7.3
million at the end of the second quarter of 2014, the largest in
our history.
- Adjusted EBITDA and Adjusted EBITDA Margin Highest
Ever. Adjusted EBITDA climbed 31% from the second quarter
of 2013 to a record quarterly amount of $370
million. The Company's adjusted EBITDA margin reached
a record 35.7% in the second quarter of 2014, up approximately 570
basis points from the second quarter of 2013.
- Free Cash Flow Per Share Climbs 47%. Free cash
flow in the second quarter of 2014 was $335
million, up 42% from $237
million in the second quarter of 2013. Free cash flow
per diluted share was 5.4 cents in
the second quarter of 2014, up 47% from 3.7
cents in the second quarter of 2013.
"Since we launched our capital return program in late 2012, we
have returned approximately $3.75
billion to stockholders in less than two years," noted
David Frear, Chief Financial
Officer, SiriusXM.
"On July 15th, our Board of
Directors increased our cumulative share repurchase authorization
to $6 billion. Total
debt-to-adjusted EBITDA at the end of the second quarter 2014 was
3.5 times, and our $1.25 billion
revolving credit was undrawn, leaving us ample liquidity to return
capital to shareholders and pursue strategic opportunities as they
arise," added Frear.
2014 GUIDANCE
SiriusXM reaffirmed its previously issued 2014 guidance for net
subscriber additions and increased its guidance for revenue,
adjusted EBITDA, and free cash flow:
- Net subscriber additions of approximately 1.25 million,
- Revenue of approximately $4.1
billion,
- Adjusted EBITDA of approximately $1.425
billion, and
- Free cash flow of approximately $1.1
billion.
SECOND QUARTER 2014 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)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenue:
|
|
|
|
|
|
|
|
Subscriber
revenue
|
$
878,160
|
|
$
814,718
|
|
$
1,729,596
|
|
$
1,598,060
|
Advertising
revenue
|
25,498
|
|
21,757
|
|
47,712
|
|
41,968
|
Equipment
revenue
|
27,616
|
|
18,443
|
|
51,594
|
|
36,599
|
Other
revenue
|
104,071
|
|
85,192
|
|
204,154
|
|
160,881
|
Total
revenue
|
1,035,345
|
|
940,110
|
|
2,033,056
|
|
1,837,508
|
Operating
expenses:
|
|
|
|
|
|
|
|
Cost of
services:
|
|
|
|
|
|
|
|
Revenue share and
royalties
|
200,221
|
|
155,859
|
|
395,632
|
|
304,390
|
Programming and
content
|
69,570
|
|
70,381
|
|
144,440
|
|
144,991
|
Customer service and
billing
|
90,092
|
|
80,290
|
|
181,161
|
|
160,684
|
Satellite and
transmission
|
21,272
|
|
19,493
|
|
42,651
|
|
39,188
|
Cost of
equipment
|
12,030
|
|
5,442
|
|
19,834
|
|
12,469
|
Subscriber
acquisition costs
|
124,407
|
|
129,992
|
|
247,429
|
|
246,103
|
Sales and
marketing
|
77,759
|
|
68,058
|
|
154,086
|
|
133,956
|
Engineering, design
and development
|
15,630
|
|
15,052
|
|
31,541
|
|
29,894
|
General and
administrative
|
72,582
|
|
60,392
|
|
148,825
|
|
116,732
|
Depreciation and
amortization
|
67,204
|
|
67,415
|
|
135,471
|
|
134,433
|
Total operating
expenses
|
750,767
|
|
672,374
|
|
1,501,070
|
|
1,322,840
|
Income from
operations
|
284,578
|
|
267,736
|
|
531,986
|
|
514,668
|
Other income
(expense):
|
|
|
|
|
|
|
|
Interest expense, net
of amounts capitalized
|
(67,521)
|
|
(49,728)
|
|
(121,613)
|
|
(95,902)
|
Loss on
extinguishment of debt and credit facilities, net
|
-
|
|
(16,377)
|
|
-
|
|
(16,377)
|
Interest and
investment (loss) income
|
(1,066)
|
|
294
|
|
3,283
|
|
1,932
|
Loss on change in
value of derivatives
|
(7,463)
|
|
-
|
|
(34,485)
|
|
-
|
Other (loss)
income
|
(1,745)
|
|
256
|
|
(1,652)
|
|
502
|
Total other
expense
|
(77,795)
|
|
(65,555)
|
|
(154,467)
|
|
(109,845)
|
Income before income
taxes
|
206,783
|
|
202,181
|
|
377,519
|
|
404,823
|
Income tax
expense
|
(86,822)
|
|
(76,659)
|
|
(163,570)
|
|
(155,699)
|
Net income
|
$
119,961
|
|
$
125,522
|
|
$
213,949
|
|
$
249,124
|
Foreign currency
translation adjustment, net of tax
|
(40)
|
|
(109)
|
|
78
|
|
(281)
|
Total comprehensive
income
|
$
119,921
|
|
$
125,413
|
|
$
214,027
|
|
$
248,843
|
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
|
5,865,032
|
|
6,354,755
|
|
5,979,273
|
|
6,307,541
|
Diluted
|
6,210,078
|
|
6,447,517
|
|
6,054,771
|
|
6,526,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIRIUS XM HOLDINGS
INC. AND SUBSIDIARIES
|
|
CONSOLIDATED BALANCE
SHEETS
|
|
|
As of June
30,
|
|
As of December
31,
|
|
|
2014
|
|
2013
|
|
(in thousands,
except share and per share data)
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
169,980
|
|
$
134,805
|
|
Accounts receivable,
net
|
109,117
|
|
103,937
|
|
Receivables from
distributors
|
93,159
|
|
88,975
|
|
Inventory,
net
|
21,555
|
|
13,863
|
|
Prepaid
expenses
|
110,994
|
|
110,530
|
|
Related party current
assets
|
4,937
|
|
9,145
|
|
Deferred tax
asset
|
846,612
|
|
937,598
|
|
Other current
assets
|
13,764
|
|
20,160
|
|
Total current
assets
|
1,370,118
|
|
1,419,013
|
|
Property and
equipment, net
|
1,549,881
|
|
1,594,574
|
|
Long-term restricted
investments
|
5,718
|
|
5,718
|
|
Deferred financing
fees, net
|
13,334
|
|
12,604
|
|
Intangible assets,
net
|
2,672,118
|
|
2,700,062
|
|
Goodwill
|
2,203,409
|
|
2,204,553
|
|
Related party
long-term assets
|
108
|
|
30,164
|
|
Long-term deferred
tax asset
|
801,079
|
|
868,057
|
|
Other long-term
assets
|
8,769
|
|
10,035
|
|
Total
assets
|
$
8,624,534
|
|
$
8,844,780
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable and
accrued expenses
|
$
560,591
|
|
$
578,333
|
|
Accrued
interest
|
55,028
|
|
42,085
|
|
Current portion of
deferred revenue
|
1,635,901
|
|
1,586,611
|
|
Current portion of
deferred credit on executory contracts
|
3,285
|
|
3,781
|
|
Current maturities of
long-term debt
|
497,884
|
|
496,815
|
|
Current maturities of
long-term related party debt
|
10,981
|
|
10,959
|
|
Related party current
liabilities
|
4,961
|
|
20,320
|
|
Total current
liabilities
|
2,768,631
|
|
2,738,904
|
|
Deferred
revenue
|
144,717
|
|
149,026
|
|
Deferred credit on
executory contracts
|
-
|
|
1,394
|
|
Long-term
debt
|
4,115,429
|
|
3,093,821
|
|
Related party
long-term liabilities
|
15,055
|
|
16,337
|
|
Other long-term
liabilities
|
94,813
|
|
99,556
|
|
Total
liabilities
|
7,138,645
|
|
6,099,038
|
|
Stockholders'
equity:
|
|
|
|
|
Preferred stock,
undesignated, par value $0.001 (liquidation preference of $0.001
per share); 50,000,000 shares authorized and 0 shares issued and
outstanding at June 30, 2014 and December 31, 2013
|
-
|
|
-
|
|
Common stock, par
value $0.001; 9,000,000,000 shares authorized; 5,712,347,567 and
6,096,220,526 shares issued; 5,706,347,567 and 6,096,220,526
outstanding at June 30, 2014 and December 31, 2013,
respectively
|
5,712
|
|
6,096
|
|
Accumulated other
comprehensive loss, net of tax
|
(230)
|
|
(308)
|
|
Additional paid-in
capital
|
7,221,372
|
|
8,674,129
|
|
Treasury stock, at
cost; 6,000,000 and 0 shares of common stock at June 30, 2014 and
December 31, 2013, respectively
|
(20,739)
|
|
-
|
|
Accumulated
deficit
|
(5,720,226)
|
|
(5,934,175)
|
|
Total stockholders'
equity
|
1,485,889
|
|
2,745,742
|
|
Total liabilities and
stockholders' equity
|
$
8,624,534
|
|
$
8,844,780
|
|
|
|
|
|
|
SIRIUS XM HOLDINGS
INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
(UNAUDITED)
|
|
|
For the Six Months
Ended June 30,
|
|
(in
thousands)
|
2014
|
|
2013
|
|
Cash flows from
operating activities:
|
|
|
|
|
Net income
|
$
213,949
|
|
$
249,124
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
135,471
|
|
134,433
|
|
Non-cash interest
expense, net of amortization of premium
|
10,779
|
|
10,932
|
|
Provision for
doubtful accounts
|
21,287
|
|
20,153
|
|
Amortization of
deferred income related to equity method investment
|
(1,388)
|
|
(1,388)
|
|
Loss on
extinguishment of debt and credit facilities, net
|
-
|
|
16,377
|
|
Gain on
unconsolidated entity investments, net
|
(966)
|
|
(1,382)
|
|
Dividend received
from unconsolidated entity investment
|
8,554
|
|
13,217
|
|
Loss on disposal of
assets
|
-
|
|
126
|
|
Loss on change in
value of derivatives
|
34,485
|
|
-
|
|
Share-based payment
expense
|
36,027
|
|
30,012
|
|
Deferred income
taxes
|
157,965
|
|
159,191
|
|
Other non-cash
purchase price adjustments
|
(1,890)
|
|
(137,889)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
(26,467)
|
|
(15,214)
|
|
Receivables from
distributors
|
(4,184)
|
|
(6,863)
|
|
Inventory
|
(7,692)
|
|
8,649
|
|
Related party
assets
|
2,388
|
|
205
|
|
Prepaid expenses and
other current assets
|
(1,057)
|
|
(28,317)
|
|
Other long-term
assets
|
1,238
|
|
1,353
|
|
Accounts payable and
accrued expenses
|
(40,098)
|
|
(69,310)
|
|
Accrued
interest
|
12,943
|
|
3,868
|
|
Deferred
revenue
|
44,981
|
|
59,116
|
|
Related party
liabilities
|
449
|
|
1,171
|
|
Other long-term
liabilities
|
(4,702)
|
|
(5,543)
|
|
Net cash provided by
operating activities
|
592,072
|
|
442,021
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Additions to property
and equipment
|
(58,417)
|
|
(62,980)
|
|
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
|
(33,095)
|
|
(62,980)
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds from
exercise of stock options
|
260
|
|
21,658
|
|
Taxes paid in lieu of
shares issued for stock-based compensation
|
(7,313)
|
|
-
|
|
Proceeds from
long-term borrowings and revolving credit facility, net of
costs
|
1,921,230
|
|
1,136,640
|
|
Payment of premiums
on redemption of debt
|
-
|
|
(14,719)
|
|
Repayment of
long-term borrowings and revolving credit facility
|
(905,815)
|
|
(283,180)
|
|
Common stock
repurchased and retired
|
(1,532,164)
|
|
(1,108,616)
|
|
Net cash used in
financing activities
|
(523,802)
|
|
(248,217)
|
|
Net increase in cash
and cash equivalents
|
35,175
|
|
130,824
|
|
Cash and cash
equivalents at beginning of period
|
134,805
|
|
520,945
|
|
Cash and cash
equivalents at end of period
|
$
169,980
|
|
$
651,769
|
|
|
|
|
|
Key Operating
Metrics
The following table contains our key operating metrics for the
three and six months ended June 30,
2014 and 2013, respectively. Subscribers to our connected
vehicle services are not included in our subscriber count:
|
|
Unaudited
|
|
(in thousands,
except subscriber, per subscriber and per installation
amounts)
|
For the Three
Months Ended June
30,
|
|
For the Six Months
Ended June
30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
Self-pay
subscribers
|
21,635,008
|
|
20,297,736
|
|
21,635,008
|
|
20,297,736
|
|
Paid promotional
subscribers
|
4,666,573
|
|
4,771,252
|
|
4,666,573
|
|
4,771,252
|
|
Ending
subscribers
|
26,301,581
|
|
25,068,988
|
|
26,301,581
|
|
25,068,988
|
|
|
|
|
|
|
|
|
|
|
Self-pay
subscribers
|
379,711
|
|
423,076
|
|
553,191
|
|
727,462
|
|
Paid promotional
subscribers
|
95,761
|
|
292,686
|
|
189,080
|
|
441,190
|
|
Net
additions
|
475,472
|
|
715,762
|
|
742,271
|
|
1,168,652
|
|
|
|
|
|
|
|
|
|
|
Daily weighted
average number of subscribers
|
26,005,691
|
|
24,651,268
|
|
25,805,030
|
|
24,331,646
|
|
|
|
|
|
|
|
|
|
|
Average self-pay
monthly churn
|
1.8%
|
|
1.7%
|
|
1.9%
|
|
1.8%
|
|
|
|
|
|
|
|
|
|
|
New vehicle consumer
conversion rate
|
42%
|
|
45%
|
|
42%
|
|
44%
|
|
|
|
|
|
|
|
|
|
|
ARPU
|
$
12.36
|
|
$
12.28
|
|
$
12.27
|
|
$
12.16
|
|
SAC, per
installation
|
$
33
|
|
$
47
|
|
$
34
|
|
$
47
|
|
Customer service and
billing expenses, per average subscriber
|
$
1.05
|
|
$
1.08
|
|
$
1.07
|
|
$
1.09
|
|
Free cash
flow
|
$
335,044
|
|
$
236,560
|
|
$
557,833
|
|
$
379,041
|
|
Adjusted
EBITDA
|
$
370,437
|
|
$
282,979
|
|
$
705,220
|
|
$
544,850
|
|
|
|
|
|
|
|
|
|
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
businesses, (ii) base our internal budgets and (iii) compensate
management. 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 of Sirius and XM, (ii) depreciation and amortization and
(iii) share-based payment expense. 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 an OEM and 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 also believe the exclusion of share-based
payment expense is useful given the significant variation in
expense that can result from changes in the fair value as
determined using the Black-Scholes-Merton model which varies based
on assumptions used for the expected life, expected stock price
volatility and risk-free interest rates.
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 of Sirius and XM.
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 (in thousands):
|
Unaudited
|
|
For the Three
Months Ended June 30,
|
|
For the Six Months
Ended June 30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
Net income
(GAAP):
|
$
119,961
|
|
$
125,522
|
|
$
213,949
|
|
$
249,124
|
Add back items
excluded from Adjusted EBITDA:
|
|
|
|
|
|
|
|
Purchase price
accounting adjustments:
|
|
|
|
|
|
|
|
Revenues
|
1,813
|
|
1,813
|
|
3,626
|
|
3,626
|
Operating
expenses
|
(945)
|
|
(69,479)
|
|
(1,890)
|
|
(137,889)
|
Share-based payment
expense (GAAP)
|
17,787
|
|
15,494
|
|
36,027
|
|
30,012
|
Depreciation and
amortization (GAAP)
|
67,204
|
|
67,415
|
|
135,471
|
|
134,433
|
Interest expense, net
of amounts capitalized (GAAP)
|
67,521
|
|
49,728
|
|
121,613
|
|
95,902
|
Loss on
extinguishment of debt and credit facilities, net (GAAP)
|
-
|
|
16,377
|
|
-
|
|
16,377
|
Interest and
investment loss (income) (GAAP)
|
1,066
|
|
(294)
|
|
(3,283)
|
|
(1,932)
|
Loss on change in
value of derivatives (GAAP)
|
7,463
|
|
-
|
|
34,485
|
|
-
|
Other loss (income)
(GAAP)
|
1,745
|
|
(256)
|
|
1,652
|
|
(502)
|
Income tax expense
(GAAP)
|
86,822
|
|
76,659
|
|
163,570
|
|
155,699
|
Adjusted
EBITDA
|
$
370,437
|
|
$
282,979
|
|
$
705,220
|
|
$
544,850
|
|
|
|
|
|
|
|
|
Adjusted Net Income - We define this Non-GAAP
financial measure as our actual net income adjusted to exclude the
impact of certain purchase price accounting adjustments and the
loss on change in value of derivatives, net of income tax expense.
The following table reconciles our actual income before income
taxes to our adjusted net income for the three and six months ended
June 30, 2014 and 2013 (in
thousands):
|
Unaudited
|
|
For the Three
Months Ended June 30,
|
|
For the Six Months
Ended June 30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
Income before income
taxes (GAAP):
|
$
206,783
|
|
$
202,181
|
|
$
377,519
|
|
$
404,823
|
Add back items
excluded from adjusted net income:
|
|
|
|
|
|
|
|
Purchase price
accounting adjustments:
|
|
|
|
|
|
|
|
Revenues
|
1,813
|
|
1,813
|
|
3,626
|
|
3,626
|
Operating
expenses
|
(945)
|
|
(69,479)
|
|
(1,890)
|
|
(137,889)
|
Loss on change in
value of derivatives (GAAP)
|
7,463
|
|
-
|
|
34,485
|
|
-
|
Adjusted income
before income taxes
|
$
215,114
|
|
$
134,515
|
|
$
413,740
|
|
$
270,560
|
Allocable income tax
expense
|
(83,679)
|
|
(52,461)
|
|
(160,945)
|
|
(105,518)
|
Adjusted net
income
|
$
131,435
|
|
$
82,054
|
|
$
252,795
|
|
$
165,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
2014 and 2013:
|
|
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
Three Months Ended June 30, 2013
|
|
(in
thousands)
|
As
Reported
|
|
Purchase Price
Accounting Adjustments
|
|
Allocation of
Share-based Payment Expense
|
|
Adjusted
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Subscriber
revenue
|
$
814,718
|
|
$
-
|
|
$
-
|
|
$
814,718
|
|
Advertising
revenue
|
21,757
|
|
-
|
|
-
|
|
21,757
|
|
Equipment
revenue
|
18,443
|
|
-
|
|
-
|
|
18,443
|
|
Other
revenue
|
85,192
|
|
1,813
|
|
-
|
|
87,005
|
|
Total
revenue
|
$
940,110
|
|
$
1,813
|
|
$
-
|
|
$
941,923
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Cost of
services:
|
|
|
|
|
|
|
|
|
Revenue share and
royalties
|
$
155,859
|
|
$
40,831
|
|
$
-
|
|
$
196,690
|
|
Programming and
content
|
70,381
|
|
2,478
|
|
(1,639)
|
|
71,220
|
|
Customer service and
billing
|
80,290
|
|
-
|
|
(511)
|
|
79,779
|
|
Satellite and
transmission
|
19,493
|
|
-
|
|
(827)
|
|
18,666
|
|
Cost of
equipment
|
5,442
|
|
-
|
|
-
|
|
5,442
|
|
Subscriber
acquisition costs
|
129,992
|
|
22,017
|
|
-
|
|
152,009
|
|
Sales and
marketing
|
68,058
|
|
4,153
|
|
(3,182)
|
|
69,029
|
|
Engineering, design
and development
|
15,052
|
|
-
|
|
(1,634)
|
|
13,418
|
|
General and
administrative
|
60,392
|
|
-
|
|
(7,701)
|
|
52,691
|
|
Depreciation and
amortization (a)
|
67,415
|
|
-
|
|
-
|
|
67,415
|
|
Share-based payment
expense
|
-
|
|
-
|
|
15,494
|
|
15,494
|
|
Total operating
expenses
|
$
672,374
|
|
$
69,479
|
|
$
-
|
|
$
741,853
|
|
|
|
|
|
|
|
|
|
|
(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, 2013 was
$12,000.
|
|
|
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.
|
|
|
Unaudited For the
Six Months Ended June 30, 2013
|
|
(in
thousands)
|
As
Reported
|
|
Purchase Price
Accounting Adjustments
|
|
Allocation of
Share-based Payment Expense
|
|
Adjusted
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Subscriber
revenue
|
$ 1,598,060
|
|
$ -
|
|
$ -
|
|
$ 1,598,060
|
|
Advertising
revenue
|
41,968
|
|
-
|
|
-
|
|
41,968
|
|
Equipment
revenue
|
36,599
|
|
-
|
|
-
|
|
36,599
|
|
Other
revenue
|
160,881
|
|
3,626
|
|
-
|
|
164,507
|
|
Total
revenue
|
$ 1,837,508
|
|
$ 3,626
|
|
$ -
|
|
$ 1,841,134
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Cost of
services:
|
|
|
|
|
|
|
|
|
Revenue share and
royalties
|
$ 304,390
|
|
$ 80,592
|
|
$ -
|
|
$ 384,982
|
|
Programming and
content
|
144,991
|
|
4,956
|
|
(3,281)
|
|
146,666
|
|
Customer service and
billing
|
160,684
|
|
-
|
|
(981)
|
|
159,703
|
|
Satellite and
transmission
|
39,188
|
|
-
|
|
(1,677)
|
|
37,511
|
|
Cost of
equipment
|
12,469
|
|
-
|
|
-
|
|
12,469
|
|
Subscriber
acquisition costs
|
246,103
|
|
44,022
|
|
-
|
|
290,125
|
|
Sales and
marketing
|
133,956
|
|
8,319
|
|
(6,243)
|
|
136,032
|
|
Engineering, design
and development
|
29,894
|
|
-
|
|
(3,281)
|
|
26,613
|
|
General and
administrative
|
116,732
|
|
-
|
|
(14,549)
|
|
102,183
|
|
Depreciation and
amortization (a)
|
134,433
|
|
-
|
|
-
|
|
134,433
|
|
Share-based payment
expense
|
-
|
|
-
|
|
30,012
|
|
30,012
|
|
Total operating
expenses
|
$ 1,322,840
|
|
$ 137,889
|
|
$ -
|
|
$ 1,460,729
|
|
|
|
|
|
|
|
|
|
|
(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, 2013 was
$25,000.
|
|
|
|
|
|
|
|
|
|
ARPU - is derived from total earned subscriber
revenue, advertising revenue and other subscription-related
revenue, excluding revenue associated with our connected vehicle
business, net of purchase price accounting adjustments, 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 for
subscriber and per subscriber amounts):
|
Unaudited
|
|
For the Three
Months Ended June 30,
|
|
For the Six Months
Ended
June
30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
Subscriber revenue,
excluding connected vehicle (GAAP)
|
$
855,846
|
|
$
814,718
|
|
$ 1,688,649
|
|
$ 1,598,060
|
Add: advertising
revenue (GAAP)
|
25,498
|
|
21,757
|
|
47,712
|
|
41,968
|
Add: other
subscription-related revenue (GAAP)
|
82,990
|
|
71,648
|
|
163,758
|
|
135,785
|
|
$
964,334
|
|
$
908,123
|
|
$ 1,900,119
|
|
$ 1,775,813
|
|
|
|
|
|
|
|
|
Daily weighted
average number of subscribers
|
26,005,691
|
|
24,651,268
|
|
25,805,030
|
|
24,331,646
|
|
|
|
|
|
|
|
|
ARPU
|
$
12.36
|
|
$
12.28
|
|
$
12.27
|
|
$
12.16
|
|
|
|
|
|
|
|
|
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 given the
significant variation in expense that can result from changes in
the fair market value of our common stock, the effect of which is
unrelated 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 for
subscriber and per subscriber amounts):
|
Unaudited
|
|
For the Three
Months Ended
June
30,
|
|
For the Six Months
Ended
June
30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
Customer service and
billing expenses, excluding connected vehicle (GAAP)
|
$
82,705
|
|
$
80,290
|
|
$
166,809
|
|
$
160,684
|
Less: share-based
payment expense (GAAP)
|
(587)
|
|
(511)
|
|
(1,164)
|
|
(981)
|
|
$
82,118
|
|
$
79,779
|
|
$
165,645
|
|
$
159,703
|
|
|
|
|
|
|
|
|
Daily weighted
average number of subscribers
|
26,005,691
|
|
24,651,268
|
|
25,805,030
|
|
24,331,646
|
|
|
|
|
|
|
|
|
Customer service and
billing expenses, per average subscriber
|
$
1.05
|
|
$
1.08
|
|
$
1.07
|
|
$
1.09
|
|
|
|
|
|
|
|
|
Free cash flow - is 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,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
Cash Flow
information
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
$
340,682
|
|
$
273,106
|
|
$
592,072
|
|
$
442,021
|
Net cash used in
investing activities
|
$
(5,638)
|
|
$
(36,546)
|
|
$
(33,095)
|
|
$
(62,980)
|
Net cash used in
financing activities
|
$
(286,235)
|
|
$
208,482
|
|
$
(523,802)
|
|
$
(248,217)
|
Free Cash
Flow
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
$
340,682
|
|
$
273,106
|
|
$
592,072
|
|
$
442,021
|
Additions to property
and equipment
|
(29,816)
|
|
(36,546)
|
|
(58,417)
|
|
(62,980)
|
Return of capital
from investment in unconsolidated entity
|
24,178
|
|
-
|
|
24,178
|
|
-
|
Free cash
flow
|
$
335,044
|
|
$
236,560
|
|
$
557,833
|
|
$
379,041
|
|
|
|
|
|
|
|
|
Diluted weighted
average common shares outstanding
|
6,210,078
|
|
6,447,517
|
|
6,054,771
|
|
6,526,698
|
|
|
|
|
|
|
|
|
Free cash flow per
diluted share
|
$
0.05
|
|
$
0.04
|
|
$
0.09
|
|
$
0.06
|
|
|
|
|
|
|
|
|
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, excluding purchase
price accounting adjustments, divided by the number of satellite
radio installations in new vehicles and shipments of aftermarket
radios for the period. Purchase price accounting adjustments
associated with the merger of Sirius and XM include the elimination
of the benefit of amortization of deferred credits on executory
contracts recognized at the merger date attributable to an OEM.
SAC, per installation, is calculated as follows (in thousands,
except for 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)
|
$
124,407
|
|
$
129,992
|
|
$
247,429
|
|
$
246,103
|
|
Less: margin from
direct sales of radios and accessories (GAAP)
|
(15,586)
|
|
(13,001)
|
|
(31,760)
|
|
(24,130)
|
|
Add: purchase price
accounting adjustments
|
-
|
|
22,017
|
|
-
|
|
44,022
|
|
|
$
108,821
|
|
$
139,008
|
|
$
215,669
|
|
$
265,995
|
|
|
|
|
|
|
|
|
|
|
Installations
|
3,279,564
|
|
2,973,267
|
|
6,358,074
|
|
5,684,160
|
|
|
|
|
|
|
|
|
|
|
SAC, per
installation
|
$
33
|
|
$
47
|
|
$
34
|
|
$
47
|
|
|
|
|
|
|
|
|
|
Second quarter 2014 financial information about Sirius XM Radio
Inc. will be posted to our website at investor.siriusxm.com.
Sirius XM Radio Inc. is furnishing this information in order
to comply with the reporting obligations in the indentures
governing its outstanding notes.
About SiriusXM
Sirius XM Holdings Inc. (NASDAQ: SIRI) is the world's largest
radio broadcaster measured by revenue and has 26.3 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 Trafficâ„¢, SiriusXM Travel Link,
NavTraffic®, NavWeather™, SiriusXM Aviation, SiriusXM Marine™,
Sirius Marine Weather, XMWX
Aviationâ„¢, and XMWX Marineâ„¢. 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,
2013, 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
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SOURCE Sirius XM Holdings Inc.