SiriusXM Reports Fourth Quarter and Full-Year 2015 Results

- 2015 Revenue Up 9% to a Record $4.6 Billion

- Net Income Grows to $510 Million in 2015

- 2015 Adjusted EBITDA Climbs 13% to a Record $1.66 Billion

- Free Cash Flow Per Fully-Diluted Share Increases 23% in 2015 to 24 Cents

- Net Subscriber Growth in 2015 of 2.3 Million

Feb 02, 2016, 07:00 ET from Sirius XM Holdings Inc.

NEW YORK, Feb. 2, 2016 /PRNewswire/ -- SiriusXM today announced fourth quarter and full-year 2015 operating and financial results, including record revenue of $1.2 billion and $4.6 billion, respectively, up 10% and 9% versus the prior year periods.

Net income totaled $135 million and $510 million in the fourth quarter and full-year 2015, respectively, compared to $143 million and $493 million in the fourth quarter and full-year 2014.  Net income per diluted common share was $0.03 and $0.09 in the fourth quarter and full-year 2015, respectively, versus $0.03 and $0.08 in the fourth quarter and full-year 2014. Adjusted EBITDA was $396 million and $1.66 billion in the fourth quarter and full-year, respectively, up 4% and 13% compared to the prior year periods.

"We produced our best subscriber growth in eight years, taking our subscriber base to approximately 29.6 million. The company also set records in 2015 for revenue, adjusted EBITDA, and free cash flow. We are investing in new marketing capabilities, our connected vehicle business, new satellites, a next generation wideband chipset and, most importantly, our world-class and exclusive content. We expect that these investments, together with our long-standing focus on execution, will help us continue our long history of strong, profitable growth," said Jim Meyer, Chief Executive Officer, SiriusXM.

"SiriusXM's strong, resilient business model and ability to deploy capital to benefit our stockholders present a compelling investment opportunity. Our content bundle of commercial-free music channels, live sports events, expanded comedy and entertainment programming remains a unique value in audio entertainment. And the development and deployment of our next-generation SXM17 entertainment platform and telematics services in connected vehicles position us well to continue our enviable place in the dashboard," added Meyer.

FULL-YEAR 2015 HIGHLIGHTS

  • Subscriber Growth Continues. SiriusXM added 2,283,000 net new subscribers in 2015, the highest growth in net subscribers since 2007, before Sirius and XM merged.  The growth in net new subscribers in 2015 represents a 30% increase from the 1,752,000 net new subscribers added in 2014. Self-pay net subscriber additions were 1,765,000 in 2015, approximately 23% higher than in 2014. Total paid subscribers climbed 8% in 2015 to approximately 29.6 million, and self-pay subscribers also increased 8% in 2015 to 24.3 million, both record highs.
  • Full-year Adjusted EBITDA Rose 13% to a Record High. Adjusted EBITDA of $1.66 billion in 2015 was the highest in the company's history, an increase of 13% over the $1.47 billion reported in 2014. The company's adjusted EBITDA margin was also a record high of 36%, an increase from 35% in 2014.
  • Free Cash Flow Per Diluted Share Increased 23%. Free cash flow of $1.32 billion in 2015 was up 14% from $1.16 billion in 2014.  With increased cash flow and a 7% lower average diluted share count from the company's share repurchase program, free cash flow per diluted share climbed 23% to 24.2 cents in 2015, up from 19.7 cents in 2014.

"During the fourth quarter, we spent $369 million to repurchase 92 million of our shares. In January, as our stock fell alongside the worldwide market declines, we accelerated our repurchases to nearly $200 million, repurchasing an additional 52 million shares. Our stock repurchase plan has now delivered $6.5 billion into the hands of our stockholders in just three years. We continue to maintain modest leverage of just 3.3 times adjusted EBITDA, and with no near term maturities and growing free cash flow, we have ample options on how we deploy our capital going forward," remarked David Frear, Chief Financial Officer, SiriusXM.

2016 GUIDANCE

Our full-year 2016 guidance for continued growth in net subscribers, revenue, adjusted EBITDA, and free cash flow, originally issued on January 5, 2016, is as follows:

  • Net subscriber additions of approximately 1.4 million,
  • Revenue of approximately $4.9 billion,
  • Adjusted EBITDA of approximately $1.78 billion, and
  • Free cash flow of approximately $1.4 billion.

FOURTH QUARTER AND FULL-YEAR 2015 RESULTS

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME










For the Three Months Ended
December 31,


For the Twelve Months Ended
December 31,

(in thousands, except per share data)

2015


2014


2015


2014


(Unaudited)


(Unaudited)





Revenue:








Subscriber revenue

$             998,775


$             922,192


$          3,824,793


$          3,554,302

Advertising revenue

33,449


27,970


122,292


100,982

Equipment revenue

30,944


29,938


110,923


104,661

Other revenue

132,978


110,852


512,050


421,150

Total revenue

1,196,146


1,090,952


4,570,058


4,181,095

Operating expenses:








Cost of services:








Revenue share and royalties

251,717


210,089


1,034,832


810,028

Programming and content

76,868


77,953


293,091


297,313

Customer service and billing

99,387


96,411


377,908


370,585

Satellite and transmission

28,848


21,567


94,609


86,013

Cost of equipment

13,703


15,078


42,724


44,397

Subscriber acquisition costs

140,826


126,257


532,599


493,464

Sales and marketing

98,411


98,488


354,189


336,480

Engineering, design and development

17,223


15,107


64,403


62,784

General and administrative

105,607


69,943


324,801


293,938

Depreciation and amortization

69,687


66,402


272,214


266,423

Total operating expenses

902,277


797,295


3,391,370


3,061,425

Income from operations

293,869


293,657


1,178,688


1,119,670

Other income (expense):








Interest expense, net of amounts capitalized

(77,191)


(71,981)


(299,103)


(269,010)

Loss on change in value of derivatives

-


-


-


(34,485)

Other income

3,302


6,377


12,379


14,611

Total other expense

(73,889)


(65,604)


(286,724)


(288,884)

Income before income taxes

219,980


228,053


891,964


830,786

Income tax expense

(85,347)


(84,931)


(382,240)


(337,545)

Net income

$             134,633


$             143,122


$             509,724


$             493,241

Foreign currency translation adjustment, net of tax

-


(114)


(100)


(94)

Total comprehensive income

$             134,633


$             143,008


$             509,624


$             493,147

Net income per common share:








Basic

$                   0.03


$                   0.03


$                   0.09


$                   0.09

Diluted

$                   0.03


$                   0.03


$                   0.09


$                   0.08

Weighted average common shares outstanding:








Basic

5,195,673


5,577,325


5,375,707


5,788,944

Diluted

5,247,514


5,643,839


5,435,166


5,862,020

 

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


As of December 31,


2015


2014

(in thousands, except per share data)




ASSETS




Current assets:




Cash and cash equivalents

$                       111,838


$                       147,724

Receivables, net

234,782


220,579

Inventory, net

22,295


19,397

Related party current assets

5,941


4,344

Deferred tax assets

-


1,038,603

Prepaid expenses and other current assets

187,033


119,099

Total current assets

561,889


1,549,746

Property and equipment, net

1,415,401


1,510,112

Long-term restricted investments

9,888


5,922

Intangible assets, net

2,593,346


2,645,046

Goodwill

2,205,107


2,205,107

Related party long-term assets

-


3,000

Deferred tax assets

1,115,731


437,736

Other long-term assets

145,300


12,396

Total assets

$                    8,046,662


$                    8,369,065

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY




Current liabilities:




Accounts payable and accrued expenses

$                       625,313


$                       587,755

Accrued interest

91,655


80,440

Current portion of deferred revenue

1,771,915


1,632,381

Current portion of deferred credit on executory contracts

-


1,394

Current maturities of long-term debt

4,764


7,482

Related party current liabilities

2,840


4,340

Total current liabilities

2,496,487


2,313,792

Deferred revenue

157,609


151,901

Long-term debt

5,443,614


4,487,419

Related party long-term liabilities

10,795


13,635

Deferred tax liabilities

6,681


-

Other long-term liabilities

97,967


92,481

Total liabilities

8,213,153


7,059,228

Stockholders' (deficit) equity:




Preferred stock, undesignated, par value $0.001 (liquidation preference of $0.001 per share); 50,000 shares authorized and 0 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively

-


-

Common stock, par value $0.001; 9,000,000 shares authorized; 5,153,451 and 5,653,529 shares issued; 5,147,647 and 5,646,119 outstanding at December 31, 2015 and December 31, 2014, respectively

5,153


5,653

Accumulated other comprehensive loss, net of tax

(502)


(402)

Additional paid-in capital

4,783,795


6,771,554

Treasury stock, at cost; 5,804 and 7,410 shares of common stock at December 31, 2015 and December 31, 2014, respectively

(23,727)


(26,034)

Accumulated deficit

(4,931,210)


(5,440,934)

Total stockholders' (deficit) equity

(166,491)


1,309,837

Total liabilities and stockholders' (deficit) equity

$                    8,046,662


$                    8,369,065

 

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Twelve Months Ended December 31,

(in thousands)

2015


2014

Cash flows from operating activities:




Net income

$                      509,724


$                      493,241

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




Depreciation and amortization

272,214


266,423

Non-cash interest expense, net of amortization of premium

7,872


21,039

Provision for doubtful accounts

47,237


44,961

Amortization of deferred income related to equity method investment

(2,776)


(2,776)

Gain on unconsolidated entity investments, net

-


(5,547)

Dividend received from unconsolidated entity investment

14,788


17,019

Loss on disposal of assets

7,384


-

Loss on change in value of derivatives

-


34,485

Share-based payment expense

84,310


78,212

Deferred income taxes

365,499


327,461

Other non-cash purchase price adjustments

(1,394)


(3,781)

Changes in operating assets and liabilities:




Receivables

(61,440)


(72,628)

Inventory

(2,898)


(5,534)

Related party, net 

(14,953)


(4,303)

Prepaid expenses and other current assets

(67,204)


(1,195)

Other long-term assets

(130,741)


3,393

Accounts payable and accrued expenses

52,696


(17,191)

Accrued interest

11,215


38,355

Deferred revenue

145,242


48,645

Other long-term liabilities

7,276


(7,035)

Net cash provided by operating activities

1,244,051


1,253,244

Cash flows from investing activities:




Additions to property and equipment

(134,892)


(121,646)

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

(138,858)


(96,324)

Cash flows from financing activities:




Proceeds from exercise of stock options

260


331

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

(54,539)


(37,318)

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

1,728,571


2,406,205

Repayment of long-term borrowings and revolving credit facility

(797,117)


(1,016,420)

Common stock repurchased and retired

(2,018,254)


(2,496,799)

Net cash used in financing activities

(1,141,079)


(1,144,001)

Net (decrease) increase in cash and cash equivalents

(35,886)


12,919

Cash and cash equivalents at beginning of period

147,724


134,805

Cash and cash equivalents at end of period

$                      111,838


$                      147,724

 

Key Operating Metrics              

The following table contains our key operating metrics based on our adjusted results of operations for the three and twelve months ended December 31, 2015 and 2014, respectively. Subscribers and subscription related revenues and expenses associated with our connected vehicle services are not included in our subscriber count or subscriber-based operating metrics:

 


Unaudited

(in thousands, except per subscriber and per installation amounts)

For the Three Months Ended
December 31,


For the Twelve Months Ended
December 31,

2015


2014


2015


2014

Self-pay subscribers

24,288


22,523


24,288


22,523

Paid promotional subscribers

5,306


4,788


5,306


4,788

Ending subscribers

29,594


27,311


29,594


27,311









Self-pay subscribers

472


508


1,765


1,441

Paid promotional subscribers

162


69


517


311

Net additions (a)

634


577


2,283


1,752









Daily weighted average number of subscribers

29,238


27,022


28,337


26,284









Average self-pay monthly churn

1.9%


1.8%


1.8%


1.9%









New vehicle consumer conversion rate

39%


40%


40%


41%









ARPU

$                        12.75


$                        12.49


$                        12.53


$                        12.38

SAC, per installation

$                             33


$                             33


$                             33


$                             34

Customer service and billing expenses, per average subscriber

$                          1.04


$                          1.07


$                          1.01


$                          1.07

Free cash flow

$                    299,148


$                    330,674


$                 1,315,193


$                 1,155,776

Adjusted EBITDA

$                    396,235


$                    381,306


$                 1,657,617


$                 1,467,775

(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 disposal of assets, loss on extinguishment of debt, loss on change in value of derivatives as well as certain other charges discussed below. This measure is one of the primary Non-GAAP financial measures on which we (i) evaluate the performance of our on-going core operating results period over period, (ii) base our internal budgets and (iii) compensate management. As such, adjusted EBITDA is a Non-GAAP financial performance measure that excludes (if applicable):  (i) certain adjustments as a result of the purchase price accounting for the merger of Sirius and XM, (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 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 believe the exclusion of share-based payment expense and loss on disposal of assets is useful as they are not directly related to the operational conditions of our business.  We also believe the exclusion of settlements related only to the historical use of pre-1972 sound recordings is useful as it does not represent an expense incurred as part of normal operations for the period. 

Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statements of comprehensive income of certain expenses, including share-based payment expense and certain purchase price accounting for the 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 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
December 31,


For the Twelve Months Ended
December 31,

(in thousands)

2015


2014


2015


2014









Net income (GAAP):

$             134,633


$             143,122


$           509,724


$           493,241

Add back items excluded from Adjusted EBITDA:








Purchase price accounting adjustments:








Revenues

1,813


1,813


7,251


7,251

Operating expenses

-


(946)


(1,394)


(3,781)

Pre-1972 sound recordings historical legal settlements (GAAP)

1,506


-


109,164


-

Loss on disposal of assets (GAAP)

7,384


-


7,384


-

Loss on change in value of derivatives (GAAP)

-


-


-


34,485

Share-based payment expense (GAAP)

21,976


20,380


84,310


78,212

Depreciation and amortization (GAAP)

69,687


66,402


272,214


266,423

Interest expense, net of amounts capitalized (GAAP)

77,191


71,981


299,103


269,010

Other income (GAAP)

(3,302)


(6,377)


(12,379)


(14,611)

Income tax expense (GAAP)

85,347


84,931


382,240


337,545

Adjusted EBITDA

$             396,235


$             381,306


$        1,657,617


$        1,467,775









 

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 pre-1972 sound recordings legal settlements, the loss on disposal of assets, and the loss on change in value of derivatives, 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 twelve months ended December 31, 2015 and 2014:

 


Unaudited


For the Three Months Ended
December 31,


For the Twelve Months Ended
December 31,

(in thousands, except per share data)

2015


2014


2015


2014









Income before income taxes (GAAP):

$             219,980


$             228,053


$             891,964


$             830,786

Add back items excluded from adjusted net income:








Purchase price accounting adjustments:








Revenues

1,813


1,813


7,251


7,251

Operating expenses

-


(946)


(1,394)


(3,781)

Pre-1972 sound recordings historical legal settlements (GAAP)

1,506


-


109,164


-

Loss on disposal of assets (GAAP)

7,384


-


7,384


-

Loss on change in value of derivatives (GAAP)

-


-


-


34,485

Adjusted income before income taxes

$             230,683


$             228,920


$          1,014,369


$             868,741

Allocable income tax expense

(89,500)


(85,254)


(434,703)


(352,955)

Adjusted net income

$             141,183


$             143,666


$             579,666


$             515,786

Adjusted net income per common share:








Basic

$                   0.03


$                   0.03


$                   0.11


$                   0.09

Diluted

$                   0.03


$                   0.03


$                   0.11


$                   0.09

Weighted average common shares outstanding:








Basic

5,195,673


5,577,325


5,375,707


5,788,944

Diluted

5,247,514


5,643,839


5,435,166


5,862,020

 

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 twelve months ended December 31, 2015 and 2014:

 


Unaudited For the Three Months Ended December 31, 2015

(in thousands)

As Reported


Purchase Price
Accounting
Adjustments


Allocation of
Share-based
Payment Expense


Adjusted









Revenue:








Subscriber revenue

$               998,775


$                         -


$                         -


$               998,775

Advertising revenue

33,449


-


-


33,449

Equipment revenue

30,944


-


-


30,944

Other revenue

132,978


1,813


-


134,791

Total revenue

$            1,196,146


$                   1,813


$                         -


$            1,197,959

Operating expenses








Cost of services:








Revenue share and royalties

$               251,717


$                         -


$                         -


$               251,717

Programming and content

76,868


-


(3,080)


73,788

Customer service and billing

99,387


-


(818)


98,569

Satellite and transmission

28,848


-


(991)


27,857

Cost of equipment

13,703


-


-


13,703

Subscriber acquisition costs

140,826


-


-


140,826

Sales and marketing

98,411


-


(4,929)


93,482

Engineering, design and development

17,223


-


(2,407)


14,816

General and administrative

105,607


-


(9,751)


95,856

Depreciation and amortization (a)

69,687


-


-


69,687

Share-based payment expense

-


-


21,976


21,976

Total operating expenses

$               902,277


$                         -


$                         -


$               902,277









(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 December 31, 2015 was $8,000. 

 


Unaudited For the Three Months Ended December 31, 2014

(in thousands)

As Reported


Purchase Price
Accounting
Adjustments


Allocation of
Share-based
Payment Expense


Adjusted









Revenue:








Subscriber revenue

$               922,192


$                         -


$                         -


$               922,192

Advertising revenue

27,970


-


-


27,970

Equipment revenue

29,938


-


-


29,938

Other revenue

110,852


1,813


-


112,665

Total revenue

$            1,090,952


$                   1,813


$                         -


$            1,092,765

Operating expenses








Cost of services:








Revenue share and royalties

$               210,089


$                         -


$                         -


$               210,089

Programming and content

77,953


946


(2,277)


76,622

Customer service and billing

96,411


-


(748)


95,663

Satellite and transmission

21,567


-


(1,004)


20,563

Cost of equipment

15,078


-


-


15,078

Subscriber acquisition costs

126,257


-


-


126,257

Sales and marketing

98,488


-


(4,216)


94,272

Engineering, design and development

15,107


-


(2,253)


12,854

General and administrative

69,943


-


(9,882)


60,061

Depreciation and amortization (a)

66,402


-


-


66,402

Share-based payment expense

-


-


20,380


20,380

Total operating expenses

$               797,295


$                      946


$                         -


$               798,241









(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 December 31, 2014 was $9,000.

 


Unaudited For the Twelve Months Ended December 31, 2015

(in thousands)

As Reported


Purchase Price
Accounting
Adjustments


Allocation of
Share-based
Payment Expense


Adjusted









Revenue:








Subscriber revenue

$            3,824,793


$                         -


$                         -


$            3,824,793

Advertising revenue

122,292


-


-


122,292

Equipment revenue

110,923


-


-


110,923

Other revenue

512,050


7,251


-


519,301

Total revenue

$            4,570,058


$                   7,251


$                         -


$            4,577,309

Operating expenses








Cost of services:








Revenue share and royalties

$            1,034,832


$                         -


$                         -


$            1,034,832

Programming and content

293,091


1,394


(10,325)


284,160

Customer service and billing

377,908


-


(2,982)


374,926

Satellite and transmission

94,609


-


(4,147)


90,462

Cost of equipment

42,724


-


-


42,724

Subscriber acquisition costs

532,599


-


-


532,599

Sales and marketing

354,189


-


(17,985)


336,204

Engineering, design and development

64,403


-


(9,470)


54,933

General and administrative

324,801


-


(39,401)


285,400

Depreciation and amortization (a)

272,214


-


-


272,214

Share-based payment expense

-


-


84,310


84,310

Total operating expenses

$            3,391,370


$                   1,394


$                         -


$            3,392,764









(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 twelve months ended December 31, 2015 was $35,000.

 


Unaudited For the Twelve Months Ended December 31, 2014

(in thousands)

As Reported


Purchase Price
Accounting
Adjustments


Allocation of
Share-based
Payment Expense


Adjusted









Revenue:








Subscriber revenue

$            3,554,302


$                         -


$                         -


$            3,554,302

Advertising revenue

100,982


-


-


100,982

Equipment revenue

104,661


-


-


104,661

Other revenue

421,150


7,251


-


428,401

Total revenue

$            4,181,095


$                   7,251


$                         -


$            4,188,346

Operating expenses








Cost of services:








Revenue share and royalties

$               810,028


$                         -


$                         -


$               810,028

Programming and content

297,313


3,781


(9,180)


291,914

Customer service and billing

370,585


-


(2,780)


367,805

Satellite and transmission

86,013


-


(4,091)


81,922

Cost of equipment

44,397


-


-


44,397

Subscriber acquisition costs

493,464


-


-


493,464

Sales and marketing

336,480


-


(15,454)


321,026

Engineering, design and development

62,784


-


(8,675)


54,109

General and administrative

293,938


-


(38,032)


255,906

Depreciation and amortization (a)

266,423


-


-


266,423

Share-based payment expense

-


-


78,212


78,212

Total operating expenses

$            3,061,425


$                   3,781


$                         -


$            3,065,206









(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 twelve months ended December 31, 2014 was $39,000.

 

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, the pre-1972 sound recordings historical legal settlements, and the loss on disposal of assets. The following table reconciles our actual operating expenses to our adjusted cash operating expenses for the three and twelve months ended December 31, 2015 and 2014:

 


Unaudited


For the Three Months Ended
December 31,


For the Twelve Months Ended
December 31,

(in thousands)

2015


2014


2015


2014

Operating expenses (GAAP):

$             902,277


$             797,295


$          3,391,370


$          3,061,425

Items excluded from adjusted cash operating expenses:








Purchase price accounting adjustments

-


946


1,394


3,781

Pre-1972 sound recordings historical legal settlements (GAAP)

(1,506)


-


(109,164)


-

Loss on disposal of assets (GAAP)

(7,384)


-


(7,384)


-

Share-based payment expense (GAAP)

(21,976)


(20,380)


(84,310)


(78,212)

Depreciation and amortization (GAAP)

(69,687)


(66,402)


(272,214)


(266,423)

Adjusted cash operating expenses

$             801,724


$             711,459


$          2,919,692


$          2,720,571

 

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:

 


Unaudited


For the Three Months Ended
December 31,


For the Twelve Months Ended
December 31,

(in thousands, except per subscriber amounts)

2015


2014


2015


2014









Subscriber revenue, excluding connected vehicle (GAAP)

$        973,347


$        897,308


$     3,726,340


$     3,466,050

Add: advertising revenue (GAAP)

33,449


27,970


122,292


100,982

Add: other subscription-related revenue (GAAP)

111,207


87,270


410,644


336,408


$     1,118,003


$     1,012,548


$     4,259,276


$     3,903,440









Daily weighted average number of subscribers

29,238


27,022


28,337


26,284









ARPU

$            12.75


$            12.49


$            12.53


$            12.38

 

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:

 










Unaudited


For the Three Months Ended
December 31,


For the Twelve Months Ended
December 31,

(in thousands, except per subscriber amounts)

2015


2014


2015


2014









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

$          91,686


$          87,417


$        346,789


$        340,094

Less: share-based payment expense (GAAP)

(818)


(748)


(2,982)


(2,780)


$          90,868


$          86,669


$        343,807


$        337,314









Daily weighted average number of subscribers

29,238


27,022


28,337


26,284









Customer service and billing expenses, per average subscriber

$              1.04


$              1.07


$              1.01


$              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, restricted and other investment activity, and the return of capital from investment in unconsolidated entity, 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:

 


Unaudited


For the Three Months Ended
December 31,


For the Twelve Months Ended
December 31,

(in thousands, except per share data)

2015


2014


2015


2014









Cash Flow information








Net cash provided by operating activities

$             343,097


$             365,076


$          1,244,051


$          1,253,244

Net cash used in investing activities

$             (43,949)


$             (34,402)


$           (138,858)


$             (96,324)

Net cash used in financing activities

$           (339,855)


$           (286,535)


$        (1,141,079)


$        (1,144,001)

Free Cash Flow








Net cash provided by operating activities

$             343,097


$             365,076


$          1,244,051


$          1,253,244

Additions to property and equipment

(43,949)


(34,402)


(134,892)


(121,646)

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


-

Free cash flow

$             299,148


$             330,674


$          1,315,193


$          1,155,776









Diluted weighted average common shares outstanding

5,247,514


5,643,839


5,435,166


5,862,020









Free cash flow per diluted share

$                   0.06


$                   0.06


$                   0.24


$                   0.20

 

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:

 


Unaudited


For the Three Months Ended
December 31,


For the Twelve Months Ended
December 31,

(in thousands, except per installation amounts)

2015


2014


2015


2014









Subscriber acquisition costs (GAAP)

$             140,826


$             126,257


$             532,599


$             493,464

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

(17,241)


(14,860)


(68,199)


(60,264)


$             123,585


$             111,397


$             464,400


$             433,200









Installations

3,736


3,391


14,041


12,788









SAC, per installation

$                      33


$                      33


$                      33


$                      34

 

About SiriusXM

Sirius XM Holdings Inc. (NASDAQ: SIRI) is the world's largest radio broadcaster measured by revenue and has 29.6 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 online at SiriusXM.  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 2.7 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.

To download SiriusXM logos and artwork, visit http://www.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 service providers; our ability to attract and retain subscribers, which is uncertain; our dependence upon the auto industry; general economic conditions; changes in consumer protection laws and their enforcement; the security of the personal information about our customers; other existing or future government laws and regulations could harm our business; failure of our satellites would significantly damage our business; the interruption or failure of our information technology and communications systems; 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 or other strategic initiatives; rapid technological and industry changes; failure of third parties to perform; failure to comply with FCC requirements; modifications to our business plans; our indebtedness; and our principal stockholder has significant influence over our management and over actions requiring stockholder approval and its interests may differ from interests of other holders of our common stock.  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 for SiriusXM:

Hooper Stevens
212-901-6718
Hooper.stevens@siriusxm.com

Chris Leal
212-584-5236
Chris.leal@siriusxm.com

 

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

 

SOURCE Sirius XM Holdings Inc.



RELATED LINKS

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