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SiriusXM Reports Second Quarter 2018 Results

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SiriusXM Reports Second Quarter 2018 Results

- SiriusXM Adds 483,000 Net New Self-Pay Subscribers in the Quarter

- Second Quarter Revenue Climbs 6% to $1.4 Billion

- Net Income Grows 45% to $292 Million in the Quarter, with Diluted EPS Climbing 49% to $0.06

- Adjusted EBITDA Grows 4% to $543 Million

- Operating Cash Flow Climbs 20% to $579 Million; Free Cash Flow Climbs 17% to $486 Million

- Company Increases 2018 Guidance for Self-Pay Subscribers, Revenue and Adjusted EBITDA

PR Newswire

NEW YORK, July 25, 2018 /PRNewswire/ -- SiriusXM today announced second quarter 2018 operating and financial results, including revenue of $1.4 billion, an increase of 6% versus the prior year period.

SIRIUS XM logo. (PRNewsFoto/SIRIUS XM Radio)

The Company's net income totaled $292 million in the second quarter 2018, compared to $202 million in the second quarter 2017. Net income per diluted common share was $0.06 in the second quarter 2018, a 49% increase compared to $0.04 in the second quarter 2017. Adjusted EBITDA grew 4% in the second quarter 2018 to $543 million, a record second quarter performance. Operating cash flow and free cash flow in the second quarter 2018 increased 20% and 17%, respectively, to $579 million and $486 million.

"SiriusXM's strong start to 2018 accelerated in the second quarter. We added 483,000 net new self-pay subscribers in the quarter with an impressive 1.6% self-pay churn rate, our best-ever performance. Our 6% growth in revenue would have been 8% absent the change in generally accepted accounting principles that was effective January 1st, and we are thrilled to increase our full-year guidance for self-pay net additions, revenue and adjusted EBITDA," said Jim Meyer, Chief Executive Officer, SiriusXM.

"We never rest in finding, acquiring, and developing the best music, talk, entertainment, sports, and comedy programming in all of audio. Last week we announced we will bring subscribers an exclusive new comedy channel created with Netflix and fueled by their world-class comedy programming from top global talent. In just the last few months, we have brought our listeners live exclusive performances from stars such as pop's Shawn Mendes, country's Jason Aldean, and the incomparable U2 playing for our subscribers at Harlem's legendary Apollo Theater," added Meyer.

SECOND QUARTER 2018 HIGHLIGHTS

  • Self-Pay Net Additions of 483,000. The Company added 483,000 net new self-pay subscribers in the second quarter to end with approximately 28.2 million self-pay subscribers. Self-pay monthly churn of 1.6% improved 11 basis points over the second quarter of 2017 and marked the lowest-ever reported by the company for a quarter. Total net additions in the second quarter were 429,000, resulting in approximately 33.5 million SiriusXM subscribers at quarter-end.
  • Strong Revenue Growth. Second quarter revenue grew 6% compared to the year-ago period to $1.4 billion. This growth was driven by a 5% increase in subscribers and an increase of 1%, after the accounting change, in average revenue per user (ARPU) to $13.30. The second quarter 2018 was impacted by the adoption of the new revenue recognition accounting standard (FASB ASU 2014-09) which reclassified approximately $24 million of revenue to offset expenses principally related to automaker agreements. These reclassifications reduced reported ARPU by $0.24 in the quarter.
  • Net Income Grows 45%. Net income in the second quarter totaled $292 million, up 45% from $202 million in the second quarter 2017. This increase included a $86 million unrealized gain associated with the change in fair value of the Company's Pandora investment, in addition to approximately $64 million of tax savings resulting from a 19.4% effective tax rate in the second quarter compared to a 37.2% effective tax rate in the prior year period. These items were partially offset by a $69 million charge related to the legal settlement that resolved all outstanding claims, including ongoing audits, under our statutory license for sound recordings for the period January 1, 2007 through December 31, 2017.
  • Free Cash Flow Increases 17%. Free cash flow for the second quarter totaled $486 million, up 17% from $417 million in the second quarter of 2017. Operating cash flow for the second quarter 2018 totaled $579 million, up 20% from the prior year period.

"In the second quarter, we spent $22 million to repurchase approximately 3.6 million shares and we paid nearly $50 million in dividends to stockholders. At the end of the quarter, our debt to adjusted EBITDA was just 3.0 times, and we had cash on hand of approximately $64 million and a completely undrawn revolver with capacity of $1.75 billion. This gives us ample liquidity to continue to invest in our business, make strategic investments and return capital to stockholders," noted David Frear, Chief Financial Officer, SiriusXM.

2018 GUIDANCE

The Company increased its 2018 guidance for self-pay net subscriber additions, revenue and adjusted EBITDA. SiriusXM's guidance for 2018 free cash flow remains unchanged. The Company's increased full-year 2018 guidance is as follows:

  • Self-pay net subscriber additions of approximately 1.15 million,
  • Revenue over $5.7 billion,
  • Adjusted EBITDA of approximately $2.175 billion, and
  • Free cash flow of approximately $1.5 billion.

CAPITAL RETURN PROGRAM

Shares of common stock may be purchased from time to time on the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act of 1934, as amended, in privately negotiated transactions, including in accelerated stock repurchase transactions and transactions with Liberty Media and its affiliates, or otherwise. The Company expects to fund the repurchases through a combination of cash on hand, cash generated by operations and future borrowings. The size and timing of these purchases will be based on a number of factors, including price and business and market conditions.

The Company's dividend policy may change at any time without notice to stockholders. The declaration and payment of dividends is at the discretion of the Company's Board of Directors in accordance with applicable law after taking into account various factors, including the Company's financial condition, operating results, current and anticipated cash needs, limitations imposed by its indebtedness, legal requirements and other factors that the Board of Directors deems relevant.

SECOND QUARTER 2018 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)

2018


2017


2018


2017

Revenue:








Subscriber revenue

$

1,138,962



$

1,111,011



$

2,256,046



$

2,189,268


Advertising revenue

47,242



40,178



89,290



76,194


Equipment revenue

36,840



29,674



71,929



59,332


Music royalty fee and other revenue

209,255



166,706



390,136



316,841


Total revenue

1,432,299



1,347,569



2,807,401



2,641,635


Operating expenses:








Cost of services:








Revenue share and royalties

404,284



292,893



714,416



570,193


Programming and content

105,650



96,255



206,486



191,799


Customer service and billing

95,582



95,324



189,447



192,099


Satellite and transmission

23,478



19,603



46,200



40,179


Cost of equipment

7,674



9,371



14,771



16,283


Subscriber acquisition costs

119,778



125,154



242,471



252,642


Sales and marketing

119,435



106,707



226,146



203,616


Engineering, design and development

27,485



27,783



58,122



51,600


General and administrative

92,683



84,607



177,289



162,808


Depreciation and amortization

74,623



73,519



146,835



150,223


Total operating expenses

1,070,672



931,216



2,022,183



1,831,442


Income from operations

361,627



416,353



785,218



810,193


Other income (expense):








Interest expense

(86,917)



(82,794)



(176,706)



(164,451)


Other income (expense)

88,212



(11,937)



124,100



(3,074)


Total other income (expense)

1,295



(94,731)



(52,606)



(167,525)


Income before income taxes

362,922



321,622



732,612



642,668


Income tax expense

(70,570)



(119,513)



(150,819)



(233,486)


Net income

$

292,352



$

202,109



$

581,793



$

409,182


Foreign currency translation adjustment, net of tax

(8,242)



2,763



(17,826)



2,746


Total comprehensive income

$

284,110



$

204,872



$

563,967



$

411,928


Net (loss) income per common share:








Basic

$

0.07



$

0.04



$

0.13



$

0.09


Diluted

$

0.06



$

0.04



$

0.13



$

0.09


Weighted average common shares outstanding:








Basic

4,481,930



4,652,426



4,486,620



4,681,223


Diluted

4,589,095



4,735,592



4,588,986



4,759,741


Dividends declared per common share

$

0.011



$

0.010



$

0.022



$

0.020


 

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


(in thousands, except per share data)

June 30, 2018


December 31, 2017

ASSETS

(unaudited)



Current assets:




Cash and cash equivalents

$

63,516



$

69,022


Receivables, net

247,148



241,727


Inventory, net

18,967



20,199


Related party current assets

13,692



10,284


Prepaid expenses and other current assets

138,015



129,669


Total current assets

481,338



470,901


Property and equipment, net

1,468,930



1,462,766


Intangible assets, net

2,511,121



2,522,846


Goodwill

2,286,582



2,286,582


Related party long-term assets

1,051,337



962,080


Deferred tax assets

371,303



505,528


Other long-term assets

128,543



118,671


Total assets

$

8,299,154



$

8,329,374


LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY




Current liabilities:




Accounts payable and accrued expenses

$

871,373



$

794,341


Accrued interest

128,029



137,428


Current portion of deferred revenue

1,935,326



1,881,825


Current maturities of long-term debt

4,660



5,105


Related party current liabilities

4,103



2,839


Total current liabilities

2,943,491



2,821,538


Deferred revenue

160,286



174,579


Long-term debt

6,443,289



6,741,243


Related party long-term liabilities

6,269



7,364


Deferred tax liabilities

8,169



8,169


Other long-term liabilities

108,218



100,355


Total liabilities

9,669,722



9,853,248


Stockholders' (deficit) equity:




Common stock, par value $0.001; 9,000,000 shares authorized; 4,485,774 and 
     4,530,928 shares issued; 4,485,774 and 4,527,742 outstanding at June 30, 2018 
     and December 31, 2017, respectively

4,485



4,530


Accumulated other comprehensive income, net of tax

4,594



18,407


Additional paid-in capital

1,267,630



1,713,816


Treasury stock, at cost; zero and 3,186 shares of common stock at June 30, 2018 and 
     December 31, 2017, respectively



(17,154)


Accumulated deficit

(2,647,277)



(3,243,473)


Total stockholders' (deficit) equity

(1,370,568)



(1,523,874)


Total liabilities and stockholders' (deficit) equity

$

8,299,154



$

8,329,374


 

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



For the Six Months Ended June 30,

(in thousands)

2018


2017

Cash flows from operating activities:




Net income

$

581,793



$

409,182


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




Depreciation and amortization

146,835



150,223


Non-cash interest expense, net of amortization of premium

4,713



4,231


Provision for doubtful accounts

23,944



27,377


Amortization of deferred income related to equity method investment

(1,388)



(1,388)


Loss on unconsolidated entity investments, net

64



2,183


Gain on fair value instrument

(117,449)




Dividend received from unconsolidated entity investment

1,366



3,606


Share-based payment expense

70,448



59,697


Deferred income taxes

134,044



220,415


Changes in operating assets and liabilities:




Receivables

(29,364)



(38,063)


Inventory

1,232



2,492


Related party, net

(1,722)



(5,756)


Prepaid expenses and other current assets

(177)



(6,617)


Other long-term assets

8,356



5,937


Accounts payable and accrued expenses

87,857



(69,078)


Accrued interest

(9,399)



(7,042)


Deferred revenue

85,100



30,779


Other long-term liabilities

7,863



4,358


Net cash provided by operating activities

994,116



792,536


Cash flows from investing activities:




Additions to property and equipment

(174,273)



(119,517)


Purchases of other investments

(7,138)



(7,355)


Acquisition of business, net of cash acquired



(107,056)


Investments in related parties and other equity investees

(6,138)



(302,526)


Repayment from (loan to) related party

3,242



(130,794)


Net cash used in investing activities

(184,307)



(667,248)


Cash flows from financing activities:




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

(71,501)



(22,595)


Revolving credit facility, net of deferred financing costs

(302,611)



610,000


Principal payments of long-term borrowings

(7,717)



(6,000)


Common stock repurchased and retired

(334,215)



(783,824)


Dividends paid

(98,684)



(93,638)


Net cash used in financing activities

(814,728)



(296,057)


Net decrease in cash, cash equivalents and restricted cash

(4,919)



(170,769)


Cash, cash equivalents and restricted cash at beginning of period

79,374



223,828


Cash, cash equivalents and restricted cash at end of period(1)

$

74,455



$

53,059



(1)     The following table reconciles cash, cash equivalents and restricted cash per the statement of cash flows to the balance sheet. The 
          restricted cash balances are primarily due to letters of credit which have been issued to the landlords of leased office space. The terms 
          of the letters of credit primarily extend beyond one year.

 


June 30, 2018


December 31, 2017


June 30, 2017


December 31, 2016

Cash and cash equivalents

$

63,516



$

69,022



$

42,738



$

213,939


Restricted cash included in Prepaid expenses and other current assets

150



244



432




Restricted cash included in Other long-term assets

10,789



10,108



9,889



9,889


Total cash, cash equivalents and restricted cash at end of period

$

74,455



$

79,374



$

53,059



$

223,828


Key Financial and Operating Performance Metrics

Subscribers and subscription related revenues and expenses associated with our connected vehicle services and Sirius XM Canada are not included in our subscriber count or subscriber-based operating metrics.

Set forth below are our subscriber balances as of June 30, 2018 compared to June 30, 2017:


As of June 30,


2018 vs 2017 Change

(in thousands)

2018


2017


Amount


%

Self-pay subscribers

28,203


26,675


1,528


6

%

Paid promotional subscribers

5,292


5,372


(80)


(1)

%

Ending subscribers (a)

33,495


32,048


1,447


5

%

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

The following table contains our Non-GAAP financial and operating performance measures which are based on our adjusted results of operations for the three and six months ended June 30, 2018 and 2017.  The ARPU and SAC, per installation, metrics for the three months ended June 30, 2018 have been reduced due to the adoption of Accounting Standards Update ("ASU") 2014-09, Revenue - Revenue from Contracts with Customers, and all related amendments, which established Accounting Standards Codification ("ASC") Topic 606 (the "new revenue standard") as of January 1, 2018 by $0.24 and $0.24, respectively.  The ARPU and SAC, per installation, metrics for the six months ended June 30, 2018 have been reduced due to the adoption of the new revenue standard as of January 1, 2018 by $0.24 and $0.28, respectively.  For more information regarding the impact on these metrics, refer to the glossary below.








2018 vs 2017 Change

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

For the Three Months
Ended June 30,


For the Six Months
Ended June 30,


Three Months


Six Months

2018


2017


2018


2017


Amount


%


Amount


%

Self-pay subscribers

483



466



690



725



17



4

%


(35)



(5)

%

Paid promotional subscribers

(54)



(20)



69



(23)



(34)



(170)%

%


92



400

%

Net additions (a)

429



445



759



702



(16)



(4)%

%


57



8

%

Daily weighted average number of subscribers

33,197



31,746



33,013



31,559



1,451



5

%


1,454



5

%

Average self-pay monthly churn

1.6

%


1.7

%


1.7

%


1.8

%


(0.1)%



(6)

 

%


(0.1)%



(6)

 

%

New vehicle consumer conversion rate

39

%


40

%


39

%


40

%


(1)%



(3)

 

%


(1)%



(3)

 

%

















ARPU

$

13.30



$

13.22



$

13.13



$

13.08



$

0.08



1

%


$

0.05



%

SAC, per installation

$

27.54



$

31.19



$

27.86



$

30.18



$

(3.65)



(12)

%


$

(2.32)



(8)

%

Customer service and billing expenses, per average subscriber

$

0.89



$

0.94



$

0.88



$

0.95



$

(0.05)



(5)

 

%


$

(0.07)



(7)

 

%

Adjusted EBITDA

$

543,422



$

521,936



$

1,075,271



$

1,023,739



$

21,486



4

%


$

51,532



5

%

Free cash flow

$

486,243



$

416,725



$

812,705



$

665,664



$

69,518



17

%


$

147,041



22

%

Diluted weighted average common shares outstanding (GAAP)

4,589,095



4,735,592



4,588,986



4,759,741



(146,497)



(3)%



(170,755)



(4)

 

%

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

Glossary

Adjusted EBITDA - EBITDA is defined as net income before interest expense, income tax expense and depreciation and amortization.  We adjust EBITDA to exclude the impact of other income as well as certain other charges discussed below.  Adjusted EBITDA is a Non-GAAP financial measure that excludes (if applicable): (i) certain adjustments as a result of the purchase price accounting for the merger of Sirius and XM, (ii) share-based payment expense and (iii) other significant operating expense (income) that do not relate to the on-going performance of our business.  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 capital structure and purchase price accounting.  We believe investors find this Non-GAAP financial measure useful when analyzing our past operating performance with our current performance and comparing our operating performance to the performance of other communications, entertainment and media companies.  We believe investors use adjusted EBITDA to estimate our current enterprise value and to make investment decisions.  As a result of large capital investments in our satellite radio system, our results of operations reflect significant charges for depreciation expense.  We believe the exclusion of share-based payment expense is useful as it is not directly related to the operational conditions of our business.  We also believe the exclusion of the legal settlements and reserves related to the historical use of sound recordings, loss on extinguishment of debt and loss on disposal of assets, to the extent they occur during the period, is useful as they are significant expenses not incurred as part of our 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 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:


For the Three Months Ended June 30,


For the Six Months Ended June 30,

(in thousands)

2018


2017


2018


2017

Net income:

$

292,352



$

202,109



$

581,793



$

409,182


Add back items excluded from Adjusted EBITDA:








Purchase price accounting adjustments:








Revenues

1,813



1,813



3,626



3,626


Sound recording legal settlements and reserves

69,144





69,144




Share-based payment expense (1)

36,215



30,251



70,448



59,697


Depreciation and amortization

74,623



73,519



146,835



150,223


Interest expense

86,917



82,794



176,706



164,451


Other (income) expense

(88,212)



11,937



(124,100)



3,074


Income tax expense

70,570



119,513



150,819



233,486


Adjusted EBITDA

$

543,422



$

521,936



$

1,075,271



$

1,023,739



(1)            Allocation of share-based payment expense:

 


For the Three Months Ended June 30,


For the Six Months Ended June 30,

(in thousands)

2018


2017


2018


2017

Programming and content

$

10,198



$

7,063



$

18,429



$

13,564


Customer service and billing

1,077



1,029



2,141



2,040


Satellite and transmission

1,268



1,084



2,513



2,271


Sales and marketing

5,505



5,802



11,020



11,482


Engineering, design and development

4,089



3,686



8,236



7,240


General and administrative

14,078



11,587



28,109



23,100


Total share-based payment expense

$

36,215



$

30,251



$

70,448



$

59,697


ARPU - is derived from total earned subscriber revenue, advertising revenue and other subscription-related revenue, excluding revenue associated with our connected vehicle services, 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.  The ARPU for the three and six months ended June 30, 2018 reflects adjustments as a result of adopting the new revenue standard as of January 1, 2018.  ARPU is calculated as follows:


For the Three Months Ended June 30,


For the Six Months Ended June 30,

(in thousands, except per subscriber amounts)

2018


2017


2018


2017

Subscriber revenue, excluding connected vehicle services

$

1,112,652



$

1,090,356



$

2,204,901



$

2,148,410


Add: advertising revenue

47,242



40,178



89,290



76,194


Add: other subscription-related revenue

165,058



128,179



305,874



252,647



$

1,324,952



$

1,258,713



$

2,600,065



$

2,477,251


Daily weighted average number of subscribers

33,197



31,746



33,013



31,559


ARPU

$

13.30



$

13.22



$

13.13



$

13.08


The table below illustrates the impact that the adoption of the new revenue standard has had on ARPU for the three and six months ended June 30, 2018.


For the Three Months Ended June 30, 2018


For the Six Months Ended June 30, 2018

(in thousands, except per subscriber
amounts)

As Reported


Impact of
Adopting
ASU 2014-09


Balances Without
Adoption of ASU
2014-09


As Reported


Impact of
Adopting
ASU 2014-09


Balances Without
Adoption of ASU
2014-09

Subscriber revenue, excluding connected vehicle services

$

1,112,652



$

23,787



$

1,136,439



$

2,204,901



$

48,179



$

2,253,080


Add: advertising revenue

47,242





47,242



89,290





89,290


Add: other subscription-related revenue

165,058





165,058



305,874





305,874



$

1,324,952



$

23,787



$

1,348,739



$

2,600,065



$

48,179



$

2,648,244


Daily weighted average number of subscribers

33,197



33,197



33,197



33,013



33,013



33,013


ARPU

$

13.30



$

0.24



$

13.54



$

13.13



$

0.24



$

13.37


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:


For the Three Months Ended June 30,


For the Six Months Ended June 30,

(in thousands, except per subscriber amounts)

2018


2017


2018


2017

Customer service and billing expenses, excluding
connected vehicle services

$

89,335



$

90,388



$

177,068



$

182,508


Less: share-based payment expense

(1,077)



(1,029)



(2,141)



(2,040)



$

88,258



$

89,359



$

174,927



$

180,468


Daily weighted average number of subscribers

33,197



31,746



33,013



31,559


Customer service and billing expenses, per average
subscriber

$

0.89



$

0.94



$

0.88



$

0.95


Free cash flow - is derived from cash flow provided by operating activities, net of additions to property and equipment and restricted and other investment activity.  Free cash flow is a metric that our management and board of directors use to evaluate the cash generated by our operations, net of capital expenditures and other investment activity.  In a capital intensive business, with significant investments in satellites, we look at our operating cash flow, net of these investing cash outflows, to determine cash available for future subscriber acquisition and capital expenditures, to repurchase or retire debt, to acquire other companies and to evaluate our ability to return capital to stockholders.  We exclude from free cash flow certain items that do not relate to the on-going performance of our business, such as cash outflows for acquisitions, strategic investments and net loan activity with related parties.  We believe free cash flow is an indicator of the long-term financial stability of our business.  Free cash flow, which is reconciled to "Net cash provided by operating activities," is a Non-GAAP financial measure.  This measure can be calculated by deducting amounts under the captions "Additions to property and equipment" and deducting or adding Restricted and other investment activity from "Net cash provided by operating activities" from the unaudited consolidated statements of cash flows.  Free cash flow should be used in conjunction with other GAAP financial performance measures and may not be comparable to free cash flow measures presented by other companies.  Free cash flow should be viewed as a supplemental measure rather than an alternative measure of cash flows from operating activities, as determined in accordance with GAAP.  Free cash flow is limited and does not represent remaining cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt maturities.  We believe free cash flow provides useful supplemental information to investors regarding our current cash flow, along with other GAAP measures (such as cash flows from operating and investing activities), to determine our financial condition, and to compare our operating performance to other communications, entertainment and media companies.  Free cash flow is calculated as follows:


For the Three Months Ended June 30,


For the Six Months Ended June 30,

(in thousands)

2018


2017


2018


2017

Cash Flow information








Net cash provided by operating activities

$

579,418



$

483,211



$

994,116



$

792,536


Net cash used in investing activities

$

(99,313)



$

(606,862)



$

(184,307)



$

(667,248)


Net cash used in financing activities

$

(494,447)



$

(63,667)



$

(814,728)



$

(296,057)


Free Cash Flow








Net cash provided by operating activities

$

579,418



$

483,211



$

994,116



$

792,536


Additions to property and equipment

(92,868)



(66,152)



(174,273)



(119,517)


Purchases of restricted and other investments

(307)



(334)



(7,138)



(7,355)


Free cash flow

$

486,243



$

416,725



$

812,705



$

665,664


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 promotional period 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 connected vehicle services), divided by the number of satellite radio installations in new vehicles and shipments of aftermarket radios for the period.  The SAC, per installation, for the three and six months ended June 30, 2018 reflects adjustments as a result of adopting the new revenue standard as of January 1, 2018.  SAC, per installation, is calculated as follows:


For the Three Months Ended June 30,


For the Six Months Ended June 30,

(in thousands, except per installation amounts)

2018


2017


2018


2017

Subscriber acquisition costs, excluding connected
vehicle services

$

119,778



$

125,154



$

242,471



$

252,642


Less: margin from sales of radios and accessories,
excluding connected vehicle services

(28,542)



(20,285)



(56,000)



(43,031)



$

91,236



$

104,869



$

186,471



$

209,611


Installations

3,313



3,362



6,693



6,946


SAC, per installation

$

27.54



$

31.19



$

27.86



$

30.18


The table below illustrates the impact that the adoption of the new revenue standard has had on SAC, per installation, for the three and six months ended June 30, 2018.


For the Three Months Ended June 30, 2018


For the Six Months Ended June 30, 2018

(in thousands, except per installation
amounts)

As Reported


Impact of
Adopting
ASU 2014-09


Balances Without
Adoption of ASU
2014-09


As Reported


Impact of
Adopting
ASU 2014-09


Balances Without
Adoption of ASU
2014-09

Subscriber acquisition costs,
excluding connected vehicle
services

$

119,778



$

800



$

120,578



$

242,471



$

1,845



$

244,316


Less: margin from sales of radios
and accessories, excluding
connected vehicle services

(28,542)





(28,542)



(56,000)





(56,000)



$

91,236



$

800



$

92,036



$

186,471



$

1,845



$

188,316


Installations

3,313



3,313



3,313



6,693



6,693



6,693


SAC, per installation

$

27.54



$

0.24



$

27.78



$

27.86



$

0.28



$

28.14


About SiriusXM

Sirius XM Holdings Inc. (NASDAQ:SIRI) is the world's largest radio company measured by revenue and has approximately 33.5 million subscribers. SiriusXM creates and offers 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 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 through SiriusXM Traffic™, SiriusXM Travel Link, NavTraffic®, NavWeather™. SiriusXM delivers weather, data and information services to aircraft and boats through SiriusXM Aviation™ and SiriusXM 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 approximately 2.6 million subscribers. SiriusXM is also a leading provider of connected vehicles services, 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 and the timing of events may differ materially from the results anticipated in these forward-looking statements. SiriusXM is providing non-GAAP information on a prospective basis that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends.  We believe investors find these Non-GAAP financial measures useful in evaluating our core trends because they provide a direct view of our underlying contractual costs. This information should be viewed in addition to, and not as an alternative for or superior to, our results prepared in accordance with GAAP.  In addition, SiriusXM's Non-GAAP financial measures may not be comparable to similarly-titled measures by other companies. SiriusXM does not provide a non-GAAP reconciliation for Adjusted EBITDA guidance to Net income or Free cash flow guidance to Net cash provided by operating activities because it does not provide guidance for the reconciling items between adjusted EBITDA to Net income, which includes the provision for income taxes, interest expense and other income, nor does the Company provide guidance for the reconciling items between Free cash flow to Net cash provided by operating activities, which includes additions to property and equipment.  As items that impact Net income and Net cash provided by operating activities are out of the Company's control and/or cannot be reasonably predicted, the Company is unable to provide such guidance as the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures. Accordingly, a reconciliation to Net income and Net cash provided by operating activities is not available without unreasonable effort.

The following factors, among others, could cause actual results and the timing of events to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: our substantial competition, which is likely to increase over time; our ability to retain subscribers or increase the number of subscribers is uncertain; our ability to profitably attract and retain subscribers as our marketing efforts reach more price-sensitive consumers is uncertain; failing to protect the security of the personal information about our customers; interference to our service from wireless operations; we engage in substantial marketing efforts and the continued effectiveness of those efforts are an important part of our business; consumer protection laws and their enforcement; our failure to realize benefits of acquisitions or other strategic initiatives; unfavorable outcomes of pending or future litigation; the market for music rights, which is changing and subject to uncertainties; our dependence upon the auto industry; general economic conditions; 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; rapid technological and industry changes; failure of third parties to perform; our failure to comply with FCC requirements; modifications to our business plan; our indebtedness; our studios, terrestrial repeater networks, satellite uplink facilities or other ground facilities could be damaged by natural catastrophes or terrorist activities; our principal stockholder has significant influence over our affairs and over actions requiring stockholder approval and its interests may differ from interests of other holders of our common stock; we are a "controlled company" within the meaning of the NASDAQ listing rules; impairment of our business by third-party intellectual property rights; and changes to our dividend policies which could occur at any time. 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, 2017, 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

Patrick Reilly
212-901-6646
patrick.reilly@siriusxm.com

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/siriusxm-reports-second-quarter-2018-results-300686050.html

SOURCE Sirius XM Holdings Inc.

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