SiriusXM Reports Second Quarter 2018 Results
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.
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 1(st), 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 4,485 4,530
4,530,928 shares issued; 4,485,774 and 4,527,742 outstanding at June 30, 2018
and December 31, 2017, respectively
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 - (17,154)
December 31, 2017, respectively
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 For the Three Months For the Six Months Three Months Six Months
subscriber and per installation Ended June 30, Ended June 30,
amounts)
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 As Reported Impact of Balances Without As Reported Impact of Balances Without
amounts) Adopting Adoption of ASU Adopting Adoption of ASU
ASU 2014-09 2014-09 ASU 2014-09 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 $89,335 $90,388 $177,068 $182,508
connected vehicle services
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 $0.89 $0.94 $0.88 $0.95
subscriber
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 $119,778 $125,154 $242,471 $252,642
vehicle services
Less: margin from sales of radios and accessories, (28,542) (20,285) (56,000) (43,031)
excluding connected vehicle services
$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 As Reported Impact of Balances Without As Reported Impact of Balances Without
amounts) Adopting Adoption of ASU Adopting Adoption of ASU
ASU 2014-09 2014-09 ASU 2014-09 2014-09
----------- ------- ----------- -------
Subscriber acquisition costs, $119,778 $800 $120,578 $242,471 $1,845 $244,316
excluding connected vehicle
services
Less: margin from sales of radios (28,542) - (28,542) (56,000) - (56,000)
and accessories, excluding
connected vehicle services
$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(TM), SiriusXM Travel Link, NavTraffic®, NavWeather(TM). SiriusXM delivers weather, data and information services to aircraft and boats through SiriusXM Aviation(TM) and SiriusXM Marine(TM). 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
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SOURCE Sirius XM Holdings Inc.
