EX-99.1 2 siri2q2018earningsrelease.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1


 
 
x1c84851a001imagea11.jpg
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

NEW YORK – July 25, 2018 – 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 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