July 29, 2014

SiriusXM Reports Second Quarter 2014 Results

NEW YORK, July 29, 2014 /PRNewswire/ --

  • Revenue Exceeds $1.0 Billion, Up 10% From Second Quarter of 2013
  • Net Income of $120 Million
  • Adjusted EBITDA Grows 31% to a Record $370 Million
  • Free Cash Flow Increases 42% to a Record $335 Million
  • Share Repurchases Exceed $1.6 Billion in 2014
  • 2014 Financial Guidance Raised

SiriusXM announced second quarter 2014 financial and operating results, including revenue of $1.035 billion, up 10% from the second quarter 2013.  Net income was $120 million, or $0.02 per diluted share, in the second quarter of 2014.

SIRIUS XM logo.

Adjusted net income climbed 60% to $131 million in the second quarter of 2014 from $82 million in the second quarter of 2013.  Adjusted EBITDA for the second quarter of 2014 reached a record $370 million, up 31% from $283 million in the second quarter of 2013.

"SiriusXM once again posted outstanding results in the second quarter by adding 475,000 total net new subscribers, including 380,000 net new self-pay subscribers.  We set new records for trial conversions to self-pay, adjusted EBITDA and adjusted EBITDA margin in the quarter, and we are raising our 2014 guidance for revenue, adjusted EBITDA, and free cash flow," stated Jim Meyer, Chief Executive Officer, SiriusXM.

"Our extraordinary operating performance supported the buyback of over 350 million shares in the quarter, or approximately 6% of our outstanding stock.  Perhaps more importantly, we improved our superior content by adding even more channels and shows created with major brands and personalities, such as Joel Osteen, NBC's TODAY Show, and YouTube, and we expanded the range and depth of our commercial-free music programming with the introduction of three new channels in the categories of country, women's pop, and dance," added Meyer. "As the leader in audio entertainment, we never rest in searching for new content that our subscribers will love."

Additional financial and operating highlights of the second quarter include:

  • Subscribers Exceed 26.3 Million.  Net subscriber additions in the second quarter of 2014 were 475,472.  The total paid subscriber base reached a record 26.3 million, up 5% from a year earlier.  Self-pay net subscriber additions were 379,711, and the self-pay subscriber base reached a record high of 21.6 million, up 7% from the second quarter of 2013. Paid and unpaid trials combined to produce a total trial funnel of 7.3 million at the end of the second quarter of 2014, the largest in our history.
  • Adjusted EBITDA and Adjusted EBITDA Margin Highest Ever.  Adjusted EBITDA climbed 31% from the second quarter of 2013 to a record quarterly amount of $370 million.  The Company's adjusted EBITDA margin reached a record 35.7% in the second quarter of 2014, up approximately 570 basis points from the second quarter of 2013.
  • Free Cash Flow Per Share Climbs 47%.  Free cash flow in the second quarter of 2014 was $335 million, up 42% from $237 million in the second quarter of 2013.  Free cash flow per diluted share was 5.4 cents in the second quarter of 2014, up 47% from 3.7 cents in the second quarter of 2013. 

"Since we launched our capital return program in late 2012, we have returned approximately $3.75 billion to stockholders in less than two years," noted David Frear, Chief Financial Officer, SiriusXM.

"On July 15th, our Board of Directors increased our cumulative share repurchase authorization to $6 billion.  Total debt-to-adjusted EBITDA at the end of the second quarter 2014 was 3.5 times, and our $1.25 billion revolving credit was undrawn, leaving us ample liquidity to return capital to shareholders and pursue strategic opportunities as they arise," added Frear.

2014 GUIDANCE

SiriusXM reaffirmed its previously issued 2014 guidance for net subscriber additions and increased its guidance for revenue, adjusted EBITDA, and free cash flow:

  • Net subscriber additions of approximately 1.25 million,
  • Revenue of approximately $4.1 billion,
  • Adjusted EBITDA of approximately $1.425 billion, and
  • Free cash flow of approximately $1.1 billion.

SECOND QUARTER 2014 RESULTS

 

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)










For the Three Months Ended June 30,


For the Six Months Ended June 30,

(in thousands, except per share data)

2014


2013


2014


2013

Revenue:








Subscriber revenue

$             878,160


$             814,718


$          1,729,596


$          1,598,060

Advertising revenue

25,498


21,757


47,712


41,968

Equipment revenue

27,616


18,443


51,594


36,599

Other revenue

104,071


85,192


204,154


160,881

Total revenue

1,035,345


940,110


2,033,056


1,837,508

Operating expenses:








Cost of services:








Revenue share and royalties

200,221


155,859


395,632


304,390

Programming and content

69,570


70,381


144,440


144,991

Customer service and billing

90,092


80,290


181,161


160,684

Satellite and transmission

21,272


19,493


42,651


39,188

Cost of equipment

12,030


5,442


19,834


12,469

Subscriber acquisition costs

124,407


129,992


247,429


246,103

Sales and marketing

77,759


68,058


154,086


133,956

Engineering, design and development

15,630


15,052


31,541


29,894

General and administrative

72,582


60,392


148,825


116,732

Depreciation and amortization

67,204


67,415


135,471


134,433

Total operating expenses

750,767


672,374


1,501,070


1,322,840

Income from operations

284,578


267,736


531,986


514,668

Other income (expense):








Interest expense, net of amounts capitalized

(67,521)


(49,728)


(121,613)


(95,902)

Loss on extinguishment of debt and credit facilities, net

-


(16,377)


-


(16,377)

Interest and investment (loss) income 

(1,066)


294


3,283


1,932

Loss on change in value of derivatives

(7,463)


-


(34,485)


-

Other (loss) income 

(1,745)


256


(1,652)


502

Total other expense

(77,795)


(65,555)


(154,467)


(109,845)

Income before income taxes

206,783


202,181


377,519


404,823

Income tax expense

(86,822)


(76,659)


(163,570)


(155,699)

Net income

$             119,961


$             125,522


$             213,949


$             249,124

Foreign currency translation adjustment, net of tax

(40)


(109)


78


(281)

Total comprehensive income

$             119,921


$             125,413


$             214,027


$             248,843

Net income per common share:








Basic

$                   0.02


$                   0.02


$                   0.04


$                   0.04

Diluted

$                   0.02


$                   0.02


$                   0.04


$                   0.04

Weighted average common shares outstanding:








Basic

5,865,032


6,354,755


5,979,273


6,307,541

Diluted

6,210,078


6,447,517


6,054,771


6,526,698









 







SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS



As of June 30,


As of December 31,



2014


2013


(in thousands, except share and per share data)

(Unaudited)




ASSETS





Current assets:





Cash and cash equivalents

$                       169,980


$                       134,805


Accounts receivable, net

109,117


103,937


Receivables from distributors

93,159


88,975


Inventory, net

21,555


13,863


Prepaid expenses

110,994


110,530


Related party current assets

4,937


9,145


Deferred tax asset

846,612


937,598


Other current assets

13,764


20,160


Total current assets

1,370,118


1,419,013


Property and equipment, net

1,549,881


1,594,574


Long-term restricted investments

5,718


5,718


Deferred financing fees, net

13,334


12,604


Intangible assets, net

2,672,118


2,700,062


Goodwill

2,203,409


2,204,553


Related party long-term assets

108


30,164


Long-term deferred tax asset

801,079


868,057


Other long-term assets

8,769


10,035


Total assets

$                    8,624,534


$                    8,844,780


LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





Accounts payable and accrued expenses

$                       560,591


$                       578,333


Accrued interest

55,028


42,085


Current portion of deferred revenue

1,635,901


1,586,611


Current portion of deferred credit on executory contracts

3,285


3,781


Current maturities of long-term debt

497,884


496,815


Current maturities of long-term related party debt

10,981


10,959


Related party current liabilities

4,961


20,320


Total current liabilities

2,768,631


2,738,904


Deferred revenue

144,717


149,026


Deferred credit on executory contracts

-


1,394


Long-term debt

4,115,429


3,093,821


Related party long-term liabilities

15,055


16,337


Other long-term liabilities

94,813


99,556


Total liabilities

7,138,645


6,099,038


Stockholders' equity:





Preferred stock, undesignated, par value $0.001 (liquidation preference of $0.001 per share); 50,000,000 shares authorized and 0 shares issued and outstanding at June 30, 2014 and December 31, 2013

-


-


Common stock, par value $0.001; 9,000,000,000 shares authorized; 5,712,347,567 and 6,096,220,526 shares issued; 5,706,347,567 and 6,096,220,526 outstanding at June 30, 2014 and December 31, 2013, respectively

5,712


6,096


Accumulated other comprehensive loss, net of tax

(230)


(308)


Additional paid-in capital

7,221,372


8,674,129


Treasury stock, at cost; 6,000,000 and 0 shares of common stock at June 30, 2014 and December 31, 2013, respectively

(20,739)


-


Accumulated deficit

(5,720,226)


(5,934,175)


Total stockholders' equity

1,485,889


2,745,742


Total liabilities and stockholders' equity

$                    8,624,534


$                    8,844,780






 


SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)



For the Six Months Ended June 30,


(in thousands)

2014


2013


Cash flows from operating activities:





Net income

$                      213,949


$                      249,124


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





Depreciation and amortization

135,471


134,433


Non-cash interest expense, net of amortization of premium

10,779


10,932


Provision for doubtful accounts

21,287


20,153


Amortization of deferred income related to equity method investment

(1,388)


(1,388)


Loss on extinguishment of debt and credit facilities, net

-


16,377


Gain on unconsolidated entity investments, net

(966)


(1,382)


Dividend received from unconsolidated entity investment

8,554


13,217


Loss on disposal of assets

-


126


Loss on change in value of derivatives

34,485


-


Share-based payment expense

36,027


30,012


Deferred income taxes

157,965


159,191


Other non-cash purchase price adjustments

(1,890)


(137,889)


Changes in operating assets and liabilities:





Accounts receivable

(26,467)


(15,214)


Receivables from distributors

(4,184)


(6,863)


Inventory

(7,692)


8,649


Related party assets

2,388


205


Prepaid expenses and other current assets

(1,057)


(28,317)


Other long-term assets

1,238


1,353


Accounts payable and accrued expenses

(40,098)


(69,310)


Accrued interest

12,943


3,868


Deferred revenue

44,981


59,116


Related party liabilities

449


1,171


Other long-term liabilities

(4,702)


(5,543)


Net cash provided by operating activities

592,072


442,021







Cash flows from investing activities:





Additions to property and equipment

(58,417)


(62,980)


Acquisition of business, net of cash acquired 

1,144


-


Return of capital from investment in unconsolidated entity

24,178


-


Net cash used in investing activities

(33,095)


(62,980)







Cash flows from financing activities:





Proceeds from exercise of stock options

260


21,658


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

(7,313)


-


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

1,921,230


1,136,640


Payment of premiums on redemption of debt

-


(14,719)


Repayment of long-term borrowings and revolving credit facility

(905,815)


(283,180)


Common stock repurchased and retired

(1,532,164)


(1,108,616)


Net cash used in financing activities

(523,802)


(248,217)


Net increase in cash and cash equivalents

35,175


130,824


Cash and cash equivalents at beginning of period

134,805


520,945


Cash and cash equivalents at end of period

$                      169,980


$                      651,769






 

Key Operating Metrics              

The following table contains our key operating metrics for the three and six months ended June 30, 2014 and 2013, respectively. Subscribers to our connected vehicle services are not included in our subscriber count:

 



Unaudited


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

For the Three Months Ended June 30,


For the Six Months Ended June 30,


2014


2013


2014


2013











Self-pay subscribers

21,635,008


20,297,736


21,635,008


20,297,736


Paid promotional subscribers

4,666,573


4,771,252


4,666,573


4,771,252


Ending subscribers

26,301,581


25,068,988


26,301,581


25,068,988











Self-pay subscribers

379,711


423,076


553,191


727,462


Paid promotional subscribers

95,761


292,686


189,080


441,190


Net additions

475,472


715,762


742,271


1,168,652











Daily weighted average number of subscribers

26,005,691


24,651,268


25,805,030


24,331,646











Average self-pay monthly churn

1.8%


1.7%


1.9%


1.8%











New vehicle consumer conversion rate

42%


45%


42%


44%











ARPU

$                        12.36


$                        12.28


$                        12.27


$                        12.16


SAC, per installation

$                             33


$                             47


$                             34


$                             47


Customer service and billing expenses, per average subscriber

$                          1.05


$                          1.08


$                          1.07


$                          1.09


Free cash flow

$                    335,044


$                    236,560


$                    557,833


$                    379,041


Adjusted EBITDA

$                    370,437


$                    282,979


$                    705,220


$                    544,850










 

Glossary

Adjusted EBITDA - EBITDA is defined as net income before interest and investment income (loss); interest expense, net of amounts capitalized; income tax expense and depreciation and amortization. We adjust EBITDA to exclude the impact of other income and expense, loss on extinguishment of debt, loss on change in value of derivatives as well as certain other charges discussed below. This measure is one of the primary Non-GAAP financial measures on which we (i) evaluate the performance of our businesses, (ii) base our internal budgets and (iii) compensate management. Adjusted EBITDA is a Non-GAAP financial performance measure that excludes (if applicable):  (i) certain adjustments as a result of the purchase price accounting for the merger of Sirius and XM, (ii) depreciation and amortization and (iii) share-based payment expense. The purchase price accounting adjustments include: (i) the elimination of deferred revenue associated with the investment in XM Canada, (ii) recognition of deferred subscriber revenues not recognized in purchase price accounting, and (iii) elimination of the benefit of deferred credits on executory contracts, which are primarily attributable to third party arrangements with an OEM and programming providers.  We believe adjusted EBITDA is a useful measure of the underlying trend of our operating performance, which provides useful information about our business apart from the costs associated with our physical plant, capital structure and purchase price accounting. We believe investors find this Non-GAAP financial measure useful when analyzing our results and comparing our operating performance to the performance of other communications, entertainment and media companies. We believe investors use current and projected adjusted EBITDA to estimate our current and prospective enterprise value and to make investment decisions. Because we fund and build-out our satellite radio system through the periodic raising and expenditure of large amounts of capital, our results of operations reflect significant charges for depreciation expense. The exclusion of depreciation and amortization expense is useful given significant variation in depreciation and amortization expense that can result from the potential variations in estimated useful lives, all of which can vary widely across different industries or among companies within the same industry. We also believe the exclusion of share-based payment expense is useful given the significant variation in expense that can result from changes in the fair value as determined using the Black-Scholes-Merton model which varies based on assumptions used for the expected life, expected stock price volatility and risk-free interest rates.  

Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statements of comprehensive income of certain expenses, including share-based payment expense and certain purchase price accounting for the merger of Sirius and XM. We endeavor to compensate for the limitations of the Non-GAAP measure presented by also providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the Non-GAAP measure.  Investors that wish to compare and evaluate our operating results after giving effect for these costs, should refer to net income as disclosed in our unaudited consolidated statements of comprehensive income. Since adjusted EBITDA is a Non-GAAP financial performance measure, our calculation of adjusted EBITDA may be susceptible to varying calculations; may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP. The reconciliation of net income to the adjusted EBITDA is calculated as follows (in thousands):

 


Unaudited


For the Three Months Ended June 30,


For the Six Months Ended June 30,


2014


2013


2014


2013









Net income (GAAP):

$             119,961


$             125,522


$           213,949


$           249,124

Add back items excluded from Adjusted EBITDA:








Purchase price accounting adjustments:








Revenues

1,813


1,813


3,626


3,626

Operating expenses

(945)


(69,479)


(1,890)


(137,889)

Share-based payment expense (GAAP)

17,787


15,494


36,027


30,012

Depreciation and amortization (GAAP)

67,204


67,415


135,471


134,433

Interest expense, net of amounts capitalized (GAAP)

67,521


49,728


121,613


95,902

Loss on extinguishment of debt and credit facilities, net (GAAP)

-


16,377


-


16,377

Interest and investment loss (income) (GAAP)

1,066


(294)


(3,283)


(1,932)

Loss on change in value of derivatives (GAAP)

7,463


-


34,485


-

Other loss (income) (GAAP)

1,745


(256)


1,652


(502)

Income tax expense (GAAP)

86,822


76,659


163,570


155,699

Adjusted EBITDA

$             370,437


$             282,979


$           705,220


$           544,850









 

Adjusted Net Income - We define this Non-GAAP financial measure as our actual net income adjusted to exclude the impact of certain purchase price accounting adjustments and the loss on change in value of derivatives, net of income tax expense. The following table reconciles our actual income before income taxes to our adjusted net income for the three and six months ended June 30, 2014 and 2013 (in thousands):

 


Unaudited


For the Three Months Ended June 30,


For the Six Months Ended June 30,


2014


2013


2014


2013









Income before income taxes (GAAP):

$             206,783


$             202,181


$             377,519


$             404,823

Add back items excluded from adjusted net income:








Purchase price accounting adjustments:








Revenues

1,813


1,813


3,626


3,626

Operating expenses

(945)


(69,479)


(1,890)


(137,889)

Loss on change in value of derivatives (GAAP)

7,463


-


34,485


-

Adjusted income before income taxes

$             215,114


$             134,515


$             413,740


$             270,560

Allocable income tax expense

(83,679)


(52,461)


(160,945)


(105,518)

Adjusted net income

$             131,435


$               82,054


$             252,795


$             165,042

















 

Adjusted Revenues and Operating Expenses - We define this Non-GAAP financial measure as our actual revenues and operating expenses adjusted to exclude the impact of certain purchase price accounting adjustments from the merger of Sirius and XM and share-based payment expense. We use this Non-GAAP financial measure to manage our business, to set operational goals and as a basis for determining performance-based compensation for our employees. The following tables reconcile our actual revenues and operating expenses to our adjusted revenues and operating expenses for the three and six months ended June 30, 2014 and 2013:

 



Unaudited For the Three Months Ended June 30, 2014


(in thousands)

As Reported


Purchase Price Accounting Adjustments


Allocation of Share-based Payment Expense


Adjusted











Revenue:









Subscriber revenue

$ 878,160


$ -


$ -


$ 878,160


Advertising revenue

25,498


-


-


25,498


Equipment revenue

27,616


-


-


27,616


Other revenue

104,071


1,813


-


105,884


Total revenue

$ 1,035,345


$ 1,813


$ -


$ 1,037,158


Operating expenses









Cost of services:









Revenue share and royalties

$ 200,221


$ -


$ -


$ 200,221


Programming and content

69,570


945


(2,254)


68,261


Customer service and billing

90,092


-


(587)


89,505


Satellite and transmission

21,272


-


(956)


20,316


Cost of equipment

12,030


-


-


12,030


Subscriber acquisition costs

124,407


-


-


124,407


Sales and marketing

77,759


-


(3,407)


74,352


Engineering, design and development

15,630


-


(1,937)


13,693


General and administrative

72,582


-


(8,646)


63,936


Depreciation and amortization (a)

67,204


-


-


67,204


Share-based payment expense

-


-


17,787


17,787


Total operating expenses

$ 750,767


$ 945


$ -


$ 751,712











(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the merger of Sirius and XM. The increased depreciation and amortization for the three months ended June 30, 2014 was $10,000.

 



Unaudited For the Three Months Ended June 30, 2013


(in thousands)

As Reported


Purchase Price Accounting Adjustments


Allocation of Share-based Payment Expense


Adjusted











Revenue:









Subscriber revenue

$               814,718


$                         -


$                         -


$               814,718


Advertising revenue

21,757


-


-


21,757


Equipment revenue

18,443


-


-


18,443


Other revenue

85,192


1,813


-


87,005


Total revenue

$               940,110


$                   1,813


$                         -


$               941,923


Operating expenses









Cost of services:









Revenue share and royalties

$               155,859


$                 40,831


$                         -


$               196,690


Programming and content

70,381


2,478


(1,639)


71,220


Customer service and billing

80,290


-


(511)


79,779


Satellite and transmission

19,493


-


(827)


18,666


Cost of equipment

5,442


-


-


5,442


Subscriber acquisition costs

129,992


22,017


-


152,009


Sales and marketing

68,058


4,153


(3,182)


69,029


Engineering, design and development

15,052


-


(1,634)


13,418


General and administrative

60,392


-


(7,701)


52,691


Depreciation and amortization (a)

67,415


-


-


67,415


Share-based payment expense

-


-


15,494


15,494


Total operating expenses

$               672,374


$                 69,479


$                         -


$               741,853











(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the merger of Sirius and XM. The increased depreciation and amortization for the three months ended June 30, 2013 was $12,000

 



Unaudited For the Six Months Ended June 30, 2014


(in thousands)

As Reported


Purchase Price Accounting Adjustments


Allocation of Share-based Payment Expense


Adjusted











Revenue:









Subscriber revenue

$ 1,729,596


$ -


$ -


$ 1,729,596


Advertising revenue

47,712


-


-


47,712


Equipment revenue

51,594


-


-


51,594


Other revenue

204,154


3,626


-


207,780


Total revenue

$ 2,033,056


$ 3,626


$ -


$ 2,036,682


Operating expenses









Cost of services:









Revenue share and royalties

$ 395,632


$ -


$ -


$ 395,632


Programming and content

144,440


1,890


(4,469)


141,861


Customer service and billing

181,161


-


(1,164)


179,997


Satellite and transmission

42,651


-


(1,902)


40,749


Cost of equipment

19,834


-


-


19,834


Subscriber acquisition costs

247,429


-


-


247,429


Sales and marketing

154,086


-


(6,973)


147,113


Engineering, design and development

31,541


-


(3,863)


27,678


General and administrative

148,825


-


(17,656)


131,169


Depreciation and amortization (a)

135,471


-


-


135,471


Share-based payment expense

-


-


36,027


36,027


Total operating expenses

$ 1,501,070


$ 1,890


$ -


$ 1,502,960











(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the merger of Sirius and XM. The increased depreciation and amortization for the six months ended June 30, 2014 was $20,000.

 



Unaudited For the Six Months Ended June 30, 2013


(in thousands)

As Reported


Purchase Price Accounting Adjustments


Allocation of Share-based Payment Expense


Adjusted











Revenue:









Subscriber revenue

$ 1,598,060


$ -


$ -


$ 1,598,060


Advertising revenue

41,968


-


-


41,968


Equipment revenue

36,599


-


-


36,599


Other revenue

160,881


3,626


-


164,507


Total revenue

$ 1,837,508


$ 3,626


$ -


$ 1,841,134


Operating expenses









Cost of services:









Revenue share and royalties

$ 304,390


$ 80,592


$ -


$ 384,982


Programming and content

144,991


4,956


(3,281)


146,666


Customer service and billing

160,684


-


(981)


159,703


Satellite and transmission

39,188


-


(1,677)


37,511


Cost of equipment

12,469


-


-


12,469


Subscriber acquisition costs

246,103


44,022


-


290,125


Sales and marketing

133,956


8,319


(6,243)


136,032


Engineering, design and development

29,894


-


(3,281)


26,613


General and administrative

116,732


-


(14,549)


102,183


Depreciation and amortization (a)

134,433


-


-


134,433


Share-based payment expense

-


-


30,012


30,012


Total operating expenses

$ 1,322,840


$ 137,889


$ -


$ 1,460,729











(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the merger of Sirius and XM. The increased depreciation and amortization for the six months ended June 30, 2013 was $25,000.










 

ARPU - is derived from total earned subscriber revenue, advertising revenue and other subscription-related revenue, excluding revenue associated with our connected vehicle business, net of purchase price accounting adjustments, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. Other subscription-related revenue includes the U.S. Music Royalty Fee.  ARPU is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

 


Unaudited


For the Three Months Ended June 30,


For the Six Months Ended

June 30,


2014


2013


2014


2013









Subscriber revenue, excluding connected vehicle (GAAP)

$        855,846


$        814,718


$     1,688,649


$     1,598,060

Add: advertising revenue (GAAP)

25,498


21,757


47,712


41,968

Add: other subscription-related revenue (GAAP)

82,990


71,648


163,758


135,785


$        964,334


$        908,123


$     1,900,119


$     1,775,813









Daily weighted average number of subscribers

26,005,691


24,651,268


25,805,030


24,331,646









ARPU

$            12.36


$            12.28


$            12.27


$            12.16









 

Average self-pay monthly churn - is defined as the monthly average of self-pay deactivations for the period divided by the average number of self-pay subscribers for the period.

Customer service and billing expenses, per average subscriber - is derived from total customer service and billing expenses, excluding connected vehicle customer service and billing expenses and share-based payment expense, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. We believe the exclusion of share-based payment expense in our calculation of customer service and billing expenses, per average subscriber, is useful given the significant variation in expense that can result from changes in the fair market value of our common stock, the effect of which is unrelated to the operational conditions that give rise to variations in the components of our customer service and billing expenses. Customer service and billing expenses, per average subscriber, is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

 


Unaudited


For the Three Months Ended

June 30,


For the Six Months Ended

June 30,


2014


2013


2014


2013









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

$          82,705


$          80,290


$        166,809


$        160,684

Less: share-based payment expense (GAAP)

(587)


(511)


(1,164)


(981)


$          82,118


$          79,779


$        165,645


$        159,703









Daily weighted average number of subscribers

26,005,691


24,651,268


25,805,030


24,331,646









Customer service and billing expenses, per average subscriber

$              1.05


$              1.08


$              1.07


$              1.09









 

Free cash flow - is derived from cash flow provided by operating activities, capital expenditures and restricted and other investment activity.  The calculation for free cash flow and free cash flow per diluted share are as follows (in thousands, except per share data):

 


Unaudited


For the Three Months Ended June 30,


For the Six Months Ended June 30,


2014


2013


2014


2013









Cash Flow information








Net cash provided by operating activities

$             340,682


$             273,106


$             592,072


$             442,021

Net cash used in investing activities

$               (5,638)


$             (36,546)


$             (33,095)


$             (62,980)

Net cash used in financing activities

$           (286,235)


$             208,482


$           (523,802)


$           (248,217)

Free Cash Flow








Net cash provided by operating activities

$             340,682


$             273,106


$             592,072


$             442,021

Additions to property and equipment

(29,816)


(36,546)


(58,417)


(62,980)

Return of capital from investment in unconsolidated entity

24,178


-


24,178


-

Free cash flow

$             335,044


$             236,560


$             557,833


$             379,041









Diluted weighted average common shares outstanding

6,210,078


6,447,517


6,054,771


6,526,698









Free cash flow per diluted share

$                   0.05


$                   0.04


$                   0.09


$                   0.06









 

New vehicle consumer conversion rate - is defined as the percentage of owners and lessees of new vehicles that receive our satellite radio service and convert to become self-paying subscribers after the initial promotion period. At the time satellite radio enabled vehicles are sold or leased, the owners or lessees generally receive trial subscriptions ranging from three to twelve months. We measure conversion rate three months after the period in which the trial service ends. The metric excludes rental and fleet vehicles.

Subscriber acquisition cost, per installation - or SAC, per installation, is derived from subscriber acquisition costs and margins from the sale of radios and accessories, excluding purchase price accounting adjustments, divided by the number of satellite radio installations in new vehicles and shipments of aftermarket radios for the period. Purchase price accounting adjustments associated with the merger of Sirius and XM include the elimination of the benefit of amortization of deferred credits on executory contracts recognized at the merger date attributable to an OEM. SAC, per installation, is calculated as follows (in thousands, except for installation amounts):

 



Unaudited



For the Three Months Ended June 30,


For the Six Months Ended June 30,



2014


2013


2014


2013











Subscriber acquisition costs (GAAP)

$             124,407


$             129,992


$             247,429


$             246,103


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

(15,586)


(13,001)


(31,760)


(24,130)


Add: purchase price accounting adjustments

-


22,017


-


44,022



$             108,821


$             139,008


$             215,669


$             265,995











Installations

3,279,564


2,973,267


6,358,074


5,684,160











SAC, per installation

$                      33


$                      47


$                      34


$                      47










 

Second quarter 2014 financial information about Sirius XM Radio Inc. will be posted to our website at investor.siriusxm.com.  Sirius XM Radio Inc. is furnishing this information in order to comply with the reporting obligations in the indentures governing its outstanding notes.

About SiriusXM

Sirius XM Holdings Inc. (NASDAQ: SIRI) is the world's largest radio broadcaster measured by revenue and has 26.3 million subscribers.  SiriusXM creates and broadcasts commercial-free music; premier sports talk and live events; comedy; news; exclusive talk and entertainment; and the most comprehensive Latin music, sports and talk programming in radio. SiriusXM is available in vehicles from every major car company in the U.S. and from retailers nationwide as well as at shop.siriusxm.com. SiriusXM programming is available through the SiriusXM Internet Radio App for smartphones and other connected devices as well as online at siriusxm.com. SiriusXM also provides premium traffic, weather, data and information services for subscribers in cars, trucks, RVs, boats and aircraft through SiriusXM Traffic™, SiriusXM Travel Link, NavTraffic®, NavWeather™, SiriusXM Aviation, SiriusXM Marine™, Sirius Marine Weather, XMWX Aviation™, and XMWX Marine™.  SiriusXM holds a minority interest in SiriusXM Canada which has more than 2 million subscribers.

On social media, join the SiriusXM community on Facebook, Twitter, Instagram, and YouTube.

This communication contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements include, but are not limited to, statements about future financial and operating results, our plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as "will likely result," "are expected to," "will continue," "is anticipated," "estimated," "believe," "intend," "plan," "projection," "outlook" or words of similar meaning.  Such forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control.  Actual results may differ materially from the results anticipated in these forward-looking statements. 

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:  our competitive position versus other radio and audio entertainment providers; our ability to attract and retain subscribers, which is uncertain; our dependence upon the auto industry; general economic conditions; failure of our satellites, which, in most cases, are not insured; the interruption or failure of our information and communications systems; the security of the personal information about our customers; royalties we pay for music rights, which increase over time; the unfavorable outcome of pending or future litigation; our failure to realize benefits of acquisitions; rapid technological and industry change; failure of third parties to perform; changes in consumer protection laws and their enforcement; failure to comply with FCC requirements and other government regulations; and our indebtedness.  Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our Annual Report on Form 10-K for the year ended December 31, 2013, which is filed with the Securities and Exchange Commission (the "SEC") and available at the SEC's Internet site (http://www.sec.gov).  The information set forth herein speaks only as of the date hereof, and we disclaim any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this communication.

E-SIRI

Contact Information for Investors and Financial Media:

Investors:

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

Media:

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

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SOURCE Sirius XM Holdings Inc.

News Provided by Acquire Media


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