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25.07.2013 13:00:00
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SiriusXM Reports Second Quarter 2013 Results
NEW YORK, July 25, 2013 /PRNewswire/ -- Sirius XM Radio (NASDAQ: SIRI)today announced second quarter 2013 financial and operating results, including record revenue of $940 million, up 12% from the second quarter 2012 revenue of $838 million. Net income for the second quarter 2013 and 2012 was $126 million and $3.1 billion, respectively. Net income in the second quarter of 2012 benefitted from a $3 billion reversal of deferred income tax valuation allowances.
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Income before income taxes rose 47% to $202 million in the second quarter compared to $138 million in the second quarter of 2012. Adjusted EBITDA for the second quarter of 2013 reached a record $283 million, up 19% from $237 million in the second quarter of 2012.
"SiriusXM's second quarter results reflect record performance on almost every vital metric: the 25 million subscriber milestone, record revenue, adjusted EBITDA and adjusted EBITDA margin. We grew our revenue at double digit rates for the sixth consecutive quarter while being very mindful of our costs as we invest in advanced IP and telematics platforms designed to provide more services to our subscribers and automakers," noted Jim Meyer, Chief Executive Officer, SiriusXM.
"Our increase in adjusted EBITDA guidance speaks to our excellent first half performance as well as our outlook for further growth later this year. SiriusXM has now purchased 391 million shares of its common stock so far this year for nearly $1.3 billion, and we plan to continue using our growing free cash flow and strong balance sheet in a very disciplined way to reward our investors," added Meyer.
Additional highlights of the second quarter include:
- Adjusted EBITDA Margin Reaches 30%. Adjusted EBITDA climbed 19% from last year's second quarter to a record quarterly figure of $283 million, and a record adjusted EBITDA margin of 30%.
- Subscribers Exceed 25 Million Amid Record Growth. Net subscriber additions in the quarter were 715,762, up from 622,042 in the second quarter of 2012, marking the largest quarterly gain since the fourth quarter of 2007. Our total paid subscriber base reached a record 25.1 million, up 9% from the prior year period. Self-pay net subscriber additions were 423,076, while the self-pay subscriber base reached a record high of 20.3 million, up 9% from the prior year period. Total paid and unpaid trials grew by 528,000 from the first quarter 2013 to 6.7 million.
- Free Cash Flow Reaches a Second Quarter Record. Free cash flow was $237 million, up from $230 million in the second quarter of 2012. Year-to-date free cash flow reached $379 million, an increase of 55% from the same period in 2012.
"During the second quarter, we repurchased 195 million shares of our common stock for $650 million. We also repurchased approximately $130 million in principal amount of our outstanding debt during the second quarter. Following our $1 billion debt issuance in May, the Company's outstanding debt was approximately 3.2x our trailing adjusted EBITDA, below our target leverage of 3.5x. Combined with our strong cash position of $652 million and undrawn revolving credit facility of $1.25 billion, we have tremendous flexibility to continue pursuing capital returns, debt repurchases, and acquisitions," noted David Frear, SiriusXM's Executive Vice President and Chief Financial Officer.
2013 GUIDANCE
After increasing its total net additions guidance on July 9, 2013, the Company today increased its 2013 guidance for adjusted EBITDA and reiterated guidance for subscriber growth, revenue, and free cash flow:
- Self-pay net subscriber additions of approximately 1.6 million,
- Total net subscriber additions of approximately 1.5 million,
- Revenue of over $3.7 billion,
- Adjusted EBITDA of approximately $1.14 billion, and
- Free cash flow of approximately $915 million.
SECOND QUARTER 2013 RESULTS
SIRIUS XM RADIO 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) | 2013 | 2012 | 2013 | 2012 | |||
Revenue: | |||||||
Subscriber revenue | $ 814,718 | $ 730,285 | $ 1,598,060 | $ 1,430,526 | |||
Advertising revenue | 21,757 | 20,786 | 41,968 | 39,456 | |||
Equipment revenue | 18,443 | 16,417 | 36,599 | 33,370 | |||
Other revenue | 85,192 | 70,055 | 160,881 | 138,912 | |||
Total revenue | 940,110 | 837,543 | 1,837,508 | 1,642,264 | |||
Operating expenses: | |||||||
Cost of services: | |||||||
Revenue share and royalties | 155,859 | 135,426 | 304,390 | 267,537 | |||
Programming and content | 70,381 | 65,169 | 144,991 | 135,265 | |||
Customer service and billing | 80,290 | 68,679 | 160,684 | 134,866 | |||
Satellite and transmission | 19,493 | 17,551 | 39,188 | 35,661 | |||
Cost of equipment | 5,442 | 7,150 | 12,469 | 12,956 | |||
Subscriber acquisition costs | 129,992 | 119,475 | 246,103 | 235,596 | |||
Sales and marketing | 68,058 | 57,422 | 133,956 | 115,781 | |||
Engineering, design and development | 15,052 | 6,272 | 29,894 | 18,962 | |||
General and administrative | 60,392 | 65,664 | 116,732 | 125,550 | |||
Depreciation and amortization | 67,415 | 66,793 | 134,433 | 132,910 | |||
Total operating expenses | 672,374 | 609,601 | 1,322,840 | 1,215,084 | |||
Income from operations | 267,736 | 227,942 | 514,668 | 427,180 | |||
Other income (expense): | |||||||
Interest expense, net of amounts capitalized | (49,728) | (72,770) | (95,902) | (149,742) | |||
Loss on extinguishment of debt and credit facilities, net | (16,377) | (15,650) | (16,377) | (25,621) | |||
Interest and investment income (loss) | 294 | (1,728) | 1,932 | (2,871) | |||
Other income (loss) | 256 | (173) | 502 | (749) | |||
Total other expense | (65,555) | (90,321) | (109,845) | (178,983) | |||
Income before income taxes | 202,181 | 137,621 | 404,823 | 248,197 | |||
Income tax (expense) benefit | (76,659) | 2,996,549 | (155,699) | 2,993,747 | |||
Net income | $ 125,522 | $ 3,134,170 | $ 249,124 | $ 3,241,944 | |||
Foreign currency translation adjustment, net of tax | (109) | 18 | (281) | (38) | |||
Total comprehensive income | $ 125,413 | $ 3,134,188 | $ 248,843 | $ 3,241,906 | |||
Net income per common share: | |||||||
Basic | $ 0.02 | $ 0.49 | $ 0.04 | $ 0.51 | |||
Diluted | $ 0.02 | $ 0.48 | $ 0.04 | $ 0.50 | |||
Weighted average common shares outstanding: | |||||||
Basic | 6,354,755 | 3,765,573 | 6,307,541 | 3,766,508 | |||
Diluted | 6,447,517 | 6,506,159 | 6,526,698 | 6,521,614 | |||
SIRIUS XM RADIO INC. AND SUBSIDIARIES | |||
CONSOLIDATED BALANCE SHEETS | |||
June 30, 2013 | December 31, 2012 | ||
(in thousands, except share and per share data) | (Unaudited) | ||
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | $ 651,769 | $ 520,945 | |
Accounts receivable, net | 101,203 | 106,142 | |
Receivables from distributors | 111,288 | 104,425 | |
Inventory, net | 16,688 | 25,337 | |
Prepaid expenses | 149,408 | 122,157 | |
Related party current assets | 9,127 | 13,167 | |
Deferred tax asset | 894,303 | 923,972 | |
Other current assets | 10,177 | 12,037 | |
Total current assets | 1,943,963 | 1,828,182 | |
Property and equipment, net | 1,523,615 | 1,571,922 | |
Long-term restricted investments | 3,999 | 3,999 | |
Deferred financing fees, net | 31,757 | 38,677 | |
Intangible assets, net | 2,494,474 | 2,519,610 | |
Goodwill | 1,815,365 | 1,815,365 | |
Related party long-term assets | 36,506 | 44,954 | |
Long-term deferred tax asset | 1,089,981 | 1,219,256 | |
Other long-term assets | 11,526 | 12,878 | |
Total assets | $ 8,951,186 | $ 9,054,843 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Current liabilities: | |||
Accounts payable and accrued expenses | $ 550,959 | $ 587,652 | |
Accrued interest | 37,822 | 33,954 | |
Current portion of deferred revenue | 1,539,841 | 1,474,138 | |
Current portion of deferred credit on executory contracts | 71,854 | 207,854 | |
Current maturities of long-term debt | 3,873 | 4,234 | |
Related party current liabilities | 7,927 | 6,756 | |
Total current liabilities | 2,212,276 | 2,314,588 | |
Deferred revenue | 152,914 | 159,501 | |
Deferred credit on executory contracts | 3,285 | 5,175 | |
Long-term debt | 3,036,660 | 2,222,080 | |
Long-term related party debt | 209,244 | 208,906 | |
Related party long-term liabilities | 17,578 | 18,966 | |
Other long-term liabilities | 80,383 | 86,062 | |
Total liabilities | 5,712,340 | 5,015,278 | |
Stockholders' equity: | |||
Preferred stock, par value $0.001; 50,000,000 authorized at June 30, 2013 and December 31, 2012: | |||
Convertible perpetual preferred stock, series B-1 (liquidation preference of $0.001 per share); 0 | - | 6 | |
Common stock, par value $0.001; 9,000,000,000 shares authorized; 6,257,721,498 and 5,262,440,085 31, 2012, respectively | 6,258 | 5,263 | |
Accumulated other comprehensive (loss) income, net of tax | (161) | 120 | |
Additional paid-in capital | 9,330,188 | 10,345,566 | |
Treasury stock, at cost; 10,500,000 and 0 shares of common stock at June 30, 2013 and December 31, 2012, respectively | (35,173) | - | |
Accumulated deficit | (6,062,266) | (6,311,390) | |
Total stockholders' equity | 3,238,846 | 4,039,565 | |
Total liabilities and stockholders' equity | $ 8,951,186 | $ 9,054,843 | |
SIRIUS XM RADIO INC. AND SUBSIDIARIES | |||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
(UNAUDITED) | |||
For the Six Months Ended June 30, | |||
(in thousands) | 2013 | 2012 | |
Cash flows from operating activities: | |||
Net income | $ 249,124 | $ 3,241,944 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 134,433 | 132,910 | |
Non-cash interest expense, net of amortization of premium | 10,932 | 21,031 | |
Provision for doubtful accounts | 20,153 | 14,879 | |
Amortization of deferred income related to equity method investment | (1,388) | (1,388) | |
Loss on extinguishment of debt and credit facilities, net | 16,377 | 25,621 | |
(Gain) loss on unconsolidated entity investments, net | (1,382) | 3,469 | |
Dividend received from unconsolidated entity investment | 13,217 | - | |
Loss on disposal of assets | 126 | 488 | |
Share-based payment expense | 30,012 | 28,869 | |
Deferred income taxes | 159,191 | (2,995,542) | |
Other non-cash purchase price adjustments | (137,889) | (147,328) | |
Changes in operating assets and liabilities: | |||
Accounts receivable | (15,214) | (26,879) | |
Receivables from distributors | (6,863) | (12,259) | |
Inventory | 8,649 | (173) | |
Related party assets | 205 | 6,813 | |
Prepaid expenses and other current assets | (28,317) | (39,308) | |
Other long-term assets | 1,353 | 16,579 | |
Accounts payable and accrued expenses | (69,310) | (51,596) | |
Accrued interest | 3,868 | (7,434) | |
Deferred revenue | 59,116 | 79,288 | |
Related party liabilities | 1,171 | 1,501 | |
Other long-term liabilities | (5,543) | 2,238 | |
Net cash provided by operating activities | 442,021 | 293,723 | |
Cash flows from investing activities: | |||
Additions to property and equipment | (62,980) | (48,944) | |
Net cash used in investing activities | (62,980) | (48,944) | |
Cash flows from financing activities: | |||
Proceeds from exercise of stock options | 21,658 | 38,671 | |
Payment of premiums on redemption of debt | (14,719) | (19,211) | |
Repayment of long-term borrowings | (283,180) | (169,899) | |
Long-term borrowings, net of costs | 1,136,640 | - | |
Common stock repurchased and retired | (1,108,616) | - | |
Net cash used in financing activities | (248,217) | (150,439) | |
Net increase in cash and cash equivalents | 130,824 | 94,340 | |
Cash and cash equivalents at beginning of period | 520,945 | 773,990 | |
Cash and cash equivalents at end of period | $ 651,769 | $ 868,330 | |
Subscriber Data and Operating Metrics
The following table contains subscriber data and key operating metrics for the three and six months ended June 30, 2013 and 2012, respectively:
Unaudited | |||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||
2013 | 2012 | 2013 | 2012 | ||||
Beginning subscribers | 24,353,226 | 22,297,420 | 23,900,336 | 21,892,824 | |||
Gross subscriber additions | 2,655,488 | 2,481,004 | 5,165,402 | 4,642,697 | |||
Deactivated subscribers | (1,939,726) | (1,858,962) | (3,996,750) | (3,616,059) | |||
Net additions | 715,762 | 622,042 | 1,168,652 | 1,026,638 | |||
Ending subscribers | 25,068,988 | 22,919,462 | 25,068,988 | 22,919,462 | |||
Self-pay | 20,297,736 | 18,670,966 | 20,297,736 | 18,670,966 | |||
Paid promotional | 4,771,252 | 4,248,496 | 4,771,252 | 4,248,496 | |||
Ending subscribers | 25,068,988 | 22,919,462 | 25,068,988 | 22,919,462 | |||
Self-pay | 423,076 | 462,876 | 727,462 | 762,224 | |||
Paid promotional | 292,686 | 159,166 | 441,190 | 264,414 | |||
Net additions | 715,762 | 622,042 | 1,168,652 | 1,026,638 | |||
Daily weighted average number of subscribers | 24,651,268 | 22,553,702 | 24,331,646 | 22,272,282 | |||
Average self-pay monthly churn | 1.7% | 1.9% | 1.8% | 1.9% | |||
New vehicle consumer conversion rate | 45% | 45% | 44% | 45% | |||
ARPU | $ 12.28 | $ 11.97 | $ 12.16 | $ 11.87 | |||
SAC, per gross subscriber addition | $ 52 | $ 54 | $ 51 | $ 57 | |||
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 remove the impact of other income and expense, loss on extinguishment of debt 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 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, | ||||||
2013 | 2012 | 2013 | 2012 | ||||
Net income (GAAP): | $ 125,522 | $ 3,134,170 | $ 249,124 | $ 3,241,944 | |||
Add back items excluded from Adjusted EBITDA: | |||||||
Purchase price accounting adjustments: | |||||||
Revenues | 1,813 | 1,867 | 3,626 | 3,747 | |||
Operating expenses | (69,479) | (73,423) | (137,889) | (147,449) | |||
Share-based payment expense (GAAP) | 15,494 | 13,917 | 30,012 | 28,869 | |||
Depreciation and amortization (GAAP) | 67,415 | 66,793 | 134,433 | 132,910 | |||
Interest expense, net of amounts capitalized (GAAP) | 49,728 | 72,770 | 95,902 | 149,742 | |||
Loss on extinguishment of debt and credit facilities, | 16,377 | 15,650 | 16,377 | 25,621 | |||
Interest and investment (income) loss (GAAP) | (294) | 1,728 | (1,932) | 2,871 | |||
Other (income) loss (GAAP) | (256) | 173 | (502) | 749 | |||
Income tax expense (benefit) (GAAP) | 76,659 | (2,996,549) | 155,699 | (2,993,747) | |||
Adjusted EBITDA | $ 282,979 | $ 237,096 | $ 544,850 | $ 445,257 | |||
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 and share-based payment expense. We use this non-GAAP financial measure to manage our business, 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, 2013 and 2012:
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 Three Months Ended June 30, 2012 | |||||||
(in thousands) | As Reported | Purchase Price Accounting Adjustments | Allocation of Share-based Payment Expense | Adjusted | |||
Revenue: | |||||||
Subscriber revenue | $ 730,285 | $ 54 | $ - | $ 730,339 | |||
Advertising revenue | 20,786 | - | - | 20,786 | |||
Equipment revenue | 16,417 | - | - | 16,417 | |||
Other revenue | 70,055 | 1,813 | - | 71,868 | |||
Total revenue | $ 837,543 | $ 1,867 | $ - | $ 839,410 | |||
Operating expenses | |||||||
Cost of services: | |||||||
Revenue share and royalties | $ 135,426 | $ 36,024 | $ - | $ 171,450 | |||
Programming and content | 65,169 | 10,431 | (1,231) | 74,369 | |||
Customer service and billing | 68,679 | - | (388) | 68,291 | |||
Satellite and transmission | 17,551 | - | (688) | 16,863 | |||
Cost of equipment | 7,150 | - | - | 7,150 | |||
Subscriber acquisition costs | 119,475 | 23,530 | - | 143,005 | |||
Sales and marketing | 57,422 | 3,438 | (2,053) | 58,807 | |||
Engineering, design and development | 6,272 | - | (1,282) | 4,990 | |||
General and administrative | 65,664 | - | (8,275) | 57,389 | |||
Depreciation and amortization (a) | 66,793 | - | - | 66,793 | |||
Share-based payment expense | - | - | 13,917 | 13,917 | |||
Total operating expenses | $ 609,601 | $ 73,423 | $ - | $ 683,024 | |||
(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, 2012 was $14,000. | |||||||
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. | |||||||
Unaudited For the Six Months Ended June 30, 2012 | |||||||
(in thousands) | As Reported | Purchase Price Accounting Adjustments | Allocation of Share-based Payment Expense | Adjusted | |||
Revenue: | |||||||
Subscriber revenue | $ 1,430,526 | $ 121 | $ - | $ 1,430,647 | |||
Advertising revenue | 39,456 | - | - | 39,456 | |||
Equipment revenue | 33,370 | - | - | 33,370 | |||
Other revenue | 138,912 | 3,626 | - | 142,538 | |||
Total revenue | $ 1,642,264 | $ 3,747 | $ - | $ 1,646,011 | |||
Operating expenses | |||||||
Cost of services: | |||||||
Revenue share and royalties | $ 267,537 | $ 70,870 | $ - | $ 338,407 | |||
Programming and content | 135,265 | 22,134 | (2,606) | 154,793 | |||
Customer service and billing | 134,866 | - | (815) | 134,051 | |||
Satellite and transmission | 35,661 | - | (1,473) | 34,188 | |||
Cost of equipment | 12,956 | - | - | 12,956 | |||
Subscriber acquisition costs | 235,596 | 47,616 | - | 283,212 | |||
Sales and marketing | 115,781 | 6,829 | (4,413) | 118,197 | |||
Engineering, design and development | 18,962 | - | (2,714) | 16,248 | |||
General and administrative | 125,550 | - | (16,848) | 108,702 | |||
Depreciation and amortization (a) | 132,910 | - | - | 132,910 | |||
Share-based payment expense | - | - | 28,869 | 28,869 | |||
Total operating expenses | $ 1,215,084 | $ 147,449 | $ - | $ 1,362,533 | |||
(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, 2012 was $28,000. | |||||||
ARPU - is derived from total earned subscriber revenue, advertising revenue and other subscription-related revenue, 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. Purchase price accounting adjustments include the recognition of deferred subscriber revenues not recognized in purchase price accounting associated with the merger of Sirius and XM. 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, | ||||||
2013 | 2012 | 2013 | 2012 | ||||
Subscriber revenue (GAAP) | $ 814,718 | $ 730,285 | $ 1,598,060 | $ 1,430,526 | |||
Add: advertising revenue (GAAP) | 21,757 | 20,786 | 41,968 | 39,456 | |||
Add: other subscription-related revenue (GAAP) | 71,648 | 58,753 | 135,785 | 116,474 | |||
Add: purchase price accounting adjustments | - | 54 | - | 121 | |||
$ 908,123 | $ 809,878 | $ 1,775,813 | $ 1,586,577 | ||||
Daily weighted average number of subscribers | 24,651,268 | 22,553,702 | 24,331,646 | 22,272,282 | |||
ARPU | $ 12.28 | $ 11.97 | $ 12.16 | $ 11.87 | |||
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 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, | ||||||
2013 | 2012 | 2013 | 2012 | ||||
Customer service and billing expenses (GAAP) | $ 80,290 | $ 68,679 | $ 160,684 | $ 134,866 | |||
Less: share-based payment expense | (511) | (388) | (981) | (815) | |||
$ 79,779 | $ 68,291 | $ 159,703 | $ 134,051 | ||||
Daily weighted average number of subscribers | 24,651,268 | 22,553,702 | 24,331,646 | 22,272,282 | |||
Customer service and billing expenses, per average subscriber | $ 1.08 | $ 1.01 | $ 1.09 | $ 1.00 | |||
Free cash flow - is derived from cash flow provided by operating activities, capital expenditures and restricted and other investment activity. Free cash flow is calculated as follows (in thousands):
Unaudited | |||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||
2013 | 2012 | 2013 | 2012 | ||||
Cash Flow information | |||||||
Net cash provided by operating activities | $ 273,106 | $ 253,775 | $ 442,021 | $ 293,723 | |||
Net cash used in investing activities | $ (36,546) | $ (23,757) | $ (62,980) | $ (48,944) | |||
Net cash provided by (used in) financing activities | $ 208,482 | $ (108,264) | $ (248,217) | $ (150,439) | |||
Free Cash Flow | |||||||
Net cash provided by operating activities | $ 273,106 | $ 253,775 | $ 442,021 | $ 293,723 | |||
Additions to property and equipment | (36,546) | (23,757) | (62,980) | (48,944) | |||
Free cash flow | $ 236,560 | $ 230,018 | $ 379,041 | $ 244,779 | |||
New vehicle consumer conversion rate - is defined as the percentage of owners and lessees of new vehicles that receive our 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. Promotional periods generally include the period of trial service plus 30 days to handle the receipt and processing of payments. 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 gross subscriber addition - or SAC, per gross subscriber addition, 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 gross subscriber additions 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 gross subscriber addition, 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, | ||||||
2013 | 2012 | 2013 | 2012 | ||||
Subscriber acquisition costs (GAAP) | $ 129,992 | $ 119,475 | $ 246,103 | $ 235,596 | |||
Less: margin from direct sales of radios and accessories (GAAP) | (13,001) | (9,267) | (24,130) | (20,414) | |||
Add: purchase price accounting adjustments | 22,017 | 23,530 | 44,022 | 47,616 | |||
$ 139,008 | $ 133,738 | $ 265,995 | $ 262,798 | ||||
Gross subscriber additions | 2,655,488 | 2,481,004 | 5,165,402 | 4,642,697 | |||
SAC, per gross subscriber addition | $ 52 | $ 54 | $ 51 | $ 57 | |||
About Sirius XM Radio
Sirius XM Radio Inc. is the world's largest radio broadcaster measured by revenue and has more than 25 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., from retailers nationwide, and online at siriusxm.com. SiriusXM programming is also available through the SiriusXM Internet Radio App for Android, Apple, and BlackBerry smartphones and other connected devices. SiriusXM also holds a minority interest in SiriusXM Canada which has more than 2 million subscribers.
On social media, join the SiriusXM community on Facebook, facebook.com/siriusxm, Twitter, twitter.com/siriusxm, Instagram, instagram.com/siriusxm, and YouTube at youtube.com/siriusxm.
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 forms of radio and audio services; our dependence upon automakers; general economic conditions; failure of our satellites, which, in most cases, are not insured; our ability to attract and retain subscribers at a profitable level; royalties we pay for music rights; the unfavorable outcome of pending or future litigation; rapid technological and industry change; failure of third parties to perform; changes in consumer protection laws and their enforcement; and our substantial 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, 2012, 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
SOURCE Sirius XM Radio
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