SiriusXM Canada Reports Q3 Fiscal 2014 Results

  • Record Total Subscribers of 2,529,800
  • Revenue of $74.5 million
  • Adjusted EBITDA** of $22.7 million, up 50.6% year-over-year
  • Refinanced existing 9.75% Senior Notes with new 5.625% Senior Notes.
  • Declared $88.3 million in ongoing and special dividends.

TORONTO, July 14, 2014 /CNW/ - Sirius XM Canada Holdings Inc. ("SiriusXM Canada" or the "Company") (TSX: XSR), parent of Sirius XM Canada Inc., today released unaudited financial results for the quarter ended May 31, 2014 (Q3 FY2014) prepared in accordance with International Financial Reporting Standards (IFRS). A summary of IFRS financial results for Q3 FY2014 is attached1. All results are reported in Canadian dollars unless otherwise stated.

Q3 FY2014 Highlights

  • Surpassed 2.5 million total subscribers. Total subscriber growth was 142,200, compared to 121,900 in Q3 FY2013
  • Adjusted EBITDA increased 50.6% to $22.7 million from $15.1 million in Q3 FY2013. This includes the impact of OEM contract renewals described below
  • Net loss was $4.9 million, which included the impact of the one-time after-tax debt refinancing charge and the OEM contract renewals described below. Excluding those special items, Q3 FY2014 net income was $4.0 million compared to $0.8 million in Q3 FY2013
  • Refinanced long term debt at a substantially lower interest rate, resulting in significant interest expense savings
  • Declared a special cash dividend of $75 million ($0.585 per class A share) and a quarterly dividend of $13.4 million ($0.105 per class A share), totaling $88.3 million in shareholder dividends
  • Renewed long-term OEM agreements with Ford and Honda
  • Expanded the number of franchise dealers in our pre-owned vehicle program to 1,400, and established partnerships with AMVOQ and CarProof to drive awareness and adoption of our pre-owned vehicle offering

Year-to-date FY2014 Financial Highlights

  • Revenue grew 6.2% to $226.4 million from $213.2 million in the same period in FY2013. This includes the impact of OEM contract renewals described below
  • Adjusted EBITDA increased 19.7% to $62.4 million from $52.1 million in the same period in FY2013. This includes the impact of OEM contract renewals described below
  • Net Income was $3.1 million, which included the impact of the one-time after-tax debt refinancing charge and the OEM contract renewals described below. Excluding those special items, year-to-date FY2014 net income was $15.3 million compared to $8.1 million in the same period in FY2013
  • Generated $53.9 million in cash before investing activities, compared to $56.2 million in the same period in FY2013. This excludes the impact of the debt refinancing charge

"The third quarter was an exceptionally busy and exciting time for SiriusXM Canada. In Q3, we reached a milestone of 2.5 million subscribers. We renewed several OEM agreements on beneficial terms, declared dividends totaling $88.3 million, including a $75 million special dividend, refinanced our long-term debt obligation at a substantially lower rate, obtained a $35 million credit facility to bolster the Company's liquidity reserves and signed several partnership agreements in the used vehicle segment of our business," said Mark Redmond, President and CEO, SiriusXM Canada. "Increasing our subscriber base, holding the line on costs and growing cash flow, remain our top priorities, and during the quarter we were successful in these areas. We remain well positioned for future growth and view the OEM renewals during the quarter as clear evidence of the strong value they ascribe to our service."

Financial and Operational Summary
Below, the Company has provided certain non-GAAP measures and industry metrics. These figures are subject to the qualification and assumptions set out in the notes to such results.

                       
Financial *   Q3 FY2014     Q3 FY2013     YTD FY2014     YTD FY2013
    (ended May 31, 2014)     (ended May 31, 2013)     (ended May 31, 2014)     (ended May 31, 2013)
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)
Total Revenue   $74,477     $73,582     $226,379     $213,162
Adjusted EBITDA**   $22,711     $15,083     $62,432     $52,152
Net Income (loss)   ($4,860)     $776     $3,054     $8,113
                       
Operating*                      
Self-Paying Subscribers   1,797     1,664     1,797     1,664
Total Subscribers   2,530     2,322     2,530     2,322
ARPU   $11.14     $11.88     $11.34     $11.62
Subscriber Acquisition Cost (SAC)   $33     $47     $38     $46
Cost Per Gross Addition (CPGA)   $56     $72     $63     $72

* All figures in the table above are in thousands except, ARPU, SAC and CPGA and include the effects of contractual changes in Q3 and YTD FY2014.
** Adjusted EBITDA is a non-GAAP measure. A reconciliation of operating income to both EBITDA and Adjusted EBITDA is provided below.

"During the quarter we redeemed our 2018 Senior Notes and issued 2021 Senior Notes with a reduction in borrowing cost that will save the Company millions of dollars over the term of the agreement with an improved covenant package that provides the Company with a lot more flexibility going forward," said Michael Washinushi, Chief Financial Officer, SiriusXM Canada. "In the quarter, we also announced a special dividend of approximately $75 million. This special dividend in conjunction with the Company's ongoing quarterly dividend speaks to the strong free cash flow generation of our subscription based business model."

DEVELOPMENTS DURING THE QUARTER

Debt refinancing charge: The Company redeemed its 2018 Senior Notes and incurred, in aggregate, $16.6 million pre-tax debt refinancing charge. SiriusXM Canada subsequently issued 2021 Senior Notes at far more favorable interest rates and much improved covenant package.

OEM contract renewals: The Company renewed agreements with several OEM partners on terms which it believes were beneficial. Changes to revenues, subsidy and revenue share rates with certain agreements, were applied retroactively to the beginning of SiriusXM Canada's current fiscal year and are fully reflected in Q3 FY2014's results. As a result, certain line items in the Company's Q3 FY2014 financial statements and its reported financial metrics will not be directly comparable to the same line items and metrics in Q3 FY2013. The table below illustrates the impact of these adjustments due to OEM contract renewals to the Q3 FY2014 financial results relative to the prior year periods.

Table: Impact of Adjustments due to OEM Contract Renewals and Debt Refinancing Charge

                                         
in ($000's)     As
Reported
    OEM
Contract
Adjustments
  Refinancing
Charge
  Q3 2014
Normalized
      Q3
2013
    Change     %
Revenue     74,477     1,502   -   75,979       73,582     2,397     3.3%
Operating Costs     52,540     6,126   -   58,666       59,061     395     0.7%
EBITDA     21,937     (4,624)   -   17,313       14,521     2,792     19.2%
Adjusted EBITDA     22,711     (4,624)       18,088       15,083     3,005     19.9%
Depreciation and amortization     7,731     -   -   7,731       9,374     1,643     21.3%
Finance costs, net     20,536     -   (16,636)   3,900       3,893     (7)     -0.2%
Income tax expense (recovery)     (1,471)     (1,225)   4,409   1,712       477     (1,235)     -72.1%
Net Income (loss)     (4,860)     (3,398)   12,227   3,970       776     3,194     411.5%

Q3 and YTD FY2014 Results Financial Review
For Q3 FY2014 revenue would have been $76.0 million (increase of 3.3%) prior to the change in OEM contract accounting.  In light of these changes revenue was $74.5 million, up $0.9 million, or 1.2%, from $73.6 million for the same period in 2013. The year-over-year increase was due primarily to an increase in the number of subscribers offset by effect on revenue due to change in OEM contacts and lower ARPU. YTD FY2014, revenue was $226.4 million, up $13.2 million, or 6.2% from $213.2 million for the same period in FY2013. Q3 FY2014 ARPU was $11.14, down from $11.88 in the same period in FY2013. Excluding the adjustments due to OEM contracts of $1.5 million to revenue, ARPU was $11.37 in the quarter representing a decrease of 4.2%. ARPU for YTD FY2014 was $11.34 compared to $11.62 for the same period in FY2013.

Q3 FY2014 Adjusted EBITDA improved to $22.7 million, representing a 50.6% increase, or $7.6 million improvement, from Adjusted EBITDA of $15.1 million in Q3 FY2013. The year-over-year increase was a result of the Company's top-line growth along with change in OEM contracts. Excluding adjustments due to OEM contracts to revenue and expenses of $4.6 million, Adjusted EBITDA increased by $3.0 million or 19.9% to $18.1 million in the quarter. YTD FY2014 Adjusted EBITDA was $62.4 million, an increase of 19.7%, or $10.3 million, from $52.2 million for the same period in FY2013.

SAC was $33 in Q3 FY2014 down from $47 in Q3 FY2013. The decrease for the quarter was due primarily to decrease in subsidy costs as a result of changes in contractual terms with OEM partners and due to an increase in gross additions predominantly from the used vehicle channel. Excluding the adjustments due to OEM contracts to subsidy costs of $2.1 million SAC decreased to $40 from $47 in the same period prior year. SAC for YTD FY2014 was $38, down from $46 for the same period in FY2013.

CPGA was $56 in Q3 FY2014 down from $72 in Q3 FY2013 due to lower SAC and higher gross additions. Excluding the adjustments due to OEM contracts to subsidy costs of $2.1 million, CPGA decreased to $63 from $72 in the same period prior year. CPGA for YTD FY2014 was $63, down from $72 for the same period in FY2013 due to lower SAC and higher gross additions.

In Q3 FY2014, the Company generated $21.2 million in cash before paying $10.4 million in call premium for early repayment of debt and using $4.2 million of cash in investing activities, and generated $51.4 million of cash in financing activities as a result of refinancing its existing debt. After these adjustments, the Company generated $6.6 million in cash for the quarter. The Company generated $12.7 million in cash in Q3 FY2014 before paying $10.4 million in call premium, resulting in a free cash flow of $2.3 million. Comparatively, the Company generated $13.9 million of cash before using $0.3 million of cash in investing activities and used $13.5 million of cash in financing activities in Q3 FY2013. The Company generated $13.3 million in free cash flow in Q3 FY2013.

YTD FY2014, the Company generated $53.9 million in cash before paying $10.4 million in call premium for early repayment of debt and using $8.1 million of cash in investing activities resulting in cash increase of $35.4 million before gaining $27.2 million of cash in financing activities. YTD FY2014, the Company generated $35.4 million in cash before paying $10.4 million in call premium, resulting in a free cash flow of $25.0 million. YTD FY2013, the Company generated $56.2 million of cash before using $10.8 million of cash in investing activities and used $39.4 million of cash in financing activities. YTD FY2013, the Company generated $39.9 million in free cash flow.

As at May 31, 2014, SiriusXM Canada had total cash and cash equivalents and short term investments of $101.5 million, compared to $47.8 million as at February 28, 2014.

Conference Call and Webcast Details
SiriusXM Canada will hold a conference call to discuss the Company's Q3 FY2014 results on Monday, July 14, 2014 at 5.00 p.m. ET. All interested parties can join the call by dialing 647-427-7450, or 1-888-231-8191. Please dial-in 15 minutes prior to the call to secure a line. The conference call will be archived for replay until Monday, July 21, 2014 at midnight. To access the archived conference call, please dial 416-849-0833, or 1-855-859-2056 and enter the reservation code 63080482. A live audio webcast of the conference call will be available at http://www.siriusxm.ca and www.newswire.ca. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.  An archived replay of the webcast will be available for 365 days at www.newswire.ca.

Reconciliations
The following is a reconciliation of EBITDA and Adjusted EBITDA to Operating Income.

                               
(In $000's)           Q3 FY2014     Q3 FY2013     YTD FY2014     YTD FY2013
            (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)
                               
Operating income               14,206       5,147         33,360     23,603
Depreciation & Amortization           7,731       9,374     26,890     26,511
EBITDA               21,937     14,521         60,250     50,114
Stock based compensation               759         526     2,119       1,858
Fair value adjustments*           16     35     63     180
Adjusted EBITDA               22,711     15,083         62,432     52,152

* Fair value adjustment relates to reduction in revenue due to valuation of deferred revenue as per purchase price accounting

Please see the Company's Management Discussion & Analysis filed July 14, 2014 for more details on the Company's Q3 FY2014 results. The non-GAAP measures used in this press release should be used in addition to, but not as a substitute for, the analysis provided in the unaudited consolidated statement of operations and comprehensive income. Please see the Company's Management Discussion & Analysis filed July 14, 2014 for complete definition of non-GAAP measures.

Forward-Looking Statements
Certain statements included above may be forward-looking in nature. Such statements can be identified by the use of forward-looking terminology such as "expects," "may," "will," "should," "intend," "plan," or "anticipates" or the negative thereof or comparable terminology, or by discussions of strategy. Forward-looking statements include estimates, plans, expectations, opinions, forecasts, projections, targets, guidance, or other statements that are not statements of fact, including with respect to the payment of dividends in the future and future performance. Although SiriusXM Canada believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct, including with respect to the ability of the Company to pay dividends in the future, the redemption of Sirius XM Canada's 5.625% Senior Unsecured Notes, and the terms, timing and conditions of any refinancing of such notes. SiriusXM Canada's forward-looking statements are expressly qualified in their entirety by this cautionary statement. SiriusXM Canada makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made, except as required by applicable law. Additional information identifying risks and uncertainties is contained in Sirius XM Canada Holdings Inc.'s filings with the Canadian securities regulators, available at www.sedar.com.

About SiriusXM Canada
Sirius XM Canada Holdings Inc. (TSX: XSR) operates as SiriusXM Canada. SiriusXM Canada, with approximately 2.5 million subscribers, is one of the country's leading audio entertainment company and broadcasts more than 120 satellite radio channels featuring premier sports, news, talk, entertainment and commercial-free music. SiriusXM Canada offers an array of content from the most recognized news and entertainment brands as well as every major sport including the NHL, NFL and MLB.

SiriusXM programming is available on a variety of devices including pre-installed and after-market radios in cars, trucks and boats, smartphones and mobile devices, and consumer electronics products for homes and offices. SiriusXM programming is also available online at www.siriusxm.ca and on Apple and Android-powered mobile devices.

SiriusXM Canada has partnerships with every major automaker and its radio products are available at more than 2,500 retail locations nationwide. To find out more about SiriusXM Canada (TSX: XSR), visit our website at www.siriusxm.ca.

CONSOLIDATED INTERIM BALANCE SHEETS
(Unaudited)
At                  
(Canadian dollars)           May 31, 2014     August 31, 2013
                   
ASSETS                  
Current assets                  
Cash and cash equivalents           98,455,400     44,078,584
Short-term investments           3,000,468     5,157,798
Accounts receivable           8,938,294     13,359,446
Prepaid expenses and other           6,223,462     6,778,736
Inventory           583,928     234,349
Total current assets           117,201,552     69,608,913
Long-term prepaid expenses           272,419     100,157
Property and equipment           4,605,429     5,979,911
Intangible assets           137,801,032     152,217,165
Deferred tax assets           52,584,598     54,483,616
Goodwill           96,732,525     96,732,525
Total assets           409,197,555     379,122,287
                   
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)                  
Current liabilities                  
Trade and other payables           49,041,937     47,145,257
Due to related parties           7,048,771     9,620,750
Interest payable           1,153,253     2,704,449
Current portion of deferred revenue           141,616,830     144,885,091
Dividends Payable           74,879,943    
Provisions           443,373     1,327,974
Total current liabilities           274,184,107     205,683,521
Deferred revenue           15,269,282     17,105,210
Other long-term liabilities           1,443,907     1,669,229
Due to related parties           1,410,298     2,390,608
Long-term debt           195,326,202     143,707,194
Provisions           367,206     323,112
Total liabilities           488,001,002     370,878,874
                   
Shareholders' equity (deficiency)                  
Share capital           176,646,017     151,794,596
Contributed surplus           5,693,941     6,161,440
Accumulated deficit           (261,143,405)     (149,712,623)
Total shareholders' equity (deficiency)           (78,803,447)     8,243,413
Total liabilities and shareholders' equity (deficiency)           409,197,555     379,122,287

 

 
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(Canadian dollars)           Three months ended   Nine months ended
        May 31, 2014     May 31, 2013   May 31, 2014     May 31, 2013
                         
Revenue       74,477,058     73,581,631   226,379,214     213,162,178
                         
Operating expenses                        
  Operating costs       52,540,334     59,060,543   166,129,072     163,047,823
  Depreciation and amortization       7,731,012     9,374,461   26,890,314     26,511,057
Operating income       14,205,712     5,146,627   33,359,828     23,603,298
                         
Finance costs, net                        
  Interest income       344,160     170,248   689,203       511,302
  Interest expense       (4,288,516)     (3,997,601)   (12,208,655)     (11,897,897)
  Loss on debt repayment       (13,195,918)       (13,195,918)    
  Foreign exchange gain (loss)       44,043     (65,986)   (251,416)     (530,496)
  Change in fair value of embedded derivative       (3,440,000)       (3,440,000)     51,378
Finance costs, net       (20,536,231)     (3,893,339)   (28,406,786)     (11,865,713)
                         
Net income (loss) before income tax       (6,330,519)     1,253,288   4,953,042     11,737,585
Income tax recovery (expense)       1,470,975     (477,169)   (1,899,018)     (3,624,553)
Net income (loss) and comprehensive income (loss)       (4,859,544)     776,119   3,054,024       8,113,032
                         
Basic and fully diluted earnings (loss) per share       (0.04)     0.01   0.02     0.07
                         

                           
CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
(Unaudited)
 
For the nine months ended
(Canadian dollars)
     
 
 
Share
Capital
   
Contributed
Surplus
     
Accumulated
deficit
    Total
Shareholders'
Equity
(Deficiency)
                           
                           
Balance, September 1, 2012       148,393,493     5,057,501     (108,196,240)     45,254,754
Net income for the period               8,113,032     8,113,032
Stock-based compensation           1,858,258         1,858,258
Dividends               (40,698,956)     (40,698,956)
Stock options exercised       2,046,569     (750,584)         1,295,985
Balance, May 31, 2013       150,440,062     6,165,175     (140,782,164)     15,823,073
                           
                           
Balance, September 1, 2013       151,794,596     6,161,440     (149,712,623)     8,243,413
Net income for the period               3,054,024     3,054,024
Stock-based compensation           2,118,645         2,118,645
Dividends               (114,484,806)     (114,484,806)
Stock options exercised       3,312,225     (1,046,948)         2,265,277
Conversion of convertible notes       21,539,196     (1,539,196)         20,000,000
Balance, May 31, 2014       176,646,017     5,693,941     (261,143,405)     (78,803,447)
                           

 
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(Unaudited)
(Canadian dollars)         Three months ended   Nine months ended
        May 31, 2014     May 31, 2013   May 31, 2014     May 31, 2013
Cash provided by (used in)                        
                         
OPERATING ACTIVITIES                        
Net income (loss) for the period       (4,859,544)     776,119   3,054,024       8,113,032
Add (deduct) items not involving cash                        
  Amortization of intangible assets       7,283,501     8,871,200   24,471,997     24,854,334
  Depreciation of property and equipment       447,511     503,261   2,418,317       1,656,723
  Income tax (recovery) expense       (1,470,975)     477,169   1,899,018       3,624,553
  Stock-based compensation       758,948     526,178   2,118,645       1,858,258
  Accrued interest       (1,267,064)     3,587,543   (1,551,196)       3,570,077
  Interest accretion       2,932,742     241,076   3,683,032       710,130
  Change in fair value of embedded derivative       3,440,000       3,440,000       (51,378)
  Foreign exchange (gain) loss       (70,858)     85,134   166,059       598,586
Net change in non-cash working capital and
deferred revenue related to operations
      (628,775)     (1,476,316)   (4,349,898)       491,672
Cash provided by operating activities       6,565,486       13,591,364   35,349,998     45,425,987
                         
INVESTING ACTIVITIES                        
Purchase of property and equipment       (373,202)     (26,853)   (1,069,264)       (58,255)
Purchase of intangible assets       (3,854,743)     (309,794)   (9,248,383)     (5,439,024)
Purchase of short-term investments                 (5,306,295)
Maturity of short-term investments             2,063,000    
Interest received on short-term investments             125,075     51,574
Cash used in investing activities       (4,227,945)     (336,647)   (8,129,572)     (10,752,000)
                         
FINANCING ACTIVITIES                        
Payment of dividends       (13,429,490)     (14,264,286)   (39,604,863)     (40,698,956)
Proceeds from issuance of debt       200,000,000       200,000,000    
Debt financing fees       (4,733,024)       (4,733,024)    
Repayment of debt       (130,771,000)       (130,771,000)    
Proceeds from exercise of stock options       319,972     715,339   2,265,277       1,295,985
Cash provided from (used in) financing
activities
      51,386,458     (13,548,947)   27,156,390     (39,402,971)
                         
Net increase (decrease) in cash and cash
equivalents during the period
      53,723,999     (294,230)   54,376,816     (4,728,984)
Cash and cash equivalents, beginning of period       44,731,401       46,599,995   44,078,584     51,034,749
Cash and cash equivalents, end of period       98,455,400       46,305,765   98,455,400     46,305,765

_________________________________
1 For a complete set of financial results including the accompanying notes please refer to the Company's filings on www.sedar.com

SOURCE: Sirius XM Canada Holdings Inc.

For further information:

Morlan Reddock
Sirius XM Canada
416-513-7418
morlan.reddock@siriusxm.ca

Dave Mason
TMX Equicom
416-815-0700 ext 237
dmason@tmxequicom.com


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