SiriusXM Canada Reports Second Quarter Fiscal 2015 Results

Company delivers record revenue driven by expansion of its self-pay subscriber base and continued growth in Self-Pay ARPU

TORONTO, April 9, 2015 /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 its fiscal 2015 second quarter ended February 28, 2015 prepared in accordance with International Financial Reporting Standards (IFRS). A summary of IFRS financial results for Q2 FY2015 is attached1.  All results are reported in Canadian dollars unless otherwise stated.

Q2 FY2015 Financial and Operating Metrics

The figures below include certain non-GAAP measures and industry metrics. These figures are subject to the qualification and assumptions set out in the Company's notes to such results.









Financial1

Q2 FY2015

Q2 FY2014

% Change


YTD FY2015

YTD FY2014

% Change


(Feb 28, 2015)

(Feb 28, 2014)



(Feb 28, 2015)

(Feb 28, 2014)



(Unaudited)

(Unaudited)



(Unaudited)

(Unaudited)




(Restated)




(Restated)










Revenue

80,086

75,466

6.1%


159,071

151,902

4.7%

Adjusted EBITDA2

23,331

22,523

3.6%


46,238

43,942

5.2%

Net Income before one-time adjustments 4

9,948

6,213

60.1%


17,972

11,016

63.1%

Net Income (loss)

(25,140)

6,213

-504.7%


(17,116)

11,016

-255.4%

Free cash flow

11,296

9,876

14.4%


24,974

22,695

10.0%









Operating1








Self-Paying Subscribers

1,862

1,769

5.3%


1,862

1,769

5.3%

Total Subscribers

2,552

2,388

6.9%


2,552

2,388

6.9%

Self-Pay ARPU3

$12.48

$11.92

4.7%


$12.43

$12.00

3.6%

Subscriber Acquisition Cost (SAC)

$35

$40

-11.2%


$37

$41

-9.6%

Cost Per Gross Addition (CPGA)

$63

$67

-6.5%


$63

$68

-6.9%

1All figures in the table above are in thousands except, ARPU, SAC and CPGA.

2Adjusted EBITDA is a non-GAAP measure. A reconciliation of income (loss) before taxes to both EBITDA and Adjusted EBITDA is provided below.

3Self-Pay ARPU is derived from the total of earned subscription revenue from Self-Pay subscribers and the music royalty and regulatory fee and activation fees, divided by the monthly weighted average number of Self-Paying subscribers. Please see the Company's MD&A for a more detailed description.

4One-time adjustments include a $16.0 million withholding tax expense and a $19.1 million, non-cash income tax expense.


"As a result of growth in our self-pay subscriber base and self-pay ARPU, we generated improvements across all of our key financial metrics," said Mark Redmond, President and CEO, SiriusXM Canada. "We set a new quarterly revenue record and also delivered year-over-year improvements in Adjusted EBITDA and free cash flow, despite significantly higher copyright royalties and greater capital expenditures. As expected, we saw churn improve sequentially. It also improved year-over-year, even with the increase in the Music Royalty and Regulatory Fee we implemented last quarter. We believe this is a strong testament to the unmatched audio entertainment experience we provide and the loyalty of our current subscribers."

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

Mr. Redmond continued: "While we continue to experience seasonality in our business, we remain on track to generate net self-pay subscriber additions on a full-year basis. We continue to make strides in the pre-owned car market and remain well-positioned to benefit from strong auto industry fundamentals. We believe our continued subscriber growth, further improvements in self-pay ARPU and prudent cost management will lead to strong free cash flow generation through the remainder of the fiscal year and a supportable dividend."

CRA Update

SiriusXM Canada received a formal notice of reassessment ("Notice") from Canada Revenue Agency ("CRA") regarding the Company's August 31, 2006 tax return.  The Notice denied the full amount of non-capital losses and eligible capital expenditures related to the Company's share issuances to SiriusXM and certain OEM partners.  As a result of the Notice, the Company, as required, booked a non-cash, one-time income tax expense of $19.1 million in Q2 2015.

The CRA had also communicated its intent to assess the Company for withholding tax and related penalties and interest on the share issuance to Sirius XM.  Subsequent to the quarter, a formal notice of reassessment was received. The Company recorded a provision of $16.0 million in its interim consolidated financial statements. Management remains of the opinion, that after careful consideration and consultation with its professional advisors, that the Company's tax filing position is merited and completely disagrees with the position taken by the CRA.

"We are confident that our current tax filing position is correct," said Michael Washinushi, Chief Financial Officer, SiriusXM Canada. "We intend to vigorously defend our position and appeal the CRA's decision. We continue to see positive trends in our business and remain optimistic about the Company's long-term growth prospects. We do not believe that these reassessments will have an impact on our strategy going forward, and our quarterly dividend remains intact. We believe we have sufficient liquidity to satisfy all obligations."

Q2 FY2015 Results Financial Review

For Q2 FY2015, revenue was $80.1 million, up $4.6 million, or 6.1%, from $75.5 million for the same period in 2014. The year-over-year improvement reflects growth in the Company's self-paying subscriber base and an increase in Self-Pay ARPU, which were partially offset by a reduction in promotional revenue due to revised terms related to contract renewals with certain OEM partners. Q2 FY2015 Self-Pay ARPU was $12.48, up 4.7% from $11.92 in Q2 FY2014. The year-over-year improvement in quarterly Self-Pay ARPU was driven by the Company's implementation of its increased Music Royalty and Regulatory Fee (MRF) on renewing subscribers. For YTD FY2015, revenue was $159.1 million, up $7.2 million, or 4.7% from $151.9 million for the same period in FY2014. Self-Pay ARPU for YTD FY2015 was $12.43 compared to $12.00 for the same period in FY2014.

For Q2 FY2015 Adjusted EBITDA, which excludes a one-time adjustment related to the $16.0 million provision for withholding tax and related interest and penalties, was $23.3 million. This was a $0.8 million, or 3.6%, improvement compared to $22.5 million in Q2 FY2014. The year-over-year increase was a result of revenue growth and marketing related cost savings, which were offset, in part, primarily by a higher cost of revenue due to an increase in the Company's copyright royalties. YTD FY2015, Adjusted EBITDA, which excludes a one-time adjustment related to the provision the Company took, was $46.2 million, an increase of $2.3 million, or 5.2%, from $43.9 million for the same period in FY2014.

As a result of the one-time income tax expense and provision for withholding tax, totaling $35.1 million, related to the August 31, 2006 tax return, the Company recorded a net loss of $25.1 million in Q2 FY2015. Excluding the one-time events, the Company generated net income of $9.9 million in Q2 FY2015. This was up $3.7 million, or 60.1%, compared to net income of $6.2 million in Q2 FY2014. Net loss was $17.1 million for YTD FY2015. Excluding the one-time events, the Company generated net income of $18.0 million. Net income was up $7.0 million, or 63.1%, compared to net income of $11.0 million in the same period of FY2014.

SAC for Q2 FY2015 continued to benefit from the revised terms related to contract renewals with certain OEM partners, as well as a greater volume of gross additions from the pre-owned vehicle market where the cost to acquire subscribers is much lower.  SAC was $35 in Q2 FY2015, down from $40 in Q2 FY2014. For YTD FY2015, SAC decreased to $37 in FY2015 from $41 for the same period in FY2014.

CPGA was $63 in Q2 FY2015, down from $67 in Q2 FY2014, reflecting lower subsidy costs and higher gross additions from the pre-owned vehicle channel, the benefits of which were partially offset by a marginal increase in marketing costs. For YTD FY2015, CPGA decreased to $63 in FY2015 from $68 for the same period in FY2014.

In Q2 FY2015, the Company generated $17.3 million in cash from operating activities, up $4.1 million, or 31.4%, from $13.2 million in cash from operating activities in Q2 FY2014 as a result of year-over-year changes in working capital offset by timing of interest payment on long-term debt. For YTD FY2015, the Company generated $34.7 million in cash from operating activities, up $5.9 million, or 20.4%, from $28.8 million in cash from operating activities for the same period in FY2014.

The Company generated free cash flow of $11.3 million in Q2 FY2015, up $1.4 million, or 14.4%, from $9.9 million in Q2 FY2014 due to higher cash from operations of $4.1 million offset by increased capital spending of $2.7 million, related to the unification of the Company's Subscriber Management System, in Q2 FY2015. For YTD FY2015, the Company generated $25.0 million of free cash flow, compared to $22.7 million in same period of FY2014.

As at February 28, 2015, the Company had total cash and cash equivalents of $22.5 million compared to $37.7 million as at November 30, 2014. The decrease is due primarily to two dividend payments totalling $26.9 million and capital expenditures of $6.0 million, offset by cash from operating activities of $17.3 million.

Conference Call and Webcast Details

SiriusXM Canada will hold a conference call to discuss the Company's Q2 FY2015 results on Friday, April 10, 2015 at 8:30 a.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 Friday, April 17, 2015 at midnight. To access the archived conference call, please dial 416-849-0833, or 1-855-859-2056 and enter the reservation code 14918334. A live audio webcast of the conference call will be available at 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 Income (loss) before income taxes.


Three months ended


Six months ended

Adjusted EBITDA: Reconciliation

February 28, 2015

February 28, 2014


February 28, 2015

February 28, 2014

In ($ 000's)

Q2 2015

Q2 2014


YTD 2015

YTD 2014







Income/(Loss) before income taxes

(1,951)

8,650


9,613

15,505

Interest expense & income

3,029

3,864


6,056

7,575

Foreign exchange gain(loss) & other

124

243


189

295

Amortization

5,190

9,252


12,132

19,159

EBITDA

6,392

22,009


27,990

42,534

Withholding tax expense

16,000

-


16,000

-

Stock-based compensation

938

497


2,244

1,360

Fair value adjustments

1

17


4

48

Adjusted EBITDA

23,331

22,523


46,238

43,942

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

 

For complete definition of non-GAAP measures and for more details on the Company's Q2 FY2015 results, please see the Company's Management Discussion & Analysis filed April 9, 2015 which is incorporated herein by reference. 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 condensed consolidated interim financial statements for Q2 FY2015.

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 more than 2.5 million subscribers, is 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, entertainment and major sports brands including the NHL, NFL, NBA, NASCAR, CNN, CBC, FOX, BBC, Howard Stern, Disney, Comedy Central and more. 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.

SiriusXM Canada has been designated one of Canada's 50 Best Managed Companies six years in a row and 2013 and 2014 rankings in PROFIT 500's list of Canada's Fastest Growing Companies.

Join SiriusXM Canada on Facebook at facebook.com/siriusxmcanada, on Twitter at twitter.com/siriusxmcanada and on YouTube at youtube.com/siriusxmcanada.

CONSOLIDATED INTERIM BALANCE SHEETS

(Unaudited)

At


 February 28,

August 31,

(Canadian dollars)


2015

2014





ASSETS




Current assets




Cash and cash equivalents                                                                                   


22,465,088

23,868,423

Accounts receivable


12,407,383

13,454,489

Prepaid expenses and other


6,757,073

4,251,306

Inventory


236,896

559,081

Total current assets


41,866,440

42,133,299

Long-term prepaid expenses


353,119

456,039

Property and equipment


4,119,554

4,508,188

Intangible assets 


131,232,166

134,971,363

Deferred tax assets


23,862,959

50,592,132

Goodwill


96,732,525

96,732,525

Total assets


298,166,763

329,393,546





LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIENCY


Current liabilities




Trade and other payables


36,063,138

44,121,466

Due to related parties


8,896,011

9,146,135

Interest payable


3,965,753

3,965,753

Deferred revenue


150,092,198

146,110,758

Provisions


16,557,440

505,783

Total current liabilities


215,574,540

203,849,895

Deferred revenue


13,023,196

15,075,749

Other long-term liabilities


664,225

533,049

Due to related parties


1,208,332

1,323,965

Long-term debt


195,784,628

195,463,860

Provisions


388,717

374,240

Total liabilities


426,643,638

416,620,758





Shareholders' deficiency




Share capital


177,777,645

176,862,133

Contributed surplus


7,918,303

6,067,419

Accumulated deficit


(314,172,823)

(270,156,764)

Total shareholders' deficiency


(128,476,875)

(87,227,212)

Total liabilities and shareholders' deficiency


298,166,763

329,393,546


 

CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
(Unaudited)












Three months ended


Six months ended

(Canadian dollars)



February 28,
2015

February 28, 2014
Restated - see
Note 2


February 28,
2015

 February 28, 2014
 Restated - see
Note 2









Revenue



80,085,543

75,466,464


159,070,508

151,902,156









Operating expenses









Operating costs



57,693,411

53,457,806


115,080,200

109,367,616


Depreciation and amortization



5,189,985

9,251,586


12,132,295

19,159,302

Operating income



17,202,147

12,757,072


31,858,013

23,375,238

Withholding tax expense



(16,000,000)


(16,000,000)









Finance costs, net









Interest income



82,580

165,618


173,026

345,043


Interest expense



(3,111,666)

(4,029,653)


(6,228,983)

(7,920,139)


Foreign exchange loss



(124,182)

(242,601)


(188,648)

(295,459)

Finance costs, net



(3,153,268)

(4,106,636)


(6,244,605)

(7,870,555)









Net income (loss) before income tax



(1,951,121)

8,650,436


9,613,408

15,504,683

Income tax expense



(23,188,540)

(2,437,786)


(26,729,173)

(4,488,590)

Net income (loss) and comprehensive income (loss)



(25,139,661)

6,212,650


(17,115,765)

11,016,093









Earnings (loss) per share - basic and diluted



(0.19)

0.05


(0.13)

0.09


























 

CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIENCY)
(Unaudited)












Total

For the six months ended,


Share

Contributed

Accumulated

Shareholders'

(Canadian dollars)


Capital

Surplus

Deficit

Deficiency







Balance, September 1, 2013


151,794,596

6,161,440

(149,712,623)

8,243,413







Net income for the period


11,016,093

11,016,093

Stock-based compensation


1,359,697

1,359,697

Dividends


(26,175,373)

(26,175,373)

Stock options exercised


2,866,448

(921,143)

1,945,305

Conversion of convertible notes


21,539,196

(1,539,196)

20,000,000

Balance, February 28, 2014


176,200,240

5,060,798

(164,871,903)

16,389,135







Balance, September 1, 2014


176,862,133

6,067,419

(270,156,764)

(87,227,212)

Net income (loss) for the period


(17,115,765)

(17,115,765)

Stock-based compensation


2,243,767

2,243,767

Dividends


(26,900,294)

(26,900,294)

Stock options exercised


915,512

(392,883)

522,629

Balance, February 28, 2015


177,777,645

7,918,303

(314,172,823)

(128,476,875)







 

CONSOLIDATED  INTERIM STATEMENTS OF CASH FLOWS
(Unaudited)



Three months ended


                          Six months ended


(Canadian dollars)


 February 28,
 2015

February 28, 2014
Restated - see
Note 2


 February 28,
 2015

February 28, 2014
Restated - see
 Note 2

Cash provided by (used in)
















OPERATING ACTIVITIES








Net income (loss) for the period


(25,139,661)

6,212,650


(17,115,765)

11,016,093


Add(deduct) items not involving cash









Amortization of intangible assets


4,749,174

8,538,416


11,241,933

17,188,496



Depreciation of property and equipment


440,811

713,170


890,362

1,970,806



Income tax expense


23,188,540

2,437,786


26,729,173

4,488,590



Stock-based compensation


938,168

497,267


2,243,767

1,359,697



Accrued interest


2,812,500

(3,871,675)


(284,132)



Interest accretion


142,029

504,100


281,933

750,290



Foreign exchange loss


181,753

174,937


255,660

236,918


Net change in non-cash working capital and
deferred revenue related to operations


10,000,440

(2,034,860)


10,129,122

(7,942,246)


Cash provided by operating activities


17,313,754

13,171,791


34,656,185

28,784,512









INVESTING ACTIVITIES








Purchase of property and equipment


(613,338)

(134,094)


(818,552)

(696,062)


Purchase of intangible assets


(4,589,610)

(3,162,002)


(8,048,703)

(5,393,640)


Prepayment for property and equipment


(814,600)


(814,600)


Maturity of short-term investments


2,063,000


2,063,000


Interest received on short-term investments


125,075


125,075


Cash used in investing activities


(6,017,548)

(1,108,021)


(9,681,855)

(3,901,627)










FINANCING ACTIVITIES







Payment of dividends


(26,900,294)

(26,175,373)


(26,900,294)

(26,175,373)


Proceeds from exercise of stock options


411,249

920,316


522,629

1,945,305


Cash used in financing activities


(26,489,045)

(25,255,057)


(26,377,665)

(24,230,068)










Net increase in cash and cash
equivalents during the period


(15,192,839)

(13,191,287)


(1,403,335)

652,817


Cash and cash equivalents, beginning of period

37,657,927

57,922,688


23,868,423

44,078,584


Cash and cash equivalents, end of
period


22,465,088

44,731,401


22,465,088

44,731,401



















 

SOURCE Sirius XM Canada Holdings Inc.

For further information: Morlan Reddock, Sirius XM Canada, 416-513-7418, morlan.reddock@siriusxm.ca; Kristen Dickson, TMX Equicom, 416-815-0700 ext 273, kdickson@tmxequicom.com


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