SiriusXM Canada Reports Third Quarter Fiscal 2015 Results

- Company delivers record revenue and double-digit year-over-year growth in Adjusted EBITDA and free cash flow -

TORONTO, July 13, 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 third quarter and year-to-date ("YTD") period ended May 31, 2015 prepared in accordance with International Financial Reporting Standards (IFRS). A summary of IFRS financial results for Q3 and YTD FY2015 is attached.  All results are reported in Canadian dollars unless otherwise stated.

Q3 and YTD 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

Q3 2015

Q3 2014


% Change

YTD 2015

YTD 2014


% Change


(May 31, 2015)

(May 31, 2014)



(May 31, 2015)

(May 31, 2014)




(Unaudited)

(Unaudited)



(Unaudited)

(Unaudited)





(Restated and
Normalized)




(Restated and
Normalized)












Revenue2

83,095

75,979


9.4%

242,166

226,379


7.0%

Adjusted EBITDA3

20,185

18,257


10.6%

66,423

66,823


(0.6)%

Net Income (loss)

7,962

(4,735)


268.2%

(9,153)

6,281


(245.7)%

Normalized net Income4

7,962

4,094


94.5%

25,822

18,508


39.5%

Free cash flow

14,366

12,749


12.7%

39,340

35,444


11.0%










Operating1









Self-Paying Subscribers

1,869

1,797


4.0%

1,869

1,797


4.0%

Total Subscribers

2,658

2,530


5.1%

2,658

2,530


5.1%

Self-Pay ARPU5

$12.87

$12.33


4.4%

$12.58

$12.11


3.9%

Subscriber Acquisition Cost (SAC)

$41

$40


2.5%

$39

$38


2.6%

Cost Per Gross Addition (CPGA)

$67

$63


6.3%

$65

$63


3.2%

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

2Includes a normalization adjustment to Q3 2014 related the renewal of certain OEM contracts. Please refer to the reconciliation tables below and the Company's MD&A for more detail.

3Adjusted EBITDA is a non-GAAP measure. A reconciliation of income (loss) before taxes to both EBITDA and Adjusted EBITDA, including one-time impact of certain OEM contract renewals in Q3 2014 and a $15.9 million withholding tax in YTD 2015, is provided below.

4Includes one-time adjustments for the impact of certain OEM contract renewals in Q3 2014 and a debt refinancing charge in Q3 2014 and YTD 2014 as well as a $15.9 million withholding tax expense and a $19.1 million, non-cash income tax expense for YTD 2015. Please refer to the reconciliation tables below and the Company's MD&A for more detail.

5Self-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.

"We set a new revenue record in the quarter, fueled by further expansion of our subscriber base and improvements in self-pay ARPU," said Mark Redmond, CEO, SiriusXM Canada. "Our top-line growth more than offset our higher copyright fees, translating into double-digit year-over-year increases in Adjusted EBITDA and free cash flow. We achieved an important milestone in the quarter. We completed the unification of our Subscriber Management System, with related business rule alignments resulting in one-time deactivations of approximately 9,000. However, we are now positioned to provide improved levels of customer service, while also driving more effective and efficient subscriber acquisition, conversion and retention. Excluding these changes, net subscriber additions would have been 16,000."

Mr. Redmond added: "We saw strong subscriber net additions in June, keeping us confident that we are on-track to achieve 2015 net self-pay subscriber growth in the mid-single digits. Our competitive positioning in the Canadian audio entertainment market is unmatched. We have in-car and streaming offerings, vehicle OEM penetration rates in the high 60s and unrivaled content. We go beyond simple commercial-free music with our exclusive, talk, news, comedy and sports content. We firmly believe in our ability to deliver continued growth as well as a supportable dividend."

Key Factors Affecting Reported Results
For the Q3 2014 and YTD 2015 periods, there were one-time events that affected the Company's results. In Q3 2014, the Company redeemed $130.8 million outstanding 9.75% senior notes that were due 2018.  This resulted in a total pre-tax debt refinancing charge of $16.6 million (after-tax - $12.2 million). In addition, in Q3 2014 the Company renewed agreements with two OEM partners. The changes to these contracts were applied retroactively from the beginning of fiscal 2014 and were fully reflected in the Q3 2014 financial results. As a result, $1.5 million in revenue, $4.1 million in revenue share and royalties and $2.1 million in subsidy costs from previous periods were reversed in Q3 2014.

For the YTD 2015 period, the company recognized a one-time, non-cash $19.1 million income tax expense and a $15.9 million withholding tax expense in Q2 2015 related to Canada Revenue Agency reassessments that the Company is currently disputing.

For the discussion below, the Company has compared normalized results as it believes this approach provides a more accurate depiction of its year-over-year performance. Please refer to the reconciliation tables below and the Company's MD&A for more detail.

Q3 and YTD FY2015 Results Financial Review
Revenue for Q3 2015 was $83.1 million, up 9.4%, or $7.1 million, from normalized revenue of $76.0 million in Q3 2014. The year-over-year improvement reflects growth in the Company's self-paying subscriber base and an increase in Self-Pay ARPU. Q3 FY2015 Self-Pay ARPU was $12.87, up 4.4% from $12.33 in Q3 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 $242.2 million, up $15.8 million, or 7.0% from $226.4 million for the same period in YTD FY2014. Self-Pay ARPU for YTD FY2015 was $12.58 compared to $12.11 for the same period in YTD FY2014.

Adjusted EBITDA, increased to $20.2 million in Q3 FY2015 from $18.3 million, excluding the impact of certain OEM contract renewals, in Q3 FY2014. This was a $1.9 million, or 10.6%, improvement compared to Q3 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. For YTD FY2015, Adjusted EBITDA, which excludes the one-time adjustment related to the withholding tax provision the Company took, was $66.4 million, a decrease of $0.4 million, or 0.6%, from $66.8 million for the same period in YTD FY2014.

The Company recorded net income of $8.0 million in Q3 FY2015, up $3.9 million, or 94.5%, compared to net income of $4.1 million in Q3 FY2014, after normalizing for the one-time after-tax debt refinancing charge and after-tax adjustments due to certain OEM contracts renewals. Excluding the one-time income tax expense and provision for withholding tax recorded in Q2 FY2015, the Company recorded a net income of $25.8 million in YTD FY2015. Net income was up $7.3 million, or 39.5%, compared to net income of $6.3 million in the same period of YTD FY2014, after normalizing the net income in YTD FY2014 for after-tax debt refinancing charge and after-tax adjustments due to certain OEM contracts renewals.

SAC was $41 in Q3 FY2015, up from $40 in Q3 FY2014, excluding the impact of OEM contract renewals. For YTD FY2015, SAC increased marginally to $39 in YTD FY2015 from $38 for the same period in YTD FY2014.

CPGA was $67 in Q3 FY2015, up from $63 in Q3 FY2014, excluding the impact of OEM contract renewals, reflecting higher SAC and marketing costs. For YTD FY2015, CPGA increased to $65 from $63 for the same period in YTD FY2014.

In Q3 FY2015, the Company generated $18.0 million in cash from operating activities, up $1.0 million, or 5.8%, from $17.0 million in cash from operating activities in Q3 FY2014, after excluding an early redemption premium of $10.4 million on debt refinancing in 2014. For YTD FY2015, the Company generated $52.6 million in cash from operating activities, up $6.9 million, or 15.0%, from $45.8 million in cash from operating activities for the same period in YTD FY2014.

The Company generated free cash flow of $14.4 million in Q3 FY2015, up $1.6 million, or 12.7%, from $12.7 million in Q3 FY2014 due to higher cash from operations and a $0.6 million decrease in capital spending as the Company completed the unification of its Subscriber Management System in April 2015. For YTD FY2015, the Company generated $39.3 million of free cash flow, up $3.9 million, or 11%, compared to $35.4 million in same period of YTD FY2014.

As at May 31, 2015, the Company had total cash and cash equivalents of $23.8 million compared to $22.5 million as at February 28, 2015. The increase is primarily due to cash flow from operating activities of $18.0 million offset by dividend payments of $13.5 million and capital expenditures of $3.6 million.

Conference Call and Webcast Details
SiriusXM Canada will hold a conference call to discuss the Company's Q3 FY2015 results on Tuesday, July 14, 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 Tuesday, July 21, 2015 at midnight. To access the archived conference call, please dial 416-849-0833, or 1-855-859-2056 and enter the reservation code 69174700. 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.






Adjusted EBITDA: Reconciliation


Three months ended May 31,


Nine months ended May 31,

In ($ 000's)


2015

2014


2015

2014



Q3 2015

Q3 2014


YTD 2015

YTD 2014




(Restated)



(Restated)









Income (loss) before income taxes


11,240

(6,161)


20,853

9,344


Interest expense & income


3,085

3,944


9,141

11,519


Loss on debt repayment


16,636


16,636


Foreign exchange loss


(138)

(44)


51

251


Amortization


5,290

7,731


17,422

26,890

EBITDA


19,477

22,106


47,468

64,641


Withholding tax expense


(113)


15,887


Stock-based compensation


820

759


3,064

2,119


Fair value adjustments


16


4

63

Adjusted EBITDA


20,185

22,881


66,423

66,823

* 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 July 13, 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 Q3 FY2015.

The tables below show the normalized quarterly financial results for the third quarter of 2014 and normalized year-to-date financial results for 2015 in comparison to 2014.


















Q3 2015


Q3 2014


Change

 in ($000's)


As
Reported


 As
Reported


OEM
Contracts


Loss on
Debt


 Q3 2014
Normalized


$


%


Revenue


83,095


74,477


1,502



75,979


7,116


9.4%


Operating costs


63,730


52,371


6,126



58,497


5,233


8.9%


Depreciation and amortization


5,290


7,731




7,731


(2,441)


(31.6)%

Operating income


14,075


14,375


(4,624)



9,751


4,323


44.3%


Withholding tax expense


(113)







(113)


—%


Finance costs, net


2,948


20,536



(16,636)


3,900


(953)


(24.4)%


Income tax expense (recovery)


3,277


(1,426)


(1,225)


4,409


1,757


1,520


86.5%

Net income (loss)


7,962


(4,735)


(3,398)


12,227


4,094


3,869


94.5%

Add back:
















Finance costs, net


2,948


20,536



(16,636)


3,900


(953)


(24.4)%


Income tax expense (recovery)


3,277


(1,426)


(1,225)


4,409


1,757


1,520


86.5%


Depreciation and amortization


5,290


7,731




7,731


(2,441)


(31.6)%

EBITDA


19,477


22,106


(4,624)



17,482


1,995


11.4%

Withholding tax expense


(113)









(113)


—%

Stock based compensation


820


759




759


61


8.1%

Fair value adjustments



16




16


(16)


9.9%

Adjusted EBITDA


20,185


22,881


(4,624)



18,257


1,928


10.6%
















Cash from operations


17,957


6,565



10,411


16,977


980


5.8%

Free cash flow


14,366


2,338



10,411


12,749


1,617


12.7%

 
















YTD 2015


YTD 2014


Change

in ($000's)

As Reported

CRA Tax
Reassessment

YTD 2015
Normalized


As
Reported


Loss on
Debt


YTD 2014
Normalized


$


%

Revenue

242,166

242,166


226,379



226,379


15,786


7.0%

Operating costs

178,810

178,810


161,739



161,739


17,072


10.6%

Depreciation and amortization

17,423


17,423


26,890




26,890


(9,468)


(35.2)%

Operating income

45,933

45,933


37,750



37,750


8,182


21.7%

Withholding tax expense

15,887

(15,887)






—%

Finance costs, net

9,192

9,192


28,407


(16,636)


11,771


(2,579)


(21.9)%

Income tax expense (recovery)

30,006

(19,088)

10,919


3,062


4,409


7,471


3,448


46.1%

Net income (loss)

(9,153)

34,975

25,822


6,281


12,227


18,508


7,313


39.5%

Add back:














Finance costs, net

9,192

9,192


28,407


(16,636)


11,771


(2,579)


(21.9)%

Income tax expense (recovery)

30,006

(19,088)

10,919


3,062


4,409


7,471


3,448


46.1%

Depreciation and amortization

17,422

17,422


26,890



26,890


(9,468)


(35.2)%

EBITDA

47,468

15,887

63,355


64,641



64,641


(1,285)


(2.0)%

Withholding tax expense

15,887

(15,887)






—%

Stock based compensation

3,064

3,064


2,119



2,119


945


44.6%

Fair value adjustments

4

4


63



63


(60)


(94.0)%

Adjusted EBITDA

66,423

66,423


66,823



66,823


(400)


(0.6)%















Cash from operations

52,613

52,613


35,350


10,411


45,761


6,851


15.0%

Free cash flow

39,340

39,340


25,032


10,411


35,444


3,897


11.0%

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 2.6 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




May 31,



August 31,

(Canadian dollars)




2015



2014

















ASSETS








Current assets








Cash and cash equivalents




23,754,313



23,868,423

Accounts receivable




12,151,746



13,454,489

Prepaid expenses and other




6,054,930



4,251,306

Inventory




34,652



559,081

Total current assets




41,995,641



42,133,299

Long-term prepaid expenses




372,087



456,039

Property and equipment




4,200,405



4,508,188

Intangible assets




133,176,854



134,971,363

Deferred tax assets




20,585,720



50,592,132

Goodwill




96,732,525



96,732,525

Total assets




297,063,232



329,393,546









LIABILITIES AND SHAREHOLDERS' DEFICIENCY








Current liabilities








Trade and other payables




56,450,541



44,121,466

Due to related parties




13,373,229



9,146,135

Interest payable




1,153,254



3,965,753

Deferred revenue




147,981,723



146,110,758

Provisions




947,408



505,783

Total current liabilities




219,906,155



203,849,895

Deferred revenue




12,083,119



15,075,749

Other long-term liabilities




653,581



533,049

Due to related parties




1,208,332



1,323,965

Long-term debt




195,889,976



195,463,860

Provisions




92,987



374,240

Total liabilities




429,834,150



416,620,758









Shareholders' deficiency








Share capital




178,432,309



176,862,133

Contributed surplus




8,469,128



6,067,419

Accumulated deficit




(319,672,355)



(270,156,764)

Total shareholders' deficiency




(132,770,918)



(87,227,212)

Total liabilities and shareholders' deficiency




297,063,232



329,393,546

See accompanying notes








 

CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME

(Unaudited)
















Three months ended


Nine months ended





May 31,


May 31, 2014


May 31,


May 31, 2014

(Canadian dollars)




2015


(Restated)


2015


(Restated)












Revenue




83,095,034


74,477,058


242,165,542


226,379,214












Operating expenses












Operating costs




63,730,101


52,370,965


178,810,301


161,738,581


Depreciation and amortization




5,290,203


7,731,012


17,422,498


26,890,314

Operating income




14,074,730


14,375,081


45,932,743


37,750,319












Withholding tax recovery (expense)




112,507



(15,887,493)













Finance costs, net












Interest income




56,182


344,160


229,208


689,203


Interest expense




(3,141,466)


(4,288,516)


(9,370,449)


(12,208,655)


Loss on debt repayment





(13,195,918)



(13,195,918)


Change in fair value of embedded derivative





(3,440,000)



(3,440,000)


Foreign exchange gain (loss)




137,724


44,043


(50,924)


(251,416)

Finance costs, net




(2,947,560)


(20,536,231)


(9,192,165)


(28,406,786)












Net income (loss) before income tax




11,239,677


(6,161,150)


20,853,085


9,343,533

Income tax recovery (expense)




(3,277,239)


1,426,091


(30,006,412)


(3,062,499)

Net income (loss) and comprehensive income (loss)




7,962,438


(4,735,059)


(9,153,327)


6,281,034












Earnings (loss) per share - basic and diluted




0.06


(0.04)


(0.07)


0.05

 

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




















Total

For the nine months ended,



Share


Contributed


Accumulated


Shareholders'

(Canadian dollars)



Capital


Surplus


Deficit


Equity











Balance, September 1 , 2013



151,794,596


6,161,440


(149,712,623)


8,243,413

Net income for the period





6,281,034


6,281,034

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


(257,916,395)


(75,576,437)











Balance, September 1 , 2014



176,862,133


6,067,419


(270,156,764)


(87,227,212)

Net loss for the period





(9,153,327)


(9,153,327)

Stock-based compensation




3,064,081



3,064,081

Dividends





(40,362,264)


(40,362,264)

Stock options exercised



1,570,176


(662,372)



907,804

Balance, May 31 , 2015



178,432,309


8,469,128


(319,672,355)


(132,770,918)

 

CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(Unaudited)




Three months ended


Nine months ended



May 31,


May 31, 2014


May 31,


May 31, 2014

(Canadian dollars)


2015


(Restated)


2015


(Restated)

Cash provided by (used in)


















OPERATING ACTIVITIES









Net income (loss) for the period


7,962,438


(4,735,059)


(9,153,327)


6,281,034

Add(deduct) items not involving cash










Amortization of intangible assets


4,775,768


7,283,501


16,017,701


24,471,997


Depreciation of property and equipment


514,435


447,511


1,404,797


2,418,317


Income tax expense


3,277,239


(1,426,091)


30,006,412


3,062,499


Stock-based compensation


820,314


758,948


3,064,081


2,118,645


Accrued interest


(2,812,500)


(1,267,064)


(2,812,500)


(1,551,196)


Interest accretion


144,183


2,932,742


426,116


3,683,032


Change in fair value of embedded derivative



3,440,000



3,440,000


Foreign exchange loss (gain)


19,668


(70,859)


275,328


166,059

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


3,255,119


(798,143)


13,384,241


(8,740,389)

Cash provided by operating activities


17,956,664


6,565,486


52,612,849


35,349,998









INVESTING ACTIVITIES









Purchase of property and equipment


(558,528)


(373,202)


(1,377,080)


(1,069,264)

Purchase of intangible assets


(3,067,366)


(3,854,743)


(11,116,069)


(9,248,383)

Prepayment for property and equipment


35,250



(779,350)


Maturity of short-term investments





2,063,000

Interest received on short-term investments





125,075

Cash used in investing activities


(3,590,644)


(4,227,945)


(13,272,499)


(8,129,572)










FINANCING ACTIVITIES









Payment of dividends


(13,461,970)


(13,429,490)


(40,362,264)


(39,604,863)

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


385,175


319,972


907,804


2,265,277

Cash provided by (used) in financing activities


(13,076,795)


51,386,458


(39,454,460)


27,156,390










Net increase (decrease) in cash and cash
equivalents during the period


1,289,225


53,723,999


(114,110)


54,376,816

Cash and cash equivalents, beginning of period

22,465,088


44,731,401


23,868,423


44,078,584

Cash and cash equivalents, end of period


23,754,313


98,455,400


23,754,313


98,455,400

 

SOURCE Sirius XM Canada Holdings Inc.

For further information: Robbie Sra, SiriusXM Canada, Tel: 416-513-7407, Robbie.Sra@siriusxm.ca; Kristen Dickson, TMX Equicom, 416-815-0700 ext 273, kdickson@tmxequicom.com


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