Sirius XM (SIRI) Reports In-Line Q2 EPS, Revenues Beat; Increased FY18 Guidance

Sirius XM (NASDAQ: SIRI) reported Q2 EPS of $0.06, in-line with the analyst estimate of $0.06. Revenue for the quarter came in at $1.43 billion versus the consensus estimate of $1.42 billion.

"SiriusXM's strong start to 2018 accelerated in the second quarter. We added 483,000 net new self-pay subscribers in the quarter with an impressive 1.6% self-pay churn rate, our best-ever performance. Our 6% growth in revenue would have been 8% absent the change in generally accepted accounting principles that was effective January 1st, and we are thrilled to increase our full-year guidance for self-pay net additions, revenue and adjusted EBITDA," said Jim Meyer, Chief Executive Officer, SiriusXM.

"We never rest in finding, acquiring, and developing the best music, talk, entertainment, sports, and comedy programming in all of audio. Last week we announced we will bring subscribers an exclusive new comedy channel created with Netflix and fueled by their world-class comedy programming from top global talent. In just the last few months, we have brought our listeners live exclusive performances from stars such as pop's Shawn Mendes, countrys Jason Aldean, and the incomparable U2 playing for our subscribers at Harlem\'s legendary Apollo Theater," added Meyer.

SECOND QUARTER 2018 HIGHLIGHTS

• Self-Pay Net Additions of 483,000. The Company added 483,000 net new self-pay subscribers in the second quarter to end with approximately 28.2 million self-pay subscribers. Self-pay monthly churn of 1.6% improved 11 basis points over the second quarter of 2017 and marked the lowest-ever reported by the company for a quarter. Total net additions in the second quarter were 429,000, resulting in approximately 33.5 million SiriusXM subscribers at quarter-end.
• Strong Revenue Growth. Second quarter revenue grew 6% compared to the year-ago period to $1.4 billion. This growth was driven by a 5% increase in subscribers and an increase of 1%, after the accounting change, in average revenue per user (ARPU) to $13.30. The second quarter 2018 was impacted by the adoption of the new revenue recognition accounting standard (FASB ASU 2014-09) which reclassified approximately $24 million of revenue to offset expenses principally related to automaker agreements. These reclassifications reduced reported ARPU by $0.24 in the quarter.
• Net Income Grows 45%. Net income in the second quarter totaled $292 million, up 45% from $202 million in the second quarter 2017. This increase included a $86 million unrealized gain associated with the change in fair value of the Company\'s Pandora investment, in addition to approximately $64 million of tax savings resulting from a 19.4% effective tax rate in the second quarter compared to a 37.2% effective tax rate in the prior year period. These items were partially offset by a $69 million charge related to the legal settlement that resolved all outstanding claims, including ongoing audits, under our statutory license for sound recordings for the period January 1, 2007 through December 31, 2017.
• Free Cash Flow Increases 17%. Free cash flow for the second quarter totaled $486 million, up 17% from $417 million in the second quarter of 2017. Operating cash flow for the second quarter 2018 totaled $579 million, up 20% from the prior year period.

"In the second quarter, we spent $22 million to repurchase approximately 3.6 million shares and we paid nearly $50 million in dividends to stockholders. At the end of the quarter, our debt to adjusted EBITDA was just 3.0 times, and we had cash on hand of approximately $64 million and a completely undrawn revolver with capacity of $1.75 billion. This gives us ample liquidity to continue to invest in our business, make strategic investments and return capital to stockholders," noted David Frear, Chief Financial Officer, SiriusXM.

2018 GUIDANCE

The Company increased its 2018 guidance for self-pay net subscriber additions, revenue and adjusted EBITDA. SiriusXM\'s guidance for 2018 free cash flow remains unchanged. The Company's increased full-year 2018 guidance is as follows:

• Self-pay net subscriber additions of approximately 1.15 million,
• Revenue over $5.7 billion,
• Adjusted EBITDA of approximately $2.175 billion, and
• Free cash flow of approximately $1.5 billion.

GUIDANCE:

Sirius XM sees Q3 2018 revenue of $5.7 billion, versus the consensus of $5.75 billion.

For earnings history and earnings-related data on Sirius XM (SIRI) click here.

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