SiriusXM Canada Achieves Record Adjusted EBITDA for Second Quarter Fiscal 2016

Transcription

1 SiriusXM Canada Achieves Record Adjusted EBITDA for Second Quarter Fiscal Record self-pay subscriber count and impressive self-pay churn fuels revenue growth and increased profitability - Toronto, ON April 6, 2016 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 2016 second quarter ("Q2 FY2016") and year-to-date period ( YTD FY2016 ) ended February 29, 2016 prepared in accordance with International Financial Reporting Standards (IFRS). A summary of IFRS financial results for Q2 and YTD FY2016 is attached. All results are reported in Canadian dollars unless otherwise stated. Q2 and YTD FY2016 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. Financial 1 Q2 FY2016 Q2 FY2015 % Change YTD FY2016 YTD FY2015 % Change 5 Feb 29, 2016 Feb 28, 2015 Feb 29, 2016 Feb 28, 2015 Revenue 84,387 80, % 167, , % Adjusted EBITDA 2 24,810 23, % 48,328 46, % Net Income and comprehensive income before nonrecurring adjustments 3 12,358 9, % 22,433 17, % Net Income (loss) and comprehensive income (loss) 28,245 (25,140) % 38,320 (17,116) 323.9% Free cash flow 13,674 11, % 23,903 24,974 (4.3)% Operating Self-Pay subscribers 1,952 1, % 1,952 1, % Total subscribers 2,653 2, % 2,653 2, % Self-Pay ARPU 4 $12.49 $ % $12.53 $ % Subscriber Acquisition Cost (SAC) $39 $ % $40 $ % 1 All figures in the table above are in thousands except, ARPU and SAC. 2 Adjusted EBITDA is a non-gaap measure. A reconciliation of income (loss) before taxes to both EBITDA and Adjusted EBITDA is provided below. 3 Non-recurring adjustments in FY2016 include the tax reversal of withholding tax expense of $15.9 million. Non-recurring adjustments in FY2015 include a $16.0 million withholding tax expense and a $19.1 million non-cash income tax expense. 4 Self-Pay ARPU is derived from the total of earned subscription revenue from Self-Pay subscribers, music royalty fee, and activation fees divided by the monthly weighted average number of Self-Pay subscribers. Please see the Company s MD&A for a more detailed description. 5 Percentage variances/changes are calculated based on the exact numbers, therefore, amounts may not sum as a result of rounding in certain instances. 1

2 Our growth continued into Q2 fiscal 2016, with record Self-Pay subscribers, top-line improvements and healthy Self-Pay churn levels translating into our highest ever quarterly Adjusted EBITDA, said Mark Redmond, President and CEO SiriusXM Canada. In the quarter, we added approximately 14,000 net Self- Pay subscribers while also executing on key elements of our long-term strategy. We continued to expand our presence in the pre-owned vehicle market with an increased proportion of our gross additions coming from this channel and also executed an agreement with one of Atlantic Canada s largest pre-owned dealership chains. We also participated in the pre-launch of Sirius XM 17 at the 2016 Consumer Electronics Show held this past January in Las Vegas, Nevada where we showcased our next-generation platform for audio services that combines satellite radio and two-way LTE connectivity. Looking to the remainder of the fiscal year, we continue to face a challenging consumer spending environment in Alberta, but we remain confident in our ability to deliver moderate subscriber and revenue growth along with strong Adjusted EBITDA and cash flow. We have a Canada-wide footprint, an over 70% Original Equipment Manufacturer ( OEM ) penetration rate, a growing overall addressable market and an unmatched audio entertainment experience that keeps getting better. Canada Revenue Agency ( CRA ) Update As at August 31, 2015, the Company had received a nil notice of reassessment for its August 31, 2006 tax return denying expenditures of $177.2 million and $68.0 million related to Sirius XM and OEM share issuances, respectively. As a result of the assessment, during fiscal 2015, the Company booked an income tax expense and a write-down of the deferred tax assets of $19.1 million. The Company was also assessed, in respect of the Sirius XM share issuances, for withholding taxes, interest and penalties of $15.9 million, which were due immediately. During the fiscal year ended August 31, 2015, the Company filed a notice of objection to the withholding tax assessment and recorded a withholding tax expense, and related accrual within trade and other payables of $15.9 million. As security, through its $50 million revolving credit facility due May 23, 2017, the Company provided a one year irrevocable $17.1 million letter of credit expiring June 29, 2016 ("Letter of Credit") to cover assessed withholding taxes, interest and penalties along with additional interest that would become payable up to the time when the Letter of Credit expires. During the current fiscal year, the Company filed a notice of appeal in respect of the withholding taxes, interest and penalties assessed and successfully defended its position. During the quarter, the Tax Court of Canada granted an order to vacate the assessment of withholding taxes, interest and penalties, and the Company accordingly reversed the $15.9 million previously accrued. Subsequent to the quarter end, the CRA released the Letter of Credit which is no longer outstanding. In respect of CRA's denial of expenditures related to Sirius XM and OEM share issuance costs claimed in the August 31, 2006 tax return, during the quarter, the Company requested a notice of loss determination from the CRA. Subsequent to the quarter, a notice of loss determination was received from the CRA stating that the losses in respect of the share issuances to OEMs and Sirius XM are nil. The Company intends to file a notice of objection in response to the notice of loss determination. The Company remains confident in its filings, and will continue to vigorously defend its position. We are pleased with our success as it relates to the CRA reassessment, said Jason Redman, CFO SiriusXM Canada. As previously stated, we were confident in our tax filing position. We believe the ruling in our favour supports the position we took. More importantly, during this time we continued to execute on our strategy, deliver strong financial results and maintain our dividend. 2

3 Q2 and YTD FY2016 Financial Results Review For Q2 FY2016, revenue was $84.4 million, up $4.3 million, or 5.4%, from $80.1 million in Q2 FY2015. The year-over-year improvement reflects growth in the Company s Self-Pay subscriber base combined with an increase in Self-Pay ARPU. For YTD FY2016, revenue was $167.9 million, up $8.8 million, or 5.6%, from $159.1 million for the same period in FY2015. YTD Self-Pay ARPU was $12.53 and $12.43 for FY2016 and FY2015, respectively. This represents a year-over-year increase of $0.10, or 0.8%, which was driven primarily by the cumulative impact of the increased music royalty fee on renewing subscribers, partly offset by increased subscription discounts to acquire and retain subscribers. Adjusted EBITDA for Q2 FY2016 increased $1.5 million, or 6.3%, to $24.8 million from $23.3 million in Q2 FY2015. The improvement was primarily due to revenue growth, which was partly offset by an increase in revenue share and royalty costs related to higher revenue and royalty rates, in addition to increased information technology and general and administration costs. Adjusted EBITDA margin increased to 29.4% in Q2 FY2016 from 29.1% in Q2 FY2015. For YTD FY2016, Adjusted EBITDA was $48.3 million, up $2.1 million, or 4.5%, from $46.2 million for the same period in FY2015. The Company recorded net income of $28.2 million in Q2 FY2016, up $53.4 million, or 212.4%, compared to a net loss of $25.1 million in Q2 FY2015. The year-over-year increase was mainly due to the $15.9 million withholding tax recovery in Q2 FY2016, the $16.0 million withholding tax expense in Q2 FY2015, and the $19.1 million write-down of deferred tax assets in FY2015. Excluding the impact of the non-recurring adjustments, net income for Q2 FY2016 and FY2015 was $12.4 million and $10.0 million respectively, an increase of $2.4 million, or 24.1%. For YTD FY2016, net income was $38.3 million, up $55.4 million, or 323.9%, compared to a net loss of $17.1 million for the same period in FY2015. Excluding the impact of the non-recurring adjustments, net income was $22.4 million and $18.0 million for YTD FY2016 and YTD FY2015 respectively. SAC for Q2 FY2016 was $39, up from $35 in Q2 FY2015 as a result of higher vehicle volume, unfavorable foreign exchange, and mix of products purchased in the Aftermarket segment. YTD FY2016 SAC was $40, up from $37 for the same period in FY2015. In Q2 FY2016, the Company generated $17.3 million in cash from operating activities which is consistent with Q2 FY2015. $34.5 million in cash from operating activities for YTD FY2016 was also in line year-overyear. The Company generated free cash flow of $13.7 million in Q2 FY2016. This represents a $2.4 million, or 21.1%, increase from $11.3 million in Q2 FY2015 as a result of a $2.4 million decrease in capital expenditures, mainly due to the completion of the Company s subscriber management system in Q3 FY2015, which was partially offset by increased cash outflow related to pre-paid trial programs. For YTD FY2016, the Company generated free cash flow of $23.9 million, down $1.1 million, or 4.3%, from $25.0 million for the same period in FY2015. As at February 29, 2016, the Company had total cash and cash equivalents of $23.1 million compared to $36.4 million as at November 30, The decrease is primarily due to cash flow from financing activities as the company issued two dividend payments in the quarter totaling $27.0 million, as well as capital expenditures of $3.6 million, which were partly offset by cash from operating activities of $17.3 million in Q2 FY

4 Conference Call and Webcast Details SiriusXM Canada will hold a conference call to discuss the Company s Q2 FY2016 results on Thursday, April 7, 2016 at 8:30 a.m. ET. All interested parties can join the call by dialing , or Please dial in 15 minutes prior to the call to secure a line. The conference will be archived for replay until Thursday, April 14, 2016 at midnight. To access the archived conference call, please dial or and enter reservation code: A live audio webcast of the conference call will be available here: Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software downloads that may be required. An archived replay will be available for 90 days. Reconciliations The following is a reconciliation of EBITDA and Adjusted EBITDA to Net Income (loss) and comprehensive income (loss) before income tax. Adjusted EBITDA: Reconciliation Q2 FY2016 Q2 FY2015 YTD FY2016 YTD FY2015 in ($ 000 s) Feb 29, 2016 Feb 28, 2015 Feb 29, 2016 Feb 28, 2015 Net Income (loss) and comprehensive income (loss) before income tax 32,371 (1,951) 46,387 9,613 Interest expense & income (net) 3,324 3,029 6,639 6,056 Foreign exchange loss Depreciation and amortization 5,618 5,190 11,121 12,133 EBITDA 41,524 6,393 64,674 27,991 Withholding tax (recovery) expense (15,887) 16,000 (15,887) 16,000 Stock-based compensation (1,410) 938 (1,042) 2,244 Third-party advisory costs Fair value adjustments 6 4 Adjusted EBITDA 24,810 23,331 48,328 46,239 6 Fair value adjustment relates to a reduction in revenue due to the valuation of deferred revenue as per purchase price accounting. For a complete definition of non-gaap measures, and for more details on the Company s Q2 FY2016 results, please see the Company s Interim Management Discussion & Analysis filed April 6, 2016 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 interim condensed consolidated financial statements for Q2 and YTD FY

5 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. Forwardlooking 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 About SiriusXM Canada Sirius XM Canada Holdings Inc. (TSX: XSR) operates as SiriusXM Canada. SiriusXM Canada, with approximately 2.7 million subscribers, is the country's leading audio entertainment company and broadcasts more than 130 satellite radio channels featuring premier sports, news, talk, entertainment and commercialfree music. SiriusXM Canada offers an array of content from the most recognized news, entertainment and major sports brands including the NHL, NFL, NBA, MLB, 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 and on Apple and Androidpowered 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, visit our website at SiriusXM Canada has been designated one of Canada's 50 Best Managed Companies seven years in a row and is currently a Platinum Club Member, in addition to 2013, 2014 and 2015 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. For further information, please contact: Odeta Kellici SiriusXM Canada Tel: Odeta.Kellici@siriusxm.ca Kristen Dickson NATIONAL Equicom kdickson@national.ca 5

6 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION At February 29, August 31, (All amounts in thousands) ASSETS Current assets Cash and cash equivalents 23,114 26,128 Accounts receivable 10,782 9,436 Prepaid expenses 2,514 5,642 Inventory Total current assets 36,441 41,241 Long-term prepaid expenses Property and equipment 8,777 4,285 Intangible assets 139, ,410 Deferred tax assets 11,361 19,428 Goodwill 96,733 96,733 Total assets 292, ,097 LIABILITIES AND SHAREHOLDERS' DEFICIENCY Current liabilities Trade and other payables 36,325 52,545 Due to related parties 12,953 15,950 Interest payable 3,966 3,966 Deferred revenue 154, ,076 Provisions 815 1,078 Total current liabilities 208, ,615 Deferred revenue 10,619 12,033 Other long-term liabilities 10, Due to related parties 1,208 1,208 Long-term debt 196, ,036 Total liabilities 426, ,543 Shareholders' deficiency Share capital 179, ,479 Contributed surplus 5,515 8,817 Accumulated deficit (319,433) (330,742) Total shareholders' deficiency (133,993) (143,446) Total liabilities and shareholders deficiency 292, ,097 6

7 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS DEFICIENCY Total For the six months ended Share Contributed Accumulated Shareholders' (All amounts in thousands) Capital Surplus Deficit Deficiency Balance, September 1, ,862 6,067 (270,157) (87,228) Net loss and comprehensive loss (17,116) (17,116) Stock-based compensation 2,244 2,244 Dividends (26,900) (26,900) Stock options exercised 916 (393) 523 Balance, February 28, ,778 7,918 (314,173) (128,477) Balance, September 1, ,479 8,817 (330,742) (143,446) Net income and comprehensive income 38,320 38,320 Stock-based compensation (1,555) (1,555) Dividends (27,011) (27,011) RSU and PSU awards, net equity settlement 1,286 (1,681) (395) Stock options exercised 160 (66) 94 Balance, February 29, ,925 5,515 (319,433) (133,993) 7

8 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) Three months ended Six months ended (All amounts in thousands except per share amounts) February 29, 2016 February 28, 2015 February 29, 2016 February 28, 2015 Revenue 84,387 80, , ,071 Operating expenses Operating costs 58,750 57, , ,080 Depreciation and amortization 5,618 5,190 11,121 12,133 Operating income 20,019 17,203 37,666 31,858 Withholding tax recovery (expense) 15,887 (16,000) 15,887 (16,000) Finance costs Interest income Interest expense (3,382) (3,112) (6,757) (6,229) Foreign exchange loss (211) (125) (527) (189) Finance costs, net (3,535) (3,154) (7,166) (6,245) Net income (loss) and comprehensive income (loss) before income tax 32,371 (1,951) 46,387 9,613 Income tax expense (4,126) (23,189) (8,067) (26,729) Net income (loss) and comprehensive income (loss) 28,245 (25,140) 38,320 (17,116) Earnings (loss) per share - basic and diluted 0.22 (0.19) 0.30 (0.13) 8

9 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended Six months ended (All amounts in thousands) February 29, 2016 February 28, 2015 February 29, 2016 February 28, 2015 Cash provided by (used in) OPERATING ACTIVITIES Net income (loss) for the period 28,245 (25,140) 38,320 (17,116) Adjustments to reconcile net income to cash provided by operating activities: Amortization of intangible assets 5,377 4,749 10,447 11,242 Depreciation of property and equipment Income tax expense 4,126 23,189 8,067 26,729 Stock-based compensation (1,410) 938 (1,042) 2,244 Tax paid in lieu of shares issued for stock-based compensation (407) (407) Accrued interest 2,813 2,813 Interest accretion Foreign exchange loss Net change in non-cash working capital and deferred revenue related to operations (21,933) 10,000 (22,140) 10,129 Cash provided by operating activities 17,293 17,314 34,499 34,656 INVESTING ACTIVITIES Purchase of property and equipment (1,112) (613) (2,537) (818) Purchase of intangible assets (2,460) (4,590) (8,012) (8,049) Prepayment for property and equipment (47) (815) (47) (815) Cash used in investing activities (3,619) (6,018) (10,596) (9,682) FINANCING ACTIVITIES Payment of dividends (27,011) (26,900) (27,011) (26,900) Proceeds from exercise of stock options Cash used in financing activities (26,951) (26,489) (26,917) (26,377) Net decrease in cash and cash equivalents during the period (13,277) (15,193) (3,014) (1,403) Cash and cash equivalents, beginning of period 36,391 37,658 26,128 23,868 Cash and cash equivalents, end of period 23,114 22,465 23,114 22,465 9