SiriusXM Revenue Up, Income Slips In Second Quarter

Q2

SIRIUSXM second quarter 2019 revenue rose 38% year-to-year to $1.977 billion (pro forma 9%), while net income fell 10% to $263 million, including a one time $86 million benefit to other income last year from unrealized gains from the PANDORA purchase (net income per diluted share was flat at 6 cents). Adjusted EBITDA increased 22% to a record $618 million.

SIRIUSXM division revenue was up 7% to $1.537 billion, bringing average revenue per user up 4% to $13.83. The service added 290,000 net net new self-pay subscribers in the quarter, ending wit over 29.3 million; 174,000 net subscriber additions brought the total to over 34.3 million. Paid promotional subscriptions declined due to fewer new auto shipments, while self-pay monthly churn was 1.7%, slightly up from 1.6% in second quarter 2018. Gross profit for the division increased 7% to $944 million, and gross margin was flat at 61%.

As for PANDORA, ad revenue grew 13% to $306 million and subscriber revenue rose 18% to $135 million, pushing total revenue up 15% to $441 million. Total Ad Supported Listener Hours slipped from 71.4 million to 64.9 million; the service saw self-pay net subscriber adds of 64,000, bringing the self-pay total to 6.2 million and the overall total to 7 million. The division's gross profit increased 40% to $157 million, resulting in a gross margin of 36%, up from 29%.

CEO JIM MEYER said, "Our company produced outstanding financial and operating results once again this quarter, and I'm pleased by the quick progress we've made in integrating PANDORA. Revenues and adjusted EBITDA each reached records in the period. We're thrilled with the results in the first half of the year, and we are raising 2019 guidance for revenue and adjusted EBITDA and reiterating our guidance for net subscriber additions and free cash flow."

MEYER added, "We continue to offer outstanding new programming across comedy, sports, talk and music, with some of the best brands in all of media. LADY GAGA played a once-in-a-lifetime show for SIRIUSXM subscribers and PANDORA listeners in late June at HARLEM's APOLLO THEATER, marking the first-ever combined SIRIUSXM and PANDORA event. We debuted 'NETFLIX IS A JOKE RADIO,' a full-time comedy channel with NETFLIX, and announced plans for a new music channel with SOULCYCLE. We launched a new jam band channel with PHISH, and special pop-up channels with MADONNA, CHER, DAVE MATTHEWS BAND and the music of PAVAROTTI. And, last week, we were thrilled to announce a groundbreaking and unprecedented collaboration with platinum-selling recording artist DRAKE -- our content is a true competitive advantage."

CFO DAVID FREAR said, "SIRIUSXM repurchased $898 million of its stock in the quarter. Total capital returned to stockholders, including dividends, is nearly $1.9 billion so far this year. Since the announcement of the PANDORA acquisition, we have repurchased all of the common stock issued as part of that transaction. During the quarter, we issued $1.25 billion of 10-year 5.50% Senior Notes due 2029 to pay down our revolving credit facility balance. In early July, we issued $1.5 billion of 5-year 4.625% Senior Notes due 2024, the proceeds of which we used to redeem SIRIUSXM's outstanding 6.00% Senior Notes due 2024. At quarter-end, our debt to adjusted EBITDA was 3.3 times and we had cash on hand of $215 million with our entire $1.75 billion revolver available. We will continue to use our strong financial position and ample liquidity to invest in our business, make strategic investments and return capital to stockholders."

The company is reiterating existing full-year 2019 guidance for SIRIUS self-pay net subscriber additions (about 1 million) and free cash flow (about $7.8 million), but is increasing its guidance for pro forma revenue ($2.35 billion) and adjusted EBITDA ($1.6 billion).

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