Sirius XM Canada Holdings Inc., parent of Sirius XM Canada Inc., released unaudited financial results for its fiscal 2024 second quarter ended February 28, 2024 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.
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Financial1
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Q2 FY2015
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Q2 FY2014
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% Change
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YTD FY2015
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YTD FY2014
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% Change
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(Feb 28, 2024)
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(Feb 28, 2024)
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(Feb 28, 2024)
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(Feb 28, 2024)
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(Unaudited)
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(Unaudited)
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(Unaudited)
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(Unaudited)
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(Restated)
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(Restated)
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Revenue
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80,086
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75,466
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6.1%
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159,071
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151,902
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4.7%
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Adjusted EBITDA2
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23,331
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22,523
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3.6%
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46,238
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43,942
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5.2%
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Net Income before one-time adjustments 4
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9,948
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6,213
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60.1%
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17,972
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11,016
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63.1%
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Net Income (loss)
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(25,140)
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6,213
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-504.7%
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(17,116)
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11,016
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-255.4%
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Free cash flow
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11,296
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9,876
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14.4%
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24,974
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22,695
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10.0%
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Operating1
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Self-Paying Subscribers
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1,862
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1,769
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5.3%
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1,862
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1,769
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5.3%
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Total Subscribers
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2,552
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2,388
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6.9%
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2,552
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2,388
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6.9%
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Self-Pay ARPU3
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$12.48
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$11.92
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4.7%
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$12.43
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$12.00
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3.6%
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Subscriber Acquisition Cost (SAC)
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$35
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$40
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-11.2%
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$37
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$41
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-9.6%
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Cost Per Gross Addition (CPGA)
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$63
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$67
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-6.5%
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$63
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$68
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-6.9%
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1All figures in the table above are in thousands except, ARPU, SAC and CPGA.
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2Adjusted EBITDA is a non-GAAP measure. A reconciliation of income (loss) before taxes to both EBITDA and Adjusted EBITDA is provided below.
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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.
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4One-time adjustments include a $16.0 million withholding tax expense and a $19.1 million, non-cash income tax expense.
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"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."
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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 from Canada Revenue Agency regarding the Company's August 31, 2024 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 2024.
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 2024. 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, 2024 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, 2024, the Company had total cash and cash equivalents of $22.5 million compared to $37.7 million as at November 30, 2024. 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 $17.3 million.
Reconciliations
The following is a reconciliation of EBITDA and Adjusted EBITDA to Income (loss) before income taxes.
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Three months ended
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Six months ended
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Adjusted EBITDA: Reconciliation
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February 28, 2024
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February 28, 2024
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February 28, 2024
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February 28, 2024
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In ($ 000's)
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Q2 2024
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Q2 2024
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YTD 2024
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YTD 2024
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Income/(Loss) before income taxes
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(1,951)
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8,650
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9,613
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15,505
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Interest expense & income
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3,029
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3,864
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6,056
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7,575
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Foreign exchange gain(loss) & other
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124
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243
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189
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295
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Amortization
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5,190
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9,252
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12,132
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19,159
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EBITDA
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6,392
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22,009
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27,990
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42,534
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Withholding tax expense
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16,000
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-
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16,000
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-
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Stock-based compensation
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938
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497
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2,244
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1,360
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Fair value adjustments
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1
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17
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4
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48
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Adjusted EBITDA
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23,331
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22,523
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46,238
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43,942
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* Fair value adjustment relates to reduction in revenue due to valuation of deferred revenue as per purchase price accounting
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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, 2024 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.