Canadian Satellite Radio Holdings Inc., parent of Sirius XM Canada Inc., today released audited financial results for the year ended August 31, 2012 (FY2012) and unaudited financial results for the quarter ended August 31, 2012 (Q4 FY2012) prepared in accordance with International Financial Reporting Standards (IFRS). A summary of IFRS financial results for FY2012 and Q4 FY2012 is attached1. To provide a basis of comparison of the performance of the combined entity formed through the business combination of Sirius Canada and XM Canada, the Company has also provided unaudited combined financial information (referred to as "Combined Information") for the comparative year and quarter ended August 31, 2011. All results are reported in Canadian dollars unless otherwise stated.
FY2012 Annual Financial Highlights Compared to Combined Information for 2011
Adjusted EBITDA increased 75.6% to $46.6 million from $26.5 million in 2011
Self-Paying Subscribers increased 13.8% to 1.6 million from 1.4 million at August 31, 2011
Revenue grew 8.9% to $259.6 million from $238.4 million for 2011
Free cash flow increased $32.3 million to $36.6 million from $4.3 million for 2011
Reported cash and cash equivalents of $51.0 million at August 31, 2012
Q4 FY2012 Financial Highlights Compared to Combined Information for the Comparative Period in 2011
Adjusted EBITDA increased 10.5% to $12.2 million from $11.1 million in Q4 2011
Revenue grew 11.5% to $68.1 million from $61.1 million in Q4 2011
Free cash flow increased $9.3 million to $8.5 million, from $(0.8) million in Q4 2011
"In fiscal 2012, we delivered significant growth in all of our key metrics and further solidified our position as a leader in the Canadian audio entertainment marketplace, with more than 2.2 million subscribers at year end,"said Mark Redmond, President and CEO, SiriusXM Canada."Through a combination of double-digit subscriber growth and effective cost management, we expanded our Adjusted EBITDA margin and drove strong free cash flow. We are extremely pleased with our first-year's performance as a merged entity."
"Looking to fiscal 2013, we are confident our growth will continue as we work to increase in-vehicle penetration rates and better leverage opportunities in the pre-owned car market," Mr. Redmond continued. "In addition, with the recent launch of SiriusXM 2.0 and Best-Of programming, subscribers are now able to access premium content from both Sirius and XM platforms and enjoy our new Internet Radio service and mobile streaming apps. These innovations enhance and extend our subscribers' entertainment experience while positioning the company for continued leadership in the audio entertainment space. We believe these premium services, in addition to the modest price increase of our base subscription rate will contribute to growth in fiscal 2013 and beyond."
Financial and Operational Summary
Combined Information for 2011 quarterly and annual results assumes the combination of XM Canada and Sirius Canada Inc. occurred as of September 1, 2010. Below, the Company has provided certain non-GAAP measures and industry metrics. These figures are subject to the qualification and assumptions set out in the notes to such results.
Financial * IFRS
FY2012 Combined
FY2011 IFRS
Q4 FY2012 Combined
Q4 2011
(ended August 31, 2012) (ended August 31, 2011) (ended August 31, 2012) (ended August 31, 2011)
(Audited) (Unaudited) (Unaudited) (Unaudited)
Total Revenue $259,619 $238,389 $68,119 $61,112
Adjusted EBITDA** $46,562 $26,522 $12,220 $11,062
Net Income (Loss) ($4,179) ($17,336) $6,117 $3,500
Operating*
Self-Paying Subscribers 1,584 1,393 1,584 1,393
Total Subscribers 2,206 1,983 2,206 1,983
Subscriber Acquisition Cost (SAC) $49 $54 $46 $50
Cost Per Gross Addition (CPGA) $75 $84 $76 $75
* All figures in the table above are in thousands except, SAC and CPGA
** Adjusted EBITDA is a non-GAAP measure. A reconciliation of operating income (loss) to both EBITDA and Adjusted EBITDA is provided below.
"We are pleased to announce that we have achieved our goal of $20 million in annualized synergies earlier than expected, as a result of our consistent focus on managing costs and optimizing operating efficiencies throughout fiscal 2012," said Michael Washinushi, CFO SiriusXM Canada. "In addition, we further strengthened our balance sheet during the year, reducing our liabilities by $12.1 million and ending Q4 with $51 million in cash and cash equivalents."
Financial review of FY2012 annual and Q4 IFRS results compared to Combined Information for the comparative quarterly and annual periods in 2011
For FY2012, revenue was $259.6 million, up $21.2 million, or 8.9%, from $238.4 million in 2011, entirely as a result of the growth in the Company's revenue-generating subscriber base. Q4 FY2012 revenue was $68.1 million, up $7.0 million, or 11.5%, from $61.1 million for the same period in 2011.
SAC was $49 in FY2012 down from $54 in 2011. SAC for Q4 FY2012 was $46, down from $50 for the same period in 2011. The decrease for the year and the quarter was due to lower subsidies and distribution costs and higher gross additions.
CPGA was $75 in FY2012 down from $84 in 2011 as a result of a decrease in marketing costs achieved through increased operating efficiencies and post-merger cost synergies coupled with higher gross subscriber additions. CPGA for Q4 FY2012 was $76, up slightly from $75 for the same period in 2011 primarily due to an in increase in marketing costs related to customer outreach around the pricing changes and rebranding costs in preparation for the holiday selling season.
FY2012 Adjusted EBITDA improved to $46.6 million, representing a 75.6% increase, or $20.1 million improvement, from Adjusted EBITDA of $26.5 million in 2011. The year-over-year increase was a result of the Company's top-line growth combined with a decrease in marketing, administrative and IT expenses, which was offset, in part, by a higher cost of revenue. Adjusted EBITDA for Q4 FY2012 was $12.2 million, up 10.5%, or $1.1 million, from $11.1 million for the same period in 2011.
In FY2012, SiriusXM Canada generated $41.1 million in cash from operations, used cash of $4.4 million in investing activities and used $11.6 million of cash in financing activities. The Company generated $36.6 million in free cash flow in FY2012. In Q4 FY2012, the Company generated $10.4 million in cash from operations, used $1.9 million of cash in investing activities, and less than $0.1 million in cash was provided by investing activities.The Company generated $8.5 million in free cash flow in Q4 FY2012.
As at August 31, 2012, SiriusXM Canada had total cash and cash equivalents of $51.0 million, up from $42.5 million as at May 31, 2012 and $26.0 million as at August 31, 2011.
Reconciliations
The following is a reconciliation of unaudited EBITDA and unaudited Adjusted EBITDA to Operating Income (loss).
(In $000's) IFRS
FY2012 Combined
FY2011 IFRS
Q4 FY2012 Combined
Q4 2011
(Audited) (Unaudited)** (Unaudited) (Unaudited)**
Operating income (loss) 2,844 (18,940) 3,013 (5,698)
Amortization 39,689 32,590 8,699 12,451
EBITDA 42,533 13,650 11,712 6,752
Stock based compensation 1,493 280 333 191
Severance and merger costs 1,383 12,321 2 3,848
Fair value adjustments* 1,152 271 173 271
Adjusted EBITDA 46,562 26,522 12,220 11,062
* Fair value adjustment relates to the reduction in revenue due to valuation of deferred revenue as per purchase price accounting
** In order to align with current reporting requirements, write off of intangibles of $4.2 million in 2011 has been reclassified from severance and merges costs to amortization. 2011 Adjusted EBITDA includes fair value adjustments to align with our current definition as of September 1, 2011.
Please see the Company's Management Discussion & Analysis filed November 14, 2012 for a more detailed explanation of the differences between IFRS actual financial results and the combined information described in this press release. 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 consolidated statement of operations and comprehensive income. Please see the Company's Management Discussion & Analysis filed November 14, 2012 for complete definition of non-GAAP measures.
CONSOLIDATED BALANCE SHEETS
At August 31, August 31, December 1,
(Canadian dollars) 2012 2011 2010 (note 1)
ASSETS
Current assets
Cash and cash equivalents 51,034,749 26,015,439 47,610,454
Accounts receivable 12,133,138 10,718,676 8,652,620
Prepaid expenses 3,361,448 2,587,736 1,918,196
Inventory 324,316 2,265,438 1,409,832
Total current assets 66,853,651 41,587,289 59,591,102
Long-term prepaid expenses 79,410 901,563 36,720
Property and equipment 7,617,399 9,680,308 2,636,352
Intangible assets 175,986,331 206,113,620 4,415,866
Deferred tax assets 59,858,394 51,545,684 —
Goodwill 96,732,525 96,732,525 —
Total assets 407,127,710 406,560,989 66,680,040
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade and other payables 39,085,800 32,870,628 31,239,110
Due to related parties 6,775,601 17,203,492 19,836,681
Interest payable 2,704,449 2,709,537 —
Current portion of deferred revenue 137,554,399 126,995,705 79,892,903
Provisions 1,285,587 2,123,557 1,126,980
Total current liabilities 187,405,836 181,902,919 132,095,674
Deferred revenue 21,019,320 20,084,379 12,710,409
Other long-term liabilities 6,902,537 9,248,840 200,156
Due to related parties 1,208,332 1,208,332 —
Deferred tax liabilities — — 1,133,756
Long-term debt 144,992,819 146,143,284 —
Provisions 344,112 497,197 —
Total liabilities 361,872,956 359,084,951 146,139,995
Shareholders' equity (deficiency)
Share capital 148,393,493 147,169,430 36,000,100
Contributed surplus 5,057,501 4,324,032 —
Accumulated deficit (108,196,240) (104,017,424) (115,460,055)
Total shareholders' equity (deficiency) 45,254,754 47,476,038 (79,459,955)
Total liabilities and shareholders' equity 407,127,710 406,560,989 66,680,040
Approved by Board of Directors
(signed) John I. Bitove (signed) Anthony Viner
John I. Bitove, Director Anthony Viner, Director
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
Total
Shareholders'
Share Contributed Accumulated Equity
(Canadian dollars) Capital Surplus deficit (deficiency)
Balance, December 1, 2010 36,000,100 — (115,460,055) (79,459,955)
Return of Capital (36,000,000) — — (36,000,000)
CSRH shares outstanding at time of merger 154,596,684 — — 154,596,684
CSRH cash deficiency notes (7,517,868) — — (7,517,868)
Shares for interest - convertible note 67,999 — — 67,999
Stock options exercised 22,515 (14,361) — 8,154
Equity component of convertible debt acquired — 1,539,196 — 1,539,196
Vested stock options at acquisition — 2,614,513 — 2,614,513
Stock-based compensation — 184,684 — 184,684
Net income for the period — — 17,853,108 17,853,108
Dividends on Class C preferred shares — — (1,601,753) (1,601,753)
Dividends on Class C common shares — — (5,942,481) (5,942,481)
Part VI.1 tax reversal — — 1,133,757 1,133,757
Balance, August 31, 2011 147,169,430 4,324,032 (104,017,424) 47,476,038
Balance, September 1, 2011 147,169,430 4,324,032 (104,017,424) 47,476,038
Net loss for the year — — (4,178,816) (4,178,816)
Stock-based compensation — 1,493,400 — 1,493,400
Stock options exercised 1,224,063 (759,931) — 464,132
Balance, August 31, 2012 148,393,493 5,057,501 (108,196,240) 45,254,754
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Canadian dollars) Year from
September 1, 2011
to August 31, 2012 Period from
December 1, 2010
to August 31, 2011
Revenue 259,619,500 140,917,994
Operating expenses
Operating costs 215,703,343 117,318,777
Integration, severance and merger costs 1,383,105 3,501,293
Depreciation and amortization 39,689,053 12,266,976
Operating income 2,843,999 7,830,948
Finance costs, net
Interest income 360,906 329,145
Interest expense (16,699,532) (3,427,853)
Foreign exchange loss (210,372) (315,095)
Loss on debt payment — (1,908,263)
Gain on revaluation of derivative 1,213,473 —
Finance costs, net (15,335,525) (5,322,066)
Net income (loss) before income tax (12,491,526) 2,508,882
Income tax recovery 8,312,710 15,344,226
Net income (loss) and comprehensive income (loss) (4,178,816) 17,853,108
Basic and diluted (loss) earnings per share (0.03) 0.19
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Canadian dollars) Year from
September 1, 2011
to August 31, 2012 Period from
December 1, 2010
to August 31, 2011
Cash provided by (used in)
OPERATING ACTIVITIES
Net income (loss) for the period (4,178,816) 17,853,108
Add(deduct) items not involving cash
Amortization of intangible assets 36,899,668 11,097,145
Depreciation of property and equipment 2,789,385 1,169,831
Deferred tax recovery (8,312,710) (15,344,226)
Stock-based compensation 1,493,400 184,684
Accrued interest (5,088) 2,709,537
Interest accretion 950,583 129,234
Loss on repayment of debt — 1,908,263
Share issued for interest settlement — 67,999
Revaluation of derivative (1,213,473) —
Unrealized foreign exchange losses (gains) 3,010 7,879
Net change in non-cash working capital and deferred revenue related to operations 12,649,125 (12,046,186)
Cash provided by operating activities 41,075,084 7,737,268
INVESTING ACTIVITIES
Cash acquired on acquisition — 2,223,112
Proceeds on sale of property and equipment — 1,757
Purchase of property and equipment (728,425) (180,198)
Purchase of intangible assets (3,700,491) (1,931,242)
Cash (used in) provided by investing activities (4,428,916) 113,429
FINANCING ACTIVITIES
Distributions to shareholders — (44,723,690)
Proceeds from exercise of stock options 464,132 8,154
Proceeds from debt — 62,000,000
Debt financing fees — (4,118,803)
Repayments of debt (917,700) (42,611,373)
Payment of related party promissory notes (11,173,290) —
Cash (used in) financing activities (11,626,858) (29,445,712)
Net increase (decrease) in cash and cash equivalents during the period 25,019,310 (21,595,015)
Cash and cash equivalents, beginning of period 26,015,439 47,610,454
Cash and cash equivalents, end of period 51,034,749 26,015,439