DAILY NEWS Nov 15, 2012 8:02 AM - 0 comments

SiriusXM Canada Reports Q4 and Year End Results

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2012-11-15

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


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