SIRI - Sirius XM Radio

[Liberty]

Q2 results:

 

http://investor.siriusxm.com/investor-overview/press-releases/press-release-details/2016/SiriusXM-Reports-Second-Quarter-2016-Results/default.aspx

 

- Second Quarter Revenue Climbs 10% to $1.2 Billion, a Quarterly Record

- Net Income Rises 68% to $173 Million and Adjusted EBITDA Grows 13% to $468 Million in the Second Quarter

- Operating Cash Flow Totals $432 Million and Free Cash Flow Reaches Quarterly High of $395 Million

- Company Increases 2016 Subscriber, Revenue, Adjusted EBITDA, and Free Cash Flow Guidance

 

 

EV/EBITDA about 15. Seems way too expensive to me. What do you think?

Regarding its moat, do you think it is so hard to lease some bandwidth from launched satellite to provide a similar service? I find it weird that DISH or DirectTV is not doing this.

On the other hand, P/FCF of 13 seems reasonable.

 

Not all EBITDA is created the same. Look at the tax situation for the next few years.

 

SIRI isn't about just bandwidth/spectrum (and they have a bunch of that too, excess capacity if they consolidate that could be worth a lot someday). It's about having relationships with car OEMs so that they put your hardware in their vehicles (which takes years because of long development cycles) and having content that people want (talk radio stars, sports, music), and bundling it in a way that is very easy to use because the target demographic just wants to press play and not have to worry about it.

 

And because of the high fixed costs of the business (for spectrum, satellites, content, auto OEM hardware subsidies), any competitor would lose money for years and years before building up the installed base and getting enough subscribers, and they probably couldn't outbid SIRI for content unless they use another existing business to finance it (but then, that would make that other business suffer, so you'd need patient shareholders). XM and Sirius when they were separate companies weren't profitable and just bid up content on each other. I don't think there's going to be another satellite radio provider in the US, and now SIRI is getting into connected car stuff and wants to integrate LTE modems into its hardware to have more non-linear features...

 

The biggest competitor by far is free terrestrial radio. The more they can differentiate from it and improve on the experience, the more FM listeners they'll attract. There's also a big opportunity (IMO) in the used car market, which is just starting to see more sat radios trickle down into it.

[muscleman]

Q2 results:

 

http://investor.siriusxm.com/investor-overview/press-releases/press-release-details/2016/SiriusXM-Reports-Second-Quarter-2016-Results/default.aspx

 

- Second Quarter Revenue Climbs 10% to $1.2 Billion, a Quarterly Record

- Net Income Rises 68% to $173 Million and Adjusted EBITDA Grows 13% to $468 Million in the Second Quarter

- Operating Cash Flow Totals $432 Million and Free Cash Flow Reaches Quarterly High of $395 Million

- Company Increases 2016 Subscriber, Revenue, Adjusted EBITDA, and Free Cash Flow Guidance

 

 

EV/EBITDA about 15. Seems way too expensive to me. What do you think?

Regarding its moat, do you think it is so hard to lease some bandwidth from launched satellite to provide a similar service? I find it weird that DISH or DirectTV is not doing this.

On the other hand, P/FCF of 13 seems reasonable.

 

Not all EBITDA is created the same. Look at the tax situation for the next few years.

 

SIRI isn't about just bandwidth/spectrum (and they have a bunch of that too, excess capacity if they consolidate that could be worth a lot someday). It's about having relationships with car OEMs so that they put your hardware in their vehicles (which takes years because of long development cycles) and having content that people want (talk radio stars, sports, music), and bundling it in a way that is very easy to use because the target demographic just wants to press play and not have to worry about it.

 

And because of the high fixed costs of the business (for spectrum, satellites, content, auto OEM hardware subsidies), any competitor would lose money for years and years before building up the installed base and getting enough subscribers, and they probably couldn't outbid SIRI for content unless they use another existing business to finance it (but then, that would make that other business suffer, so you'd need patient shareholders). XM and Sirius when they were separate companies weren't profitable and just bid up content on each other. I don't think there's going to be another satellite radio provider in the US, and now SIRI is getting into connected car stuff and wants to integrate LTE modems into its hardware to have more non-linear features...

 

The biggest competitor by far is free terrestrial radio. The more they can differentiate from it and improve on the experience, the more FM listeners they'll attract. There's also a big opportunity (IMO) in the used car market, which is just starting to see more sat radios trickle down into it.

 

Thank you!

Since your name is Liberty, I assume you have researched all of Malone's entities. What do you think are the most attractive ones?  ;)

[Liberty]

Thank you!

Since your name is Liberty, I assume you have researched all of Malone's entities. What do you think are the most attractive ones?  ;)

 

Actually, I picked the name Liberty before I had heard of John Malone, it's just a happy coincidence.

 

I'll just say that I bought some Liberty Global recently...

[rohitc99]

Q2 results:

 

http://investor.siriusxm.com/investor-overview/press-releases/press-release-details/2016/SiriusXM-Reports-Second-Quarter-2016-Results/default.aspx

 

- Second Quarter Revenue Climbs 10% to $1.2 Billion, a Quarterly Record

- Net Income Rises 68% to $173 Million and Adjusted EBITDA Grows 13% to $468 Million in the Second Quarter

- Operating Cash Flow Totals $432 Million and Free Cash Flow Reaches Quarterly High of $395 Million

- Company Increases 2016 Subscriber, Revenue, Adjusted EBITDA, and Free Cash Flow Guidance

 

 

EV/EBITDA about 15. Seems way too expensive to me. What do you think?

Regarding its moat, do you think it is so hard to lease some bandwidth from launched satellite to provide a similar service? I find it weird that DISH or DirectTV is not doing this.

On the other hand, P/FCF of 13 seems reasonable.

 

Not all EBITDA is created the same. Look at the tax situation for the next few years.

 

SIRI isn't about just bandwidth/spectrum (and they have a bunch of that too, excess capacity if they consolidate that could be worth a lot someday). It's about having relationships with car OEMs so that they put your hardware in their vehicles (which takes years because of long development cycles) and having content that people want (talk radio stars, sports, music), and bundling it in a way that is very easy to use because the target demographic just wants to press play and not have to worry about it.

 

And because of the high fixed costs of the business (for spectrum, satellites, content, auto OEM hardware subsidies), any competitor would lose money for years and years before building up the installed base and getting enough subscribers, and they probably couldn't outbid SIRI for content unless they use another existing business to finance it (but then, that would make that other business suffer, so you'd need patient shareholders). XM and Sirius when they were separate companies weren't profitable and just bid up content on each other. I don't think there's going to be another satellite radio provider in the US, and now SIRI is getting into connected car stuff and wants to integrate LTE modems into its hardware to have more non-linear features...

 

The biggest competitor by far is free terrestrial radio. The more they can differentiate from it and improve on the experience, the more FM listeners they'll attract. There's also a big opportunity (IMO) in the used car market, which is just starting to see more sat radios trickle down into it.

 

Thats an excellent summary of SIRI's business. To add to that, there seems to be a view that pandora / spotify are a big threat, but if we look at the product from these companies, there is not much to differentiate other than the alogrithms which serve the personalized music. on top of that apple, google and others are getting into the business, but using streaming music to drive users for other purchases. this is also evident from the margin these companies are making where 70% of the costs is related to content.

 

The paid version for streaming is around 10$ versus 12-13 ARPU for SIRI which is not too wide a gap anyway. so i agree, the biggest competition continues to free radio

[Liberty]

Like any good subscription business, SIRI tracks very closely churn numbers and does customer surveys to find out why people subscribe and why they unsubscribe. According to management, streaming basically doesn't even register. When people leave, it's to go back to FM radio, and the main reason is basically "I don't want to pay anymore".

 

Paid streaming alternatives aren't that much cheaper, as you pointed out, but they also aren't as user-friendly in the car. It's harder to change "channels" than on a SIRI radio that is integrated in the car, and you don't get a lot of what people subscribe to SIRI of (talk, sports, special live events), plus if you listen to many hours per month, you'll use a lot of data on your phone plan, and if you live in more rural areas (which includes a lot of people who drive long distances, a big SIRI demographic), cell coverage can be spotty. The UX and such will no doubt improve with things like Apple's CarPlay, but that's another thing that will only roll out over years and SIRI can also use CarPlay to augment its offering.

 

Streaming is a technology, not a product. It can be used by SIRI competitors and it can be used by SIRI to augment what it already offers or offer replay and non-linear features, etc. But the product that Spotify and Pandora and Apple Music offer is different from the product that SIRI offers.

 

Another option that SIRI has is to create some "free" ad-supported channels that are unlocked even for non-subscribers. Might be a way to attract new paying subscribers and to generate more ad revenue. Could be nice as long as properly balanced with the sub business (don't want to offer too much and cannibalize it).

[muscleman]

http://business.financialpost.com/news/fp-street/sirius-xm-canada-holdings-inc-shareholders-vote-in-favour-of-privatization-deal

 

 

SIRI Canada's buyout price is nearly the rock bottom in the last 3 years, at the 12 P/E multiple. How can this be fair to the minority shareholders?

 

 

 

[muscleman]

I have a question about the gap between FCF and EPS.

There is not much EPS right now but FCF seems strong. They guided 1.5 bn this year.

 

Usually this only happens when the long lived hard asset's actual life span is much longer than the accounting life span. In their SEC, they said the satellites have 15 years of life. Do you guys think these satellites can last much longer than that?

 

[bonkers]

No idea about the satellites. I have estimated the first replacements to be needed 2018-2019 for FM-1, FM-2, XM-1 and maybe FM-3. Hopefully SpaceX has greatly lowered the cost of shooting stuff up to the orbit by then.  ;)

 

Another topic: In my model one of the key sensitivities for SIRI returns comes from taxes. I believe they will run out of tax credits latest by 2018. However, if Liberty camp would somehow find a way to avoid the taxes (or postpone them further), the returns on this would be greatly boosted. What do you think there are chances for something like that happening over the few coming years?

[Liberty]

No idea about the satellites. I have estimated the first replacements to be needed 2018-2019 for FM-1, FM-2, XM-1 and maybe FM-3. Hopefully SpaceX has greatly lowered the cost of shooting stuff up to the orbit by then.  ;)

 

The CFO at the GS conference:

 

http://seekingalpha.com/article/4007450-sirius-xms-siri-management-presents-goldman-sachs-communacopia-2016-conference-transcript?part=single

 

We did sign up with Loral to build two new satellites that are due for launch in ‘19 and ‘20. The programs I think are on a little bit more than a 12-month center that -- there'll be a little spending that goes out this year. It's already in our free cash flow and then it'll be strung out between now and 2020 and you can think of it as 300 million of satellite is a good way to think of it with satellite launch, insurance and launch vehicle. In terms of other spending, there's a lot of it that’s discretionary but I would tell you that I think it's all -- that it's a basic need to say that you have to be constantly updating the code, whether it's in products or whether it's in the administrative support. You’ve got to be refreshing the servers, you've got to redo studios, desktop technology gets old. And so that a $100 million a year in the non-satellite spend is probably a -- you could call it discretionary for a couple of years, you could cut it, defer it, but you're going to have to do it at some point.

[rogermunibond]

I was a paid SIRI subscriber but left eventually after several years of calling to negotiate a lower rate upon renewal time.  I went to listening to podcasts.

 

Tons of content, much of it better than listening to CNBC or Bloomberg, which had been my main reason for keeping SIRI.

 

Don't know how long the business model of podcasting will keep that little niche growing, but until it falls apart, it's a great alternative to radio, streaming, or SIRI.

[ZenaidaMacroura]

I was a paid SIRI subscriber but left eventually after several years of calling to negotiate a lower rate upon renewal time.  I went to listening to podcasts.

 

Tons of content, much of it better than listening to CNBC or Bloomberg, which had been my main reason for keeping SIRI.

 

Don't know how long the business model of podcasting will keep that little niche growing, but until it falls apart, it's a great alternative to radio, streaming, or SIRI.

 

How do podcasts producers even get paid?  I imagine some of them are subscription based, whereas a lot of them are crowdfunded via Patreon or some other form of charitable giving by listeners?

[fareastwarriors]

I was a paid SIRI subscriber but left eventually after several years of calling to negotiate a lower rate upon renewal time.  I went to listening to podcasts.

 

Tons of content, much of it better than listening to CNBC or Bloomberg, which had been my main reason for keeping SIRI.

 

Don't know how long the business model of podcasting will keep that little niche growing, but until it falls apart, it's a great alternative to radio, streaming, or SIRI.

 

You can listen to Bloomberg radio for free on your local station if you're in the right city or you can use their app and then link it to your car.

[Liberty]

How do podcasts producers even get paid?  I imagine some of them are subscription based, whereas a lot of them are crowdfunded via Patreon or some other form of charitable giving by listeners?

 

Most of them monetize through advertising. They sell sponsorship spots and read ads during the podcasts.

 

Then there's things like Patreon, which a smaller number seem to use.

 

I'm can't think of any big subscription-only (behind a paywall) podcasts. It would probably only work for those who have already built up a huge loyal audience (ie. Howard Stern).

[rogermunibond]

That's basically it.  Ads from all the unicorn/dot coms like StubHub, SeatGeak, Blue Apron, Casper, and Harry's. Plus Patreon and direct sponsors.

 

There are some nascent podcast networks that are trying to aggregate and sell bundles.  Howl Network has Marc Maron's WTF, for example.  Scripps recently acquired Midroll and are trying to turn Stitcher into something like an aggregator with an ad network.  Blog below from Ben Thompson on the future of podcasting is good on this subject.

 

https://stratechery.com/2016/the-future-of-podcasting/

[muscleman]

No idea about the satellites. I have estimated the first replacements to be needed 2018-2019 for FM-1, FM-2, XM-1 and maybe FM-3. Hopefully SpaceX has greatly lowered the cost of shooting stuff up to the orbit by then.  ;)

 

The CFO at the GS conference:

 

http://seekingalpha.com/article/4007450-sirius-xms-siri-management-presents-goldman-sachs-communacopia-2016-conference-transcript?part=single

 

We did sign up with Loral to build two new satellites that are due for launch in ‘19 and ‘20. The programs I think are on a little bit more than a 12-month center that -- there'll be a little spending that goes out this year. It's already in our free cash flow and then it'll be strung out between now and 2020 and you can think of it as 300 million of satellite is a good way to think of it with satellite launch, insurance and launch vehicle. In terms of other spending, there's a lot of it that’s discretionary but I would tell you that I think it's all -- that it's a basic need to say that you have to be constantly updating the code, whether it's in products or whether it's in the administrative support. You’ve got to be refreshing the servers, you've got to redo studios, desktop technology gets old. And so that a $100 million a year in the non-satellite spend is probably a -- you could call it discretionary for a couple of years, you could cut it, defer it, but you're going to have to do it at some point.

 

 

 

Thank you! I used to think that FCF of 1.5 bn in 2016 means 13x P/FCF multiple, which is cheap.

Then I realized that if they have to spend billions upfront for satellites every 15 years, then the long term FCF per year in average should be very similar to the long term net income, if we exclude amortization.

 

The current P/E multiple is 40, so it is not that cheap.

 

What do you think?

 

 

With that said, if Space X changes the cost of launching drastically, then SIRI's primary asset will shift from Satellite systems to Satellite licenses. Then the long term average FCF will be much stronger.

 

 

https://www.sec.gov/Archives/edgar/data/908937/000156459016012174/siri-10k_20151231.htm#CONSOLIDATED_BALANCE_SHEETS

 

page 30 has a table that shows strong FCF each year, and higher than Net income every year. I need to spend more time to understand the reconciliation.

 

[muscleman]

Looking at SIRI's 10-K closely, D&A is just 270m, far from the most important expense, so even if we add all D&A back, it won't increase the net income by much.

 

Are there any other costs that can be adjusted to add back to net income? One item I could think of is Subscriber acquisition costs, which is expensed. But I don't feel like I can add all of it back.

 

 

Subscriber Acquisition Costs

Subscriber acquisition costs consist of costs incurred to acquire new subscribers which include hardware subsidies paid to radio manufacturers, distributors and automakers, including subsidies paid to automakers who include a satellite radio and a prepaid subscription to our service in the sale or lease price of a new vehicle; subsidies paid for chipsets and certain other components used in manufacturing radios; device royalties for certain radios and chipsets; commissions paid to retailers and automakers as incentives to purchase, install and activate radios; product warranty obligations; freight; and provisions for inventory allowance attributable to inventory consumed in our OEM and retail distribution channels.  Subscriber acquisition costs do not include advertising costs, loyalty payments to distributors and dealers of radios and revenue share payments to automakers and retailers of radios.

Subsidies paid to radio manufacturers and automakers are expensed upon installation, shipment, receipt of product or activation and are included in Subscriber acquisition costs because we are responsible for providing the service to the customers.  Commissions paid to retailers and automakers are expensed upon either the sale or activation of radios.  Chipsets that are shipped to radio manufacturers and held on consignment are recorded as inventory and expensed as Subscriber acquisition costs when placed into production by radio manufacturers.  Costs for chipsets not held on consignment are expensed as Subscriber acquisition costs when the automaker confirms receipt.

[Liberty]

Have you looked at the tax assets?

[muscleman]

Have you looked at the tax assets?

 

Not yet. I will.

 

But I looked at past 10 year's 10-k. D&A is always bigger than capex. I was confused. Then I suddenly realized that the share count increased a lot because of the merger of SIRI and XM.

Therefore, I think this is what happened.

XM paid a lot of money upfront for their satellites. When SIRI issued stocks to merge XM, the expense goes to "cash flow from financing". Had SIRI built and launched these satellites themselves, the impact would have been in "cash flow from investing activities".

 

Therefore this merger essentially shifted the much needed capex from investing activities to financing activities, making the fake appearance that SIRI has very strong  FCF.

 

The true economics of SIRI is more represented by the income statement than the cash flow statement.

 

 

Now with this realization, I have to check LBTYA again to make sure its FCF is really as strong as it is touted by Mike. But I have a feeling that cable assets are more real estate like than Satellite assets.  ::)

 

 

 

 

 

[maybe4less]

A big chunk of the difference between net income and FCF is that Siri has never been a meaningful tax payer. That is likely about to change in the next few years, so you'll need to take that into account.

 

You are right though that satellites are relatively inexpensive.

 

Re: LBYTK: You do have to be careful because the "FCF" they put into presentations is more like EBITDA as they calculate it before interest expense.

 

Have you looked at the tax assets?

 

Not yet. I will.

 

But I looked at past 10 year's 10-k. D&A is always bigger than capex. I was confused. Then I suddenly realized that the share count increased a lot because of the merger of SIRI and XM.

Therefore, I think this is what happened.

XM paid a lot of money upfront for their satellites. When SIRI issued stocks to merge XM, the expense goes to "cash flow from financing". Had SIRI built and launched these satellites themselves, the impact would have been in "cash flow from investing activities".

 

Therefore this merger essentially shifted the much needed capex from investing activities to financing activities, making the fake appearance that SIRI has very strong  FCF.

 

The true economics of SIRI is more represented by the income statement than the cash flow statement.

 

 

Now with this realization, I have to check LBTYA again to make sure its FCF is really as strong as it is touted by Mike. But I have a feeling that cable assets are more real estate like than Satellite assets.  ::)

[muscleman]

A big chunk of the difference between net income and FCF is that Siri has never been a meaningful tax payer. That is likely about to change in the next few years, so you'll need to take that into account.

 

You are right though that satellites are relatively inexpensive.

 

Re: LBYTK: You do have to be careful because the "FCF" they put into presentations is more like EBITDA as they calculate it before interest expense.

 

Have you looked at the tax assets?

 

Not yet. I will.

 

But I looked at past 10 year's 10-k. D&A is always bigger than capex. I was confused. Then I suddenly realized that the share count increased a lot because of the merger of SIRI and XM.

Therefore, I think this is what happened.

XM paid a lot of money upfront for their satellites. When SIRI issued stocks to merge XM, the expense goes to "cash flow from financing". Had SIRI built and launched these satellites themselves, the impact would have been in "cash flow from investing activities".

 

Therefore this merger essentially shifted the much needed capex from investing activities to financing activities, making the fake appearance that SIRI has very strong  FCF.

 

The true economics of SIRI is more represented by the income statement than the cash flow statement.

 

 

Now with this realization, I have to check LBTYA again to make sure its FCF is really as strong as it is touted by Mike. But I have a feeling that cable assets are more real estate like than Satellite assets.  ::)

 

 

Yeah tax is about 400 M a year, added to the net income from cash flow from operations.

 

On the other hand, I do think the XM merger shifted a lot of capex to cash flow from financing activities, and that made the FCF apparently stronger than it actually is.

 

You can't have capex consistently lower than D&A unless the assets are real estate like, but satellites and receivers both have 15 years life span and they are not real estate like.

 

 

 

Quick question about deferred income tax. They had operating losses in the past so current profits can be deducted from that. That's fine. But how does that impact the income statement? Why do they still have to say 217,603k income tax expense for the first 6 months in 2016. Why not zero?

 

 

[maybe4less]

A big chunk of the difference between net income and FCF is that Siri has never been a meaningful tax payer. That is likely about to change in the next few years, so you'll need to take that into account.

 

You are right though that satellites are relatively inexpensive.

 

Re: LBYTK: You do have to be careful because the "FCF" they put into presentations is more like EBITDA as they calculate it before interest expense.

 

Have you looked at the tax assets?

 

Not yet. I will.

 

But I looked at past 10 year's 10-k. D&A is always bigger than capex. I was confused. Then I suddenly realized that the share count increased a lot because of the merger of SIRI and XM.

Therefore, I think this is what happened.

XM paid a lot of money upfront for their satellites. When SIRI issued stocks to merge XM, the expense goes to "cash flow from financing". Had SIRI built and launched these satellites themselves, the impact would have been in "cash flow from investing activities".

 

Therefore this merger essentially shifted the much needed capex from investing activities to financing activities, making the fake appearance that SIRI has very strong  FCF.

 

The true economics of SIRI is more represented by the income statement than the cash flow statement.

 

 

Now with this realization, I have to check LBTYA again to make sure its FCF is really as strong as it is touted by Mike. But I have a feeling that cable assets are more real estate like than Satellite assets.  ::)

 

 

Yeah tax is about 400 M a year, added to the net income from cash flow from operations.

 

On the other hand, I do think the XM merger shifted a lot of capex to cash flow from financing activities, and that made the FCF apparently stronger than it actually is.

 

You can't have capex consistently lower than D&A unless the assets are real estate like, but satellites and receivers both have 15 years life span and they are not real estate like.

 

 

 

Quick question about deferred income tax. They had operating losses in the past so current profits can be deducted from that. That's fine. But how does that impact the income statement? Why do they still have to say 217,603k income tax expense for the first 6 months in 2016. Why not zero?

 

GAAP basically requires companies to record income tax expense on the income statement at statutory rates, regardless of what actual tax the company owes that year. It's a little more complicated than that, but you can think of income tax expense as theoretically what the company would pay if they don't have NOLs, accelerated depreciation, or any other of a myriad of "special situations" that can apply. In others words, it's close to a meaningless number for many companies in any given year.

 

Decent explanation on wikipedia: https://en.wikipedia.org/wiki/Tax_expense

[muscleman]

A big chunk of the difference between net income and FCF is that Siri has never been a meaningful tax payer. That is likely about to change in the next few years, so you'll need to take that into account.

 

You are right though that satellites are relatively inexpensive.

 

Re: LBYTK: You do have to be careful because the "FCF" they put into presentations is more like EBITDA as they calculate it before interest expense.

 

Have you looked at the tax assets?

 

Not yet. I will.

 

But I looked at past 10 year's 10-k. D&A is always bigger than capex. I was confused. Then I suddenly realized that the share count increased a lot because of the merger of SIRI and XM.

Therefore, I think this is what happened.

XM paid a lot of money upfront for their satellites. When SIRI issued stocks to merge XM, the expense goes to "cash flow from financing". Had SIRI built and launched these satellites themselves, the impact would have been in "cash flow from investing activities".

 

Therefore this merger essentially shifted the much needed capex from investing activities to financing activities, making the fake appearance that SIRI has very strong  FCF.

 

The true economics of SIRI is more represented by the income statement than the cash flow statement.

 

 

Now with this realization, I have to check LBTYA again to make sure its FCF is really as strong as it is touted by Mike. But I have a feeling that cable assets are more real estate like than Satellite assets.  ::)

 

 

Yeah tax is about 400 M a year, added to the net income from cash flow from operations.

 

On the other hand, I do think the XM merger shifted a lot of capex to cash flow from financing activities, and that made the FCF apparently stronger than it actually is.

 

You can't have capex consistently lower than D&A unless the assets are real estate like, but satellites and receivers both have 15 years life span and they are not real estate like.

 

 

 

Quick question about deferred income tax. They had operating losses in the past so current profits can be deducted from that. That's fine. But how does that impact the income statement? Why do they still have to say 217,603k income tax expense for the first 6 months in 2016. Why not zero?

 

GAAP basically requires companies to record income tax expense on the income statement at statutory rates, regardless of what actual tax the company owes that year. It's a little more complicated than that, but you can think of income tax expense as theoretically what the company would pay if they don't have NOLs, accelerated depreciation, or any other of a myriad of "special situations" that can apply. In others words, it's close to a meaningless number for many companies in any given year.

 

Decent explanation on wikipedia: https://en.wikipedia.org/wiki/Tax_expense

 

 

Thank you! I felt ashamed that I didn't know these basics earlier.  :-[

[Liberty]

Q3:

 

http://investor.siriusxm.com/investor-overview/press-releases/press-release-details/2016/SiriusXM-Reports-Third-Quarter-2016-Results/default.aspx

 

THIRD QUARTER 2016 HIGHLIGHTS

 

SiriusXM Subscribers Approach 31 Million. The company added 345,000 net new subscribers during the most recent three month period to end the third quarter of 2016 with approximately 31 million subscribers. Self-pay net additions were 385,000 during the third quarter, resulting in self-pay subscribers of 25.5 million at September 30, 2016.

 

Strong Revenue Growth and Record ARPU. Revenue climbed 9% to a quarterly record of $1.3 billion. The growth was driven by a 7% increase in subscribers and a 3% increase in average revenue per user (ARPU) to $13.04.

 

Record Adjusted EBITDA. Adjusted EBITDA in the third quarter of 2016 was $492 million, a record quarterly high, and up 10% from $447 million in the third quarter of 2015. Adjusted EBITDA margin was a record high 38.4% in the third quarter of 2016, up from 38.2% in the third quarter of 2015.

 

"Since the start of the third quarter, we spent roughly $300 million to repurchase 72 million shares of our common stock. SiriusXM's average share count declined by 8% in the third quarter 2016 from a year earlier as a result of our share repurchases. We are also pleased to announce a regular dividend as an element of our capital return program, beginning at $0.01 per share per quarter. Our debt to adjusted EBITDA remained just 3.4 times, and we ended the third quarter 2016 with a cash balance of $572 million in anticipation of the October 1 redemption of our 5.875% Senior Notes due 2020. We expect to continue strong capital returns to stockholders while making strategic investments in technology, content, and new satellite infrastructure," noted David Frear, Chief Financial Officer, SiriusXM.

 

INCREASED 2016 GUIDANCE

 

The company now expects full-year 2016 revenues to be approximately $5 billion and adjusted EBITDA to reach approximately $1.85 billion. SiriusXM's 2016 guidance for continued growth in total subscribers, self-pay subscribers, and free cash flow remains unchanged. The company's full-year 2016 guidance is as follows:

 

Net self-pay subscriber additions of approximately 1.6 million,

Total net subscriber additions of approximately 1.7 million,

Revenue of approximately $5 billion,

Adjusted EBITDA of approximately $1.85 billion, and

Free cash flow approaching $1.5 billion.

 

Dividend is a bit strange. Maybe LSXMA will use it to do its own buybacks at a NAV discount?

 

"The Board also approved an additional $2 billion of share repurchases, bringing SiriusXM's total repurchase authorization to $10 billion. SiriusXM has already repurchased an aggregate of $7.6 billion of common stock under its stock repurchase program."

[merkhet]

Well, the $130 million annual dividend could help LSXMA pay off its $250 million margin loan by the time they get to the 80% threshold.

[thefatbaboon]

I find this company bizarre.  It seems to do everything right and yet barely goes anywhere.  Who is selling this stock? What were they hoping the company to do that they haven't done?  Day after day there's 40m odd shares getting sold into a massive capital return program, a company that seems to have a lock on +10% ebitda growth for a long time, 65% of the float held by a non seller, a predictable fairly addictive business, long term oem contracts, long term content contracts, low churn - all in this low interest rate environment.  I've felt puzzled before with a stock versus mr market - but we have never been at odds for so long where my thesis seems to be playing out better than i expected and yet the market just continues as it was.