SiriusXM today announced first quarter 2020 operating and financial results, including revenue of $2.0 billion, increasing 5% on a pro forma basis compared to the prior year period. The Company's net income was $293 million in the first quarter 2020, compared to $162 million in the prior year period. Net income per diluted common share was $0.07 in the first quarter 2020, compared to $0.03 in the prior year period.

Adjusted EBITDA in the first quarter totaled $639 million, up 13% from $567 million in the prior year period, resulting in an adjusted EBITDA margin of 32.7%, an improvement of approximately 220 basis points from the 2019 period. The improvement in adjusted EBITDA margin was driven primarily by revenue growth across the business and reductions in subscriber acquisition costs, general and administrative costs and customer service and billing costs. Pro forma figures, including adjusted EBITDA, assume the Pandora acquisition closed on January 1, 2019.

"Since the start of the global pandemic, our top priorities have been ensuring our employees' safety and well-being, and continuing to support our subscribers and listeners by providing them the best entertainment, news, and information in the audio space. On both fronts, I'm pleased by our response. We are streaming SiriusXM for free, and we have been in overdrive introducing new shows, channels and special virtual moments. In conjunction with NYU Langone Health, we've launched a 24/7 COVID-19 focused channel and hotline, an important complement to our Doctor Radio channel. We welcomed the healthy return of Andy Cohen, Howard Stern interviewed Governor Andrew Cuomo, and SiriusXM contributed $2 million to COVID-19 response charities, with a near-term focus on New York, San Francisco, and Detroit - the home of our two biggest employee bases and the primary community of our automakers. I'm also proud that we have joined with Music Cares to support our artist community and to donate advertising inventory to the Ad Council in support of COVID-19 informational campaigns," said Jim Meyer, Chief Executive Officer, SiriusXM.

"This challenging period has in fact inspired enormous creativity from our programming teams at SiriusXM and Pandora, but creativity and adaptability has not just been limited to our programming teams. Global stay-at-home orders swiftly and materially altered the way we work. We've navigated the material disruption of call center staffing by migrating thousands of team members to work-from-home in mere days, retooled marketing campaigns, worked quickly to support our automakers, and more. In short, we immediately took steps to ensure that our audio entertainment service would be uninterrupted, to provide the best possible customer service, and to continue to operate our business with the level of excellence you have come to expect from SiriusXM. I could not be prouder of the effort and performance of our teams throughout this period," added Meyer.

"In the face of the economy hitting the brakes hard in March, SiriusXM's first quarter results were very strong. Auto sales, advertising and customer responses to marketing campaigns all fell swiftly in the second half of March, yet we delivered increasing subscribers, solid revenue growth and 13% adjusted EBITDA growth to a first quarter record of $639 million. Just as it was a little over a decade ago during the global financial crisis, SiriusXM's subscriber-based business model is resilient. We do not know what the shape of a recovery from this current crisis will look like, however, we are confident that our business will continue to generate substantial positive free cash flow. Once we have a better view of how and when the economy will restart, we plan to resume providing guidance," added Meyer.

Additional information about our business, results of operations and the evolving impact of the COVID-19 crisis on our business and operations is included below under "SPECIAL NOTE ON COVID-19 RESPONSE." Additional information, including the new risk factor entitled "The current coronavirus (COVID-19) pandemic is negatively impacting our business," regarding the impact of the COVID-19 crisis on our business and operations is contained in our Quarterly Report on Form 10-Q which will be filed with the Securities and Exchange Commission.

FURTHER UPDATE ON BUSINESS, LIQUIDITIY, AND CAPITAL RETURNS

"During the first quarter, we built upon our successful advertising sales arrangement by investing $75 million in SoundCloud and joining its Board of Directors. The SiriusXM, Pandora and SoundCloud listening platforms together offer content owners and advertisers the opportunity to access an audience of 140 million North American audio listeners. SoundCloud has an outstanding team of people, and we are excited about what we can do together," said David Frear, Chief Financial Officer, SiriusXM.

"SiriusXM returned approximately $300 million of capital to stockholders in the first quarter of 2020. We repurchased approximately $243 million of our common stock and paid approximately $59 million in dividends to stockholders. Last week, we announced our regularly quarterly dividend. We expect to continue this quarterly dividend in 2020 and beyond. In late March, we temporarily suspended our stock repurchases as we evaluated the implications of the COVID-19 crisis. Our existing stock repurchase program has $924 million remaining under the present authorization. At the end of the first quarter, our debt to adjusted EBITDA ratio was 3.1 times, and we had the entire $1.75 billion available on our revolving credit facility. With our very strong liquidity and cash flow, we plan to resume share repurchases in the second quarter and beyond," added Frear.

The Company also announced that it has withdrawn its full-year 2020 guidance for self-pay net subscriber additions, revenue, adjusted EBITDA and free cash flow first issued on January 7, 2020. The Company plans to release revised guidance at a future date when more data is available on the effects of the COVID-19 crisis on its business and inferences can be reasonably drawn regarding the timing of an economic recovery.

Shares of common stock may be purchased from time to time on the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act of 1934, as amended, in privately negotiated transactions, including in accelerated stock repurchase transactions and transactions with Liberty Media and its affiliates, or otherwise. The Company expects to fund the repurchases through a combination of cash on hand, cash generated by operations and future borrowings. The size and timing of these purchases will be based on a number of factors, including price and business and market conditions.

The Company's dividend policy may change at any time without notice to stockholders. The declaration and payment of dividends is at the discretion of the Company's Board of Directors in accordance with applicable law after taking into account various factors, including the Company's financial condition, operating results, current and anticipated cash needs, limitations imposed by its indebtedness, legal requirements and other factors that the Board of Directors deems relevant.

FIRST QUARTER 2020 HIGHLIGHTS

SiriusXM operates two complementary audio entertainment businesses — our SiriusXM business and our Pandora business. Further information regarding these two segments will be contained in the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2020. The pro forma financial and operating highlights below exclude the impact of share-based payment expense.

SIRIUSXM

• Self-Pay Subscribers Top 30.0 Million. SiriusXM added approximately 69,000 net new self-pay subscribers in the first quarter. Total net subscriber additions were (143,000), resulting in nearly 34.8 million total SiriusXM subscribers at the end of the period. Paid promotional subscribers decreased due to declines in shipments from automakers offering paid trial subscriptions with the purchase or lease of a vehicle. The total trial funnel stood at approximately 9.1 million at the end of the first quarter, down from approximately 9.3 million at the end of 2019. Self-pay monthly churn for the first quarter was 1.8%, approximately flat from 2019.
• SiriusXM Revenue of $1.6 Billion. First quarter revenue grew 6% to $1.6 billion. This growth was driven by a 2% increase in total SiriusXM subscribers and 3% growth in SiriusXM's average revenue per user (ARPU) to $13.95.
• Gross Profit Grows 7%. Total cost of services at SiriusXM increased 4% to $593 million in the first quarter, driven primarily by higher revenue share and royalties and programming and content expenses. Gross profit at SiriusXM in the quarter totaled $992 million, increasing 7% over the first quarter of 2019, and produced a gross margin of 63%, flat compared to the prior year.
• Latest in Programming. SiriusXM began to create virtual events in response to the crisis, first for the Ultra Music Festival. Garth Brooks gave a live home studio performance, and Taylor Swift kicked off a new Home DJ series. Bruce Springsteen twice delivered special playlists and commentary to the company's listeners, SiriusXM broadcast nationwide events like the Jersey 4 Jersey benefit, and Howard Stern delivered ground breaking interviews of Tom Brady and Paul McCartney.

PANDORA

• Advertising Revenue Hits $241 million. First quarter ad revenue at Pandora reached a first-quarter high of $241 million, growing 4% over the first quarter of 2019. Ad revenue was driven by strong monetization of $68 per thousand hours, growing 8% over the prior year. Strength in traditional audio advertising, boosted by video programmatic and engagement-based video, as well as the expansion of off-platform efforts and fees generated on the AdsWizz platform drove revenue growth. A reduction in subscription revenue at Pandora following the roll-off of paid promotional subscribers in the third quarter of 2019 discussed below contributed to total revenue growth for Pandora of 1% to 369 million for the first quarter of 2020.
• Total Ad Supported Listener Hours of 3.1 Billion. Monthly Active Users (MAUs) at Pandora were 60.9 million in the first quarter, down from 66.0 million in the prior year period. Total ad supported listener hours were 3.13 billion in the period, down from 3.42 billion in the first quarter of 2019.
• Self-Pay Net Adds of 51,000. Pandora added 51,000 net new self-pay subscribers to its Pandora Plus and Pandora Premium service in the first quarter to end the period with over 6.2 million self-pay subscribers. Paid promotional subscribers remained near 51,000, flat quarter-on-quarter but down from 736,000 at the end of the first quarter of 2019, as a result of a reduction in paid promotional subscriptions due to the expiration of an agreement with T-Mobile in the third quarter of 2019. Total Pandora subscribers at the end of the period were 6.3 million.
• Gross Profit Declines 5%. Total cost of services at Pandora in the first quarter of 2020 of $264 million grew 4% compared with the first quarter of 2019. This resulted in gross profit at Pandora of $105 million, down 5% over the first quarter of 2019, and produced a gross margin for the quarter of 28%, down approximately 200 basis points from 30% in the first quarter of 2019. This contraction was driven primarily by slightly higher revenue share and royalties and customer service and billing expenses as a percentage of revenue.

Subscriber acquisition costs declined by 8% to $99 million in the first quarter driven by lower hardware subsidies as certain subsidy rates decreased as well as a decline in OEM installations as a result of the COVID-19 pandemic. The growth in sales and marketing costs decreased by 3% to a total of $208 million. Engineering, design and development costs rose 9% as we continued to invest in new streaming services, next generation 360L radios, and chipsets. Excluding a one-time $25 million legal settlement reserve in the first quarter of 2019, general and administrative expenses declined 15% to $91 million driven by lower personnel costs.

With revenue up 5% and growth in total cash operating expenses of just 1.6%, excluding depreciation and amortization, share-based payment expenses, and legal settlements and reserves, adjusted EBITDA expanded by 13%. Free cash flow grew by 16% to $348 million, driven by higher cash from operations and lower capital expenditures.

SPECIAL NOTE ON COVID-19 RESPONSE

General

In general, the COVID-19 pandemic, coupled with government issued stay-at-home orders, is having a widespread and broad reaching effect on the economy. Automakers have idled plants, and dealers have closed their retail operations. New and used vehicle sales have declined sharply in recent weeks. Sporting events have been cancelled, theaters are closed and concerts have been postponed indefinitely. The impact of the COVID-19 pandemic on the travel industry has been far-reaching, adversely affecting airlines, hotels, cruise ships and theme parks. Unemployment is rising at historic rates as non-essential businesses have been closed and workers have been furloughed. Media spending by businesses has dropped sharply. To add to the uncertainty, it is unclear when an economic recovery could start and what a recovery will look like after this historic shutdown of the economy.

Against this background and these broad-based economic effects, the full extent to which the COVID-19 pandemic may negatively impact our business is still uncertain. The scope of the effects of the COVID-19 pandemic on our businesses depends on many factors beyond our control, and the effects are difficult to assess or predict with meaningful precision both generally and specifically as to our Sirius XM and Pandora businesses. While, due to the nature of our business, the effect of the pandemic may not be fully reflected in our results of operations until future periods, we believe that the adverse impact of the COVID-19 pandemic will be material to our business.

Potential Impact on our Results of Operations

It is difficult to predict how the COVID-19 pandemic will affect our company in the long-term. Based on what we have observed to date, however, we have attempted below to provide our projection as to how the pandemic will affect our business, including our revenue and expenses, over the next six months. The COVID-19 pandemic did not have a material effect on our revenue and expenses during the quarter ended March 31, 2020. We presently believe that the COVID-19 pandemic and its related economic impact will:

• adversely affect our subscriber revenue due to the decline in sales of new and used vehicles, reduced drive time, increased churn and the inability of our vendors to fully staff call centers;
• cause a decline in advertising revenues in our Pandora and SiriusXM businesses as third parties pull back on advertising spending generally;
• have an adverse effect on our equipment revenue and the sale of satellite radios, components and accessories;
• negatively impact our other revenue as the pandemic is anticipated to have similar adverse effects on Sirius XM Canada and its service as well as adversely affect our connected services business;
• reduce our revenue share and royalties expenses, although in our Pandora ad-supported service royalty reductions may not be commensurate with the decline in ad revenues;
• not significantly affect our programming and content expenses as we expect to continue to honor our agreements to acquire, create, promote and produce content, including our obligations in some cases to sports leagues that have cancelled significant portions of their seasons;
• reduce our customer service and billing costs as we may experience lower costs as a result of the inability of our vendors to fully staff the operation and management of customer service centers, although such cost reductions are expected to be partially offset by increased bad debt expense;
• not significantly affect our transmission expenses and costs of equipment expenses;
• reduce subscriber acquisition costs as hardware subsidies paid to radio manufacturers, distributors and automakers and subsidies paid for chipsets and certain other components used in manufacturing radios are expected to decline as a result of a reduction in vehicle production and possible disruptions to the supply chain;
• decrease sales and marketing expenses as the reduction in auto sales is anticipated to reduce trial subscription starts, the volume of our marketing campaigns and the associated expenses related to direct mail, outbound telemarketing and email communications, and as we likely reduce our spending on marketing, advertising, media and production, and digital performance media;
• reduce our engineering, design and development expenses as we plan to slow the development of new products and services, including streaming and connected vehicle services, and research and development efforts in the ordinary course;
• reduce our general and administrative expenses as a result of reductions in compensation, travel and entertainment and other costs; and
• not affect our depreciation and amortization expenses.

Other Potential Impacts

We have taken actions to help ensure that our audio entertainment service will continue uninterrupted through the COVID-19 pandemic, including activating our business continuity plans and implementing steps to enable employees to work remotely. The impact of these actions on our workforce are also difficult to assess, but the experience has presented new challenges for our employees as they balance the demands of the pandemic with their daily operational role. To date, however, we do not believe that these remote work arrangements have adversely affected our ability to maintain our financial reporting systems, internal control over financial reporting and disclosure controls and procedures. In addition, we do not expect to encounter any significant challenges to our ability to maintain these systems and controls.

We do not expect the COVID-19 pandemic and its related economic impact to affect our capital and financial resources, including our liquidity position. To date, the pandemic has not increased our costs of or reduced our access to capital under our revolving credit facility, and we do not believe it is reasonably likely to in the future. In addition, we do not believe that the pandemic will affect our ongoing ability to meet the covenants in our debt instruments, including under our revolving credit facility.

We believe that we have sufficient cash and cash equivalents, as well as debt capacity, to cover our estimated short-term and long-term funding needs, including amounts to construct, launch and insure replacement satellites, as well as fund future stock repurchases, future dividend payments and strategic opportunities. As of March 30, 2020, $1.75 billion was available for future borrowing under our revolving credit facility.

We also do not expect the pandemic to affect the assets on our balance sheet and our ability to timely account for those assets. For example, we do not anticipate making any significant changes as a result of the pandemic in judgments in determining the fair-value of assets measured in accordance with generally accepted accounting principles.

In addition, we do not anticipate any material impairments with respect to goodwill, indefinite life and definite life intangible assets, right of use assets or investments, increases in allowances for credit losses, restructuring charges, other expenses, or changes in accounting judgments that would have an adverse impact on our financial statements.

About SiriusXM

Sirius XM Holdings Inc. (NASDAQ: SIRI) is the leading audio entertainment company in the U.S., and the premier programmer and platform for subscription and digital advertising-supported audio products. Pandora, a subsidiary of SiriusXM, is the largest ad-supported audio entertainment streaming service in the U.S. SiriusXM and Pandora together reach more than 100 million people each month with their audio products. SiriusXM, through Sirius XM Canada Holdings, Inc., also offers satellite radio and audio entertainment in Canada. In addition to its audio entertainment businesses, SiriusXM offers connected vehicle services to automakers and directly to consumers through aftermarket devices. For more about SiriusXM, please go to: www.siriusxm.com.