Sirius XM's Canadian Arm Posts Strong Profits

Apr.18.12 | About: Sirius XM (SIRI)

Sirius XM's (SIRI) Canadian branch of operations last week reported record revenues and subscriber numbers across the board, improving in all areas year-over-year. Canada is certainly a different country, and Sirius XM Canada (Canadian Satellite Radio) is technically a separate entity. Yet one can look to the performance of what is essentially an arm of Sirius XM as a possible foreshadowing of what may come when Sirius XM reports in its upcoming Q1 conference call, usually held in May.

Some points to consider from Sirius XM Canada's earnings:

  • Record total subscribers of 2.02 million; year-over-year net additions of 192,600
  • Record self-paying subscribers of 1.45 million; year-over-year net additions of 161,900
  • Record revenue of $63.8 million
  • Adjusted EBITDA of $11.9 million, up 152.4% year-over-year
  • Cash from operating activities of $12.0 million
  • Fixed cash operating expense reduced by 11.2% year-over-year

The actual numbers were impressive, showing large proportional increases in EBITDA, subscribers, self pay subscribers, revenue and cash position. A large decrease in expenses was also observed, pointing toward good management decisions in this area and increased efficiency.

This earnings report caused just over a 10% jump in Sirius XM Canada's share price after reporting.

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This portends well for Sirius XM. While Canada and the United States are different countries, with Sirius XM and Sirius XM Canada serving these separate demographics in similar fashion, the population is rather comparable. This is especially so near the borders and population centers. Services are nearly identical between Sirius XM Canada and the parent, U.S. based Sirius XM, and Sirius XM U.S. holds a 25% stake in Sirius XM Canada as well. What's good for one can be good for the other. I believe that Sirius XM Canada's successful moves point toward the potential that Sirius XM could be due to report similar good news in May.

Of course, when making such assumptions, one must be careful not to base one's decisions on these assumptions alone. Consider the overall picture of Sirius XM and expectations based upon past performance of the company, company guidance and important figures such as auto sales numbers. I believe when all is considered, the future looks bright for Sirius XM.

Disclosure: I am long SIRI.

Additional disclosure: I am long SIRI April, May and June $2 calls.