Sirius XM Satellite Radio (SIRI) reported first quarter 2012 results today and the company is on solid footing for what promises to be a great year for the company. Most company metrics were positive and within ranges expected by the street. The stock traded up by about $0.05 in pre-market trading.
Highlights for the company include:
- Subscribers grow by 405,000 to a record 22.3 million
- Record quarterly revenue of $805 million, up 11%
- First quarter 2012 net income of $108 million, Up 38%
- Adjusted EBITDA reaches $208 million, Up 15%
- Company raises subscriber guidance to 1.5 million from previous guidance of 1.3 million
"SiriusXM is starting the year with tremendous operational momentum. We grew subscribers faster than any first quarter since our 2008 merger of Sirius and XM, and we improved our self-pay monthly churn rate to 1.9% despite implementing a price increase at the beginning of the year. Rising auto sales and our strong execution should enable us to exceed our prior 2012 subscriber growth guidance of 1.3 million, which today we are raising to 1.5 million," - Mel Karmazin, Chief Executive Officer, Sirius XM.
One key metric is not the overall subscriber number, but the self-paying subscriber number. The company was able to report an impressive 148% to 299,348. This metric shows the "stickiness" of the product to consumers because self-pay subscribers are with the service because of choice rather than a free option.
Churn was a surprise to the street with the company reporting a self-pay churn rate of 1.9% rather than the 2.1% the company had guided to. This would tend to demonstrate, at first blush, that the price increase is being well accepted by consumers. However, given that the price increase was reported to already be delivered to 35% of the base, one could anticipate that $0.50 of the $1.50 would have hit the bottom line. Average Revenue Per User (ARPU) went up only $0.16 from last quarter, which would indicate that the company is still discounting a lot via retention efforts. This is not a bad thing, but rather an area where investors need to keep expectations realistic. Many investors are expecting ARPU to top out at above $12.50, but current trends would indicate that ARPU may top out between $12.10 and $12.20. Watch this metric closely over the coming quarters.
Revenue beat the street slightly and delivered no real surprise. The company delivered nearly $805 million in revenue for the quarter.
Subscriber Acquisition Costs (SAC) were higher than anticipated by many at $60. Given that the gross subscriber additions was lower than would have been expected, the SAC number delivered by the company was well within reason.
Within the call the company discussed Satellite Radio 2.0, additional content, the growth of content for online services, and some of the goals for personalized radio in 2012.
Overall the quarter was a success for the company. The key take-away for subscribers is that the company is poised to deliver a tremendous 2012 with impressive EBITDA and Free Cash flow metrics throughout the balance of the year. Stay tuned.