Sirius Reports Record Breaking First Quarter Results

| About: Sirius XM (SIRI)

By Demian Russian

Sirius XM Radio (NASDAQ:SIRI) released its Q1 2012 financial and operating results yesterday morning and discussed those results during a conference call held at 8:00AM ET. The satellite radio service provider reported some record breaking numbers, including 405,000 net new subscribers for the quarter — the highest reported subscriber growth for the company in any Q1 since the 2008 merger of Sirius and XM.

The company also posted $805 Million in Quarterly Revenue, up 11% year-over-year and also a new record. Other highlights included Net Income of $108 Million ($0.02 per diluted share), which is up 38% year-over-year, Adjusted EBITDA of $208 Million, up 15% year-over-year, and Free Cash Flow of $15 Million, up from (-$17) million in the first quarter of 2011, the first time the company has ever reported a positive Free Cash Flow number in a first quarter.

All of this was possible while also reporting a decrease in self-pay monthly churn year-over-year, from 2.0% to 1.9%, which is also notable because this is the first quarter that subscribers were impacted by the price increase Sirius XM instituted on January 1st, 2012. The new vehicle consumer conversion rate remained stable at 45%. In light of a strengthening auto sales channel, Sirius XM management also raised their 2012 subscriber growth guidance from 1.3 Million to 1.5 million.

According to Mel Karmazin, CEO:

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.

In 2012, we continue to expect record revenue, adjusted EBITDA, and free cash flow, and our subscriber base will also finish this year at another all-time record high. Our number one focus is on delivering the best possible content to our subscribers — we are rolling out more satellite channels via factory-installed 2.0 radios, and we are improving our online offering by delivering even more live sports coverage, updated apps with enhanced features, and later this year, on-demand content and personalized radio. There has never been a better time to be a SiriusXM subscriber, and we think our unparalleled audio product will produce strong operating and financial performance for our company in the years to come, which should result in great value to our stockholders.

Sirius XM reported a self-pay net subscriber addition improvement of 148% to 299,348 and the subscriber base rose to an all-time high of 22.3 million subscribers at close the of the quarter. Robust auto sales helped lift the total paid and unpaid trial inventory by 200,000 from year-end to 5.7 million.

According to David Frear, SiriusXM’s Executive Vice President and Chief Financial Officer:

We ended the first quarter with $747 million of cash, after the repurchase of approximately $57 million in aggregate principal amount of our debt during the first quarter. Our leverage at the end of the first quarter improved to 3.9 times our adjusted EBITDA on a gross basis and 2.9 times our adjusted EBITDA on a net basis. Our growing cash flow is reducing our leverage substantially, and this improving credit profile should benefit stockholders as we refinance or pay down more than $1 billionof high coupon debt over the next 15 months.

Along with raising its full-year net subscriber growth guidance, Sirius XM reiterated its 2012 guidance for Revenue of approximately $3.3 billion, Adjusted EBITDA of approximately $875 million, and Free Cash Flow of approximately $700 million.

The replay of a special Sirius XM Q1 recap edition of Playground Radio, which originally aired earlier yesterday morning following Sirius XM’s conference call, is now available for streaming. RBC Capital Markets Global Media Analyst David Bank and Wunderlich Securities Media Analyst Matthew Harrigan offered their instant reactions to Sirius XM’s first quarter results during the program.

Disclosure: Long SIRI