There are times when an earnings call is all about the financial metrics of a company and times when it is about anything but those metrics. This Q3, Sirius XM's (SIRI) EPS will not really matter. Drilling down into ARPU won't matter, the churn won't mater, nor will the subscriber numbers. This Q3 presentation will not be about how the company performed in Q3 of 2012. Instead it will be all about the next year for Sirius XM. You can almost bank on that.
What you can expect to hear is a more global outlook of the company. It will be about overall revenue rather than Average Revenue Per User (ARPU). You will hear all about 2013 EBITDA guidance and not the figure that the company delivered in Q3. It will be about free cash flow (FCF) expected next year rather than what we saw in Q3. It will be about whether or not Mel Karmazin stays on with Sirius XM through Liberty Media's (LMCA) planned takeover.
The reason that the focus will be on the future and more global is not that there is anything to hide in the current quarter, but rather because the future is looking very robust.
As I have been projecting for a couple of months now, the company will likely announce an EPS of 2 cents, in line with analysts expectations. The company will get the benefit of about $56 million in putting some more NOLs on the books, but there will be substantial costs associated with the refinancing and retirement of debt. These issues will bring in the expected EPS of about 1.6 cents to 2 cents. In fact, my model for the quarter has changed little in the last two months. This is precisely why this call will not be about the current quarter. From many perspectives Q3 will appear very average. The future is what this is all about.
The biggest potential news we will see is that of a share buyback. In fact, this news is already built into expectations of the street. The company could announce as much as a $3 billion share buyback taking place over the next 24 months. There is a distinct possibility that what is announced, or not announced, this Q3 may have impact on the equity either by allowing it to continue a run, or having it settle down some.
Simply stated, there are now some high expectations that have been placed upon Sirius XM. If the quarterly report focuses on the positives of the upcoming year, the street will show its appreciation. While we will still not have certainty surrounding Liberty Media, the story and strategy at this point is pretty well known. The equity could see a little rest early in the week, but as we approach the call, I anticipated that eager investors will want to buy in to participate in what should be the results of a very positive call.