Despite facing a slow moving U.S. economy, SIRIUS XM Radio Inc. (SIRI) declared excellent financial results for the third quarter 2011. The company generated a record high revenue, adjusted EBITDA and massive net subscriber addition. Management has reiterated its previously set target of net subscriber addition for fiscal 2011.
Quarterly GAAP net income was $104.2 million or 2 cents per share compared with a net income of $67.6 million or 1 cent per share in the prior-year quarter. Third-quarter 2011 EPS of 2 cents easily beats the Zacks Consensus Estimate of 1 cent. Quarterly total revenue of $762.6 million was an improvement of 6.3% year over year, surpassing the Zacks Consensus Estimate of $758 million.
Quarterly total operating expenses were $578.1 million compared with $574.5 million in the year-ago quarter. Operating income, in the third quarter of 2011, was $184.5 million compared with $143.1 million in the year-ago quarter. Quarterly adjusted EBITDA was $197.3 million compared with $169.7 million in the prior-year quarter.
During the first nine months of 2011, SIRIUS XM generated $328.6 million of cash from operations compared with $291.1 million in the prior-year period. Free cash flow (cash flow from operations less capital expenditures) in the reported period was $213.6 million compared with $33.7 million in the year-ago period.
At the end of the third quarter of 2011, SIRIUS XM had $604.6 million of cash and cash equivalents and $2,703.1 million of outstanding debt compared with $586.7 million cash and cash equivalents and $2,891.7 million of outstanding debt at the end of fiscal 2010. At the end of the reported quarter, debt-to-capitalization ratio was 0.81 compared with 0.93 at the end of fiscal 2010.
Segment Wise Results
Quarterly Subscriber revenue was $660.8 million, up 8% year over year. Advertising revenue was around $18.8 million, up 17.8% year over year. Equipment revenue was $15.5 million, down 13% year over year. Other revenue was $67.4 million, down 5.9% year over year.
Subscriber Statistics
During the third quarter of 2011, SIRIUS XM added 333,683 net subscribers, which raised the company’s total subscriber base to 21,349,858 at the end of September 30, 2011. Payment category wise, Self-Pay subscriber was 17,534,310 and Paid Promotional subscriber was 3,815,548.
Important Operating Metrics
In the third quarter of 2011, ARPU came in at $11.66 compared with $11.81 in the year-ago quarter. Average self-pay monthly churn rate was 1.9%, remaining same year over year. Customer Conversion rate was 44.4% compared with 48.1% in the prior-year quarter. Subscriber acquisition cost was $55 compared with $59 in the prior-year quarter. Customer services & billing expenses per subscriber was $1.01 compared with $1.02 in the year-ago quarter.
Future Financial Outlook
Management projected that full-year 2011 revenue of SIRIUS XM will be approximately $3 billion. Free cash flow in 2011 will approach $400 million. The company estimated that it will add 1.6 million net new subscribers in 2011. Adjusted EBITDA, in fiscal 2011, is likely to reach $715 million.
For fiscal 2012, total revenue will be approximately $3.3 billion. Adjusted EBITDA will be around $860 million. Free cash flow will be approximately $700 million.
Recommendation
SIRIUS XM is the largest broadcast radio service provider in the U.S. and the second largest entertainment subscription service provider after Comcast Corp. (CMCSA). We maintain our long-term Neutral recommendation for SIRIUS XM. Currently, it holds a short-term Zacks #2 Rank (Buy) on the stock.
COMCAST CORP A (CMCSA): Free Stock Analysis Report
SIRIUS XM RADIO (SIRI): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment