SIRIUS XM Radio Inc. (NASDAQ:SIRI) declared mixed financial results for the second quarter of 2011. However, the company generated a record high adjusted EBITDA and massive net subscriber addition. Management also raised its target for fiscal 2011 net subscriber addition.
Quarterly GAAP net income was $173.3 million or 3 cents per share compared with a net income of $15.3 million or break-even per share in the prior-year quarter. Second- quarter 2011 EPS of 3 cents was well above the Zacks Consensus Estimate of 1 cent. Quarterly total revenue of $744.4 million was an improvement of 6.4% year over year, but fell below the Zacks Consensus Estimate of $751 million.
Quarterly total operating expenses were $571.4 million compared with $574.1 million in the year-ago quarter. Operating income, in the second quarter of 2011, was $173 million compared with $125.6 million in the year-ago quarter. Quarterly adjusted EBITDA was $185.1 million compared with $154.3 million in the prior-year quarter.
During the first half of 2011, SIRIUS XM generated $213.5 million of cash from operations compared with $141 million in the prior-year period. Free cash flow (cash flow from operations less capital expenditures) in the reported period was $138.2 million compared with a negative $28.3 million in the year-ago period.
At the end of the second quarter of 2011, SIRIUS XM had $528.3 million in cash and cash equivalents and $2,697.7 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 0.84 compared with 0.93 at the end of fiscal 2010.
Segment Wise Results
Quarterly Subscriber revenue was $639.6 million, up 6.3% year over year. Advertising revenue was around $18.2 million, up 15.4% year over year. Equipment revenue was $17 million, down 8.1% year over year. Other revenue was $69.5 million, up 8.9% year over year.
Subscriber Statistics
During the second quarter of 2011, SIRIUS XM added 452,147 net subscribers, which raised the company’s total subscriber base to 21,016,175 at the end of June 30, 2011. Payment category-wise, Self-Pay subscriber was 17,170,306 and Paid Promotional subscriber was 3,845,869.
Important Operating Metrics
In the second quarter of 2011, ARPU came in at $11.53 compared with $11.81 in the year-ago quarter. Average self-pay monthly churn rate was 1.9% compared with 1.8% in the year-ago quarter. Conversion rate was 45.2% compared with 46.7% in the prior-year quarter.
Subscriber acquisition cost was $54 compared with $59 in the prior-year quarter. Customer services & billing expenses per subscriber was $1 compared with $1.01 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.
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.(NASDAQ:CMCSA).We maintain our long-term Outperform recommendation for SIRIUS XM. Currently, it holds a short-term Zacks #1 Rank (Strong Buy) on the stock.
Quarterly GAAP net income was $173.3 million or 3 cents per share compared with a net income of $15.3 million or break-even per share in the prior-year quarter. Second- quarter 2011 EPS of 3 cents was well above the Zacks Consensus Estimate of 1 cent. Quarterly total revenue of $744.4 million was an improvement of 6.4% year over year, but fell below the Zacks Consensus Estimate of $751 million.
Quarterly total operating expenses were $571.4 million compared with $574.1 million in the year-ago quarter. Operating income, in the second quarter of 2011, was $173 million compared with $125.6 million in the year-ago quarter. Quarterly adjusted EBITDA was $185.1 million compared with $154.3 million in the prior-year quarter.
During the first half of 2011, SIRIUS XM generated $213.5 million of cash from operations compared with $141 million in the prior-year period. Free cash flow (cash flow from operations less capital expenditures) in the reported period was $138.2 million compared with a negative $28.3 million in the year-ago period.
At the end of the second quarter of 2011, SIRIUS XM had $528.3 million in cash and cash equivalents and $2,697.7 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 0.84 compared with 0.93 at the end of fiscal 2010.
Segment Wise Results
Quarterly Subscriber revenue was $639.6 million, up 6.3% year over year. Advertising revenue was around $18.2 million, up 15.4% year over year. Equipment revenue was $17 million, down 8.1% year over year. Other revenue was $69.5 million, up 8.9% year over year.
Subscriber Statistics
During the second quarter of 2011, SIRIUS XM added 452,147 net subscribers, which raised the company’s total subscriber base to 21,016,175 at the end of June 30, 2011. Payment category-wise, Self-Pay subscriber was 17,170,306 and Paid Promotional subscriber was 3,845,869.
Important Operating Metrics
Subscriber acquisition cost was $54 compared with $59 in the prior-year quarter. Customer services & billing expenses per subscriber was $1 compared with $1.01 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.
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.(NASDAQ:CMCSA).We maintain our long-term Outperform recommendation for SIRIUS XM. Currently, it holds a short-term Zacks #1 Rank (Strong Buy) on the stock.
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