Mel Karmazin, Sirius XM CEO
by Dennis “Cos” Costa
Company Increases 2010 Guidance to Approximately 1.1 Million Net Subscriber Additions
Sirius XM Radio (NASDAQ: SIRI) today announced that it added 583,249 net subscribers during the second quarter of 2010, and raises full year guidance to ~1.1M net subscribers. This comes after the company already had adjusted its guidance on May 17, 2010 to full year net subscriber additions of over 750K, and FCF of over $100M. A year ago, the company was struggling as the automotive industry restructured and posted a net subscriber loss of (185K) in the same quarter.
The company also stated that they have added 754K net subscribers in the first half of 2010, compared to a loss of (590K) subscribers in the same period of 2009, representing a year-over-year increase of more than 1.1M net subscriber gains.
“Our subscriber results mark the best quarter of gross additions, deactivations and net additions since the merger of SIRIUS and XM in July 2008. The strong execution in both adding subscribers and retaining them resulted in our record-high 19.5 million subscriber milestone, despite continued economic uncertainty. The further improvement in our guidance reflects the attractiveness of satellite radio, but maintains a cautious outlook for continued improvement in the economy.”
Mel Karmazin, Chief Executive Officer of SIRIUS XM.
The company also released additional subscriber metrics with this announcement.
- Gross additions increased by 46% and deactivations decreased by 8% compared to the second quarter of 2009
- Self-pay churn improved to 1.8% for the second quarter of 2010 from 2.0% for the second quarter of 2009
- The conversion rate from a trial subscription improved in the second quarter of 2010 to 46.7%, up from 44.3% in the same quarter of 2009
With this news and upward moving guidance, investors and analysts will be waiting with much anticipation to see how these subscriber metrics will affect the company’s ability to continue togrow cash from its operations. The company is due to report its financial results at the end of July, early August for the second quarter of 2010.
Position: Long SIRI
Cos – I have been having an argument with Spencer about Sirius in my opinion being a nascent media company with hypergrowth ahead. I believe that we will see between 50-100 million subs in the next decade or two because I think Sirius will go standard in cars. Fact is there are 240 million cars on the road.
My question is all of us talk new and used car OEM, but do we have any idea about what Sirius will be releasing for the 2010 Xmas retail lineup? I remember last year they had a press show for retail in August. It was when Demian predicted SkyDock.
I was so high on Skydock but I ended up getting a TTR1! I am expecting some hot product for Xmas. Any clue on the releases? Not Sony but Sirius releases. Thanks
Muscle,
I am in agreement with you that subscriber growth is at an early stage of development for the combined company. The growth/sustainability had a necessary setback with the merger process, and then unfortunately again with the fiscal crisis. With all that inventory sitting out their in used cars, and even now another 6M vehicles rolling out each year (11.5M SAAR), of which about half are becoming subs, it wouldn’t take much to open the flood gates, as it would appear is beginning to happen with this announcement.
Churn management is also a big part of the growth, which means Content must be the very best to keep growth moving at the rate your speaking of.
As for equipment, I believe the whole industry of mobile and hand held devices needs a “nexus” product. Smartphones, iPads, navigation devices, video, delivered on wifi vs streaming vs satellite infrastructure. The system, carrying the best content and functions, delivered seemlessly, is the one that is going to win out? The next generation of products needs to be able to utilize all networks, while delivering premium content, video or audio, and let you make a phone call too.
Too many proprietary technologies right now for any truly universal product to be developed. Consolidation in the services provider industry may solve that problem. In any event I think SXM needs to be focused on Content and Accessibility while maintaining its Satellite Infrastructure, letting the cell phone companies consolidate a bit more while working out their “pipeline” issues.
Hell yeah!!!! Just when everyone was feeling the lowest, Sirius comes out with the almost 600K in adds. Love it. Hope you all bought your shares at the bargain basement prices.
Good information. Thanks for getting it out so quickly.
I agree with Muscle and cos here about the potential for growth. I heard Spencer on the BTR show last night opine that the days of exponential growth are gone. Although I appreciate his insights, I disagree on this point. Pent-up demand for new vehicles has not been exhausted, and long-term sales forecasts reflect this.
With other revenue-increasing and cost-cutting avenues still to be fully exploited as well, I believe we have much to look forward to as investors.
I didn’t hear the show but I believe the real growth is still ahead. Sirius just turned EBITDA positive last year. It has just begun to grow.
Also with 240 million cars on the road there are only 10-16 million new cars sold each year. Used car sales are double or triple that number each year and Sirius has just started to penetrate used cars.
We are in inning #1
I agree 100% and have I’ve always said this for some time. The ramp up on sub growth is at a some point (starting now) has to sky rocket. I’m not going to go and say I saw the almost 600k subs this quarter but I can certainly say I’m not to surprised. As long as they keep penetrating the market(s), continuing adding distribution devices and producing UNIQUE content for all demographics this company has a very bright future.
Agreed.
One thing I am wondering about is ARPU. I think it is a key number. I hope they aren’t just discounting like crazy in order to reduce churn. I hope ARPU is stable or rising.
Also I believe a great way to increase ARPU would be to put Howard on the cell phone apps. I believe ARPU is going to be a key driver for this company in the future, especially when the price freeze comes off next summer and they could do much more tiering.
I don’t mind the discounting to reduce churn as long as its temporary until they build a massive core base to the point where they are growing at a fast enough pace that they can “afford” to let penny pinching customers go, because they’ll be back. I also believe ARPU will have a huge ramp up proceeding the ramp up in subs once you have a base of XXX million there are just wayyy to many opportunities to make a few extra dollars of each sub. Not only Howard lets not forget Live Nation/Ticketmaster, possible international opportunities, boats, airplanes, businesses, television widgets so on so on…I think this is only the beginning & many investors begging for a buy are selling themselves VERY VERY short.