SIRIUS XM Q1 Earnings In Line, Revs Beat - Analyst Blog

SIRIUS XM Holdings Inc. SIRI reported better-than-expected financial results for the first quarter of 2014. The company generated record high adjusted EBITDA as a considerable number of subscribers stayed on after an initial promotional period.

Quarterly GAAP net income came in at $94.1 million or 2 cents per share compared with $123.4 million or 2 cents per share in the prior-year quarter. First-quarter net earnings per share of 2 cents were exactly in line with the Zacks Consensus Estimate.

Quarterly total revenue of $997.7 million exhibits annualized growth of 11.2% and also outpaced the Zacks Consensus Estimate of $991 million.

Quarterly total operating expenses totaled $750.3 million compared with $650.5 million in the year-ago quarter. Operating income, in the reported quarter, was around $247.4 million as against $246.9 million in the prior-year quarter. SIRIUS XM posted record first-quarter adjusted EBITDA growth of 27.8%, bringing the figure to $334.8 million.

In the first quarter of 2014, SIRIUS XM generated $251.4 million of cash from operations compared with $167.9 million in the year-ago quarter. Quarterly free cash flow was $222.8 million against $142.5 million in the year-ago quarter.

At quarter end of the reported quarter, SIRIUS XM had nearly $121.2 million of cash and cash equivalents and $3,440.7 million of outstanding debt compared with $134.8 million and $3,093.8 million, respectively, at the end of 2013. At the end of the reported quarter, the debt-to-capitalization ratio stood at 0.52 against 0.53 at the end of 2013.

Segment Results

Quarterly Subscriber revenues were $851.4 million, up 8.7% year over year. Advertising revenues stood at $22.2 million, up 9.9% year over year. Equipment revenues were $24 million, up 32.1% year over year. Other revenues were $100.1 million, up 32.2% year over year.

Subscriber Statistics

During the first quarter of 2014, SIRIUS XM added 266,799 (down 41.1% year over year) net subscribers, which reached the company's total subscriber base to 25,826,109 as of Mar 31, 2013, up 6.1% year over year. Payment category wise, Self-Pay subscribers totaled 21,255,297 (up 7% year over year) while Paid Promotional subscribers were 4,570,812 (up 2.1% year over year).

Important Operating Metrics

In the reported quarter, average revenue per user came in at $12.18 compared with $12.05 in the year-ago quarter. Average self-pay monthly churn rate was 1.9% against 2% in the prior-year quarter. New Vehicle Customer Conversion rate came in at 42% versus 44% in the year-earlier quarter. Subscriber acquisition cost stood at $35 compared with $47 in the year-ago quarter.

Financial Outlook

Management expects full-year 2014 revenues to cross the $4 billion mark. Free cash flow will likely be $1.1 billion. The company estimates an addition of 1.25 million net new subscribers in 2014. Adjusted EBITDA is projected to be around $1.38 billion.

Other Stocks to Consider

SIRIUS XM, the leading broadcast radio service provider in the U.S., currently has a Zacks Rank #3 (Hold). Other better-ranked TV/Radio broadcasters that warrant a look include Phoenix New Media Ltd. FENG, Entravision Communications Corp. EVC and Saga Communications Inc. SGA. All these stocks carry a Zacks Rank #2 (Buy).