SIRIUS XM Radio Inc. (SIRI) reported better-than-expected fourth-quarter 2009 financial results. Quarterly revenue of $676.2 million was an improvement of 8.7% year-over-year and also better than the Zacks Consensus Estimate of $658 million. This was primarily due to the sale of “Best of” programming, rate increases to the company’s multi-subscription and Internet packages, and the U.S. Music Royalty Fee introduced in the previous quarter.
Quarterly net income was $14.2 million or break-even compared to a net loss of $245.8 million or 8 cents per share in the prior-year quarter. Fourth quarter EPS of break-even was well above the Zacks Consensus Estimate for a loss of 2 cents.
Quarterly total operating expenses were $592.5 million, compared to $675.3 million. Operating income in the reported quarter was $83.7 million, compared to an operating loss of $53.1 million in the year-ago quarter.
Satellite & transmission costs remained the same year-over-year. Programming and content cost declined 13.4% from the prior-year quarter. Revenue share and royalty costs declined 2.8%. Customer service & billing costs decreased 13.2%. Cost of equipment decreased 32.5%. Sales and marketing costs declined 5.4%. Subscriber acquisition costs declined 3.3%. General & administrative costs were down 30.9%. Engineering, design, & development costs dropped 35% year-over-year.
During fiscal 2009, SIRIUS XM generated $433.8 million of cash from operations, compared to a cash consumption of $152.8 million for operations in the year-ago quarter. Free cash flow (cash flow from operations less capital expenditures) in fiscal 2009 was $185.3 million compared to a negative ($283.3) million in fiscal 2008. At the end of fiscal 2009, SIRIUS XM had $383.5 million cash & cash equivalents and $2,813 million of outstanding debt, compared to $380.4 million cash & cash equivalents and $3,220.5 million of outstanding debt at the end of fiscal 2008.
Segment-Wise Results
Quarterly Subscriber revenue was $588 million, up 3.4% year-over-year. Advertising revenue was $14.5 million, down 8.3%. Equipment revenue was $19 million, marking a drop of 38.1%. Other revenue was $54.7 million, up 662% year-over-year.
Subscriber Statistics
During the fourth quarter of 2009, SIRIUS XM net added 257,028 subscribers, which raised the company’s total subscriber base to 18,772,758. Out of this, OEM subscribers were 10,930,952; Retail subscribers were 7,725,750; and Rental subscribers were 116,056. As far as the Payment category is concerned, Self-Pay subscribers were 15,703,932 and Paid Promotional subscribers were 3,068,826.
Other Important Metrics
In the fourth quarter 2009, average revenue per user (ARPU) was $10.92, compared to $10.65 in the year-ago quarter. Conversion rate was 46.4%, compared to 44.2%. Average self-pay monthly churn rate was 2%, versus 1.8% in the year-ago quarter. Subscriber acquisition cost was $64, compared to $70. Customer services & billing expenses per subscriber was $1.06, versus $1.18.
Future Financial Outlook
Management is expecting full year 2010 revenue to exceed $2.7 billion. Free cash flow will remain positive in 2010. The company also projected the net addition of more than 500,000 subscribers in 2010. Adjusted operating income for full fiscal 2010 is likely to reach $550 million, an improvement of 20% year-over-year.
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