Despitea slow moving U.S. economy, SIRIUS XM Radio Inc. (SIRI) declared solid financial results for the fourth quarter of 2011. As per management, its growth momentum in 2011 will further expand in 2012.
Quarterly GAAP net income was $71.3 million or 1 cent per share compared with a net loss of $81.4 million or a loss of 2 cents per share in the prior-year quarter. Fourth-quarter 2011 EPS of 1 cent was exactly in line with the Zacks Consensus Estimate. Quarterly total revenue of $783.7 million was an improvement of 6.5% year over year, slightly below the Zacks Consensus Estimate of $788 million.
Quarterly total operating expenses were $629.3 million compared with $664.3 million in the year-ago quarter. Operating income, in the fourth quarter of 2011, was $154.5 million compared with $71.6 million in the year-ago quarter. Quarterly adjusted EBITDA was $167.3 million compared with $144.5 million in the prior-year quarter.
During 2011, SIRIUS XM generated $543.6 million of cash from operations compared with $512.9 million in the prior-year period. Free cash flow (cash flow from operations less capital expenditures) in the reported period was $406.2 million compared with $201 million in the year-ago period.
At the end 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 of cash and cash equivalents and $2,891.7 million of outstanding debt at the end of 2010. At the end of 2011, debt-to-capitalization ratio was 0.81 compared with 0.93 at the end of 2010.
Segment Wise Results
Quarterly Subscriber revenue was $672.5 million, up 8.3% year over year. Advertising revenue was around $20.1 million, up 10.2% year over year. Equipment revenue was $22.7 million, up 9.3% year over year. Other revenue was $68.5 million, down 9.9% year over year.
Subscriber Statistics
During the fourth quarter of 2011, SIRIUS XM added 542,966 net subscribers, which raised the company’s total subscriber base to 21,892,824 at the end of December 31, 2011. Payment category wise, Self-Pay subscriber was 17,908,742 while Paid Promotional subscriber was 3,984,082.
Important Operating Metrics
In the fourth quarter of 2011, ARPU came in at $11.61 compared with $11.80 in the year-ago quarter. Average self-pay monthly churn rate was 1.9%, remaining same year over year. Customer Conversion rate was 44% compared with 45% in the prior-year quarter. Subscriber acquisition cost was $55 compared with $58 in the prior-year quarter. Customer services & billing expenses per subscriber was $1.03 compared with $1.11 in the year-ago quarter.
Future Financial Outlook
Management projected that full-year 2012 revenue of SIRIUS XM will be approximately $3.3 billion. Free cash flow in 2012 will be $700 million. The company estimated that it will add 1.3 million net new subscribers in 2012. Adjusted EBITDA, in fiscal 2012, is likely to reach $860 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 Outperform recommendation on SIRIUS XM. Currently, it holds a short-term Zacks #3 Rank (Hold) on the stock.
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