Rising Auto Sales Drive Sirius XM Subscriber Growth

Sirius RadioSirius XM's (SIRI) first quarter results impressed as its total subscribers reached a new high of 20.6 million, up 9% from a year ago. Its adjusted EBITDA was $181 million, up 15% year-over-year. Management mentioned that subscriber growth was supported by a rebound in the auto industry. Both Ford (F) and GM (GM) have also reported encouraging earnings recently.

Despite the problems for the OEM supply chain caused by Japan's earthquake, the firm expects to increase net new subscribers by 1.4 million in 2011. While we anticipate Sirius's average revenue per subscriber will continue to grow to around $160 by the end of forecast period, Trefis members predict higher per subscriber revenue of $185, implying a premium of just under 20% to our $2 price estimate for SIRI stock.


Impressive Results

A revival in automobile sales helped lift Sirius XM's net subscriber numbers in the first quarter to 373,064 -- an increase of 118% from the same period last year. The company's churn rate has remained more or less stable at 2% of total paid subscriptions, while its free cash flow improved by $110 million year-over-year. However, its average revenue per user was up by a marginal $0.04, which was a result of higher sales of premium services, including "best of" programming, data services and streaming, according to the company. For full year 2011, Sirius XM guides for adjusted EBITDA of $715 million, and free cash flow of closer to $350 million.

New Positive Developments

Citing strong quarterly performance, subscriber growth and debt reduction, Moody's has upgraded Sirius XM's debt ratings from B3 to B2 (still around 5 levels below investment grade) and raised its probability of default rating from B2 to B1.

Sirius has also entered the television app market by signing a deal with Samsung (SMSN) so that the Sirius XM app will now be included on Samsung televisions. As many TVs are Internet-enabled today, consumers will be able to access radio content on their TV sets using Sirius XM app, just as with Netflix (NFLX). This will provide a tough new source of competition to Internet radio players like Pandora, and will also lower Sirius' dependence on automobile sales for its revenues in the long run.

Our complete analysis for Sirius XM's stock is here.

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7 Comments

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George McSweeney

I consider us lucky here in Hawaii xm/sirrus is not available. somme rentals have the option available but however for some reason I think the way the sattelites are positioned... we don't have the signal here. Well thats a partial truth actually. On cable TV and satellite TV (Dish network is the only one I knows for sure) has music channels on their lineup. No talk stuff though.

June 08 2011 at 2:44 AM Report abuse rate up rate down Reply
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June 08 2011 at 12:47 AM Report abuse rate up rate down Reply
papadb24

What increase in Auto Sales? More Aol Propaganda.

June 07 2011 at 11:18 AM Report abuse +2 rate up rate down Reply
Mary Dwelch

yes you can save money on your auto insurance by making few simple changes search on the web for "Auto Insurance Clearance" gave me the lowest rate, most people can simply save money by checking rates with other company.

June 07 2011 at 5:50 AM Report abuse -1 rate up rate down Reply
Robbie

Interestingly, I decided to do some checking on Syrius complaints after I posted my last comment. It seems this has been going on for a couple of years. Since they still do it, I assume some BIG BOYS have a big stake in Syrius. Again, TOO FUNNY!!

June 06 2011 at 8:29 PM Report abuse +1 rate up rate down Reply
Robbie

Is this article for real? Maybe Sirius has increased it's subcribers by using UNAUTHORIZED renewals from people whose credit card numbers they have on file previously. This has happened to myself and 2 other people that I know in the last month. I suggest Trefis (or any other self-serving shyster operation dig a bit deeper before they analyze squat. Too funny. Except it's not!

June 06 2011 at 8:04 PM Report abuse +1 rate up rate down Reply
1 reply to Robbie's comment
jenyouwino

Fortunately my card on record had a suspect transaction and was canceled. That was about the time Sirius gobbled up XM. I say gobbled up because what was good on XM was replaced with a Sirius sound alike. They were sorry excuses and that's all I'll say. Sirius tried to tap my card, but of course it didn't work. I canceled my subscription, and listening to Sirius/XM recently in a rental car gives me no reason whatsoever to think it was a bad move.

June 07 2011 at 10:57 PM Report abuse rate up rate down Reply