SIRIUS XM Radio Inc. (SIRI - Analyst Report) declared weaker-than-expected financial results for the third quarter of 2013. However, management raised its financial guidance for fiscal 2013.
Quarterly GAAP net income was $62.9 million or 1 cent per share compared with $74.5 million or 1 cent per share in the prior-year quarter. Third-quarter earnings per share of 1 cent fell below the Zacks Consensus Estimate of 2 cents. Quarterly total revenue of $961.5 million exhibits annualized growth of 10.9% but failed to meet the Zacks Consensus Estimate of $969 million.
Quarterly total operating expenses were $677 million compared with $635.6 million in the year-ago quarter. Operating income, in the reported quarter, was around $284.5 million compared with $231.8 million in the prior-year quarter. SIRIUS XM posted third-quarter adjusted EBITDA of $295.7 million against $244.6 million in the prior-year quarter. During the third quarter of 2013, the company repurchased 124 million shares of its common stock for $459 million.
In the reported quarter, SIRIUS XM generated $302.2 million of cash from operations compared with $219.8 million in the prior-year quarter. Quarterly free cash flow was $245.3 million against $195.2 million in the year-ago quarter.
At quarter end, SIRIUS XM had nearly $716.8 million of cash and cash equivalents and $3,650.9 million of outstanding debt compared with $521 million and $2,226.3 million, respectively, at the end of 2012. At the end of the reported quarter, the debt-to-capitalization ratio was 0.53 compared with 0.36 at the end of 2012.
Segment Wise Results
Quarterly Subscriber revenues were $834.1 million, up 10.1% year over year. Advertising revenues were $21.9 million, up 7.3% year over year. Equipment revenues were $18 million, up 1% year over year. Other revenues were $87.6 million, up 22.5% year over year.
During the third quarter of 2013, SIRIUS XM added 513,078 (up 15.1% year over year) net subscribers, which raised the company’s total subscriber base to 25,582,066 at the end of Sep 30, 2013, up 9.5% year over year. Payment category wise, Self-Pay subscribers were 20,670,333 (up 8.6% year over year) while Paid Promotional subscribers were 4,911,733 (up 13.6% year over year).
Important Operating Metrics
In the third quarter of 2013, average revenue per user came in at $12.29 compared with $12.14 in the year-ago quarter. Average self-pay monthly churn rate was 1.8% against 2% in the prior-year quarter. Customer Conversion rate came in at 44%, remaining same year over year. Subscriber acquisition cost stood at $52 compared with $51 in the year-ago quarter.
Management projects full-year 2013 revenues to be approximately $3.77 billion. Free cash flow will likely be $915 million. Self-pay net subscriber additions are expected to be approximately 1.5 million. The company estimated that it will add 1.6 million net new subscribers in 2013. Adjusted EBITDA is estimated to be around $1.14 billion.
For fiscal 2014, total revenue is expected to be more than $4 billion and adjusted EBITDA is likely to be approximately $1.38 billion.
Other Stocks to Consider
SIRIUS XM, the largest broadcast radio service provider in the U.S., currently has a Zacks Rank #2 (Buy). Other TV/Radio broadcasters that also warrant a look include Phoenix New Media Ltd. (FENG - Snapshot Report), LIN Media LLC. and Nexstar Broadcasting Group Inc. (NXST - Snapshot Report). All these stocks carry a Zacks Rank #2 (Buy).