SIRIUS XM Posts Mixed 4Q

SIRIUS XM Radio Inc. (SIRI - Analyst Report) declared mixed financial results for the fourth quarter of 2012. Quarterly GAAP net income was $156.3 million or 2 cents per share compared with a net income of $71 million or 1 cent per share in the prior-year quarter.

Fourth-quarter earnings per share of 2 cents were exactly in line with the Zacks Consensus Estimate. Quarterly total revenue of $867.4 million, exhibits an annualized growth of 14%, but fell short of the Zacks Consensus Estimate of $900 million.

Quarterly total operating expenses were $679.3 million compared with $629.3 million in the year-ago quarter. Operating income, in the reported quarter, was around $213.1 million compared with $154.5 million in the year-ago quarter. SIRIUS XM posted quarterly adjusted EBITDA of $230.5 million compared with $167.3 million in the prior-year quarter.

During fiscal 2012, SIRIUS XM generated $806.8 million of cash from operations compared with $543.6 million of cash from operations in the prior-year period. Free cash flow in fiscal 2012 was $709.5 million compared with $406.2 million in fiscal 2011.

At the end of fiscal 2012, SIRIUS XM had nearly $521 million of cash and cash equivalents and $2,226.3 million of outstanding debt compared with $774 million of cash and cash equivalents and $2,685.2 million of outstanding debt at the end of 2011. At the end of 2012, debt-to-capitalization ratio was 0.36 compared with 0.79 at the end of 2011.

Segment Wise Results

Quarterly Subscriber revenue was $774.5 million, up 15.2% year over year. Advertising revenue was $22.4 million, up 8.6% year over year. Equipment revenue was $22.3 million, down 1.7% year over year. Other revenue was $73.2 million, up 6.9% year over year.

Subscriber Statistics

During the fourth quarter of 2012, SIRIUS XM added 534,953 (down 1.5% year over year) net subscribers, which raised the company’s total subscriber base to 23,900,336 at the end of Dec 31, 2012, up 9.2% year over year. Payment category wise, Self-Pay subscriber was 19,570,274 (up 9.3% year over year) while Paid Promotional subscriber was 4,330,062 (up 8.7% year over year).

Important Operating Metrics

In the fourth quarter of 2012, ARPU came in at $12.12 compared with $11.61 in the year-ago quarter. Average self-pay monthly churn rate was 1.8% compared with 1.9% in the prior-year quarter. Customer Conversion rate came in at 44%, remaining same year over year. Subscriber acquisition cost stood at $54 compared with $55 in the year-ago quarter.

Financial Outlook

Management projects full-year 2013 revenue of SIRIUS XM to be approximately $3.7 billion. Free cash flow for 2013 will be $900 million. Self-pay net subscriber additions will be approximately 1.6 million. The company estimated that it will add 1.4 million net new subscribers in 2013. Adjusted EBITDA, in 2013, is likely to reach $1.1 billion.

Other Stocks to Consider

SIRIUS XM, the largest broadcast radio service provider in the U.S., currently has a Zacks Rank #3 (Hold). Other major entertainment broadcasters include Entravision (EVC - Snapshot Report) with a Zacks Rank #1 (Strong Buy), LIN TV Corp. (TVL - Snapshot Report) with a Zacks Rank #2 (Buy) and Discovery Communications Inc. (DISCA - Snapshot Report) with a Zacks Rank #2 (Buy).