Looking Ahead to 4th Quarter Results
I find it ironic that a Wall Street Analyst is the only job in the world in which, when they are wrong in their analysis puts the company in a bad light rather than themselves. Now that most Wall Street Analysts have dropped coverage of Sirius XM for the time being, I thought I’d take a shot at doing some projecting myself. I’m going to try my hand at a simplified version that will not require a degree in accounting or economics to understand.
The OEM numbers should be the easiest to estimate. New car sales for Q4 2008 totaled 2,481,069 units, compared to 3,800,000 in 2007. We can safely assume a modest 50% installation rate which tells us that 1,240,534 cars were sold in the quarter equipped with Satellite Radio. Although most believe the subscriber conversion rate on these units to be approximately 50%, the general economy should weaken this number a bit. Last quarter came in at 47%. My best estimate is that 46% signed up for the service in the latest completed quarter which would bring OEM subs in at a conservative 570,646 new subscribers.
130,037 subscribers will have been lost if churn remains at a historical constant of 1.7%. This would bring the total end of year subscribers to 19,361,520. If we add retail and multiple subscription packages such as the highly cross-promoted “Best Of” packages, the company should easily reach its year end goal of 19,500,000 subscribers.
Having made that bold assumption, subscriber revenue should come in at over 600 million dollars, with advertising and equipment revenue bringing total revenue even higher.
Of course, the top line numbers have always been good. The problem facing Satellite Radio has always been controlling its costs. Mel Karmazin has done a great job at Sirius in reducing costs which nearly brought the company to a break even point on its own. It is impossible to estimate the savings that may or may not have been realized in Q4 due to a lack of history since the merger. I firmly expect that the company has greatly reduced its costs for the quarter, yet actions such as these always carry a cost associated with them which may result in a near term offset of any gains that were realized.
Another question remains in whether there will be additional goodwill impairment charges reported. The company did take a charge in Q3, so there is no requirement for them to do so again in Q4.
All of these factor into whether Sirius XM will meet, beat, or miss the -.06 to -.08 range for the quarter, with the consensus being -.07. For each of the last 2 years, Sirius had surprised to the upside in Q4 by .02. With this in mind, I am projecting another upside surprise of -.05, as earnings are expected to be reported soon.
Position: Long Sirius XM
wanna tack on a target price too
Thanks for the update. When do you expect them to end a quarter at .00 or better?
I am not sure they will, but hopefully they will before 4th quarter 2009.
Good prediction Brandon,but I beleive there is a 6 month lag on oem;s turning into paid subscribers as I was when I bought my GM trailblazer in 2007 and got 6months free then paid my subscription.I believe the 2nd and 3rdQ 2008 car sales were the worst in history.so i beleive the numbers will be bad for new subscribers as per forcasted but still growth positive,which is key in this socialistic market we now live in.
did they release a date yet?
“130,037 subscribers will have been lost if churn remains at a historical constant of 1.7%. This would bring the total end of year subscribers to 19,361,520. If we add retail and multiple subscription packages such as the highly cross-promoted “Best Of” packages, the company should easily reach its year end goal of 19,500,000 subscribers.”
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Brandon,
Do you really think we’ll have 140k retail adds? I think that’s pretty optimistic given the trend and the worsening economy. Also, I can’t see how the best of promotion helps with subscription adds. ARPU yes, but subscriptions?
the only reason this could occur is that this is the Xmas season, which is usually the best as well as Jan period with Xmas crossovers/late activations–We do need some new gadgets as the displays at BB are now hidden with everything else
any guess about retail?
The key isnt going to be sub additions but rather showing cost controls starting to be realized
If sirius shows sub additions to be LESS then expected, but cost cutting with bottom line to be much better then expected, watch for an upgrade by S&P plus some PPS increases
Im still waiting to see a very robest marketing push to lock in current 2nd receiver rates plus internet before the increase–i havent seen the push yet via my personal account which could really add a few extra hundred million or so to the bottom line if done correctly–Yet there is only silience which leads me to believe something major is happenning behind the curtain as we speak–Perhaps working with autos,MLB, NFL to lower their costs, which would benefit all for the future–Its going to be an interesting year as most on the street betting against the company–Any positive changes will cause some real modifications to the PPS–if somethings happens
Tremendous Upside potential. This company is growing in a bad economy. The stock price is not in line with the facts on the ground.
the sad part is the only ones who dont seem to think the stock price is in line with where it should be are the shareholders
street still treating this company like a bankrupt candidate–Time will tell
Holy crap Brandon your churn number is way off. A churn rate of 1.7 is 323,0000 on 19 million that is monthly churn you know, so then also multiply that by 3 and you get 969,000.
we shall see…different methodology here.
I was trying to simplify it.
O.K. I see you are basically saying that they will add 500,000 net adds then. That may be true, while I would like it to be, I just dont think it will be. Lets hope I am wrong. I will say this I have heard jmm32 say he heard Stern say that he knows for sure that SIRIXM now has over 20 million I also just saw a Ruters article that stated the had 20 million so while I dont know if they were misspoken/written,or they were just rounding up it was the second such time it has happened so far.
I’m still confused. Brandon, how do you arrive at your 130k churn loss figure?
Winagain35, hell yes 140,000 easy and way more. The 4th quarter has always been a retail quarter.
Let’s hope so. Otherwise, based on your churn figures, we’ll have a net loss in subs. That would be brutal.
based on your method, sirius would have lost 5% of their subscribers in 3 months…
P.S. Winagain that is Gross adds though. The problem is they as said before are going to lose almost a million subscribers if it is a 1.7 churn rate.
Yeah, the question I posed to Brandon was Net retail adds, since he was projecting that the company would end Q4 with 19.5 million total.
Considering the 1.7 churn numbers, I’m a little worried. I think ANY sub growth would be positive.
http://satwaves.com/sp-may-rai.....rating.php
Feb 17 – Standard & Poor’s Ratings Services today placed its ‘CCC’ corporate credit rating for Sirius XM Radio Inc
nd XM Satellite Radio Holdings Inc. (which we analyze on a consolidated basis), as well as all issue-level ratings for the company, on CreditWatch with positive implications. The action is based on the recent announcement that Liberty Media Corp. (BB+/Watch Neg/–) will make a $530 million investment in Sirius and its subsidiaries in the form of a loan and an equity interest.
Liberty has initially agreed to provide a $280 million 15% senior secured loan due December 2012 ($250 million which will be funded today), to repay Sirius’ $171.6 million 2.5% convertible notes due Feb. 17, 2009, and to provide funds for general corporate purposes. Liberty has agreed to provide an additional loan of $150 million to XM Satellite Radio and to purchase up to $100 million of the loans under XM Satellite Radio’s existing credit facilities from the lenders. Sirius still faces significant debt maturities in 2009, with $350 million of XM bank debt maturing May 2009 and $227.5 million of XM 10% convertible senior notes due December 2009.
In addition, Standard & Poor’s believes the company may encounter significant obstacles in meeting its 2009 financial targets of $300 million of EBITDA and modestly positive free cash flow, considering the sharp decline in U.S. auto sales and the weak retail consumer electronics market, which we believe are likely to slow subscriber growth.
“For the Sirius rating to be raised, the company will need to demonstrate progress toward achieving sustainable profitability and positive discretionary cash flow, and address its sizable remaining 2009 maturities,” said Standard & Poor’s credit analyst Hal Diamond.
“We currently believe that the likely extent of a potential upgrade of the corporate credit rating would be limited to one notch, to ‘CCC+’. An upgrade from the ‘CCC’ category would entail progress addressing maturities and operating cash requirements beyond 2009.” (New York Ratings Team)
Yeah, but if he is off, its the company’s fault.
Just to clear things up I think Bradon is saying that gross adds from retail will be about a million and gross adds for OEM are going to be 500,000. Then take the 1 million lost to churn you get 500,000.
P.S. That is possible lets not forget that just last year 4th quarter yielded just over one million net adds proforma.
For the third quarter the company posted 1,846,996 gross additions and 1,502,915 cancellations for a net addition of 344,081 subs.
I think what I’m forgetting to account for is the trial subs, some of which are counted.
At any rate, I think we can assume that Malone has seen the numbers and probably wouldn’t have agreed to the deal without proof of growth.
I dont think it matters to be honest if it is a GM OEM they dont get counted (because SIRIXM gets barely anything for them. If it is a Ford or other then SIRI is getting paid for them anyway. It is just a matter of it being defered revenue or not.
Brandon, I would still fix that because you know this article will get picked up by Seeking Alpha. Can you imagine the comments you are going to get about that. At the very least say you did it to simplify the net add numbers.
If the author means controlling costs by offering sub-standard programming,having DJ’s yak on & on,limited playlists. Basically turning SatRad into terra FM without commercials (yet) then what’s the point??
Just today some dumbassed DJ played music(and a 3 minute commentary) by the band “Guadacanal Diary (an 80’s-90’s themed band by anyone’s category)on “Deep Tracks” The DJ even admitted that classic rock is defined by the time period 1964 – 1977. Prior to playing the song but he thought the song had relevance. It was one of the lamest attempts at knowing the genre I have ever heard.
This is the kind of BS we subscribers/investors have to put up with. How can you expect anyone to put up with such incompetence??
Is this what passes as praise of Mel & his minions running what once was a great medium into the ground???
Recondo72,
Now your talking! These clowns are controlling the WRONG costs! $55 million for that Travis the face eater look alike Oprah. Whatever million they paid that sexless, control freak Martha. $15 million for “Dog.” They need to stop signing “talent” that is so famous that they are known universally by their first name; they ain’t that talented, and they don’t deserve the fame that they fell into. Did I mention Howard? I listen faithfully, but that contract was stupid, and helped put Sirius in hock up to their eyeballs. These morons were spending like it was play money; how could they not know the day of reckoning would eventually come. What jackasses!
The reason for the churn is that Mel and his blowhard cronies are giving people every reason to…… churn.. If I didn’t have a lifetime sub, I would be asking myself in all ernestness, “Is this what I signed up and paid for?” What really kills me is that we tell them SPECIFICALLY what we want – there is no mystery to it. No one is being the least bit vague. They see what happens when subscribers are jerked around; subs cancel and go and tell their friends that Sirius/XM sucks. It doesn’t seem to dawn on them that their incompetence – as you described it – is turning people off and leading to cancellations.
Sirius/XM knows that they are destoying the programming. They know that they are pissing subscribers off. They know that people won’t tolerate it much longer; they have to know that people are jumping ship as they intentionally accelerate and aim the company for the iceberg. They see the numbers, and they see the disenchantment that they have created. The question of all questions is; why on earth don’t they do something… ANYTHING…. to help improve the situation?
All of us work jobs where you are held accountable for our actions, and you damn well better produce results or you will be out on you ASS and replaced in a heartbeat. How is it that these overpaid, nonproducing, lethargic lard asses can get away with their pitiful job performance. Obviously nobody at the company is held accountable for anything, but if they had any conscience at all they would at least feel beholden to the subscribers. We live in a world where the average person gets shit on every day, nobody cares about the customer or customer service (Sirius/XM is horrendous), and the only God most corporations pray to is the ALMIGHTY DOLLAR.
Mark my words – this company will never succeed and never get out of this self imposed hell they are in unless they do an about face and start making subscriber happiness priority number ONE. Heres how it is supposed to work, but these assholes just don’t get it; we pay you our hard earned money, then….. you give us what we want AND what you promised you were going to deliver to us (remember Mel, better everything and the best radio experience anywhere?). THEN, if we have any problems, you get down on your hands and knees and KISS OUR ASSES, and don’t stop kissing until you have resolved whatever you did to piss us off! This is the way it should be. These people should cherish,,, no… WORSHIP us, every last subscriber and unsophisticated shareholder out there. This is what all of us should demand – nothing less.
Satellite radio is getting exactly what it deserves. They give nothing, therefore they should, theoretically, get nothing in return. We have been way too nice to these “incompetents” who have squandered our money and destroyed OUR company. Mel hasn’t saved a Goddamn thing yet, so don’t be so foolish to lavish undeserved praise on this shyster. The only thing he’s done is slowed the ship down a little, but he still has it aimed dead on towards the iceberg – with a stubborn grip of steel on the steering wheel!
Howards contract was dictated by the market. How much do you think Rush makes? http://online.wsj.com/article/.....lenews_wsj
Why do you think Sirius offered him 500 mil? Because someone else was probably offering him 475 mil.
With that said, I think I’ll buy a few more shares. I have to disagree. While some of their programming may have slipped, Sirius XM is vastly superior to FM. There is no comparison.
Sure they could improve. Everyone can make improvements on anything, but 12.95 for what it is today is a great deal. Nothing else comes close.
For those who disagree, there’s always FM (have fun listening to 55 minutes of commercials and 5 minutes of Britney Spears every hour).
Well said SteveO.
It sickens me to be on the side of the street and see the wreck coming. I guess it’s better than being in the car though. Bad thing is I’ve paid for some of the of the gas & insurance!!
Mel & his minions AIN”T listening and a lot of these posters (knowledgable as they are) can’t see the forest for the trees. Got a little over a year left on my multi-year subscription & am undecided whether to renew.
For the posters saying it’s better than FM. Well, it depends on what FM you’re talking about. If you’re talking aobut what you can normally receive in a vehicle; somewhat better (but as you & I and a SHITLOAD of others can attest – “not near as good as it once was”). If you’re talking about FM stations available on the internet;the ones I listen to on my home computer will give those yakking dumbassed DJ’s on most of the SatRad stations a run for their money in both programming and professional ability(the DJ’s/announcers on WXRC/95.7/”The Ride”{Classic Rock} – Charlotte,NC are SUPERIOR to anyone SiriusXM has. SiriusXM comedy channels – what a joke!(“insert pun here”) Slacker’s comedy selections has SiriusXM beat like a stray dog with mange(my apologies to mangy stray dogs).
For the last time when someone like me who was a RABID SatRad fan cannot fully recommend to a potential subscriber that they pay their hard earned money for hardware and/or subscription, what does that say? I personally know 5 or 6 guys in my Air Force Reserve unit who subscribed (years ago) to either Sirius or XM because I told them what a great thing SatRad was.
I couldn’t/wouldn’t do that now. What more do I have to say??
Churn is way off. Very irresponsibe post! How do you get 130,000? Look at past quarters. Churn has always been way higher than 130,000. I’m long SIRI, but I have a terrible feeling that their gonna report negative net adds.
Yea yea yea, you know I heard the same shit about the 3rd quarter to. That was by a guy who said he worked for SIRI (I did not believe him then).
who cares?! They made it through February and are not going bankrupt. Enough said. 4Q is a non issue, and any investor that sells on the bad news will just be back in a month.
Freak’n shorts! Stay long stupid.
Charles – good point. Stern also put Sirius “on the map”, and jump started the subscriptions. The other individuals I mentioned, as good investments per say, are at the very least questionable aquisitions. Most likely they are a complete waste of money, in my estimation.