sirius-xm-new-logoThe highly anticipated Q1 numbers are finally out. As expected, Sirius XM is highlighting that they are a “cash flow growth story” and concentrating on bottom line metrics. Mel Karmazin also noted that synergies are coming into play. The company saw a $23 reduction in cash costs despite the condition of the economy.

Karmazin noted, “The growth in adjusted income from $31.8 million in the fourth quarter of 2008 to $108.8 million in the first quarter of 2009 should give investors comfort that we are well positioned to exceed $350 million in adjusted income from operations this year, an increase from our prior guidance to exceed $300 million.”

As expected by this publication, the loss in subscribers was substantial. The company lost 404,000 subscribers. The biggest hit in the sub number came from promotional period subs dropping off. Self paying subs declined only 1%. On the positive side was a substantial decrease in the cost to obtain a subscriber (SAC). SAC was down to $61. Average Revenue Per User (ARPU) dropped to $10.43 from $10.48. The company states that this is reflected by ad sales that are down by 20% offset by higher revenue from the “BEST OF” programming. There are now 700,000 subscribers that are paying an additional $4 per month for “BEST OF” programming (500,000 getting BEST OF Sirius and 200,000 getting BEST OF XM). Should baseball come to the BEST OF XM package, the company has potential to grow that further. Almost all the way across the board, Sirius XM demonstrated substantial cost declines. Overall the loss for the quarter was 7 cents vs. a 2 cent loss expected by the street.

The big news was the adjusted EBITDA. The company had previously indicated that they would finish 2009 with positive $300 million in adjusted EBITDA. The company adjusted guidance by increasing this metric to more than $350 million.

Sirius XM finished the quarter with $375 million in cash and marketable securities. Free Cash Flow was negative $4 million.

Sirius XM noted that overall penetration in the OEM channel was 53%, and that penetration will increase to the high 50’s for 2009. The company highlighted that for the first time the popular Toyota Camry will offer satellite radio as a factory installed option in several trim levels. The conversion rate (consumers who become self paying after a promotional period) has fallen to 45%. The company attributes this decline, in part, to installations in lower end trim levels.

Many investors have been clamoring for a Sirius XM iPhone application. The company announced that they plan to launch an application before the end of the second quarter. Watch for launch to happen early to mid June so that it coincides with Father’s Day. The company states that they anticipate leveraging on air hosts to help market the application.

The company additionally announced that they have renegotiated their deal with General Motors through 2020 at a substantial savings. This is good news because traditionally the GM deal has been the most expensive OEM deal. Details of the deal are not yet available.

[Sirius XM Press Release]

Position – Long Sirius XM Radio