SiriusXM’s Q4 of 2012 – Positive Call – Few Concerns
As most investors know SiriusXM (NASDAQ:SIRI) announced the Q4 2012 results yesterday and this was the first quarterly call with Interim CEO James Meyer at the helm. Because SiriusXM had previously announced that it had met or exceeded all guidance for 2012 there was not going to be much in the way of surprises on the financials. Overall the call went very well and prospects for SiriusXM look good for 2013.
There were a few items of note that deserve some attention:
- Subscribers Grow to a Record 23.9 Million
- Record Revenue of $3.4 Billion, Up 13%
- Net Income of $3.5 Billion Includes an Income Tax Benefit of $3.0 Billion
- Adjusted EBITDA Reaches a Record $920 Million, Up 26%
- Free Cash Flow Grows 71% to a Record $709 Million
- churn down to 1.8% for Q4
As you can see things look quite positive and the company is setting some impressive records. There is a reason to remain bullish on this equity. There were however some points that need to be considered by investors that want to understand risk and exposure (even if it is minimal):
- Year over year subscriber growth for Q4 was actually down. The company went from 543,000 in 2011 on 1.9% churn to 535,000 on 1.8% churn. This happened despite better new car sales and despite a more ramped up used car initiative.
- ARPU was down from Q3 by 3 cents. This went from $12.14 to $12.12. This is the first time in several quarters that this metric dipped. It would seem to indicate that the bump in ARPU on the $1.50 price increase is now fully accounted for (or almost there) at $0.51. It is also an indication that retention efforts and discounts are being used to retain subscribers.
- The company offered no time-frame on a share buyback. In addition the company indicated that Liberty may or may not participate on a pro-rata basis on share buybacks. I have been talking a bit about this for a couple of weeks now. Essentially Liberty wants to maintain 50% ownership and the 7% notes, stock options (when exercised), etc. would dilute them below that level. By not selling into a buyback Liberty will maintain above 50%
- SAC was up a bit. I do not consider this a major concern because it is an investment into new subscribers that will be positive to the bottom line. This was more a function of manufacturing cycles than anything else.
Overall things are positive. There will be an impact (an $80 to $90 million one time charge) in Q1 relating to some 320 million shares that will be issued surrounding the tender offer for the 7% notes. We also have a satellite to launch at some point this year which will have cost impacts. Q1 will likely not be as pretty as some may hope because of one time charges. A savvy investor can take advantage of this. The SiriusXM press release on the quarter is available for your review.
Why no mention of your huge miss on EPS?
Lorna….
I covered that in detail in an article on SA
http://seekingalpha.com/articl.....and-misses
The miss was essentially due to the company not booking NOL’s the way they had said they would.
In q2 the company reported $2.99 billion of income tax benefit. That made q2 come in at 48 cents per share. At that point the company guided that it still had $112 million of income tax benefit left to book and that it would be booked this year. In q3 the company booked $20 million. That implied that there was $92 million left to book. At no time did the company give any indication that it was not going to book the remaining $92 million.
I made it clear that the nol benefit equated to about 1.4 cents. And that would be the mechanism by which 4, and possibly 5 cents is possible.
Between not booking the NOL’S, showing a tax payment, and a substantial increase in share count, the issue added up to about 2.3 cents. I also made clear that the NOL issue gets backed out when looking at the real company performance. Thus, a potential pop could have happened if 4 or 5 cents was announced, but I did not expect it to last once there was an understanding of what came from the NOL booking.
Overall my revenue projections were within 2% and cost projections within 5%. I am not sure why the ompany never refined its guidance on this issue, but clearly there was a decicsion not to book these anymore. The amount that they were going to book is based on what they felt they could actually use out of the 8 billion in NOL’s. perhaps subsequent to the q2 announcement the company decided that it may not be able to use what they felt they would 2 quarters previously. Another possibility is that Liberty carried an influence on whether or not to use them.
spence if churn was down how did subs fall short of q42011 it doesn’t make any sence?????
Fraz….
Churn is reported as a percentage.
Think of it this way.
Churn of 1.9% on 1,000,000 is 19,000
Churn of 1.8% on 1,100,000 is 19,800
Are there expansion plans for Europe?
Karen,
Nothing has been announced. The easiest and least expensive way into Europe is via Internet. There is stiff competition there from the likes of Deezer, which is well established already.
We will have to watch for hints coming up in next couple of months. There is most likely some type of expansion coming that will be in the media March or April. It looks to me like overseas, we will have to see what happens. (All comments are based on my astrology research)
Spencer, can you tell me why on earth, did the company not promote the free trial period to the general public thats going on right now? What a missed opportunity. Even a short 10 second superbowl spot would have millions of potential listeners digging out their old sat radios, or tuning in on their in dash units for half a month of FREE Sirius XM Radio. I hopped in my old Jeep Wrangler that had an aftermarket head unit in it which had the Sirius logo in the face, and sure enough…it was up and running. I am hopefull that with Liberty in control, that marketing such as this will improve (begin?)in the near future. I told about a dozen friends and relatives about this and they were very excited about the free trial.However, if there was an announcement, nobody I asked knew anything about it. I only heard from a few websites such as this one. Thank you for your informative and drama free website. I can see that you must have an incredible viewer count based on all the banner ads I see here. Keep up the good work. I am long and strong SIRI