Sirius Weekly Thread May 3, 2010

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Originally Posted by Sirius Roadkill

Several analysts provided upbeat pre-earnings comments today:

Wunderlich Securities analyst Matthew Harrigan repeated his Hold rating, but lifted his target price to $1.25, from $1. He adds that a sustained recovery in U.S. auto sales to the 12 million unit annual rate would push his valuation estimate up to $1.50. He expects Q1 sales of $672.9 million with EBITDA of $138.2 million and “essentially break-even” EPS. He estimates ARPU at $11.06, and subscriber acquisition costs of $64.36.

Barrington Research analyst James Goss this morning repeated his Outperform rating on the shares; he also see a break-even quarter, with revenue of $682.2 million Goss writes that one potential catalyst for the stock could be inclusion in in stock indexes that had removed the shares as the stock price tumbled. Goss keeps his $1.25 target.

Lazard Capital analyst Barton Crockett repeated his Buy rating and $1.35 target. He sees revenue of $666 million, adjusted EBIRDA of $137 million and a profit of a penny a share. Crockett thinks the company will raise its full-year 2010 EBITDA guidance from the current $550 million to $600 million or higher.

Satellite Standard Group analyst Spencer Osborne, in his usual wait-and-see style, does not offer a price target but sees revenue of $704-$712 million, adjusted income from operations of $120-$135 million and EPS of breakeven to a 1 penny profit. Osborne, perhaps the only analyst who actually understands the fundamental metrics of the company, estimates ARPU of $11 and subscriber acquisition costs of $70.

I spoke earlier with with an exhausted Osborne, who will be anchoring live coverage of the conference call tomorrow morning beginning at 7:00 A.M. eastern on Sirius Buzz Radio, who said, "overall the call will carry a positive tone, and should be well received, in particular if they are able to report a positive EPS. The focus will be on guidance, growth, and better economic conditions."

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For the first quarter of 2010, SIRIUS XM recognized total revenue of $670.6 million compared to $605.5 million for the first quarter 2009. This one goes to Matthew Hooligan who called revenue at $672.9 million.

Total ARPU for the three months ended March 31, 2010 was $11.48, compared to $10.48 for the three months ended March 31, 2009. Have to give this one to Osborne who projected $11.

In the first quarter of 2010, the company grew pro forma adjusted income from operations to $157.8 million compared to pro forma adjusted income from operations of $108.8 million for the first quarter of 2009. Hooligan.

Net Income Per Common Share of $0.01 Versus ($0.07) a Year Ago. Gotta give this one to Barton Crooked who nailed it right on the head (of course he did spend a week up David Frear's butt)

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Originally Posted by SiriuslyLong

Yeah, it's getting a little weird. All I can say is that it all started here. One day someone needs to chronicle the story of Sirius Buzz, SW and KOAT.

Though it was interesting to see BM "turn" the guy from MF.

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I have always thought Rick M. was usually fare. He had some articles that missed somethings but for the most part I think he has been a pumper.

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Originally Posted by Sirius Roadkill

For the first quarter of 2010, SIRIUS XM recognized total revenue of $670.6 million compared to $605.5 million for the first quarter 2009. This one goes to Matthew Hooligan who called revenue at $672.9 million.

Total ARPU for the three months ended March 31, 2010 was $11.48, compared to $10.48 for the three months ended March 31, 2009. Have to give this one to Osborne who projected $11.

In the first quarter of 2010, the company grew pro forma adjusted income from operations to $157.8 million compared to pro forma adjusted income from operations of $108.8 million for the first quarter of 2009. Hooligan.

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Hey dont I get any credit I said about 100,000 new subs in April and Mel said, "as of last week we had over the number of subscribers we had EVER." that means they added at least 70,000 as of last week.

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Originally Posted by john

Hey dont I get any credit I said about 100,000 new subs in April and Mel said, "as of last week we had over the number of subscribers we had EVER." that means they added at least 70,000 as of last week.

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that was a good call . . but not yet official . . . now wait til you see my next post!

2010 OUTLOOK

SIRIUS XM continues to project net subscriber additions of over 500,000 for the full year. The company continues to expect to record over $2.7 billion of pro forma revenue in 2010 and to achieve pro forma adjusted income from operations of approximately $550 million. Free cash flow is expected to remain positive for the full year.

You want increased guidance? . . . here's your guidance!

There were some here at SB who thought Mel would increase guidance based on net ads in Q1 . . . some that thought he must increase guidance based on Q1 . . . some who wanted him to increase guidance based on Q1 . . . some who said SP from here on would depend on guidance and then . . . . . there was just one lone voice who said F the analysts, no new guidance.

Thank you Mel . . . well-played. F the analysts!

Now I will grant you, he did tweak the language a bit by adding "over" here and there . . . but with no new specificity as many had hoped for or wanted.

Subscriber acquisition costs increased 28%, or $23.3 million, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. SAC, as adjusted, per gross
subscriber addition (4)(7) $59

Bad miss by Osborne who projected SAC increase to $70

(4) SAC, as adjusted, per gross subscriber addition is derived from subscriber acquisition costs and margins from the direct sale of radios and accessories, divided by the number of gross subscriber additions for the period. See footnote 9 for a reconciliation of the pro forma amounts to their respective GAAP amounts. SAC, as adjusted, per gross subscriber addition is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

Unaudited Pro Forma
-------------------
For the Three Months
Ended
March 31,
---------
2010 2009
---- ----

Subscriber acquisition costs $107,045 $83,710
Less: margin from direct sales of
radios and accessories (6,364) (1,916)
SAC, as adjusted $100,681 $81,794
======== =======

Gross subscriber additions 1,720,848 1,338,961
SAC, as adjusted, per gross
subscriber addition $59 $61

ASSETS
Current assets:
Cash and cash equivalents $268,538mm

Net advertising revenue 14,527 12,304

small contributor yes but ad revenue up 18.07% is still a plus

(6) Free cash flow is calculated as follows (in thousands):

Unaudited Pro Forma
-------------------
For the Three Months
Ended
March 31,
---------
2010 2009
---- ----

Net cash (used in) provided by
operating activities $(37,688) $66,871
Additions to property and
equipment (98,965) (71,140)
Merger related costs - 623
Restricted and other investment
activity 9,450 -
Free cash flow $(127,203) $(3,646)

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Originally Posted by john

I have always thought Rick M. was usually fare. He had some articles that missed somethings but for the most part I think he has been a pumper.

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Rick has acted like a moron for the last 12 months. Nothing but negative. He missed all of his calls as far as I'm concerned. I am glad that he's had a change of heart. But, for any of us that have been long in SIRI for many years, he had been a real thorn in the side during 2009

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Originally Posted by Sirius Roadkill

2010 OUTLOOK

SIRIUS XM continues to project net subscriber additions of over 500,000 for the full year. The company continues to expect to record over $2.7 billion of pro forma revenue in 2010 and to achieve pro forma adjusted income from operations of approximately $550 million. Free cash flow is expected to remain positive for the full year.

You want increased guidance? . . . here's your guidance!

There were some here at SB who thought Mel would increase guidance based on net ads in Q1 . . . some that thought he must increase guidance based on Q1 . . . some who wanted him to increase guidance based on Q1 . . . some who said SP from here on would depend on guidance and then . . . . . there was just one lone voice who said F the analysts, no new guidance.

Thank you Mel . . . well-played. F the analysts!

Now I will grant you, he did tweak the language a bit by adding "over" here and there . . . but with no new specificity as many had hoped for or wanted.

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You see that is just another example, If you recall I had told you that I would not count on Mel saying anything about new sub numbers until at least the second quarter. I think I said something like that is because Mel is Mel and he will wait till it is almost impossible to keep that number and not look foolish. Such as having something like 470,000 subs by the 2nd quarter.

Here Sirius Roadkill this is a perfect example of Mel as himself. read this and after that I will give you my translation of what Mel really said.


Lev Polinsky – JP Morgan

"I wanted to ask a question to better understand the guidance. If I look at $2.7 billion in revenue which is sort of the low end and $550 million in EBITDA and back out the first quarter then I get about 120 basis points of margin compression throughout the rest of the year compared with last year on an EBITDA margin basis. In Q1 you saw pretty good expansion of EBITDA margin ad obviously that is assuming you come in at the low end of revenue guidance. I just wanted to understand if there is spend coming up this year I should be thinking about or how I should be thinking about that implied margin guidance. Then one quick clarification question, do you have the number of the unpaid promo subscribers?"


Mel Karmazin

"Let me take the first one. We mentioned during our opening remarks about not at this time raising guidance. There is nothing we are anticipating in the course of 2010 that is going to change the way the company has been operating and looks as it did in the first quarter. The issue that could change is if in fact we are going to add significantly more subscribers then obviously our SAC costs would go up; something we would be very happy to see occur. But we understand the issue on our guidance. We understand if you annualize the EBITDA from where it is now, we understand everything you have raised and all we can say is that we are looking at the guidance. There is no concern about the rest of the year for the company. You should anticipate it is still early in the year. We just got the April car sales numbers yesterday so you will just have to be a little bit patient before we do anything on guidance. David?"




Translation of what Mel really said: Listen you twit, I know our projections are starting to looking ridiculous but I like to underpromise and over deliver haven't you read that about me. So, NO there are not any extra cost you should be worried about, you dumb twit. You are just trying to force me to give better projections and that is not my style.

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Originally Posted by john

Here Sirius Roadkill this is a perfect example of Mel as himself. read this and after that I will give you my translation of what Mel really said.


Lev Polinsky – JP Morgan

"I wanted to ask a question to better understand the guidance. If I look at $2.7 billion in revenue which is sort of the low end and $550 million in EBITDA and back out the first quarter then I get about 120 basis points of margin compression throughout the rest of the year compared with last year on an EBITDA margin basis. In Q1 you saw pretty good expansion of EBITDA margin ad obviously that is assuming you come in at the low end of revenue guidance. I just wanted to understand if there is spend coming up this year I should be thinking about or how I should be thinking about that implied margin guidance. Then one quick clarification question, do you have the number of the unpaid promo subscribers?"


Mel Karmazin

"Let me take the first one. We mentioned during our opening remarks about not at this time raising guidance. There is nothing we are anticipating in the course of 2010 that is going to change the way the company has been operating and looks as it did in the first quarter. The issue that could change is if in fact we are going to add significantly more subscribers then obviously our SAC costs would go up; something we would be very happy to see occur. But we understand the issue on our guidance. We understand if you annualize the EBITDA from where it is now, we understand everything you have raised and all we can say is that we are looking at the guidance. There is no concern about the rest of the year for the company. You should anticipate it is still early in the year. We just got the April car sales numbers yesterday so you will just have to be a little bit patient before we do anything on guidance. David?"




Translation of what Mel really said: Listen you twit, I know our projections are starting to looking ridiculous but I like to underpromise and over deliver haven't you read that about me. So, NO there are not any extra cost you should be worried about, you dumb twit. You are just trying to force me to give better projections and that is not my style.

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Beautiful! Love it!

Mel can double-talk with the best of them . . . I especially love when he toys with the analysts who try to ask the same question 6-ways-to-Sunday as if Mel is going to somehow slip-up and spill the beans

The analysts are useless bloodsucking parasites . . . they would be more productive to society by harvesting wheat or corn crops (Adam Smith)

The analysts want everything handed to them on a silver platter . . . it's nice when Mel turns the platter sideways and shoves it up their collective $!#&*

Mel is playing his cards just right!

Quote:

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Originally Posted by john

Here Sirius Roadkill this is a perfect example of Mel as himself. read this and after that I will give you my translation of what Mel really said.


Lev Polinsky – JP Morgan

"I wanted to ask a question to better understand the guidance. If I look at $2.7 billion in revenue which is sort of the low end and $550 million in EBITDA and back out the first quarter then I get about 120 basis points of margin compression throughout the rest of the year compared with last year on an EBITDA margin basis. In Q1 you saw pretty good expansion of EBITDA margin ad obviously that is assuming you come in at the low end of revenue guidance. I just wanted to understand if there is spend coming up this year I should be thinking about or how I should be thinking about that implied margin guidance. Then one quick clarification question, do you have the number of the unpaid promo subscribers?"


Mel Karmazin

"Let me take the first one. We mentioned during our opening remarks about not at this time raising guidance. There is nothing we are anticipating in the course of 2010 that is going to change the way the company has been operating and looks as it did in the first quarter. The issue that could change is if in fact we are going to add significantly more subscribers then obviously our SAC costs would go up; something we would be very happy to see occur. But we understand the issue on our guidance. We understand if you annualize the EBITDA from where it is now, we understand everything you have raised and all we can say is that we are looking at the guidance. There is no concern about the rest of the year for the company. You should anticipate it is still early in the year. We just got the April car sales numbers yesterday so you will just have to be a little bit patient before we do anything on guidance. David?"




Translation of what Mel really said: Listen you twit, I know our projections are starting to looking ridiculous but I like to underpromise and over deliver haven't you read that about me. So, NO there are not any extra cost you should be worried about, you dumb twit. You are just trying to force me to give better projections and that is not my style.

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Now here's my translation:

Mel, dismissively patting the research analysts on their heads and in his most derisive tone, exclaiming:

"here boys . . here's your EBITDA guidance. now go back to your little semi-autonomous workstations, load-up your off-the-rack discounted cash flow software and grow some fn hair on your ass"

Some big pullback today huh?


Hope Jon Pluc was lucky enough to ring the bell at $1.11

but somehow I doubt he did . . . poor bastard :p

I am sick and tried of the lack of common sense at The Street.com. There latest bash on SIRIXM (and their last gasp because they have nothing else at this point). Is now that SIRIXM loses ether way on Stern. REALLY have they ever heard you cant have it both ways, you dumb twits. So lets take a look at their logic on this one:

1) They say SIRIXM cant afford to pay Stern that much.

2) They say they cant afford to lose Stern because of all the subscriber he gets them.

REALLY, I mean REALLY is that what they are saying!!!!!!!

Ok so where is the logic in those statements?????


Listen, you twits that makes no sense what so ever. Ether he gets them enough subs to pay for what they are paying him or he does not and then they pay him less or it is worth getting rid of him. IT DOES NOT GO BOTH WAYS. Here you dumb twits let me give you an example: That would be like saying AAPL cant afford having the IPAD because it cost to much to make but they cant stop making it because it is to popular.


Ok now that we have shown that the people at The Street.com are stupid I will show just how stupid they are.

Lets just take each statement by itself.

"1) They say SIRIXM cant afford to pay Stern that much."

Really so how in the hell is that when they hired him they only had about 1 million subs, they now have 9.5 million subs (that takes into account ONLY SIRI half). At least 2.3 million of them Stern is most likely responsible for. Mel has already said, if they get just 1 million subs from Stern then he has paid for himself (and that does not count advertising revenue).


NEXT

"2) They say they cant afford to lose Stern because of all the subscribers he gets them."


That has some merit but the basic fact is that even if they lose 1 million to 1.5 million subs (and that is going way out there) they would still have 17.5 million subs as a total. A loss yes but not anything they cant afford. On top of that they would have 100 million a year to help sofen that blow. Not to mention I dont think that many would leave anyway, it is called the "bate and switch" anyone ever heard of that, it works, that is why businesses use it all the time. The point is that while many of Sterns fans came for him the ones that did most likely (as a matter of fact CAN'T listen to him for more then 5 hours a day). That means they listen to other channels/shows the other time. They can always go where ever Stern gos, but that does not mean they will also cancel their subscription to SIRIXM that they have liked for other things for YEARS NOW. My personal estimate would be that these analyst are all wrong (ONCE AGAIN) about how many subs would churn out because of thisor the other. I think it would actually be closer to (at most) 500,000 then any of their estimates.


So once again there is one basic fact, ether Stern is worth what they are paying him or he is not worth it. That means one two things happen They pay him what they believe he is worth and he stays OR they let him go. Ether way the company sees it they will be more profitable for it. That is the bottom line here it does not go both ways.


Now if I worked for "The Street.com" this would be my logic: The company is losing money on Stern but they will pay him more to keep him because they cant afford to lose him, then I would have to be saying to myself, "really did I justy say that".

P.S. Just so people know. You see what they at The Street.com are trying to do here with those kinds of articles dont you!!!! They are setting you up to say the stock gos down NO MATTER WHAT HAPPENS, that is there agenda. That is the only conclusion I can come up with when someone is that illogical and makes as little sense as that (Havasucker is a perfect example of how bad it gets when you have an agenda).

Reading the Post-Earnings Tea Leaves on Sirius XM Radio
5/5/2010 2:38 PM

As Joseph Hargett reported in Tuesday's Opening View, Sirius XM Radio Inc. (SIRI) was hit by a wave of post-earnings selling pressure. Even though the company's first-quarter profit of 1 penny per share narrowly surpassed analysts' expectations, SIRI is currently mired in red ink for the second day in a row (OK, in fairness, so are most other stocks). In an article yesterday, Franklin Paul of Reuters observed that "investors may take issue with a decline in the quarter in free cash flow." Whatever the cause, investors are certainly taking issue -- SIRI has shed about 9% since its earnings report hit the Street.

Considering the stock's post-event pullback, I found it interesting that calls were the options of choice on SIRI yesterday -- at least, among traders on the International Securities Exchange (ISE). During the course of Tuesday's session, options players on the ISE bought to open 3,246 calls on SIRI, compared to just 9 puts. Most of those bullish bets appear to have been added at the stock's January 2012 1-strike call, which gained 3,359 contracts in open interest overnight.

So, what do we make of this call buying activity? Are bulls buying into the stock's dip, or are short sellers buying calls in order to hedge a fresh round of bearish bets? There's a solid case to be made for either side of the argument -- SIRI has so far found support at its rising 10-day and 20-day moving averages, but shorts have a known affinity for the stock. In fact, short interest on SIRI surged by about 60% during the past month.

-posted by Elizabeth Harrow (eharrow@sir-inc.com)
5/5/2010 2:38 PM

Quote:

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Originally Posted by john

I am sick and tried of the lack of common sense at The Street.com. There latest bash on SIRIXM (and their last gasp because they have nothing else at this point). Is now that SIRIXM loses ether way on Stern. REALLY have they ever heard you cant have it both ways, you dumb twits. So lets take a look at their logic on this one:

1) They say SIRIXM cant afford to pay Stern that much.

2) They say they cant afford to lose Stern because of all the subscriber he gets them.

REALLY, I mean REALLY is that what they are saying!!!!!!!

Ok so where is the logic in those statements?????


Listen, you twits that makes no sense what so ever. Ether he gets them enough subs to pay for what they are paying him or he does not and then they pay him less or it is worth getting rid of him. IT DOES NOT GO BOTH WAYS. Here you dumb twits let me give you an example: That would be like saying AAPL cant afford having the IPAD because it cost to much to make but they cant stop making it because it is to popular.


Ok now that we have shown that the people at The Street.com are stupid I will show just how stupid they are.

Lets just take each statement by itself.

"1) They say SIRIXM cant afford to pay Stern that much."

Really so how in the hell is that when they hired him they only had about 1 million subs, they now have 9.5 million subs (that takes into account ONLY SIRI half). At least 2.3 million of them Stern is most likely responsible for. Mel has already said, if they get just 1 million subs from Stern then he has paid for himself (and that does not count advertising revenue).


NEXT

"2) They say they cant afford to lose Stern because of all the subscribers he gets them."


That has some merit but the basic fact is that even if they lose 1 million to 1.5 million subs (and that is going way out there) they would still have 17.5 million subs as a total. A loss yes but not anything they cant afford. On top of that they would have 100 million a year to help sofen that blow. Not to mention I dont think that many would leave anyway, it is called the "bate and switch" anyone ever heard of that, it works, that is why businesses use it all the time. The point is that while many of Sterns fans came for him the ones that did most likely (as a matter of fact CAN'T listen to him for more then 5 hours a day). That means they listen to other channels/shows the other time. They can always go where ever Stern gos, but that does not mean they will also cancel their subscription to SIRIXM that they have liked for other things for YEARS NOW. My personal estimate would be that these analyst are all wrong (ONCE AGAIN) about how many subs would churn out because of thisor the other. I think it would actually be closer to (at most) 500,000 then any of their estimates.


So once again there is one basic fact, ether Stern is worth what they are paying him or he is not worth it. That means one two things happen They pay him what they believe he is worth and he stays OR they let him go. Ether way the company sees it they will be more profitable for it. That is the bottom line here it does not go both ways.


Now if I worked for "The Street.com" this would be my logic: The company is losing money on Stern but they will pay him more to keep him because they cant afford to lose him, then I would have to be saying to myself, "really did I justy say that".

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Could not have said it better myself john. The day Jimmy Cramer was born he was waaaaa-ing out of both sides of his mouth . . . . I am sure, however, that thestreet.con will not be alone in this inane perspective

Stern Stays . . costs too much in expenses
Stern Leaves . . costs too much in revenue

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Originally Posted by Sirius Roadkill

Could not have said it better myself john. The day Jimmy Cramer was born he was waaaaa-ing out of both sides of his mouth . . . . I am sure, however, that thestreet.con will not be alone in this inane perspective

Stern Stays . . costs too much in expenses
Stern Leaves . . costs too much in revenue

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Every time I ran a scenario, it came out Stern was worth it. Let's try it again.

2 MM subs x $10 / sub = $20MM per month x 12 months per year = $240 MM / year.

Say 1 MM subs; then you $120 MM per year. Say 500k subs; then $60 MM per year.

From a revenue perspective, these scenarios appear favorable. What we don't neccessarily know is expenses.