Sirius XM Posts Profit, More Subs

By Joseph Palenchar -- TWICE, 5/17/2010

NEW YORK — Sirius XM Radio in the first quarter posted a net profit for the second quarter in a row and expanded its subscriber base for the third quarter in a row.

The company attributed its 171,441 net subscriber additions to better-than-expected new car sales, improving retail sales, and a greater number of new-car buyers converting promotional subscriptions to paid subscriptions.

These factors contributed to a first quarter net profit of $41.6 million, on a GAAP basis, as did cost controls, declining borrowing costs and average revenue per user (ARPU) that grew 10 percent year-over-year, the company said. Rising ARPU, in turn, was driven in the quarter by the charging of a music royalty fee, rate increases on the company’s multi-subscription and Internet-streaming rate plans, and 1.1 million subscribers who’ve stepped up to the company’s “Best Of” subscription option.

For the quarter ending March 31, Sirius XM expanded its subscriber base by 171,441 people, to 18.9 million. By last week, however, continued net adds boosted subscriber levels beyond the company’s 19 million peak enjoyed at the end of 2008, CEO Mel Karmazin said.

The first quarter’s net adds of 171,441 followed a fourth-quarter 2009 gain of 257,028 net adds and a third-quarter 2009 gain of 102,295. The three-quarter trend reversed a string of net subscriber losses that reduced the company’s yearend 2009 subscriber base by 1.2 percent compared with the end of 2008.

For the first quarter, total revenues were up 13 percent year over year to $663.8 million.

Despite what company officials called improving retail sales, the base of subscribers who own a satellite radio bought at a retail store continued to shrink, though at a markedly slower pace on a sequential basis. The retail subscriber base fell to 7.42 million from the fourth quarter’s 7.73 million, which was down markedly from the third quarter’s 9.04 million.