New York – Sirius XM Radio reported a reduced loss, higher revenue but fewer net subscribers during the first quarter ended March 31.
The net loss was $50.4 million as compared with a first quarter net loss of $104.1 million last year. Revenue was $586.9 million for the quarter, up from the prior year’s $270.4 million.
Sirius XM reported it had more subscribers in the first quarter than last year at the same time but fewer than the fourth quarter of 2008. Sirius XM ended first quarter 2009 with 18.59 million subscribers, up 3 percent from 17.97 million pro forma subscribers at the end of first quarter 2008 and down 2 percent from fourth quarter 2008 subscribers of 19.0 million.
The pro forma self-pay monthly customer churn was 2.2 percent in the first quarter 2009, as compared with
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self-pay monthly customer churn of 2.1 percent for Sirius and 1.8 percent for XM in the first quarter 2008.
Sirius XM blamed the quarterly decline on slower auto sales and on its recent rate hike for multi-radio subscribers and online streaming subscribers.
Sirius said slower car sales, now at a run rate below 10 million cars per year (down from the typical 15 to 16 million in recent years) hurt first quarter subscriber sales. Also, the churn among self-paid subscribers rose to 2.9 percent during the quarter from below 2 percent for the year ago period, which the company attributed to the recession.
Further, as more budget cars now include satellite radio, fewer customers are signing up for paid service when the promotional period is over. The “conversion rate” from promotional to paid customer dropped to 45 percent for the quarter, down from 51 percent in the first quarter last year. Adding to Sirius’s challenges, consumers were bombarded early in the year with messages that Sirius XM could face bankruptcy, and Circuit City filed for bankruptcy, noted Mel Karmazin, CEO, during a conference call to discuss first quarter results.
Karmazine said, “Satellite radio is now a cash flow growth story,” based on its pro forma adjusted income for the quarter of $108.8 million, the second consecutive quarter of positive adjusted income from operations which is an improvement from last year.
Karmazin said he is more focused at the moment on profitability than growing subscribers. “There is no question we are running this company to generate the greatest amount of cash flow. There was a time when the focus was on adding new content and signing up OEMs and there also was a time when the focus was on adding subscribers at any cost…Today our focus is on making money.”
He explained, “We are very focused on keeping our subscribers very happy and growing our base, but in the current environment, it’s secondary to growing our profits.”
The company, which merged in July 2008, warned investors a few months ago about a possible Chapter 11 filing before Liberty Media invested $530 million in the company. But Karmazin said it has resolved its liquidity problems of earlier this year and said it has sufficient cash to cover both its 2009 and 2010 maturities.
Sirius XM is now predicting $350 million in adjusted income for 2009, higher than the previously predicted $300 million. For the remainder of the year the company hopes its iPhone app will boost sales. (Click here for related product story.) It is predicting the $350 million in adjusted income for the full year, assuming only nine million in car sales and taking into account Chrysler plant closings and bankruptcy and similar possible actions at General Motors.