Sirius Revenue Up, But Loss Increases

By Amy Gilroy On Aug 8 2005 - 6:00am

Sirius Satellite Radio reported a $177.5 million loss for its second quarter, but revenue was up and the company managed to beat Wall Street expectations.

The $177.5 million loss for the quarter, ended June 30, was up from the $136.8 million posted during the same period last year. This was somewhat offset by the improved revenue, which increased to $52.2 million, compared to the $13.2 million generated during the year-ago period.

“We beat Wall Street consensus expectations on all important metrics through a continuing focus on sound business execution, while maintaining low churn and very high levels of customer satisfaction,” said Sirius' CEO Mel Karmazin.

Sirius said its subscriber list should climb to 3 million by the end of 2005, up from 2.7 million, marking the third time it has raised subscriber projections this year. The company attributed this jump to the start of the NFL season and the addition of Martha Stewart and Howard Stern to its programming.

Subscribers as of June 30 tallied 1,814,626 with a net addition of 365,931 in the second quarter, or a 184 percent increase over the period a year ago.

The company reported a churn of 1.4 percent for the quarter, and expected to finish the year at approximately 1.5 percent.

Sirius further announced a bond offering of $400 million in senior notes, due in 2013, to “take advantage of favorable market conditions,” according to Karmazin.

Karmazin said Sirius' “red hot” momentum will continue into next year as car factory programs continue to broaden and new products are introduced.

Responding to an analyst's question during an Aug. 2 earnings conference, Karmazin said Howard Stern, during his morning radio show, “talked about a rumor where he was going to be taken off the air at the end of September.” Karmazin said, “We are not interested in interfering with his contract, but when he is free from his contract, we'll start with Howard in January or sooner.” Karmazin promised analysts, “You can be sure there will be no one in the United States that will not know Howard is on Sirius with our promotions.”

In other metrics, Sirius reported negative earnings before interest, taxes, depreciation and amortization (EBITDA) of $108.8 million for the quarter, which widened by $11.5 million over the same period last year, although, again, it beat analyst expectations, said a spokesman. Sirius also reported more severe EBITDA losses for the end of the year, increasing its guidance for the metric, from $510 million to $540 million for the year.

In terms of retail market share, Sirius said it is on track to reach parity with XM. According to Karmazin, research firm The NPD Group, Port Washington, N.Y., has Sirius' retail market share at 48 percent for the quarter and 53 percent for the month of June. Part of the improved retail performance was due to strong sales at RadioShack, according to a Sirius spokesman. Sirius' retail market share has increased from 7 percent in 2002, Karmazin said.

To further boost retail sales, Sirius announced it will reduce the price of its popular Starmate plug-and-play receiver to $79, from $99, as part of an NFL national promotion through September that will be supported by broadcast and print advertising. The company will also offer a $30 rebate on other plug-and-play receivers.

Sirius reported a 375 percent increase in OEM sales growth for the second quarter. Subscriber acquisition costs were $160 for the quarter, and expected to fall below $145 for the year.