New York - SiriusXM posted a record $3.13 billion in net income in the second quarter and $3.24 billion for the first half, thanks to a one-time $3 billion income-tax benefit that resulted from previous years of net operating losses.
Without the benefit, net income would have been about $136 million. That compares with year-ago net-income of $173.3 million, which included a one-time benefit of $84 million associated with the merger of Sirius Canada and XM Canada.
For the quarter, SiriusXM's total revenues grew 13 percent to $837.5 million, marking the highest revenues for any quarter in satellite-radio history, thanks to subscription-price hikes that the company began to phase in starting in January, strong new-car sales, and growing activations in the used-car market. About 50 percent of subscribers are now paying the $1.50/month subscription increase.
First-half revenues were up 11.9 percent to $1.64 billion.
Because of the revenue gains, the satellite-radio broadcaster raised its 2012 revenue forecast to $3.4 billion from a previous $3.3 billion and stood by its revised forecast of 1.6 million net new subscribers, which was up from the 1.3 million forecast at the beginning of the year.
Monthly churn by self-paying subscribers and the conversion rate of trial subscriptions to paid subscriptions by new-car purchasers were stable in the quarter from the year-ago period at 1.9 percent and 45 percent, respectively.
In boosting second-quarter net income, the company said it used up "substantially all" of the tax benefits of its previous net operating losses in the quarter but expects to use its remaining net operating losses in future quarters to shield income from taxes and therefore boost net income.
Analysts pointed out that the use of net operating losses to boost net income could increase SiriusXM's stock price, thus making it more costly for Liberty Media, the company's largest shareholder owning about 46 percent of the broadcaster's stock, to gain a majority stake. Liberty is in discussions with SiriusXM to increase its stake and has asked the Federal Communications Commission to declare that it has effective control over the broadcaster.
As part of a 2009 deal to save SiriusXM from bankruptcy, Liberty loaned the broadcaster $530 million, which in turn gave Liberty a 40 percent stake in the satellite-radio company.
As previously disclosed, net new subscribers growth rose 38 percent to 622,000, the highest level for any quarter since Sirius and XM merged in July 2008. First-half net adds were up 24 percent to 1.03 million to bring the subscriber base to 22.9 million.
In other announcements, the company said it just added on-demand service to its Internet radio service for PCs, CE devices and smartphones, enabling users to access a catalog of 200 shows and 2,000 hours of content. The company is also on target to launch by year's end a personalized radio service over the Internet and to smartphones, enabling users to "tailor channels to their tastes," Karmazin said.
The company also said OEM satellite radio is in two-thirds of all vehicles manufactured today.