Sirius XM Cuts Losses In Q3 - Twice

Sirius XM Cuts Losses In Q3

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Sirius XM reported stronger revenues and a reduced loss for its third quarter compared with last year, but net subscribers fell as sales of automobiles slid.

Pro forma revenue increased 16 percent for the third quarter, ended Sept. 30, to $612.8 million, up from pro forma total revenue of $529.3 million for the period a year ago.

CEO Mel Karmazin called the results "impressive" given the macroeconomic picture, noting the No. 1 radio company, Clear Channel saw a third-quarter revenue decline of 7 percent, and CBS was down 12 percent.

Net loss was $217.0 million, compared with a pro forma net loss of $265.5 million last year. Actual results included a $4.8 billion impairment charge to goodwill, related mainly to the slide in the company's stock price

Karmazin assured analysts repeatedly during a conference call last week that Sirius XM is confident it will refinance its over $1 billion in debt, including an initial payment of $210 million due in February, which has been a point of concern to analysts.

"We are in active discussions with holders of existing debt and a significant number of additional lenders. Diligence is underway," Karmazin said, explaining, "We are hopeful and confident of refinancing that traunch," referring to the February payment.

Sirius XM remained ahead of last year in total subscribers, up 17 percent to 18.9 million, compared with 16.2 million a year ago. But results for the quarter in net new subscribers were down considerably, as auto sales nosedived.

The company added 344,100 net subscribers, compared with 839,750 for the quarter a year ago. It showed a loss of 149,416 retail subscribers, compared with a gain of 46,730 for the quarter last year. OEM new subscribers totaled 492,215, compared with 783,400.

On the plus side, Karmazin said thousands of consumers are converting to the higher-cost Best of Both service plan each day and that the company is now reducing conflicting channels.

Karmazin said adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) excluding merger related costs was a loss of $9 million for the quarter, compared with a loss of $104 million last year. "We're very pleased with how quickly we're achieving cost savings" due to the merger, Karmazin said, claiming the company has reduced 22 percent of the combined workforce.

Sirius XM reported a 64 percent improvement in pro forma adjusted loss from operations of $37 million before purchase accounting and restructuring costs.

Average monthly self-pay customer churn was 1.7 percent, compared with 1.6 percent last year, and subscriber acquisition costs (SAC) per gross subscriber addition was $74, an improvement of 15 percent over the quarter last year of $87.

Average monthly revenue per subscriber (ARPU) was $10.47, down from $10.75.

During the confernece call, Karmazin did not mention, nor was he asked about, Directed Electronics' decision to exit the Sirius-branded hardware business (see p. 4). Requests for a comment on the situation by Sirius XM after the briefing were not answered at press time.

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