SiriusXM Hits Record Number of Subscribers in Q2, Profits Slip

Andrew Klips |

More subscribers led to more net revenue for SiriusXM Holdings Inc. (SIRI) , which helped mediate a 4.4 percent decline in profit during the second quarter on the back of higher operating expenses.

The satellite music provider said Tuesday morning that revenue rose 10 percent compared to the second quarter of 2013, from $940.11 million to $1.035 billion.  Subscription revenue rose nearly 8 percent to $878.2 million.  Net income totaled $119.96 million, down from $125.52 million in the year earlier quarter. On a per share basis, profits were flat at 2 cents. Adjusted earnings, which exclude one-time items, surged 60 percent to $131.44 million, compared to $82.05 million in the year prior quarter.

Wall Street called the 2 cent-per-share in profits, but was a little low on their expectations of $1.02 billion in sales.

Notably, more people are using Sirius XM, with the company adding 475,472 new subscribers, including 380,000 net new self-pay subscribers. Sirius set a new record for trial conversions to self-pay, according to chief executive Jim Meyer. Meyer also highlighted all-time bests for adjusted EBITDA ($370 million) and adjusted EBITDA margin (35.7%).

The total paid subscriber base also hit a record high at 26.3 million, up 5 percent from the same time in 2013.

Meanwhile, operating expenses increased 12 percent to $750.77 million from $672.37 million. The rise in costs was widespread and mostly nominal across categories, except for revenue sharing and royalty expenses climbing 28 percent to $200.22 million and costs for customer service and billing jumping 12 percent to $90.1 million.

Sirius has a market capitalization of more than $20 billion, but building value on a per share basis has long been a challenge, with about 6 billion shares outstanding.  The company is trying to put a dent in that count, buying back 350 million shares, about 6 percent of the total outstanding stock, during the quarter. On July 15, the Sirius board approved a $2 billion increase in an ongoing share repurchase plan, lifting the total to $6 billion.  The capital return program was first launched almost two years ago, but was put on hold at the start of the year in connection to Liberty Media Corp. considering buying the stake in Sirius that it doesn’t already own.  Once Liberty changed its mind, the repurchase plan went back into effect in the second quarter.

"Since we launched our capital return program in late 2012, we have returned approximately $3.75 billion to stockholders in less than two years," noted David Frear, Chief Financial Officer, SiriusXM, in a statement this morning.

Looking ahead, Sirius boosted its revenue outlook for 2014 to $4.1 billion from the $4.0 billion it previously guided. The company also reaffirmed its forecast for net subscriber additions of 1.25 million for the year.

Shares of SIRI have risen more than 10 percent from 2014 lows around $3.00 in April, but are still off by about 3 percent this year, closing Monday at $3.38 and trading relatively flat at the noon hour on Tuesday.

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Symbol Name Price Change % Volume
PM.19B Philip Morris International Inc 1.375% Notes 2019 n/a n/a n/a 0
SIRI Sirius XM Holdings Inc. 4.15 0.02 0.48 26,274,257


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