Sirius Satellite Radio (SIRI) just announced their 1Q07 results, showing a 61% increase in revenue to a record $204 million from the year ago quarter, strong first quarter subscriber growth of 556,490 driving ending subscribers to approximately 6,581,045 subscribers.
Sirius ended 1Q07 with almost 6.6 million subscribers up 61% from the 4.08 million subscribers at the end of the year-ago quarter.
During 1Q07, Sirius added 556,490 net subscribers consisting of 192,978 from the retail channel and 364,674 from the OEM channel. In 1Q07, Sirius captured 66% of satellite radio segment share, marking the sixth consecutive quarter for leadership.
Total revenue for 1Q07 increased to $204.0 million, up 61% from $126.7 million for the year-ago quarter. Advertising revenue was $6.7 million during first quarter 2007 and average monthly revenue per subscriber (or "ARPU") was $10.46. Average monthly subscriber churn was 2.3%, and was consistent with previously provided 2007 churn guidance. SAC per gross subscriber addition was $104 for the first quarter of 2007.
Sirius reported a net loss of ($144.7) million, or ($0.10) per share for 1Q07 - a 68% improvement from a net loss of ($458.5) million - or ($0.33) per share for 1Q06. The adjusted net loss for 1Q07 (adjusted to exclude stock-based compensation) improved to ($120.5) million, or ($0.08) per share, a 31% improvement from the adjusted net loss for first quarter 2006 of ($174.0) million, or ($0.13) per share.
Sirius reaffirmed their 2007 guidance of more than 8 million subscribers for the full year of 2007; total revenues approaching 1 billion dollars; average monthly subscriber churn of approximately 2.2 - 2.4%; and SAC per gross subscriber addition of approximately $95.
Full financials after the jump...
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARIES
SUBSCRIBER DATA, METRICS
AND OTHER NON-GAAP FINANCIAL MEASURES
(Dollars in thousands, unless otherwise stated)
(Unaudited)
Subscribers:
For the Three Months
Ended March 31,
2007 2006
Beginning subscribers 6,024,555 3,316,560
Net additions 556,490 761,187
Ending subscribers 6,581,045 4,077,747
Retail 4,234,804 3,000,321
OEM 2,323,683 1,049,036
Hertz 22,558 28,390
Ending subscribers 6,581,045 4,077,747
Retail 192,978 534,958
OEM 364,674 225,343
Hertz (1,162) 886
Net additions 556,490 761,187
Metrics:
For the Three Months
Ended March 31,
2007 2006
Gross subscriber additions 988,458 960,610
Deactivated subscribers 431,968 199,423
Average monthly churn (1)(6) 2.3 % 1.8 %
SAC per gross subscriber addition
(2)(6) $ 104 $ 113
Customer service and billing
expenses per average subscriber
(3)(6) $ 1.15 $ 1.55
Total revenue $ 204,037 $ 126,664
Free cash flow (4)(6) $ (146,715) $ (165,537)
Monthly ARPU:
Average monthly subscriber
revenue per subscriber
before effects of Hertz
subscribers and mail-in rebates $ 10.30 $ 10.70
Effects of Hertz subscribers 0.04 0.03
Effects of mail-in rebates (0.24) (0.58)
Average monthly subscriber
revenue per subscriber 10.10 10.15
Average monthly net advertising
revenue per subscriber 0.36 0.65
ARPU (5)(6) $ 10.46 $ 10.80
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARIES
SUBSCRIBER DATA, METRICS
AND OTHER NON-GAAP FINANCIAL MEASURES - CONTINUED
(In thousands, except per share amounts)
(Unaudited)
Adjusted Loss from Operations:
For the Three Months
Ended March 31,
2007 2006
Net loss $ (144,745) $ (458,544)
Depreciation 26,786 24,933
Stock-based compensation 24,260 284,586
Other income and expense 9,145 11,622
Income tax expense 555 753
Adjusted loss from operations (7) $ (83,999) $ (136,650)
Adjusted Net Loss and Adjusted
Net Loss per Share:
For the Three Months
Ended March 31,
2007 2006
Net loss $ (144,745) $ (458,544)
Stock-based compensation 24,260 284,586
Adjusted net loss (8) $ (120,485) $ (173,958)
Net loss per share (basic and diluted) $ (0.10) $ (0.33)
Stock-based compensation 0.02 0.20
Adjusted net loss per share
(basic and diluted) (8) $ (0.08) $ (0.13)
Weighted average common shares
outstanding (basic and diluted) 1,457,011 1,386,982
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARIES
SUBSCRIBER DATA, METRICS
AND OTHER NON-GAAP FINANCIAL MEASURES - CONTINUED
(Dollars in thousands, unless otherwise stated)
(Unaudited)
Condensed Consolidated Statements of
Operations:
For the Three Months
Ended March 31,
2007 2006
Total revenue $ 204,037 $ 126,664
Operating expenses:
Satellite and transmission 7,330 7,301
Programming and content 57,063 49,934
Revenue share and royalties 27,134 13,527
Customer service and billing 21,654 17,618
Cost of equipment 9,292 3,465
Sales and marketing 32,518 32,279
Subscriber acquisition costs 98,237 109,144
General and administrative 23,403 17,367
Engineering, design and development 11,405 12,679
Depreciation 26,786 24,933
Stock-based compensation 24,260 284,586
Total operating expenses 339,082 572,833
Loss from operations (135,045) (446,169)
Other income (expense) (9,145) (11,622)
Loss before income taxes (144,190) (457,791)
Income tax expense (555) (753)
Net loss $ (144,745) $ (458,544)
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
For the Three Months
Ended March 31,
2007 2006
Revenue:
Subscriber revenue, including effects
of mail-in rebates $ 190,796 $ 115,181
Advertising revenue, net of agency fees 6,721 7,338
Equipment revenue 4,671 3,692
Other revenue 1,849 453
Total revenue 204,037 126,664
Operating expenses (excludes depreciation
shown separately below) (1):
Cost of services:
Satellite and transmission 7,986 8,203
Programming and content 59,998 299,734
Revenue share and royalties 27,134 13,527
Customer service and billing 21,853 17,862
Cost of equipment 9,292 3,465
Sales and marketing 38,162 34,481
Subscriber acquisition costs 100,117 119,043
General and administrative 35,343 31,873
Engineering, design and development 12,411 19,712
Depreciation 26,786 24,933
Total operating expenses 339,082 572,833
Loss from operations (135,045) (446,169)
Other income (expense):
Interest and investment income 6,042 9,937
Interest expense, net of amounts
capitalized (15,192) (17,124)
Equity in net loss of affiliate - (4,445)
Other income 5 10
Total other income (expense) (9,145) (11,622)
Loss before income taxes (144,190) (457,791)
Income tax expense (555) (753)
Net loss $ (144,745) $ (458,544)
Net loss per share (basic and diluted) $ (0.10) $ (0.33)
Weighted average common shares outstanding
(basic and diluted) 1,457,011 1,386,982
(1) Amounts related to stock-based compensation included in other
operating expenses were as follows:
Satellite and transmission $ 656 $ 902
Programming and content 2,935 249,800
Customer service and billing 199 244
Sales and marketing 5,644 2,202
Subscriber acquisition costs 1,880 9,899
General and administrative 11,940 14,506
Engineering, design and development 1,006 7,033
Total stock-based compensation $ 24,260 $ 284,586
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARIES
BALANCE SHEET DATA
(In thousands)
As of
March 31, December 31,
2007 2006
(Unaudited)
Cash, cash equivalents and
marketable securities $ 264,122 $ 408,921
Restricted investments 77,850 77,850
Working capital (270,900) (257,799)
Total assets 1,506,147 1,658,528
Long-term debt 1,067,339 1,068,249
Total liabilities 1,928,057 2,047,599
Accumulated deficit (3,978,465) (3,833,720)
Stockholders' deficit (421,910) (389,071)
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
For the Three Months Ended
March 31,
2007 2006
Cash flows from operating
activities:
Net loss $ (144,745) $ (458,544)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 26,786 24,933
Non-cash interest expense 754 761
Provision for doubtful accounts 2,088 1,777
Non-cash equity in net loss of affiliate - 4,445
(Gain) loss on disposal of assets (4) 221
Stock-based compensation 24,260 284,586
Deferred income taxes 555 753
Changes in operating assets and liabilities:
Accounts receivable 6,639 9,952
Inventory (473) (1,198)
Receivables from distribution partners (7,569) (8,687)
Prepaid expenses and other current assets (9,173) (13,071)
Other long-term assets (2,924) 579
Accounts payable and accrued expenses (47,811) (45,220)
Accrued interest (11,763) (10,460)
Deferred revenue 21,731 44,458
Other long-term liabilities 7,702 7,543
Net cash used in operating activities (133,947) (157,172)
Cash flows from investing activities:
Additions to property and equipment (12,458) (5,496)
Sales of property and equipment 96 52
Purchases of restricted and other investments (310) (2,869)
Purchases of available-for-sale securities - (71,600)
Sales of available-for-sale securities 10,850 104,450
Net cash (used in) provided
by investing activities (1,822) 24,537
Cash flows from financing activities:
Proceeds from exercise of stock options 1,510 1,459
Net cash provided by financing activities 1,510 1,459
Net decrease in cash and cash equivalents (134,259) (131,176)
Cash and cash equivalents at the beginning
of period 393,421 762,007
Cash and cash equivalents at the end of
period $ 259,162 $ 630,831
FOOTNOTES TO PRESS RELEASE AND TABLES FOR NON-GAAP FINANCIAL MEASURES
This press release, including the selected financial information above, includes the following non-GAAP financial measures: average monthly churn; SAC per gross subscriber addition; customer service and billing expenses per average subscriber; free cash flow; average monthly revenue per subscriber, or ARPU; adjusted loss from operations; adjusted net loss; and adjusted net loss per share. The definitions and usefulness of such non-GAAP financial measures are as follows (dollars in thousands, unless otherwise stated):
(1) SIRIUS defines average monthly churn as the number of deactivated
subscribers divided by average quarterly subscribers.
(2) SIRIUS defines SAC per gross subscriber addition as subscriber
acquisition costs, excluding stock-based compensation, and margins
from the direct sale of SIRIUS radios and accessories divided by the
number of gross subscriber additions for the period. SAC per gross
subscriber addition is calculated as follows:
For the Three Months
Ended March 31,
2007 2006
Subscriber acquisition costs $ 100,117 $ 119,043
Less: stock-based compensation (1,880) (9,899)
Add: margin from direct sale of
SIRIUS radios and accessories 4,621 (227)
SAC $ 102,858 $ 108,917
Gross subscriber additions 988,458 960,610
SAC per gross subscriber $ 104 $ 113
(3) SIRIUS defines customer service and billing expenses per average
subscriber as total customer service and billing expenses, excluding
stock-based compensation, divided by the daily weighted average number
of subscribers for the period. Customer service and billing expenses
per average subscriber is calculated as follows:
For the Three Months
Ended March 31,
2007 2006
Customer service and billing
expenses $ 21,853 $ 17,862
Less: stock-based compensation (199) (244)
Customer service and billing
expenses, as adjusted $ 21,654 $ 17,618
Daily weighted average number
of subscribers 6,295,282 3,782,543
Customer service and billing
expenses, as adjusted, per
average subscriber $ 1.15 $ 1.55
(4) SIRIUS defines free cash flow as cash flow from operating activities,
capital expenditures and restricted and other investment activity.
Free cash flow is calculated as follows:
For the Three Months
Ended March 31,
2007 2006
Net cash used in operating activities $ (133,947) $ (157,172)
Additions to property and equipment (12,458) (5,496)
Restricted and other investment
activity (310) (2,869)
Free cash flow $ (146,715) $ (165,537)
(5) SIRIUS defines ARPU as the total earned subscriber revenue and net
advertising revenue divided by the daily weighted average number of
subscribers for the period. ARPU is calculated as follows:
For the Three Months
Ended March 31,
2007 2006
Subscriber revenue $ 190,796 $ 115,181
Net advertising revenue 6,721 7,338
Total subscriber and net
advertising revenue $ 197,517 $ 122,519
Daily weighted average number
of subscribers 6,295,282 3,782,543
ARPU $ 10.46 $ 10.80
(6) SIRIUS believes average monthly churn; SAC per gross subscriber
addition; customer service and billing expenses per average
subscriber; free cash flow; and ARPU provide meaningful information
regarding operating performance and liquidity and are used for
internal management purposes; when publicly providing the business
outlook; as a means to evaluate period-to-period comparisons; and to
compare the company's performance to that of its competitors. SIRIUS
also believes that investors use current and projected metrics to
monitor performance of the business and make investment decisions.
SIRIUS believes the exclusion of stock-based compensation expense in
the calculations of SAC per gross subscriber addition and customer
service and billing expenses per average subscriber is useful given
the significant variation in expense that can result from changes in
the fair market value of SIRIUS common stock, the effect of which is
unrelated to the operational conditions that give rise to variations
in the components of subscriber acquisition costs and customer service
and billing expenses. Specifically, the exclusion of stock-based
compensation expense in the calculation of SAC per gross subscriber
addition is critical in being able to understand the economic impact
of the direct costs incurred to acquire a subscriber and the effect
over time as economies of scale are reached.
These non-GAAP financial measures are used in addition to and in
conjunction with results presented in accordance with GAAP. These non-
GAAP financial measures may be susceptible to varying calculations;
may not be comparable to other similarly titled measures of other
companies; and should not be considered in isolation for, or superior
to measures of financial performance prepared in accordance with GAAP.
(7) SIRIUS refers to net loss before taxes; other income (expense) -
including interest and investment income, interest expense, loss from
redemption of debt and equity in net loss of affiliate; depreciation;
impairment charges; and stock-based compensation expense as adjusted
loss from operations. Adjusted loss from operations is not a measure
of financial performance under GAAP. The company believes adjusted
loss from operations is a useful measure of its operating performance.
The company uses adjusted loss from operations for budgetary and
planning purposes; to assess the relative profitability and on-going
performance of consolidated operations; to compare performance from
period to period; and to compare performance to that of its
competitors. The company also believes adjusted loss from operations
is useful to investors to compare operating performance to the
performance of other communications, entertainment and media
companies. The company believes that investors use current and
projected adjusted loss from operations to estimate the current or
prospective enterprise value and make investment decisions.
Because the company funds and builds-out its satellite radio system
through the periodic raising and expenditure of large amounts of
capital, results of operations reflect significant charges for
interest and depreciation expense. The company believes adjusted loss
from operations provides useful information about the operating
performance of the business apart from the costs associated with the
capital structure and physical plant. The exclusion of interest
expense and depreciation is useful given fluctuations in interest
rates and significant variation in depreciation expense that can
result from the amount and timing of capital expenditures and
potential variations in estimated useful lives, all of which can vary
widely across different industries or among companies within the same
industry. The company believes the exclusion of taxes is appropriate
for comparability purposes as the tax positions of companies can vary
because of their differing abilities to take advantage of tax benefits
and because of the tax policies of the various jurisdictions in which
they operate. The company also believes the exclusion of stock-based
compensation expense is useful given the significant variation in
expense that can result from changes in the fair market value of the
company's common stock. Finally, the company believes that the
exclusion of equity in net loss of affiliate (SIRIUS Canada, Inc.) is
useful to assess the performance of its core consolidated operations
in the continental United States. To compensate for the exclusion of
taxes, other income (expense), depreciation, impairment charges and
stock-based compensation expense, the company separately measures and
budgets for these items.
There are material limitations associated with the use of adjusted
loss from operations in evaluating the company compared with net loss,
which reflects overall financial performance, including the effects of
taxes, other income (expense), depreciation, impairment charges and
stock-based compensation expense. The company uses adjusted loss from
operations to supplement GAAP results to provide a more complete
understanding of the factors and trends affecting the business than
GAAP results alone. Investors that wish to compare and evaluate the
operating results after giving effect for these costs, should refer to
net loss as disclosed in the unaudited consolidated statements of
operations. Since adjusted loss from operations is a non-GAAP
financial measure, the calculation of adjusted loss from operations
may be susceptible to varying calculations; may not be comparable to
other similarly titled measures of other companies; and should not be
considered in isolation, as a substitute for, or superior to measures
of financial performance in accordance with GAAP.
(8) SIRIUS refers to adjusted net loss and adjusted net loss per share as
net loss per share excluding impairment charges and stock-based
compensation expense. Adjusted net loss and adjusted net loss per
share are not measures of financial performance under GAAP. The
company believes adjusted net loss and adjusted net loss per share are
useful to investors to compare its operating performance to the
performance of other communications, entertainment and media
companies. The company believes the exclusion of impairment charges is
appropriate for comparability purposes as the existence, amount and
timing of impairment charges can vary from period to period and can
vary widely across different industries or among companies within the
same industry. The company also believes the exclusion of stock-based
compensation expense is useful given the significant variation in
expense that can result from changes in the fair market value of the
company's common stock.
There are material limitations associated with the use of adjusted net
loss and adjusted net loss per share in evaluating the company
compared with net loss and net loss per share, which reflects overall
financial performance, including the effects of impairment charges and
stock-based compensation expense. The company uses adjusted net loss
and adjusted net loss per share to supplement GAAP results to provide
a more complete understanding of the factors and trends affecting the
business than GAAP results alone. Investors that wish to compare and
evaluate the operating results after giving effect for these costs,
should refer to net loss and net loss per share as disclosed in the
unaudited consolidated financial statements of operations. Since
adjusted net loss and adjusted net loss per share are non-GAAP
financial measures, the calculation of adjusted net loss and adjusted
net loss per share may be susceptible to varying calculations; may not
be comparable to other similarly titled measures of other companies;
and should not be considered in isolation, as a substitute for, or
superior to measures of financial performance prepared in accordance
with GAAP.
I'll be interested to see how Wall Street reacts to this. Sirius continues to portray itself as the stronger company but I'm not so sure. At first glance:
In favor of Sirius:
Twice as many net adds in 1Q07 (580k vs 260k)
In favor of XM:
Lower net loss ($122M vs $145M)
Greater revenue ($264M vs $204M)
Lower churn (1.8% vs 2.3%)
Lower SAC ($65 vs $104)
I've been saying for almost a year now that it seems like XM is deliberately forsaking the growth numbers in an effort to firm up its bottom line, and that its poor marketing performance is as much strategy as incompetence. That continues to be borne out... Sirius wins big on retail, wins big in overall net adds, but XM is on stronger footing financially.
Also, Sirius better plan on getting a LOT bigger if it's going to continue having churn numbers a third higher than XM's. Maybe some of that car-lot-subscriber accounting is coming back to bite them now.
Are both company's out of debt and in positive cash flow?