SIRIUS XM Q3 up 3%


SIRIUS XM’s Q3 pro forma total revenue was $630 million, up 3% from Q3 2008 of $613 million. This was the company’s fourth consecutive quarter of positive pro forma adjusted income from ops. It also announced a 19% decrease in pro forma total cash operating expenses compared to Q3 2008. This 3%, or $17 million, increase in revenue was driven by the sale of “Best of” programming, rate increases to the company’s multi-subscription and Internet packages, and the Music Royalty Fee introduced this quarter.

Q3 subscription revenue was $587 million, up 3% from Q3 2008 pro forma subscription revenue of $572 million.

Pro forma amounts exclude the effects of stock-based compensation, purchase accounting adjustments, and assume the merger of SIRIUS and XM occurred on 1/1/08. Monthly average revenue per subscriber (ARPU) was $10.87 in the quarter, up 3% from $10.51 in Q3 2008.

SIRIUS XM ended quarter with 18,515,730 total subscribers, a decrease of 2% from the Q3 2008 pro forma total subscribers of 18,920,911 and an increase of 102,295 from Q3 2009 subscribers of 18,413,435. Self-pay subscribers were 15,456,748, up 266,160 from the 15,190,588 self-pay subscribers in the third quarter 2008 and up 35,405 from Q2 2009. The self-pay monthly customer churn rate was 2.0% in Q3 2009, in-line with Q2 2009, and up from a pro forma 1.7% churn rate in Q3 2008. Ending promotional subscribers were 3,058,982 in the quarter.

“We are very pleased with what we accomplished during the third quarter, especially when considering the macroeconomic issues affecting consumers and the auto industry,” said SIRIUS XM CEO Mel Karmazin. “We managed to grow revenue, grow ARPU, reduce operating costs, increase adjusted income from operations significantly, and refinance higher cost debt. We look forward to continuing this performance. We grew subscribers and improved churn in the quarter, and we are well positioned to take advantage of an economic rebound. We expect to grow subscribers, revenue, and cash flow next year regardless of the magnitude of any recovery.”

SIRIUS XM affirmed its year 2009 guidance of over $400 million in pro forma full-year adjusted income from operations. The company also provided guidance for 2010. “We expect the company’s cash flow growth momentum to continue into 2010, and we project full-year adjusted income from operations to increase approximately 20% next year,” said Karmazin. Based upon assumed 2010 automobile sales of 11.3 million units, SIRIUS XM expects to achieve positive full-year subscriber growth in 2010. The company also expects 2010 revenue growth of mid- to high-single digits, and growth in free cash flow compared to 2009.

Satellite and transmission costs decreased 26%, or $6 million in the quarter,  compared to the same period in 2008 due to reductions in maintenance costs, repeater lease expense, and personnel costs.

Programming and content costs decreased 29%, or $38 million, compared to the same period in 2008, due mainly to a one-time payment recognized in 2008 to a programming provider upon completion of the merger with XM, reductions in personnel and on-air talent costs as well as savings on certain content agreements.

Customer service and billing costs decreased 5%, or $3 million, due primarily to reductions in personnel and customer call center expenses.

Subscriber acquisition costs decreased 17%, or $23 million, and decreased as a percentage of revenue to 17% from 22% in the quarter, compared to the same period in 2008.