NEW YORK – SIRIUS Satellite Radio says it should have three million subscribers by the end of 2005, while posting a large quarterly loss of US$177 million.
And, during today’s conference call with financial analysts, company CEO Mel Karmazin said the company can’t wait to get to Canada.
“There is currently the appeals process going on at the regulatory agency,” he said. “We anxiously anticipate entering the lucrative Canadian market as soon as practical, at the conclusion of the regulatory process and the finalization of our agreement with our Canadian partners.”
As of June 30, 2005, the end of the quarter, SIRIUS had 1,814,626 subscribers. The second quarter subscriber figure reflects net additions of 365,931 subscribers, a 184% increase over the same time frame a year ago.
So, for the third time this year, the company is raising its 2005 year-end subscriber guidance and now says it expects to have three million subscribers at year-end, up from previous guidance of approximately 2.7 million subscribers.
This news comes a week after XM boosted its outlook as well.
“(SIRIUS) attributes its revised outlook to continued momentum in the retail and automotive OEM distribution channels, and expectations of strong consumer demand for SIRIUS’ exclusive programming, including the NFL, Martha Stewart Living Radio and Howard Stern, as well as the continued appeal of its commercial-free music,” explains the release.
"Our great second quarter results clearly indicate that momentum for SIRIUS is accelerating," added Karmazin. "We beat Wall Street consensus expectations on all important metrics through a continuing focus on sound business execution, while maintaining low churn and very high levels of customer satisfaction. Plus, our automotive channel showed very strong results and consumers responded favorably to our second quarter retail promotion. Going into the second half of the year, we believe that creative new programming, additional automotive factory programs and the introduction of exciting new products will continue to drive our strong growth for the future."
SIRIUS reported record revenue of $52.2 million (all figures in U.S. dollars) for the second quarter of 2005, a 295% increase over the $13.2 million reported for the year-ago quarter. Average monthly churn during the second quarter of 2005 was 1.4%.
The company reported subscriber acquisition costs (SAC) per gross subscriber addition of $160 for the second quarter of 2005, a 32% improvement over SAC per gross subscriber addition of $234 in the year-ago quarter. The company expects SAC to fall to $145 by the end of 2005.
During the second quarter of 2005, SIRIUS added 244,985 net subscribers from its retail channel, a 137% increase over 103,201 retail net additions in the year-ago quarter, and a 23% sequential increase over 198,558 retail net additions in the first quarter of 2005. The company also added 121,664 net subscribers from its automotive OEM channel, a 375% increase over 25,636 net additions from that channel in the second quarter of 2004, and a 13% sequential increase over 107,855 automotive OEM net additions in the first quarter of 2005.
And, added Karmazin, company research has shown that 86% of the time its subscribers are in their SIRIUS-equipped car, “the subscriber is listening to SIRIUS.”
Despite the good news, the company reported a net loss of $177.5 million for the second quarter of 2005 a 30% deeper loss when compared to the second quarter of 2004.
During the quarter, SIRIUS and the Ford Motor Company announced an agreement that extends SIRIUS’ exclusive relationship with Ford through September 2011, with the option for Ford to extend the agreement through September 2013. Ford and SIRIUS also recently announced that Ford will offer SIRIUS as a factory installed option on select vehicles beginning in August of this year. Ford and Lincoln Mercury expect to generate up to one million SIRIUS subscribers over the 2006 and 2007 model years, and expect to significantly increase factory-installed volumes in the 2008 model year. DaimlerChrysler’s SIRIUS factory installation program continues to be on track, and they expect to produce more than 500,000 SIRIUS subscribers over the 2005 and 2006 model years.
SIRIUS continues to add more innovative programming to appeal to subscribers and advertisers. Beginning this month, SIRIUS will launch its second season of NFL play-by-play coverage as The Official Satellite Radio Partner of the NFL, and introduce Martha Stewart Living Radio and other new programming offerings. The company is also preparing for the arrival of Howard Stern in January 2006 and, in 2007, NASCAR.
SIRIUS ended the second quarter of 2005 with approximately $577 million in cash, cash equivalents and marketable securities, which the company continues to believe is sufficient to reach free cash flow breakeven under its current business plan. SIRIUS’ first quarter of positive free cash flow could be reached as early as the fourth quarter of 2006, further underscoring its expectations to generate positive free cash flow for the full year 2007.
