Sirius Earnings: Hefty Expenses Hid Growing Subscribers


While Sirius XM Radio (NASDAQ:SIRI) has been working to gain traction in the used-car market, its business is still largely dependent on new car sales numbers. Vehicle sales surged 17 percent and 4.2 percent in August and September, respectively, and because of the ongoing strength of United States automobile sales, analysts expected the company to report strong results, flush with net subscriber additions.

Even more encouraging for the company’s third quarter prospects was the fact that a new pricing scheme had been implemented, a change that was expected to give the satellite radio provider an operating leverage gain that would positively impact margins. But even before earnings were released Thursday morning, analysts worried that the threat of Apple (NASDAQ:AAPL) and Pandora (NYSE:P), which are competing for the in-vehicle radio market as well, would soon be felt.

The company did show strong growth in net subscriber additions. Before the bell Thursday morning, Sirius XM reported a 16 percent decline in earnings as higher expenses hid the correspondingly strong increase in subscriber additions. Net subscriber additions rose to 513,000 in the past quarter, up from 446,000 additions in the year-ago quarter, bringing the company’s total subscriber base to 25.6 million. The quarter’s subscriber gains helped subscriber revenue rise 10 percent to $834.1 million and total revenue increased 11 percent to $961.5 million. However, Sirius reported a profit of $62.9 million, which represented a decline of the $74.5 million recorded a year ago, as operating expenses jumped 6.5 percent to $677 million.

“SiriusXM had a great quarter, with the 513,000 net subscriber additions and the 373,000 self-pay net additions setting post-merger records for the third quarter,” said Chief Executive Officer Jim Meyer in the earnings press release, referring to the 2008 merger between Sirius and XM.

Shareholders looked beyond that record, and focused on the fact that the company missed both revenue and net income estimates, bidding shares down 3.4 percent to $3.92 per share in premarket trading. Still, the stock is up nearly 35 percent this year to date.

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