Earnings: Subscriber Losses At Sirius Cancel Impact Of Costs Cuts; EPS Flat
Its debt challenges have been side-stepped for now, but Sirius XM (NSDQ: SIRI) Satellite Radio has other issues to worry about. The company’s pro forma revenue grew 5 percent to $605.5 million in the first quarter, below consensus estimates of $647 million, and its loss per share was $0.07, also below analyst forecasts of a loss of $0.02. The company was able to cut costs significantly during the quarter, but most of those gains were offset by a drop in subscribers. Sirius said further cost cuts would enable it to earn about $350 million in earnings before interest, taxes, depreciation and amortization (EBITDA) versus its previous expectations of $300 million, but it did not say if that would come from further cost cuts or subscriber additions.
–Sirius lost 404,422 net subscribers versus a gain of 625,909 during the first quarter of 2008.
–Average revenue-per-user decreased to $10.43 from $10.48, indicating further discounts to seduce new subscribers and keep existing ones.
–Subscriber acquisition costs (primarily advertising, marketing and subsidies) decreased 26 percent to $61.
–Other expense reductions: satellite and transmission costs were down 23 percent; programming was 10 percent lower; and sales and marketing decreased 35 percent.
Significant cost benefit become useless because of the offsetting. Continuous decrease in cost can eventually help in increasing revenue once the number subscriptions stabilize.