Satellite radio company Sirius XM (SIRI) reported a significant 10% jump in its revenue in the second quarter that ended recently. Its performance during the second-quarter was mainly driven through superior content as it added more channels and shows coupled with major brands and personalities such as Joel Osteen. Also, its short-term pains like expanding the range and depth of its commercial-free music programming with the introduction of three new channels such as women's pop and dance contributed to its top-line growth for the quarter.
Its total paid subscriber base rose 5% during the quarter to $26.3 million as it added 475,472 total net new subscribers. It additionally witnessed a 7% growth in its self-pay subscriber base that reached a record high of 21.6 million during second-quarter 2014.
The New York-based company for the second quarter posted revenue of $1.04 billion as compared with revenue of $940.1 million in the same quarter last year. It also topped analysts' estimates of $1.02 billion for the quarter. However, its net profit for the second quarter fell 4% to $120 million or earnings of $0.02 per cents from $125.5 million or earnings of $0.02 per cents in the same period a year earlier. Nevertheless, its earnings for the quarter came in line with analysts' estimates of $0.02 earnings per share. The drop on revenue was due to higher operating expenses offset a notable gain in revenue and net subscribers.
The outlook continues to be strong
Looking forward, the satellite radio provider raised its full-year revenue forecasts. The company now expects its revenue for the full year to be at $4.1 billion. It previously forecasted revenue of $4.0 billion for the year. Sirius also expects total net subscriber addition of approximately 1.25 million and adjusted EBITDA of around $1.425 billion for the full year. Also, its free cash flow is estimated to come in around $1.1 billion for the year. Its free cash flow had a strong growth of 42% to $335 million as it reduced the share counts through its stock repurchase program.
Sirius XM continues to benefit from the healthy growth rate that rose 7% to 16.5 million during the second quarter. Moreover, auto sales growth is up about 4% so far this year that should drive its sales going forward. According to one of the reports by Reuters, "Worldwide, auto sales in 2014 are seen rising 3.4 percent, according to research firm IHS, while LMC Automotive sees an increase of 5 percent. Talk of sales and the challenges ahead will be a topic of conversation among executives at the Detroit auto show this week."
In addition, Sirius is providing a free access to its radio for new car buyers for a few months and effectively converting them to its paid service subscription that should increase its total net addition. It additionally remains focused to capture growing satellite radio market in automobiles. Sirius is aggressively strengthening its relationship with car makers. Its new car penetration has been remarkable as it captured approximately 70% of the total new car market. Moreover, its conversion rate is pretty strong; that should certainly drive growth for its subscription going forward.
Furthermore, the company continues to benefit from the used car segment that looks strong. It has pretty solid networks of dealers of approximately 13,000 that offer sales information to the company in the second-owner market. Besides, the company has approximately 4,000 dealers who have enrolled with its service lane initiatives and created another distribution channel to capture owners of Sirius XM enabled vehicles.
Also the company is confident about this market that is expected to contribute a net addition of approximately 2 million to its self-pay base this year. It also expects this number to grow at a healthy rate in the long run.
Apart from this, the satellite radio provider is also benefiting from its connected vehicle business. This connected vehicle business is an essential part of its long-term strategy that should enhance its popularity among the OEM and enables the company to offer features related to safety, security and convenience features to auto business. Sirius is also committed to deploy its connected car
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