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It's time to start taking Sirius XM Radio (Nasdaq: SIRI  ) seriously.

The country's only provider of satellite radio delivered its fourth consecutive quarter of good news this morning, once again validating its premium-radio business model.

Revenue climbed 16% to $705.6 million, ahead of Wall Street's top-line expectations of $689.4 million. Healthy revenue growth is essential as Sirius XM tries to set itself apart from satellite television giants DirecTV (NYSE: DTV  ) and DISH Network (Nasdaq: DISH  ) , which trade at more attractive valuation multiples. Analysts had pegged all three companies to grow at similar top-line rates in 2011. This kind of quarter will send Wall Street reaching higher.

Sirius XM broke even on the bottom line, reversing a year-ago deficit. However, net income creeps up to $0.01 a share once you back out one-time charges related to the extinguishment of debt.  

Some of the good news was already out of the bag. Sirius XM told investors that it had tacked on 583,249 net new subscribers during the period when it raised its guidance last month.

Free cash flow clocked in at an impressive $108.3 million, silencing critics who fear that the company's chunky debt balance will be its undoing. On that front, Sirius XM closed out the period with its leverage ratio at a historic low.

Keeping up with the welcome trend of previous reports, average revenue per user is climbing, churn for paying customers is dropping, and the conversion rate on free trial expirations is improving.

The company is revising its guidance slightly higher, expecting $2.8 billion in adjusted revenue and $150 million in free cash flow. The move implies that free cash flow will decelerate a bit over the next two quarters, but it's still an inspiring sight for a broadcasting giant that was pondering bankruptcy protection a year ago. Besides, the way that Sirius XM has been ratcheting up its targets in recent months, the trend clearly favors positive revisions with every passing quarter.

Once again, we have 6.4 billion diluted shares outstanding, reflecting Liberty Capital's (Nasdaq: LCAPA  ) 40% preferred stake. Now that Sirius XM is profitable, those shares are working their way into the company's income statement. There are only a handful of stateside companies with a larger number of shares outstanding.

The near-term future is bright for Sirius XM. Sure, Ford (NYSE: F  ) and its peers will see year-over-year sales growth trail off, now that the automotive industry is pitted against last summer's recovery. But an improving economy should translate into even healthier conversion and churn rates for Sirius XM.

If you didn't take the satellite radio star seriously before, it's never too late to start.

Ford is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He does not own shares in any of the companies in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.

Read/Post Comments (6) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 04, 2010, at 10:50 AM, bighairydogcat wrote:

    I still say it is a dying technology. Why buy the cow when you can get the milk for free. Read today's headlines, AT&T/Verizon are moving towards financial transactions via smartphones. Why? Because everyone who has a phone in the near future will have a smartphone, and they want the debit card companies transaction fees I would imagine. These phones allow so much more. Streaming of music/video via Bluetooth or direct plugin(cable) to your Siri capable vehicles factory radio. There are just too many free options for mobile entertainment via smartphones that will allow for Siri to be anything but short term.

    Have a smartphone, download Pandora, or Slacker radio and give it a try.(try on pc/mac too!) Only then can you see my perspective. Also there are thousands of podcasts(similar to siri radio as it is audio only) that cover every genre that are free too. Comedy, Sports, etc.. Want a California radio station in New York? Try I heart radio.. also free.

    I just cannot be convinced to quit laughing. Hehe

  • Report this Comment On August 04, 2010, at 11:19 AM, ThongLover854 wrote: should be your statement is rediculous. Why do you uninformed hacks keep trying this same silly notion of Pandora or nationwide internet radio.

    1. Streaming Unlimited Internet that works nationwide, everywhere does not exist. Bandwidth is being limited and the charges to go over the limits will be huge $$$. And there isn't a carrier that covers the entire USA with no drop zones anyway. You may work/live in a five mile radius...but many people don' Pandora/Internet Radio won't work.

    2. Content. Let me ask you a question laugher...can you get live CNN, CNBC, ESPN and dozens of other news, weather, sports channels nationwide uninterrupted on Pandora? No, you can't...i have the Pandora app..i've tried it twice and it's okay for music but SUCKS for everything else. And that is if i am sitting at my house listening to it...if i decide to drive 500 miles, i'm guessing it would be a total failure.

    But back to Content...if you want to drive from Atlanta to Kansas City and listen to five different baseball games and a soccer game and a preseason NFL game, can you do that on Pandora? i don't think you can SilentMercy. My guess is you would have to use AM or FM, but that wouldn't work either because it would depend on which markets you were driving through.

    If you cannot afford $15/month, I'm sorry. There are plenty of people that can and will pay for a PREMIUM, SUPERIOR service. And when the used car market is handled as well, giving owners the option of buying SIRI for $X month with limited content, that market will increase even more quickly as well.

    And the TTR1 is one of the best technical gadgets of 2010. This WIFI enabled desktop satellite radio streams ALL SIRI channels with only an electrical plug-in. I bought one and i think i'm going to buy another one.

    So then i have my iPhone SIRI app...SIRI in my auto...and two WIFI radios in my house. $15/month including internet so i can listen to SIRI anywhere on any PC...

    So i'm pretty much covered worldwide with SIRI for $15/month. That's pretty cool in my book. And I can listen to any music, talk, sports, comedy I want and I'm happy to pay and I will be happy to pay when they hike the price in a year a couple bucks a month.

    When they have their next price hike, that will equal 20,000,000 subscribers times $2/month for example which comes in at a nice fat HALF BILLION extra revenue, most of it making it to the bottom line...

    So, as you can see...myself and many others love the SERVICE and love the STOCK.

  • Report this Comment On August 04, 2010, at 11:26 AM, Forgiven21306 wrote:

    Have you ever tried listening to radio via smartphone in a non urban setting? I have. It cuts in and out incessantly. I tried it and hated it. There are long stretches of interstate where smart phone reception doesn't even exist. I never closed my account with Sirius and plan to keep it open. My wife and I have been Sirius customers for the past 3 years. It is by far one of the best "entertainment" options we have purchased within those 3 years.

    I only listen to one station on Sirius. The quality of the music and lack of commercials in conjunction with the fact that my satellite radio NEVER cuts out on me, no matter the location is why Sirius beats Pandora, Slacker, and youtube streamed from my droid to my truck radio. I have tried all 3. All 3 depend on networks which are unreliable at best. Who wants to listen to music that chops off and on every 15 seconds?

  • Report this Comment On August 04, 2010, at 11:31 AM, theedge1034 wrote:

    Okay, silentmercy lets refute your short mentality.

    AT&T and the major wireless companies ELIMINATED unlimited data plans, which means if you want 'free' Pandora, you will be paying a good chunk of change to keep streaming unless you are on WiFi. And how do you figure it is free? Data plans start at $15 and work up to $45/month depending on what plan you are.. so the milk is definately not free.

    Have you used Pandora? It is okay, you can't change stations per se, you can't get live content, sports, talk radio, etc and you can only fast forward to the next song for a limited time. This is a weakness of Pandora and any other "streaming" music service. Not to mention, the usage rights to Pandora music will not always be free.

    Podcasts? So, I have to download a Podcast of something that occured in the past to listen now? How many people do you think can do this on a regular basis? The average consumer would rather turn something on and be able to listen now to live content... can you imagine a sports call-in show on a podcast ?

    Everything fits in, I like Sirius for Talk Radio that you cannot hear anywhere else (Opie & Anthony, Ron & Fez, Howard Stern, etc) and also live CNN News, Sporting News Radio and any music category I want. Not to mention being able to listen to ANY NFL, MLB and NHL game that I want to for no extra charge!

    So, keep laughing, the past 4 quarters for Sirius have been on the rise, and you probably won't be laughing last.

  • Report this Comment On August 04, 2010, at 12:36 PM, Grrrrt wrote:

    The question you have to as is why do Pandora dorks feel such a need to come to every SIRI board and non-stop bash SIRI? I don't feel a need to go to Pandora boards and bash that crappy service. I mean, why would I waste my time?

  • Report this Comment On August 05, 2010, at 5:23 PM, Puckplayr4 wrote:

    I don't subscribe to the service but I own the stock. It seems to have stabilized with room for improvement. I will be watching retention numbers very closely over the next couple of years, and any lower than expected numbers will be the red flag of all red flags.

    As for the service...whatever. I'm glad you dorks...err...Fools love it though!

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