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We're just a week away from Sirius XM Radio's (Nasdaq: SIRI ) second-quarter report. The only game in town when it comes to satellite radio has been in a good groove lately. Subscriber counts are climbing again after a brief recessionary lull. Shrewd cost management after the merger of Sirius and XM three years ago has finally transformed a company with billions in accumulated net operating losses into a profitable media company.
Let's go over a few things that I would love to hear CEO Mel Karmazin say next Tuesday.
1. "Earnings and subscribers should continue to grow."
Analysts see Sirius XM earning $0.01 a share over the prior three months. That may not sound like much, but it is for a company with 6.5 billion shares outstanding. Wall Street is banking on a profit of $0.05 a share this year, expanding to $0.07 a share come 2012. Again, that may not seem like much, but it's substantial for a stock priced at a little more than two bucks per share.
Now that Sirius XM has its content and operating costs in check, the challenge will be to accelerate subscriber growth without sacrificing profitability. It's a delicate balance, since new subscribers cost more to acquire than the subscription revenue they generate in any given quarter.
Sirius XM has a good shot at breaking from the low-margin operators that have made terrestrial radio a money pit for investors. Healthy margins with ample net account additions is the one-two punch that would send shorts scrambling to cover their bearish wagers.
2. "There will be a rate hike next year, and it will move the needle."
Karmazin all but promised a material increase in monthly rates during Sirius XM's previous call.
Coinciding with this summer's third anniversary of the merger between Sirius and XM, the end of the FCC-mandated freeze would give Sirius XM the flexibility to increase profitability by bumping its subscription plans higher. For Sirius itself, this would be the first increase in actual primary rates in the platform's history. XM, on the other hand, was originally $9.99 a month before joining Sirius at $12.95 six years ago.
A settlement got in the way of a near-term test of listener pricing elasticity. Sirius XM agreed to wait until 2012 to bump prices higher, but now we're a little more than five months away from that starting line.
It obviously wouldn't be in Sirius XM's best interests if it went public with an exact date and an exact amount for a price increase, but it would be refreshing for Karmazin to once again confirm that an increase was forthcoming and that it wouldn't be some nominal amount.
Analysts see revenue growing just 7% this year, before climbing 11% come 2012. Are analysts baking in a bump in rates or accelerating subscriber growth? Either way, next year's target will be jacked up quickly if Sirius XM provides a little more clarity on the timing and extent of the increase.
3. "Sirius XM 2.0 is going to roll out on time, and it will be a game changer."
We still don't know a whole lot about Sirius XM 2.0, satellite radio's first material refresh. We know that new receivers will have access to more content. Karmazin has indicated an interest in beefing up content targeted at Latinos, a move that should send shivers down the spine of terrestrial specialists Spanish Broadcasting (Nasdaq: SBSAD ) and Entravision (NYSE: EVC ) .
It will also be more interactive. A source told CNET three months ago that the receiver would incorporate on-demand programming, similar to how TiVo revolutionized television viewing. The problem with that is that the sultans of streams -- Spotify, Pandora (NYSE: P ) , and podcast-friendly Stitcher -- already do that.
It's not fair to compare a steady satellite signal with iffy smartphone streaming, but dashboards are certainly getting crowded with eardrum magnets these days. Toyota's (NYSE: TM ) Entune, for example, makes it nearly seamless to stream Pandora and Clear Channel's (OTC: CCMO) beefed up iHeartRadio.
As premium radio, Sirius XM will need to raise the bar above the growing options becoming available to drivers. Karmazin has continuously indicated that the new platform will roll out by the end of this year. Well? If it's really set to hit the market in the coming months, a few more details would be appreciated.
These three things would go a long way in dictating the stock's direction between now and the end of the year. (I can also hope for an increase in guidance for its subscriber count and cash flow projections. Higher conversion rates and lower churn wouldn't hurt, either.)
Your move, Mr. Karmazin.
What would you like to hear in next week's quarterly report? Share your thoughts in the comments box below.