Time to Get Sirius

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Satellite radio consolidator Sirius XM Radio (Nasdaq: SIRI) posted its last irrelevant quarterly report this morning. I dismiss the numbers as meaningless for two reasons:

• The results are for Sirius as a stand-alone company, before last week's completion of its merger with XM.
• Key figures were pre-announced by Sirius last month.

In other words, we already knew that Sirius revenue climbed 25% to $283 million, and that the company narrowed its adjusted operating loss by 70%. We also knew that XM actually landed more net new subscribers than Sirius during the quarter. That is the first time that has happened since Howard Stern's arrival. 

However, this morning's report does shed some light on other important metrics. It's a mixed bag there.

The good:

• Subscriber acquisition costs fell, on both an absolute basis and per-gross-subscriber basis.
• Operating expenses clocked in essentially flat, despite the respectable top-line spurt.

The bad:

• The average subscription revenue per user fell (as expected, with existing subscribers adding discounted add-on accounts), but ad revenue per listener also fell. Shouldn't Sirius be able to do a better job of selling the ad space on its non-commercial-free channels? It all adds up to average revenue per user going to $10.49, from $10.71 a year earlier.
• The balance sheet isn't getting any prettier. Negative working capital widened to $822.3 million, and so did the company's negative book value.  

Like mouthwash, these are numbers you gargle with before spitting down the drain. The upcoming quarters will look dramatically different once we begin consuming consolidated results. It may get a bit bumpy at first, but Sirius is already looking for $400 million in cost-saving synergies next year.

The market may not see it that way. It hates radio stocks at the moment. Sirius and overseas satellite provider Worldspace (Nasdaq: WRSP) are trading at nearly identical penny-stock prices of $1.45 and $1.46, respectively. Terrestrial radio operators Emmis (Nasdaq: EMMS), Cumulus (Nasdaq: CMLS), and Spanish Broadcasting (Nasdaq: SBSA) also closed yesterday at $3 a share or less.

Between the ad-market slowdown and drivers spending less time on the road, it's easy to see why Wall Street is down on the sector, but at least Sirius has the merger-based synergies to milk over the next few quarters.

Yes, this morning's Sirius numbers may be practically meaningless, but the fact that it's the last time that they will be irrelevant is actually quite relevant.   

More news than static on the Sirius-XM delays:

• Satellite Radio's Last Independence Day
• Kicking Sirius While XM Is Down
• XM Beats Sirius