Like wedging a crumpled dollar bill into a vending machine, a buck keeps coming back to Sirius XM Radio
Shares of the satellite radio provider popped back up to a $1 close yesterday, after it posted a better-than-expected subscriber count and ramped up its projection for all of 2010.
I briefly touched on the uplifting news during yesterday's bullish counter to my earlier bearish argument, but the fresh numbers warrant a little more discussion.
Beyond the 583,249 net additions during the quarter, Sirius XM put out other encouraging performance metrics for the second quarter. Since it won't be releasing its actual report until early next month, this is what we have to chew on between now and then.
I'll italicize the press release comments and follow them up with a few thoughts.
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Gross additions increased by 46% and deactivations decreased by 8% compared to the second quarter of 2009. The year-over-year comparisons are impressive, but keep in mind that last year's second quarter was also one of the only two quarters in which the satellite radio industry suffered a sequential dip in net subscribers. In other words, these sums are stacked on top of last year's depressed metrics.
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Self-pay churn improved to 1.8% for the second quarter of 2010 from 2.0% for the second quarter of 2009. This is impressive. Forget last year's 2% churn rate in the heart of the recession when consumers were cutting costs. Churn was also 2% during this year's first quarter, so there is substantial sequential improvement there, too.
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The conversion rate from a trial subscription included in the sale of a vehicle to a self-pay subscription improved in the second quarter of 2010 to 46.7%, up from 44.3% for the second quarter of 2009. Again, it's not a surprise to see the year-over-year boost. As long as we don't dip back into a recession, 44% may be the floor when it comes to conversion rates. This year's first quarter conversions clocked in at 45.2%, so once again there is healthy sequential improvement there. Cynics who feel that free streaming through Apple
(Nasdaq: AAPL) smartphone apps is eating into Sirius XM's growth need to explain why conversion rates for premium radio continue to inch higher.
However, the most impressive move is Sirius XM's upping its subscriber guidance to 1.1 million net additions this year. In other words, Sirius XM expects to close out the year with a whopping 19.9 million subscribers.
Sirius XM clearly feels that automakers have moved enough cars to keep its rolls growing in the near term, even as car companies warn of tough comparisons for the balance of the year as results are stacked against last summer's Cash for Clunkers catalyst.
Investor enthusiasm in auto stocks has also waned. Shares of Ford
Offsetting the woes of an industry that Sirius XM milks for subscriber growth, it's clear that the satellite radio star mulled all of this over before revising its guidance. It has tacked on 1.1 million net subscribers during the past year, so it believes that it can add as many net radio buffs during the second half of this year as it did during last year's better half.
It's also important to acknowledge the trend. Just two months ago, Sirius XM was publicly expecting to add 500,000 net subscribers this year. It bumped that figure up to 750,000 in mid-May. Now we get another healthy boost from a company that -- if anything -- has been lowballing its guidance lately.
It's a good place to be, especially in this iffy market.
How many net subscribers do you think Sirius XM can land this year? Share your thoughts in the comments box below.
