Satellite radio is rocking and rolling these days, and Sirius XM Radio (NASDAQ:SIRI) is still simmering after another hot quarterly report. Last week's second quarter results were solid, and the company followed up the financials with a well-received conference call.
With steady and profitable growth making Sirius XM a market darling, the shares are now approaching an eight-year high. Let's go over a few of the more interesting nuggets said during the earnings call.
1.8 Million net additions and counting
When we gave you our initial guidance in January we projected 1.2 million net subscribers this year. Our performance has been so strong that we've already done 94% of the original full year net add projection in only six months. New and used car trial starts totaled a record 4.8 million in the second quarter. And the all-important trial funnel is now at an all-time high of 8.2 million, and retention trends look strong.
Sirius XM investors should be used to lowball guidance. Sirius XM has a habit of kicking off the year with a conservative outlook that it can revise as the year plays out. Its year-end target for net additions has gone from 1.2 million to 1.6 million to now 1.8 million with every passing quarterly report.
Things should continue to get better. As Sirius XM points out, 4.8 million car buyers started new trial subscriptions during the quarter with a record 8.2 million drivers kicking the tires now. Even with conversion rates slipping Sirius XM should continue to make it up in volume.
Music still makes the satellite go round
We've made acquiring the radio broadcast rights to all the major music festivals a high priority.
A growing subscriber base makes it easy to pay up for compelling content, and Sirius XM got that this past quarter with broadcasting performances from Coachella, Bonnaroo, and even the Grateful Dead farewell tour. It also hosted exclusive concerts with Pitbull and James Taylor, each performance in promotion of a channel launch.
More than just radio
Our moves to take better advantage of connected vehicles by enhancing our audio service and providing new non-audio services are a long-term play that will take many years to develop.
Sirius XM has been making a push into telematics and other platforms that have nothing to do with its flagship satellite radio service. It may not be evident right now. It will take time. Sirius XM did launch NissanConnect Services powered by SiriusXM during the quarter, giving drivers the ability to lean on it for safety, security, and convenience services that most don't associate with the media giant.
The connected vehicle business won't end here. Sirius XM expects to announce new enhanced deals in the coming months.
Eating its own cooking
Finally, during the second quarter, we repurchased 144 million shares of our stock for $560 million. So far this year through yesterday, we have spent about $1.3 billion to repurchase 338 million shares.
There's no denying that Sirius XM has a lot of shares outstanding. It has kept profitability back on a per-share basis. It has made the most of its perpetually improving free cash flow to eat away at that balance, buying back 1.5 billion shares along the way.
As the stock moves higher it may be spending more money to repurchase fewer shares, but it's the right call for a company that issues too many shares during its darkest days.
SXM17 will take time
I think I have said most of what I want to say about the timing (of SXM17) because it's going to be contingent on our auto partners rollout, and our auto partners prefer to keep those rollout plans confidential.
Sirius XM went public earlier this year with what it's calling SXM17, a new platform that blends satellite broadcasts with smartphones or mobile Wi-Fi. It didn't have anything new to say, but it did point to next January's CES expo as the time when it will make more details available. It could be a game changer for a company that's already defying the naysayers by posting steady growth and consistent profitability.
Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.