Sirius Satellite Radio missed the Street’s Q4 sales prediction as growth slowed, but EPS beat analysts’ expectations. Sirius posted $249.8 million in Q4 revenue, up 29% year-over-year but missing the Street’s $267.4 million consensus by 7%. Growth slowed from 905,000 net additions in Q4 2006 to 654,000 net additions in Q4 2007 — an almost 30% y/y decline in net adds. EPS came in at an 11 cents per share loss, beating the Street’s 13 cents per share loss. But profits are irrelevant at this point for Sirius — all that matters is subscriber growth, which is slowing.
Conference call highlights: Where will growth come from? One idea: Installing Sirius into used cars. Setting up facilities with all its exclusive car partners to install radios in pre-owned cars.
No news on the DOJ and FCC approval of SIRI’s merger with XM Satellite Radio (XMSR).
LIVE conference call notes:
8:04 Optimistic that we will get good news on merger soon. No guidance until then. Going through subscriber growth numbers.
8:05 Subscriber goal was 8 million, we delivered 8.3 million. Estimated churn to be 2.2% to 2.4%. We delivered 2.2%. SAC $101 for full year, $90 for Q4.
8:07 29th month in a row where SIRI beat XMSR in satellite radio growth.
8:07 Auto sector: SIRI production penetration rate about 10% of exclusive OEMs. Now growing to over 50% in 2008 and poised to go even higher in next few years. Also extended exclusive relationship with ford until 2016 and Chrysler until 2017. Ford will install Sirius into 70% of 2009 cars.
8:09 Going through same subscriber growth numbers. Aftermarket: While net additions are clearly down from 2006, SIRI retail NPD share in Q4 was at a record 68%. ASP greater than XMSR’s. Inventory about half where it was last year.
8:11 Increasingly clear that competing with more audio gadgets. Translation: Satellite radio growth stinks.
8:12 Ford launching Travel Link data services in 2009. Includes realtime traffic, weather, gas prices, movie listings, sports scores. Ford so enthusiastic, including as standard equipment in every next gen nav system they sell.
8:14 Kia building SIRI into 100% of its cars beginning in 2010 model year. OEM relationships targeting 70%+ penetration.
8:15 Also very focused on used car channel. Certified pre-owned program in 2008 with each of OEM partners. Launched Ford this month. This segment represents a big oppty to 2nd and 3rd owners at “very attractive economics.”
8:16 New: Elvis radio, Eminem channel, Jimmy Buffett channel. Grateful Dead, Sinatra channels. Jay-Z, Garth Brooks, Miley Cyrus “pop-up” channels.
8:17 Howard Stern continues “radio revolution” on Sirius. Really? Next part of Howard Stern documentary coming soon. Added Variety radio news.
8:20 Bragging about how much press they got last year!
8:21 Going through financial numbers.
8:23 Merger update: During Q4 shareholders of both companies approved merger. Approval from DOJ and FCC are pending. We believe that we have made the case that the merger will strengthen satellite radio within audio marketplace.
8:24 Bottom line: “Merger is great for both consumers and shareholders.” Efficiencies “extraordinary.” Religious leaders have voiced support for the merger!
8:26 Q&A: 2-3 year outlook on retail channel? Industry has slowed probably more than you thought it would? Think about the used cars!
8:33 General economy has impacted aftermarket.
8:39 Apologies for the delays, folks. Technical difficulties on our end.
8:43 Haven’t gotten advertising revs up to 10% of overall revs yet.
8:45 February “a little scary” based on some sales reports.
8:46 Q&A over. No closing remarks.
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