Sirius Q2 Earnings Conference Call Highlights and Transcript

Sirius Satellite Radio Q2 2006 Earnings Conference Call Transcript (SIRI)
Posted on Aug 1st with stocks: SIRI (www.seekingalpha.com)

Below are highlights. Full Transcript: HERE

Sirius Satellite Radio (SIRI)Q2 2006 Earnings Conference CalL
August 1, 2006 8:00 am ET

Mel Karmazin:
We ended the quarter with 158% more subscribers than we had at the end of Q2 '05. OEM grew 217% and retail grew 142%. We delivered 64% net subscriber growth this quarter over last Q2. According to NPD, our market share in 2Q05 was 47% and this year it increased to 57%, with the most recent month of June being 61% versus 52% a year ago. For the year-to-date, we have 58% market share of the fast-growing satellite radio market, according to NPD.
Since September '05, we have been the market share leader every single month and July will be no exception. Remember, we told you to expect parity, not the pre-eminent position we now hold. We fully expect to get the majority of retail net adds going forward in this very important distribution channel. Where the customer has the choice, they continue to prefer Sirius.
We are also on target to deliver the growth in OEM that we committed to. We will double the number of OEM subs this year from the level we had going into '06.
Our record revenue in the quarter was $150 million versus $52 million last year. We call that dramatic growth. Our ARPU increased in the quarter to $11.16 from $10.50 last year. Our advertising ARPU was $0.62 versus $0.22 last year, reflecting advertising growth even greater than subscriber growth.
On the cost side, very importantly, our SAC per gross add for the year-to-date has dropped from $173 to $122, which is on track to deliver the approximate $110 we had given you as guidance for the full year '06.
Looking forward, our unparalleled world-class content, industry-leading unaided awareness, brand strength and consumer satisfaction continue, and contribute to our very bullish feelings about satellite radio, and specifically Sirius. We just concluded a wave of consumer satisfaction research which was in the field the end of June through the first week in July -- so the data is obviously very current -- and the results showed that 94% of our subscribers are satisfied. That number is up from 92%. When asked, 90% said they would recommend Sirius to a friend, up from 86%. This satisfaction is driving our low churn, which is driving our very strong net adds.
When you look at the exciting growth of satellite radio, which added approximately 1 million net subscribers in the second quarter, it is very important to remember that the satellite penetration remains low and there is big growth ahead for many, many years to come. By the end of this year, if you relate the number of satellite radio subscribers from us and our competitor to just the number of households in the United States -- approximately 109 million households, and that doesn't include the 216 million cars on the road -- the penetration is still less than 15%. We have accomplished a lot in a few years, but the growth, and the big growth, really lies ahead.
Our video initiative is well underway and we are close to signing deals to offer the best video programming for kids as part of our OEM offering in the second half of the year.

In Canada, Sirius’ growth is explosive and we are by far the satellite leader in this market. Since launch in Canada, where unlike the United States, both companies began at the same time, Sirius has well over 60% of the market.

Our personal live satellite radio product, Stiletto, is great. We have been beta testing it for a few weeks and we will have it available to consumers by the end of the summer.

We continue to develop our important second stream of revenue in advertising. We have approximately $22 million on the books this morning. That compares to finishing all of last year at slightly over $6 million.

Most important is that each quarter that passes we put ourselves closer to delivering what we really believe is most relevant for our investors; and that is to deliver on our financial plan.

We reiterate today that we believe we will be free cash flow positive -- and that is after CapEx -- for the full year '07 and subsequent years; and, could be free cash flow positive in the fourth quarter of this year, which will begin in just a few weeks.

We are also pleased to be able to once again be in a position to raise our year end guidance and also our revenue estimate for '06.

Also most important is that we continue to deliver on all of the commitments we have made to investors.

Jim Meyer:
During the quarter, we introduced the new Sportster 4. It is ultra sleek in design, uses a gen 3 chipset for lower cost, and incorporates our new universal connector, which allows for expanded accessory options. As Mel mentioned earlier, we are on target to launch Stiletto later this month, our first live wearable with a number of exciting new features. With the introduction of the new Sportster 4 as well as a new line of wearables, we believe our hardware is more than competitive.

Satellite launch. We recently announced that in late 2008 we will launch a new and powerful Sirius FM 5, our fourth satellite, into a geostationary orbit joining our existing satellites to create a hybrid constellation. We expect several major benefits from this permanent hybrid configuration, such as: improved robust service, signal diversity, and network redundancy. Sirius FM 5 should extend the useful lives of our existing satellites and serve as an in orbit spare in the event of a major failure, reducing a small element of risk to our customers and shareholders. Our minimum look angles will improve, while we simultaneously retain the benefit of the high look angle HEO birds.

I would like to comment on the FM modulator issue. We continue to cooperate with the FCC on the FM modulator inquiry and we continue to believe that we have enough supply in the marketplace to meet near-term demand. We expect to have greater clarity from the FCC shortly and to resolve this issue expeditiously.
In addition, I can assure you that cost-effective engineering solutions are available and being evaluated, which can address both the regulatory and service quality issues related to the FM modulators in the near term.

Scott Greenstein:
Going forward, we will add content judiciously as it makes sense for the audiences we serve, with a focus on the Company's overall goal of reaching cash flow positive in late 2006, early 2007.

In programming, the momentum created by Howard Stern has continued well into 2006 and, more importantly, continues to date. Most recently, with the buzz surrounding his acquisition of The Tapes, the uncensored recordings of every show he did from the last 20 years. With the innovative content he and his staff have made here and with the tapes now as well, the Howard Stern show and his channels will continue to work very hard for Sirius subscribers, but also for the acquisition of new subscribers, ad sales, public relations and interactive.

Between back-to-school sales, the launch of new car models, and of course the holiday season, we are entering our busiest time of the year.

8/01/2006 12:10:00 PM

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