Sirius XM Guides Cautiously After Beat

After posting better-than-expected first quarter earnings, Sirius XM management is asking investors to 'be patient' as they wait for guidance updates.
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NEW YORK (TheStreet) -- Sirius XM (SIRI) - Get Report is veering on the cautious side with its full-year guidance, after reporting a surprise first-quarter net income Tuesday.

Sirius XM noted that it's still early in the year and that it just received April car sales numbers, but it's being cautious about modifying numbers for now. Management is asking investors to "just be patient" as they wait for Sirius XM to provide further guidance.

"But we are very, very encouraged about our current performance, and automaker reports," Sirius XM's chief executive Mel Karmazin said during the company's first quarter earnings conference call. The company was one of the most liquid securities and heavily-traded stocks on the NASDAQ during the first quarter.

Management said during the conference call that it doesn't expect anything to change the way the company has been operating, though costs could go up if the company adds significantly more subscribers. Meanwhile, customer satisfaction levels have been at over 90%, despite the introduction of the U.S. Music Royalty Fee.

In about a year and several months, Sirius XM will hit the three-year mark of the merger between Sirius and XM Radio, and could, at that time, reconsider its pricing structure. Company executives said during the conference call that by then, price freezes should "go away," and provide the company with more pricing flexibility, and give it "another arrow" with which to drive value for investors.

As far as how contractual negotiations are going with Howard Stern, the company said it has "nothing new to report," and added that investors should just tune in to his show for progress reports.

For the first quarter, Sirius XM reported net income per common share of 1 cent versus a loss of 7 cents a share in the year-ago period, beating the break-even consensus estimate. First quarter net-income was $41.6 million, compared with a loss of $238.8 million the previous year. Programming and content costs had decreased 6% during the period, while subscriber acquisition costs increased 28%

The company reported pro forma revenue of $670.6 million, up 11%, but falling below the consensus revenue estimate of $671.32 million. The increase in revenue was driven by the U.S. Music Royalty Fee introduced in the third quarter of 2009, the sale of "Best of" programming, and rate increases to the company's multi-subscription and Internet packages.

Also during the quarter, ARPU (average revenue per subscriber) was up about 10%; the company's self-pay customer churn rate was 2%, down from 2.2% from a year ago; the conversion rate improved to 45.2% from 44.6%; and ad revenue grew 18%.

SIRIUS XM ended first quarter with 18,944,199 subscribers, up 344,765 from 18,599,434 subscribers in the year-ago period. Net subscriber additions of 171,441 in the first quarter improved significantly from a loss of 404,422 subscribers last year. The company said that it is back to having a record number of subscribers.

The stock has fallen to $1.13 Tuesday, down 7.3%, as investors take profits.

-- Reported by Andrea Tse in New York

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