SiriusXM posted a $126 million profit on record revenue of $940 million in the second quarter. Revenue was up 12% from the prior-year period. Profit of $125 million was slightly higher than the prior-year period when excluding a $3 billion deferred income tax valuation benefit that inflated profit to $3.1 billion.
"SiriusXM's second quarter results reflect record performance on almost every vital metric: the 25 million subscriber milestone, record revenue, adjusted EBITDA and adjusted EBITDA margin," said Chief Executive Officer Jim Meyer, Chief Executive Officer. "
The satellite radio company added 716,000 subscribers in the quarter, bringing the total to 25.1 million, up 9% from the prior-year period. Self-pay subscribers reached a record 20.3 million, also up 9% year-over-year. The rest of the subscriber base comes from unpaid trials. The strong gains in the quarter prompted SiriusXM to raise its 2013 subscriber guidance, to 1.5 million net additions, three weeks ago when it announced it had surpassed the 25 million-subscriber threshold.
The satellite radio business model that was unprofitable just a few years ago is now generating enough cash to both fuel growth and return to shareholders. SiriusXM ended the quarter with $652 million in cash and generated $379 million of free cash flow in the first half of the year, up 55% from the prior-year period. "We have plenty of fire power to profitably invest in the growth of our business, consider accretive acquisitions and continue our aggressive share repurchase program," said EVP and CFO David Frear.
The auto market, vital to SiriusXM's growth. Frear cited strong auto sales of 16 million units in June, the highest level if November 2007, as a contributing factor in the second-quarter's record revenue. Frear added that there are now 54.5 million vehicles on the road enabled with SiriusXM.
The company has a few different ways of converting idle equipment. One is its Pre-Owned Vehicle Program in which over 10,000 participating auto dealers give three-month subscriptions to buyers of used vehicles. Another is the Service Lane Program that launched this summer. The program will provide a complimentary two-month subscription to qualifying customers who bring in their vehicles for service. "I think that's going to be a pretty target-rich area," said Meyer.
Shares of SiriusXM quickly rose 1.9% to $3.75, just shy of the 52-week high of $3.77, Thursday morning but soon gave up those early gains and was trading slightly below Wednesday's close of $3.68. The company's shares are up 27.7% year to date and 77.4% in the last 12 months.