Sat, Apr 19, 2014, 4:24 PM EDT - U.S. Markets closed


% | $
Quotes you view appear here for quick access.

Sirius XM Holdings Inc. Message Board

  • ayleeuhs ayleeuhs Feb 5, 2013 4:24 PM Flag

    Q4 2012 Results - Transcript - Question-and-Answer Session

    Question-and-Answer Session

    Barton Crockett - Lazard Capital Markets-
    Okay. And then if I could switch to the share repurchase, I just want to be clear about a couple of things related to this. First, did you guys not buy back any stock to date, in the fourth quarter, so far this year? And if not, was there some type of constraint that kept you from getting into the market?And then secondly, on the Liberty Media change, was there some type of contractual commitment that had to be changed? Or is this just a statement from Liberty that they’re no longer kind of necessarily participating in the share repurchase?

    David Frear-
    Two things. When we announced the program in December, we were pretty close to earnings. And so the advice we had was to stay out of the market until we had gotten kind of the material nonpublic information into the marketplace, which I think we effectively do with this call and getting the K filed. You know, with respect to Liberty, when we originally announced the program Liberty was under 50%. We announced that they would be participating pro ratas so as not to accrete their ownership. You know, given that they’ve gone into the marketplace and they have gone over 50%, that there doesn’t seem to be any structural reason why the board should, for instance, insist on their pro rata participation. So it’s left to their discretion to participate in a manner that they feel is best for their business.

    Ben Swinburne with Morgan Stanley.Benjamin Swinburne -
    One I wanted to ask about how you’re thinking about telematics in particular, and any other sort of new business investments or opportunities ahead of the company you haven’t talked about before. Telematics is certainly getting a lot of buzz and focus coming out of CES, etc., and you guys are pretty uniquely positioned given your customer base and platform to look at that opportunity.
    And then also related to CES, you had the Toyota announcement. Can you talk about what that announcement and what maybe other announcements with other OEMs might mean to the business longer term? I know, David, you’ve always talked about a sweet spot in penetration rate, but maybe there’s more opportunity for upside than people realize. Your thoughts there?

    Jim Meyer-
    I think, number one, I want to be clear. The word “telematics” is the buzzword, but the real buzzword for me is “connected car” and all of those things that connected car offers in the future, many of which haven’t been completely fleshed out yet. So, as you know, I think every auto maker now is either planning or is putting in place how they intend to deal with their architecture in 2017 and beyond vis-à-vis the connected car. We think it’s important that we participate in those discussions. I’m not sure exactly which businesses that ultimately we need to be in. Obviously, on the short term, the one that is important for auto makers and one that we think we can play in and provide value is in fact the telematics business. And so that’s why we launched our initiative with Nissan. That’s why we’re out working with other OEMs to try to pursue and deliver to them what they may want. What’s most important to me is that we ensure that in this next generation - and by that I mean in the ’17 and beyond timeframe, that when the car has two paths into it, both the IP path and the satellite path, that we’re able to figure out how to best monetize that, and, as importantly, use both of those capabilities to improve the experience for our customers. And I think it’s a very logical step for us, and it’s one where we intend to put a lot of focus.In terms of the Toyota announcement, number one we were quite excited about that announcement. And these things take time, as you all know, with OEMs. We’ve been working on it for a couple of years, and it takes a couple more years before it ramps up and rolls out to the numbers, but the great thing about this channel is when the OEM commits to it, it does happen, and we love the result.I personally believe, still, that high-60%, 70% is the right sweet spot for us for penetration, and I do believe that’s kind of where you’ll see our penetration stay over the next five years.

    Benjamin Swinburne -
    And you wouldn’t expect any change to conversion ratio as a result of that inching up over time as you get into maybe lower price point cars and stuff?

    Jim Meyer-
    It’s a challenge, I’ll be honest with you. I mean, we have issues of mix that we wrestle with every quarter. The primary reason is, obviously, the lower price models convert at a lower rate than the higher price models. And so we wrestle with that. I think we’re still comfortable with our range that we’ve given for conversion, and I think we’ll see how 2013 goes

    Matthew Niknam with Goldman Sachs-
    Two if I could. One on used cars. If you can give us any more color on the churn profile and profitability of a used car customer and how that might compare to your traditional base?
    And then secondly, on self-pay churn, that continues to improve, even as the rate hike from earlier last year rolls through the base. Can you help us think through what’s driving the improvements in self-pay churn, and if there’s an opportunity for any additional improvement from these levels going forward?

    Jim Meyer-
    Let me just start on self-pay for a moment, and then David will take it and then answer your specific question on used cars. So there’s a lot going on. It’s hard to necessarily say our improvement is due to one thing or the other. I mean, starting with the economy, we think, improved in 2012, and we think that was helpful. Obviously, we continue to try to correlate what drove what we thought was outstanding performance in the fourth quarter. I think there were a lot of little things, also, that we did, that helped improve that number, and we’re going to continue to do those things as we move forward. I don’t think there was one magical thing that drove the number where it went.

    David Frear-
    And on the used cars, I’d say that it’s still sort of early days on individual metrics, and I know it sounds like we’ve got a lot of transactions, and we do. But we do like to see these things sort of trend over time. Overall profitability on used cards is going to be certainly as good as the new car profitability, the single biggest reason being that we don’t have to reinvest in the radio. So reacquiring revenue generating subscriptions on previously installed radios is an immensely profitable business for us. I think it will be a little while before we’re able to tease out sort of sustained differences in churn profile. So you just have to stay tuned for that.

    Jessica Reif Cohen with Bank of America Merrill Lynch-
    First, on the buyback, are you willing to commit to a time frame?
    You’re so far below your leverage target. I was just wondering, now that you’re going to start it, is there any timeframe that you can offer?

    Jim Meyer-
    No, I don’t think we’re going to come out with a timeframe. We don’t want to compete against ourselves in the market. We will fill the initial authorization. As you know, we’ve got to be mindful of our restricted payment covenants as well.

    Jessica Reif Cohen -
    And then the second question is, on some of the new initiatives that you outlined, Jim, should we think about this as a revenue opportunity? How will you charge for it? Or do you think of it as a churn reducer?

    Jim Meyer-
    I think it’s a great question. In the IP area, as you know, we charge for our subscribers to be able to stream our content. And we certainly have no plans to change that. And I think as we’ve improved significantly our IP offering, we ought to be able to sell more of our subscribers a bundle that includes both our satellite-delivered content as well as our IP-delivered content. And we’re certainly working hard to do that.At the heart of it, though, is our basic belief, which is a more-engaged subscriber is more likely a subscriber that’s going to stay with us over the long term. And so we see IP, particularly as it’s easy path into the home, as another great way to keep our subscribers engaged. So I think in terms of IP it’s a double-edged sword.In terms of the stuff we talked about longer term, with the connected car, I see two things there. One, certainly it’s a defensive play to make sure that we are part of new technology that rolls out and helps us keep a hand in what may go out in many, many years to come. But also, I believe there will be other revenue opportunities there that will be good for us, and as those businesses evolve, I think we’re well-positioned to take advantage of those. And then finally, in a true, connected car, I can’t help but believe that’s a better experience for our subscribers, and should help our churn and conversion profiles as well.

    David Frear-
    It’s definitely both. We will get additional revenue from it. It may be a way, through bundling, to help with the RPU block as opposed to just price increases. And we definitely know from the last 10 years of selling bundles and upgrades to customers that the more engaged customer does in fact churn less.

    Jessica Reif Cohen -
    I have one last question. Again, it relates to churn, which everybody’s brought up. It’s so good. You’re passing through the music royalty fee. Given this low churn, can you give us your current view on price increase? Would you consider a price increase for this year?

    Jim Meyer-
    Well, we don’t have any plans right now for a general price increase. I can tell you, and if you’re a subscriber whose account renewed in February, for instance, you have been notified of a change in the MRF, and a passing along of that. We need to see how that goes, and watch that profile over the next six months. And I think that’s going to be our focus for 2013.


    Copyright policy: All transcripts on this site are the copyright of Seeking Alpha... So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to SeekingAlpha

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • --- I think it will be a little while before we’re able to tease out sort of sustained differences in churn profile.--- David Frear

      Stephen Faulkner Comments

      I want to quote what I said back in November here as I think it bears repeating :

      "And the final issue with the churn metric may be evident from the example of Joe. Churn is not a measure of individuals who choose to cancel because they are not satisfied with the service. Because all self pay cancellations for any reason are included in churn, it includes an entire collection of individuals: some who choose to cancel because they are not satisfied, some who choose to cancel for financial reasons, some who choose to cancel because they switched radios or cars, etc., etc. When I cancelled on my Sirius Stiletto radio and activated my Lynx in January? I was added to churn for Q1, yet I am a very satisfied Sirius XM customer."

      It's very important to understand. Some will try to paint the churn number as ENTIRELY made up of dissatisfied subscribers who cancel or people who make a conscious choice to deactivate the service and not re-subscriber. This is COMPLETELY UNTRUE. The actual *real* measure of subscriber satisfaction is in how many choose to pay, or the self pay number. If this is increasing AND conversion rates are stable AND churn is relatively stable or better yet decreasing, it can be said that given all of these factors that subscriber satisfaction is increasing.

      Frustrating as it may be for bears, Sirius XM is and appears capable of continuing to be, an increasingly in demand product.

    • ---In our earnings release this morning, we announced that Liberty Media is not required to participate in our stock buybacks.--- David Frear

      Stephen Faulkner Comments

      I figure they *might* do what I have been saying all along. Simply let SIRI buyback without participating for some time and allow that to raise their stake in the company. If they need the cash they can participate. Really depends on LMCA's needs at the moment. If they can grow the cash with SIRI at a rate exceeding what they would get elsewhere for it, they'll keep it with SIRI. If they expect, for instance $4.25 end of year, there's little reason to sell back any shares now. Let the buyback gobble up the float.

      • 1 Reply to ayleeuhs
      • Sirius XM: Bear Traps On Sale $4.20 Each
        February 6, 2013
        By Stephen Faulkner

        Tinker also notes that he expects Liberty Media may hold off on participating in Sirius XM's buyback program now that it has gone to a controlling stake.

        Liberty Media is no longer committed to tendering its SIRI stock suggesting increasing confidence in the growth prospects and desire to own more without paying.

        I believe this to be immensely important going forward as this changes the game from a 1:1 float / Liberty sell-back ratio to a possibility that Sirius XM simply buys back from the float and allows Liberty to increase its stake in the company without committing more capital. This is something I have expected and suggested before, and I would not be surprised to find that Liberty does not participate in Sirius XM's buyback plan for some time. Unless Liberty needs the cash and sees better prospects for the use of said cash, why not leave it with Sirius XM if gains of 33% year over year are in sight?

    • Digging Into Sirius Earnings: The Rise of Telematics
      By Blake Bos
      February 5, 2013

      ...During this quarter's earnings release, Sirius shed light on its plans in the rising field of telematics in auto. Telematics refers to systems using wireless communications for convenience features and diagnostic tasks, such as Ford's SYNC system...

    • Bryan Kraft with Evercore Partners-
      On RPU. It was basically flat quarter-over-quarter, despite a lot of fourth quarter renewals at the new higher price point. Was there a step up in the level of discounting to drive more sub growth in the quarter, and if so, was that driven more toward retaining customers who were receiving the price increase for the first time? Or was it more to convert unpaid trial subs to paid? If you could just shed some light on that, it would be helpful.

      David Frear-
      There’s no change in the discounting practices. That wasn’t really a factor in the quarter on quarter change in RPU. I think you’ve seen other seasonality in the RPU in previous years, where any enhancement in is a little bit less fourth quarter from third quarter. Part of it is that it is an average, right? So the fourth quarter renewals at the higher price, remember, are coming at the end of the quarter, and there’s very little recognized revenue that comes from all those rollovers. So that’s certainly going to affect it. But there’s really no underlying change of business practice that you should be concerned about.

      Bryan Kraft -
      So is it safe to say that you would expect the RPU to continue to increase in the first and second quarter as the price increase rolls through?

      David Frear-
      Yeah. The RPU will continue to pick up. Remember, it takes a long time for things to roll through, and so believe it or not, we’re only just shaking off, now, the effects of the reduction in the music royalty fee from $1.98 to $1.42 that went through in December of 2010. That negatively impacted our RPU numbers all year. In the first quarter, we’ll pick that up, and so RPU should grow. Jim MeyerAlso remember that the percent of subscribers who come in through paid trials also impacts that number, and as those grow, let’s say differently, and different rates quarter to quarter, that can also have a factor on suppressing RPU, obviously, as the money comes from the automaker instead of the end user.

      John Tinker with Maxim-
      You haven’t discussed your ratings for a while, in terms of how many people actually listen to your service who take the service versus, say, listening to an iPod or radio. And I wondered if you could give us some idea of how that’s going.

      Jim Meyer-
      Well, we’ve been competing against iPod and terrestrial radio for 10 years now. I’ve been here for 10 years, I don’t ever remember having talked about ratings between satellite radio, terrestrial radio, internet radio, and iPod listening. But there’s a lot of competition in audio entertainment. There are complementary services. Many of our subscribers are internet radio listeners, and many of them have personal digital music collections, and so that’s just been part of the program for 10 years now.

      John Tinker -
      I think actually you published a number about two or three years ago, I think in the K, and you suggested that people that had your service listened - you had said about 70% of the listening, which was obviously pretty high. Could you just touch on the $3 billion income tax benefit that went through the P&L, and where your NOL now stands?

      David Frear-
      The NOL will be in a footnote to the K. I think it’s around $7 billion. And it should shield taxes for the next several years. The $3 billion income item is the reversal of the deferred tax valuation allowance. It’s a sort of GAAP driven disclosure, but from an investor’s perspective, it’s the future shield of taxable income that will really matter in valuation.

      Vijay Jayant with ISI Group-
      Hi, this is David Joyce for Vijay. Just wanted to see if you could provide some color on the impact to your business model when a large OEM partner contract changes toward the end of this year.

      David Frear-
      Well, it’s going to be accretive to EBITDA. The contract comes up in the fourth quarter and I think year on year comparisons in the quarter for EBITDA will be favorable. Obviously it’s only one quarter’s impact on the full year, so most of the benefit will actually be found in 2014. Many analysts, I think Vijay included, have written on the subscriber recognition affected. Effectively, in the contract that we have a paid trial moving to an unpaid trial, so the year on year comparisons and total subscriber additions fourth quarter to fourth quarter will be down. But it really doesn’t affect self-pay. The business is effectively how many self-paid subscribers do we have and how many conversion opportunities do we have in the trial funnel, and the change in geography for the OEM between paid and unpaid trial doesn’t change any of those dynamics.Okay, thanks everyone. Appreciate your time this morning.


      Copyright policy: All transcripts on this site are the copyright of Seeking Alpha... So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to SeekingAlpha

3.14-0.03(-0.95%)Apr 17 4:00 PMEDT

Trending Tickers

Trending Tickers features significant U.S. stocks showing the most dramatic increase in user interest in Yahoo Finance in the previous hour over historic norms. The list is limited to those equities which trade at least 100,000 shares on an average day and have a market cap of more than $300 million.
AsiaInfo-Linkage, Inc.
NasdaqGSWed, Jan 15, 2014 4:00 PM EST