SIRIUS Outlines Growth Targets To 2013… Can It Make It? (SIRI)

SIRIUS XM Radio Inc. (NASDAQ: SIRI) has its annual meeting of stockholders today, and the company is out with some updated information which will be as important as ever to its burned stockholders.  We have seen the presentation and have pooled some of the new data and the outlook being issued by Mel Karmazin.  The guidance is being given out to 2013 and it outlined the company’s expected debt maturities to 2014.While the company is discussing long-term growth plans, there are still questions on whether it can survive between now and then.

For starters, SIRIUS says that a deep recession is now under way andthe financial markets remain disrupted.  The unemployment rate is its highest since 1993 and will get worse as layoffs accelerate.  Consumerconfidence is at all-time lows and car sales are their weakest inmore than a quarter of a century.  Lastly, SIRIUS noted the weakeningretail and consumer electronics environment.

The company expects 19.1 million subscribers at the end of2008.  It sees stable self-churn rates at 1.77% expected for thisyear.  The company’s expected revenue 2008 is expected at$2.4 billion.  Its post-merger headcount is down more than20%.

SIRIUS puts its adjusted EBITDA guidance for 2008 at -$200 millionversus prior expectations of -$300 million.  This implies a Q4-2008adjusted EBITDA improvement of 86% to -$32 million from last year.

Karmazin also maintains that SIRIUS XM will grow faster than othermajor media companies in 2009 with penetration gains in every majorauto maker.  It sees ending 2009 with roughly 20.6 million subscribersand revenues of roughly $2.7 Billion.  It also sees the 2009 mergersynergies at $425 million and growing.  The company is still callingfor positive EBITDA in 2009 with approximately $300 million in the year.

More important than anything is the long-term guidance.  You can betthat this will change drastically, but here are the long-term goals ofthe company:

                               2009 2010 2011  2012 2013
Ending Subscribers   20.6  22.1  24.0  26.2  28.4
Total Revenue           $2.7  $3.0  $3.4  $3.8  $4.1
Adjusted EBITDA      $0.3  $0.6  $0.9  $1.3  $1.5
Free Cash Flow         $0.0  $0.4  $0.6  $1.0  $1.4

As far as liquidity, SIRIUS sees $995 million in debt maturities in2009, yet sees $0 in 2010.  For the years beyond, it sees the followingin annual debt maturities:

• $230 million in 2011;
• $248 million in 2012;
• $500 million in 2013;
• $1.334 billion maturing in 2014;

SIRIUS further noted that no new issuance of its rating grade havebeen made since the September 15 bankruptcy of Lehman and spreadsexpected are at all-time highs against Treasuries.  In fact, it showedthat the current yield implied for the XM debt issued in July would nowbe something to the tune of 52% rather than the 16% at issuance.  Italso said JPMorgan is working on the overall financing plan and islooking to complete the plan by March 1.

Shares are trading up 10% on this data, but shares are still only trading at $0.142 because prices are so low. 

We still view this as an at-risk stock.  The reverse split is something that the company cannot likely get around, but this strategy rarely works.  Mel Karmazin may also need to leave as one of our own 10 CEOs TO GO FOR 2009, but he may still try to take this private.  Stay tuned.

Jon C. Ogg
December 18, 2008