SIRIUS XM Holdings Inc. (SIRI -Analyst Report) reported strong financial numbers for the third quarter of 2014. The company generated record high adjusted EBITDA and revenues in the quarter as well. Also, SIRIUS XM raised the outlook for revenues, free cash flow and subscriber addition for fiscal 2014.

Quarterly GAAP net income came in at $136.2 million or 2 cents per share compared with $62.9 million or 1 cent in the prior-year quarter. The earnings figure of 2 cents was in line with the Zacks Consensus Estimate. Meanwhile, total revenue of $1,057.1 million exhibited annualized growth of 9.9% and also out-shined the Zacks Consensus Estimate of $1,019 million.

Quarterly total operating expenses stood at $763.1 million, up 12.7% year over year. Operating income, in the reported quarter, was around $294 million, increasing 3.3% from the last year quarter. SIRIUS XM posted record third-quarter adjusted EBITDA growth of 29%, reaching the figure to $381 million. 

At the end of the first nine months of 2014, SIRIUS XM had $888.2 million of cash from operations compared with $744.3 million in the similar period last year. Quarterly free cash flow in the same period was $801 million against $626.1 million in the year-ago quarter.

At the end of the reported quarter, SIRIUS XM had nearly $103.6 million of cash and cash equivalents and $4,259.6 million of outstanding debt compared with $134.8 million and $3,093.8 million, respectively, at the end of 2013. The debt-to-capitalization ratio stood at 0.78 against 0.53 at the end of 2013.

Segment Wise Results

Quarterly Subscriber revenues were $902.5 million, up 8.2% year over year. Advertising revenues stood at $25.3 million, up 15.5% year over year. Equipment revenues were $23.1 million, up 28% year over year. Other revenues were $106.1 million, up 21.3% year over year.

Subscriber Statistics

In the third quarter of 2014, SIRIUS XM added 432,817 (down 15.6% year over year) subscribers, which reached the company’s total subscriber base to 26,734,398 as of Sep 30, 2014, up 5% year over year. Payment category wise, Self-Pay subscribers totaled 22,014,606 (up 6.1% year over year) while Paid Promotional subscribers were 4,719,792 (down 3.9% year over year).

Important Operating Metrics

Despite intensifying competition from Google Inc. , Apple (AAPL - Analyst Report) and Pandora Inc. (P - Snapshot Report), SIRIUS XM’s average revenue per user stood at $12.47 in the quarter compared with $12.29 in the year-ago quarter. Average self-pay monthly churn rate was 1.9% against 1.8% in the prior-year quarter. New Vehicle Customer Conversion rate came in at 41% versus 44% in the year-earlier quarter. Subscriber acquisition cost stood at $35 compared with $45 in the year-ago quarter.

Financial Outlook

Management expects full-year 2014 revenues to reach $4.15 billion while adjusted EBITDA is projected to be around $1.425 billion. Free cash flow will likely stand at $1.12 billion. Also, the company estimates an addition of 1.5 million net new subscribers in 2014. 

SIRIUS XM currently has a Zacks Rank #3 (Hold).

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