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Sirius XM Holdings (SIRI) Q3 Earnings Miss, Revenues Up Y/Y

Zacks Equity Research

Sirius XM Holdings SIRI reported third-quarter 2019 earnings of 5 cents per share that missed the Zacks Consensus Estimate by a penny and declined 28.6% year over year.

Earnings were negatively impacted by refinancing expenses associated with the company’s July redemption of its 6.00% senior notes due 2024.

Total revenues on a reported basis jumped 37.1% year over year to $2.01 billion and beat the Zacks Consensus Estimate of $1.98 billion. On a proforma basis, revenues increased 6.7% year over year.

The top line was driven by robust subscriber and advertisement revenues. Subscriber revenues (77.4% of total revenues) grew 16.1% from the year-ago quarter to $1.56 billion. Advertisement revenues (18.2%) surged 695.7% year over year to $366 million.

Equipment revenues (2.2% of total revenues) rose 9.8% from the year-ago quarter to $45 million. Other revenues (2.2% of total revenues) increased 10% from the year-ago quarter to $44 million.

Sirius XM Holdings Inc. Price, Consensus and EPS Surprise

Sirius XM Holdings Inc. Price, Consensus and EPS Surprise

Sirius XM Holdings Inc. price-consensus-eps-surprise-chart | Sirius XM Holdings Inc. Quote

SiriusXM Standalone Details

Sirius XM segment pro-forma revenues were $1.57 billion, up 6.6% year over year. The increase was driven by 3% growth in subscriber base and 3.1% in ARPU, which was $13.90.  

Sirius XM added 210K net subscribers. Self-pay subscribers increased 4% year over year to 29.637 million. The company added 302K net self-pay subscribers in the reported quarter. However, the company lost paid promotional subscribers due to a decline in shipments from automakers offering paid promotional subscriptions.

Total subscribers were 34.554 million as of Sep 30, 2019, better than 33.693 million as of Sep 30, 2018.

Sirius XM traffic users grew 12% year over year to 9.378 million and Canada subscribers increased 1% to 2.706 million.

Additionally, average self-pay monthly churn rate was 1.7% in the third quarter, down 0.1% year over year.

Subscriber revenues rose 6.3% year over year to $1.42 billion. Advertising revenues were $51 million, up 10.9% year over year.

Moreover, Equipment revenues were up 9.8% to $45 million. Other revenues improved 9.5% year over year to $46 million.

Pandora Details

Pandora’s pro-forma revenues increased 6.9% year over year to $447 million owing to 7.9% growth in advertising revenues, which totaled $315 million. Additionally, subscriber revenues grew 4.8% year over year to $132 million.

Ad revenues were driven by strong third-quarter monetization of $85 per thousand hours, up 10% year over year.

Management stated that strength in traditional audio advertising, backed by video programmatic and engagement-based video as well as the expansion of off-platform efforts and fees generated on the AdsWizz platform, drove ad revenues.

However, ARPU decreased 3.3% year over year to $6.46.

Meanwhile, Monthly Active Users (MAUs) were 63.1 million at the end of the reported quarter, down from 68.8 million in the year-ago quarter. Ad-supported listener hours declined 7.5% year over year to 3.32 billion.

Pandora added 33K net self-pay subscribers and exited the third quarter with nearly 6.3 million self-pay subscribers, which included 45K paid promotional subscribers.

Operating Details

In the third quarter, total operating expenses surged 56% year over year to $1.54 billion.

Revenue share and royalty costs soared 72.6% year over year to $592 million. Satellite and transmission costs surged 91.7% year over year to $46 million.

Customer service & billing costs improved 25.3% to $119 million. Programming & content costs were $116 million, up 20.8%. Cost of Equipment rose 14.3% to $8 million.  

Engineering, design and development expenses soared 151.6% from the year-ago quarter to $78 million. Sales and marketing expenses jumped 99.1% to $233 million.

However, subscriber acquisition costs declined 7.3% year over year to $101 million.

Adjusted EBITDA increased 12.3% year over year to $657 million.

Balance Sheet & Cash Flow

As of Sep 30, 2019, cash and cash equivalents were $90 million compared with $215 million as of Jun 30, 2019.

Long-term debt as of Sep 30 was $7.90 billion compared with $7.84 billion as of Jun 30.

At quarter-end, Sirius XM’s debt to adjusted EBITDA ratio was 3.25 times. The company had nearly $1.7 billion available under its revolving credit facility.

Cash flow from operating activities in third-quarter 2019 was $544 million compared with $545 million in second-quarter 2019. Free cash flow was $465 million in the third quarter compared with $474 million in the previous quarter.

Sirius XM repurchased shares worth $464 million in the reported quarter.

2019 Guidance

Revenues, on a pro-forma basis, are expected to be approximately $7.85 billion for the year. Adjusted EBITDA is expected to be $2.4 billion. The company anticipates adding almost 1 million Sirius XM self-pay net subscribers.

Free cash flow is expected to be around $1.625 billion.

Zacks Rank & Stocks to Consider

Currently, Sirius XM carries a Zacks Rank #4 (Sell).

iHeartMedia IHRT, Discovery DISCA and Cumulus Media CMLS are some better-ranked stocks in the broader consumer discretionary sector. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

iHeartMedia, Discovery and Cumulus Media are set to report quarterly earnings on Nov 6, 7 and 11, respectively.

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