Sirius XM Raises Full Year 2020 Guidance After Q3 Earnings Report

Company adds 169K self-pay net subscribers in Q3

After issuing its third quarter 2020 financial report on Thursday, streaming audio subscription service Sirius XM has raised its full year 2020 financial and subscriber guidance. Based on year-to-date performance, the company expects to add 800,000 in self-pay net subscribers. Sirius XM also estimates total revenue of approximately $7.85 billion, adjusted EBITDA of about $2.475 billion, and free cash flow of approximately $1.6 billion.

“Sirius XM maintains strong momentum heading into year end, and we are increasing all of our full-year subscriber and financial guidance today.  Our talented people and our powerful business model have delivered stellar results during a challenging year for our company and country,” said Jim Meyer, Sirius XM CEO, in an October 22 news release. “Our commitment to having the best possible audio content from top talent, as well as leading media and sports brands, has never wavered.”

Meyer will retire at the end of 2020 and become the vice chairman of the company’s board of directors. Jennifer Witz, who is currently serving as the company’s president of sales, marketing and operations, will succeed him as CEO on January 1, 2021.

“This will be my last earnings period as SiriusXM’s CEO, and the numbers we are reporting today reflect the incredible progress our team has made during my tenure. It has been an honor to lead SiriusXM for the past eight years, and I’m thrilled to be passing the baton at year end to a leader as capable as Jennifer Witz,” Meyer added.

Third quarter financial highlights for Sirius XM

  • The streaming audio company added 169,000 net new self-pay subscribers in the third quarter, bringing total self-pay subscribers to nearly 30.5 million. [In the second quarter of 2020, Sirius XM added 264,000 net new self-pay subscribers.]
  • Self-pay monthly churn was 1.7%, representing no change over Q3 2019 churn.
  • Total net subscriber additions were 186,000, bringing total Sirius XM subscribers to 34.4 million. [In the second quarter of 2020, Sirius XM added 516,000 total net new subscribers.]
  • Sirius XM revenue was $1.6 billion, a 1% increase year-over-year. Though the company saw a decline in advertising revenue, this was offset by subscriber revenue.
  • Monthly ARPU increased 2% compared to Q3 2019.
  • Total gross profit was $979 million, a 1% increase year-over-year, and gross profit margin was 62%, flat compared to the same period last year.
  • Thid quarter net income was $272 million, an 11% increase, with diluted earnings per share of $0.06.
  • New car penetration rate increased 78%, up 500 basis points year-over-year.

Third quarter financial highlights for Pandora

In February 2019, Sirius XM acquired streaming audio service Pandora. Highlights from Pandora for the third quarter of 2020 include the following:

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  • Advertising revenue was $306 million, a 3% decline year-over-year. Monetization of $84 per thousand hours was down 1% year-over-year.
  • Pandora had 58.6 million monthly active users, down from 63.1 million during the third quarter of 2019.
  • Total ad supported listener hours were 3.12 billion, down slightly from 3.32 billion in Q3 2019.
  • Average monthly listening hours per ad-supported user increased 1.8% to 19.5 in Q3 2020 compared to 19.1 in Q3 2019.
  • Pandora had 105,000 net new self-pay subscribers to Pandora Plus and Pandora Premium subscription services, bringing total self-pay subscribers to 6.4 million.
  • Paid promotional subscribers for the quarter was 43,000, representing essentially no change year-over-year.
  • Gross profit for the quarter decreased 4%.

Operational highlights for the quarter include the addition of Sean S. Sullivan as the company’s chief financial officer, effective October 26, and the closing of Sirius XM’s acquisition of Stitcher earlier this month.

“On Monday, we announced the closing of our acquisition of Stitcher and are quickly integrating that business with SiriusXM’s content and ad sales businesses, and our existing hosting and analytics platform, Simplecast.  Stitcher greatly advances SiriusXM’s position in podcasting, the fastest growing sector in audio entertainment.  We offer audio publishers a state-of-the art suite of content hosting, data analytics, ad insertion and sales representation services through programmatic and direct sales.  We are excited to combine the largest digital audio salesforce with a leading podcast ad network and to offer advertisers an attractive path to over 150 million North American listeners across our platforms,” said Witz.

The streaming audio subscription service prides itself on all-star content including Howard Stern, Jenny McCarthy and LL Cool J.
The streaming audio subscription service offers an all-star line-up of content. Image: Sirius XM

COVID-19 impact

The streaming audio subscription service also addressed the COVID-19 impact and its general impact on the economy and the unknown future impact it may have on Sirius XM. Specifically, lower vehicle sales and a decline in advertising are having direct effects, but the company says the scope of the impact is “difficult to assess or predict with meaningful precision.”

“We remain focused on the well-being of our employees, customers and all those we serve while also taking responsive measures to adapt to the current environment.  Against the backdrop of the COVID-19 pandemic we are seeing certain positive trends in certain key indicators that support our business.  For example, in the quarter ended September 30, 2020, new vehicle sales recovered compared to the prior three and six month periods.  Similarly, we have seen recent increases in advertising orders, although the outlook for advertising revenue remains uncertain and we cannot reasonably predict when advertising activity will return to pre-pandemic levels,” the company said.

Insider Take

Though Sirius XM stated that it will be difficult to anticipate COVID-19’s impact on the company’s overall performance, the streaming audio subscription service has many positives going for it. The company continues to add popular content, audiences are still very interested in Sirius XM’s various subscription plans, and the company has two major products – Sirius XM (subscription) and Pandora (freemium – ad-supported free + subscription plans) – to offer customers. The addition of Stitcher to the mix will also benefit the company. While subscribers were down compared to the second quarter of 2020, the company has exhibited confidence in the fourth quarter by increasing their guidance in both financial and subscriber categories.