SiriusXM Paid Subscriber Base Hits Record High of Nearly 34 Million

Company issues 2019 guidance in advance of fourth quarter earnings report.

SiriusXM (NASDAQ: SIRI) is starting out 2019 on a positive note. On Tuesday, the company reported that its total paid subscriber base has hit a record high of 34 million. By the end of 2018, SiriusXM had added 1.4 million self-pay subscribers bringing the total self-pay subscribers to 28.9 million, exceeding the company’s 2018 guidance by about 40 percent. At year end, total net subscriber additions were 1.3 million, helping the company hit its record high.

The company has scheduled its fourth quarter and full year 2019 earnings call for January 30, but it offered a few teasers of what investors can expect. The company said it expects to meet or exceed its 2018 guidance in three categories: revenue, adjusted EBITDA and free cash flow. In 2018, including dividends, SiriusXM returned approximately $1.5 billion in capital to shareholders. During the earnings call, the company will release its fourth quarter and full-year 2018 financial and operating results.

In advance of the results, the company issued 2019 guidance for subscribers and finances, including the following:

• SiriusXM expects self-pay net additions of 1 million
• Total revenue of approximately $6.1 billion
• Adjusted EBITDA of approximately $2.3 billion
• Free cash flow of approximately $1.6 billion

This guidance excludes any changes that may result from the company’s acquisition of Pandora Media, which is expected to close in the first quarter of 2019.

“I'm proud to report that 2018 was not only another year of operational excellence at SiriusXM, with record high subscribers, revenue and adjusted EBITDA. Last year also saw SiriusXM achieve important milestones, like the introduction of 360L and significant improvements in our smartphone apps and IP distribution on connected devices. We attained a record 40 percent adjusted EBITDA margin in the third quarter, saw our efforts in connected vehicle services bear fruit and, of course, we were extremely pleased to reach an agreement to acquire Pandora Media," said Jim Meyer, SiriusXM CEO, in a January 8 news release.

“We expect to close the Pandora transaction shortly following the Pandora stockholder meeting scheduled for late this month, and we are quickly moving to implement exciting ways the two businesses can work together. We remain confident that this transformational acquisition will open exciting pathways for long-term value creation and cash flow growth for our stockholders,” added Meyer.

At this juncture, investors don’t seem to be particularly impressed. On January 8, the day of the announcement, SiriusXM stock closed at $6.35 per share. By 6:49 p.m. ESTP on January 9, it had dropped to $6.06 per share. This isn’t particularly concerning though. A year ago – January 10, 2018 – SiriusXM stock was valued at $5.56 per share, so it is up over the long term.

Insider Take:

SiriusXM is doing a good job of growing its subscriber base, by offering a wide range of products and services and price ranges. Customers can listen through streaming or satellite radio. Packages start as low as $10.99, although some promotional offers could start lower than that. Premium streaming offers more than 200 channels including the infamous Howard Stern, NBA and NHL games, access to SiriusXM videos, 5,000+hours of on-demand content and commercial-free music. Via satellite radio, subscribers can choose from other packages that suit their tastes and budget.

What we are interested to see is how SiriusXM will integrate Pandora Media into its current mix. There will certainly be cross-promotional opportunities, but package opportunities as well. We can see the offers now: “Get SiriusXM AND Pandora for just $XX.XX per month!” It will also be interesting to see what the acquisition of Pandora does to SiriusXM’s bottom line. Pandora has been operating in the red for a long time. Though it has seen some success in the last year, it could be a drain on SiriusXM'x coffers. SiriusXM will need a strong strategy in place to put this deal to work for the company.

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