By Cameron Coats and Adam R Jacobson
The first quarter earnings caravan swung through SiriusXM Satellite Radio on Thursday, and while its revenue fell by 2% and its net income slipped from Q1 2022, the EPS results were in line with analysts’ estimates. The revenue, however, was not.
With SiriusXM CEO Jennifer Witz highlighting the company’s performance alongside outgoing CFO Sean Sullivan, the Thursday morning earnings call also served as Wall Street’s introduction to new Chief Financial Officer Tom Barry.
Revenue for Q1 2023 reached $2.14 billion, falling from $2.19 billion. This missed the Zacks Consensus Estimate by 1.06%.
Net income of $233 million ($0.06 per diluted share) was seen in Q1, dropping from $309 million ($0.08) one year earlier. The 6 cent EPS met the forecasts of analysts polled by Zacks.
Adjusted EBITDA stood at $625 million, dropping from $690 million; free cash flow amounted to $144 million, dipping from $258 million.
But. the bigger takeaway could perhaps be the subscriber numbers, and not the profit and loss figures. In Q1, there was statistically flat growth in its paid and promotional subscriber numbers, year-over-year. The ARPU for SiriusXM declined by 2%, to $15.29.
Yet, on the company’s earnings call, Witz emphasized that SiriusXM outperformed expectations, crediting better-than-expected ad revenue from self-service and programmatic channels. While the company aims to focus more on streaming, in-car entertainment remains its largest revenue generator.
Therein lies the troubles that SiriusXM is facing: Trial startups saw a 3% decrease in new cars and a 7% decrease in used cars during Q4, resulting in fewer conversion opportunities in Q1. That said, trial startups overall were up by 7% in the first quarter. The company experienced a subscription churn rate of 1.6%.
SiriusXM also experienced a boost in podcast ad revenue, which increased by 34% during the first quarter, demonstrating the positive momentum in the podcasting industry.
SiriusXM still expects “modestly negative” growth in new subscriptions for the year, but anticipates a stronger performance in the latter half of 2023. They aim to attract more customers through the widespread launch of their data-driven platform, 360L, which is currently available in 30% of new cars and is projected to reach 40% by the end of the year. The company also boasted a new partnership with Mercedes-Benz.
During the call, the recent Walmart+ bundle deal was discussed, highlighting strategic partnerships that contribute to SiriusXM’s growth. Barry, the incoming CFO, shared that his primary focus is on driving growth, emphasizing the importance of cautious and disciplined decision-making, considering that the majority of free cash flow is expected to come in the second half of the year.
For Jeffrey Wlodarczak, Principal and Internet/Media/Communications Analyst at Pivotal Research Group, SiriusXM reported “a mixed Q1 result which saw worse than expected self-pay subscriber losses (347,000) versus our 296,000 estimate on moderately higher than forecast churn (1.6% vs. our 1.5%).”
As such, he reduced Pivotal’s target price on SiriusXM shares from $5 to $4 while reiterating its “Hold” rating, noting that 2024 is poised to be a better fiscal year for the satellite radio company.
Just before 3pm Eastern, SIRI was trading at $3.65 per share.
