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Why Is Sirius XM (SIRI) Down 2.4% Since Last Earnings Report?
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A month has gone by since the last earnings report for Sirius XM (SIRI - Free Report) . Shares have lost about 2.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Sirius XM due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Sirius XM Holdings reported first-quarter 2020 earnings of 7 cents per share that beat the Zacks Consensus Estimate by 40% and increased 133% year over year.
Total revenues on a reported basis jumped 11.9% year over year to $1.95 billion and beat the Zacks Consensus Estimate by 2.5%. On a pro-forma basis, revenues increased 5.1% year over year.
The top line was driven by increasing subscriber and advertisement revenues. Subscriber revenues (81.2% of total revenues) grew 8.7% from the year-ago quarter to $1.58 billion. Advertisement revenues (14.6%) increased 36.4% year over year to $285 million.
Equipment revenues (2.1% of total revenues) remained flat year over year at $41 million. Other revenues (2.1% of total revenues) increased 13.9% from the year-ago quarter to $41 million.
SiriusXM Standalone Details
Sirius XM segment pro-forma revenues were $1.58 billion, up 6% year over year. The increase was driven by 1.7% growth in subscriber base and 3.2% in ARPU, which was $13.95.
Self-pay subscribers increased 3.4% year over year to 30.047 million. The company added 69K net self-pay subscribers in the reported quarter.
However, Sirius XM lost 143K net subscribers. The company lost paid promotional subscribers due to a decline in shipments from automakers offering paid promotional subscriptions.
Total subscribers were 34.766 million as of Mar 31, 2020, better than 34.171 million as of Mar 31, 2019.
Sirius XM traffic users grew 10% year over year to 9.706 million and Canada subscribers increased 1% to 2.687 million.
Additionally, average self-pay monthly churn rate was 1.8% in the first quarter, which remained flat year over year.
Subscriber revenues rose 6.4% year over year to $1.45 billion. Other revenues improved 13.2% year over year to $43 million. Moreover, Equipment revenues remained flat year over year at $41 million.
However, advertising revenues were $44 million, down 4.3% year over year.
Pandora Details
Pandora’s pro-forma revenues increased 11% year over year to $369 million owing to 4.3% growth in advertising revenues, which totaled $241 million. This was partially offset by 4.5% decline in subscriber revenues, which came in at $128 million.
Ad revenues were driven by strong first-quarter monetization of $67.54 per thousand hours, up 7.9% 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.
Moreover, ARPU increased 2.2% year over year to $6.85.
Meanwhile, monthly active users (MAUs) were 60.926 million at the end of the reported quarter, down from 66.035 million in the year-ago quarter. Ad-supported listener hours declined 8.5% year over year to 3.13 billion.
Pandora added 55K self-pay subscribers and exited the first quarter with nearly 6.215 million self-pay subscribers. However, it lost 685K paid promotional subscribers over the year.
Operating Details
In the first quarter, total operating expenses increased 5.2% year over year to $1.48 billion.
Revenue share and royalty costs grew 15.9% year over year to $570 million. Satellite and transmission costs increased 29% year over year to $40 million.
Customer service & billing costs improved 4.4% to $118 million. Programming & content costs were $118 million, up 11.3% while Cost of Equipment declined 33.3% year over year to $4 million.
Engineering, design and development expenses increased 31.5% from the year-ago quarter to $71 million. Sales and marketing expenses jumped 23% to $225 million.
However, subscriber acquisition costs declined 8.3% year over year to $99 million.
Adjusted EBITDA grew 12.7% year over year to $639 million, driven primarily by revenue growth across the business and reductions in subscriber acquisition costs, general and administrative costs and customer service and billing costs.
Balance Sheet & Cash Flow
As of Mar 31, 2020, cash and cash equivalents were $40 million compared with $106 million as of Dec 31, 2019.
Long-term debt as of Mar 31, 2020 was $7.847 billion compared with $7.842 billion as of Dec 31, 2019.
At quarter-end, Sirius XM’s debt to adjusted EBITDA ratio was 3.1. The company had $1.75 billion available under its revolving credit facility.
Cash flow from operating activities in first-quarter 2020 was $416 million compared with $532 million in fourth-quarter 2019. Free cash flow was $348 million in the first quarter compared with $408 million in the previous quarter.
Guidance Withdrawal For 2020
The company withdrew its full-year 2020 guidance for self-pay net subscriber additions, revenue, adjusted EBITDA and free cash flow.
The company plans to release revised guidance at a future date when more data is available on the effects of the COVID-19 crisis on its business.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 8% due to these changes.
VGM Scores
At this time, Sirius XM has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Sirius XM has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Sirius XM (SIRI) Down 2.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Sirius XM (SIRI - Free Report) . Shares have lost about 2.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Sirius XM due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Sirius XM Holdings Q1 Earnings Top, Revenues Rise Y/Y
Sirius XM Holdings reported first-quarter 2020 earnings of 7 cents per share that beat the Zacks Consensus Estimate by 40% and increased 133% year over year.
Total revenues on a reported basis jumped 11.9% year over year to $1.95 billion and beat the Zacks Consensus Estimate by 2.5%. On a pro-forma basis, revenues increased 5.1% year over year.
The top line was driven by increasing subscriber and advertisement revenues. Subscriber revenues (81.2% of total revenues) grew 8.7% from the year-ago quarter to $1.58 billion. Advertisement revenues (14.6%) increased 36.4% year over year to $285 million.
Equipment revenues (2.1% of total revenues) remained flat year over year at $41 million. Other revenues (2.1% of total revenues) increased 13.9% from the year-ago quarter to $41 million.
SiriusXM Standalone Details
Sirius XM segment pro-forma revenues were $1.58 billion, up 6% year over year. The increase was driven by 1.7% growth in subscriber base and 3.2% in ARPU, which was $13.95.
Self-pay subscribers increased 3.4% year over year to 30.047 million. The company added 69K net self-pay subscribers in the reported quarter.
However, Sirius XM lost 143K net subscribers. The company lost paid promotional subscribers due to a decline in shipments from automakers offering paid promotional subscriptions.
Total subscribers were 34.766 million as of Mar 31, 2020, better than 34.171 million as of Mar 31, 2019.
Sirius XM traffic users grew 10% year over year to 9.706 million and Canada subscribers increased 1% to 2.687 million.
Additionally, average self-pay monthly churn rate was 1.8% in the first quarter, which remained flat year over year.
Subscriber revenues rose 6.4% year over year to $1.45 billion. Other revenues improved 13.2% year over year to $43 million. Moreover, Equipment revenues remained flat year over year at $41 million.
However, advertising revenues were $44 million, down 4.3% year over year.
Pandora Details
Pandora’s pro-forma revenues increased 11% year over year to $369 million owing to 4.3% growth in advertising revenues, which totaled $241 million. This was partially offset by 4.5% decline in subscriber revenues, which came in at $128 million.
Ad revenues were driven by strong first-quarter monetization of $67.54 per thousand hours, up 7.9% 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.
Moreover, ARPU increased 2.2% year over year to $6.85.
Meanwhile, monthly active users (MAUs) were 60.926 million at the end of the reported quarter, down from 66.035 million in the year-ago quarter. Ad-supported listener hours declined 8.5% year over year to 3.13 billion.
Pandora added 55K self-pay subscribers and exited the first quarter with nearly 6.215 million self-pay subscribers. However, it lost 685K paid promotional subscribers over the year.
Operating Details
In the first quarter, total operating expenses increased 5.2% year over year to $1.48 billion.
Revenue share and royalty costs grew 15.9% year over year to $570 million. Satellite and transmission costs increased 29% year over year to $40 million.
Customer service & billing costs improved 4.4% to $118 million. Programming & content costs were $118 million, up 11.3% while Cost of Equipment declined 33.3% year over year to $4 million.
Engineering, design and development expenses increased 31.5% from the year-ago quarter to $71 million. Sales and marketing expenses jumped 23% to $225 million.
However, subscriber acquisition costs declined 8.3% year over year to $99 million.
Adjusted EBITDA grew 12.7% year over year to $639 million, driven primarily by revenue growth across the business and reductions in subscriber acquisition costs, general and administrative costs and customer service and billing costs.
Balance Sheet & Cash Flow
As of Mar 31, 2020, cash and cash equivalents were $40 million compared with $106 million as of Dec 31, 2019.
Long-term debt as of Mar 31, 2020 was $7.847 billion compared with $7.842 billion as of Dec 31, 2019.
At quarter-end, Sirius XM’s debt to adjusted EBITDA ratio was 3.1. The company had $1.75 billion available under its revolving credit facility.
Cash flow from operating activities in first-quarter 2020 was $416 million compared with $532 million in fourth-quarter 2019. Free cash flow was $348 million in the first quarter compared with $408 million in the previous quarter.
Guidance Withdrawal For 2020
The company withdrew its full-year 2020 guidance for self-pay net subscriber additions, revenue, adjusted EBITDA and free cash flow.
The company plans to release revised guidance at a future date when more data is available on the effects of the COVID-19 crisis on its business.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 8% due to these changes.
VGM Scores
At this time, Sirius XM has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Sirius XM has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.