SiriusXM Earnings Review: The Company Eyes New Platforms To Expand Its Presence
The satellite radio provider SiriusXM (NASDAQ:SIRI) released its Q4’16 and full year earnings on February 2nd. Sirius XM exceeded its annual guidance on both revenues and profits, due to both growth of the subscriber base and an increase in ARPU (average revenue per user). SiriusXM bagged 1.75 million new subscribers in 2016 which was helped by a 1% increase in the new car penetration rate. The EBITDA margins for the quarter shot up by 110 basis points on an annual basis due decreases in both customer acquisition costs and general and administrative expenses. The company’s free cash flow for the year surged by over 15% and now stands at $1.51 billion dollars.
To keep its growth intact in 2017, Sirius XM has been actively investing in new technology and teaming up with new partners to expand their presence. Relatively new concepts including the high growth market of ‘connected cars’ are falling under SiriusXM’s radar for expansion in the near future. For 2017, the company continues to guide for increases in subscribers, revenues and EBITDA. This comes in lieu of the fact that it expects the number of new cars sold to remain nearly same as that of previous year, that is, 17 million.
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New Partnerships And Connected Cars Can Be The Key To Growth
- To provide their service on platforms other than cars, SiriusXM partnered with Amazon Fire TV and Samsung TV in December. It plans to launch its service on Apple TV, Chromecast, Android TV, Playstation and other devices in the near future.
- The company is also aiming to tap the ‘connected cars’ market in 2017. The connected car refers to the vehicles equipped with the internet through which the driver can stay connected with other devices inside and outside the car. According to a report by Markets & Markets, connected car market is expected to reach $46.69 billion by 2020, growing at over 10% CAGR.
- Apart from this, the company is planning to invest in satellite technology to improve the quality of its broadcast, which will be backed by the latest content that it is bringing for its users. For instance, it added Fox Sports to its broadcasting list in addition to the new shows by various other popular artists.
The possible offsetting factors for SiriusXM’s 2017 growth can be the competitive threat from ‘Android Auto’ and ‘Apple CarPlay’, which can eat into Sirius XM’s market keeping in mind the huge combined customer base of Android and Apple. Apart from this, any weakening in the economic environment or new car sales would be a headwind for Sirius XM as well.