Sirius XM Earnings Review: Subscriber Growth Slows Down, But Both Top Line And Bottom Line Stay Strong

by Trefis Team
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Sirius XM Radio
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SiriusXM (NASDAQ:SIRI) released its Q1’17 earnings on April 27th. The revenues of Sirius XM grew by 8% led by 5% growth in number of subscribers and 2.3% rise in average revenue per user. The company ended the quarter with 31.6 million subscribers. The profitability too held strong with EBITDA margin reaching the all time high of 38.7%.

The key factors in Q1 earnings which can affect the future results are:

  1. The subscriber growth has slowed down.
  2. Sirius XM has acquired Automatic Labs, which is a step towards connected cars.

siri-Q1'17-earn

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Slow subscriber growth can pose a concern

Although the results of the company met the estimates, the subscriber growth came out to be on the  lower side. The company added 257,000 net new subscribers, but it was not enough looking at the company guidance of 1.3 million new additions for the full year. The point of concern is that this number was already lower than the 1.6 million new additions in FY’16. This leaves the company to average out over 350,000 net new subscribers over the next three quarters. However, this does not indicate that the company is losing out on traction, but it can definitely hurt investor sentiment if it fails to meet the guidance, though the company has reiterated its guidance of 1.3 million new subscribers.

siri-Q1'17-earn-1

Connected Cars Can Be A Boost To Top Line

According to a report by Markets & Markets, its market is expected to reach $46.69 billion by 2020, growing at over 10% CAGR. To tap this growing market, the company has acquired Automatic Labs for over $100 million. Automatic Labs specializes in connected vehicle data and analytics and the connected car adapters. This technology will enable Sirius XM to pitch the cars with no connectivity that can prove to be vital in boosting their subscriber base  in the future, if the normal growth reaches a point of saturation.

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