Why Is Sirius XM (SIRI) Up 7.2% Since Last Earnings Report?
A month has gone by since the last earnings report for Sirius XM (SIRI). Shares have added about 7.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Sirius XM due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
SiriusXM Q3 Earnings in Line, Subscriber Revenues Up Y/Y
SiriusXM reported third-quarter 2020 earnings of 6 cents per share that matched the Zacks Consensus Estimate and increased 20% year over year.
Total revenues on a reported basis increased 0.7% year over year to $2.03 billion. The figure beat the consensus mark by 4.4%. On a pro-forma basis, revenues also increased 0.7% year over year.
Subscriber revenues (78.7% of total revenues) rose 2.4% from the year-ago quarter to $1.59 billion.
Meanwhile, advertisement revenues (17%) declined 5.7% year over year to $345 million. Equipment revenues (2.3% of total revenues) increased 4.4% year over year to $47 million. Other revenues (1.9% of total revenues) decreased 11.4% from the year-ago quarter to $39 million.
SiriusXM Standalone Details
SiriusXM segment pro-forma revenues were $1.59 billion, up 1.5% year over year. While the subscriber base declined 0.3%, the company witnessed growth of 1.8% in ARPU, which was $14.15.
Self-pay subscribers increased 3% year over year to 30.5 million. The company added 169K net self-pay subscribers in the reported quarter.
Total subscribers were 34.4 million as of Sep 30, 2020, less than 34.5 million as of Sep 30, 2019.
SiriusXM traffic users grew 1% year over year to 9.430 million. However, Canada subscribers decreased 3% to 2.612 million.
Additionally, average self-pay monthly churn rate was 1.7% in the third quarter, unchanged year over year.
Subscriber revenues rose 2.7% year over year to $1.46 billion. Moreover, Equipment revenues increased 4.4% year over year to $47 million.
However, advertising revenues were $39 million, down 23.5% year over year. Other revenues declined 10.9% year over year to $41 million.
Pandora’s pro-forma revenues decreased 2% year over year to $438 million owing to 2.9% decline in advertising revenues, which totaled $306 million. Subscriber revenues were unchanged year over year at $132 million.
Weakness in ad revenues was due to decrease in third-quarter monetization to $84 per thousand hours, down 1% year over year.
However, ARPU increased 5.7% year over year to $6.83.
Monthly active users were 58.6million at the end of the reported quarter, down from 63.1 million in the year-ago quarter. Ad-supported listener hours declined 6% year over year to 3.12 billion.
Pandora added 105K self-pay subscribers and exited the third quarter with 6.404 million self-pay subscribers.
In the third quarter, total operating expenses increased 0.8% year over year to $1.55 billion.
Revenue share and royalty costs were up 1.7% year over year to $602 million. Programming & content costs were $123 million, up 6%. Cost of equipment declined 37.5% year over year to $5 million.
Customer service & billing costs were unchanged year over year at $119 million. Transmission costs were also unchanged at $46 million.
Subscriber acquisition costs increased 8.9% year over year to $110 million. General and administrative costs increased 5.6% to $131 million.
Engineering, design and development expenses decreased 17.9% from the year-ago quarter to $64 million. Sales and marketing expenses declined 4.7% to $222 million.
Adjusted EBITDA increased 0.6% year over year to $661 million.
Balance Sheet & Cash Flow
As of Sep 30, 2020, cash and cash equivalents were $44 million compared with $1.77 billion as of Jun 30, 2020. The company had $1.749 billion available for future borrowing under its revolving credit facility.
Long-term debt, as of Sep 30, 2020, was $7.85 billion compared with $7.847 billion as of Jun 30, 2020.
At the end of the third quarter, SiriusXM’s net debt to trailing 12-month adjusted EBITDA ratio was 3.1 times.
Cash flow from operating activities in third-quarter 2020 was $443 million compared with $544 million in the year-ago quarter. Free cash flow was $361 million down 22.4% year over year.
SiriusXM repurchased shares worth $486 million in the reported quarter. The company also announced a 10% increase to its dividend that as of November will stand at $0.014641 per share per quarter.
Revenues, on a pro-forma basis, are expected to be $7.85 billion better than previous guidance of $7.7 billion. Adjusted EBITDA is expected to be $2.475 billion.
The company anticipates adding almost 800K SiriusXM self-pay net subscribers in 2020.
Free cash flow is still expected to be $1.6 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -9.57% due to these changes.
Currently, Sirius XM has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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