SiriusXM Posts Double-Digit Profit Growth on Subscription Price Hikes, Pandora’s Ad Revenue

SiriusXM Holdings reported double-digit profit growth in the first quarter driven by the company’s subscription price hikes and increased advertising revenue from Pandora.

Net income rose 20% to $245 million, and overall revenue edged 1% higher to $2.1 billion in the quarter ending March 31 compared to the same period a year ago. The company’s adjusted earnings before interest, tax, depreciation and amortization (adjusted EBITDA), a metric that normalizes company earnings by removing one-time costs, rose by nearly 6% to $666 million for a margin of 31.9%, and free cash flow more than tripled to $171 million from a year ago.

The company’s stock was up 1.2% to $27.08 in mid-day trade. In the past month SiriusXM’s stock has risen by more than 17% as investors speculated that it may lease or sell some of its vast and valuable airwave resources, or spectrum, to space start-ups. Investors also reacted positively to mid-April reports that terrestrial radio station iHeart Radio approached SiriusXM to discuss a potential sale. Executives declined to discuss appetite for selling internal resources or acquisitions, saying it is most focused on growing its core business, like its 360L platform.    

SiriusXM Holdings, which encompasses its in-car satellite radio, Pandora, podcasting and streaming networks, consistently reports steady earnings, but the company has struggled in recent years with declining subscribers. After experiments developing a costly streaming app, building a popular podcast business and two subscription price hikes in two years, the company has hit on family or companion plans as a successful way to increase customer loyalty and stem subscriber loss.

“We’re very pleased with our Q1 subscriber performance, especially after a strong Q4 last year, and the companion subscriptions clearly contributed to that,” Sirius CEO Jennifer Witz, saying they drove 124,000 subscriptions. “Companion plans expand access to SiriusXM to more listeners across the household, and also enhance the value and improve retention of that subscription household. So we’re really pleased.”

Churn among self-pay subscribers fell to a record low of 1.5%, despite SiriusXM raising the price of subscriptions like its Platinum/All Access offering by $1 to $25.99. SiriusXM lost 111,000 self-paying subscribers — compared to 303,000 this quarter last year — for a total of 31.2 million self-pay subscribers. Trial subscribers who pay typically $1 for the first three months totaled 1.6 million in the quarter, a decline of 37,000 to 1.6 million. These improvements contributed to a 13-cent increase in average revenue per user (ARPU) to $14.99, Witz said.

SiriusXM launched new artist-curated channels in the quarter from Morgan Wallen, John Summit and a live Metallica call in show, as well as pop-up channels for BTS, Luke Combs and Robin around their album releases.

The company has worked to keep a lid on expenses as it works to achieve its target of $1.5 billion in free cash flow by 2027. They reduced overall cost of services by $6 billion by spending slightly less on revenue share and royalties costs for music programming, which cost $697 million split roughly even between SiriusXM and Pandora, and programming and content, which cost $137 million for a total of $986 million. Total company operating expenses decreased slightly to $1.6 billion.

Pandora generated half a billion in total quarterly revenue, including $129 million from about 5.6 million subscribers and $372 million from advertisers. Pandora reported a gross profit of $139 million for a gross margin of 28%. Pandora’s total monthly active users fell 5% to 40.1 million.

With most of its revenue coming from its in-vehicle satellite radio product, SiriusXM is exposed to customer sentiment related to car sales and gas prices. Witz said they think they can control their offerings and prices to maintain “resilient in-car foundation and… support performance.”

Earlier in April, SiriusXM announced a deal with Google and YouTube making SiriusXM, Pandora, SoundCloud and its podcast networks the exclusive advertising representative for audio ads that run against YouTube content in the United States.

Advertising revenue rose by 3% to around $407 million on a 37% increase in podcasting advertising revenue, a sign Witz said that its ad “momentum is accelerating.”

“Our partnership with YouTube marks a significant step forward,” Witz said on a call. “We are expanding our reach to 255 million monthly listeners, nearly 90% of the US population, age 13 and older [offering] advertisers scaled access to content … like SNL to leading creators like Mr. Beast as well as podcasts beyond our own network and streaming music.”