Sirius XM (SIRI) Tops Q3 EPS by 1c, Revenues Beat; Offers FY18 Revenue Outlook Below Consensus

October 24, 2018 7:02 AM EDT

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Sirius XM (NASDAQ: SIRI) reported Q3 EPS of $0.07, $0.01 better than the analyst estimate of $0.06. Revenue for the quarter came in at $1.47 billion versus the consensus estimate of $1.46 billion.

THIRD QUARTER 2018 HIGHLIGHTS

  • Self-Pay Net Additions of 298,000. The Company added 298,000 net new self-pay subscribers in the third quarter to end the period with approximately 28.5 million self-pay subscribers. Self-pay monthly churn of 1.8% improved 12 basis points over the third quarter of 2017. Total net additions in the third quarter were 198,000, resulting in approximately 33.7 million SiriusXM subscribers at quarter-end.
  • Revenue of $1.5 Billion. Third quarter revenue grew 6% compared to the year-ago period to $1.5 billion. This growth was driven by a 5% increase in subscribers and an increase of nearly 1%, after an accounting change, in average revenue per user (ARPU) to $13.48. The third quarter 2018 was impacted by the adoption of the new revenue recognition accounting standard (FASB ASU 2014-09) which reclassified approximately $24 million of revenue to offset expenses principally related to automaker agreements. Excluding these reclassifications, which reduced reported ARPU by $0.24 in the third quarter of 2018, ARPU growth would have totaled 2.3%.
  • Record Adjusted EBITDA, Margin 40%+. Adjusted EBITDA in the third quarter reached a record $589 million, up 7% over the third quarter 2017, driven primarily by lower subscriber acquisition costs and fixed operating expenses as a percentage of revenue. The Company\'s record adjusted EBITDA margin of 40.1% in the quarter is also the first time the Company has topped 40%.
  • Net Income Grows 24%. Net income in the third quarter totaled $343 million, up 24% from $276 million in the third quarter 2017. This increase included a $44 million unrealized loss associated with the change in fair value of the Company\'s Pandora investment, in addition to approximately $89 million of tax savings resulting in a 3.3% effective tax rate in the third quarter, compared to a 28.3% effective tax rate in the prior year period. The third quarter 2018 tax rate was driven by savings from the Tax Act in addition to benefits from share-based compensation and a $65 million benefit from state research and development tax credits. The Company estimates its full-year 2018 effective tax rate will be approximately 17%.

"SiriusXM's standout third quarter saw continued strength in subscriber additions and churn performance while adjusted EBITDA reached a quarterly record-high $589 million. Our revenue growth, adjusted for the change in generally accepted accounting principles that was effective January 1st, totaled 8% in the quarter. In addition to our operational excellence, we were thrilled this quarter to announce an agreement to acquire Pandora Media, which we expect to close in the first quarter of 2019. With the end of the year in sight, we are increasing our full-year guidance for self-pay net additions, revenue and adjusted EBITDA," said Jim Meyer, Chief Executive Officer, SiriusXM.

"We have a relentless focus on creating and curating content our subscribers will love — our limited-run Dave Matthews Band Radio was a perfect example. We also presented fiery live performances just for subscribers, like our recent show by The Killers in New York. We've added provocative talent in talk and sports, with a daily show from CNN's Chris Cuomo, a new show from Hall of Famer Reggie Jackson, the return of Brett Favre\'s popular show, and a new program highlighting women in sports hosted by journalist Christine Brennan and retired tennis pro Rennae Stubbs," added Meyer.

"Share repurchases in the third quarter were $334 million, totaling approximately 48 million shares, in addition to the nearly $50 million in dividends we paid to stockholders. At the end of the quarter, our debt to adjusted EBITDA was just 3.0 times, and we had cash on hand of approximately $46 million and undrawn revolver capacity of $1.63 billion. On October 9, 2018, we announced a 10% increase in our quarterly dividend payable in November, and our strong capitalization and ample liquidity provide us flexibility to continue investing in our business, make strategic investments and further return capital to stockholders," noted David Frear, Chief Financial Officer, SiriusXM.

GUIDANCE:

Sirius XM sees FY2018 revenue of $5.725 billion, versus the consensus of $5.76 billion.

For earnings history and earnings-related data on Sirius XM (SIRI) click here.



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