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Sirius XM (SIRI) Down 2.6% Since Last Earnings Report: Can It Rebound?

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  • SIRI

It has been about a month since the last earnings report for Sirius XM (SIRI). Shares have lost about 2.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Sirius XM due for a breakout? 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.

Sirius XM Q2 Earnings Beat, Subscriber Revenues Up Y/Y

Sirius XM Holdings reported second-quarter 2021 earnings of 10 cents per share, which beat the Zacks Consensus Estimate by 42.8% and increased 100% year over year.

Total revenues, on a reported basis, increased 15.2% year over year to $2.15 billion. The top line beat the consensus mark by 4.3%. On a pro-forma basis, revenues increased 15.1% year over year.

Subscriber revenues (76% of total revenues) rose 4% from the year-ago quarter to $1.64 billion.

Advertisement revenues (19.9% of total revenues) increased 81.8% year over year to $429 million. Equipment revenues (2.4% of total revenues) surged 104% to $51 million.

Other revenues (1.8% of total revenues) increased 2.7% from the year-ago quarter to $38 million.

Sirius XM Standalone Details

Sirius XM segment pro-forma revenues were $1.64 billion, up 6.7% year over year. While the total subscriber base increased 0.7% to 34.5 million, the company witnessed growth of 4.4% in ARPU, which was $14.57.

Self-pay subscribers increased 3% year over year to 31.3 million. The company lost 23K net self-pay subscribers in the reported quarter.

Sirius XM traffic users were at 9.2 million, down 2% year over year. Also, Canada subscribers decreased 1% to 2.5 million.

Average self-pay monthly churn rate was 1.5% in the second quarter, down 10 basis points year over year.

Subscriber revenues rose 3.8% year over year to $1.5 billion. Equipment revenues increased 104% to $51 million.

Advertising revenues were $46 million, up 84% year over year. Other revenues increased 2.7% to $38 million.

Pandora Details

Pandora’s pro-forma revenues increased 53.6% year over year to $516 million owing to 81.5% growth in advertising revenues, which totaled $383 million. Subscriber revenues climbed 6.4% to $133 million.

The growth in ad revenues was due to increase in second-quarter monetization to $100.4 per thousand hours, up 81.7% year over year.

However, ARPU decreased 0.4% year over year to $6.67.

Monthly active users were 55.1 million at the end of the reported quarter, down from 59.6 million in the year-ago quarter. Ad-supported listener hours declined 7.9% to 3.03 billion.

Pandora exited the second quarter with 6.51 million self-pay subscribers, up 4.2% year over year.

Operating Details

In the second quarter, total operating expenses increased 2.7% year over year to $1.5 billion.

Revenue share and royalty costs were up 12.4% year over year to $662 million. Programming & content costs were $128 million, up 24.3%. Transmission costs increased 22% year over year to $50 million.

Cost of equipment remained flat year over year at $4 million. Customer service & billing costs increased 4.1% to $126 million.

Subscriber acquisition costs increased 85.4% year over year to $89 million. Engineering, design and development expenses increased 13.5% to $59 million.

Sales and marketing expenses increased 12.9% to $227 million. General and administrative costs increased 11.8% to $114 million.

Adjusted EBITDA increased 13.8% year over year to $700 million.

Balance Sheet

As of Jun 30, 2021, cash and cash equivalents were $1.12 billion compared with $59 million as of Mar 31, 2021.

Long-term debt, as of Jun 30, 2021, was $8.8 billion compared with $8.5 billion as of Mar 31, 2021.

At the end of the second quarter, Sirius XM’s net debt to trailing 12-month adjusted EBITDA ratio was 3.2.

2021 Guidance

Revenues are expected to be approximately $8.55 billion. Adjusted EBITDA is expected to be around $2.6 billion.

The company anticipates adding around 1.1 million Sirius XM self-pay net subscribers in 2021.

Free cash flow is expected to be approximately $1.7 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 7.69% due to these changes.

VGM Scores

Currently, Sirius XM has a strong Growth Score of A, 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions has been net zero. It comes with little surprise Sirius XM has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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