Sirius XM Q1 Earnings: “A remarkable quarter.” Is there Spotify impact?

siriusxm logoSirius XM released its first-quarter earnings report yesterday in an investor call that was proud, confident, and featured upward revisions to future guidance of subscriber growth and revenue. Most of the talking was done by James E. Meyer, CEO, and David J. Frear, CFO.

“We are executing extremely well,” they said, and called the Q1 reporting period “A remarkable quarter.”

Key details:

  • Sirius XM saw a net subscriber gain of 394,000 paying listeners, a 128% year-over-year lift.
  • The subscriber influx created the strongest Q1 growth story in seven years.
  • Sirius XM now has “close to” 23-million self-paying subscribers.
  • As new member flowed in, customer retention was a complementary strong point: a low 1.8% churn rate represented the best Q1 retention performance since the merger of Sirius and XM.
  • The company raised guidance on subscriber growth in 2015 from 1.2-million to 1.4-million: “We are very confident that we will attain our new guidance.”
  • The quarter generated $1.08-billion dollars of revenue, and Sirius projects $4.47-billion for the year (revised upward from $4.40-billion).
  • while revenue grew 8% from the previous year, costs remained relatively stable, leading to a 37% EBITDA margin for Q1 — the highest ever “and one of the highest around when looking across the media landscape.”


During the Q&A portion of the call, one analyst asked about music licensing costs and regulatory scrutiny happening in Washington. James E. Meyer seemed to place most of his certainty on the slow-moving nature of lawmaking: “I think it’s an unbelievably complicated landscape. There are a lot of issues for people to consider. And I’d certainly expect there to be an active lobbying agenda by a lot of people for changes in the way that royalties are administered in the United States, but I know I’m not optimistic in the near term for there being legislation coming through.”

The Sirius pay-for-radio model is unusual in the current ad-supported radio environment. Meyer addressed that broadly: “The question has been and will continue to be: Will people pay for radio? And I believe we’ve proved that very close to 28 million people today will pay for radio, and that’s really our task going forward – forget about how it’s delivered.”

Spotify was the subject of some curiosity among analysts in the Q&A period. That makes sense, as Spotify’s 25-million monthly subscribers put the on-demand music service in the same ball field as Sirius’ subscription-radio model, with about the same number of subscribers. CFO David J. Frear talked about Spotify and music streaming generally:

“It’s not like our subscribers don’t stream; we know they do. About two-thirds of our subscribers report that they regularly stream an audio service at least once a week. Spotify’s $10 offering, I don’t think has anything to do with our business. I think Spotify’s $10 offering is coming out of the downloaded and the physical media business, as opposed to the radio business.”

What about music-streaming in the car, where Sirius XM does most of its business? Frear again: “We can’t find any evidence at all — we’ve done a lot of looking — that conversion rates are adversely affected in connected vehicles where streaming opportunities are built into the car. We just can’t find any evidence of it adversely affecting demand for our service.”


Brad Hill