Sirius XM Proves It's Immune to the Pandemic

Sirius XM Holdings Inc. (NASDAQ: SIRI) reported third-quarter 2020 results before markets opened on Thursday. The satellite and streaming music company reported diluted earnings per share (EPS) of $0.06 on operating revenues of $2.03 billion. In the third quarter of 2019, the company posted EPS of $0.05 on revenues of $2.01 billion. Analysts were expecting Sirius to post EPS of $0.05 on revenues of $1.94 billion.

Although the company said that the impact of the COVID-19 pandemic on its business has been muted so far, the future remains uncertain. To date, the pandemic has not had a material effect on revenues and expenses, liquidity or the company’s cost of capital. New vehicle sales picked up in the third quarter after two quarters of weak sales.

It appears that Sirius is going to escape the worst part of the pandemic, just as it managed to dodge the worst effects of the Great Recession. In the third quarter of 2009, the company reported a year-over-year revenue gain of 27%, including some gains from its then-recent merger with XM.

Sirius raised its guidance on three key measures. The company now expects self-pay net subscriber additions for the year to jump from a prior estimate of 500,000 to 800,000. Full-year revenue guidance was raised from $7.70 billion to $7.85 billion and adjusted earnings before interest, taxes, depreciation and amortization guidance was lifted from $2.40 billion to $2.48 billion. Free cash flow guidance was unchanged at $1.60 billion.

Jennifer Witz, who will take over as chief executive in January, commented: “Our new guidance implies that we will finish the year with self-pay net additions close to 90% of what we originally projected – an extraordinary performance in this year’s environment.”

The SiriusXM satellite radio business added 169,000 net new self-pay subscribers in the third quarter, and the satellite service now has 34.4 million subscribers, of which 8.9 million are free trial customers. The segment’s revenue rose by 1% year over year to $1.6 billion and gross profit margin of 62% was essentially unchanged.

Pandora, the company’s streaming service, saw ad revenue decline by 3% to $306 million and ad-supported listener hours fell by about 6% to 3.12 billion. Pandora added 105,000 net new self-pay subscribers and closed the quarter with nearly 6.4 million self-pay customers of which 6.36 are self-payers. Gross profit in the segment declined by 4% and gross margin dipped by one point to 37%.

On Monday, Sirius closed its $300 million acquisition of Stitcher, a creator and distributor of podcasts.

Sirius expects to continue its share buybacks and dividend payments. The company repurchased $544 million worth of common stock in the quarter and pays an annualized dividend yield of 1.01%.

Shares traded up about 2% Thursday morning to $5.98, in a 52-week range of $4.11 to $7.40. The consensus 12-month price target is $6.96.

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