SiriusXM Still Feeling Pain of Sluggish Car Sales; ARPU Up on Q3 Rate Hike

A Q3 rate hike helped push SiriusXM's average revenue per user in Q1 up 9% year on year to $15.53, said management on an earnings call Thursday. Quarterly revenue grew 6% to $1.7 billion, despite lower auto sales due to supply chain disruptions.

SiriusXM self-pay subscribers slipped by 25,000 and paid promotional subscribers by 54,000, said the company. Net additions in the quarter “were impacted by the lower auto sales we began to see in the second half of last year as supply constraints became more pronounced,” said CEO Jennifer Witz. “These conditions have not yet eased.” New car and estimated used car penetration rates “grew modestly” to 83% and 52%; the SiriusXM-enabled fleet numbers nearly 146 million vehicles, she said.

Growth in digital subscriptions, the company’s fastest growing segment, was offset by declines in traditional in-car subs, said Witz. “We’ll be closely watching supply chains and sales volumes,” she said. “Inventories remain very tight.”

SiriusXM had a 20% falloff in trials in Q4 from the peak in Q2 last year, Witz said. It had a “little bit of an uptick” in Q1, a trend the company hopes will continue through 2022, but she noted “new challenges in the auto supply chain, the war in Ukraine and shutdowns in China” due to COVID-19 cases, “which we obviously hadn’t expected at the beginning of the year.” Witz was encouraged by comments from automakers on earnings calls over the past couple of days indicating they expect increased production over the year.

Advertising revenue from Pandora and the company's off-platform business grew 8% to $336 million, with off-platform ad revenue climbing 43% year over year to nearly $95 million in Q1, the company said. Ad revenue at Pandora grew to $89.77 per thousand hours, up from $85.69 in the year-ago quarter. Pandora's monthly active users numbered 50.6 million in the quarter, down from 55.9 million in Q1 2021. Total ad-supported listener hours were 2.68 billion, down from 2.87 billion. Self-pay subscribers to the Pandora Plus and Pandora Premium services edged ahead by 4,000 to end the quarter flat with Q1 2021 at 6.3 million.

Consumer demand for new and used vehicles, and the company’s services, are “healthy,” Witz said. Monthly churn rate in the quarter was 1.6%, she said. The company is making progress deploying the 360L service that combines satellite and streaming content; Witz called it a “long-term investment” that will allow the company to grow subscription revenue and, eventually, the advertising platform. The podcast business is growing; SXM Media was the top-ranked podcast advertising network in weekly U.S. listener reach in the quarter, Witz said, referencing Edison Research data.

Witz acknowledged there will be quarters with low or negative satellite net additions but said overall audio in America is “thriving” on growth in digital audio. Monthly online audio listeners in the U.S. grew to 73% of the 12 and older U.S. population, from 68% a year ago, she said, citing Edison data. Americans on average are spending 17 minutes more per day on audio vs. 2020, she said. Digital audio was the fastest growing segment in advertising last year, approaching $5 billion, she said, citing Interactive Advertising Bureau figures.

SiriusXM reaffirmed 2022 revenue guidance of $9 billion with about 500,000 self-pay net subscriber additions. The stock closed 5.7% higher Thursday at $6.31.