SiriusXM Dials Back Self-Pay Subs Projection on Automotive Questions

SiriusXM scaled back guidance for self-pay subscriber growth due to challenges and uncertainty in new and used auto sales, said CEO Jennifer Witz on a Q2 earnings call Thursday. The company said on its April earnings call it expected 500,000 more self-pay subscribers in 2022.

Witz also cited “growing uncertainty in the advertising market,” where SiriusXM generates “significant revenue with high variable margins.” The company is “watching cancellations closely,” she said. SiriusXM is now “prudently implementing” cost-saving measures, including reining in hiring to “priority roles,” looking at its real estate footprint and taking “a more measured approach on discretionary spending," Witz said.

But SiriusXM maintained 2022 revenue guidance of $9 billion in its Q2 earnings report following a 4% year-on-year rise in revenue to $2.25 billion for the quarter ended June 30. Net income declined to $292 million vs. $433 million in Q2 2021, when it had $140 million in satellite insurance recoveries, the company said. Shares closed 2.2% higher Thursday at $6.58.

Self-pay subscribers increased by 23,000 and paid promotional subscribers grew by 54,000 in the quarter, with total self-pay subs remaining at 32 million on 1.5% churn, the company said. It had 34 million total subscribers for the quarter. Trials numbered 7.3 million at the end of June, up from 6.9 million at the end of March.

SiriusXM “managed through” supply chain challenges in the auto industry, Witz said. New and used car penetration rates grew to 84% and 51%, respectively; its fleet is about 145 million cars, she said. The company extended contracts with Mazda and Mitsubishi this quarter, she said.

At the end of June, SiriusXM had 34 million subscribers; Pandora had 6.3 million for Pandora Plus and Premium, "decreasing modestly," the company said. Revenue in the SiriusXM segment increased 5% to $1.7 billion. Growth was driven by a $1.05 increase in average revenue per user, which rose 7% year on year, for a total ARPU of $15.62, the company said. A 2% increase in SiriusXM self-pay subscribers was partially offset by effects of a lower base of paid promotional subscribers, the company said.

Ad revenue in the Pandora and Off-Platform segment grew 5% year on year to $403 million. Off-platform advertising, including the podcast business, increased 50% to nearly $119 million. Ad revenue held at $100 per thousand hours at Pandora, roughly flat with Q2 2021, the company said. Travel, restaurants, gambling and retail have been strong advertising categories for the company, said Chief Financial Officer Sean Sullivan.

Monthly active users at Pandora declined by 4.6 million to 50.5 million in the quarter; ad-supported listener hours were 2.84 billion, down from 3.03 billion, the company said. Average hours per ad-supported user climbed 3% to 21.1 vs. 20.4 in Q2 2021.

Subscriber revenue slipped 2%, advertising revenue rose 5% and total cost of services increased 14% in Q2, driven by investment in new podcast content, the company said. That led to a 13% decline in gross profit for the Pandora and Off-Platform segment to $167 million, down 6 points from the year-ago period, it said. Time spent listening by active users grew at Pandora, attributed to improved personalization and expanded content.

SiriusXM is “making progress” with several electric vehicle startups, Witz said, saying details will be provided in coming months. It's currently in some Tesla models and would like more, Witz said. The company is seeing an uptick in streaming-only subscriptions, and it’s evolving the business to focus on listening both in and outside the vehicle, she said. Initial consumer response to streaming efforts have been “encouraging,” she said, and the company expects it to be a "much more significant” part of future business.

On price increases, Witz referenced SiriusXM’s history of raising prices on its full-price tier, while noting that the company is “very sensitive" to the fact that its "largest competition in the car," over-the-air radio, "continues to be free.” The company is “disciplined” in how it looks at rate increases, she said, “but I would expect us to continue to consider them going forward.