Welcome back to the quarterly "beat and raise" magic, Sirius XM Holdings (NASDAQ:SIRI). The media giant came through with a strong financial report on Wednesday morning, posting slightly better-than-expected second-quarter results and lifting most of its full-year guidance metrics higher.
The satellite radio provider returned to form after its ho-hum performance three months ago, where it may have landed ahead of Wall Street's top- and bottom-line targets but merely reiterated its initial 2018 outlook. Standing still has been rare for Sirius XM over the past nine years, during which it has been one of the market's biggest gainers. The stock is roughly a 140-bagger since bottoming out in early 2009. Bulls will be happy to see it on the move again.
Revenue rose 6.3% to $1.43 billion in the second quarter, matching the first quarter's uptick but just ahead of the 5.4% gain that analysts were modeling. Sirius XM's top-line growth would've been closer to 8% if it weren't for accounting changes that kicked in this year. Net income soared 45% to $292 million, though as a result of Sirius XM's aggressive buybacks it came out to a 49% surge on a per-share basis. Sirius XM's profit of $0.06 per share matched analyst estimates.
Sirius XM closed out the period with 483,000 more self-pay subscribers than it had at the end of March, comfortably ahead of what Wall Street was forecasting. There are now more than 33.5 million subscribers on Sirius XM.
The most impressive nugget in Sirius XM's report is that monthly churn clocked in at a record low of 1.6%. Sirius XM has historically given up between 1.8% and 2.1% of its existing user base in any given month. Listeners have never stuck around as well as they did during the second quarter. The bearish argument has always been that folks will stop paying for premium radio in this era of connected cars where free or nearly free mobile apps can stream seamlessly off of smartphone-tethered dashboards, but that's not how things are playing out. Sirius XM is as popular as ever, and its growing audience has never been this loyal.
Sirius XM's outlook for the year is a bit rosier than it was back in late April.
- Self-pay net subscribers will grow by 1.15 million in 2018, up from its earlier target of 1 million.
- The revenue goal is going from "approximately" $5.7 billion to "over" $5.7 billion.
- Adjusted EBITDA that was pegged at roughly $2.15 billion is now up to $2.175 billion.
- Sirius XM's free cash flow forecast remains steady at approximately $1.5 billion.
The boosts may not seem like much, but just inching in the right direction matters. Satellite radio continues to gain traction, and that's good news for Sirius XM investors, who have already been rewarded nicely over the years.