There was some good, some bad, and some ugly when Sirius XM Holdings (SIRI) reported its fourth-quarter results on Thursday morning. Let's start with the good. Revenue clocked in at $2.287 billion for the final three months of last year. It's a mere 0.2% increase over the past year, but it's the first time that the satellite radio provider posted a top-line increase after three consecutive year-over-year declines. It also posted a slight uptick in self-pay subscriber additions. Its profit of $0.09 a share was also just ahead of expectations. It has now posted three straight beats on the bottom line.
Let's turn to the bad, and buckle up; it's a much longer list.
- Revenue declined 0.6% for all of 2023, the first annual dip in Sirius XM's history.
- Despite landing 131,000 self-pay subscribers, it also shed 225,000 paid promotional accounts.
- Sirius XM closed out the year with 445,000 fewer self-pay subscribers, and it's obviously not a good look when a radio platform is losing listeners.
- Subscriber revenue, advertising revenue, operating profit, and pre-tax income declined for both the fourth quarter and all of 2023.
- Free cash flow of $1.2 billion may seem impressive, but it's 23% lower than 2022 -- which itself happens to be 15% below where it landed in 2021.
The good? Check. The bad? Check. The ugly? Let's talk about Sirius XM's guidance for 2024.
The song remains the same
It seems as if 2024 will be an encore performance. Sirius XM's guidance calls for $8.75 billion in revenue, 2% lower than the $8.95 billion it just delivered in 2023. Analysts were holding out for a 2% increase. The media giant sees free cash flow holding firm at $1.2 billion with a slight step down in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
It could be worse. Critics have been predicting that Sirius XM will fade out in an era of connected cars and free or nearly free streaming audio apps. It's still a viable, profitable, and sustainable platform.
Business has been meandering for some time. Back out 2019 when revenue was spiked by the acquisition of the Pandora app and Sirius XM posted seven straight years of single-digit revenue growth before last year's retreat. Even the Pandora deal seems like a dud in retrospect. Pandora was supposed to give Sirius XM a foothold in streaming and a way to consolidate two ad-supported platforms, but Pandora's audience has contracted in back-to-back years.
Image source: Getty Images.
A radio of hope
This doesn't mean that Sirius XM will never grow again. The namesake satellite radio service is still serving 33.9 million subscribers. There are more than 46 million listeners for Pandora and other off-platform streams. There is power and scalability when you can reach the masses.
The appeal of coast-to-coast radio coverage of more than 150 stations and live sports may not be the same in this era of a record number of drivers who can seamlessly stream their phone apps through their dashboards. Sirius XM still has its exclusive marquee content and other advantages.
Let's also not forget that Sirius XM is at its best when folks are driving. It's been a challenging couple of years on this side of the COVID-19 crisis. Drivers are on the road more, and not just because gas prices have fallen by more than a third since peaking in June 2022. Companies are calling many employees back to in-office work, and that means more time spent on morning and afternoon commutes. Increased usage should help with sign-ups and churn, but also increase how much advertisers are willing to pay this attractive demographics group.
As far as the stock goes, the starting line is kind for the media stock. The shares moved slightly lower last year, even as the general market roared higher. The unflattering stock chart coupled with Sirius XM recently increasing its dividend for the seventh year in a row is pushing its yield north of 2%. This once-battleground growth stock is now a steady income producer.
It's also returning money to its shareholders through aggressive buybacks, and that's been helping profitability on a per-share basis even as its business model is stuck in neutral. Sirius XM is trading for a reasonable 16 times trailing earnings. There are things far worse than an attractively priced stock that is out of favor and a monopoly niche that could shift into drive in the next couple of years.
