Sirius XM also provided a glimpse of its future. Let's go over a few of the more interesting morsels said during the earnings call.
Raising the bar
Sirius XM posted results in the first quarter that exceeded our expectations for subscriber growth and position us well for continued outperformance in 2015. As a result, we are increasing both our subscriber and revenue guidance.
Once again, Sirius XM is raising its outlook. It goes without saying that the satellite-radio monopoly loves to issue conservative guidance that it can nudge higher as the year plays out. Investors aren't complaining since the stock has been one of the market's hottest stocks since bottoming out at $0.05 six years ago.
However, sometimes the market does get ahead of the expected upticks. It happened this time. Sirius XM's revenue guidance for all of 2015 went from $4.4 billion to $4.47 billion, but analysts were forecasting $4.49 billion ahead of the report.
The second time around
Our focus on the pre-owned car market is also paying off.
Sirius XM's growth continues to stem primarily from buyers of new cars with factory-installed receivers, but there's a meaty opportunity in the used car market. More cars are now hitting the resale market with Sirius or XM receivers, and Sirius XM has been striking deals with used car dealers and service centers to offer drivers of secondhand automobiles free trials of the service.
There are now 16,000 franchise and independent dealers handing over customer data to Sirius XM on folks buying preowned cars, and there are 7,000 dealers in the Service Lane program as folks come in to get service done on their vehicles with dormant satellite receivers.
It's working, and Sirius XM points out that the number of free trials it's been issuing to used car buyers is up 35% over the past year. They may never convert at the same rate as new car buyers. A lack of disposable income is a big reason why some bypass new cars. However, it's all incremental for Sirius XM.
Sirius XM is eating its own cooking
In the first quarter, we continued to return capital to our shareholders as we spent $534 million to acquire 144 million shares of our common stock. Year-to-date through Friday, this number reached about 180 million shares for $671 million. This means we removed about 3% of our shares outstanding so far this year and more than 20% of our outstanding shares since this program began just over two years ago.
Sirius XM knows that it's share count is gargantuan, resulting in gobs of profit that turn into a couple of pennies on the bottom line on a per-share basis. The important nugget for investors in that remark is that it has gone on to buy another 36 million shares since the end of the first quarter.
There's still a lot of open road out there
Vehicles in operation with SiriusXM installed reached 73 million, still only about 30% of the vehicles on the road.
Subscriber growth may be decelerating on a percentage basis, but it doesn't mean that we're closing in on peak satrad. As Sirius XM points out, less than a third of the cars out there currently have Sirius or XM receivers. That's a lot of upside, and it helps that 70% of all new cars hitting the market hit the showroom with factory-installed receivers.
One can counter that with just 27.7 million subscribers out of 73 million receivers it means that 62% of the folks driving around in cars with Sirius or XM receivers have decided it's not worth it. That's where marketing, education, and investment in content will come in.
SXM17 bears watching
I can't tell you how excited I am about this initiative. I've been hinting at it for the last four quarters in my quarterly earnings call comments that you were going to see us create our next platform around both streaming and satellite.
Sirius XM finally went public with a code name for a new platform that will combine satellite with smartphone or mobile Wi-Fi connectivity. Sirius XM is calling it SXM17 -- for now -- and it promises more details will be revealed later this year. The actual product may be a year or two away, but it seems as if Sirius XM wants to turn the connected car into an advantage instead of a threat.
Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.