Subscriber Revenue Jump Can’t Prevent SiriusXM Q4 Loss

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Here’s the good news for Sirius XM shareholders: Subscriber, advertising and equipment revenue all climbed for the satellite radio company in Q4.


Unfortunately, those gains couldn’t offset a gain in revenue share and royalty payments—a key contributor to a fourth-loss that was in line with the expectations of Wall Street analysts.

Consolidated revenue for Sirius XM rose to $1.4 billion, from $1.3 billion. This was paced by a gain in subscriber revenue in Q4 to $1.15 billion, from $1.08 billion. Ad revenue also improved for Sirius XM, jumping to $42.7 million from $38.9 million.

But, in a way, the recording industry may be to blame for Sirius’ financial challenge in Q4. Revenue share and royalties are by far the satellite broadcasting company’s biggest operating expense, and in the quarter this soared to $343.6 million, from $319.6 million.

Total operating expenses hit $1.01 billion, rising from $973.4 million.

With that, Sirius XM swung to a net loss of $37 million (one cent per share), compared to Q4 2016 net income of $204.6 million (4 cents per share).

The per-share results came in line with the forecasts of eight analysts surveyed by Zacks Investment Research, while revenues surpassed the Zacks consensus estimate of $1.395 billion.

The fourth quarter net income results reflect a $185 million (4 cents per diluted share) charge associated with the revaluation of Sirius XM’s deferred tax assets as a result of the Tax Cuts and Jobs Act. The company also in Q4 recorded a decrease of approximately $72 million (2 cents per diluted share) in the fair value of its investment in Pandora, reversing the prior quarter’s unrealized gains.

Adjusted EBITDA grew 14%, to $541.6 million.

Sirius XM CEO Jim Meyer was upbeat in surmising his company’s performance in the final three months of 2017. “The fourth quarter capped a strong year for SiriusXM and was our best quarter for self-pay subscriber growth in five years,” he said. “We exceeded all of our 2017 subscriber and financial guidance, even after increasing these targets during the year.”

He was particularly pleased that Sirius XM achieved growth in an environment of slowing auto sales.

For the full-year of 2018, Sirius XM revenue increased to $5.43 billion, from $5.02 billion. But, FY ’18 net income slipped to $647.9 million (14 cents per share), from $745.9 million (15 cents).

What’s expected from the home of Howard Stern and commercial-free music channels?

  • Self-pay net subscriber additions of approximately 1 million
  • Revenue of approximately $5.7 billion
  • Adjusted EBITDA of approximately $2.15 billion
  • Free cash flow of approximately $1.5 billion

As of Dec. 31, 2017, Sirius XM saw its self-pay subscriber rolls jump by 6% year-over-year, to 27,513,000. Paid promotional subscribers slipped by 3%, to 5,223,000. Its ARPU increased to $13.43, from $13.16.

As of 2:38pm Eastern, investors seem satisfied with Sirius XM’s performance in Q4, as shares were up 2.6%, to $6.11.

This continues a healthy growth trend for SIRI shares, which were below $4.15 a share until June 2016.