Sirius XM (SIRI, Financial) recorded excellent results recently. Moving ahead into the fourth quarter, Sirius XM is once more expanding its guidance for free cash flow, revenue and subscribers and, each twice in just three months. At present, it expects net subscriber additions of about 1.5 million, nearly $4.15 billion of revenue and roughly $1.12 billion of free cash flow for this year.
Strong performance
Sirius XM concluded the third quarter with 26.7 million paid subscribers including, a record 22 million self-pay subscribers. The complete net additions in the quarter were 433,000, including 53,000 paid promotional additions and 380,000 self-pay net adds.
The robust quarterly auto sales benefited the company’s paid trial additions and enabled it to raise its subscriber guidance for the second time in a row since last two months. New car SAAR expanded 7% to 16.75 million during the quarter. Moving ahead, the full-year auto sales are forecasted to be nearly 16.4 million, a modest increase of about 5% from a year ago.
Getting better
Sirius XM’s new car penetration rate during the third quarter reached 71.5%, an increase of nearly 2.8 points over the same period last year. It concluded the third quarter with about 68 million factory-enabled vehicles under operation and equating approximately 28% of the vehicles on the road.
For every passing year, a greater number of preowned vehicles sold are expected to include a satellite radio, and Sirius XM has made significant progress in executing its preowned business for this year. All the key automaker provides a Sirius XM tryout with its authorized preowned vehicle sales at all the franchise dealer location. And further, Sirius XM currently has over 14,000 auto dealers offering Sirius XM tryout to their noncertified customers, recording 11,000 more trials compared to the end of preceding year.
Self-pay churn rate for the entire business remained extremely robust at 1.9%.
During the third quarter, free cash flow was recorded the highest at $267 million among all the earlier third quarters. For this entire year to date, Sirius XM has generated $825 million of free cash flow, an increase of 32% over last year.
Sirius XM has added several innovative channels, popular hosts and exciting shows for this quarter. The online radio major has strengthened its music offering by releasing 3 innovative music channels for country audiences, women's pop and dance. It has lately concluded the month-long extraordinary channel highlighting Barbra Streisand's music.
It has released the encouraging Joel Osteen Radio to become a full-time channel and introduced the TODAY Show Radio, allowing its subscribers live access to audio feeds of TODAY from both coasts. It has added a permanent Bleacher Report Radio channel; an innovative daily show on Mad Dog Sports Radio featuring Stephen A. Smith who’s a well-known sport media personality; and introduced a unique show featuring Hall of Fame Golfer Freddie Couples to the expanding portfolio of its PGA TOUR Radio.
There are incredible opportunities for Sirius XM to add significantly popular features among the consumers leveraging IP in the car coupled with innovative ways of utilizing connectivity and fresh data sources for interacting and engaging closely with its subscribers and accelerate its business growth.
Sirius XM has introduced an innovative marketing database which when coupled with particularly priced programming packages, like the one for Joel Osteen Radio, must enable it to draw and hold greater customers.
Sirius XM has nearly 27 million paid subscribers having repeated revenue business. The customer churn rate is also extremely low, adding more and more customers each passing year.
Conclusion
Overall, Sirius XM seems like a good investment option looking at the significant growth opportunities in the future, driving solid company revenue growth and thus enhanced free cash flows and higher shareholder returns.
