Sirius XM (SIRI, Financial) reported solid numbers last quarter that came above Street expectations. This was mainly driven by strong U.S auto sales that increased the number of subscribers and led to a significant rise in revenue and profits. Led by its year-over-year growth, the stock performed quite well with greater expectations for the days ahead.
New car sales will boost growth
The company benefited from the boost in car sales that is fitted with Sirius receivers. The buyer will get free access for few months but then will have to subscribe to keep the service on. As a result, its paid subscribers rose 4.5% for the quarter and as the U.S car market looks steady, Sirius expects even better results in the coming months. Even in the pre-owned car market, the company made significant progress as the number of auto dealers providing SiriusXM trials increased to 14,000 from 11,000 last year.
The company is even more positive about this segment, since the acquisition of connected vehicle services business of Agero, Inc. last year. This has opened doors for the company to large automobile manufacturers such as BMW, Honda and Toyota among others. Explaining this further, the management said (according to the earnings call transcript on Seeking Alpha):
“It has brought us even closer to the OEMs and opened the door to long-term cooperation on a variety of decisions relating to the next generation of connected vehicles. We are actively engaged with our existing OEM customers in defining the connected vehicle services that will be deployed in their vehicles over the following years.”
Enriching the content
In addition, the company continues to enrich its content, which is the fundamental driver of its business with great new channels, new hosts and new shows. During the quarter it strengthened its music offerings with three new music channels for dance, women's pop and country audiences. The company made various changes such as the launch of the TODAY Show Radio, Bleacher Radio, a new daily show on Mad Dog Sports Radio with Stephen A. Smith and like this other similar additions, hoping to increase the subscriber base. To provide latest music to its listeners, the company also partnered with YouTube and created YouTube 15. It is an exclusive weekly countdown show that showcases the latest music emerging online.
Conclusion
Going forward, it expects better results in the days to come. The management prides to generate strong cash flows, even while growing steadily on a year over year basis. And these cash flows are being efficiently utilized by Sirius to invest in its business and pay handsome dividends to its shareholders. For the entire fiscal year it raised its revenue outlook to $4.15 billion compared to its previous estimate of $4.1 billion. These are encouraging results that could boost its performance in the coming years.
