Why Sirius XM's Fourth Quarter Results Were A Mixed Bag?

Feb 5 2014, 12:58pm CST | by

Sirius XM‘s Q4 2013 financial results were a mixed bag. While the new car penetration rate increased and the company continued to perform well in terms of getting more self-pay subscribers to its platform, its guidance for 2014 implied a material slowdown in the growth. In addition, the fourth quarter profits shrank due to some one-time charges. The company also mentioned that it has formed a special committee to review Liberty Media’s recently proposed stock transaction to acquire the remaining 48% stake in Sirius XM. We are in the process of reviewing our price estimate for Sirius XM in the light of recent earnings and will have an update ready soon. Our current price estimate for the company stands at $3.45, implying a slight discount to the market price. Here are the key takeaways from the earnings.

See our complete analysis for Sirius XM

Here Is What Was Good About Sirius XM’s Q4 2013 Earnings

The subscriber loss in the fourth quarter was not indicative of a trend. Sirius XM ended the year with 25.56 million subscribers, implying an annual net subscriber gain of 1.66 million. Given where the company was at the end of the third quarter, the subscription base shrank slightly in the fourth quarter. However, as it turns out, this was an exceptional event resulting from change in OEM (original equipment manufacturer) contracts. Paid promotional subscribers declined by 434,240 as a key OEM shifted to unpaid trial.

Sirius XM’s new car penetration rate reached an all time high of 71% due to a penetration increase in Toyota and Honda. For 2014, the company expects to maintain a figure of 70% as a result of these deals and agreement extension with Nissan, which will also expand satellite equipment to its full range of models. A 70% penetration rate will imply that approximately 11.2 million vehicles with Sirius XM equipment will be sold in 2014 in the U.S. This represents a growth of about 4.7% over 2013, and 15.5% over 2012. Presently there are around 60 million vehicles in the U.S. with a factory installed satellite radio, and and the company expects this figure to reach 110 million over the course of next five years.
/>

In addition to the above, the continued cost control is something that investors can be happy about. Sirius XM grew its cash flow and EBITDA (earnings before interest, taxes, depreciation and amortization) at a much higher rate than the revenues. Subscriber acquisition costs declined, which is an expected result of more brand visibility and word-of-mouth marketing. Sirius XM is also pushing into connected vehicle services which it expects to generate around $100 million in revenues in 2014.
/>

Here Is What Worries Us
/>

The overall growth is likely to slow down materially this year as evident from Sirius XM’s guidance. The company is taking a cautious approach and expects its full year net subscriber additions to amount to 1.25 million in 2014, down 25% from 1.66 million in 2013. Additionally, the growth in revenue, EBITDA and free cash flow will also decline. To counter this and sustain revenue growth, Sirius XM is implementing a price increase and it remains to be seen how well this change is absorbed by its customers. Given that competitors including Pandora and Apple are trying to make inroads in in-vehicle market, customers will have more options to choose from and this could impact Sirius XM’s growth going forward.

Understand How a Company’s Products Impact its Stock Price at Trefis

http://investor.siriusxm.com/releasedetail.cfm?ReleaseID=817666

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

Source: Forbes Auto

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

IPad Air Giveaway 2014 is Online
IPad Air Giveaway 2014 is Online
Our sister site I4U News is giving away a brand new iPad Air or if you can wait an iPad Air 2. This is an $499 value.
 
 
Your Parent Or Kid Moved In: Are You Covered?
A record 57 million Americans now live in multigenerational family households — double the number in 1980, according to a new Pew Research Center study. And I bet many of them have the wrong homeowner’s or renters...
 
 
Pandora Looks to Challenge Terrestrial Radio's Dominance in Cars
Pandora Media is one of the largest Internet radio providers in the U.S. with more than 75 million active users. While the company’s active user count has increased at a robust pace historically, it is likely to slow...
 
 
Are General Manager Salaries About To Skyrocket? Will There Be A Front Office Salary Cap?
Are General Manager Salaries About To Skyrocket? Will There Be A Front Office Salary Cap?
It’s January 2026. New York Yankees owner Hal Steinbrenner gets out of his driverless car and triumphantly marches before the gathered press to introduce his prized new free agent. It’s a record-breaking contract—over...
 
 
 

Latest from the Network

US unmanned spacecraft explodes shortly after launch
Washington, Oct 29 (IANS) An unmanned spaceship operated by a private US firm exploded just minutes after its launch Tuesday, media reported. The rocket blew up over the launch complex at Wallops Island, Virginia,...
Read more on Politics Balla
 
A$AP Rocky and Chanel Iman split
A$AP Rocky and Chanel Iman have reportedly ended their engagement. The 26-year-old rapper, who secretly proposed to the Victoria's Secret model in April after less than a year of dating, recently split from the 23-year-...
Read more on Celebrity Balla
 
Australian troops conduct G20 security training
Sydney, Oct 29 (IANS) Australian special forces troops have conducted G20 training exercises involving a mock hostage recovery operation in Brisbane Tuesday. Australian Defence Force spokesman for the G20, Maj. Gen....
Read more on Politics Balla
 
Nick Jonas angry over band split?
Los Angeles, Oct 29 (IANS) Pop star Nick Jonas is reportedly angry with his siblings over the breakup of their band - The Jonas Brothers. The trio disbanded in October last year after pulling out of a North American...
Read more on Celebrity Balla
 
Chinese peacekeepers to help build Ebola quarantine center
United Nation, Oct. Oct 29 (IANS) The Chinese contingent of the UN Mission in Liberia (UNMIL) will help build an Ebola Quarantine and Control Center in the capital city of Monrovia, a UN spokesperson said here Tuesday...
Read more on Business Balla
 
IS captures three gas wells in Syria
Damascus, Oct 29 (IANS) The Islamic State(IS) militants Tuesday captured three gas wells in Syria's central province of Homs, media reported. The IS captured the gas wells east of Palmyra in Homs after intense clashes...
Read more on Politics Balla
 
Jennifer Lawrence and Chris Martin's split wasn't dramatic
Jennifer Lawrence's split from Chris Martin reportedly ''wasn't dramatic.'' The 'Hunger Games' actress quietly decided to end her relationship with the Coldplay frontman a few weeks ago after four months of dating...
Read more on Celebrity Balla
 
Eddie Redmayne just wants to pay his mortgage
Eddie Redmayne says he is just trying to pay his mortgage. The 'Les Miserables' actor, who is set to marry antiques dealer Hannah Bagshawe in December, claims he doesn't consider himself ''a movie star'' and doesn't...
Read more on Celebrity Balla
 
Jane Lynch finalizes divorce
Jane Lynch's ex-wife Dr. Lara Embry received millions in their divorce. The 'Glee' star, whose split from clinical psychologist was finalized on Monday (10.27.14), following their separation in February 2012, reportedly...
Read more on Celebrity Balla
 
David McIntosh keen to marry Kelly Brook
London, Oct 29 (IANS) Following their recent reconciliation, actor David McIntosh says he wants to marry his on-off girlfriend Kelly Brook. The 28-year-old star is eager to wed the model in Mykonos, Greece, reports...
Read more on Celebrity Balla