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

Second MERS case reported in Qatar
Doha, Oct 23 (IANS) A 43-year-old man in Qatar has tested positive for Middle East Respiratory Syndrome (MERS) in the second confirmed case of the deadly virus in 10 days, media reported Thursday. The patient had...
Read more on Business Balla
 
Two people die in Pakistan bomb blast
Islamabad, Oct 23 (IANS) At least two people were killed and 12 others injured in an explosion that took place in Pakistan's Balochistan province Thursday, media reported. The bomb was planted on a motorcycle, Dawn...
Read more on Politics Balla
 
Trott extends contract with Warwickshire till 2017
London, Oct 23 (IANS) England batsman Jonathan Trott, whose mental issues led to his abrupt departure from last winter's Ashes tour, has confirmed his successful comeback to competitive cricket by signing a new three-...
Read more on Sport Balla
 
Srikanth, Kashyap big movers in BWF rankings
Kuala Lumpur, Oct 23 (IANS) Indian men shuttlers Kidambi Srikanth and Parupalli Kashyap jumped seven places each in the latest Badminton World Federation (BWF) rankings released Thursday while Olympic bronze medallist...
Read more on Sport Balla
 
Alvin Stardust dead
London, Oct 23 (IANS) English singer Alvin Stardust died after a short illness. He was 72. Stardust's manager confirmed the news about his demise Thursday, reports mirror.co.uk. He was recently diagnosed with...
Read more on Celebrity Balla
 
Indian man reunited with family after 40 years
Dubai, Oct 23 (IANS) An Indian man, who had disappeared from his hometown in Kerala nearly 40 years ago, has been found by his family at a hospital in Dubai in the UAE, a newspaper report said. Now in his 60s, Abdulla...
Read more on Politics Balla
 
Srikanth, Kashyap, Saina rise in world rankings
Kala Lumpur, Oct 23 (IANS) Indian men shuttlers Kidambi Srikanth and Parupalli Kashyap jumped seven places each in the latest released Badminton World Federation (BWF) rankings Thursday while Olympic bronze medallist...
Read more on Sport Balla
 
Flintoff signs for Big Bash side Brisbane Heat
Brisbane, Oct 23 (IANS) Former England captain and all-rounder Andrew Flintoff, who retired from international cricket in 2009, Wednesday confirmed that he will play for Brisbane Heat in the Big Bash League (BBL) this...
Read more on Sport Balla
 
OPEC daily basket price falls again
Vienna, Oct 23 (IANS/WAM) The basket of 12 crude oils of the Organization of Petroleum Exporting Countries (OPEC) closed at $81.94 a barrel Wednesday compared to $82.09 Tuesday, the OPEC Secretariat said. The new OPEC...
Read more on Business Balla
 
Lopez to sign multi-million dollar deal?
Los Angeles, Oct 23 (IANS) Singer-actress Jennifer Lopez is reportedly in the final stages of securing a multi-million dollar deal to perform in Las Vegas. The 45-year-old is being offered $350,000 per show at The...
Read more on Celebrity Balla