Business

SiriusXM Revenue Up Slightly to $2 Billion, Pandora Recovers in Virus-Impacted Q3

SiriusXM
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SiriusXM

SiriusXM's third-quarter 2020 results showed little effects from the pandemic that has be-felled many entertainment companies. Satellite radio revenue showed typical, steady improvement while advertising revenue, mainly from Pandora, dipped below the third-quarter of 2019 but improved greatly from a pandemic-related plummet in the second quarter. SiriusXM’s share price rose 2.7% to $6.02 in early trading on Thursday.

The combined company's topline results:

Total revenue grew 1% to $2.0 billion.
Total adjusted EBITDA improved 12% to $657 million, an all-time high. (The adjustments are mainly a $40 million loss on the extinguishment of debt and $58 million of share-based payments.)
Net income declined 28.2% to $246 million due to expenses from refinancing debt due 2024.
Advertising fell only 6% year-over-year after a 46% improvement from second-quarter advertising.

SiriusXM’s satellite service had small but steady improvements from the third quarter in 2019.
• Satellite subscriber revenue improved 1% to $1.6 billion.
• Satellite gross profit grew 7% to $596 billion.

One of the biggest questions going into Thursday's earnings results was the status of Howard Stern, whose five-year contract with SiriusXM ends this year. Judging from outgoing CEO Jim Meyer's comments, SiriusXM has a good chance of signing Stern to a new contract. Meyer said the two sides have had "very strong" and "very productive" conversations, and he is "very confident" the two sides will consummate a deal "shortly."

News reports said Stern is asking for $120 million per year. Although Meyer did not say what Stern is asking for, he said both sides are "happy" with the economics of a "long-term arrangement." Stern is worth $120 million per year if just 1.07 million of SiriusXM's 34.4 million subscribers leave in his absence, according to Billboard’s calculations.

Pandora had mixed results that showed the business has recovered from a pandemic-related crash in the second quarter.

• Pandora’s advertising revenue dropped 3% year-over-year to $306 million, a big turnaround from the 31 percent decline in the second quarter.
• Pandora’s September advertising increased year-over-year, said Meyer -- but he didn’t give the number.

Four full-year guidance metrics were increased from the second quarter:

• SiriusXM’s self-pay net subscriber additions guidance was raised from approximately 700,000 to 800,000.
Total revenue guidance raised from $7.7 billion to $7.85 billion.
Adjusted EBITDA guidance raised from $2.4 billion to $2.475 billion.
Free cash flow guidance was unchanged at $1.6 billion.

But Pandora’s third-quarter metrics were mostly negative compared to a year ago.

• Pandora’s self-pay net subscribers grew by 105,000. Pandora has two subscription services: a $9.99 premium service and a $4.99 radio tier with limited interactive features.
Pandora’s ad-supported listening hours declined 6.6% to 3.1 billion.
• Pandora’s monthly active users dropped 7.1% to 58.6 million from 63.1 million.
• Advertising revenue per thousand listener hours declined 1.0% $84.46.
• Licensing costs per thousand listener hours increased 2.9% to $40.16.
• Licensing costs per paid subscriber grew 2.4% to $4.19.

Liquidity, a crucial factor during the pandemic, isn't a problem. SiriusXM says the pandemic "has not affected our capital and financial resources, including our liquidity position." It believes it has enough cash and debt capacity to cover short-term and long-term funding needs, including the costs of building and launching satellites.

• Cash and cash equivalents were $33 million, down from $106 million at the end of the second quarter.
• The credit facility is undrawn with $1.749 available for borrowing.
• Free cash flow is expected to be $1.6 billion in 2020 with capital expenditures.

The combined company's financials through nine months of 2020 showed improvements in costs that resulted in a better bottom line.

• Consolidated revenue is unchanged at $5.9 billion.
• Consolidated cost of services declined 3% to $793 million.
• Consolidated net income improved 17% to $808 million.
• Consolidated adjusted EBITDA grew 4% to $1.9 billion.