A drop in SiriusXM's paid subscribers in the first quarter sent the satellite radio giant's stock down more than 7% on Tuesday (April 30), even as first-quarter revenue beat analysts' expectations.
The company said first-quarter revenue rose 0.8% to $2.16 billion — analysts polled by the London Stock Exchange had expected $2.13 billion — thanks mainly to a 7% rise in sales revenue advertisements.
Advertising revenue totaled $402 million in the quarter, enough to offset a 1 percent decline in subscription revenue, which came in at $1.68 billion and contributes nearly 80 percent of the company's total profits.
A 1.4% decline in self-pay subscribers to 31.58 million customers in the quarter contributed to a “slightly higher variance” as increased vehicle sales with existing subscriptions drove those subscribers into unpaid trials, SiriusXM CFO Tom Barry he said in a telephone call with analysts.
Executives reiterated their guidance for 2024 and said they expect improvements in subscription revenue, trial subscriptions and ad revenue in the second half of the year.
Despite launching a new and expensive streaming app with features SiriusXM says allows it to tailor content to subscribers, Executives faced questions from analysts about what would weigh on future growth.
“From the business side, it's really about reviving demand,” said SiriusXM CEO Jennifer Vitch he said on the phone call. “It's taking longer than we expected in terms of rolling out the new platform and our ability to leverage the marketing improvements. But the key opportunities to create demand… are clear, at the price, discovery and control level, and we have this multifaceted effort to [drive] these things.”
The company hopes the revamped app, which launched in December and costs $9.99 a month, will attract new subscribers and drive revenue growth.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 4% to $650 million. The company's gross profit rose 0.6% to $1.13 billion, while its gross margin was flat at 53% in the quarter compared to a year ago. Total operating expenses were almost flat at $1.73 billion.
Warren BuffettBerkshire Hathaway is a big investor in SiriusXM, having bought nearly 9.7 million shares worth about $44 million last fall and then another 1.9 million shares worth $50 million of the tracker stock earlier this month.
In February, SiriusXM laid off 3% of its workforce, affecting about 170 workers at the company, which said the cuts would allow it to invest in content and new technologies.
SiriusXM stock closed at $2.92 on Tuesday (April 30), down 7.2%.
