Sirius XM’s subscriber growth in fiscal 2015
Sirius XM (SIRI) recently announced its 4Q15 and 2015 earnings. The company had a stellar 2015 performance with a 30% increase in subscribers over 2014. The company had net subscriber additions of 2.2 million during the year. Self-pay net subscriber additions rose by 23% YoY (year-over-year) to 1.7 million in 2015. In 2015, the company had 24.3 million self-pay subscribers, which increased by 8% YoY.
Total paid subscribers in 2015 were 29.6 million, an increase of 8% over 2014. The primary drivers for the higher-than-expected subscriber growth were the “lower-than-expected churn” and higher car sales as more and more cars, both used and new, were fitted with Sirius XM satellite radio. According to the company, it is estimated that 28% of “used cars “ were fitted with Sirius XM in 2015.
The company had a high satellite radio penetration rate of 74.5% in 2015. Sirius XM has stated that it expects a “mid-70% penetration rate” for a long time. As the chart below indicates, subscriber revenue had the highest contribution to the company’s revenues at 84% with revenues of $3.8 billion in 2015.
Fiscal outlook for Sirius XM in 2016
In 2016, Sirius XM expects to see total subscribers of about 31 million, with net subscriber additions of 1.4 million. The company expects to see revenues of $4.9 billion in 2016. The company expects $1.8 billion of adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) in fiscal 2016 with a free cash flow of $1.4 billion.
The company expects to increase its investments to strengthen its marketing capabilities to draw in more subscribers. It also plans to continue to invest in online transactions and efficiency improvement of its call centers.
Due to these increased investments, the company does not expect margin expansion in 2016 but does expect margin growth to continue in 2017. Sirius XM expects a 40%-plus margin in the long term.
Sirius XM accounts for 0.39% of the PowerShares QQQ Trust Series 1 ETF (QQQ). QQQ also has 10.7% of its holdings in Apple (AAPL), 8.6% of its holdings in Microsoft (MSFT), and 5.3% of its holdings in Alphabet (GOOG). For investors interested in exposure to the television sector, QQQ has 4.4% exposure to the sector.