SiriusXM Lost 445,000 Self-Pay Subscribers in 2023 as It Shifts Resources to New Streaming Tier
Written by djfrosty on February 1, 2024
SiriusXM added 131,000 self-pay subscribers in the fourth quarter and beat its full-year guidance for earnings and free cash flow while only slightly missing its revenue goal, the company announced Thursday (Feb. 1). The satellite radio giant lost 445,000 self-pay subscribers for the full year, however.
Full-year revenue declined 0.6% to $8.95 billion, slightly below last quarter’s guidance of $9 billion. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) declined 2% to $2.8 billion, coming in a little above guidance of $2.75 billion. Free cash flow of $1.2 billion was down about 23% but beat guidance by $50 million.
SiriusXM, built on a satellite radio service favored by older consumers, is in re-building mode. The company launched a new app in November and a $9.99-per-month streaming-only subscription service aimed at younger audiences who don’t listen primarily in their cars. The app houses Sirius’ 400-plus channels in addition to an audio library and a growing stable of podcast content that includes such brands as Smartless, which earlier this week left Amazon’s Wondery after striking a $100 million deal with SiriusXM, and Conan O’Brien’s Team Coco, which SiriusXM acquired in 2022.
The strategy isn’t likely to produce results this year, though. “While early indications are showing signs of positive impacts of our business investments, it will take time for these to fully reflect in our subscriber and financial metrics,” said CEO Jennifer Witz during Thursday’s earnings call.
While SiriusXM expects “roughly level” subscriber numbers in 2024, new streaming-only subscribers pay less than satellite radio subscribers and will result in a lower average revenue per user. Those factors, along with an advertising market Witz called “uncertain,” leads the company to expect two of its key financial metrics to fall in 2024. Full-year revenue guidance of $8.75 billion would be a 2.2% decline from $8.95 billion in 2023, while adjusted EBITDA guidance of $2.7 billion would mark a 3.3% year-over-year decline. Free cash flow is expected to remain at $1.2 billion.
Investors appeared to have baked the rebuild process into their forecasts and did not react negatively to Thursday’s earnings results. Shares of SiriusXM rose as much as 5.1% on Thursday morning and closed at $5.23, up 2.8%.
SiriusXM’s satellite radio service generated full-year revenue of $6.8 billion, down 1% year over year. Self-pay subscribers grew 131,000 in the fourth quarter after falling 96,000 in the third quarter. For the full year, self-pay subscribers fell by 445,000 to approximately 34 million. Paid promotional subscribers dropped by 225,000 in the fourth quarter but increased by 15,000 for the full year.
Pandora revenue increased 1% to $1.6 billion, while its subscribers fell 3% to 6.0 million, down from 6.2 million at the end of 2022. The music streaming service finished the year with 46.0 million monthly active users, down 3.4% from 47.6 million in the prior-year period. Total ad-supported listener hours of 10.48 billion in 2023 was down 4% from 10.88 billion in 2022. Pandora’s gross profit dipped 3% to $638 million.
SiriusXM laid off 8% of its staff in March 2023, which resulted in approximately $140 million in cost savings, CFO Tom Barry said on Thursday. This year, the company is targeting nearly $200 million in additional savings, he added, that will be “reinvested” in “more targeted and more performance-oriented marketing on the streaming side.”
SiriusXM’s full-year 2023 financial metrics
- Total revenue of $8.95 billion, down 0.6%.
- Adjusted EBITDA of $2.8 billion, down 2%.
- Free cash flow of $1.2 billion, down 23%.
- SiriusXM revenue of $6.8 billion, down 1%.
- Pandora revenue of $1.6 billion, up 1%.
- SiriusXM satellite radio self-pay subscribers of 34 million.
- Pandora subscribers of 6 million.