SiriusXM Adds Self-Pay Subs, Says Car Sales and Advertising "Fell Swiftly" Amid Pandemic

The firm, led by CEO Jim Meyer, lost 143,000 overall satellite radio subs in the first quarter due to fewer paid promotional users and withdraws its guidance due to the virus crisis.

Audio entertainment giant SiriusXM, the home of Howard Stern, on Tuesday said it added self-pay subscribers in its satellite radio and Pandora businesses for the first quarter, the first one affected by the coronavirus pandemic.

But the company, controlled by John Malone's Liberty Media, withdrew its 2020 guidance amid the pandemic and said its satellite radio subscribers fell when including promotional subs.

"In the face of the economy hitting the brakes hard in March, SiriusXM's first-quarter results were very strong," CEO Jim Meyer said. "Auto sales, advertising and customer responses to marketing campaigns all fell swiftly in the second half of March."

SiriusXM shares were up 4 percent before the market open. This earnings season is covering results for companies' first quarter of 2020, which include coronavirus pandemic fallout in the U.S. for March.

SiriusXM lost 143,000 satellite radio subscribers as it added 69,000 self-pay customers, after adding 131,000 self-pay subs in the year-ago period while losing 212,000 promotional subs. In the year-ago period, it had added 132,000 net subscribers. "Paid promotional subscribers decreased due to declines in shipments from automakers offering paid trial subscriptions with the purchase or lease of a vehicle," the firm said. It ended March with more than 34.8 million subscribers, including more than 30 million self-pay users.

Meanwhile, music streaming service Pandora added 51,000 net self-pay subscribers in the first quarter to end March with more than 6.2 million total such users. In the year-ago period, it had added 246,000 net new self-pay subscribers. Total Pandora subscribers at the end of March stood at 6.3 million.

Ad revenue at Pandora reached $241 million in the latest quarter, up 4 percent from the year-ago period and marking a first-quarter high.

The company withdrew its 2020 guidance, but Meyer said: "Just as it was a little over a decade ago during the global financial crisis, SiriusXM's subscriber-based business model is resilient. We do not know what the shape of a recovery from this current crisis will look like; however, we are confident that our business will continue to generate substantial positive free cash flow. Once we have a better view of how and when the economy will restart, we plan to resume providing guidance."

The company also said about the virus crisis' impact: "It is difficult to predict how the COVID-19 pandemic will affect our company in the long term. ... The COVID-19 pandemic did not have a material effect on our revenue and expenses during the quarter ended March 31."

SiriusXM said it expects the pandemic to "adversely affect our subscriber revenue due to the decline in sales of new and used vehicles, reduced drive time, increased churn and the inability of our vendors to fully staff call centers; cause a decline in advertising revenues in our Pandora and SiriusXM businesses as third parties pull back on advertising spending generally;" and "not significantly affect our programming and content expenses, as we expect to continue to honor our agreements to acquire, create, promote and produce content."

SiriusXM and Stern on March 31 said North American listeners would get free access to The Howard Stern Show and other premium content through May 15 as consumers shelter at home amid the pandemic.

SiriusXM in February also unveiled a $75 million investment in open audio platform SoundCloud in return for a minority stake of an undisclosed size and two board seats. The investment follows a successful advertising sales relationship started last year between Pandora and SoundCloud, which said it would use the additional money to "accelerate its product development and enhance the services that fuel its global community of creators and listeners."

Meyer had said on March 10 that "with the backdrop of the coronavirus, it's unchartered waters for everyone." Speaking at the Deutsche Bank Annual Media, Internet & Telecom Conference, which was set to take place in Palm Beach, Fla., but was changed to a virtual event amid virus fears, he had added: "It's difficult for us to predict the entire auto supply chain, but the pieces of it we manage are holding together well, and we continue to see vehicles shipping at a normal rate."

SiriusXM's first-quarter earnings of $293 million were up from $162 million as revenue increased 5 percent on a pro forma basis to $2 billion. Adjusted EBITDA in the first quarter totaled $639 million, up 13 percent.

Said Meyer about the lockdown initiatives the company has set: "We are streaming SiriusXM for free, and we have been in overdrive introducing new shows, channels and special virtual moments. In conjunction with NYU Langone Health, we've launched a 24/7 COVID-19 focused channel and hotline, an important complement to our Doctor Radio channel."

He added: "We welcomed the healthy return of Andy Cohen, Howard Stern interviewed Governor Andrew Cuomo, and SiriusXM contributed $2 million to COVID-19 response charities, with a near-term focus on New York, San Francisco, and Detroit – the homes of our two biggest employee bases and the primary community of our automakers."

Concluded the CEO: "This challenging period has in fact inspired enormous creativity from our programming teams at SiriusXM and Pandora, but creativity and adaptability has not just been limited to our programming teams. Global stay-at-home orders swiftly and materially altered the way we work. ... We immediately took steps to ensure that our audio entertainment service would be uninterrupted, to provide the best possible customer service, and to continue to operate our business with the level of excellence you have come to expect from SiriusXM."

On Tuesday's earnings call, management emphasized that honoring its content agreements also means continuing to pay for sports programming even when there are no live sports. But Meyer said he expects all kinds of discussions on that topic and what the loss of live events means down the line with sports content partners.

Meyer was also asked whether he expects consumer demand for SiriusXM services to take a longer-term hit due to the pandemic. He said that listening in cars has dropped in recent weeks, but said SiriusXM listening trends have come back a bit and he doesn't expect long-term damage. Said the CEO: "I’m not worried at all about demand" or listening hours going forward once people start commuting to work again.