Sirius Once Again Posts Record Results

| About: Sirius XM (SIRI)
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Summary

Sirius meets or exceeds all guidance.

Company has a history of issuing conservative guidance.

Issues guidance for 2017.

Earlier today SiriusXM Holdings (NASDAQ:SIRI) reported that it added

more than 1.7 million net subscriber additions in the year, exceeding the company's increased guidance of 1.7 million net subscriber additions. Self-pay net subscriber additions in 2016 were 1.66 million, exceeding the company's increased guidance of 1.6 million and resulting in self-pay subscriptions of approximately 26 million at year end.

The company also announced that it

expects to meet or exceed its 2016 guidance for revenue, adjusted EBITDA and free cash flow.

As a reminder, the company's most recent guidance was:

  • Net self-pay subscriber additions of approximately 1.6 million,
  • Total net subscriber additions of approximately 1.7 million,
  • Revenue of approximately $5 billion,
  • Adjusted EBITDA of approximately $1.85 billion, and
  • Free cash flow approaching $1.5 billion.

While the above are the most recent guidance figures, it is also important to remember that these are up modestly from the initial guidance issued by the company at this time last year. That guidance was:

• Net subscriber additions of approximately 1.4 million,
• Revenue of approximately $4.9 billion,
• Adjusted EBITDA of approximately $1.78 billion, and
• Free cash flow of approximately $1.4 billion.

Even more important, the company also issued 2017 guidance of:

• Self-pay net subscriber additions of approximately 1.3 million,
• Revenue of approximately $5.3 billion,
• Adjusted EBITDA of approximately $2.025 billion, and
• Free cash flow of approximately $1.5 billion.

Shortly after the announcement, the shares began to move higher in the pre-market session reaching $4.58 as of this writing (NOTE: I took the opportunity to sell some of my holdings at $4.57). While the company is known for issuing conservative guidance, there are data points that appear strange.

First, revenue is only projected to grow by 6% after price and fee increases, along with a growing subscriber base.

Second, despite Adjusted EBITDA increasing by $175 million, free cash flow is projected to remain flat. Only a small part of this gap can be explained by rising interest expense.

Even more important than these anomalies is what has occurred with guidance. As previously noted, the company has had a history of issuing conservative guidance. It would then raise that guidance throughout the year and then meet or exceed that final guidance. These beats have become less and less over the past few years. Investors would be wise to take this into consideration.

Disclosure: I am/we are long SIRI.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: In addition to my long position, I have January 2017 $4 covered calls written against a portion of my long positions. I also DRIP shares of Sirius, and continue to make frequent short term trades on large blocks of Sirius.