Sirius XM's Connected Vehicle Business Posts Strong Gains

Crunching Numbers
3.2K Followers

Summary

  • Sirius finally separately identified CVS subscriber revenue.
  • The company achieved strong double-digit revenue growth.
  • It is still far from achieving $200 million in revenue initially expected by 2016.

For the past several years, I have been publishing articles about the revenue generated by the Sirius XM Holdings' (NASDAQ:SIRI) Connected Vehicle Services, or CVS, business unit. For those less familiar with Sirius or its CVS business, the company purchased CVS from Agero for approximately $529 million in late 2013. In early 2014, CEO Jim Meyer noted that he expected that the business would generate:

... close to $100 million of revenue this year [2014], and we expect to grow this at strong double digit rates over the next many years. We are in the process of fully integrating the CV business into Sirius XM, and its financial results are embedded in our guidance today.

As an early stage growth business, we expect the connected vehicle services product line to contribute at or near breakeven on an EBITDA basis in 2014, but with high variable margins, a relatively low capex profile, and substantial scaling in the business as penetration expands, we see many similarities in the financial profile of connected vehicle services and satellite radio.

During that same call, CFO David Frear added:

... In 2014, we expect connected vehicle services, excluding our existing traffic business, to approach $100 million in revenue. In the course of the next three years [by 2016], we expect connected vehicle service revenue will double [$200 million], and will continue to grow at high rates for many years to come.

It took years before the company acknowledged that the growth was less than expected. In May 2016, CFO David Frear discussed the business at an analyst conference:

... [CVS is] going to have a faster growth rate than satellite radio, but a faster growth rate would mean maybe going from 2% of our revenues to 3 to 4% of our revenues... it's not like it's going to go from 2% to 30%.

This article was written by

3.2K Followers
As of May 13, 2022, ranked #95 out of 10,688 Bloggers (top 1%) by TipRanks and #392 out of 18,543 (top 2%) overall experts by TipRanks.com. https://www.tipranks.com/bloggers/crunching-numbersFocus had been mostly on Sirius XM Holdings, B&G Foods - and more recently on Arbor Realty - and income investing. Huge fan of stocks that pay dividends, mostly because studies have shown that much of the total return from investing in stocks has been from dividends. Will often repeat the above in articles that I write for Seeking Alpha. I also will often note that it is rare that I write about stocks/companies that I do not own. I have 30 years (through 2000) experience working for basic manufacturing and high tech industries in both the US and Europe. Company sizes ranged from start-ups to Fortune top 10. Experience as manager and/or grunt in fields of financial analysis, revenue forecasting, business planning, budgeting, pricing analysis, compensation planning, contracts, marketing and product management. Have been investing in stocks more than 50 years, options for 30 years and on and off in real estate since 1981. Laid off when the dot-com bubble burst, and had the luxury to begin investing full time.I have no separate paid service offered on Seeking Alpha despite having been asked to start one on multiple occasions. There are many reasons that I have not done so. The primary reason is that I benefited greatly from the articles - and especially from the comments - on Seeking Alpha when it was a free site, and contributors weren't paid. It is my turn to pay it back. A secondary reason is that I like the luxury of choosing when to write rather than feeling obligated to pump out articles on a regular basis for subscribers or restricting myself to some particular set of themes. I will reply to almost any comment, especially those that have a different view. If, however, someone disagrees with me and attributes a position or statement to me that I have not made, I will give them a chance to substantiate the claim. If they can't, and refuse to publicly acknowledge the error, I will no longer reply to that individual. Finally, for those that wonder about the picture I have chosen, it is a turkey vulture that had landed in our front yard. There are certain funds known as "vulture" funds that focus on companies with distressed assets. It was an investment class that had always intrigued me. Also, most of my early articles focused on SiriusXM Holdings, a company that I owned stock in and one that nearly went bankrupt. It seemed appropriate, especially after my original image was declined. It was an image of a pig and in reference to the Wall Street adage: "Bears can make money, Bulls can make money, Hogs (or pigs) get slaughtered."BS in engineering from Boston U, MBA in finance from Rutgers.

Analyst’s 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.

Although I have a small long term position, I also actively trade shares of Sirius as well as sell covered calls against the positions. I also reinvest the dividends.

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