SiriusXM Loses 173,000 Subscribers in Second Quarter, Stock Sinks 6%

SiriusXM Holdings stock fell by more than 6% on Thursday after the satellite radio and streaming content company said it lost 173,000 subscribers in the quarter ending on June 30.

The company said it lost approximately 100,000 SiriusXM self-pay subscribers and 73,000 paid promotional subscribers. While that was an improvement from the same period last year, and churn remained steady at 1.5%, it caused a 5% decline in SiriusXM subscriber revenue and $0.42 year-over-year decrease in average revenue per user (ARPU) to $15.24. That pushed SiriusXM Holdings’ second quarter revenue down 3% to $2.18 billion, below analysts’ expectations.

On a call discussing the quarter’s earnings, executives sought to emphasize Sirius’ improved profit margin and lower operating expenses, despite signing big-ticket deals for podcast powerhouses like SmartLess Media earlier this year.

“SiriusXM’s financial position remains robust as we steadily enhance our business and establish a sustainable foundation for growth,” Sirius CEO Jennifer Witz said on the call, reiterating the company’s 2024 financial targets. “With these solid margins and declining capital expenditures, we anticipate converting more of this strong EBITDA into growing free cash flow in the coming years.”

Quarterly profit rose 2% to $316 million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was flat year over year at $702 million and its adjusted EBITDA margin held steady at 32%.

Sirius reported operating expenses fell 5.5% on lower costs of running SiriusXM and Pandora and off-platform services across the board and lower personnel costs after the companies’ two rounds of layoffs over the last 18 months. Subscriber acquisition costs decreased by 1%. Free cash flow in the quarter rose 6% to $343 million.

“We think the key for the stock is conversion of self-pay trials,” Steven Cahill, equity analyst at Wells Fargo, wrote in a report for investors on Thursday. “Self-pay conversion in new [and] used car is arguably [SiriusXM Holdings’] biggest key performance indicator as it looks to improve capture of younger car buyers versus digital competition. We think Q2 self-pay converstion were down to around 30%-32% from 33% in the prior quarter.”

While SiriusXM saw declines in both subscriber and advertising revenue, Pandora and off-platform segments reported an 8% rise in subscriber revenue to $138 million. The segment’s advertising revenue held flat at $400 million from the same quarter a year ago.

Late last year, Sirius announced plans for a 10-to-1 reverse stock split and merger with Liberty Media’s SiriusXM Group tracking stock, a move aimed at bolstering the company’s faltering stock price. Executives said Thursday that transaction will close on Sept. 9. The Nasdaq-listed SiriusXM Holdings has seen its stock price fall by more than 65% from a 52-week high of $7.95, leading the Nasdaq to drop SiriusXM from its Nasdaq-100 Index last Thursday (June 13).

SiriusXM’s stock price was down 6.25% to $3.22 as of 12.25 p.m. New York time.