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Sirius XM Posts Record Revenue, CEO Talks Pandora Merger

Sirius XM announced fourth quarter and full-year 2018 operating and financial results in an earnings call Wednesday morning, including record revenue of $1.5 billion and $5.8 billion, respectively, increasing 7% and 6% compared to the prior year periods. Sirius CEO Jim Meyer (pictured) and CFO David Frear also discussed the company’s plans for Pandora, which it acquired in a $3.5 billion deal last year; in a major consolidation move, the company announced on Tuesday that Pandora CEO Roger Lynch and several other executives will step down, with Lynch’s roles being absorbed by Meyer.

Sirius XM’s’s net income totaled $251 million in the fourth quarter, compared to $37 million in the prior year period, while full-year 2018 net income grew 81% to a record $1.2 billion. Net income per diluted common share was $0.06 in the fourth quarter, compared to $0.01 in the prior year period, while full-year 2018 net income per diluted common share grew 88% to $0.26. Adjusted EBITDA grew 6% to $576 million in the fourth quarter, and grew 6% for the full-year 2018 to a record $2.2 billion.

The company also reported that its total subscribers have topped 34 million, and that it added 414,000 net new self-paying subscribers in the fourth quarter and 1.4 million for the full year, ending 2018 with approximately 28.9 million self-pay subscribers. During the call the company said that combined with Pandora it has 100 million total listeners.

It also reported its 2018 revenue grew 6% over 2017 to a record $5.8 billion. This growth was driven by a 4% increase in subscribers and growth in average revenue per user to $13.34. Net income for the full-year 2018 totaled $1.2 billion, up 81% from $648 million in 2017. This increase included a $43 million unrealized gain associated with the change in fair value of the Company’s Pandora investment, in addition to savings from the Tax Act, which reduced the U.S. federal corporate income tax rate from 35% to 21% and savings from research and development credits.

“Sirius XM had a strong finish to 2018, a year that saw our ninth consecutive year of one-million-plus net subscriber adds and our lowest full-year churn rate in the past decade,” CEO Jim Meyer said. “We have set even more ambitious goals for the company to continue growing in 2019. In addition, we were pleased that yesterday Pandora’s stockholders voted in favor of our proposed merger,” and said during the call that he expected the transaction to close Friday.

During the call Meyer and CFO David Frear spoke bullishly of the Pandora acquisition and the potential synergies. They noted that the auto market has been stronger than expected and that Sirius has struck a 10-year deal with Toyota that will see their service offered in all of its new cars. They also spoke of potential synergies between Sirius and Pandora together, they are building “a media company that will be competitive for decades to come.”

Regarding Lynch, Meyer noted that he has begun to “immediately consolidate g&a functions and have units report directly” to him, and that he has a “ton of respect for Roger Lynch and the masterful job he has done. I would like to personally thank him for his contributions.”

Meyer said, “This merger has never been about cost synergies: we see tremendous opportunities to create unique listening packages” and “strong prospects for cross promotions across combined North American audiences.”

He noted, however, that “Without a doubt, the biggest challenge at Pandora is active listeners and listener hours,” areas where the company has lagged in recent years. In a Q&A session at the end of the call, he said the decline in listener hours is a “flashing light” and added, “We are focused on that, we believe deep in our gut that that metric is fixable by making the listening experience more compelling.”

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