Sirius XM(SIRI) - 2023 Q2 - Quarterly Report

Subscriber Metrics - Sirius XM business had approximately 34.0 million subscribers as of June 30, 2023[164] - Pandora business had approximately 6.2 million subscribers as of June 30, 2023[165] - Sirius XM had 34,047 subscribers as of June 30, 2023, an increase of 16 from 34,031 subscribers in June 2022, driven by higher paid promotional subscribers from vehicle sales, partially offset by lower self-pay subscribers due to lower vehicle conversion rates and higher vehicle-related churn[213][217] - Sirius XM Canada subscribers increased by 54 (2%) to 2,628 as of June 30, 2023, compared to 2,574 in June 2022[213][218] - Pandora's monthly active users decreased by 3,059 (6%) to 47,419 as of June 30, 2023, from 50,478 in June 2022, primarily due to churn and a decline in new users[213][221] - Pandora's self-pay subscribers decreased by 90 (1%) to 6,229 as of June 30, 2023, from 6,319 in June 2022, with net additions of 7 for the three months ended June 30, 2023, compared to a loss of 9 in the same period in 2022[213][221] Revenue and Financial Performance - Sirius XM subscriber revenue increased by 1% to $1,597 million for the three months ended June 30, 2023, driven by higher self-pay revenue[174] - Sirius XM advertising revenue decreased by 8$45 million for the three months ended June 30, 2023, due to fewer spots sold on news and entertainment channels[175] - Sirius XM equipment revenue increased by 4% to $47 million for the three months ended June 30, 2023, driven by higher chipset production[176] - Sirius XM other revenue decreased by 11$33 million for the three months ended June 30, 2023, primarily due to lower connected vehicle services revenue[177] - Pandora and Off-platform subscriber revenue decreased by 2% to $128 million for the three months ended June 30, 2023, driven by a decline in Pandora Plus subscribers[178] - Pandora and Off-platform advertising revenue decreased by 1$400 million for the three months ended June 30, 2023, due to lower streaming sell-through[180] - Total consolidated revenue decreased by less than 1% to $2,250 million for the three months ended June 30, 2023[181] - Sirius XM revenue share and royalties increased by 2$405 million for the three months ended June 30, 2023, driven by higher web streaming royalty rates[183] - Adjusted EBITDA for the three months ended June 30, 2023, was $702 million, an increase of 3$23 million) compared to $679 million in the same period in 2022, driven by lower sales and marketing costs, partially offset by higher revenue share and royalties as well as higher litigation costs[215][224] - Free cash flow for the three months ended June 30, 2023, was$323 million, a decrease of 26% ($112 million) compared to$435 million in the same period in 2022[215] - Free cash flow decreased by 26% to $323 million for Q2 2023 compared to$435 million in Q2 2022, primarily due to higher cash taxes and satellite capital expenditures[225] - Net cash provided by operating activities decreased by $87 million to$801 million for the six months ended June 30, 2023 compared to $888 million in the same period of 2022[227][228] - Cash flows used in investing activities increased by$32 million to $365 million for the six months ended June 30, 2023, primarily due to spending on capitalized software, hardware, and satellite construction[230] - Cash flows used in financing activities decreased by$178 million to $442 million for the six months ended June 30, 2023, primarily due to lower cash dividend payments and share repurchases[232] - Adjusted EBITDA increased to$702 million for Q2 2023 from $679 million in Q2 2022, driven by higher net income and lower legal settlements[248] - Free cash flow for the six months ended June 30, 2023, was$467 million, compared to $693 million for the same period in 2022[251] - Net cash provided by operating activities for the six months ended June 30, 2023, was$801 million, down from $888 million in 2022[251] Advertising and Listener Metrics - Majority of Pandora's revenue is generated from advertising on the ad-supported radio service[166] - Ad-supported listener hours for Pandora decreased by 4$2.62) to $97.13 for the three months ended June 30, 2023, from$99.75 in the same period in 2022, driven by a decrease in total advertisements sold[215][223] Business Operations and Partnerships - Sirius XM holds a 70% equity interest and 33% voting interest in Sirius XM Canada[164] - Liberty Media beneficially owned approximately 83% of the outstanding shares of the company's common stock as of June 30, 2023[168] - The company provides connected vehicle services to several automakers, enhancing safety, security, and driving experience[164] - Pandora offers three service tiers: ad-supported radio, Pandora Plus, and Pandora Premium[165] - The company has an exclusive ad sales arrangement with SoundCloud in the US and certain European countries[167] - AdsWizz Inc. provides a comprehensive digital audio and programmatic advertising technology platform[167] - The company's Sirius XM service is distributed through satellite radio systems and streamed via mobile and home devices[162] Expenses and Costs - Sirius XM programming and content expenses decreased by 3% ($4) to$135 for the three months ended June 30, 2023, compared to $139 in the same period in 2022[184] - Sirius XM customer service and billing expenses decreased by 3$3) to $100 for the three months ended June 30, 2023, compared to$103 in the same period in 2022[185] - Sirius XM transmission expenses increased by 14% ($5) to$41 for the three months ended June 30, 2023, compared to $36 in the same period in 2022[187] - Pandora and Off-platform revenue share and royalties increased by 4$13) to $327 for the three months ended June 30, 2023, compared to$314 in the same period in 2022[190] - Pandora and Off-platform programming and content expenses increased by 29% ($4) to$18 for the three months ended June 30, 2023, compared to $14 in the same period in 2022[191] - Subscriber acquisition costs increased by 2$2) to $93 for the three months ended June 30, 2023, compared to$91 in the same period in 2022[196] - Sales and marketing expenses decreased by 23% ($65) to$220 for the three months ended June 30, 2023, compared to $285 in the same period in 2022[197] - Engineering, design and development expenses increased by 15$11) to $83 for the three months ended June 30, 2023, compared to$72 in the same period in 2022[198] - General and administrative expenses increased by 24% ($30) to$157 for the three months ended June 30, 2023, compared to $127 in the same period in 2022[200] - Depreciation and amortization expense increased to$139 for the three months ended June 30, 2023, compared to $135 in the same period in 2022[201] - Share-based payment expense decreased to$42 million for Q2 2023 from $47 million in Q2 2022, primarily due to lower sales and marketing expenses[249] Subscriber Acquisition and ARPU - SAC (Subscriber Acquisition Cost) per installation decreased by 16$2.54) to $13.73 for the three months ended June 30, 2023, from$16.27 in the same period in 2022, driven by a change in the mix of OEMs and lower chipset costs[215][220] - ARPU (Average Revenue Per User) for Sirius XM increased by $0.04 to$15.66 for the three months ended June 30, 2023, from $15.62 in the same period in 2022, primarily driven by increases in certain subscription rates, partially offset by the impact of promotional plans and lower advertising revenue[215][219] - Subscriber acquisition cost (SAC) per installation for the three months ended June 30, 2023, was$13.73, a decrease from $16.27 in 2022[253] - Total installations for the three months ended June 30, 2023, were 3.567 million, up from 2.974 million in 2022[253] - Subscriber acquisition cost (SAC) per installation for the six months ended June 30, 2023, was$14.05, a decrease from $14.46 in 2022[253] - Total installations for the six months ended June 30, 2023, were 6.901 million, up from 6.099 million in 2022[253] Financial Instruments and Borrowings - As of June 30, 2023, the company had$223 million outstanding under its Credit Facility with $1,527 million available for future borrowing[233] - The company's board authorized an aggregate of$18 billion for common stock repurchases, with $1.24 billion remaining available as of June 30, 2023[236] - Sirius XM's borrowings under the Credit Facility now use the Secured Overnight Financing Rate (SOFR) instead of LIBOR as the benchmark rate[256] - The company may use hedging instruments such as swaps, caps, options, forwards, or futures to manage interest rate risks in the future[256]