Satellite radio and media company Sirius XM (NASDAQ:SIRI) beat analysts' expectations in Q1 CY2024, with revenue flat year on year at $2.16 billion. On the other hand, the company's full-year revenue guidance of $8.75 billion at the midpoint came in slightly below analysts' estimates. It made a GAAP profit of $0.07 per share, improving from its profit of $0.06 per share in the same quarter last year.

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Known for its commercial-free music channels, Sirius XM (NASDAQ:SIRI) is a broadcasting company that provides satellite radio and online radio services across North America.

Cable and Satellite

The massive physical footprints of fiber in the ground or satellites in space make it challenging for companies in this industry to adjust to shifting consumer habits. Over the last decade-plus, consumers have ‘cut the cord’ to their traditional cable subscriptions in favor of streaming options. While that is a headwind, this affinity to streaming means more households need high-speed internet, and companies that successfully serve customers can enjoy high retention rates and pricing power since the options for internet connectivity in any geography is usually limited.

Sales Growth

Examining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Sirius XM's annualized revenue growth rate of 7.9% over the last five years was weak for a consumer discretionary business. Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Sirius XM's recent history shines a dimmer light on the company as its revenue was flat over the last two years.

We can better understand the company's revenue dynamics by analyzing its number of core subscribers and pandora subscribers, which clocked in at 33.43 million and 5.96 million in the latest quarter. Over the last two years, Sirius XM's core subscribers were flat while its pandora subscribers averaged 3% year-on-year declines.

This quarter, Sirius XM's $2.16 billion of revenue was flat year on year but beat Wall Street's estimates by 1.4%. Looking ahead, Wall Street expects revenue to decline 1.6% over the next 12 months, a deceleration from this quarter.

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Cash Is King

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.

Over the last two years, Sirius XM has shown solid cash profitability, giving it the flexibility to reinvest or return capital to investors. The company's free cash flow margin has averaged 14.7%, above the broader consumer discretionary sector.

Sirius XM's free cash flow came in at $132 million in Q1, equivalent to a 6.1% margin and down 8.3% year on year.

Key Takeaways from Sirius XM's Q1 Results

It was encouraging to see Sirius XM slightly top analysts' revenue expectations this quarter thanks to better-than-expected advertising revenue. On the other hand, its core subscribers churned and its full-year revenue guidance fell short of Wall Street's estimates. Its full-year EBITDA and free cash flow guidance were in line. Overall, this was a mixed quarter for Sirius XM. The stock is up 1.3% after reporting and currently trades at $3.22 per share.

So should you invest in Sirius XM right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.