Sirius XM Holdings Inc. shared an updated strategic plan, which sharpens the Company’s focus on its core subscription business; leverages the strength of its advertising business across its portfolio; accelerates efficiency throughout the organization; and emphasizes robust margins, free cash flow generation, and stockholder returns.
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“At SiriusXM, we are focusing on the strengths that set us apart – including our strong core subscriber base, our unique position in vehicle, and our unrivaled, curated content — and taking steps to drive profitability and cash flow as we face marketplace headwinds impacting the company’s growth trajectory,” said Jennifer Witz, Chief Executive Officer of SiriusXM. “We have a clear path forward and are confident we can deliver for our stockholders.”
Sharpening Strategic Focus on the Company’s Strengths & Differentiators to Drive Stockholder Value
SiriusXM’s premium offerings stand alone in audio entertainment, and the Company is highlighting key actions it will take to lean into its differentiated position as it charts its path forward.
- Doubling Down on SiriusXM’s Core Automotive Subscriber Segment: SiriusXM’s position in-vehicle remains unrivaled in audio entertainment, reflected in its leading in-car share of ear1. As 90% of SiriusXM’s subscribers have the service embedded in-car today, the Company is focusing its resources on increasing retention and capturing additional growth opportunities within this valuable segment that underpins its scaled subscriber base. As a part of this effort, the Company will shift marketing and other resources away from high-cost, high-churn audiences in streaming to focus resources on core revenue-generating segments.
- Utilizing Streaming as a Companion to the Company’s Core Automotive Offering: The investments the Company has made over the past two years have expanded the service’s reach and engagement in and out of the vehicle, and SiriusXM will continue to highlight the value-added benefits of the app to its core subscribers. SiriusXM will also utilize the streaming platform for automotive distribution where beneficial, both in support of the Company’s growing population of IP and satellite enabled vehicles with 360L and as evidenced by its recent inclusion in the 2024 Tesla Holiday Update. By integrating SiriusXM’s streaming solution into Tesla’s IP-enabled operating system, SiriusXM is rapidly expanding access to its service to more than two million vehicles already on the road, opening up a valuable new segment of its core audience in some of the most popular vehicles in North America.
- Curating Unrivaled Content: SiriusXM’s biggest competitive advantage remains its premium, exclusive, live and on-demand content from its roster of top talent and subject-matter experts. The Company will continue cultivating deep connections between fans and hosts, with future investments centered on the major differentiators that resonate with its core, including: its human curated and hosted music channels, unmatched depth and breadth of live sports, extensive bench of leading audio talent, and growing podcast network.
- Leveraging the Company’s Advertising Strength: The Company will leverage its leadership position in ad-supported audio, both within Pandora and podcasting, to monetize ad-based experiences in its flagship SiriusXM service, and will prioritize adtech investments that simplify campaign planning, purchasing, and measurement for advertiser campaigns across its portfolio. Additionally, long-term, the Company plans to capitalize on its automotive expertise and prowess to launch first-to-market, integrated, addressable in-car ad experiences.
- Increasing Efficiency: Following the successful implementation of cost-reduction efforts across various business units as well as a period of high re-investment in product infrastructure, SiriusXM is further optimizing efficiencies in key areas across the business. The Company is scrutinizing the lifetime value of subscribers, optimizing marketing efforts for higher returns, aligning content investments with its strategic and profitability goals, and closely monitoring the return on technology investments to drive greater operational efficiency and enhance the listener experience. To date, the Company has delivered an aggregate of approximately $350 million of run rate savings in 2023 and 2024, and will target an initial incremental $200 million of annualized savings exiting 2025.
Capital Allocation Priorities to Drive Stockholder Returns
The Company’s strategic actions are focused on preserving its strong balance sheet, maintaining leading margins, and optimizing free cash flow. These actions will enable SiriusXM to prioritize deleveraging in the near-term while simultaneously enhancing stockholder returns.
- Continuing Planned Deleveraging: Following the retirement of 12% of its outstanding common stock and the addition of $1.7 billion of debt as a result of the Liberty Media split-off transactions, the Company remains committed to its leverage target of low-to-mid 3 times adjusted EBITDA. Without giving effect to any opportunistic share repurchases, SiriusXM expects to reduce its debt by approximately $700M in 2025 and achieve a leverage ratio of 3.6x by year end 2025.
- Maintaining Dividend: The Board of Directors of SiriusXM remains committed to its current quarterly dividend of $0.27 per share, or $1.08 per share annually, currently returning more than $350 million to stockholders per year.
- Stock Buyback Authorization: The Board authorized $1.166 billion common stock repurchase program remains in place. The timing and amount of any shares repurchased will be determined based on SiriusXM’s evaluation of market conditions and other factors and the program may be discontinued or suspended at any time. Repurchases will be made in compliance with all SEC rules and other legal requirements and may be made in part under a Rule 10b5-1 plan, which permits stock repurchases when SiriusXM might otherwise be precluded from doing so.
2025 Outlook
In conjunction with today’s update, SiriusXM is providing 2025 guidance for total revenue of $8.5 billion, adjusted EBITDA of $2.6 billion, and free cash flow of $1.15 billion. This follows the Company’s reaffirmation of its 2024 guidance for total revenue of approximately $8.675 billion, adjusted EBITDA of approximately $2.7 billion, and free cash flow of approximately $1 billion. Aligned with its enhanced focus on free cash flow, the Company expects free cash flow conversion, free cash flow as a percentage of EBITDA, to increase from approximately 37% in 2024 to approximately 44% in 2025. Additionally, the Company is targeting free cash flow of $1.5 billion in 2027.
The Company excludes from adjusted EBITDA the impact of other income (expense), gain on extinguishment of debt, impairment, restructuring and other costs, other non-cash charges such as share-based payment expense, and legal settlements and reserves (if applicable). Similarly, free cash flow does not include certain items that do not relate to the on-going performance of the Company’s business, such as cash flows related to acquisitions, strategic and short-term investments, including tax efficient investments in clean energy. Free cash flow may also be negatively impacted by legal settlements which are excluded from adjusted EBITDA.
Adjusted EBITDA and free cash flow are non-GAAP financial measures. The Company has not provided a reconciliation of adjusted EBITDA to projected net income (loss) or free cash flow to net cash provided by operating activities because full-year net income (loss) and net cash provided by operating activities will include special items that have not occurred and are difficult to predict with reasonable certainty. Due to this uncertainty, the Company cannot reconcile adjusted EBITDA and free cash flow to their comparable GAAP measures without unreasonable effort.
Chief Operating Officer Appointment
As a part of this effort, SiriusXM has appointed Wayne D. Thorsen, former Executive Vice President and Chief Business Officer at ADT Inc., to serve as SiriusXM’s Executive Vice President and Chief Operating Officer, effective December 16. In the newly-created role, Thorsen will oversee SiriusXM’s product and technology functions and be responsible for aspects of the Company’s commercial activities, as well as business development, certain consumer marketing activities, and corporate strategy. With his depth of experience driving business development and innovation at a variety of leading companies including ADT, Google Inc., and Social Finance, Inc., Thorsen is well-positioned to help SiriusXM deliver meaningful results alongside greater efficiency.
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