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SiriusXM Bets Big on the Connected Car

CEO Jim Meyer says satcaster sees “tremendous value” in combining satellite broadcast, IP connectivity

Capitalizing on its purchase of dashboard telematics company Agero last year, SiriusXM feels well-positioned as automakers march towards developing the connected car.

“Every one of them is evolving to a connected car and every one of them will offer connected vehicle services of some type,” SiriusXM CEO Jim Meyer told analysts, noting that OEMs are using different types of connectivity in their vehicles and those decisions are a “marathon, not a sprint,” according to Seeking Alpha.

Meyer said the company is on-track to do approximately $100 million of revenue in its connected vehicle business this year and SiriusXM expects to double that over a three-year timeframe. The satcaster is moving “our entire organization to capitalize on this opportunity from our investments in the CV business to the improvements we are planning in our core audio service. We see tremendous value in delivering a service that combines the best features of satellite broadcast and IP connectivity.”

At the same time, SiriusXM recognizes that its service is shared with others in the dashboard. In fact, some 64% of the satcaster’s subscribers also listen to Pandora, according to FBR Capital Markets.

But SiriusXM EVP and CFO David Frear says the majority of the “churn” the company sees is from consumers who, when their free trials ends, return to over-the-air radio. “The majority of the churn we see … are going back to FM radio, or going back to terrestrial radio. We’re not seeing a meaningful impact that I can see on our business today from streaming. That doesn’t mean we won’t in the future, but today we just don’t see it,” Frear told analysts, according to Seeking Alpha.

Churn improved to 1.9% from 2% in the first quarter, according to SiriusXM. The company added 266,799 net subscribers in the quarter for a total of 25.8 million total paid subscribers in the quarter. It had a self-pay subscriber base of $21.3 million.

Revenue for SiriusXM in the first quarter was just shy of $1 billion, up 11% year-over-year. Driven by the strong revenue growth and tight management of cash operating expenses which were up just 4%, adjusted EBITDA climbed 28% to 335% million, according to the company.