Sirius XM (NASDAQ:SIRI) Chief Financial Officer Zac Coughlin said the company is focused on growing subscription revenue, expanding its advertising business and preserving longer-term strategic optionality around its spectrum assets, following a first half marked by higher revenue, EBITDA and free cash flow.
Speaking at an investor event, Coughlin said SiriusXM’s strategy, refocused at the end of 2024, centers on strengthening the subscription business through the in-car experience, accelerating advertising growth and using the company’s scale to improve efficiency and shareholder returns. He said first-half revenue rose 1%, with both business channels growing, while EBITDA increased 5% and free cash flow climbed 67%.
Subscription focus shifts toward value and revenue
The CFO said SiriusXM has a durable subscriber base, noting that more than half of subscribers have been with the service for over 10 years. He cited record-low churn and record-high customer-satisfaction metrics as evidence of that loyalty.
Rather than managing solely for subscriber-count growth, the company is increasingly focused on the long-term economic value of subscribers and subscription revenue growth, Coughlin said. The company plans to continue refining package segmentation, pricing and discount strategies while adding value to customers.
“We think about it less as a trade-off and more as a balance” between average revenue per user and subscriber retention, Coughlin said. He noted that SiriusXM raised prices in back-to-back years while maintaining record-low churn, and said the company sees potential to take pricing again if market conditions permit.
Near-term subscriber trends remain on track with internal plans for the third quarter, according to Coughlin. He said the company expects churn to remain low, aided by its continuous-service efforts and the popularity of its Companion plan. The principal external risk to subscriber growth remains the automotive selling-rate environment, given the importance of new vehicles to SiriusXM’s subscriber funnel, he said.
Content, automotive partnerships and 360L
Coughlin said breadth of content remains a competitive advantage for SiriusXM, spanning music, sports, news, comedy, podcasts, talk and entertainment. The company has also used live events to deepen consumer connections, holding more than 400 live events annually, he said.
Its recently announced Sports Pass offering illustrates its effort to broaden access to content, Coughlin said. The product is intended to serve audiences beyond the traditional automotive funnel, while also being offered as a free add-on for the company’s most valuable customers.
Automaker relationships remain a key advantage, Coughlin said, citing more than two decades of integration work and “win-win economics” with original equipment manufacturers. He said SiriusXM is working with automakers as connected vehicles and IP-based delivery become more important, while the gradual turnover of the vehicle fleet means the transition will take time.
The company’s SiriusXM with 360L platform is installed in more than half of newly purchased vehicles and represents more than 20% of the total subscriber base, Coughlin said. The platform provides more detailed consumer listening data, which SiriusXM is using to inform programming, marketing, product and technology decisions. He said deeper personalization and customer engagement could support retention and pricing over time.
YouTube arrangement could become a material advertising driver
Coughlin highlighted SiriusXM Media’s arrangement with YouTube as a significant new opportunity for the advertising business. He said SiriusXM Media already has a scaled advertising sales organization, technology platform and relationships with large advertisers, while YouTube adds a sizable audience.
Combined, SiriusXM and YouTube will reach 255 million Americans, or 90% of the listening population age 13 and older, according to Coughlin. He said the companies will spend roughly the first half of next year ramping the arrangement, with more material output expected in the second half.
The agreement is structured similarly to an advertising-representation deal, he said. SiriusXM does not expect substantial incremental investment because much of the required sales, technology and advertiser infrastructure is already in place. Coughlin said the arrangement should be meaningfully profitable, though its profitability will be lower than podcasting and within the range of SiriusXM’s owned-and-operated advertising platform.
Advertising revenue rose 5% in the second quarter, with podcasting and programmatic advertising the strongest contributors, Coughlin said. He expects second-half growth rates to moderate because comparisons with the prior year become more difficult, but said underlying demand remains constructive. The company sees the $18 billion to $20 billion annual audio advertising market as under-monetized and believes improved targeting and measurement could expand the overall market.
Capital allocation and spectrum optionality
Coughlin said SiriusXM has reached its long-term leverage target range, though it remains near the high end of its low-to-mid-three-times leverage objective. The company expects to move more squarely toward the middle of that range through the rest of 2026.
Beginning in early 2027, Coughlin said the company expects a broader set of capital-allocation options. After internal investment needs and potential incremental inorganic opportunities, he said share repurchases are likely to be a priority over dividend increases. SiriusXM considers its current dividend sufficient and views buybacks as a more efficient use of capital at current share-price levels, he said.
On spectrum, Coughlin said the company’s 35 megahertz of contiguous mid-band spectrum is essential to the current satellite-radio business but also creates medium- to longer-term optionality. SiriusXM continues to migrate new customers to one portion of its satellite spectrum, though it does not intend to disrupt longstanding customers still using the legacy portion of the network.
About Sirius XM (NASDAQ:SIRI)
Sirius XM Holdings Inc provides subscription-based audio entertainment and information services in the United States and Canada. Its SiriusXM service delivers commercial-free music, sports, news, talk and entertainment programming through satellite radio and internet streaming, including its mobile app and connected-vehicle platforms.
The company offers a broad range of exclusive and licensed content, including live sports coverage, original talk and comedy programs, news services, podcasts, and music channels organized by genre and artist.
