Q2 2021 Sirius XM Holdings Inc Earnings Call
Good morning, and welcome to Sirius XM, and second quarter, 2021 financial and operating results conference call.
Today's conference is being recorded a question and answer session will be conducted following the presentation. If you have a question at that time. Please press the star.
And 1 on your telephone keypad.
And then any time you'd like to fear of missing the queue. Please press star 2.
At this time I would like to turn the call of the Hooper Stevens Senior Vice President Investor Relations and Finance Mr. Stevens. Please go ahead.
Thank you and good morning, everyone welcome to Sirius XM second quarter 2021 earnings conference call. Today, we will have prepared remarks from Jennifer Witz, Our Chief Executive Officer, and Sean Sullivan, Our Chief Financial Officer, Scott Greenstein, Our President and Chief content Officer will join Jennifer and Sean to take your questions I would like to remind everyone that certain statements made during the call.
And it might be forward looking statements as the term is defined in the private Securities Litigation Reform Act of 1995 of these and all forward looking statements are based upon management's current beliefs and expectations and necessarily depend upon assumptions data or methods that may be incorrect or imprecise such forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially.
Really for more information about those risks and uncertainties. Please view Sirius XM SEC filings and today's earnings release, we advise listeners to not rely unduly on forward looking statements and disclaim any intent or obligation to update them as we begin I would like to remind our listeners that today's results will include discussions about both actual results and adjusted results all.
All of discussions of adjusted operating results exclude the effects of stock based compensation and certain purchase price accounting adjustments with that I'll turn it over to Jennifer.
Thank you and good morning, everyone. Our second quarter results demonstrate remarkable continued growth across our business highlighted by 335000 net new.
New self paid siriusxm subscribers record low churn of just 1.5% and outstanding advertising growth of 82% total revenue grew 15% adjusted EBITDA climbed 14% from a new quarterly record and we generated $550 million of free cash flow, we now expect to add.
1.1 million net new Sirius XM self pay subscribers in 2020, 1 marking our fastest annual growth since 2018, given our strong operating and financial performance and the first half we are raising all of our financial guidance across the board and addition to highlighting of great quarter today I want to talk about.
And can you focus on 3 strategic areas first our intention to continue growing and building on our strong presence and the vehicle second our increased focus on engagement and subscription outside of the car and third our plans to grow our unique advertising platform of course are leading and unmatched.
Our consent underpins all of the strategic efforts and will play a central role and our ability to deliver on that day.
The fact that his greatest success has come by pairing and easy to use service with well curated content in the vehicle for our subscribers and we intend to keep winning and the car by driving higher penetration and growing.
The all distributions the vast majority of our subscribers today value adds because they enjoy our in vehicle experience and most of our listening occurs there as well approximately 140 million vehicles on the road today are enabled for Sirius XM and this continues to decline with the new car penetration rate at reached 80.
And <unk> and the second quarter of 4 points from a year ago. Our distribution in vehicle continues to grow Dean and recently expanded agreement that makes Sirius XM of standard feature and all Jaguar land Rover and many models sold and the United States.
Sirius XM is also bringing the enhanced $3.50 all experience.
And to bring more and more new vehicle buyers the significant volume already rolling out across 9 automakers, including Audi and BMW Ford GM, and the Atlantis and Volkswagen with more on the way we continue to expect approximately 80% of Sirius XM equipped new vehicles in 2025.
And include 360 L.
Customers Love $3.50, all of the enhanced feature set ease of use and interface. Our research shows that there is an increase and customer satisfaction and likelihood to subscribe and consumers experience. These new features we are seeing some encouraging listening and conversion trends when we isolate for other variables.
And then compare at the <unk> capable of cars to other vehicles. We also see very strong conversion rate among trailers, who use the breath of TL features on demand Pandora artist stations and the broader set of extra channels enabled by IP delivery, although it's still very early in this data is extremely promising.
Net of new feature.
And is key to improved performance. So we are hard at work to improve our targeted personalized marketing efforts enabled by and tailored to agree to a deal. We expect the usage data provided and these new cars to be very helpful to our content recommendations and to improve the efficiency and relevance of our marketing efforts over the long run there is no reason and this will not also.
Improve retention and up sell as well we.
We believe the further growth and new vehicle penetration and 360 L distribution will add to the meaningful share of ear game. The Sirius XM has seen and the car. According to Edison research from 2016 to 2021 Sirius XM gains the largest amount of in vehicle listening.
And compared to any other service.
Outside of listening to M. F M, which is fragmented and shrinking Sirius XM maintains the dominant share of the ear in vehicle in fact, our share of here is roughly 3 times bigger than all screaming competitors combined.
Of course, we are not satisfied by success within the vehicle alone we're very.
At the time growing engagement and subscription outside of the vehicle as well 2 years ago, we changed the packing structure of Sirius XM to include streaming and no additional cost to almost all of our subscribers. During the pandemic, we opened up our streaming service for free and we encourage our existing subscribers to stream.
We have already started.
So if you the fruits of these efforts our research shows that subscribers, whose day of Sirius XM is their number 1 source for audio outside of the car has doubled in the past 3 years out of vehicle listening enhances the value proposition of and overall satisfaction with our service and is a strong predictor of in vehicle conversion.
And retention.
To date, most of our growth and streaming has come from existing subscribers using the service outside of the vehicle, but we have been putting the building blocks and place to drive incremental subscription that arent tied to a vehicle. We have made major investments to improve the quality and capabilities of our Sirius XM App experience, which we have rebrand.
Branded adds the SSM app with more updates on the way we are infusing the SSM app with an even broader range of content, including exclusive programming that is unique to the digital environment and we are now making meaningful marketing investments to raise awareness of our digital offering Sirius XM has a history of disrupting audio and we.
Look to further shape the future of idea we are committed to growing the Sirius XM digital subscription, which will give us an opportunity to take our premium audio content to a much broader audience.
As of this month, we will begin, allowing digital subscription purchases directly and the iOS and Android versions of the ethics and app, making it much easier.
The year for consumers to subscribe to our digital packages as part of the IAP launch, we introduced simplified lower pricing for the streaming music and entertainment planned and the streaming platinum plan, which adds powered sports play by play and Personalised Pandora station for the first time ever we now allow listeners to try and the ethics them.
ASP of free with a 3 hour of preview window before setting up of 1 month trial. We believe the functionality of all that more of listeners to recognize how our exclusive content is truly unmatched and the streaming space and.
And let me just adds we actually have variable margins on our digital subscription that are as good or better than satellite.
Making this opportunity all of the more attractive leaning into digital subscription will be 1 of the key ways. We expect to grow our large sub base and 1 of the best ways to succeed with the younger more diverse customer base.
The third area of focus I mentioned is our advertising platform the purchase of Pandora and 2019 and medium.
Mediately gave us a scaled adds support of user base best in class AD Tech and and extraordinarily successful AD sales team and the past 12 months alone we have generated $1.6 billion of advertising revenue share.
The effects and the large addressable audience approximately 150 million listeners makes ours.
Or is the largest digital audio AD platform and North America of position, sometimes underestimated or overlooked by investors advertisers and other content creators.
To better leverage the scale and drive success for our advertising clients, we created ethics and media of unified sales organization, representing the best and lives.
Ive radio streaming and podcasting. We also have a full suite of end to end distribution and monetization solutions for content creators and publishers and marketers.
Are the largest aggregator of premium supply for audio advertisers and the U S are scaled AD networks include a leading podcast advertising network mineral.
Mid roll premium exclusive and representation for other platforms and podcast or such as downside and NBC Universal News group and significant available inventory of via the packs and add way of marketplaces, we have of best in class buy and sell side AD Tech stack that leverages, the Sirius XM owned audio ad platform.
And with and simple tasks, which support publishers from large enterprises to individual creators and Sirius XM and also has an incredible in house audio creative consultancy studio revenue that many of our customers are using and move of creative agencies.
Our growing off platform revenue for us.
Most of our arrangements with third parties by leveraging our scale AD Tech and sales infrastructure. These media properties publishers and creators can focus on what they do best making great content and we can help them improve monetization.
All of our efforts to grow in and out of the vehicle whether through subscription or advertising.
And kind of outstanding content at their foundation to continue successfully shaping the future of audio we will never lose our focus on delivering high value content curated and often exclusive live or personalized we continue to add programming for our listeners with new collaborations with talent media and social brands.
Can you talk is a perfect example, we are working with the social platform and as the creators to enable multiple new audio experiences that includes Pandora exclusive platelets from leading creators on the platform a new groundbreaking full time Sirius XM channel that is expected next month and re airings of Pandora live event.
With the major artist on Tictoc, we are already seeing higher engagement of this content from younger listeners.
Pandora and Sirius XM, we continued to celebrate black artist and culture for Black music month, with new podcasts music channel talk programming and events.
1 Great example of being Black Diamond.
And then and original podcast, we created and focused on the rich history of neither of the baseball.
We continue to approach podcast and the discipline and a deep knowledge base of what worked and audio for the long run we brought in Rome, and Mars and his team at 99 per cent of invisible the critically acclaimed podcast that had been downloaded 500.
100 million times Roman could've gone anywhere, but we are an ideal place for creators do their best work and monetize it across the largest distribution and promotion platform in North America recently, we announced that Rogen would do his first ever podcast and the best starting in the fall.
Talk that the Britney.
Spirit story, if the newest podcast from our witnessed op unit at Stitcher 3 weeks and the show has been downloaded over 550000 times rich number 8 on the Apple podcast chart and garnered major press around the world.
Sirius XM will always offer a wide range of opinions and viewpoints and is a great.
So we recently announced the new show created and hosted by Meg and Kelly coming in September she joined and array of talent covering the broadest spectrum of political and news programming and audio Meg and show represents a unique multiplatform approach. She can interact live for Sirius XM subscribers.
For example, and also enjoy video highlights in the ethics and apps and and edited podcast version of the show and subsequently receive wider distribution of Sirius XM, Pandora Stitcher and other major platforms to.
And to make it easier to understand our offering and purchase all of this great content and we recently rebranded our subs.
Who will then plan and to unlock more value for our best customers, We launched platinum VIP. Our first ever subscription plan that includes multiple vehicle access plus streaming. This new VIP plan also includes live concert archives from <unk> Dot net greater access to virtual and live Sirius XM events.
And and enhanced here of customer care.
For close to 2 decades, we have transformed the way and listeners consume music news and other content inside of the vehicle and in recent years, we have been expanding the reach of our services beyond the vehicle our hard work and investments are driving a higher satisfaction rate and.
For food value proposition that we now know ties directly back to the strong subscriber growth and churn performance I'm very proud of this quarter's results and progress on our strategic priorities and with that I will turn it over to Sean.
Thank you Jennifer and good morning, everyone. Our second quarter results highlight the impressive growth Sirius XM.
And continues to deliver and subscribers revenue adjusted EBITDA and free cash flow total revenue increased 15% to $2.1.6 billion led by 82% growth and AD revenue, although the pandemic impact of the advertising business and last year's second quarter as of point of comparison, our AD revenue grew 20%.
Percent compared to the second quarter of 2019 continue.
Continued strong performance and our on and off platform businesses, including adds waves and stitcher contributed to overall advertising revenue growth.
Adjusted EBITDA increased 14% to 700 million a company record for any single quarter day.
Alluded earnings per share.
Share where 10 or.
For <unk>, excluding of $140 million of satellite recoveries tax affected.
Our strong financial performance generated $550 million of free cash flow during the second quarter free cash flow included $16 million of insurance proceeds related to FX and 7 to.
The date, we have booked $140 million of insurance proceeds.
The <unk>, including the $16 million collected in Q2.
Against this we will begin spending this year on a replacement satellite FX and <unk> as well as on our next generations, there FX and 10.
Turning to our segments and the Sirius XM segment revenue increased 7% to $1.6 billion with RPM.
Growth of 4% to $14.57.
Gross profit grew 5% to $996 million, resulting in a margin of 61% year to date Saar has been approximately $17 million, Although June SAR came and light compared to preceding months consumer demand for new and used vehicles remained strong.
And we saw record trial starts and both new and used cars and the second quarter positioning us well for the back half.
Moving now to the Pandora segment advertising revenue of $383 million and the second quarter increased 82% from last year, and even 25% compared to the same period and 2019.
<unk> and monetization at Pandora was aided by the addition of Stitcher and our off platform business centered around adds with <unk>.
Pandora's AD revenue crossed the $100 per 1000 hours and off platform revenue, excluding stitcher grew approximately $22 million or <unk>, 79% compared to the second quarter of 2000.
The growth.
Driven by considerable growth and adds with Soundcloud and add weight.
Bookings remained strong across the board during the second quarter with the largest gains being and travel and tourism pent up demand and an increase and consumer confidence of both contributed to the travel industry seeing 1 of the strongest surges on.
The record and the second quarter restaurant and automotive categories increased spending and we saw large growth and entertainment driven by the return of the movie business.
Pandora monthly active users and total AD supported listening hours were $55 million and $3 <unk> 3 billion, respectively. Pandora added 118000 net new self.
Tubs to and the second quarter was $6.5 million total self pay subscribers gross profit and the Pandora segment grew 176% over the second quarter of 2020 or 23% compared to the second quarter of 2019, and gross margin improved 16 points to 37% given the web.
And based decision, we now have certainty and the bulk of our streaming and royalty rates through 2025.
And the first half of 2021 returned approximately $965 million of capital to stockholders comprised of $844 million and common stock repurchases and of $121 million and dividends and.
In June.
June we opportunistically raised $2 billion of new senior unsecured notes with a coupon of just 4% and we intend to use the remaining cash proceeds and August to call our outstanding 2022 notes.
Net debt to adjusted EBITDA was 3.2 times at the end of the second quarter or $1.75 billion revolving.
500 facility was completely undrawn and fully available.
Turning to 2021 guidance as Jennifer mentioned, we now expect to add $1.1 million self pay net subscribers at Sirius XM with the 300000 upside driven by strong additions and record low churn.
With momentum and both subscription.
And advertising, we now expect $200 million of incremental revenue for.
Our $8.5.5 billion in total.
Higher margins and meaningful new investments and long term growth drive of $100 million and upside to our 2021, adjusted EBITDA expectation, which now sits at $2.6.75 billion.
We are also increasing our free cash flow expectation for $2.$7.7 billion based on higher adjusted EBITDA and insurance recoveries net of new satellite spending.
We feel very good about our updated guidance and growing full year visibility so with that I will open it up for Q&A.
Thank you at this time, we'd like to open the call up for questions I would like to remind everyone in order to ask the question. Please press star 1 on your telephone keypad.
And that any time, you would like to be removed from the queue. Please press star 2.
Pause for just a moment to compile the Q&A roster.
Hello, and we'll go ahead and take our first question from Jessica Reif Ehrlich with Bank of America Securities.
Excuse me. Thank you. Please go ahead. Thank you. Thank you Teresa for questions.
And 1 on advertising.
Jordan area of growth can you parse through like the different areas broadcasting.
Versus the traditional platform versus digital.
And maybe what the different demographics and growth rates are and.
And then second on churn.
Outstanding is do you think of sustainable to keep it at this level and then finally on the premium service.
It seems like a hefty price I'm just wondering if you can address what you think the Tam is.
I mean, it's it's differentiated but.
And if you could just address where do you think the market size would be.
Yeah.
Sure Hi, Jessica so on the <unk>.
Advertising front, we saw growth across all categories.
And on the Pandora owned and operated Sirius XM, Stitcher and and our.
Our other off platform and so it was really across the board and and clearly last year of second quarter was depressed and are going into COVID-19, but overall advertising revenue I as I think Sean mentioned in his comments is up 20% versus the second quarter of 2019, and so really strong growth across the board.
And I think we're going to share anything on demographics necessarily Bud and Bud.
Really just you know a lot of the categories and you want a comment on some of the category and yes, we saw a lot of and travel and leisure restaurants, and we've talked about it and the script I guess, what I would add Jessica is obviously, we've done very well both on and off the off platform. So whether it sound cloud adds with.
And with.
Some of the AD representation deals.
And it's really driven growth and we.
We continue to see strong demand across all of our platforms and products, we see great pricing.
So we really think there is still.
Meaningful amount of growth on the advertising line, depending on the platform.
And opportunity so we're really pleased.
<unk>.
I think the the <unk>.
S XM media organization, and bringing that together really really positions us well for the back half of the year.
Great and so on churn and your question is whether it's sustainable I think and we are all a little surprised by 1.5% we haven't seen that and.
And a long time, but you know we've been at 1.6% I think 3 of the 4 quarters. Prior to this last quarter. A non paid continues to run low voluntary churn has been much lower than we even expected and you know vehicle weighted related is off.
Year over year as we as we expected going into this year with higher trial starts and so I think if you look at the rest of the year as we said kind of going into the year, we would expect it to tick up and I would expect non paid to continue to revert to more normal levels and spending levels increase on the consumer side and you know vehicle related as well.
As you know we think.
The trial starts will continue to be strong.
Going through this year on the voluntary side I would just point out that we believe that there is a.
A lot of momentum there with what we've done on streaming and providing access to our subscribers and.
Overall, we've seen.
And just really nice increases and satisfaction and value perception, which translates through to retention and so really pleased with that and.
And then your last question about the premiums of it though I assume you're referring to platinum VIP and we just launched that this month and.
And are you now.
I think that's the biggest opportunity there.
We and our subscriber base is and those households that have 1 active vehicle and another inactive vehicle and presenting this plan to them with the fact that it has 2 vehicles subscriptions to streaming logins true.
And by December of VIP benefits, including opportunities for access.
And with it you know are of Great live events and performance is our access to Nugs dot net content through their App and then you know platinum level VIP care. So you know with these levels of benefits. We do think that that's going to be the most attractive market within our subscriber base and but there's also.
Accessories to upsell those that have and 2 vehicles subscribed, but on other plans and not the platinum level of plants.
Thank you.
Alright.
We can go ahead and take our next question from Steven Cahall with Wells Fargo. Please.
The opportunity.
Thanks.
Maybe first for me was just wondering if you could sort of break down your gross add funnel in terms of what you've seen from new cars versus used car and it seems like we'll probably get into a period here and the future where used cars and we're just going to be a bigger part of transactions on inventory shortage and so we're just love to know how those trends.
Please go ahead Mac, especially as we're now getting into used cars that are a lot of newer than they've historically been.
And then Sean and I was wondering if you could give us a few housekeeping items like new car penetration and new and used car conversion rates and paid trial starts.
I'll start on kind.
Trends for contribution and the funnel we have a we've had really strong growth as you know record trial starts in Q1, and Q2 of this year and the consumer down and demand for and new and used vehicles has been really strong as you know and so we've seen growth on the topline in terms of conversion.
Kind of vote and overall gross adds.
In addition to the lower churn rate so that contributed to the better net adds of overall, so I'd just say on the contribution or the relative contribution so Henry Theyre going up for both new cars and used cars for us.
And the second quarter, we had 82% on the new car side, which is.
Jen for points year over year used cars and continues to tick up towards 50%.
And you know and it's probably a couple of points year over year.
And so we did have 1 quarter of last year, where he used car trial starts were were about the same about 50.50 with new car trial starts, but otherwise you know they the our trials.
Up for its do tend to skew slightly towards a new and and I would expect that to continue given kind of the the growth and the pen rates we've seen there.
And so that and I'm kind of the.
The other metrics that I don't think we're going to get into some of the specifics.
Trials and the splits of churn and otherwise Wizard and other parts of the question John that you want to cover I don't think so I think you've covered alternate for thank you.
Thanks.
Okay. We'll go ahead and take our next question from Jason Bazinet with Citi.
Please go ahead.
Thanks, So much. Thank you just 1 for the switch and then 1 for Mr. Sullivan.
You said, 1 thing and the prepared remarks about very more variable margins and IPP.
Greater than the satellite services, where you're comparing variable margin to variable margin on that comment of variable margin to sort of average margin.
And then for Mr. Sullivan.
You mentioned, the 2 billion capital range that you did.
With the potential to use the proceeds to pay off the 2022 that I was just wondering can you just sort of talk about what the extra billing and will be used for.
The first on your variable margin question.
And we were comparing variable margins for our digital standalone subscribers versus our satellite subscribers and just looking at the kind of the the royalty rates the data path and customer of hair and overall, we look as good or better on the digital side.
And and we don't have the same kind of Faq right that we would have on the satellite side of the business I, you know and and in terms of digital subscriptions and the acquisition funnel and you know, it's it's really about marketing and it is highly performance driven and so you know we have the ability to scale that up and down based on you know where.
Side and.
Where we're trending in terms of the performance against you know kind of Ltvs and other threshold. So.
And so it's very trackable and something that you'll see us spending a lot more towards as we launch a through IAP and have done a tremendous amount of work and building.
Where our products and the in the apps and our digital subscriptions on the Sirius XM side, we've added a lot of content and over the last couple of years with you know hundreds of extra channels with on demand podcast video and so it's a really robust offering and at relatively low and competitive pricing.
And we've put the capabilities in place now for consumers to transact much.
More easily and App, and we'll be putting marketing behind that.
To continue to drive awareness about the presence of and availability and and strength of our product outside of.
For the car and you know, we hope to have more distribution partnerships to announce and the future as well to support that Sean that Jason just on your other questions and we raised $2 billion, we had a roughly $1 billion drawn on the revolver. So that the that was paid down and the $1 billion you see on the balance sheet at the end of the quarter.
And that will be used for quality August 22 notes that I mentioned.
Thank you.
All right, we'll take our next question from Ben Swinburne with Morgan Stanley. Please go ahead.
Thanks, Good morning.
Jennifer just some of the advertising.
The business, obviously, a lot of strength there.
Can you talk a little bit about sort of what the governors are on growth looking forward I'm, just wondering if sort of third party inventory.
It is a key part of the longer term growth story and kind of how you guys attract more third party inventory into Sirius XM sort of what's the pitch and.
Maybe you could talk a little bit about how advertisers are viewing digital audio as we have this.
The strong AD market, we're seeing this year and then Shaun is there anything in the quarter or and the guidance on the LTE front from the web 5 decision that you want to call out I don't know if there was any of adjustments from the first quarter or anything.
Material you'd call out of just given that you now have line of sight and those costs versus sort of what you were accruing or what was and the guidance. Thank you.
Yes, and maybe I'll take the second 1 first and I'll turn it over to Jennifer So I think of you look at.
And the L. P. M. You can see the effects are through the first half of the year.
As we.
And the last call or maybe outside of recent conference, we were narrowly and better than what we had and the.
The ruling was narrowly better than what we had anticipated. So I think what you see and the first half and what you see embedded and our guidance reflects the current rates and expectations. So it's all factored in.
And.
Advertising question.
And I think theres growth across all categories and clear.
Clearly, we've had declines and the listeners on the Pandora of that but despite that we continue to drive better monetization there and.
And it's really a function of rates and sell through and.
But yes it is.
There's probably even more opportunity off platform and were using as John mentioned, where the ethics of media. We're using all of the strength that we have with this combined sales force is really strong AD tech platform as well as you know really all of the value added services that we bring to the table of whether it's the studio resonate.
And for us to bring more publishers to our platform and.
For them to participate and our marketplaces and and for US you know to direct sell on their behalf and we did that and we continue to expand our relationship with Soundcloud as you know and with NBC Universal and I believe there'll be more to come and then of course and there has been dramatic growth and podcasts.
And we have all of the assets again that we need there to continue to support podcast creators and and being able to monetize and distribute their content broadly really across all platforms.
Jennifer 1 other thing on that.
And I wanted to just add.
It is with Pandora and the growth also will come.
True, we're not constrained on the music side, where we are commercial free on Sirius and as Jennifer mentioned the live events. They did 1 with edge here and at Pandora that was both great content, but also of great advertising revenue.
And the modes launch has led to a number of major artists like the Olivia Rodrigo and adjusted Beaver and others.
Tictoc is now starting to be a presence on the platform.
And other things will come as.
Music and other content really starts to go into the <unk>, it's going.
The lead to a lot of other opportunities.
And other and the second point was there's a lot of content providers that look to us for AD sales and as they get into that process. They determined there was audio assets, we have that they want their content on whether its NBC news and others, we can start with.
The content and the end up at the AD sales or vice versa. So I like our position and growing and AD sales due to the attractiveness on both sides.
And then thanks, Scott and Scott and I would just.
For the broadest set of capabilities across.
Multiple formats of other it.
Live our podcast or.
And you know more interactive or on demand and you know we have a all of these different formats music talk news sports and so we and that's that's what advertisers want they want to be able to buy brought the across audio assets.
Thanks, everybody.
Yeah.
All right, we'll take our next question from Bryan Kraft Deutsche Bank. Please go ahead.
Hi, Thanks, Good morning, I had a couple of questions. If you don't mind first just wondering if you can give us a sense of whether you expect much acceleration and the ARPA growth from the shift to the new plans and can you clarify whether existing subscribers will.
The grandfathered into the old plans or if they'll be forced to migrate as their subscriptions renew and then secondly, how do you think the new new vehicle inventory recovery shaping up for the second half of the year do you think it will be back to normal as far as dealer inventories by the end of the year of at least close or do you think it and actually takes into next year. Thanks.
<unk>.
So I guess I'll start with the first of all of them on our pro growth and Sean if you want to add and feel free but the.
And sort of consistent growth of around I think 2% to 3% annually and ARPA growth and.
I do think we've had really strong take rates on our highest.
Package and prior to launch of siting and VIP, which previously was called all access and is now renamed platinum and so that was real evidence that there is demand above that which you know played into our decision to launch of platinum VIP and no one's gonna be forced to migrate them and it's a voluntary package and.
Migration for the plans that are changing names, obviously will be and will be seamless, but and so I think there's upside in our pud, but we we don't look at RPM on its own and it it's really how do we drive overall revenue and clearly that's a function of volume and rate and we believe that there is.
The opportunity really across the pricing curve and we have a number of packages of different price points and yeah, I think well continue to drive demand.
From a number of consumer segments, including like our digital product right, which is competitively priced and against our other subscription as well and was there anything else on RPM.
And it function and this year, obviously of the increases and ARPA is also just the recovery and AD revenue and.
And which has been really strong and and rolls through that as well and and then I know your last point about new vehicle inventory of and you know I'm sure you're following all the news of the days sales as the I think the mid twenties and.
And which is just and you know exceptionally low, but I'd say the automakers have done a phenomenal job and it did.
Determining which models to produce you know putting vehicles on a lot of until the parts come in and you know and and making sure that they are making the best decisions and vehicle average vehicle sales prices were.
As high as they've ever been and the last quarter and the demand is still there. So I think there could be some softness and the third quarter still them, but you know I am hoping that it's you know turning around by the end of the year and going into next year.
Okay, just 1 follow up on the <unk> question did any of.
Of the price points on the other plants change or was it was it really just at the at the premium level.
No no other parts of might change.
Thank you very much.
Yeah.
All right, we'll take our next question from Doug Mitchelson with Credit Suisse. Please go ahead.
Thanks, so much.
I was just curious 1 of the talk about advertising, obviously on this call and and and previous for the Pandora specific inventory like how much more upside the advertising and <unk> do you see and and I can't tell if I just missed it and the and the answer the last question, but did you talk about AD loads on Pandora have you considered.
Consider changing those it all have they changed at all given the good pricing that you're seeing on the advertising side and then.
Separately from that anything on the M&A front.
And that you are finding interesting, especially as you broaden out on the on the AD sales front and.
And obviously, you're a little bit further along on the podcast front, how should we think about the potential.
Oh and appointment of M&A and what are your thoughts of that right now thanks.
Sure Doug.
On the on the Pandora side and think AD loads have been relatively consistent and I don't believe there's any intention to change that given the demand and the pricing environment.
1.2 I think we've seen you know.
Greece sellout percentages.
As a across the board of year over year.
And there is still room to increase the sellout and given the strong demand and given the pricing and I think the product that we offer and we do think there's the incremental upside. So we'll leave it there of what we've talked about the back half of the year and and our expectation for advertising.
<unk> growth.
So that's the advertising you know again capital allocation.
Remains consistent.
As we've talked about we're really focused on 360 out of it we're really focused on the digital sx and app and investing there and and enhancing our position outside of the vehicle.
We've done as you know disciplined.
M&A across the board I think right now we really feel good about the portfolio of assets. We have we don't really think there's a real GAAP you know there are things like Rome, and Mars and <unk>.
And the 99% of invisible that I think are nice additions to the portfolio and the offering.
So from an M&A perspective.
And we'll continue to.
Observe what's in the marketplace and you know where there are gaps and things that can accelerate our offering of our strategic roadmap, but we feel pretty good about the where we're at right now.
Alright, thank you.
Okay.
Okay.
And we will take our last and final question from James Ratcliffe.
Evercore ISI.
Please go ahead.
Thank you and 2 if I could first of all and 360 L.
I think you mentioned that you're working the customers who use the service are more likely to convert as I recall back when the Sirius XM product was new and most people hadn't experienced and like a big driver.
Immersion was whether the sales person actually demo day on delivery and what are you doing with the dealerships to ensure that our people actually understand what they're getting and the car and you know what the capability of 360 L. R and secondly on the Sirius XM salary of the Arps, who can you talk a little about what youre seeing in terms of ARPA for growth.
<unk> adds and how that's trending.
For the new customers coming on board. Thanks.
Okay. So I'll start with 360 L. Yes, you are right that demos and dealerships definitely helped drive our conversion and we do have a field team that.
Most out train yeah the.
The employees at the dealerships to encourage them to provide trials by the way, they're also making sure for used cars that the radios are on which is done also a great job in terms of getting people to convert because it's just you know another.
Hum remove friction and.
But on the new car side with 360 L again.
It's a competitive situation and at the dealership you know, they're they're trying to provide a lot of information about the car to the buyer and you know we're not going to be always represented and and you know full of demo.
The way to know you know the the great thing about 360 out of all is that you know to the extent we have good information over time, we can provide really strong recommendation. So I mean this is just a major fundamental change and our business. You know we have only been able to deliver as you know through of broadcast network to the car.
And in the past and now leveraging and the motive and the car and having access to all of that data. We can provide such of you know I'm much more customized experience for the for the listener and I absolutely believe that's going to drive performance, we see it as customers use all of these new features but we can provide information.
Our non what other features might be relevant or other content. I mean, it's just the game changing and and of course, we can do that in the car and we can do it out of the car and our marketing materials. So even if we don't get the deal or demo I think we have a lot of tools now to be able to improve the interaction from day 1 as the.
And as consumers move into those cars that are 360 out of capable and and then you know what.
And we aren't really discussing ARPA for gross adds and you know we do use promotional offers and and you know other types of and plans to encourage conversion.
And you know and then roll people to higher place packet of higher priced packages over time and so that's just a function of how the relative amount of new additions are compared to the base and any given time period.
Thank you James Thanks.
Thanks, James Thanks, everybody for.
Participating in today's call if we didn't get to please give us the range, we will talk offline and next quarter. Thanks, everybody.
Yeah.
Okay.
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