Q1 2022 Sirius XM Holdings Inc Earnings Call
Please standby we're about to begin.
Good day and welcome to the Sirius XM is first quarter 2022 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 star one on your telephone keypad.
If at any time you'd like to be removed from the queue. Please press star two.
At this time I'd like to turn the call over to Hooper Stevens Senior Vice President Investor Relations and Finance Mr. Stevens. Please go ahead.
Thank you and good morning, everyone welcome to Sirius <unk> first quarter 2022 earnings conference call.
They 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 might be forward looking statements as the term is defined in the private Securities Litigation Reform Act of 1995. 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 sub.
Jack to risks and uncertainties that could cause actual results to differ materially.
For more information about those risks and uncertainties. Please view Sirius <unk> 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 call will include discussions about both actual results and adjusted results.
All discussions of adjusted operating results exclude the effects of stock based compensation with that I'll hand, the call over to Jennifer.
Thank you for joining us today curious exam reported solid first quarter growth in both subscription and advertising revenue and healthy cash generation, even after substantial investments in our business.
We are reaffirming all of our subscriber and financial guidance for the year.
Each day, we make progress in shaping the future of audio entertainment in North America with curated distinct and original content exclusive live events and a growing podcast business.
Audio and America is thriving and so with Sirius XM. According to recent Edison Research monthly online audio listeners in the U S grew to 73% of the 12 and up U S population.
From 68% a year prior.
Daily audio time is also increasing with Americans on average spending 17 more minutes per day with audio compared to the same time in 2020.
At Sirius XM consumption of our unique content via streaming is contributing to this growth as we are seeing time spent listening to siriusxm growing meaningfully faster than our subscriber base.
These industry trends are also driving enhanced monetization as is evident in the iab, new Internet advertising revenue report, which found that digital audio is the fastest growing advertising segment last year climbing to almost $5 billion. This underscores the continued opportunity for scale within this segment of our business.
Thank the media has established itself as a leader as the number one ranked podcasting AD networks powering significant growth in our advertising revenue across all of our platforms. We reach approximately 150 million monthly listeners and we are extremely well positioned for future growth.
As you saw on our release Siriusxm self pay net additions were slightly negative in the first quarter with growth in digital subscriptions, partially offsetting a decline in our traditional in car subscription first quarter net additions much as in the fourth quarter were impacted by the lower auto sales, we began to see in the second half of last year as supply constraints became more.
These conditions have not yet E star actually declined sequentially each month in the first quarter and inventories remain very tight we're always working very hard to outperform our guidance, but we will be closely watching supply chains and sales volume and we'll of course keep you updated as the year progresses.
With all this uncertainty and the general economic environment consumer demand for both new and used vehicles and our service is healthy we continue to retain subscribers with an excellent monthly churn rate of just one 6% and <unk> reached a record level in the first quarter climbing 9% year over year as pricing actions. We took late last year continue.
To yield benefit.
Our new car and estimated used car penetration rates grew modestly to 83% and 52% respectively and our enabled fleet is now nearly 146 million cars. We continue to make progress deploying 360 L. At many automakers the rollout of 360 L and enhanced features that come with it is a.
Long term investment that will enable us to grow subscription revenue and eventually even our AD platform for years to come.
John will talk more about the financials, but we are making substantial investments to build additional paths to grow beyond our traditional vehicle funnel, we have doubled down on brand marketing to position ourselves for younger audiences and out of car streaming and in performance marketing to drive digital acquisition. We believe building out a digital funnel is the right thing.
For the business long term.
Remember our economics on our digital subscribers are very strong, especially compared to other audio streaming company and enable us to invest to grow this funnel subscribers listening on our digital platforms to on demand content are up more than 50% year over year, demonstrating growing demand for more control and personalized content with.
Sirius XM and this will increase as awareness grows.
During our last earnings call, we discussed the new hire of Joe Inzerillo, our head of product and technology, one quarter into the job. He is already having an impact on our company as we accelerate the current state of our tech across the organization and map out the future of our business.
By improving personalization and recommendations in the ethic them App and in 360 L. Easing digital onboarding widening distribution on 10 foot devices and speeding innovation and car. We are broadening the attractiveness of Sirius XM to potential subscribers across the board.
We are adding talent with diverse experience building customer centric digital products and we plan to increase our velocity to market.
We believe these investments will benefit subscriber growth long term, whether in car or a purely digital.
Our best in class content drives engagement and subscriber loyalty, we've introduced listeners to first time artist channels from the legendary Joni Mitchell rock and soul icon, Tina Turner, Abra Levine Marin Morris and a year long channel from one of the best selling Act in music history Red Hot Chili peppers.
Also brought back artists and partner branded channels that drew headlines and subscriber attention such as Neil Young radio and the David Bowie Channel.
Our programming regularly honors important groups that are being recognized throughout the country. During women's history month, we created a channel devoted to the defining female led festival tour of the nineties lowest fare get aired alongside other programming dedicated to female artists across genres. During black history month, we worked with artists and their represent.
It has to create curated channels, where the recent Franklin channel miles Davis radio and the Motown channel, we created the Granby channel to showcase this year's artist nominees, leading up to music's biggest night.
<unk> continued to create new ways for listeners to experience the music they love by creating a personalized station mode curated by law, Brian James on uninterrupted radio, adding a number of top Latin artist to our suite of billionaire station and by teaming up with Soundcloud to highlight innovative emerging artists with the new Digi core.
By Soundcloud station.
This is an extension of Sirius XM collaboration with Soundcloud, which both an existing channel Soundcloud radio and an original show the lookout lifetime cloud on hip hop nation.
The live experience is so important to our subscribers and listeners and Sirius XM and Pandora continued to offer great live performances for thousands of fans with major artists, including Abra Levine, John Legend, John Mayer and Kelly Rowland, our multifaceted relationship with Tic Toc allowed us to amplify and extend the reach of some of these events too young.
Our audiences and the comedy World, We launched at Showtime at the Apollo comedy the channel showcase the very best standup from the programs decades long run, including early performances from some of today's biggest comedians.
Our approach to podcast thing is purposely multi track some agreements are with major podcast brands for exclusive global rights to advertising inventory and others go beyond that and involve close collaboration and the content of the shows or in which podcast or have the opportunity to expand their audience and profile by appearing on Sirius XM channels.
It's our experience that great podcasts can also make great content on Sirius XM and so we launched new cross platform endeavors, such as the first ever streaming channel dedicated to a podcast freakonomics serving as a curated collection of the best of the award winning series B.
We launched two new live shows open lines on fashion in which the host of the popular horror comedy podcast last podcast on the left talk directly with listeners about a paranormal topic of their choice and it's me tanks lives on the Starz channel in which the well known digital creator and host of the popular podcast gives advice.
Directly to listeners.
We are the top network and the Triton Digital podcast report, an average weekly users and download and several of our shows received high honors, including seven NV Award nomination and a win for the best comedy podcast and we just received seven Webby award, including two for our popular Conan O'brien needs.
As a friend.
Additionally, ethics are media the company's combined advertising sales group is the undisputed leader in podcast AD sales and we are the number one podcast advertising network and weekly U S. Listener reach her Edison research and the representative of four of the top 15 podcast in the country, including crime Junkie Office Lady.
These dateline N B C and soon pod save America.
Over the past several months, we signed even more exclusive podcast sales and distribution agreements with a variety of publishers, including Crooked media, which showcases some of the most popular and critically acclaimed podcasts in the country such as the aforementioned pod save America and revolver are leading multicultural audio on demand content creator and <unk>.
Sure.
We're also seeing more digital content creators turning to podcast thing to expand their brand and partnering with us to scale their audio present, along with things. We recently signed new deals with both critical role and therapy gecko, both of which gained niche but significant fame through live video streaming and are now extending into the audio space.
So many of our listeners love sports and we are seeing significant year over year increases in the consumption of sports content. We are committed to the best live coverage of the biggest event Sirius XM and I M athlete. The media network founded by former NFL, All pro receiver Brandon Marshall F teamed up on our new content deals that include.
Our lives nightly show on our Mad Dog Sports Radio channel.
As part of the agreement ethics that media is also now the exclusive global AD representative for the popular I am athlete audio podcast.
Last year, we signed an agreement to become the exclusive audio provider of the Masters tournament and this year, we provided top notch coverage across all four rounds of the tournament for golf fans and added new voices to our team Mike to Rico, Curtis Strange Suzy Whaley and Steve Melnick.
NFL continues to be one of our most popular sports offerings and we kept the season by offering multiple broadcast of the Super Bowl from L. A NFL radio Mad Dog Sports Radio Sirius XM Fantasy Sports Radio E. S. P. N you radio and other channels broadcast daily from radio row at the L. A convention center, while several star person.
Analogies, including Kevin Hart, Conan O'brien, and sway Calloway hosted the Super Bowl week specials from our La Studios.
Sirius XM covered two inaugural events featuring athletes from historically black colleges and universities. The N B a H B C. You classic and the H B C. You legacy Bowl, giving listeners live access to these two great games in their first year.
From sports and music to news talk and entertainment, we continue to bring our listeners a best in class listening experience across platform ranging from can't Miss live programming to stand out music and comedy Curation to award winning podcasts.
All in all I'm pleased with how Sirius XM is weathering the challenging auto sales environment investing to improve and accelerate our digital distribution and growing our AD platform by our podcast thing. We also continue to generate significant cash flows that enable us to shape, our future and reward our stockholders for more details on those financials I'll turn.
It over to Sean.
Thank you Jennifer So highlight Q1 results revenue increased by 6% in the first quarter with advertising revenue up 8% to $383 million.
Adjusted EBITDA grew 1% to 690 million the new first quarter record, even as we continue to make meaningful investments in sales and marketing plus revenue share associated with our podcasting AD rep deals.
Diluted earnings per share were eight cents versus five cents in last year's first quarter. When we had the impact of $245 million in noncash impairment charges.
We generated 258 million of free cash flow during the first quarter of 22% from the prior year, primarily on higher receipts from customers, partially offset by higher satellite capital expenditures.
Turning to our operating segments for Sirius XM total revenue in the first quarter increased six 4% to $1 $7 billion driven by the 9% growth in <unk> offset by lower paid trial subscribers.
Gross profit in the Sirius XM segment climbed 8% to one point, those 7 billion, representing a margin of 62%.
And the Pandora and off platform segment advertising revenue of $336 million increased 8% in the first quarter with Pandora's AD revenue per thousand hours, reaching a first quarter record of $90.
In the first quarter, our podcast thing in off platform businesses generated 95 million in revenue an increase of 42% year over year.
We expect these businesses will represent a growing portion of this segments revenue overtime.
Gross profit in the Pandora and off platform segment was flat on $137 million in what is typically a seasonally light AD revenue quarter with a 29% gross margin slightly lower than last year, given the meaningful investments in new podcast content that are still early in monetization.
Today, we reiterate our existing guidance for 2022 revenue of approximately $9 billion adjusted EBITDA of approximately $2 8 billion and free cash flow of approximately 1.55 billion.
As Jennifer mentioned, we continue to expect approximately 500000 net new self pay Sirius XM subscribers. This year, we continue to expect that supply constraints impacting auto sales will push the substantial majority of our projected self pay subscriber growth to the second half of the year.
Both advertising and subscription revenue will contribute to growth in 2022 is advertising momentum continues as subscription revenue benefits from rate actions.
Our adjusted EBITDA guidance this year reflects meaningful investments in product content and marketing to drive growth in digital.
The capital allocation front, we were pleased with the reaction to February is $1 billion special dividend to our stockholders and even with that it was 50% increase to our recurring dividend last fall, we still repurchased $200 million of stock during the quarter.
We ended the first quarter at three five times net debt to EBITDA flat with year end 2021 pro forma for the special dividend within the low to mid threes range. We've told you to continue to expect our balance sheet remains extremely well positioned and earlier. This month, we availed ourselves of an opportunity to take.
On an additional $500 million two year term loan to reduce our revolver balance at even lower rates.
As always we retain significant flexibility to continue investments to grow the business examine acquisition opportunities.
Returning capital to our stockholders via dividends and share repurchases.
With that operator, let's open it up to Q&A.
At this time, we'd like to open up the call for questions.
I'd like to remind everyone in order to ask a question. Please press star one on your telephone keypad.
Tom you'd like to be removed from the queue. Please press star two.
Pause for just a moment to compile the Q&A roster.
Your first question comes from Jessica Reif Cohen with Bank of America Securities. Please go ahead.
Oh. Thank you two questions impressively you did not reduce your self pay net add guidance I'm wondering if you could talk a little bit or give more color.
What you're seeing in the digital only channel.
Judicable, sorry, I presume will represent a meaningful portion of your net adds this year.
What's going on in the or sector.
And when would you expect it to be an overall a meaningful part of your overall sub base that's.
That's the first question on the phone.
Hi, Jessica I. So look I think we talked a little bit about this on the last call and as we expected going into this year, there are going to be quarters, where we see low or negative satellite net adds and you know as I mentioned in the comments, we did have positive.
Digital net adds that way negative satellite net ads and part and you know I I expect as the trial funnel continues to build over the course of the year, we could see more of that I still don't it's not going to be a significant proportion of our overall self pay base in the near term right. This is a long term build for.
For us we're definitely seeing some success and an uptick and you know the digital trials starts from our efforts not only on the marketing side with performance media, but also through in App purchase in the App stores and our partnerships and we'll have more to launch there. So you know again, it's a steady uptick in trials leading to.
Two more growth in the digital trial funnel and more digital and that adds but I still expect satellite that adds to ultimately be the majority of our net adds going forward them as the trial funnel starts to come back.
My membership.
Impressive performance and then just quickly switching gears to maybe Scott you can see.
You talked about a little bit of basic investment focus.
Somebody's going onto the contents iPhone podcasting to artist channel for life, we just feel pretty diverse.
Talk about the kind of build versus buy it seems like most of it.
Bill, but you did allude or Scott, Sean alluded to two possible M&A.
Yeah.
I was just going to speak to the conferences shown can touch on it.
Any M&A.
As you know always opportunistic in what we look at in context. The goal is ultimately as we laid out in earlier calls that they feed as many of our platforms and in a synergistic in organic way sort of grow when you look at whether it's team who has a podcast.
Has a play on kick talk radio and music will do Playbooks on Pandora.
Any of the other things that we look at them, it's where the big feed right.
And yes it.
As you know content is a creative thing and when opportunities pop up we look at them and see where they fit in our plans and some things you know obviously, we don't do.
But the goal really is to look at the blend of things that will make an impact immediately and others that we can grow in and figure out where they go. If you look at early days of satellite radio. It was much more focused on a very established demo as time has gone on.
We've created pop ups and a regular rhythm in routine of having artists of all guidance for young Kohl's and diverse in every genre and thats really going to be the model going forward, where there is.
Is something that's really big it matters, we'll look at it in some cases do it and in others, we're looking to sort of broaden and widen the portfolio of content to serve as many.
New audiences.
Much is holding the old audiences.
And I think I'm not sure we had any reference to M&A. Jessica you know obviously, we did the 99 P ideal last year and we'll continue to look at opportunities there, but a lot of the deals we've been doing have been focused on I you know wrapping the AD sales and you know with some pretty significant additions you know over the last few months.
And that shows up in the Edison report, which is a nice win for us and we're number one in listener reach and since then we signed Crooked media. So yeah. I think it was Sean mentioned on the margin side. I is you know as the as we ramp up sales for these new arrangements and you know we would expect that the margins will get.
Better overtime I in podcasting, but if we see a lot of a great tailwind in podcasting in general the you know the listening growth is coming from you know I think our core demo. The 35 to 54 and we're seeing also I think growth coming in the car generally which is obviously a stretch.
For us and so we feel really good about our position here.
And then I expect to see more of the big podcast the.
Turning into Sirius XM channels like for Economics, I think this is a plan there to really grow that area and that also obviously expanding the growth in the revenue.
Thank you.
Thank you we'll take our next question from Steven Cahall with Wells Fargo.
Thanks.
Jennifer I was wondering if you could just talk a little more about how the trial funnel is shaping up now that we're almost four four months into the year you talked about the deceleration in <unk> that you saw in the first quarter I know there is a churn benefit in these environments on vehicle churn, but obviously the the AD side of things is probably running a.
Little tough so maybe just give us a little more color on how you think about the reaffirmed net add guidance as we move a little closer to the back half of the year.
And then Sean you talked about the positive reaction to the special dividend just wondering how the company thinks about those and what conditions are right for the potential for future special dividends is it the stock price is it something in regards to the balance sheet and would you ever consider inching up your leverage for even more cash appointment. Thanks.
Sure. So I'll talk a little bit about the net add guidance, Stephen and you know look we going into the year and the fourth quarter of last year, which he had set up our trials for the first quarter of this year I know last year in the fourth quarter, we saw a significant downtick in trials as we you know.
Addressed on the last call you know they were down about 20% from the peak in the second quarter of last year, and and you know nearly as low as we saw it really at the Lowe's as a pandemic in the Q2 of 'twenty. So that was you know real downtick and then we've seen a little bit of an uptick in the first quarter I'm, you know which will.
Health in the second quarter, and then I would expect that that'll just continue to uptick during the course of the year look there's a lot of dynamics here, you're all seeing this it's very public and you know there's new challenges in the auto supply chain due to the war in Ukraine, and shutdowns in China, because of Covid cases, which we obviously hadn't expected.
At the beginning of the year and but you know I think we're very keyed into the third party estimates are for SAR and you know that suggest that you know the auto sales will continue to come up over the course of the year I feel good about some of the comments from the automakers and their earnings calls over the last couple of days.
As I it sounds like they continue to see strong demand are you know as evidenced by the higher prices and are looking for production to increase throughout the year are the used car dynamics are shifting around a bit I mean, we definitely have seen some pressure on used car sales generally in the.
Because of the high prices now they've come down a little bit and but we have this organic increase in our pen rates and are continuing to grow our distribution channels. So yeah. We feel good about the trial funnel starting to come back over the course of this year and on the churn side. You know you mentioned vehicle related.
Did have a tick down in the first quarter to one 6% and slightly lower than the one six I think we had last year in the first quarter really strong resolve we continue to see I think really strong performance on the voluntary side vehicle related was actually up a little bit and non pay continues to hold it.
<unk> low level. So you know I think one six as you know not where I would expect the rest of the year to be a but it's a it's a good strong start to the year and really encouraged by the retention among our self pay base, which you know clearly shows up on the voluntary side.
And Steve just on the capital allocation again are we are continuing on focused on organic investments, we talked about content, we talked about sales and marketing, we really want to build the funnel around digital so obviously, that's our highest and best use.
We'll look at M&A I think we're very comfortable in the low to mid threes are to the extent, we would take that higher would be something opportunistic, but probably temporary and short term at the moment. So you know we'll be guided by our EBITDA growth will be guided by free cash flow will be guided by the stock price in terms of our grid and the ACA.
Pivoting in the pace of our share repurchase so I think what we did in the first quarter is not the similar to what you would expect in terms of pacing, but again, we'll we're gonna be opportunistic and the beauty is it's a flexible our allocation.
Policy that we have and we can pull the levers as the situations and the facts and circumstances change so.
That's how we look at it no no real change from what we said historically.
Great. Thanks for all the color.
Okay.
Thank you we'll take our next question from Barton Crockett with Rosenblatt Securities.
Great. Thank you for taking the question.
I wanted to ask about the inflationary environment, which really hasn't come up on your call, which is curious because it's coming up everywhere else but.
You know people are talking about business right now so I'm wondering from your perspective.
Active.
In this environment do you have greater ability to drive up pricing.
Do you feel that with our inflationary backdrop likes this does not matter and on the cost side does it impact you.
There might be a situation, where you can raise prices more than you would see costs grow so it might be margin positive, but I was wondering if you could address that.
Yeah, I think I. Thanks for the question Barton on the inflation side from a pricing standpoint, you know we took some rate actions are which we've talked about in the fourth quarter. Both on our full price side in our promotional plans and you know we've benefited I think we saw some initial ah.
Fiber reaction, but we're through that and you know I think the timing was actually pretty good and you know in the past we've had a large amount of success in terms of raising prices, but we're always mindful that our primary competition certainly in a vehicle is free and you know we need to be very careful about.
You know, how we look at rate increases going forward I and we again, we're not just focused on the rate increase we look at revenue overall. So you know there is some balance clearly on demand you know I I suspect there is more demand at the lower end and so you know we'll continue to look at opportunities there, but I think the inflationary.
Trends have only helps on the pricing side and on the cost structure. John you can chime in but I think a large part of our cost structure is not tied to.
Two rises and you know are increases in commodity prices or things like that I mean, you know we have a lot of our economics tied into our relationships with third parties that are a percentage of revenue. So that's you know affected by where revenue is going in general or anything else on that nothing more material.
Some of the module cost, obviously wages and labor really at the end of the day I think Scott talked about the content marketplace. So oh in all I think we feel good about the resiliency of the business in the context of an inflationary environment.
Okay. That's great. Thanks, a lot for the color.
Thank you. Our next question comes from Kevin ROE with RBC capital markets.
Good morning, Thanks for taking the question I just wanted to dig into advertising.
You need to see strength, there with strong monetization on Pandora and off platform as well as continued growth with podcast thing you know that.
Said, a number of other companies have called out some recent pressures or at a minimum some limited visibility heading into Q2, given the broader macro issues. So I was hoping for some more color on the trends that you're seeing and expectations throughout the year. Thanks.
Sure. So you know from an advertising certainly I've heard the comments from some of the other conference.
Conference calls this week I guess from our perspective, you know our topline feel great about digital audio advertising over the long term.
No and we talked about we are making meaningful investments in our podcast business and some of those big deals that we've done are just onboarding and really need to be fully absorbed to rip monetization. So so from a supply side, we feel very good about the available capacity to monetize our the sales team has done.
Have a wonderful job.
In terms of your C. R. R. P. M. You see are the ability to monetize.
You know again, there's definitely some caution out there around certain advertisers C. P. G. Specifically, so I think there may be some near term you know I.
I guess hesitancy deferrals et cetera, but over the 'twenty two timeframe, we feel good about the supply we feel good about where the demand is and our ability to monetize it. So I don't know if jennifer's anything want to add to that yeah. I would just add that I think what's been great about adding podcast thing to the mixes there.
We have a really strong brand presence on the Pandora side of the business, where we have really extensive relationship there and we have really strong D to C representation on the Sirius XM broadcast side of the business into we can ultimately build the right mix in podcasting podcasting has largely been a D. Our advertising.
Opportunity and we are bringing more brands to the podcast opportunity and where we also have the opportunity to build the relationships across or is that kind of podcasts on the Dr. Side. So you know the cross selling opportunity is something I think is really strong for us and unique to us and you know again any kind of headwinds that are coming.
Given that it has hesitancy that Sean mentioned and I think we can offset in some part based on you know what we have in terms of opportunities are in that area and cross selling.
That's great. Thank you both.
Thank you. Our next question comes from Stephen <unk> with Goldman Sachs.
Great. Thank you maybe a follow up for kind of firm broadcasting mentioned, the sales and distribution deal with you guys just walk us through the quarter could you maybe talk about how much opportunity how much more opportunity do you think is out there to sign more deals.
Deals going forward and then maybe for Sean can you talk a little bit about maybe what the economics of these representation deals look like for you help us think through the revenue and EBITDA contribution mortgage deals come on.
So I'd say and and and Scott you can jump in but on on the AD Rep deals a lot of the Big podcast you know the top 10 top 15 have really traded I. So I'm not sure. There's a lot of opportunity to add large amounts of inventory there.
They'll be up and comers end and other and podcast or is emerging but yeah. We have a lot of strong names and that you know as we talked about we have three soon to before and the top 15 I you know the.
The inventory we have is largely said I'd say probably for this year I'm of course will be opportunistic in looking at at other I you know deals as they might come available, but but that's you know I think largely sat for the year.
Scott did you think yes.
Yeah, Jennifer statement is obviously correct as to to where it stands today, what I do think is going to emerge as youre going to see genres.
<unk> become very strong so true crime comedy and I think politics says as we get into election season, we will continue to grow so having anchors like crime junkie.
Brocade in cocoa and things like that.
Allow us to be in a position where.
We will be able to grow our brands underneath that that hopefully will be the next.
Group that hits, the top 10 or 20 on that and get it.
It will be an early on those so I think those will have a different economic portfolio and a lot of those will be.
AD rep deals there'll be deals that we have.
Broader rights on in Florida creative involvement with so.
Optimistic that while the top 15 is and we love our position and that is somewhat static right now.
It's clearly going to evolve and is evolving where things will come out of those John .
Like normal succession in music or film or others, there'll be others coming in there and we think we're positioned pretty well and the big genres.
Yeah. This is Steve just to follow up on your last point on the economics of it.
They're they're generally a revenue share deals with minimum guarantees.
Obviously, they do need to ramp is on board do you see you saw some of that pressure.
And the margin in the first quarter and.
Our hope and expectation is that are these deals have a margin gross margin profile, that's not dissimilar to where the segment is today.
Great. Thanks Niccolo.
Operator next question please.
Sorry about that the operator, and we'll take our next question next.
Our next question from Greg Johnson with Credit Suisse.
Hey, good morning could you help us take apart the really strong <unk> growth in the quarter and understand how much of <unk> strength was flow through of the fall price increase versus.
Subscribers using the tier up to the premium plans or are there factors. Thanks, so much.
Yeah, I mean, it's certainly a big part of it is the roll through of the rate increase are in in the fourth quarter and also some of the actions. We took on promotional pricing I you know at the at the lower end, but we are seeing strong demand for our platinum VIP plan and.
I do believe there is opportunity probably even above that I mean, we have such loyalty among our subscriber base that you know there are I think other creative ways that we can add value and create packaging above that but and you know some of that's just.
Become clear because of the demand for PV, IP and PV IP, it's at $35 price point, and we haven't seen any a decrease in kind of the take rate on our platinum plan, which as you know right below that from a pricing standpoint.
The other factors in <unk> are you know clearly that it's you know where the AD revenue continues to recover and perform nicely on the Siriusxm side.
That has helped as well or anything so no I think that covers it.
Thank you we'll take our next question from Jim Goss with Barrington Research.
Thanks, a couple of questions one I would like.
A little more discussion about the AD sales process, you have a great breadth of the audience and.
But a variety of demos and geographic focuses.
<unk>.
Between Pandora and Sirius and pod casting.
There are a lot of opportunities for other complications and I'm. Just wondering if you could discuss the process you go through in the sales group you try to assign the incentive Adjacencies you might provide in order to advance the whole.
AD sales category.
So look I can give you some more color I know there's.
We are as I mentioned, I think being effective in cross selling our work with broadcast on the Siriusxm side with podcast thing and with of course, you know the the significant contributor we have with Pandora and the teams and we are continuing to find ways to sell them.
We're effectively across the teams. It was just last year that we really brought everything together under ethics and media you know in that banner and so bringing kind of the best practices. We've had in easy in these individual areas. All together collectively I do believe is going to continue to help us sell more effectively.
Take advantage of opportunities I mean, we have not exhausted every opportunity here right. There is more opportunity in programmatic you know there are probably more opportunities on our self serve platform are through ads with a you know there's definitely some opportunity for us to continue.
Due to rollout our audio I D product you know in terms of better targeting for advertisers and you know as I talked about earlier that we have these great relationships with brands. We also have these great relationships with you know kind of the direct response advertisers and making sure that we're bringing them effective products across our.
Inventory and there's just there's more room, there and you know we have as we've talked about I think a lot on the call. We have great representation deals on the podcast thing side I, you know with Conan and and you know Megan Kelly and Ipi and NBC unless pockets all left in and Crooked and crime Jackie said, we're well.
Represented across.
You know the inventory with different demos.
In younger on podcast thing all the way up to probably slightly older demo on Sirius XM. So I believe we are really well positioned here.
Okay.
And one other area I thought it was a good point that you were improved usages offsetting the.
Softness in auto sales.
There is somewhat of a capacity utilization aspect of this if you will because youre hitting an inflection point, where the relative importance of the audio listening avenues.
Creating a benefit.
That might prevent an upward bias.
The revenue opportunities and I'm wondering if there are metrics you use or we should brace to evaluate the growth progress.
In the absence of.
Some traditional drivers, especially SAR for example.
I I look the the usage of course were hampered in some ways on the satellite side, we don't have a lot of usage statistics, but with 360 L. Rolling out we're getting more and more data and are as we've talked about our satellite subscribers are using our digital products more and more and we get usage.
Information, there and I referenced the stat in the my comments about on demand listening are increasing 50% year over year. The listeners of on demand content and we've also had a nice uptick on extra channels listening as well and I I believe that's just a sign of.
Our customers wanting to be able to customize their listening more and more right. It's happening all over media and in some ways. We've achieved this tremendous success over all of these years without that capability and there's just more and more for us to do in the car and.
On the apps, which will help with satellite subscriber acquisition and retention and digital acquisition and retention in terms of providing more personalized recommendation, we have Ah I believe improvements coming in the next few months here that will rollout to 360 L vehicles on the road and all of the App.
<unk> of course, and it's just I.
I am confident there is an untapped opportunity here because we know it works with other companies, whether it's video or otherwise and if we can provide you that those personalized recommendations to our customers I they will listen to more content find more great content that they love and we just haven't been able to do that in the car.
And we will.
Oh, sorry, sorry, I mean, I agree I think there is an upward growth bias.
It tends to get lost in the shuffle of focusing on auto sales alone with the various things you've been doing and I'm trying to measure that.
Good thing too.
Okay anyway, thank you very much.
Thank you, we'll take our next and final question from Sebastian with J P. Morgan.
Yes.
Hey, guys. Thanks for the question I just wanted to see if you could help us.
Think about the off platform growth in the quarter, obviously, you talked about it here during the call and we're pretty positive on it coming out of the fourth quarter call as well can you help us think about what the revenue growth. There what is owned and operated for lack of a better term stuff that you guys are now just kind of integrating I think.
As.
Scott mentioned are just bringing online versus new partnerships and new.
Apps.
Inventory that you're getting from some of these deals outside of <unk>.
Sirius XM family or ecosystem.
Some color around that would be great.
Yeah, I'll start such on China, you can pick up if you have something to add but the.
Off platform is by its nature not owned and operated I and that's why we provided some clarity and kind of the the segment name and the growth. There covers everything from podcast thing to taxes from ads with as well as some of the marketplaces, we have or you know.
And third party inventory and we're seeing nice growth across all of those pieces of course podcasting is growing and in particular because of the new AD rep deals, we've been adding and so we have more inventory there, but we have a lot of other relationship.
That's out there whether it Soundcloud and you know we're ramping up in Europe , or Adobe and you know we set up these various marketplaces for both and you know general advertising on the music streaming side, but also in podcast thing. So you know there. There is there has been growth across all three of those areas I'd say, you know Todd guessing the taxis and.
And the other off platform audio sales that we do in music and otherwise.
Yes, So oh, we'll continue prospectively are especially auto to provide some color in terms of you know what.
Oh I know, what's on Pandora, obviously, you see the dynamic around it and they're using that hours and we've added a bunch of AD sales representation deal. So we will try to continue to provide an update in terms of what.
What those podcast off platform all are driving in terms of growth on a quarter to quarter basis.
Thank you and one quick follow up on I think in your prepared remarks, the substantial majority of growth coming in the back half of the year I mean does that imply some growth for the first half of the year.
In terms of something to that.
Yes, I don't think we're providing a second quarter again I'm going to leave it there Sebastiano you, we talked about where our SAR is where the trial funnel and trial starts are.
Certainly coming into the year was probably a little more optimism than where we sit today in terms of the marketplace.
But again, we feel confident for the full year number and the majority of that coming in the back half.
Great. Thanks again.
Thank you Sebastian and thank you everyone for joining today will speak to you soon.
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