Q4 2023 Sirius XM Holdings Inc Earnings Call

Greetings welcome to Sirius XM is fourth quarter and full year 2023, operating and financial results Conference call.

At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

You May press Star two if you would like to remove your question from the queue.

For participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Please note this conference is being recorded.

At this time I'll turn the conference over to Hooper Stevens Senior Vice President of Investor Relations and Finance Mr. Stevens you may begin.

Hooper Stevens: Thank you and good morning, everyone welcome to Sirius XM sports quarter, and full year 2023 earnings conference call. Today, we will have prepared remarks from Jennifer Witz, Our Chief Executive Officer, and Tom Berry, Our Chief Financial Officer, Scott Greenstein, Our President and Chief content Officer will join Jennifer and Tom to take questions. During the Q&A portion of this call.

Hooper Stevens: I would like to remind everyone that certain statements made during this 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 subject to risks and uncertainties.

Hooper Stevens: That could cause actual results to differ materially for more information about these risks and uncertainties. Please view Sirius XM SEC filings and today's earnings release.

Hooper Stevens: We advise listeners to not rely unduly on forward looking statements and disclaim any intent or obligation to update them as we begin I'd like to remind our listeners that today's call will include discussions about the 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.

Jennifer Witz: Thank you Hooper and good morning, it's an exciting time for Sirius XM as we continue the transformation across all aspects of our business and we appreciate your time today, we'll start by reviewing our strong 'twenty 'twenty. Three result, I'll highlight major strategic achievements and Tom will present, the financial details todays call well also.

Jennifer Witz: Focus on Sirius XM future emphasizing three main goal enhancing our subscription value, including building on our recently launched next generation Sirius XM experience driving growth in our AD business and optimizing our organization focus and cost structure. All of this comes alongside the announced Liberty.

Jennifer Witz: Media transaction aimed at creating a streamlined and more attractive equity structure.

Jennifer Witz: In 2023, Sirius XM exceeded expectations with strong operating and financial performance, including surpassing our adjusted EBITDA and free cash flow targets. I'm also pleased to report our self pay net adds returned to positive growth in both the fourth quarter and the second half overall.

Jennifer Witz: This growth resulted from improved streaming and in car net additions and was bolstered by continued positive responses to our robust content slate led by new artist nation from high profile talent, including John Mayer more on that in a bit.

Jennifer Witz: We also maintained our incredibly low subscriber churn at one 6% despite increases in vehicle related turnover during the year.

Jennifer Witz: Our 'twenty 'twenty four guidance anticipates, improving year over year self pay net add results, but with slightly lower revenue and adjusted EBITDA and steady free cash flow.

Jennifer Witz: Well early indications are showing signs of positive impact from our business investment. It will take time for these to fully reflect in our subscriber and financial metrics. The challenge to 'twenty 'twenty four revenue comes from roughly level subscriber numbers at a modestly softer arpaio, partially from a more diverse subscriber base with more streaming only subscribe.

Jennifer Witz: This shift coupled with an AD market that remains uncertain influences our revenue outlook.

Jennifer Witz: Against this revenue backdrop, we're focusing on cost efficiencies, even as we invest in content marketing and our technology platform. This approach enables us to maintain stable EBITA margin and cash generation in 'twenty 'twenty four I am confident the investments we continue to make in our business have us on a path to return to.

Jennifer Witz: The sustained long term subscriber and revenue growth today in car subscribers remain the vast majority of our 34 million subscribers and continue to be essential to our business. This past year, we extended long term agreements with Mercedes Benz Volvo and Honda and launched new partnerships with EV manufacturers.

Jennifer Witz: Ian and Polestar, two integrate Sirius XM into their vehicles. This year, our biggest priority. This year with Oems is to boost 360 L adoption as we see positive trends in conversion retention and Arco among self pay subscribers with 360 L vehicles, Sirius XM software forward user experience.

Jennifer Witz: Offers a broader set of IP delivered content, including more music channels personalize artist stations live sports features and more making our in vehicle recommendations critical to enhancing subscription value and standardization of personalization and content discovery features across 360 L vehicles will.

Jennifer Witz: Accelerate with growing adoption of the Android automotive operating system.

Jennifer Witz: Most importantly, 20 twenty-three was a year of building and our strategy initiated over a year ago to launch a next generation platform driving future growth remains firmly on course. Many of you joined our media event in November where we discuss the benefits of the new platform and while we are we are still very.

Jennifer Witz: Very much at the early stages of this journey, our new Sirius XM App, which launched on December 14th is yielding promising signs of improved engagement with most of our existing mobile users now transition to the new App. We are seeing the recommendation engine performing well and exposing listeners to a greater breadth of content.

Jennifer Witz: A key driver of improved discovery enabled by the new personalization features we are also already seeing significantly better quality of service metrics, including a reduction in our time to live latency by nearly 90%, which is core to our unmatched sports play by play offering where.

Jennifer Witz: We're actively listening to customer feedback and with a new infrastructure in place. We've already released a series of App and web player updates and have plans for rapid and continuous improvement in the weeks and months ahead. We also introduced our new Sirius XM brand last quarter, reflecting a more modern look and feel the all new logo.

Jennifer Witz: As our route that's home to the stars and brought back our beloved dog mascot, Stella who shows up as an icon for content discovery and the new App.

Jennifer Witz: Again, it's early days, but we're already seeing a positive lift in brand perception among the growth audience segments. We are looking to attract our new brand marketing strategy leans into fandom to showcase our differentiated offering across music sports talk in podcast that bring fans closer to what they love.

Jennifer Witz: In the fourth quarter, we expanded our unique content portfolio with the launch of exclusive new artist channels with John Mayer and Kelly Clarkson, who loves the direct connection they get to their fans along with fresh new genre channels tailored to capture the interest of younger audiences. The channels are all performing well and showing strong listening.

Jennifer Witz: Especially with streaming trailers in life with John Mayer, the talented guitarist and songwriter experiments with new programming formats to finding his channel not by genre, but by the time of day as well as the day of the week. The channel has quickly become a hit and one of our most listened to artist branded channels.

Jennifer Witz: So introduced another podcast from the legendary Lavar Burton his new children show sound detected the podcast, which recently wrapped is distributed broadly as part of our Sirius XM podcast network and quickly sort to the top of the chart ranking number one in kids and family on Apple podcasts as we continue to build out our portfolio.

Jennifer Witz: Our content on air and through podcasts from leading host. We're also very excited about today's launch of our new show with James Corden. This life of mine. This brings the iconic host into audio for the first time, where there's new interview series airing exclusively on Sirius XM New episodes will be released weekly.

Jennifer Witz: The guest lineup, including Martin Scorsese, Kim Kardashian, David Beckham and more.

Jennifer Witz: Earlier this week, we announced a new multiyear agreement with smart less media and its founders will Arnett, Jason Bateman and Shawn Hayes that brings our hugely successful podcast smart list to Sirius XM, It's a comprehensive deal that strengthens our industry, leading position in podcasting by giving us the most.

Jennifer Witz: Top ranked podcasts of any player in the space. It also enhances our Sirius XM subscription business with a wide array of benefits only available to our subscribers from windowing new episodes, two events to making portions of the library exclusive.

Jennifer Witz: And it strengthens our advertising business given the scale of smart list, which will be exclusively represented by our advertising sales group Sirius XM media.

Jennifer Witz: Thinking of our advertising business total AD revenue remained relatively flat with fourth quarter and full year are down less than a percent odd casting and programmatic continued to be strong growth drivers throughout the year. These positive results. Despite challenges faced by the AD industry throughout the year highlight the value we offer with our flexible network.

Jennifer Witz: [noise] approach, which ensures brands connect with their target audiences, regardless of the platform. This year, we will focus on expanding advertising services and investing in capabilities with many powered by generative AI to enhance monetization inefficiency for marketers.

Jennifer Witz: Sure we are confident that our strategy in the advertising business is the right one as.

Jennifer Witz: As we progress on this transformative journey really utilized cutting edge technologies to ensure lessors benefit from an increasingly seamless and personalized connection to our unique content, however, whenever and wherever they want and as we expand efforts to reach new listeners drive trials and improve our <unk>.

Jennifer Witz: Already strong retention by enhancing our value proposition, we look forward to the upcoming rollout of our content sharing and collaboration with audible later this quarter. This collaboration will bring select audible content into Sirius XM and highlight Sirius XM programming on the audio storytelling platform.

And are largely commoditized streaming music market, where consumers are confined to algorithmically driven or self selected play list. We are deliberately investing and human curated and live audio experiences featuring high profile and up and coming talent, our strategy aims to attract and retain lessened.

Jennifer Witz: Speaking community and connection by providing them with unique opportunities to get closer to the artist hosts and content. They love in closing I'm pleased with our durable financial performance in 2023, and we are confident we will deliver improved year over year subscriber results in 'twenty 'twenty four and.

Jennifer Witz: <unk> strong cost discipline. During this transformative phase as we work to drive long term growth and stockholder value with that.

That I will turn it over to Tom.

Tom Berry: Thank you Jennifer and good morning, everyone as Joe highlighted we closed the year on a positive trajectory achieving robust financial and subscriber results either met or exceeded our goals.

Tom Berry: Importantly in 2023 we strengthened our power the future growth with the successful launch of our new App began the process to streamline our equity structure through the proposed Liberty transaction.

Tom Berry: Secured a meaningful strategic cost initiatives.

Tom Berry: <unk> 20th suite revenue was steady at $8 95 billion consistent with our guidance of approximately $9 billion total subscription revenue and advertising revenue remained nearly flat for the full year at $6 9 billion at 1.8 billion, respectively full year 2023 adjusted EBITDA and free cash flow of two points.

Tom Berry: Seven 9 billion at 1.2 billion, respectively. This means we outperformed our original guidance for adjusted EBITDA by nearly $100 million and outperformed our original guidance for free cash flow by about $150 million.

Tom Berry: Fourth quarter revenue was largely unchanged at 2.29 billion with subscription and advertising revenue at 1.7 billion and $479 million respectively.

Tom Berry: Adjusted EBITDA saw a 4% decline to 715 million a day.

Tom Berry: Crews can be attributed to a rise in revenue share and royalty expenses sales and marketing and engineering design and development expenses offset by lower customer service and billing G&A and transmission costs net income for the quarter was 352 million or nine cents per diluted share.

Tom Berry: Free cash flow continues to be back with you during the year coming in at $445 million in the quarter.

Speaker Change: Turning to the segments.

Speaker Change: Sirius XM segment, we delivered one 7 billion of revenue down less than 1% year over year. Sirius XM is advertising revenue remained challenged which we believe is a product of the tough broadcast advertising market <unk>.

Speaker Change: <unk> during the fourth quarter and full year, 2023 was $15.63 and $15.56 respectively.

Speaker Change: From a March 2023 price increase on sludge full price plans, but this is offset by the effect of promotional self pay subscription plans the lower advertising revenue mentioned, a little lower paid promotional rates from certain Oems grew.

Speaker Change: Gross profit in the Sirius XM segment for the fourth quarter decreased 2% to 1.04 billion compared to 1.6 billion recorded in last year's fourth quarter, representing a margin of 61% down only one point as we absorbed roughly $20 million in higher music royalties for the full year.

Operator: Greetings. Welcome to SiriusXM's fourth quarter and full year 2023 Operating and Financial Results conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If you would like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Speaker Change: <unk> gross profit was 4.15 billion also as a 61% margin.

Speaker Change: In the door and off platform segment total revenue was $571 million and $2 1 billion for the fourth quarter and full year, respectively, an increase of 2% and 1% advertising revenue in this segment of 436 million increased 4% sequentially and 1% year over year.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. At this time, I'll turn the conference over to Hooper Stevens, Senior Vice President of Investor Relations and Finance. Stevens, you may begin.

Speaker Change: Driven by continued strong growth of podcasting and poker programmatic ad sales.

Hooper Stevens: Thank you, and good morning, everyone. Welcome to SiriusXM's fourth quarter and full year 2023 earnings conference call. Today, we will have prepared remarks from Jennifer Witts, our Chief Executive Officer, and Tom Berry, our Chief Financial Officer. Scott Greenstein, our President and Chief Content Officer, will join Jennifer and Tom to take questions during the Q&A portion of this call. I would like to remind everyone that certain statements made during this 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.

Speaker Change: Podcasting revenue saw a 22% year over year lift in the quarter, while programmatic podcast revenue increased 12% sequentially and 97% year over year gross profit in the Pandora in all platforms segment of 193 million for the fourth quarter, representing a margin of 34%.

Speaker Change: Up from 32% from prior year fourth quarter full year gross profit in this segment was 638 million a margin of 30%.

Speaker Change: We returned approximately $102 million.

Speaker Change: To stockholders in the fourth quarter through our regular quarterly dividend, which was increased by 10% full.

Hooper Stevens: Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. For more information about these risks and uncertainties, please view SiriusXM's SEC filings and today's earnings. We advise listeners not to rely unduly on forward-looking statements and disclaim any intent or obligation to update them. As we begin, I'd 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.

Speaker Change: Full year capital returns totaled 657 million, including dividends and share repurchases. We ended the year with net debt to adjusted EBITDA of three two times, we had $216 million of cash and equivalents and our entire 1.75 billion revolver was undrawn and available.

Speaker Change: Ed.

Speaker Change: Last week, we closed a new 1.1 billion term loan a delayed draw facility that we have.

Hooper Stevens: With that, I'll hand the call over to Jennifer. Thank you, Hooper, and good morning. It's an exciting time for SiriusXM as we continue the transformation across all aspects of our business, and we appreciate your time today. We'll start by reviewing our strong 2023 results. I'll highlight major strategic achievements, and Tom will present the financial details.

Speaker Change: Place for 364 day bridge loan commitment, we intend to draw that facility as part of the closing of the Liberty transaction.

Speaker Change: Additionally, as an update on the Liberty transaction Liberty media filed their form S. Four on Monday, and we still expect the transaction to close early in the third quarter.

Speaker Change: At the end of the third quarter Paretsky. She rules, we suspended our share repurchase plan in response to Liberty's proposed offer.

Jennifer Witts: Today's call will also focus on SiriusXM's future, emphasizing three main goals, enhancing our subscription value, including building on our recently launched Next Generation SiriusXM experience, driving growth in our ad business, and optimizing our organization's focus and cost structure. All this comes alongside the announced Liberty Media transaction aimed at creating a streamlined and more attractive equity structure. In 2023, SiriusXM exceeded expectations with strong operating and financial performance, including surpassing our adjusted EBITDA and free cash flow targets. I'm also pleased to report our self-pay net ads returned to positive growth in both the fourth quarter and the second half overall. This growth resulted from improved streaming and in-car network additions and was bolstered by continued positive responses to a robust content fleet led by new artist stations from high-profile talent, including John Mayer. More on that in a bit.

Speaker Change: The transaction is pending we anticipate remaining out of the market.

Speaker Change: As we look forward beyond the Liberty transaction, we will continue to target leverage in the low to mid three times range and we anticipate being back in this zone. During the second half of 2025, well, we will primarily focus on deleveraging. We will continue our dividend policy and have the flexibility to be opportunistic on share.

Speaker Change: Purchases.

Speaker Change: We continue to focus on further strategic cost savings efforts. This year in 2023, we obtained approximately 140 million of cost savings through the org structure optimization continued consolidation of our real estate footprint and broad operational efficiencies in 'twenty 'twenty four we are targeting nearly 200 million.

Additional cost savings with more efficient allocation of resources in marketing and programming along with more efficient approach to customer service. This year, we're stepping up on socially responsible tax equity investments as a cleaner energy technologies, including industrial carbon capture and storage these investments.

Jennifer Witts: We also maintained our incredibly low subscriber churn rate at 1.6% despite increases in vehicle-related turnover during the year. Our 2024 guidance anticipates improving year-over-year self-paid net ad results but with slightly lower revenue and adjusted EBITDA and steady free cash flow. While early indications are showing signs of positive impact from our business investments, it will take time for these to fully reflect in our subscriber and financial metrics. The challenge to 2024 revenue comes from roughly flat subscriber numbers and a modestly softer ARPU, partially from a more diverse subscriber base with more streaming-only subscriptions. This shift, coupled with an ad market that remains uncertain, influences our revenue outlook. Against this revenue backdrop, we're focusing on cost efficiencies even as we invest in content, marketing, and our technology platform. This approach enables us to maintain stable EBITDA margins and cash generation through 2024.

Speaker Change: Produce tax credits and related tax losses over the next seven years, we currently expect to generate more than $250 million and net after tax cash benefit with the bulk of these benefits come into the latter portion of the contract.

Speaker Change: The payment of these equity investments will be classified as investing activities from a cash flow perspective, while the tax credit losses will benefit our federal cash taxes and operating activities, increasing our free cash flow available to reinvest in our business and return capital to stockholders visa.

Speaker Change: These agreements contain customary termination provisions should tax laws change or the projects not perform as expected.

Speaker Change: And as previously discussed we will see continued free cash flow tailwind as opposed to satellite.

Speaker Change: Satellite capital expenditures declined significantly in the years ahead.

Speaker Change: Finally earlier today, we released our 2024 guidance projecting revenue of approximately $8 75 billion.

Jennifer Witts: I am confident the investments we continue to make in our business have us on a path to return to sustained long-term subscriber and revenue growth. Today, in-car subscribers remain the vast majority of our 34 million subscribers and continue to be essential to our business. This past year, we extended long-term agreements with Mercedes-Benz, Volvo, and Honda and launched new partnerships with EV manufacturers Rivian and Polestar to integrate SiriusXM into their vehicles this year. Our biggest priority this year with OEMs is to boost 360L adoption as we see positive trends in conversion, retention, and ARPU among self-paced subscribers with 360L vehicles. SiriusXM's software-forward user experience offers a broader set of IP-delivered content, including more music channels, personalized artist stations, live sports features, and more, making our in-vehicle recommendations critical to enhancing subscription value. And standardization of personalization and content discovery features across 360L vehicles will accelerate with growing adoption of the Android Automotive operating system.

Speaker Change: Adjusted EBITDA of approximately $2 7 billion and free cash flow of approximately $1 2 billion.

Speaker Change: And the cost and incremental interest expenses arising from our pending transaction with Liberty media, we anticipate providing an update to our free cash flow guidance upon closing.

Speaker Change: Jennifer mentioned in regards to self pay net adds we expect to see an improvement in our performance versus 2023 with that I'll turn it over to the operator for Q&A.

Speaker Change: Thank you.

Speaker Change: At this time, we'll be conducting a question and answer session.

Speaker Change: If you'd like to ask a question. Please press star one from your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Speaker Change: You May press Star two if you like to remove your question from the queue.

Speaker Change: For participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.

Speaker Change: One moment. Please we poll for questions. Thank you.

Speaker Change: Yeah.

Speaker Change: Our first question. This morning is from the line of Kevin Meson Perone with Morgan Stanley. Please proceed with your questions.

Speaker Change: Thanks, Good morning, guys.

Jennifer Witts: Most importantly, 2023 was a year of building, and our strategy, initiated over a year ago to launch a next-generation platform driving future growth, remains firmly on course. Many of you joined our media event in November, where we discussed the benefits of the new platform, and while we are still very much at the early stages of this journey, our new SiriusXM app, which launched on December 14th, is yielding promising signs of improved engagement. With most of our existing mobile users now transitioned to the new app, we are seeing the recommendation engine performing well and exposing listeners to a greater breadth of content, a key driver of improved discovery enabled by the new personalization features.

Speaker Change: First one for Tom you mentioned.

Speaker Change: The 140 male of cost optimization that you were able to achieve this year and then the 200 you're targeting in.

Speaker Change: In 24, so I guess I was just wondering if you could unpack that 200 million number that you call out I think marketing programming and customer service and their lease, but just kind of across the buckets, where do you see the most opportunity to limit expense growth this year and realize those savings and then one more if I can for.

Speaker Change: Either.

Speaker Change: Scott or Jennifer, but big New agreement signed for Smart lists.

Speaker Change: Jennifer you mentioned some of the benefits from that deal in terms of strengthening that business and then supporting using that some of the content to support subscription a strength, but just generally what is what is a big deal like this kind of indicate in terms of how the pod casting business is performing for you.

Jennifer Witts: We are also already seeing significantly better quality of service metrics, including a reduction in our time-to-live latency by nearly 90%, which is core to our unmatched sports play-by-play offering. We are actively listening to customer feedback, and with a new infrastructure in place, we've already released a series of app and web player updates and have plans for rapid and continuous improvements in the weeks and months ahead. We also introduced our new SiriusXM brand last quarter, reflecting a more modern look and feel. The all-new logo embraces our root that's home to the stars and brings back our beloved dog mascot, Stella, who shows up as an icon for content discovery in the new app.

Speaker Change: And then how do you plan to leverage that content.

Speaker Change: Outside of what you mentioned if any other areas.

And how do you think about the podcast opportunity just overall would be really helpful. Thanks, guys.

Jennifer Witz: Okay. Okay, great. Thanks, Kamran for the question, so I'm talking the $200 million in 2020 for Theres a lot of moving pieces as you can imagine, but you know as I summarized its programming, it's marketing and there's customer service, but I would say a couple of extra things.

Jennifer Witz: When you look at marketing for example, marketing was up slightly year over year, but I would say, we're investing a lot more in the streaming side and so we've optimized our marketing costs. So the savings of 200 million is being reinvested as we approach a more targeted and more performance oriented marketing on the streaming side. So a lot.

Jennifer Witts: Again, it's early days, but we're already seeing a positive lift in brand perception among the growth audience segments we are looking to attract. Our new brand marketing strategy leans into fandom to showcase our differentiated offering across music, sports, talk, and podcasts that brings fans closer to what they love. In the fourth quarter, we expanded our unique content portfolio with the launch of exclusive new artist channels with John Mayer and Kelly Clarkson, who love the direct connection they get to their fans, along with fresh new genre channels tailored to capture the interests of younger audiences. The channels are all performing well and showing strong listening, especially with streaming trailers. In Life with John Mayer, the talented guitarist and songwriter experiments with new programming formats, defining his channel not by genre but by the time of day, as well as the day of the week.

Jennifer Witz: There is no add back from that standpoint, and I would say the second point on it is as we work on building out our tech stack in 'twenty 'twenty four there will be impact on various parts of the business, whether it's you know what there's customer service or whether its programming. So we have a lot of moving parts there going into it so the savings are actually spread throughout the business, but it.

Jennifer Witz: Also you know there is overall net savings as part of it but when you look at the number there are a lot of it can be offsetting various costs that we're we're incurring as we transition our platform and in our move to more of a straight approach in 2024.

Jennifer Witts: The channel has quickly become a hit and one of our most listened-to artist branded channels. We also introduced another podcast from the legendary LeVar Burton, his new children's show, Sound Detective. The podcast, which recently wrapped up, is distributed broadly as part of our SiriusXM podcast network and quickly soared to the top of the charts, ranking number one in kids and family on Apple Podcasts. As we continue to build out our portfolio of content on air and through podcasts from leading hosts, we're also very excited about today's launch of our new show with James Corden, This Life of Mine. This brings the iconic host into audio for the first time with his new interview series airing exclusively on SiriusXM. New episodes will be released weekly with a guest lineup including Martin Scorsese, Kim Kardashian, David Beckham, and more.

Speaker Change: Yeah I'll start on smart lesson, then hand, it to Scott just to add in but we're really thrilled to be working with will Arnett, Jason Bateman and John Hayes on this I mean, they've put together a phenomenal podcast network, including you know there really significant podcasts and it really just benefits all parts of our business.

Speaker Change: And I think we were able to come to show great place with them, where and you know we're broadening their exposure, bringing some content to Sirius XM subscribers, specifically, but also just adding to our overall podcast that work and positioning us really strongly in terms of representing from in <unk>.

Speaker Change: Add standpoint, and you know a lot of major podcast content and the industry Scott you Wanna comment more specifically.

Scott Greenstein: Sure. Thanks, Jennifer So a couple of things one is you know the podcast.

Jennifer Witts: Earlier this week, we announced a new multi-year agreement with SmartList Media and its founders, Will Arnett, Jason Bateman, and Sean Hayes, that brings their hugely successful podcast, SmartList, to SiriusXM. It's a comprehensive deal that strengthens our industry-leading position in podcasting by giving us the most top-ranked podcasts of any player in the space. It also enhances our SiriusXM subscription business with a wide array of benefits only available to our subscribers, from windowing new episodes to events to making portions of the library exclusive. And it strengthens our advertising business, given the scale of SmartList, which will be exclusively represented by our advertising sales group, SiriusXM Media. Speaking of our advertising business, total ad revenue remained relatively flat, with the fourth quarter and full year down less than a percent.

Scott Greenstein: Kiss thing and an industry is really still in the second or third inning. So it's evolving but it's starting to shake out.

Scott Greenstein: And Ah reminiscent way of terrestrial radio and some other things the top 10 in podcasts and largely has stayed the same for awhile and by all the charts. You know we have three of the top 10, some four of the top 10.

Scott Greenstein: We're averaging about 175 million monthly downloads in that network.

Scott Greenstein: The goal always was two things to create the ultimate sort of suite of assets that we could fine tune and calibrate between what would be best for a curated subscriber pay model and to continue to build on.

Scott Greenstein: The most robust podcast network.

Scott Greenstein: Network of an audience.

Scott Greenstein: Filtered and funneled our AD sales model.

Jennifer Witts: Podcasting and programmatic continued to be strong growth drivers throughout the year. These positive results, despite challenges faced by the ad industry throughout the year, highlight the value we offer with our flexible network approach, which ensures brands connect with their target audiences, regardless of the platform. This year, we will focus on expanding advertising services and investing in capabilities, many powered by generative AI, to enhance monetization and efficiency for marketers. In short, we are confident that our strategy in the advertising business is the right one.

Scott Greenstein: And I think we're getting close to that point. So that's one thing secondly, as everybody knows our art content different than most other certainly audio services generates enormous enormous amounts of earned media and we're starting to see podcasts now do that as well.

Scott Greenstein: So when you combine what we're doing on the Sirius side on the podcast side, where now feeding you know the cost or the cost, but they're feeding a huge amount of free earned media. So we like that in addition, you know the new talent that is going to distinguish itself in audio is going to come.

Jennifer Witts: As we progress on this transformative journey, we will utilize cutting-edge technologies to ensure listeners benefit from an increasingly seamless and personalized connection to our unique content, however, whenever, and wherever they want. And as we expand efforts to reach new listeners, drive trials, and improve our already strong retention by enhancing our value proposition, we look forward to the upcoming rollout of our content sharing collaboration with Audible later this quarter. This collaboration will bring select Audible content into SiriusXM and highlight SiriusXM programming on the audio storytelling platform.

Scott Greenstein: A part casting and generally when you're the leader young podcast, there's wanna be at that network, it's no different than anything else and we feel really good that we're going to be an attractive.

Scott Greenstein: <unk> platform for that.

Scott Greenstein: As you can tell with smart list, we announced about doing a crime junkie and audio shocked channels on serious we're gonna start to use these assets as I said to calibrate what might make sense on both sides of the paywall and adding smart list along with Conan O'brien.

Tom Berry: In a largely commoditized streaming music market where consumers are confined to algorithmically-driven or self-selected playlists, we are deliberately investing in human-curated and live audio experiences featuring high-profile and up-and-coming talent. Our strategy aims to attract and retain listeners seeking community and connection by providing them with unique opportunities to get closer to the artists, hosts, and content they love. In closing, I am pleased with our durable financial performance in 2023, and we are confident we will deliver improved year-over-year subscriber results in 2024 and maintain strong cost discipline during this transformative phase as we work to drive long-term growth and stockholder value. With that, I'll turn it over to Tom. Thank you, Jennifer, and good morning, everyone.

Scott Greenstein: And Brian Junkie, Crooked Dateline and others, we just feel really good about the position. We're in with this so we look forward to more but we feel we're perfectly positioned right now.

Speaker Change: Great. Thanks, guys.

Speaker Change: Yeah.

Speaker Change: Our next question comes from the line of Vijay Jayant with Evercore ISI. Please proceed with your questions.

Vijay Jayant: Thank you.

Vijay Jayant: If I could.

Vijay Jayant: Just wanted to think about pricing for the satellite product and in 'twenty. Four typically you have a dollar a month rate increase and we also have yeah.

Speaker Change: Given all of this transition.

Speaker Change: Hum.

Speaker Change: You should expect a sort of a rate increase there.

Speaker Change: In your implicit guide, obviously I'm, assuming the streaming product is going to grow so it sort of implies that does it imply that the satellites.

Speaker Change: You know paid subscriber base is going to a decline in 'twenty four and if that's the case then the.

Tom Berry: As Jennifer highlighted, we closed the year on a positive trajectory, achieving robust financial and subscriber results that either met or exceeded our goals. Importantly, in 2023, we strengthened our path to future growth with the successful launch of our new app, began the process to streamline our equity structure through the proposed Liberty transaction, and executed on meaningful strategic cost. In 2023, revenue was steady at $8.95 billion, consistent with our guidance of approximately $9 billion. Total subscription revenue and advertising revenue remained nearly flat for the full year at $6.9 billion and $1.8 billion, respectively.

Speaker Change: The impact on <unk>, given the streaming product is priced lower.

Speaker Change: Then you average out or is there some sort of offset to that on pricing. Thank you.

Speaker Change: Yeah, I'll, let conor.

Speaker Change: Tom comment on Arqiva in a second but just as it relates to pricing and the rate increase you know we've done D. J <unk>. Our last two rate increases were pretty close together I did we did one in late 'twenty or 'twenty, one and another one in early 2023. So we have had a history of a <unk>.

Speaker Change: <unk> every other year.

Speaker Change: And we are anticipating another rate increase next year and so this would be a year without a rate increase on our full price packages and that plays into our revenue guide I.

Speaker Change: We are really excited about the 999 price point on our streaming only plan and believe that enables us to really address a broader market you talked a lot about the growth audiences and positioning ourselves as complementary to our music streaming service.

Tom Berry: Full year 2023 adjusted EBITDA and free cash flow of $2.79 billion and $1.2 billion, respectively. This means we outperformed our original guidance for adjusted EBITDA by nearly $100 million and outperformed our original guidance for free cash flow by about $150 million. In the fourth quarter, revenue was largely unchanged at $2.29 billion, with subscription and advertising revenue at $1.7 billion and $479 million, respectively, and Justin Dibitas saw a 4% decline to $715 million. The decline can be attributed to a rise in revenue share and royalty expenses, sales and marketing, and engineering design and development expenses, offset by lower customer service and billing, G&A, and transmission costs. Net income for the quarter was $352 million, or $0.09 per diluted share. Free cash flow continued to be back-weighted during the year, coming in at $445 million in the quarter.

Speaker Change: Because of the nature of our content and how differentiated it is and it's really early days obviously since the launch are only about seven weeks in but we're very excited about what the streaming product in the market and the product market fit. It provides both audience is I can provide from a tailwind standpoint too.

Speaker Change: Overall revenue growth and we believe that there's limited risk of cannibalization for instance between the in car base and our streaming grows because they're very different products and yes, you talk a little bit about them.

Speaker Change: The impact of growth in streaming and ARPA overall, but we believe we're well positioned as we continue to add more value to our in car packages to execute on run at rate increases going forward, but also drive volume approach across both in car and streaming bases in the future and I commented.

Tom Berry: Turning to this segment, in the SiriusXM segment, we delivered $1.7 billion in revenue, down less than 1% year-over-year. SiriusXM's advertising revenue remained challenged, which we believe is a product of the tough broadcast advertising market. Our food revenue during the fourth quarter of full year 2023 was $15.63 and $15.56, respectively.

Speaker Change: Comment on.

Speaker Change: Yeah, I would just add D J.

Speaker Change: We look at it as you know.

Speaker Change: An approach of growth approach to our subscriber base, we saw the more affordable and competitive streaming plans at 90, 99 will be attractive to the younger more urban audience and so by expanding the demand and expanding our Tam we believe it really won't cannibalize, but we.

Tom Berry: It benefited from the March 2023 price increase on select full-price plans, but this is offset by the effect of promotional self-pay subscription plans, the lower advertising revenue mentioned, and the lower paid promotional rates from certain OEMs. Gross profit in the SiriusXM segment for the fourth quarter decreased 2% to $1.04 billion compared to the $1.06 billion recorded in last year's fourth quarter, representing a margin of 61% down only one point as we absorbed roughly $20 million in higher music royalties. For the full year, gross profit was $4.15 billion, also at a 61% margin.

Speaker Change: Look at it is additive to our overall subscriber base.

Speaker Change: Great. Thanks, so much.

Speaker Change: Thanks Roger.

Speaker Change: My next questions are from the line of Barton Crockett with Rosenblatt. Please proceed with your questions.

Barton Crockett: Okay, great. Thank you for taking the question I guess, a couple really kind of thinking about that.

Barton Crockett: The sub trends in the arms of the kind of dynamics here drilling into that a bit so.

Barton Crockett: Have the expectation that you'll be growing yourself pay adds over the course of the year, but I also noted in your earnings release, you are talking about a decline in the free trial.

Base.

Barton Crockett: At the end of the year in 2023, so I'm just wondering if theres any kind of quarterly cadence. We should think about maybe if there is some pressure on self pay near term, reflecting the free trial that maybe you know it turns around as we go through the course of the year that you can talk to you and then in terms of ARP, who you know one of the things that I thought you guys were thinking about.

Tom Berry: In the Pandora and off platform segment, total revenue was $571 million and $2.1 billion for the fourth quarter and full year, respectively, an increase of 2% and 1%. Advertising revenue in the segment of $436 million increased 4% sequentially and 1% year over year, driven by continued strong growth in our podcasting and programmatic ad sales. Podcasting revenue saw a 22% year-over-year lift in the quarter, while programmatic podcast revenue increased 12% sequentially and 97% year-over-year. Gross profit in the Pandora and off-platform segment of $193 million for the fourth quarter represented a margin of 34%, up from 32% in the prior year's fourth quarter. Full-year gross profit in the segment was $638 million, a margin of 30%.

Barton Crockett: With your approach to grow the gross demos was not just the 999 streaming offer but also maybe some pricing changes on the satellite radio packaging and maybe some lower price opportunity there.

Barton Crockett: Wonder if you could talk to that if that's still part of the plan or any update on how you're thinking.

Speaker Change: Yeah. So thanks for the questions Barton I on the self pay net adds for 'twenty 'twenty four I or we haven't provided a specific number in guidance as you know, but our plan is to improve net adds year over year I would certainly hope that puts us in a position to have positive net adds but.

Barton Crockett: It's really too early in the year to provide any more specificity about that but as you highlighted obviously one of the big factors in driving self pay net adds is the trial funnel I. We had this dynamic last year as well where fourth quarter trial starts were a little lower than third quarter and that will put some.

Tom Berry: We returned approximately 102 million to stockholders in the fourth quarter through our regular quarterly dividend, which was increased by 10%. Full year capital returns totaled $657 million, including dividends and share repurchase. We ended the year with net debt to adjusted EBITDA of 3.2 times. We had $216 million of cash in equivalents, and our entire $1.75 billion revolver was undrawn and available at year end.

Barton Crockett: Pressure on first quarter conversions I think as you look at seasonality for self pay net adds this year. It will look pretty similar to last year.

Barton Crockett: Where are we would expect probably some declines in the early part of the year and the positive ads in the latter part of the year I. So similar seasonality similar trajectory last year, we delivered on our goal and commitment to have better self pay net adds sequentially each quarter.

Tom Berry: And last week, we closed our new $1.1 billion Term Loan, a delayed draw facility that will replace the 364-day bridge loan commitment. We intend to draw that facility as part of the closing of the Liberty Transaction. Additionally, as an update on the Liberty transaction, Liberty Media filed its Form S-4 on Monday, and we still expect the transaction to close early in the third quarter. At the end of the third quarter, per SEC rules, we suspended our shared purchase plan in response to Liberty's proposed offer.

Barton Crockett: Over the course of the year and we would look to do that this year as well.

Barton Crockett: We did address that in the fourth quarter. We saw you know with 130000 self pay net adds were very pleased with that result, and that I. We are contributing factors of improvements in both streaming and in car net adds and we'd expect that to also be the case for 'twenty.

Speaker Change: 24, or so on a your question about a satellite or in car pricing and packaging. We are in the market testing some different packages and you're right. We are looking at expanding the price points and packages we offer on the in car side of our business do you believe that.

Tom Berry: While the transaction is pending, we anticipate remaining out of the market. As we look forward beyond the Liberty transaction, we will continue to target leverage in the low to mid three times range, and we anticipate being back in this zone during the second half of 2025. While we will primarily focus on deleveraging, we will continue our dividend policy, and have the flexibility to be opportunistic on share repurchase.

Speaker Change: There is room to capture more demand there as well among the growth audience is it maybe that many of those and you know potential listeners launch of streaming only package, but we're going to have more technology in place to be able to move customers more seamlessly between the embedded in car experience.

Tom Berry: In addition, we continue to focus on further strategic cost-saving efforts this year. In 2023, we attained approximately 140 million in cost savings through the org structure optimization, continued consolidation of our real estate footprint, and broad operational. In 2024, we are targeting nearly $200 million of additional cost savings with more efficient allocation of resources in marketing and programming, along with a more efficient approach to customer service. This year, we are stepping up socially responsible tax equity investments in clean air energy technologies, including industrial carbon capture and storage. These investments will produce tax credits and related tax losses.

Speaker Change: And our streaming experience today.

Speaker Change: Most of our streaming only subscribers are listed listening outside of the car predominantly and so there is you know again, an opportunity I think to lean into that to build gross but also make it easier for customers to move obviously, they can listen on the app in the car as well, but there's you know enhanced benefits to the embedded.

Speaker Change: Experience in the car. So we'll have more to say on pricing and packaging for the in car base over the course of the year a lot of that comes with the migration to the new Tech stack for in car <unk>, which.

Speaker Change: Which will start later in the second quarter and you know, we'll we'll proceed through the different elements of that tech stack them throughout the year, but I'm really excited about the flexibility that will give us some pricing and packaging.

Tom Berry: Over the next seven years, we currently expect to generate more than $250 million in net after-tax cash benefits, with the bulk of these benefits coming in the latter portion of the contract. The payment of these equity investments will be classified as investing activities from a cash flow perspective, while the tax credit and losses will benefit our federal cash taxes and operating activities, increasing our free cash flow available to reinvest in our business and return capital to our stockholders. These agreements contain customary termination provisions should tax laws change or the projects not perform as agreed.

Speaker Change: Some of the things Tom mentioned about you know how to support customers and customer service and better identity I am better Martech overall.

Speaker Change: Thank you.

Speaker Change: Yeah.

Our next question is from the line of Stephen Cahill with Wells Fargo pushes here with your questions.

Stephen Cahall: Thanks, So Jennifer I think a lot of the investments you made in 2023, we're about trying to improve future conversion rates and especially with younger car buyers could you help us on maybe what you started to see either late in 2023 or what you're expecting in 2024 in terms of those proof points around convert.

Tom Berry: And as previously discussed, we will see continued free cash flow tailwinds as both satellite and non-satellite capital expenditures decline significantly in the years ahead. Finally, earlier today, we released our 2024 guidance, projecting revenue of approximately $8.75 billion, and just an EBIT of approximately $2.7 billion and free cash flow of approximately $1.2 billion, excluding the cost and incremental interest expenses arising from our pending transaction with Liberty.

Stephen Cahall: <unk> with the updated App experience and then to follow on B J's question, just around mix shift as you're ramping up on streaming only it seems like there should be positive for volumes, but it is a heavily discounted product versus in car and I would guess that a lot of drivers today, just don't have the connectivity issues with their phone that they might've had once upon a time.

Speaker Change: So how do we just think about <unk> longer term as you start to shift the mix towards in car and streaming only thank you.

Speaker Change: Sure. Thanks, Stephen so on conversion rate much of the benefits that we would expect to I have walked through on the in car conversion rates are really going to come towards the latter part of this year. So what we launched in December as you know is our our new overall tech platform, but primarily.

Operator: We anticipate providing an update to our free cash flow guidance upon closing. Additionally, as Jennifer mentioned in regards to self-pay net ads, we expect to see an improvement in our performance versus 2023. With that, I'll turn it over to the operator for Q&A. Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue.

Speaker Change: Supporting our new streaming App. So we would expect to see progress in streaming first and where the new Tech platform currently benefits our in car trailers and subscribers is where we have 360 all in place we have a much better search algorithm and the backend that will support.

Speaker Change: Sure.

Speaker Change: Recommendations in 360, L and with so where we're going to see improvement. This year on conversion rates will be especially with younger audiences will be where we can improve in 360 L. Because we know that 360, I always see higher conversion rates and non 360 L. I and also our cross.

Operator: If you are using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Thanks. Our first question this morning is from the line of Cameron Masson-Perron with Morgan Stanley. Pleased to see you there, Cameron. Thanks. Morning, guys. First one's for Tom.

Speaker Change: It really our trial or our base of trailers as we improve marketing and that is you know when we have a person can see how we can leverage the data obviously to provide better personalized marketing, but even if we don't have 360 also across the non enabled vehicles in new and used we will have better marketing capabilities to personalize based on other data points.

Tom Berry: You mentioned the 140 million of cost optimization that you were able to achieve this year and then the 200 you're targeting in 24. So I guess I was just wondering if you could unpack that 200 million number a bit. You know, you call out, I think, marketing, programming, and customer service in the release, but just kind of across those buckets, where do you see the most opportunity to limit expense growth this year and realize those savings? And then one more, if I can, for either Scott or Jennifer, but a big new agreement signed for SmartList. Jennifer, you mentioned some of the benefits from that deal in terms of strengthening that business and then using some of the content to support subscription strength.

Speaker Change: And but that's going to take time to build out we do have improvements in our overall marketing technology stack you know using sales force that will be in place you know starting later in the second quarter and rolling through into the third quarter, but it's very much tied to the overall migration of our our in car platform.

Speaker Change: Hi, so earlier in the year, we should certainly have more to talk about on the progress we're making in streaming as a leading indicator there and then just on your question about mix shifts, we really believe that.

Speaker Change: There is really two components here to demand and and our subscriber base, we have a very loyal and passionate subscriber base in our core segment too weak.

Tom Berry: But just generally, you know, what does a big deal like this kind of indicate in terms of how the podcasting business is performing for you? And then how do you plan to leverage that content outside of what you mentioned, if any other areas, and how do you think about the podcast opportunity just overall would be really helpful? Thanks, guys. Okay, great.

Speaker Change: We believe we have the opportunity to continue to raise price going forward as long as we continue to enhance value through product improvements and and content additions that you've had a history of doing it and we also believe we have an opportunity to open up more demand with younger generations, whether it's streaming or in some of the sort.

Tom Berry: Thanks, Cameron, for the question. So, unpacking the $200 million in 2024, there's a lot of moving pieces, as you can imagine, but, you know, as I summarized, it's programming, it's marketing, and there's customer service. But I would say a couple extra things. When you look at marketing, for example, marketing is up slightly year over year, but I would say we're investing a lot more in the streaming side, and so we've optimized our marketing costs. So, the savings of the $200 million are being reinvested as we approach more targeted and more performance-oriented marketing on the streaming side.

Speaker Change: The new packages and price points that we'll be launching.

Speaker Change: I you know towards the second half of the year. So it's you know it is a factor.

Speaker Change: A factor that we need to look and watch for cannibalization, but we really don't believe it's a concern today and of course, we have the opportunity going forward to the extent that you know the streaming package at 999 is so compelling it creates some risk to cannibalization and car base I you know, we can adjust pricing accordingly and of course our.

Tom Berry: So, a lot of it is, you know, add back from that standpoint, and I would say the second point on it is, as we work on building out our tech stack in 2024, there will be an impact on various parts of the business, whether it's, you know, whether it's customer service or whether it's programming. So, we have a lot of moving parts that are going into it, so the savings are actually spread throughout the business, but there is also, you know, an overall net savings as part of it, but when you look at the number, a lot of it can be offsetting various costs that we're incurring as we transition our platform and move to more of a streaming approach in 2024. Yeah, and I'll start on the SmartList and then hand it to Scott just to add in, but we're really thrilled to be working with Will Arnett, Jason Bateman, and Sean Hayes on this.

Speaker Change: Our in car product includes a lot more than just streaming right. You can use streaming anywhere you want to lessen simultaneously with using the in car product.

Speaker Change: Great journey for one of its.

Speaker Change: Jennifer one other thing to add on the younger demo point is.

As has been well documented and you mentioned you know the content was built for our core demo and there still as passionate as ever this year alone. When you think about you know John Mayer James Corden, Kelly Clarkson, Carrie Underwood will I am shaggy in some of these others that are being really launched and will bloom.

Speaker Change: You know throughout 'twenty four and beyond you know this is a content play on a younger demo and generally you know our track record as a company when we put out premium content and it's marketed and they're aware of it sometimes takes a little time, but they generally are attracted to that content. So this is really the first.

Jennifer Witts: I mean, they've put together a phenomenal podcast network, including, you know, their really significant podcast, and it really just benefits all parts of our business. And I think we were able to come to a great place with them where, you know, we're broadening their exposure, bringing some content to SiriusXM subscribers specifically, but also just adding to our overall podcast network and positioning us really strongly in terms of representing, from an advertising standpoint, a lot of major podcast content in the industry. Scott, do you want to comment more specifically? Sure. Thanks, Jennifer.

Speaker Change: Time, we're gonna have significant content for a younger demo we've always had it but now it's got the Mega brands and people that we've had for our core for years. So I'm looking forward to seeing how that'll go.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Jim Goss with Barrington Research. Please proceed with your questions.

Jim Goss: Thanks, absolutely. This follows a little on to what Scott was just talking about and the programming costs. It seems like you're going to have more originals at this stage and I'm wondering if yes, how that ties into the maybe a more conservative programming costs.

Scott Greenstein: So a couple of things. One is, you know, the podcast thing and industry is really still in the second or third inning, so it's evolving. But it's starting to shake out, you know, in a reminiscent way of terrestrial radio and some other things. The top ten in podcasting largely has stayed the same for a while. And on all the charts, you know, we have three of the top ten, some four of the top ten.

Jim Goss: In vision, but also impact royalty obligations from the shift in the nature of the programming.

And maybe also the royalty impact from.

Scott Greenstein: You know, we're averaging about 175 million monthly downloads in that network. So the goal was always two things: to create the ultimate sort of suite of assets that we could fine tune and calibrate between what would be best for a curated subscriber pay model and to continue to build the most robust podcast network with an audience that filtered and funneled our ad sales model. And I think we're getting close to that point.

Jim Goss: Framing as you get to identify exactly what's being played when it gets to be a little different from the satellite.

Jim Goss: We look at streaming revenues.

Jim Goss: Alright, Scott why don't you talk about the.

Scott Greenstein: Correct the value prop.

Scott Greenstein: Sure. Thank you Jim.

Scott Greenstein: Sure so the value proposition as I as you you alluded to is now you know sort of a blended demo proposition and we've always had an audience that looks and tries to be younger from you know the research. So I feel really good that we're gonna have a lot of back and forth on.

Scott Greenstein: So that's one thing. Secondly, as everybody knows, our content, different than most other, certainly audio services, generates enormous, enormous amounts of earned media. And we're starting to see podcasts now do that as well. So when you combine what we're doing on the serious side and the podcast side, we're now feeding, you know, the costs are the costs, but they're feeding a huge amount of free earned media. So we like that.

Scott Greenstein: The content you know for.

Scott Greenstein: Since live sports placed every demo that's been proven whether it's you know visual or audio and all of that our comedy and other things and obviously those are not you know in the royalty pool on that you know the listening is still a you know primarily on the on the satellite it's growing obviously on the digital.

Scott Greenstein: And when you say originals you know, we're always looking to create.

Scott Greenstein: In addition, you know, the new talent that is going to distinguish itself in audio is going to come out of podcasting. And generally, when you're the leader, young podcasters want to be on that network. It's no different than anything else.

Scott Greenstein: Original unique content or pieces of it like smart lists and other things with that so you know we're going to continue to do that but also you know curation has always been a major part that under one roof, we're able to service people their needs without now going to five or six apps like they have to do on vis.

Scott Greenstein: And we feel really good that we're going to be an attractive platform for that. And as you can see with SmartList, we announced about doing our Crime Junkie and Audio Chuck channels on Sirius. We're going to start to use assets, as I said, to calibrate what might make sense on both sides of the paywall. And adding SmartList along with Conan O'Brien, Crime Junkie, Crooked, GateLine, and others.

Scott Greenstein: Leo or other things. So you know we still was mentioned before we have the all the live sports rights all under one roof and you know when you combine that with the new programming, we're launching and everything else.

Scott Greenstein: Never been more excited about the ability to have exactly what we need to keep our core excited passionate and pain and at the same time really putting out a lineup now got a younger demo can be attracted to and feel that you need to Sirius XM.

Scott Greenstein: We just feel really good about the position we're in. So, we look forward to more, but we feel we're perfectly positioned right now. Great, thanks guys. Our next question comes from the line of Vijay Jayant with Evercore ISI. Thank you. Thank you. Two, if I could.

Speaker Change: Yeah. So I would say I think that's a great summary, Scott and I would say we have a very flexible model in terms of how we monetize content and you know Scott and his team along with John Chandler runs AD sales look really carefully at the opportunities we have to bring content behind the paywall for Sirius XM.

Tom Berry: You just want to think about your pricing for the satellite product. Thank you. I'll let Tom comment on ARPU in a second, but just as it relates to pricing and a rate increase, you know, we've done, Vijay, our last two rate increases were pretty close together. We did one in late 2021 and another one in early 2023. So we have had a history of approximately every other year, and we're anticipating another rate increase next year. So this would be a year without a rate increase on our full price packages, and that plays into our revenue guide. We are really excited about the $9.99 price point on our streaming-only plan and believe that it enables us to really address a broader market. You know, we've talked a lot about growth audiences and positioning ourselves as complementary to a music streaming service because of the nature of our content and how differentiated it is. And it's really early days.

Speaker Change: Fiber is that will enhance value. So for instance, like James Corden, that's exclusive to Sirius XM and we're really excited at its first show and we'll be on air today or something more broad like spotless, where there'll be a combination of monetize through AD sales, but also some amount of content. That's exclusive first Sirius XM. So.

Speaker Change: That's a model we continue to work and perfect and I think we're in a good place helps us manage our content costs and monetize in different ways and then I would say I know, we have had a history of being pretty disciplined on the programming side and we will continue to do that going forward more insights with data as to what consumers are listening to.

Speaker Change: In and out of the car will certainly help with content decisions going forward and you know we expect to get a lot more of that through 360, Alan streaming this year on licensing so yeah, our music licenses, our a significant portion of our cost structure represent probably about a little over 30% of our operating costs.

Jennifer Witts: Obviously, since the launch, we're only about seven weeks in, but we're very excited about what the streaming product and the product market fit it provides for these growth audiences can provide from a tailwind standpoint to overall revenue growth. And we believe that there is limited risk of cannibalization, for instance, between the in-car base and our streaming growth because they're very different products. And yes, you talk a little bit about, you know, the impact of growth in streaming and ARPU overall, but we believe we're well-positioned as we continue to add more value to our in-car packages to execute on rate increases going forward, but also drive volume across both in-car and streaming bases in the future. Other than, I would just add, BJ, that, you know, in approaching a growth approach to our subscriber base, we And so by expanding the demand and expanding our TAM, we believe it really won't cannibalize, but we look at it as additive to our overall subscriber base. Great. Thanks so much.

Speaker Change: We probably pay about $2 billion to the rights holders and you know the the largest portion of that is.

Speaker Change: Is our I R C or b arrangement for the satellite side of our business, which you know come it doesn't come up again until the end of 'twenty. Seven. So we have you know a lot of predictability around those costs on the in car side of our business in streaming we have a slightly.

Speaker Change: Lower percentage and when you look at our the cost of the music licensing so.

Speaker Change: So far our streaming only packages, it's a lower percentage I and we have healthy margins in both sides for both streaming and in car subscribers because our licensing structure is so different from.

Speaker Change: That of the music streaming companies that have direct licenses, we have direct licenses on the Pandora side of our business of course, and you know where we have a fully interactive subscription that was a necessity I and you know those are pretty separate right. So the dynamics there resemble more of another music streaming company, but on the Siriusxm side.

Speaker Change: <unk> you know I think it's approximately 15% or so for our satellite license through sound exchange and I don't anticipate a lot of shifts in that in the interim based on.

Jennifer Witts: Thanks. Our next questions come from the line of Barton Crockett with Rosenblatt. I'm pleased to see you with your questions. Okay, great.

Jennifer Witts: Thank you for taking the question. I guess a couple, really kind of thinking about the subtrends and the ARPU kind of dynamics here, drilling into that a bit. So, you know, you have an expectation that you'll be growing your self-pay ads over the course of the year. But I also noted in your earnings release that you're talking about a decline in the free trial base at the end of the year in 2023. So, I'm just wondering if there's any kind of quarterly cadence we should think about maybe if there's some pressure on self-pay near-term reflecting the free trial that maybe, you know, turns around as we go through the course of the year that you can talk about. And then in terms of ARPU, one of the things that I thought you guys were thinking about with your approach to grow the growth demos was not just the $9.99 And I was wondering if you could talk about that, if that's still part of the plan, or any update on how you're thinking. Yeah, so thanks for the questions, Barton.

Speaker Change: How people are listening.

Speaker Change: Okay. Thank you very much.

Speaker Change: Our next question is from the line of Jessica Reif Ehrlich with Bank of America. Please proceed with your question.

Speaker Change: Yeah. Thank you maybe switching gears a little bit Jennifer I think you mentioned one of the <unk>.

Speaker Change: Three pillars for growth for the future as advertising could you give us some color on your long term advertising plans what are the drivers what are your goals. What do you think the Tam is and secondly, given expectations of lower 24, what gives you confidence aside from free cash flow, which will obviously benefit from lower capex.

Did you can reverse the trends in the rate increase or cost cutting or something else.

Speaker Change: And then sorry, but I just wanted to ask on something Scott you said that.

Speaker Change: Are you considering or have you considered bundling your service with others or do you content already is like Oh encompass all encompassing so that you don't need to do that.

Jennifer Witts: On self-pay net ads for 2024, we haven't provided a specific number and guidance yet, as you know, but our plan is to improve net ads year over year. We certainly hope that puts us in a position to have positive net ads, but it's really too early in the year to provide any more specificity about that. But as you highlighted, obviously, one of the big factors in driving self-pay net ads is the trial funnel. We had this dynamic last year as well, where fourth-quarter trial starts were a little lower than third-quarter, and that will put some pressure on first-quarter conversions. I think as you look at seasonality for self-pay net ads this year, it'll probably look pretty similar to last year, where we would expect probably some declines in the early part of the year but positive ads in, you know, the latter part of the year. So, similar seasonality, similar trajectory.

Well, thanks, Jessica I'll I'll, let Scott jump in but on bundling, it's clearly been an opportunity that we've seen many of the video streamers use in conjunction with you know, whether it's telcos or others and we do have relationships in place with T mobile in Walmart and others.

Speaker Change: Where we it's primarily what I would call distribution and those have been effective I think we'll have more opportunities as we launch the new E. Commerce platform more broadly just makes it easier to do those types of things.

Scott Greenstein: But in terms of the truth or hard bundle with content I think an interesting I opportunity. Obviously this is going to come through when we launch audible and trying to find ways to really make it integrated in terms of having content on one another's platforms and also I trial offer.

Jennifer Witts: Last year, we delivered on our goal and commitment to have better self-pay net ads sequentially each quarter over the course of the year, and we would look to do that this year as well. We did address that in the fourth quarter. We saw, you know, the 130,000 self-pay net ads. We're very pleased with that result and that we have contributing factors of improvements in both streaming and in-car net ads, and we would expect that to also be the case for 2024. So on your question about satellite or in-car pricing and packaging, we are in the market testing some different packages, and you're right; we are looking at expanding the price points and packages we offer on the in-car side of our business.

Scott Greenstein: So we'll be able to experiment with different types of offers this year and bundles and I do think it's a we're very attractive to a number of potential partners given our very low churn and so that's certainly an opportunity arrow Scott if you have anything else to add on that.

Scott Greenstein: Yeah, just one point of Jessica you know, obviously a lot of as Jennifer mentioned were attractive because we have a lot of exclusive content that we like to be exclusive and all of that but where we're starting to see traction is as I mentioned in the earned media. So much he comes off our content.

Jennifer Witts: We do believe there is room to capture more demand there as well among growth audiences. It may be that many of those potential listeners want a streaming-only package, but we are going to have more technology in place to be able to move customers more seamlessly between the embedded in-car experience and our streaming experience. Today, most of our streaming-only subscribers are listening predominantly outside of the car, and so there's, you know, again, an opportunity, I think, to lean into that to build growth, but also make it easier for customers to move. Obviously, they can listen on the app in the car as well, but there are, you know, enhanced benefits to the embedded experience in the car.

Scott Greenstein: Meaning you know from the radio and podcasting people are now tracking back and checking out the service and trying it. So if there was a way that it increased the right amount of free sampling of of what comes out on a daily basis in any version of our news talk sports comedy music.

Speaker Change: I would love to look at that but what I not interested in is increasing someone else's bundle at our expense. So it'll have to be the right thing and as Jennifer mentioned, there's plenty asking to do it. So you know, we'll see where it goes.

Speaker Change: Yeah, I'll, let Tom covered free cash flow in a minute, but on advertising Jessica. It is one of our three pillars will do and we did about $1 8 billion in advertising last year and it's a we have a really strong position in audio I like our assets here with you know broadcast and Pandora, which is really still.

Jennifer Witts: So we'll have more to say on pricing and packaging for the in-car base over the course of the year. A lot of that comes with the migration to the new tech stack for the in-car, which, you know, will start later in the second quarter and will proceed through the different elements of that tech stack throughout the year, but I'm really excited about the flexibility it'll give us in pricing and packaging. Some of the things Tom mentioned about how we'll support customers and customer service, better identity, and better MarTech overall. Thank you.

Speaker Change: A key driver, we do about 60% of our AD revenue through Pandora and really despite the listener declines, which you havent had mitigated some to some extent last year and he used were down about 3%.

Speaker Change: About the same for AD hours as well I. It still remains a core value proposition and that has a lot to do with the fact that there was a lot of great opportunities to serve and you know advertisers an important and AD units, whether it's display audio or video.

Jennifer Witts: Our next question is from the line of Stephen Cahall with Wells Fargo. Please proceed with your question. Thanks.

Jennifer Witts: So, Jennifer, I think a lot of the investments you made in 2023 were about trying to improve future conversion rates, and especially with younger car buyers. Could you help us with maybe what you started to see either late in 2023 or what you're expecting in 2024 in terms of those proof points around conversion with the updated app experience? And then to follow on Vijay's question, just around makeshift as you're ramping up on streaming only. It seems like this should be positive for volumes, but it is a heavily discounted product versus in-car, and I would guess that a lot of drivers today just don't have the connectivity issues with their phone that they might have once upon a time. So, how do we just think about ARPU in the longer term as you start to shift the mix towards in-car and streaming only? Thank you. Sure. Thanks, Stephen.

Speaker Change: Oh in Pandora, and so we've been able to really and and the team has done a great job continuing to improve monetization in Pandora, but the collection of assets. We have has been key to taking advantage of opportunities in the space. So obviously, there's been a lot of tailwind around podcasting and we continue to see growth and opportunities there going forward.

Speaker Change: A word I and then programmatic across both streaming and podcasting and it is a huge tailwind and there will be more a solution that will provide there that will will enhance our ability to grow in that area as well. So it's really the collection of assets, we have and continuing to lean into those I think you know Panther.

Speaker Change: Where it gets better when we move to looking to re platform that Sirius XM digital will provide another opportunity for more targeted and you know AD units as well on the Sirius XM business. You know, we will look at opportunities to enhance our position in free whether that's Pandora and Sirius XM or some combination of that.

Jennifer Witts: So, on conversion rates, much of the benefits that we would expect to have roll through on the in-car conversion rates are really going to come towards the latter part of this year. So, what we launched in December, as you know, is our new overall tech platform, but primarily supporting our new streaming apps. So, we would expect to see progress in streaming first, and where the new tech platform currently benefits our in-car trialers and subscribers is where we have 360L in place. We have a much better search algorithm in the back end that will support recommendations in 360L.

Speaker Change: Those are probably as we get into 2025, so there will be more AD opportunities on platform, but we also think theres growth off by farm you know as it relates to podcasting the taxis business that we're in and just general marketplace revenue and then free cash flow and then free cash flow. Jessica you know when you look at the free cash.

Speaker Change: <unk> flow, obviously, it's heavily dependent on two things, which you know we've talked about the capex is going to continue to decline over the next few years, you know I think our overall capex 'twenty 'twenty four is gonna be our high watermark and I think as you look outward in 2025 and onboard our Sac capex.

Jennifer Witts: So, where we're going to see improvements this year on conversion rates will be, especially with younger audiences, will be where we can improve 360L. Because we know that 360L has higher conversion rates than non-360L and also across really our trialer base of trialers as we improve marketing. And that is, you know, when we have 360L, we can leverage the data, obviously, to provide better personalized marketing. But even if we don't have 360L, so across the non-enabled vehicles and new and used, we'll have better marketing capabilities to personalize based on other data points. But that's going to take time to build out.

Speaker Change: Naturally come down as the satellites are launched and are non Sac capex.

Speaker Change: I'll start tailing off after I think we got through the middle of 2025, as we get the Pandora up and refreshed, but from there our non Sac capex should start trending down also so it's a natural trajectory obviously theres.

Speaker Change: There's the EBITDA that impacts it and the rest of the factors, but the major player. That's moving the number up is getting back to a into a cycle of a set capex. Yeah. I think at 1.2 for our guidance. This year on free cash flow you know being relatively flat to last year of course, excluding some of the potential of any transaction impacts and.

Jennifer Witts: We do have improvements in our overall marketing technology stack, using Salesforce, that will be in place starting later in the second quarter and rolling through into the third quarter. It's very much tied to the overall migration of our in-car platform. So, earlier in the year, we should certainly have more to talk about the progress we're making in streaming as a leading indicator there. And then just on your question about mixed shifts, we really believe that there are really two components here to demand and our subscriber base. We have a very loyal and passionate subscriber base in our core segments, which we believe we have the opportunity to continue to raise prices going forward as long as we continue to enhance value through product improvements and content additions, you know, which we've had a history of doing.

Speaker Change: Is you know a real strong signal and we should be at a low point in free cash flow with our opportunities in the years to come.

Speaker Change: Thank you.

Speaker Change: Thank you our next and final question will be from the line of Jason Bazinet with Citi. Please proceed with your question.

Jason B. Bazinet: I just have a deal related question.

Jason B. Bazinet: You guys have been very consistent about a <unk> close.

Jason B. Bazinet: My sense is that the risk arb community or event driven community is a little bit confused about that timing.

Jason B. Bazinet: They think its conservative and could happen sooner. So do I think theres, a FCC license transfer and then there's a shareholder vote on the Liberty side can you just sort of unpack what your assumptions are.

Jason B. Bazinet: The undergirds the <unk> close.

Speaker Change: So Jason if you if you look at it when we initially worked our timeline with Liberty you know we are on target as far as what our current schedule as we said, we filed or Liberty filed the S. Four on Monday.

Jennifer Witts: And we also believe we have an opportunity to open up more demand with younger generations, whether it's streaming or in some of the new packages and price points that we'll be launching, you know, towards the second half of the year. So, it's, you know, it is a factor that we need to look at and watch for canalization, but we really don't believe it's a concern today.

Speaker Change: So that was on the timeline that we envisioned the FCC licenses has been applied.

Jennifer Witts: And, of course, we have the opportunity going forward to the extent that, you know, the streaming package at $9.99 is so compelling, it creates some risk of cannibalization of the in-car base. We can adjust pricing accordingly. And, of course, our in-car product includes a lot more than just streaming, right? You can use streaming anywhere you want to listen simultaneously with using the in-car product.

Speaker Change: And you know as we said I think the long pole in the pet is going to be the FCC process, a number of reviews and correspondingly follow up.

Speaker Change: We need to do so so you know right now we have no indicators there knew based upon what we've seen that it would be any earlier, but we are very focused on trying to get it done as fast as we can.

Speaker Change: Super helpful. Thank you.

Speaker Change: Thank you Jason and thank you everybody for participating today talk to you soon.

Jennifer Witts: Great, thank you. Jennifer, one other thing to add on the Younger demo point is, you know, as has been well documented and you mentioned, the content was built for our core demo, and they're still as passionate as ever. This year alone, when you think about, you know, John Mayer, James Corden, Kelly Clarkson, Carrie Underwood, Will.i.am, Shaggy, and some of these others that are being really launched and will bloom, you know, throughout 24 and beyond, you know, this is a content play on a younger demo. And generally, you know, our track record as a company when we put out premium content and it's marketed So this is really the first time we're going to have significant content for a younger demo, but now it's got the mega brands and people that we've had for our core for years. So I'm looking forward to seeing how that goes. Thank you.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.

Scott Greenstein: Our next question comes from the line of Jim Goss with Barrington Research. Please proceed with your question. Thanks. Actually, this goes a little on to what Scott was just talking about in the programming class. It seems like you're going to more originals at this stage, and I'm wondering how that ties into the maybe more conservative programming cost you anticipate, but also the impact on loyalty obligations from the shift in the nature of the programming, and maybe also the loyalty impact from streaming as you get to identify exactly what's being played, and it gets to be a Scott, why don't you knock out the content and value prop?

Scott Greenstein: Sure, thank you, Jim. Sure. So the value proposition, as you alluded to, is now sort of a blended demo proposition. And we've always had an audience that looks and tries to be younger based on the research.

Scott Greenstein: So I feel really good that we're going to have a lot of back and forth on the content. For instance, live sports plays well on every demo. That's been proven, whether it's visual or audio, and all that, or comedy, and other things.

Scott Greenstein: And obviously, those are not in the royalty pool on that. The listening is still primarily on the satellite. It's growing, obviously, on digital. And when you say originals, we're always looking to create original, unique content or pieces of it, like SmartList and other things with that. So we're going to continue to do that. But also, curation has always been a major part, that under one roof, we're able to service people their needs without them going to five or six apps like they have to do with video or other things. So we still, as mentioned before, we have all the live sports rights all under one roof.

Scott Greenstein: And when you combine that with the new programming we're launching and everything else, I've never been more excited about the ability to have exactly what we need to keep our core excited, passionate, and paying, and at the same time, really putting out a lineup now that a younger demo can be attracted to and feel it's unique to SiriusXM. Yeah, so I would say, I think that's a great summary, Scott, and I would say we have a very flexible model in terms of how we monetize content. And, you know, Scott and his team, along with John Trimble, who runs AdSales, look really carefully at the opportunities we have to bring content behind the paywall for SiriusXM subscribers that will enhance value. So, for instance, James Corden, that's exclusive to SiriusXM, and we're really excited his first show will be on air today.

Jennifer Witts: Or something more broad, like SmartList, where there'll be a combination of revenue through AdSales but also some amount of content that's exclusive to SiriusXM. So, that's a model we continue to work on and perfect, and I think we're in a good place because it helps us manage our content costs and monetize in different ways. And then I would say, you know, we have had a history of being pretty disciplined on the programming side, and we will continue to do that going forward. More insights with data as to what consumers are listening to in and out of the car will certainly help with content decisions going forward. And, you know, we expect to get a lot more of that through 360L and streaming this year.

Jennifer Witts: On licensing, so, yeah, our music licenses are a significant portion of our cost structure. They represent probably about a little over 30% of our operating costs. We probably pay about $2 billion to the rights holders.

Jennifer Witts: And, you know, the largest portion of that is our CRB arrangement for the satellite side of our business, which doesn't come up again until the end of 27. So we have a lot of predictability around those costs on the in-car side of our business. In streaming, we have a slightly lower percentage when you look at the cost of music licensing. So for our streaming-only packages, it's a lower percentage, and we have healthy margins on both sides for both streaming and in-car subscribers because our licensing structure is so different from that of the music streaming companies that have direct licenses. We have direct licenses on the Pandora side of our business, of course, and where we have fully interactive subscriptions, that was a necessity. And those are pretty separate, right?

Jennifer Witts: So the dynamics there resemble more of another music streaming company, but on the SiriusXM side, I think it's approximately 15% or so for our satellite license through sound exchange. And I don't anticipate a lot of shifts in that in the interim based on how people are listening. Thank you very much. Our next question is from the line of Jessica Reif Ehrlich with Bank of America. No, thank you.

Jennifer Witts: Maybe switching gears a little bit, Jennifer, I think you mentioned one of the three pillars for growth for the future is advertising. Could you give us some color on your long-term advertising plans? What are the drivers?

Jennifer Witts: What are your goals? What do you think the TAM is? And secondly, given expectations of a lower 24, what gives you confidence, aside from free cash flow, which will obviously benefit from lower CapEx, that you can reverse the trends? Is it the rate increase or cost-cutting or something else? And then I'm sorry, but I just wanted to ask something Scott just said: are you considering or have you considered bundling your service with others, or do you view your content already as like all-encompassing so that you don't need to? Well, thanks, Jessica. I'll let Scott jump in.

Jennifer Witts: But on bundling, it has clearly been an opportunity that we've seen many of the video streamers use in conjunction with, you know, whether it's telcos or others. And we do have relationships in place with T-Mobile and Walmart and others where it's primarily what I would call distribution. And those have been effective. I think we'll have more opportunities as we launch the new commerce platform more broadly. It just makes it easier to do those types of things.

Scott Greenstein: But in terms of a true sort of hard bundle with content, I think an interesting opportunity obviously is going to come through when we launch Audible and try to find ways to really make it integrated in terms of having content on one another's platforms and also a trial offer. So we'll be able to experiment with different types of offers this year and bundles. And I do think it's – we're very attractive to a number of potential partners given our very low churn, so that's certainly an opportunity. I don't know, Scott, if you had anything else to add to that.

Scott Greenstein: Yeah, just one point, Jessica, as Jennifer mentioned, we're attractive because we have a lot of exclusive content that we like to be exclusive and all of that. But where we're starting to see traction is, as I mentioned in earned media, so much heat comes off our content, meaning, you know, from the radio and the podcasting, people are now tracking back and checking out the service and trying it. So if there was a way that it increased the right amount of free sampling of what comes out on a daily basis in any version of our news talk, sports, comedy, music, I would love to look at that. But what I'm not interested in is increasing someone else's bundle at our expense. So it'll have to be the right thing, and as Jennifer mentioned, there's plenty of reasons to do it.

Jennifer Witts: So, you know, we'll see where it goes. Yeah, and I'll let Tom cover Freecast in a minute, but advertising is one of our three pillars. You know, we did about $1.8 billion in advertising last year, and we have a really strong position in audio. I like our assets here with, you know, Broadcast and Pandora, which is really still a key driver. We do about 60% of our ad revenue through Pandora. And really, despite the listener declines, which, you know, were mitigated to some extent last year, MEUs are down about 3%, and it's about the same for ad hours as well.

Jennifer Witts: It still remains a core value proposition, and that has a lot to do with the fact that, you know, we have a lot of great opportunities to serve advertisers and important ad units, whether it's display, audio, or video in Pandora. So we've been able to, and the team has done a great job continuing to improve monetization in Pandora. But the collection of assets we have has been key to taking advantage of opportunities in the space.

Jennifer Witts: So obviously, there have been a lot of tailwinds around podcasting, and we continue to see growth and opportunities there going forward. And then programmatic across both streaming and podcasting is a huge tailwind, and there will be more solutions that we'll provide there that will enhance our ability to grow in that area as well. So it's really the collection of assets we have and continuing to lean into those. I think, you know, Pandora gets better when we move to looking to replatform that.

Jennifer Witts: SiriusXM Digital will provide another opportunity for more targeted, you know, ad units as well on the SiriusXM business. We will look at opportunities to enhance our position in free, whether that's Pandora or SiriusXM or some combination of those, probably as we get into 2025. So there will be more ad opportunities on platform, but we also think there's growth off platform, you know, as it relates to podcasting, the tech fees, the business that we're in, and just general marketplace revenue.

Tom Berry: And then free cash flow? And then free cash flow, Jessica. You know, when you look at the free cash flow, obviously, it's heavily dependent on two things, which, you know, we've talked about the SAT capex is going to continue to decline over the next few years. You know, I think overall capex in 2024 is going to be our high watermark. And I think as you look outward in 2025 and onward, our SAT capex is going to naturally come down as the satellites are launched, and our non-SAT capex will start tailing off after I think we get through the middle of 2025, as we get the Pandora app up and refreshed. But from there, our non-SAT capex should start trending down also.

Tom Berry: So it's a natural trajectory. Obviously, there's the EBITDA that impacts it and the rest of the factors, but the major play that's moving the number up is getting back into a cycle of SAT capex. Yeah, I think at 1.2 for our guidance this year on free cash flow, being relatively flat to last year, of course, excluding some of the potential Liberty transaction impacts, is a real strong signal. And, you know, we should be at a low point in free cash flow with opportunities in the years to come.

Jennifer Witts: Thank you. Thank you. Our next and final question will be from the line of Jason Bazinet with Citi. Please proceed with your question. I just have a deal-related question.

Tom Berry: You guys have been very consistent about a three-cue close. My sense is that the risk ARB community or event-driven community is a little bit confused about that timing. They think it's conservative and could happen sooner.

Tom Berry: So, I think there's a FCC license transfer and then there's a shareholder vote on the Liberty side. Can you just sort of unpack what your assumptions are that undergird the 3Q close? So, Jason, when we initially worked out our timeline with Liberty, you know, we are on target as far as what our current schedule is. We sent, or Liberty filed, the S-4 on Monday, and so that was on the timeline that we envisioned. The FCC license has been applied for, and, you know, as we said, I think the long pull on the tent is going to be the FCC process, the number of reviews, and corresponding follow-up that we need to do. So, you know, right now, we have no indicators that are new based upon what we've seen that it would be any earlier, but we are very focused on trying to get it done as fast as we can.

Tom Berry: Super helpful. Thank you. Thank you, Jason, and thank you, everybody, for participating today. Talk to you soon. This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.