Q3 2024 Sirius XM Holdings Inc Earnings Call

Speaker Change: Greetings. Welcome to SiriusXM's third quarter 2024 Operating and Financial Results conference call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation.

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Speaker Change: Please note that this conference is being recorded.

Speaker Change: At this time, I'll turn the conference over to Hooper Stevens, Senior Vice President of Investor Relations and Finance.

Speaker Change: Mr. Stevens, you may now begin.

Hooper Stevens: Thank you and good morning everyone. Welcome to SiriusXM's third quarter 2024 earnings conference call. Today we will have prepared remarks from Jennifer Witz, our Chief Executive Officer, and Tom Barry, our Chief Financial Officer. Scott Greenstein, our President and Chief Content Officer, will join Jennifer and Tom to take your questions during the Q&A portion of this call.

Speaker Change: I would like to remind everyone that certain statements made during the call might be forward-looking statements as the term is defined in the Private Securities Litigation Reform Act of 1995.

Speaker Change: 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: Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. For more information about those risks and uncertainties, please view SiriusXM's SCC filings and today's earnings release.

Speaker Change: We advise listeners to not rely unduly on forward-looking statements and disclaim any intent or obligation to update them.

Speaker Change: 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 and the Liberty Media transaction.

Speaker Change: Additionally, we have posted a supplementary presentation on our Investor Relations website for your convenience. With that, I'll hand the call over to Jennifer.

Jennifer Witz: Thanks, Hooper, and thank you all for joining us this morning.

Jennifer Witz: It was a milestone quarter for us at SiriusXM, as we completed our transaction with Liberty Media and emerged as a fully independent public company.

Jennifer Witz: To achieve these goals, we expect to leverage the power of our full portfolio to grow our core business through the expansion of a free, ad-supported tier of SiriusXM and the introduction of a premium interactive bundle both in-car and in-app.

Jennifer Witz: With each of these initiatives, we will be building upon the broader tech replatforming we began last year, as well as the insights we've gained from Pandora and our other business units.

Jennifer Witz: to deliver more value to our customers across an expanded set of offerings, drive discovery of our exclusive content, and give subscribers the control they crave.

Jennifer Witz: As we continue making progress in the evolution of our business, we will share key updates to illustrate how we are measuring against each of our objectives.

Jennifer Witz: Jumping into the third quarter, we are pleased to have delivered 14,000 self-pay net additions and improvement of 110,000 from last year's third quarter, and we still expect our full year subscriber performance to be slightly better than last year's.

Jennifer Witz: Our advertising revenue was softer than expected, with lower demand due to a flood of new CTV supply entering the market, advertisers spend shifting toward performance products, a truncated election cycle, and lower than expected podcast inventory.

Jennifer Witz: We expect this shift to also impact fourth quarter ad revenue and as a result we are lowering our revenue guidance by 75 million dollars. While we aren't happy with these near-term numbers, I want to reiterate our confidence in our advertising business and the long-term potential it has to support growth of the company.

Jennifer Witz: One of the biggest announcements from the past few months was our new exclusive agreement with Alex Cooper's UNWELL.

Jennifer Witz: The podcast network, including its flagship Call Her Daddy, has strong resonance among millennials and Gen Z.

Jennifer Witz: We see enormous opportunity here to both bolster our ad offering, where we are already seeing positive momentum in the market, with presenting sponsorships selling out quickly, and drive subscribers to SiriusXM with exclusive new programming from Alex and the entire Unwell Network coming early next year.

Jennifer Witz: We're proud to be home to so many powerful voices like Alex and a platform for important conversations across every topic and fandom. In the past six months, the sitting president, as well as both presidential candidates and their vice presidential nominees, appeared on SiriusXM Talk and podcast programming for exclusive in-depth conversations.

Jennifer Witz: showcasing the power of our platform and the impact of our audience.

Jennifer Witz: News, politics, and sports are areas where live, up-to-the-minute content is critical, and we are the go-to audio destination for listeners who don't want to miss a moment.

Jennifer Witz: We are seeing double digit percentage increases in news and politics programming, both in terms of the number of listeners and hours listened.

Jennifer Witz: This quarter, we launched new shows from former U.N. Ambassador Nikki Haley and rising political voice for Gen Z Dylan Douglas, providing perspectives from both sides of the aisle.

Jennifer Witz: and with sports listenership rising quarter over quarter and the football season now underway, we've introduced new expert commentators into our lineup, including legendary football coaches Jimbo Fisher and Bill Belichick.

Jennifer Witz: As podcasting's role across our business continues to expand, this quarter we released a series of updates to our app focused on improving the podcast listener experience and enhancing discovery.

Jennifer Witz: These features allow us to better serve our current and future customers as we continue to see upticks in podcast listenership across both our core and growth audience segments.

Jennifer Witz: We also launched a new feature which makes it seamless for in-car subscribers to download and sign into our app from the vehicle display, allowing them to easily access even more content and features such as On Demand.

Jennifer Witz: Over the last few weeks, we began scaling our new personalized customer journeys to the majority of our new and used car trialers. Initial results show these journeys are leading customers to listen at higher rates early in trial.

Jennifer Witz: All of these are key leading indicators for the business, and it will be critical for us to scale and sustain these increases throughout the trial and self-pay lifecycle in order to drive improvements in conversion, retention, and overall customer satisfaction.

Jennifer Witz: This quarter, we continued to expand our wholesale three-year subscription program with the addition of Toyota, and we now have nine OEMs participating.

Jennifer Witz: Early results for this initiative are encouraging, as dealers are showing interest in ordering vehicles with this added value feature.

Jennifer Witz: This program and additional automotive initiatives such as expanded used car programs that help us identify and provide trials to new owners at point of sale are driving subscriber performance while some of our bigger picture initiatives ramp up.

Jennifer Witz: The same can be said of our Podcast Plus subscription in relation to our streaming subscribers where positive momentum contributed to our sub growth this quarter.

Jennifer Witz: As we look to build value with new customers, earlier this month we began to roll out our new in-car pricing and packaging structure.

Jennifer Witz: Now, pricing for both streaming-only and in-car begins at $999, a compelling price that makes SiriusXM competitive with other audio subscriptions and a strong complementary service for audio enthusiasts.

Jennifer Witz: For in-car subscribers, the $9.99 price point offers access to every one of our incredible music channels in the car and on the app, with the ability to purchase add-ons for sports, talk and news, providing subscribers with more flexibility than ever before.

Jennifer Witz: We believe this will both attract listeners who may have been left behind by our premium-priced packages and allow us to move away from discounted pricing by enabling price-conscious subscribers to tailor the package to their interests and budget, instead of relying on short-term promotional packages.

Jennifer Witz: We've also been pushing more features and content into our plans, which help drive broader demand, reduce churn, and support future price adjustments. These updates provide expanded content, additional features, and greater accessibility across our most popular offerings.

Jennifer Witz: This includes access for all our subscribers to Artist Stations, allowing for greater personalization to be enjoyed by all, and the ability for Platinum subscribers to stream on up to three devices simultaneously, which should help introduce new listeners within families, as younger generations take advantage of their parents' subscriptions and become fans themselves.

Jennifer Witz: And in an effort to continue providing even more value to our platinum customers, as well as win-back subscribers who did not convert, we launched the next phase of our Walmart collaboration this quarter, giving six months of their Walmart Plus service to our customers at no cost.

Jennifer Witz: Wal-Mart will also be providing extended trials of SiriusXM to their customers. And this month, we announced a new agreement with ESPN Plus to provide extended trials of each service, highlighting the sports prowess of both brands to dedicated fans.

Jennifer Witz: We are responding by investing in our ad tech stack and pursuing collaborations with industry leaders where we can offer better targeting and measurement, such as our new agreement with LiveRamp, which enables a first-to-market data clean room for audio for Group M clients.

Jennifer Witz: and within podcasting, recent agreements with Unwell and SmartList are opening up new opportunities and inventory.

Jennifer Witz: Across the board we are committed to maintaining our financial strength with ongoing business optimization. We are advancing scalable AI and automation tools across our business and our AI customer agent work is already exceeding our expectations.

Jennifer Witz: In closing, we remain focused and disciplined in our approach to continuing our long-term financial success and putting ourselves on a path for both subscriber and free cash flow growth.

Jennifer Witz: We are spearheading rapid initiatives each quarter to capture demand and retain our base.

Jennifer Witz: Simultaneously, we are building long-term solutions to enhance our value and drive sustainable growth.

Speaker Change: With subscriber growth for the quarter, consumer excitement around our exclusive programming, and new features and pricing now in market, we are excited about the opportunity ahead. And now I will pass the call over to Tom to share more on the financials.

Tom Barry: Thank you, Jennifer. Good morning, everyone. Today, I'm excited to walk you through our third quarter financial performance, highlight some key operational milestones, and share more details on our outlook. Afterwards, Jennifer and I will be happy to take your questions.

Tom Barry: In the third quarter, SiriusXM delivered revenue of $2.17 billion, a decrease of 4% compared to the same period last year.

Tom Barry: primarily driven by a 5% drop in subscriber revenue to 1.65 billion and a 2% decline in advertising revenue to 450 million.

Tom Barry: Self-pay Sirius XM subscribers increased by 14,000 this quarter, a notable improvement compared to the same quarter last year, driven primarily by lower churn.

Tom Barry: Additionally, we saw an expected decline in paid promotional subscribers as new agreements with certain OEMs moved new car trials from paid to free.

Tom Barry: These changes will benefit the company over the lifetime of the vehicle by maximizing profitability of subscribers coming from those OEMs.

Tom Barry: Turning to advertising revenue, we saw a modest $10 million decline year-over-year to finish the quarter at $450 million.

Speaker Change: As Jennifer highlighted, the decline was due to softer market conditions, increased competition, a shorter election cycle, and lower podcast inventory.

Speaker Change: However, we are actively investing in technology and distribution arrangements to position our advertising business for positive momentum in the years ahead.

Speaker Change: We saw a 6% increase in podcast revenue with demand outpacing supply, including the fourth quarter launch of Unwell on the SiriusXM podcast network.

Speaker Change: Looking ahead, we see a significant opportunity to capture a larger share of non-audio ad dollars by expanding our 360-degree marketing solutions, integrating social and video to drive growth.

Speaker Change: Adjusted EBITDA for the quarter of $693 million decreased by 7% year-over-year, driven by softer subscriber revenue offset by savings and cost of services, personnel related, and certain G&A expenses.

Speaker Change: This produced a relatively stable, adjusted EBITDA margin of 32%. We are maintaining a disciplined financial culture and remain firmly on track to achieve our $200 million cost savings target for the full year 2024.

Speaker Change: Most of these savings are being reinvested in the business to fuel our transformation and longer term strategic goals.

Speaker Change: Let's dive deeper into our segments.

Speaker Change: starting with the SiriusXM segment, which generated $1.63 billion in revenue in the quarter. This includes subscriber revenue of $1.51 billion, a decline of 5% year-over-year, and advertising revenue of $41 million, down 2%.

Speaker Change: In the third quarter of 2024, our total ARPU declined by 53 cents, ending the quarter at $15.16, compared to $15.69 last year.

Speaker Change: This reflects an increase in subscribers on promotional rates and streaming-only self-pay plans. As Jennifer mentioned, our long-term focus is on driving overall subscriber revenue in all of our efforts.

Speaker Change: From new pricing and packaging options now being rolled out, to the recent subscription value adds designed to improve demand and support future rate adjustments, are in the furtherance of this goal.

Speaker Change: Gross profit in the Sirius XM segment reached $969 million, a 7% decline compared to the previous year.

Speaker Change: This brought our gross margin down to 60%, a one percentage point drop. Subscriber acquisition costs were 90 million compared to 87 million the same period last year.

Speaker Change: Shifting to the Pandora and off-platform segment, revenue remained relatively flat at 544 million. This was driven by a 2% year-over-year increase in sub revenue tied to rate increases on our Pandora subscriptions.

Speaker Change: Segment ad revenue declined by 2% to 409 million. Pandora ad hours totaled 2.47 billion, a 7% decline, while average monthly listing among ad supported users remained stable at 21 hours.

Speaker Change: Gross profit in the Pandora and off-platform segment was $187 million.

Speaker Change: an increase of 4% year over year, reflecting a point of improved gross margin at 34% as we get better at monetizing our podcast portfolio and seek to refine and improve upon existing deals.

Speaker Change: In connection with the Liberty transaction in the third quarter, prior to the close of the transaction, Liberty completed an assessment of the fair value of the company's goodwill based on sustained lower share price.

Speaker Change: as SiriusXM's share price converged with those of the Liberty Tracking stocks heading into the close.

Speaker Change: As a result, a non-cash impairment charge of approximately $3.36 billion was recorded. This non-cash charge does not impact the company's cash flow, ongoing operations, or liquidity.

Speaker Change: Additionally, following the transactions closed, we revised our guidance for free cash flow to approximately 1 billion dollars.

Speaker Change: This adjustment incorporates an additional $215 million in deal-related cash costs, which includes transaction fees, year-to-date legacy Liberty operating and interest expenses allocated to the Sirius Tracker, and post-close interest costs.

Speaker Change: Of this, approximately $180 million has been paid by September 30, with an additional $35 million expected in the fourth quarter.

Speaker Change: Free cash flow for the third quarter was $93 million.

Speaker Change: The decrease from last year was due to approximately $72 million increase in Liberty transaction-related costs along with lower cash receipts, higher programming payments, and elevated CapEx, partially offset by lower cash taxes paid.

Speaker Change: Looking at CapEx on the non-satellite side, we continue to expect spending this year of about $450 to $500 million.

Speaker Change: This will continue at a similar level next year, driven by continued investments in our new tech platform and upgrades to our repeater and broadcast infrastructure.

Speaker Change: Starting in 2026, we anticipate a decline in non-SAC CapEx to below $400 million.

Speaker Change: We project satellite CapEx spending of approximately 300 million dollars this year Before seeing a steady reduction to near zero by 2028 and beyond

Speaker Change: Along the way, we expect about $180 million in SAC CapEx in 2025, $95 million in 2026, and $45 million in 2027.

Speaker Change: Our capital allocation priorities remain consistent. First, investing in our business.

Speaker Change: Second, returning to our long-term leverage target of low to mid three times adjusted EBITDA.

Speaker Change: and third, continuing our opportunistic capital return posture, with priority on maintaining our regular quarterly dividend while we deliver.

Speaker Change: And remember, economically, the Liberty transaction represented a leveraged share shrink that reduced our shares outstanding by 12%.

Speaker Change: During the third quarter, SiriusXM paid $103 million to shareholders through our dividend, and we closed the quarter with a net debt-to-adjusted EBITDA ratio of 3.8 times.

Speaker Change: And as Jennifer mentioned, for the 2024 guidance, we are adjusting total revenue down by $75 million to approximately $8.675 billion on softer ad revenue.

Speaker Change: However, we are reiterating our guidance to adjusted EBIT of approximately $2.7 billion and free cash flow of approximately $1 billion.

Tom Barry: Lastly, we remain committed to enhancing communications with our shareholders. As Hooper noted, we added an earnings presentation to our IR site, which will continue to evolve as part of our effort to improve transparency.

Tom Barry: We are also exploring additional ways to further enhance our disclosures around operating performance and financials. More to come. Operator, let's open the line and Jennifer and I will be happy to take questions.

Speaker Change: Thank you. At this time, we will now be conducting a question and answer session.

Speaker Change: If you'd like to ask a question, you may press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue.

Speaker Change: You may press star two if you'd like to withdraw your question from the queue.

Speaker Change: For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you.

Speaker Change: Thank you and our first question comes from the line of Kochen Mural with Evercore ISI. Please receive your questions.

Speaker Change: Good morning and thanks for taking the question. Just one, it's certainly encouraging to see the efforts on the pricing and packaging side.

Speaker Change: I was hoping you could expand a bit more on how you're looking to balance the opportunity to expand your TAM and go after new subscribers versus the risk of pricing down your existing subscriber base over time.

Speaker Change: Sure. Thank you, Cook. And we actually have not seen a lot of the impact of the pricing and packaging strategy in the current numbers yet. We're just starting to roll out on the in-car side of the business the $9.99 lead price point and you know we're starting to roll that out and trial starts this quarter which means that

Speaker Change: We'll start to see the impact of that going into next year, but we are very encouraged by the results we saw in initial testing, which shows that after that

Speaker Change: Post-trial promotion, retention is much higher because there's a lot more transparency and

Speaker Change: consumers value the persistent lower price point. Now I don't expect it to have a lot of cannibalization impact as you know these are new subscribers rolling through.

Speaker Change: on trials, but we do have a lot of levers to pull in order to manage that, whether it's

Speaker Change: value through enhanced content, access, or features, and we've already started to roll that through our packages ahead of this new pricing going in place. So ...

Speaker Change: and I mentioned some of this earlier, but adding, putting our

Speaker Change: better programming around live sports and Howard, for instance, in our broader package, moving that down in the packaging stack, as well as, you know, adding at the top more concurrency so people with streaming logins can listen in multiple places at the same time.

Speaker Change: I do believe we'll be able to manage this very effectively. We also have a $10 streaming price point in market, as you know, and the audiences that are choosing streaming only are very different than the in-car audiences, and I think we have the opportunity to continue to increase our overall revenue optimization by strategically focusing on those segments very differently.

Speaker Change: Perfect. Thanks Jennifer.

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

Jessica Ehrlich: I think next year Howard Stern's contract comes up, so could you just talk about your overall podcast strategy, how profitable can this division be, how quickly can you monetize Cop Call Her Daddy, and then any preliminary thoughts on Howard's upcoming contract?

Speaker Change: Okay, thanks. We'll take the podcasting first and then the Howard part. So on the podcasting, as we mentioned earlier on, there was always a strategy of getting to a point of mass.

Speaker Change: to supplement our ad sales business. As digital advertising was shrinking and all that went with that, podcasts were the fastest-growing digital audio for advertising demand, and we've seen that as recently as the fourth quarter.

Speaker Change: So, at the time, a lot of the bigger shows had not settled into ad rep deals, so the goal was to get those and have a critical mass so the advertising business would fund it. I think we've done a pretty good job in showing that we can monetize podcasts as a company.

Speaker Change: Then the next goal, as you've heard me mention on the calls, was to look for talent and other content that could come out of those podcast deals.

Speaker Change: So what we did was in each of the deals we built in, in increasing amounts.

Speaker Change: exclusive content to test at Sirius XM or in our micro subscription at Apple.

Speaker Change: For instance, our Conan O'Brien channel now, according to Edison, has got much more listeners than it had even a month ago. Unwell will launch two new channels in the first quarter.

Speaker Change: Smartless has given us early access to content and as you know major subscriber events starting with the interview of Howard earlier this year.

Speaker Change: Mel Robbins just re-signed with a weekly live show so we're going to continue to look at that with the goal of testing and using data to figure out at what point something might make sense to go behind the paywall either in all or in part and obviously that shifts

Speaker Change: directly into our subscription business.

Speaker Change: The last point, which I think can't be overlooked, one of the core competencies of the company is curation.

Speaker Change: and podcasts continue to grow, they're all over the map, and it's very hard to sort them. Eventually, I think we'll be in a position, on top of all of the above, to be the definitive source of curating them into people's interest buckets and genres and other things.

Speaker Change: So, I feel really good where we are. It's been consistent with what we've said all along and continuing to grow. The monetization is clear. You know, Unwell is already off to a great start. SmartLess is...

Speaker Change: well ahead of our projections and we feel really good you know where those will go.

Speaker Change: As for Howard, he's a singular talent.

Speaker Change: Johnny Carson or others retired that the new group would replace them. They were just simply filling in on those slots

Speaker Change: So, Howard, we hope he continues forever. You heard last week his Bruce Springsteen interview. He continues to excel. Get us awareness and everything else that goes with what he does.

Speaker Change: Having said that, there's many demos that he may not hit as strongly, and whether it's Alex Cooper, Smartless, Conan,

Speaker Change: Andy Cohn, Ashley Flowers. We have so much talent hitting the top level of audio and different demos. We feel really good, you know, where we stand on that. And we're always opportunistic looking at talent and the podcasting arena provides a lot for us to look at.

Speaker Change: Great, thank you so much.

Speaker Change: Thank you. The next question is from the line of Stephen Cahill with Wells Fargo. Please proceed with your question.

Speaker Change: Thank you. First, I was wondering if you could just give us any more color on the complexion of the self-pay net ads in the quarter. You talked about the promotional and the streaming subscriber additions.

Speaker Change: I think streaming total subscribers or net ads is something we're all focused on at this point, so I was wondering if you could just

Speaker Change: give us any more information on what those did, as well as maybe how the engagement looks like with those customer cohorts.

Speaker Change: And then, you know, Jennifer, as you continue to focus on the streaming audio product.

Speaker Change: and you think about the competition in streaming audio, I was wondering if you think there's an opportunity to eventually shift that product to having some amount of on-demand music functionality. I know that would change the margins, but just wondering how you think about the evolution of the streaming-only experience as an addition to the in-car experience and what those tools might be. Thank you.

Speaker Change: Sure, thanks, Stephen. Starting with the third quarter performance, we're really pleased with where we landed and still expect to be positive in the second half and better year over year on net ads in total. And I think the largest contributing factor in the third quarter was lower churn. We also saw higher automotive volumes, which helped offset the lower conversion rates we've seen year over year.

Speaker Change: started to stabilize a bit. And on the streaming side, as you highlighted, we have grown subs this year, and I would expect that to continue. I think the

Speaker Change: The key for the quarter, because a lot of the bigger initiatives were rolling out on pricing and packaging and personalized marketing, are just starting to roll out and we would expect those to take time to generate increased demand and improve retention, but the key for the quarter was really a lot of different campaigns and

Speaker Change: initiatives that we launched because we're not waiting for these bigger initiatives to...

Speaker Change: all fall into place. So we have the Podcast Plus subscription as we've talked about. We've had win-back campaigns focused on older cars. We've had three-year subscriptions with the OEMs and many others. So on your point on the engagement side,

Speaker Change: We have and I think in our earlier comments we commented on

Speaker Change: what we're seeing in early and trial engagement, which again are the important leading indicators for improved retention and conversion in streaming and on the in-car side. And we continue to see consumption of content expanding.

Speaker Change: and that is one of the most important indicators for conversion. We know that when customers either in streaming or in...

Speaker Change: Carr, listen to a broader set of content, including non-music content, that we see ultimately better conversion and retention. So we're very pleased with what we're starting to see there. Obviously, the key is to make sure that we can sustain those improved early in trial engagement metrics and scale them across our trialers.

Speaker Change: And then your last question about streaming audio and on-demand. So that's a big factor for us longer term. So the key first is to make sure that we have launched and fully migrated our subscriber base to the new tech platform.

Speaker Change: which will give us a lot more capabilities, not only in features and content delivery to subscribers and trialers, both in streaming and in the car.

Speaker Change: but also in pricing and packaging flexibility and identity and things like that. And off that platform, we will then be able to look at an interactive bundle. So we believe that's key to growing subscribers over the long term alongside an ads tier. And with an interactive bundle, we would expect to use, you know, basically the rights we have today with Pandora alongside the rights we have today

Speaker Change: emphasizing Sirius XM's very unique place for human curated discovery of music

Speaker Change: alongside the choose-a-song-listen-whatever-you-want of Pandora. What's key to the success there, obviously, is ensuring that...

Speaker Change: – those services are bundled and integrated in a way that removes the friction from the customer experience. Because, clearly, we could co-sell them today, but the consumer experience needs to be such that it's very easy to listen to a song on SiriusXM, discover or rediscover something, and then save it into a playlist on Pandora Premium. So that's our focus over the longer term, and we do think there's a real opportunity to unlock demand and retention there.

Speaker Change: associated with are very affluent and in a frankly older base where is streaming on-demand services have not effectively penetrated that to date.

Speaker Change: Thank you.

Speaker Change: Our next question is from the line of Stephen Leshack with Goldman Sachs. Please proceed with your question.

Stephen Leshack: of the Historical Range this quarter, but at the same time, I think you called out some promotional pricing. Just curious how we should think about these two levers trending as you look to maximize revenue. Thank you.

Speaker Change: Sure, I'll start off at ads and then I'll turn it over to Tom to add any other color. I think we provided some context for, you know, some of the headwinds we're seeing in our earlier comments, you know, more, certainly there's been a flood of CTV supply and advertisers are shifting to more.

Speaker Change: bottom of the funnel performance-based media opportunities as opposed to brand building. And then, you know, we've seen some impacts on a shorter, from a shorter political cycle and the iOS changes on.

Speaker Change: podcast inventory. So, our focus is really on

Speaker Change: counteracting the trends where we can, investing in where we see tailwind. So our programmatic overall was up 9% in the quarter, podcasting was up 6%. And the real opportunity is in the intersection of those two programmatic podcasting, which is really small to date, but has seen significant growth at about 50% in the quarter. So

Speaker Change: Our areas of focus are content and technology here. On the content side, Scott talked about some of the podcasting moves we've made.

Speaker Change: There's, as Tom mentioned, I think an opportunity for us to pursue broader 360 solutions. And then on the technology side,

Speaker Change: We have a number of efforts underway. We mentioned, I think, on the call, earlier in the call, what we've done recently with LiveRamp in terms of the clean room. It's all about better targeting and measurement.

Speaker Change: and we're working closely with the trade desk to continue to integrate with UID2. And there's a number of other technology implementations we're undertaking to just make buying easier for smaller businesses.

Speaker Change: Those are the areas we're focused on. As we go into next year, we'll re-evaluate, of course, and provide guidance at that point in time. But we're certainly hoping and looking for a return for brands focused on brand building, as opposed to just bottom of the funnel conversion.

Speaker Change: and Steven. The only thing I would add on that is, you know, as we've looked the, you know, our Talented Ad Sales Group has been, you know, the headwinds that we outlined in the initial comments. We've been pivoting with our offering and, you know, being down two percent in Q3.

Speaker Change: wasn't terrible, but I think as we assess the full year, a lot of those factors is what drove down and caused us to adjust our revenue guidance. So that was, there's multiple headwinds and factors in there, but I think the team's aggressively focused on trying to ensure that we can get the optimal package and the optimal offering to marketers.

Speaker Change: As far as ARPU, if you look at our churn, yes, our churn was very favorable at 1.6.

Speaker Change: so we were very happy with that. Our poo was down 53 cents roughly. You know, when you look at it overall...

Speaker Change: you know we continue to leverage across the board our promotional pricing plans.

Speaker Change: You know, we use the promotional pricing plans to...

Speaker Change: Witz, Thomas Barry Witz, Bryan Kraft, Thomas Barry Witz, Bryan Kraft, Thomas Barry Witz,

Speaker Change: So, you know, we're really focused on the subscriber base. The ARPU is obviously an output, but overall, I would say, you know, I think we're continuing to aggressively, you know, work on our subscriber numbers and our subscriber strategy.

Speaker Change: Yeah, I think as we've talked about, because of what Tom highlighted in terms of the pressure of these promotional plans, we do have the opportunity with the $10 entry point to ensure that customers are getting on the right package from the start and they're not getting on a much higher priced premium package with, you know, more content frankly, but, you know, that may not meet their needs.

Speaker Change: We have the opportunity to leverage these more discreet price points and I think bring ARPU up for our subscribers on promotional plans.

Speaker Change: That's great. Thank you both.

Steven: Thanks, Steven.

Speaker Change: Thank you. The next question is from the line of David Joyce with Seaport Research. Please proceed with your question.

David Joyce: Thank you. Another question on advertising, if I could, kind of looking at your various initiatives.

David Joyce: such as turning on the ads in car for the non-subscribers and also

David Joyce: working on re-platforming so all the streaming and satellite services and 360L are all on the same kind of platform. When do you expect these to start contributing and showing through and offsetting the broader ad market challenges that you've been discussing? Thanks.

Speaker Change: We talked a little bit about free access last quarter, and we're still in a very select set of vehicles there and in test and learn mode. And we are seeing customers engage with the service post-trial if they had chosen not to convert. The numbers are small. I don't have any reason to believe that there's going to be a cannibalization impact there, because the content set is small. It's about 40 channels.

Speaker Change: and of course there's advertising in the music channels.

Speaker Change: We'll continue to learn there. I think it's an opportunity for us to adjust content over time to different users. You know, we're leveraging the 360L platform. Over time, we can use ad replacement technology to make sure that those ads are more targeted to the specific consumers listening. That's going to take time to build, right?

Speaker Change: about 13 million cars on the road that are 360L enabled. We will have this year a total of 40% of our new car trial starts with 360L. That should ramp up next year to over 50% and then key to that really accelerating in the year following in 26 is the launch in one other major OEM. So as we continue to roll that out and it starts to roll through used car trials, we'll have a much larger base in 360L where we can...

Speaker Change: look to build scale for a more prominent ad offering in the car. Not just in free access, but also with the ad replacement technology, providing IP-targeted ads in the subscription business as well. We do about...

Speaker Change: I don't know, $180 million in SiriusXM ad revenue. So there is opportunity to continue to grow that in our subscription service.

Speaker Change: as long as we can provide these more targeted opportunities. So it's going to take years to build up the scale here, but we're really excited about how that complements a future ad-supported offering on the streaming side in our apps as well.

Speaker Change: All right. Thank you, Jennifer.

Speaker Change: Thank you. Our next and final question is from the line of Cameron Masson Perrone with Morgan Stanley. Please proceed with your questions.

Speaker Change: Thank you, good morning.

Speaker Change: First, I wanted to follow up on ARPU. You guys in the past have kind of talked about

Speaker Change: every other year kind of philosophy or cadence of price increases. Is that still something we should expect heading into?

Speaker Change: 2025 and just any color on kind of how selective across the packages that that any activity might be or whether we should expect something anything more holistic on the on the satellite side.

Speaker Change: and then on the sales and marketing front, you know, down nicely year over year even as you guys were able to drive improvement in net ads.

Speaker Change: So wondering, you know, if you could just comment on what's allowing you to find efficiency there while still driving nice funnel improvement and net ads improvement. Thanks.

Speaker Change: I'll take the pricing question and then Tom can comment on sales and marketing costs.

Speaker Change: We are on a every-other-year trajectory for rate increases, and I want to withhold on any further guidance on how broad-based it will be, but we have recently, as I mentioned earlier, added more value to our full-price packages so that customers can experience that at least for a few months before we might take a price action there. And that's a series of things, including content and features, as well as access.

Speaker Change: and so we are

Speaker Change: looking at that for early next year and I think that will bode well for ARPU. We still face the same trends that we've seen in terms of promotional plans and the impact on acquisition and retention so it'll be a balance of how those things play out in terms of the ARPU trajectory.

Speaker Change: I would say, Cameron, on the sales and marketing side, you know, we have spent a fair amount of time of analyzing our costs on the sales and marketing side, reviewing the effectiveness of our marketing campaigns and sales campaigns.

Speaker Change: And, you know, I think whether it's on the Pandora side or the Sirius side, the success that we've had, you know, in looking at costs is starting to bear more fruit. And I think as we look at the year ahead, we're going to spend more time on, as we get more data from our replatforming and we start getting more information, I think we'll have more effective use of our sales and marketing spend.

Speaker Change: Very helpful. Thank you both.

Speaker Change: Alright, thanks Cameron. Thanks everybody for participating in today's call. We'll speak to you soon.

Speaker Change: This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.