Q2 2025 Sirius XM Holdings Inc Earnings Call

Operator: Greetings. Welcome to the Sirius XM second quarter 2025 earnings call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Hooper Stevens, Senior Vice President of Investor Relations and Finance. Thank you, Hooper. You may now begin.

Greetings, welcome to the SiriusXM second quarter 2025 earnings call.

At this time of dispense, Earnest and only mode.

Question and answer session, or follow the formal presentation?

If anyone should require operator assistance, please press *0 on your telephone keypad.

As a reminder, this conference is being recorded.

It is my pleasure to introduce Hooper Stevens, Senior Vice President of Vesta Relations and Finance.

Hooper Stevens: Thank you and good morning, everyone. Welcome to Sirius XM's second quarter 2025 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, and Wayne Thorson, our Executive Vice President and Chief Operating Officer, will join Jennifer and Tom to take your questions during the Q&A portion of this call. I would like to remind everyone that certain statements made during the call might be forward-looking statements as the terms 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 that could cause actual results to differ materially.

Thank you, Hooper, you may now begin.

Thank you, and good morning, everyone. Welcome to SiriusXM second quarter 2025 earnings conference call. Today, we will have prepared remarks from Jennifer wits, our chief executive officer and Tom Barry. Our Chief Financial Officer, Scott Greenstein, our president and chief content officer and Wayne Thorson, our Executive Vice President and chief operating officer will join Jennifer and Tom to take your questions during the Q&A portion of this call.

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

These in all four 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.

Hooper Stevens: For more information about these risks and uncertainties, please view Sirius XM's SEC filings and today's earnings release. We advise listeners to not rely unduly on forward-looking statements and disclaim any intent or obligation to update them. As we begin, I'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. Additionally, we have posted a supplementary presentation on our IR website for your convenience. With that, I'll hand the call over to Jennifer.

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. In today's earnings release, we advise listeners not to rely solely 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...

Jennifer Witz: Thank you, Hooper Stevens. Good morning, everyone. The second quarter was a period of great progress as we continued to deliver meaningful value to our subscribers, listeners, and advertising partners and optimize our organization through the lens of our renewed strategic focus. From deeper engagement with our loyal listeners to early momentum associated with our operational improvements and continued strong results across key performance indicators, we are confident we are on the right path for the long-term success of the business. Beginning with content, it has been an exciting few months as we announced new talent and programming, produced one-of-a-kind subscriber events, and tapped into the full power of our platform with major moments in news and culture. One of the highlights of the quarter included our new agreement with Stephen A. Smith, who will be joining us this fall.

And adjusted results all discussions of adjusted operating results exclude the effects of stock-based compensation. Additionally, we have posted a supplementary presentation on our IR website for your convenience with that, I'll hand the call over to Jennifer.

Thank you, Hooper. Good morning, everyone. The second quarter was a period of great progress, as we continued to deliver meaningful value to our subscribers, listeners and advertising partners and optimize our organization through the lens of our renewed, strategic Focus,

From deeper engagement with our loyal listeners to early momentum associated, with our operational improvements and continued strong results. Across key performance indicators. We are confident, we are on the right path for the long term success of the business.

Jennifer Witz: SiriusXM offers multifaceted personalities and creators a place to connect deeply with their fans on many topics. This deal, for example, has Stephen A. helming both a live daily sports show on Mad Dog Sports Radio and a political and culture program expected to air on the POTUS Channel and then run as a broadly distributed podcast. The collaboration with Stephen A. leans into many of our strengths, including our leadership in sports audio, live coverage, real-time fan interaction, and effective monetization of listeners across both subscription and advertising-supported audio. These are the types of thoughtful content investments we will continue to make moving forward. Within our SiriusXM subscription business, we are pleased to deliver year-over-year improvements in self-pay net adds for the fifth quarter in a row, which in Q2 improved by $32,000 over the same quarter last year.

Collaboration with Stephen a lanes into many of our strengths, including our leadership in sports audio live coverage real time fan interaction and effective monetization of listeners across both subscription and advertising supported audio. These are the types of thoughtful content investments, we will continue to make.

Moving forward.

Within our Sirius XM subscription business, we're pleased to deliver year over year improvement in self pay net adds for the fifth quarter in a row, which in Q2 improved by 32000 over the same quarter last year.

Jennifer Witz: This quarter's results were primarily driven by the expansion and positive impact of new acquisition initiatives combined with continued low churn. These initiatives include our automotive dealer three-year subscription program, which earlier this month kicked off with Audi, our ACE OEM partner, enhancements to our used car owner data, our EV expansion, and Podcast Plus package. We still anticipate the headwinds we highlighted heading into 2025, particularly our intentional pullback of streaming marketing spend to impact comparisons in the back half of the year. While our full-year subscriber expectations remain unchanged, the first half of 2025 underscores the success of these acquisition efforts and the strength, health, and resilience of our core subscriber base. We are committed to delivering even greater value to our dedicated customers.

This quarter's results were primarily driven by the expansion and positive impact of new acquisition initiatives combined with continued low churn. These.

These initiatives include our automotive dealer three year subscription program, which earlier this month kicked off with Audi our eighth OEM partner enhancements to our used car owner data R. E V expansion and podcast plus package.

We still anticipate the headwinds we highlighted heading into 2025, particularly our intentional pullback of streaming marketing spend to impact comparisons in the back half of the year.

But while our full year subscriber expectations remain unchanged. The first half of 2025 underscores the success of these acquisition efforts and the strength and resilience of our core subscriber base we.

We are committed to delivering even greater value to our dedicated customers. After successfully incorporating additional content into various packages last fall. We are pursuing further value add as well as continuous enhancements to our in app experience as a complement to in car listening.

Jennifer Witz: After successfully incorporating additional content into various packages last fall, we are pursuing further value adds as well as continuous enhancements to our in-app experience as a complement to in-car listening. This quarter, we launched a new call-in button, which appears on live talk programming in the app as the phone lines open up for listeners, making it as easy as one tap to chat live with favorite hosts. This is just one of the ways we are super serving our core audience, deepening their connection with our content through the timeliness of our service. We are also seeing increased usage of our streaming offering more broadly, with in-app time spent listening up year over year in both listening hours and days for our self-pay subscribers. Additionally, consumption of our streaming extra channels and artist stations continues to increase both in-car and in-app.

This quarter, we launched a new calling button, which appears on live talk programming in the App as the phone lines open up for listeners, making it as easy as one tap to chat live with favorite hosts. This is just one of the ways. We are super serving our core audience deepening their connection with our content through the timeliness of our service.

We are also seeing increased usage of our streaming offering more broadly within our time spent listening up year over year and both listening hours and days for our self pay subscribers. Additionally consumption of our streaming extra channels in artist nation continues to increase both in car and in App building engagement across content types.

Jennifer Witz: Building engagement across content types and devices has been a major factor in sustaining our incredibly high customer satisfaction and low churn. As we look to highlight our unique differentiators to new potential customers and thoughtfully grow our subscriber base, we are building additional packages to meet their needs. Earlier this month, we began rolling out SiriusXM Play, our new in-car and in-app ad-supported subscription plan. Featuring a compelling subset of our music and talk programming available at a low monthly price, we expect Play to be available in almost 100 million vehicles by the end of this year. Play presents a logical solution for price-sensitive customers with SiriusXM already built into their vehicles who are looking to complement their on-demand audio platform of choice with a more curated, live, and connected experience with the same ease of traditional radio.

And devices has been a major factor and sustaining our incredibly high customer satisfaction and low churn.

As we look to highlight our unique differentiators to new potential customers and thoughtfully grow our subscriber base. We are building additional packages to meet their needs earlier. This month, we began rolling out Sirius XM play our new in car and in App AD supported subscription plan featuring a compelling subset of.

Music and talk programming available at a low monthly price, we expect play to be available in almost 100 million vehicles by the end of this year.

Play presents a logical solution for price sensitive customers with Sirius XM already built into their vehicles or looking to complement their on demand audio platform of choice with a more curated live and connected experience with the same ease of traditional radio the introduction of play rounds out our broader pricing and packaging work.

Jennifer Witz: The introduction of Play rounds out our broader pricing and packaging work, which now includes a variety of plans and price points suited to different types of listeners. While we believe Play has the potential to contribute to improved subscriber results, we are scaling this new solution at a thoughtful rate, leveraging the marketing investments we've made to target the right potential customers with the right content and package. Play also introduces opportunities into our portfolio of advertising solutions, taking advantage of the continuous improvements we are making to our ad tech stack. This includes the addition of ad replacement capabilities on 360L vehicles toward the end of this year and updates which will make it easier for marketers to seamlessly purchase across satellite broadcast, streaming, and podcasting in a single order.

<unk>, which now includes a variety of plans and price points suited to different types of listeners.

We believe play has the potential to contribute to improved subscriber results. We're scaling this new solution at a thoughtful rate leveraging the marketing investments we've made to target the right potential customers with the right content and package.

It also introduces opportunities into our portfolio of advertising solutions, taking advantage of the continuous improvements we are making to our AD Tech stack. This includes the addition of AD replacement capabilities on 360 L vehicles towards the end of this year and updates, which will make it easier for marketers to seamlessly purchase across satellite broad.

Cast streaming and podcasting in a single order.

Jennifer Witz: This quarter, we announced an agreement to improve audio's representation within media mix models, an important step forward in the measurement landscape. We also launched a new capability which allows advertisers to leverage AI voice replicas in audio ad creative to quickly launch more scalable campaigns at a lower cost. Each of these advancements is part of our larger goal of getting audio in every media plan by addressing many of the complexities in creative planning, buying, measuring, and targeting that have traditionally held marketers back. We continue to see challenges in the ad market due to economic consumer and tariff uncertainty, ranging from budget pullbacks to dollars shifting to lower funnel channels to drive short-term sales, with categories such as retail more adversely impacted. Additionally, we are seeing pricing pressure in streaming from an excess of CTV inventory and audio competitors reacting. Podcasting, however, remains a bright spot.

This quarter, we announced an agreement to improve audio is representation within media mix models and important step forward in the measurement landscape.

We also launched a new capability, which allows advertisers to leverage AI voice replicas and audio AD creative to quickly launch more scalable campaigns at a lower cost.

Each of these advancements is part of our larger goal of getting audio in every media plan by addressing many of the complexities and creative planning buying measuring and targeting that have traditionally held marketers back we continue to see challenges in the AD market due to economic consumer.

And tariff uncertainty ranging from budget pullbacks to dollars shifting to lower funnel channels to drive short term sales with categories, such as retail more adversely impacted <unk>.

Additionally, we are seeing pricing pressure in streaming from an excess of CTV inventory and audio competitors reacting podcasts. However remains a bright spot while overall advertising was down approximately 2% from Q2 2020 for podcast AD revenue climbed almost 50% year over year.

Jennifer Witz: While overall advertising was down approximately 2% from Q2 2024, podcast revenue climbed almost 50% year over year. The investments we've made in the podcast space, new content, significantly expanded video and social inventory, and ongoing measurement and technology enhancements are paying off for both our creators and our business. This week, we announced an agreement with one of the top true crime podcasts, Morbid, and in Q2, we signed a deal with comedian Trevor Noah, which brought his show, What Now?, to our network this month. When a creator's reach suddenly expands, such as Mel Robbins' show, which is up more than 500% year over year, or Conan O'Brien adding full-length podcast video on YouTube, we are able to quickly and effectively monetize that growth.

The investments we've made in the podcast space, new content significantly expanded video and social inventory and ongoing measurement and technology enhancements are paying off for both our creators and our business.

This week, we announced an agreement with one of the top true crime podcasts morbid and in Q2, we signed a deal with comedian Trevor Noah which brought his show what now to our network. This month when our creators reached suddenly expands such as Mel Robyn show, which is up more than 500% year over year or.

Conan O'brien, adding full length podcasts video on Youtube, we are able to quickly and effectively monetize that growth. This quarter. We also hosted a variety of live events, including John Mayer, joining smartly live in Los Angeles, which provide both subscriber exclusives and opportunities for deeper brand integrations.

Jennifer Witz: This quarter, we also hosted a variety of live events, including John Mayer joining Smartlist Live in Los Angeles, which provide both subscriber exclusives and opportunities for deeper brand integrations. Overall, we have made strong progress across many of our key initiatives in the quarter with disciplined investments that will enhance experiences for our subscribers and advertisers to support the future growth in our business. At the same time, we continue to drive efficiencies across our organization, and we remain focused on delivering on our guidance for the year. Now, I will turn it over to Thomas Barry for details on the quarter's financial results.

Overall, we've made strong progress across many of our key initiatives in the quarter with disciplined investments that will enhance experiences for our subscribers and advertisers to support the future growth in our business at the same time, we continue to drive efficiencies across our organization and we remain focused on delivering on our guy.

For the year.

And now I'll turn it over to Tom for details on the quarter's financial results.

Thomas Barry: Thank you, Jennifer, and good morning, everyone. In the second quarter, we executed with strong financial discipline, delivering results that highlight the strength of our model and the consistency of our strategy. We maintained healthy margins, accelerated our cost savings program, and generated substantial free cash flow, all while continuing to invest in what matters for long-term success. With that, let's jump into the results. Revenue for the quarter totaled $2.14 billion, down 2% compared to the second quarter last year, with similar results across our subscription and advertising revenue streams. Adjusted EBITDA in the quarter was $668 million, down 5% on a year-over-year basis, reflecting a healthy margin of 31%. Free cash flow rose 27% to $402 million, driven by timing of payments, lower capital expenditures, and the elimination of Liberty-level overhead in prior year.

Thank you Jennifer and good morning, everyone in the second quarter, we executed was strong financial discipline delivering results that highlight the strength of our model and the consistency of our strategy.

Maintained healthy margins.

Celebrate our cost savings program and generate substantial free cash flow all while continuing to invest in what matters for long term success.

With that let's jump into the results.

Revenue for the quarter totaled to $1 4 billion down 2% compared to the second quarter last year with similar results across our subscription and advertising revenue streams adjusted EBITDA in the quarter was $668 million down 5% on a year over year basis, reflecting a healthy margin of 31%.

Free cash flow rose, 27% to $402 million, driven by timing of payments lower capital expenditures and the elimination of liberty level overhead and prior year.

Thomas Barry: On the topic of costs, we had previously articulated a $200 million run rate cost savings goal across OpEx and CapEx exiting this year. Thanks to early action, we now expect to achieve approximately $200 million of gross savings in period this year. While the majority of this is in OpEx, we also now expect to land near the lower end of our previously articulated non-satellite CapEx range of $450 million to $500 million this year. We expect non-satellite CapEx to decline to approximately $400 million next year, in addition to the significant decline we will see in satellite CapEx. The success of our cost program reflects continued strong discipline in execution across our business. In the quarter, sales and marketing expense declined 20% year over year, benefiting from a more efficient campaign mix in the timing of planned brand and in-car initiatives.

On the topic of course, we had previously articulated a $200 million run rate cost savings goal across Opex and capex exiting this year.

Thanks to early action, we now expect to achieve approximately $200 million of gross savings in period. This year. While the majority of this is in Opex. We also now expect to land near the lower end of our previously articulated non satellite Capex range of 450 to 500 million this year.

We expect non satellite capex to decline to approximately $400 million next year. In addition to the significant decline we will see in satellite Capex.

The success of our cost program reflects continued strong discipline and execution across our business in.

In the quarter sales and marketing expense declined 20% year over year.

From a more efficient campaign mix and the timing of planned brand and in car initiatives.

Thomas Barry: That said, we do expect some reinvestment in the second half as we re-accelerate select campaigns, and of course, we begin to lap lower spending quarters from late last year. Product and technology costs fell by 20% in the quarter to $48 million, driven by ongoing optimization of vendor contracts and cloud infrastructure. Gross cost savings were partially offset by several anticipated items. G&A was $124 million, an increase of 23%, reflecting higher legal expenses against a positive insurance recovery in the prior year period. During the quarter, we took decisive steps to sharpen our organizational and product focus with a comprehensive technology and workforce realignment. This included a non-cash write-off of approximately $100 million in capitalized software assets that are no longer aligned with our streamlined roadmap. We also reduced our product and tech workforce by 20% among contractors and 10% among full-time employees.

That said, we do expect some reinvestment in the second half as we Reaccelerate slug campaigns and of course, we begin to lap lower spending quarters from late last year.

Product and technology costs fell by 20% in the quarter to $48 million driven by ongoing optimization of vendor contracts and cloud infrastructure.

Those cost savings were partially offset by several anticipated items G&A was $124 million, an increase of 23%, reflecting higher legal expenses against a positive insurance recovery in the prior year period.

During the quarter, we took decisive steps to sharpen our organizational and product focus with a comprehensive technology and workforce realignment.

This included a noncash write off of approximately $100 million and capitalized software assets that are no longer aligned with our streamlined roadmap.

We also reduced our product and tech workforce by 20% among contractors and 10% among full time employees.

Thomas Barry: These changes position us to operate more nimbly and with greater use of AI-enhanced development in the future, enabling stronger execution of our core mission. Subscriber acquisition costs were $107 million in the quarter, up 16% year over year. This rise reflects continued investment in high-quality subscriber acquisition channels, including contractual changes with select automakers. SAC per installation was about $18, reflecting our focus on expanding penetration and encouraging adoption of SiriusXM 360L and the latest generation of our chipset in vehicles. These investments are part of our broader strategy to optimize expenses across revenue share, data costs, and marketing. Looking at the segments, SiriusXM revenue was $1.61 billion, down 2% from prior year, driven by a smaller self-pay subscriber base. ARPU was essentially flat at $15.22, improving our recent trends as the impact of the March rate increase continued to roll through.

These changes position us to operate more nimbly.

Greater use of AI enhanced development in the future, enabling stronger execution of our core mission.

Subscriber acquisition costs were 107 million in the quarter up 16% year over year.

This rise reflects continued investment in high quality subscriber acquisition channels, including contractual changes with select automakers.

Per installation was about $18, reflecting our focus on expanding penetration and encouraging adoption of Sirius XM free 60, L and the latest generation of our chipset and vehicles.

These investments are part of our broader strategy to optimize expenses across revenue share data costs and marketing.

Looking at the segments Sirius XM revenue was 1.61 billion down 2% from prior year, driven by smaller self pay subscriber base <unk>.

<unk> was essentially flat at $15 22.

Proving our recent trends as the impact of the March rate increase continue to roll through.

Thomas Barry: Segment gross profit was $966 million, with a gross margin of 60%. Subscriber performance improved meaningfully year over year, driven by strength in gross ads and continued strength in self-pay retention. Self-pay net sub additions were negative $68,000 in the second quarter, an improvement of $32,000 compared to the prior year. This improvement reflects meaningful contributions from our new acquisition programs, paired with continued low churn rate of 1.5%, with strong performance across canceled demand, non-pay, and vehicle-related deactivations. In our Pandora and Off Platforms segment, revenue was $524 million, down 3% on a year-over-year basis. Subscriber revenue declined 6%, driven by a smaller average subscriber base, while advertising revenue fell 2%, reflecting reduced advertiser demand in streaming music and broader competitive pressures. These trends were partially offset by growth in podcast monetization, with podcast advertising revenue increasing substantially year over year at close to 50%.

Gross profit was 966 million with a gross margin of 60% subscriber performance improved meaningfully year over year driven by strength in gross adds and continued strength in self pay retention self pay net sub additions were rolled were negative 68000 in the second quarter an improvement of 30.

<unk> 2000 compared to the prior year this.

This improvement reflects meaningful contributions from our new acquisition programs paired with continued low churn rate of one 5% with strong performance across canceled demand non PE and vehicle related the activations.

Our Pandora and off platform segment revenue was $524 million down 3% on a year over year basis subscriber revenue declined 6% driven by a smaller average subscriber base, while advertising revenue fell 2%, reflecting reduced advertiser demand in streaming music.

Water competitive pressures these.

These trends were partially offset by growth in podcast monetization with podcast advertising revenue increasing substantially year over year at close to 50% we.

Thomas Barry: We also saw expanded reach through video and social platforms, including contributions from new creator partnerships. Segment gross profit was $154 million, with a 29% margin. Our capital structure remains healthy and flexible. We ended the quarter with a net debt-to-adjusted EBITDA ratio of 3.8 times. We returned approximately $137 million to shareholders in the quarter, by $92 million in dividends and $45 million in share buybacks. Finally, we are reaffirming our full-year 2025 guidance, approximately $8.5 billion in total revenue, $2.6 billion in adjusted EBITDA, and $1.15 billion in free cash flow, reflecting continued confidence in our strategy and execution. While the advertising environment remains the largest risk to our outlook, the company is closely monitoring the related macroeconomic trends. At the same time, we see potential upside to our free cash flow guidance, given potential tax-related benefits from recent legislation and some degree of lower CapEx.

We also saw expanded reach through video and social platforms, including contributions from new creative partnerships.

<unk> gross profit was 154 million with a 29% margin.

Our capital structure remains healthy and flexible we ended the quarter with a net debt to adjusted EBITDA ratio of three eight times, we returned approximately $137 million to shareholders in the quarter by $92 million in dividends and $45 million share buybacks. Finally, we are reaffirming our full year 2025.

Guidance approximately $8 5 billion in total revenue $2 6 billion and adjusted EBITDA at 1.15 billion in free cash flow, reflecting continued confidence in our strategy and execution.

While the advertising environment remains the largest risk to our outlook. The company is closely monitoring the related macroeconomic trends.

Same time, we see potential upside to our free cash flow guidance given potential tax related benefits from recent legislation in some degree of lower Capex. We plan to update you on the ball to close we remain confident in our strategic priorities and our ability to deliver on our financial targets strong cash generation and ongoing.

Thomas Barry: We plan to update you in the fall. To close, we remain confident in our strategic priorities and our ability to deliver on our financial targets. Strong cash generation and ongoing focus on cost efficiency positions us well to navigate near-term headwinds. At the same time, we're investing in what matters: our core subscription business, enhanced in-car experiences, and growing off-platform monetization. We are optimistic about our future and committed to driving meaningful value to our listeners and shareholders. With that, I'll turn it over to the operator for Q&A.

Focus on cost efficiency positions us well to navigate near term headwinds at.

At the same time, we're investing in what matters, our core subscription business enhanced in car experiences and growing off platform modernization, we are optimistic about our future and committed to driving meaningful value to our listeners and shareholders with that I'll turn it over to the operator for Q&A.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question at this time, 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 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. The first question today comes from the line of Jessica Reif Ehrlich with Bank of America. Please proceed with your question.

Thank you well now be conducting a question and answer session.

If you'd like to ask a question at this time. 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 to remove yourself from the queue.

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

Wendell please while we poll for questions.

Thank you and the first question today comes from the line of Jessica Reif Ehrlich with Bank of America. Please proceed with your question.

Jennifer Witz: Oh, thank you. Good morning, everyone. A quick question on maybe what Tom just, two questions, but what Tom just mentioned on the guidance for free cash flow. It was, you said you may, you will revisit maybe because of tax and CapEx, but you know, it was a huge beat in the second quarter. I am just wondering why not the flow-through for the full year? Then a question for Scott. You have been so great at consistently introducing new content. How are you thinking now about trying to skew younger? Particularly when that is maybe more challenged from a subscription level, you know, it would seem like it would be more like advertising supported. Any commentary on that would be great.

Oh, Thank you good morning, everyone.

A question on maybe what Tom just two questions, but what Tom just mentioned on the guidance for free cash flow.

You said you may you'll revisit maybe its because its tax and capex, but.

It was a huge beat in the second quarter I'm, just wondering why or why not to flow through for the full year and then a question for Scott you did so created consistently introducing new content. How are you thinking now about like trying to skew younger.

And particularly when that's maybe more challenged from a subscription level.

It did seem like it would be more like advertising supported so any commentary on that would be great.

Thomas Barry: Jessica, good morning. It is Tom. To address the first one, as it relates to free cash flow, we did have a sizable beat on free cash flow year over year in the quarter. Some of it was timing. As you look at the first quarter, we were a little bit behind as far as where we were looking number-wise year over year. So year to date, we think we are in pretty good shape when we look at the timing of the payments going into the full year. We do have two things that have been going on. The team has been working on the cost structure and continuing to focus on CapEx and the optimization of CapEx.

So Jessica good morning its.

It's Tom so to address the first one as it relates to free cash flow, yes, we did have a <unk>.

<unk> will be on free cash flow year over year in the quarter.

It was timing and as you look at the first quarter, we were a little bit behind as far as where we're looking number wise year over year. So year to date, we think we're in pretty good shape. When we look at the timing of the payments going into the full year. We do have two things that have been going on the team's been working on the cost structure and continuing to.

A focus on Capex and the optimization of Capex and honestly the new tax Act. We're just looking through the final a stroke. So they just to make sure that we got the spread of it between multiple years because you can.

Thomas Barry: Honestly, the new tax act, we are just looking through the final strokes of it just to make sure that we got the spread of it between multiple years because you can actually spread it over 2025 and 2026 to benefit. We are just working through that. We should have an update on that in this fall timeframe.

Actually spread it over 25 and 26 the benefit and so we're just working through that we should have an update on that.

And this fall timeframe great.

Scott Greenstein: Right. On the question about getting younger, a couple of things. One, obviously, the podcast market has been ripe for us to look at that and still monetize heavily in that. When you look at Alex Cooper, Smartless, even Mel Robbins and Rotten Mango, those are younger than our core. Even Stephen A. Smith, which is in radio and podcasting, is a little younger than our core. With that, we have the ability to see how that works. Alex Cooper's music channel on SiriusXM is doing really well, and that is obviously geared to a younger audience. We are going to look at where that calibration is and start to see where something might be younger but yet ripe for subscription. While we are waiting that out, we are going to continue to monetize heavily younger content in the podcast market.

Great.

On the question about getting younger a couple of things one obviously the podcast market has been right for us to look at that and still monetize heavily in that when you look at Alex Kuiper smart with even though Robbins and Rotten Mango those are younger than our core and even Steven a Smith, which is in.

Radio and podcasting is a little younger than our core so with that we have the ability to see how that works now Alex Cooper's music channel on Sirius is doing really well and that's obviously geared to a younger audience. So we're going to look at where that calibration is and start to see where something might be younger.

Yet right for subscription and while we're waiting that out we're going to continue to monetize heavily younger content in the podcast market.

Jennifer Witz: Yeah, I'd just add on to that, Jessica. I, you know, we just heard this week that with Edison's new Q2 report, we're going to be the number one podcast network in monthly listener reach for audiences 18 and up. As you highlighted, we've got a much broader audience with our podcast content. That does give us the opportunity, as Scott outlined, to perhaps bring more of those younger listeners into SiriusXM. But as you know, we're being very disciplined and focusing on our core audience there.

Yeah, I'd just add on to that Jessica I you know, we just heard this week that with Edison Nu Q2 report, we're gonna be the number one podcast that work and monthly listener reach our audiences 18 and up so as you highlighted we've got a much broader audience.

As our podcast content and that does give us the opportunities as Scott outlined to perhaps bring more of those younger listeners into serious Exxon, but as you know we're being very disciplined in focusing on our core audience there.

Speaker 11: Thank you.

Thank you.

Operator: Our next questions come from the line of Barton Crockett with Rosenblatt Securities. Please proceed with your questions.

Our next questions come from the line of Barton Crockett with Rosenblatt Securities. Please proceed with your questions.

Wayne Thorson: Thanks for taking the question. I wanted to maybe lean in a little bit more on what you are doing with podcasting and the digital side of advertising. I guess a couple of things. One is, if you could give us just some type of sense of how to think about podcasts in the mix. It was up 50%. Just to try and get a sense of when that is going to be large enough to really move the needle on the overall kind of ad line. Secondarily, I know that there is some development, some efforts on your side and also with some others in the sector on more fulsomely developing the digital kind of programmatic ad tech capabilities.

Thanks for taking the question.

I wanted to maybe lean in a little bit more on what youre doing with podcasting and the digital side of advertising.

And I guess, a couple of things one is.

If you could give us just some type of sense of how to think about podcast in new Mexico was up 50%.

Just trying to get a sense of when that's going to be large enough to really move the needle on the overall kind of add line.

And then secondarily.

I know that there is there is some development some efforts.

On your side and also with some others in the sector on a more fulsome way developing the digital kind of programmatic AD tech capabilities.

Wayne Thorson: I was just wondering if you could update us on where you guys are with that and how you think that could contribute over time to that ad revenue line for you.

Was just wondering if you could update us on where you guys are with that and.

How you how you think that could contribute over time to that AD revenue line for you.

Jennifer Witz: Yeah, thanks, Barton. We are really pleased with our podcast offering. It's, you know, we were up nearly 50% in the quarter. We continue to see strong growth going forward there. In terms of the mix, I think we've said in the past that Pandora represents about 55% to 60% of our total advertising revenue. So that gives you some indication. The rest is obviously SiriusXM, Pandora, or SiriusXM podcasting and other off-platform. We do think there's room for this to continue to grow as a portion of our total ad revenue. We have a lot of opportunities, not only just given the talent, and as Scott mentioned, sort of creators coming to us because of our industry-leading monetization and how we've approached sort of cross-platform distribution, more broadly.

Thanks, Barton I, we are really pleased with our podcast offering. It's I you know we were up nearly 50% in the quarter. We continued to see strong growth going forward. There in terms of the mix I. So I think we've sat in the past that handle a represents about 55% to 60%.

Of our total advertising revenue. So that gives you some indication on the RASK is obviously Sirius XM Pandora are serious Exxon podcasting and other off platform, but we do think there's room for those to continue to grow as a portion of our total AD revenue.

We have a lot of opportunities not only just given the talent and and as Scott mentioned sort of creators coming to us because of our industry, leading monetization and how we've approached the cross platform distribution more.

More broadly we've worked really well in terms of distribution with Youtube and others to take advantage of the massive growth in video podcasting I as.

Jennifer Witz: We've worked really well in terms of distribution with YouTube and others to take advantage of the massive growth in video podcasting, as well as monetizing through social. I think on the programmatic side, or maybe to speak a little bit more broadly about the advertising revenue outside of podcasting on, you know, music streaming and other digital audio, our biggest opportunity there, so Pandora RPM was down in the quarter, and we continue to see challenges with really the macroeconomic backdrop and the flood of inventory from CTV. What we need to better do is to make sure audio isn't competing with CTV but is increasingly seen as a way to extend reach. We've talked about this before. Audio is significantly under-monetized relative to other media. One of the ways to unlock that is through things like better targeting and measurement.

As well as monetizing through social and so I think on the programmatic side or maybe just speak a little bit more broadly about the advertising revenue outside of broadcasting on music streaming and other digital audio.

Our biggest opportunity Theres, a pandora RPM was down in the quarter and we continue to see challenges with really the macroeconomic backdrop and a flood of inventory from D. T D and what we need to better do is to make sure audio isn't competing with C. T V but is increasingly.

Scene as a way to extend reach and we've talked about this before audio is significantly under monetize relative to other media one of the ways to unlock that is through things like better targeting and measurement. We did announce a deal with <unk> to improve our integration with MLM models will have more of those to come but we are seeing.

Jennifer Witz: We did announce a deal with Innovate to improve our integration with models. We'll have more of those to come, but we are seeing some nice take-up by advertisers there, and it really does help extend the value of audio and prove the ROI, where in this environment, obviously, advertisers are really focused on making sure that they're seeing those specific returns.

Some nice take up by advertisers there and it really does help I extend the value of audio and prove the ROI. We're in this environment. Obviously advertisers are really focused on making sure that they're seeing a specific return.

Wayne Thorson: Okay. That's great. Thank you.

Okay. That's great. Thank you.

Okay.

Operator: Our next questions come from the line of Stephen Cahill with Wells Fargo. Please proceed with your questions.

Our next questions come from the line of Steven Cahall with Wells Fargo. She with your questions.

Stephen Cahill: Thanks. Jennifer, I think you all have done a lot of simplifying of the in-car plans. I think the most notable one is your all-music plan. I think prior to this, music has always had a bit of a tiering structure to it. Can you just update us a little bit on that strategy and what kind of customer benefits or churn benefits you are seeing as you step into these new simplified plans? What does it mean for ARPU over the medium term? Should we still expect growth in the second half of the year? On net adds, historically, Q4, I think, has been your best quarter for net adds. This is kind of an abnormal year given all the tariff impacts on the auto market. How do we think about net add trends as we get through the year?

Thanks, So Jennifer I think you all have done a lot of simplifying of the in car plans I think the most notable one is you're all music Atlanta I think prior to this music has always had a bit of a tiered structure to it. So can you just update.

That's a little bit on that strategy and like what kind of customer benefits or churn benefits youre seeing as you step into these new simplified plans and what does it mean for <unk> over the medium term should we still expect growth in the second half of the year.

And then just on net adds historically Q4, I think has been your best quarter for net adds this is kind of an abnormal year given all the tariff impacts on the auto market. So how do we think about net add trends as we get through the year and should we still expect that year on year improvement in net adds excluding the impact from streaming. Thank you.

Stephen Cahill: Should we still expect that year-on-year improvement in net adds, excluding the impact from streaming? Thank you.

Yeah.

Jennifer Witz: Sure. Thanks, Stephen. First, on pricing and packaging, I am really pleased with the progress we have made here. We continue to focus on three primary efforts. One is enhancing value of our full-price subscription plans. As you know, we did a rate increase in March, and we were really well positioned, I think, to manage through that because of the content we provided to more subscribers last fall. That is going to be an operating model for the future. In our in-car modular pricing and packaging with the $9.99 price point you mentioned, we are rolling this out slowly to new customers only in trial first, alongside shorter-term promos, which means they roll to these full-price packages more quickly. We have a number of different price points there, as you alluded to, with $9.99 being the entry-level price point all the way up to $25.

Sure Thanksgiving I, so first on pricing and packaging I'm really pleased with the progress. We've made here. We continue to focus on three primary efforts one is enhancing value of our full price subscription plans as you know we get a rate increase in March and we were really well positioned I think to manage through that.

Because of the content, we provide it to more subscribers last fall.

And that is gonna be I kind of in our operating model for the future I in our in car modular pricing and packaging with a 99 price point you mentioned I you were rolling this out slowly to new customers only in trial first a weird alongside shorter term promos are which means they roll to the full price package.

There's more quickly.

So we have a number of different price points. There as you alluded to with 999 being a kind of the entry level price point, all the way up to $25. The vast majority of customers coming through are those marketing campaigns are choosing the 25 dollar package and the real benefit of this is that we see.

Jennifer Witz: The vast majority of customers coming through those marketing campaigns are choosing the $25 package. The real benefit of this is that we see stronger retention ultimately on these full-price packages. We not only get off of these longer-term discounts we have been using in acquisition more quickly, but we also retain customers on these full-price packages. We think that has a lot to do with the enhanced transparency there. I will turn to Wayne in a minute to talk a little bit about the introduction of Play, which is part of the good, better, best packaging structure we have put in place. I really feel good about the balance of demand and retention in terms of this full packaging structure.

Longer retention ultimately omnis full a full priced packages. So we not only get off of these longer term a discount we have been using an acquisition more quickly, but we also retain customers on these full priced packages. We think that has a lot to do with the enhanced transparency there.

And I'll I'll turn to wane in a minute to talk a little bit about the introduction of play which is you know part of the good better best packaging structure, we've put in place, but I really feel good about the balance of demand and retention in terms of this full packaging structure and I think we've said in the past and we still believe that.

Jennifer Witz: I think we have said in the past, and we still believe that ARPU trends will continue to improve as we go out through this year, generally because of the roll-through of the rate increase we did in March. I will come back to net adds after Wayne comments on Play.

At our boot trends will continue to improve as we go out through this year I generally because of the roll through of the rate increase we did in March and then I'll come back to net adds after Wayne comments on play.

Wayne Thorson: Yeah, and thanks. As Jennifer Witz said, this is priced to Play, which we just launched about two weeks ago, is in the U.S. and Canada. It is priced below our lowest music-only offering, which you are noting. It does extend our good, better, best pricing strategy, which we are getting much more disciplined with. The goal here is to reach these new price-sensitive audiences, but still preserving the ARPU that we have through a balanced mix of subscription and, of course, advertising revenue. This is very similar to what we have seen become quite standard with SVODs. We are still testing price points as we are moving through, but we expect it to stay under $7 for the MSRP to the user, of course, with the advertising revenue on top of that.

And thanks.

As Jennifer said I mean, this is price to play what should we just launched about two weeks ago.

Is in the U S and Canada, it's priced below our lowest music only offering which are noting and it does extend our good better best pricing strategy, which we're getting much more disciplined with and the goal here is to reach these new price sensitive audiences, but still preserving the ERP that we have through a balanced mix of subscription and of course advertising revenue and.

Yeah. It was very similar to what we've seen you know would.

Become quite standard and with S. Funds. So we're still testing price points as we're moving through but we expect it to stay under seven for the MSRP for the user of course with the advertising revenue on top of that and and and as noted in our last call and as noted elsewhere.

Wayne Thorson: As noted in the last call and as noted elsewhere, a big part of this is being thoughtfully, as we thoughtfully roll this out and being guided by some of the investments that we have made in our martech stack to be able to target to people who we found in the past or we have targeted and modeled as much more price-sensitive or, in the past have been guided towards, other plans or deep discounts from the beginning.

A big part of this is being thoughtfully as we thoughtfully roll this out and being guided by.

Some of the investments that we've made in our martech stack to be able to target to people, who we found in the past or or we have a we have targeted and model is much more price sensitive or or in the past have been guided towards you know other plans or deep discounts from the beginning.

Jennifer Witz: Yeah. So back to net adds and the trend line, I do expect to see some change in seasonality this year relative to years past. Some of that has to do with the year-over-year comps and the fact that we had a very relatively strong quarter in the fourth quarter last year on streaming. Just maybe to give you a bit more color on that, obviously, with the suspension of the federal regulation on click-to-cancel, we should see a slightly better outcome as a result of not having that in place, although it is rolling out in several states. We continue to watch that. On the streaming side, we would expect about a reduction of 300,000 net adds this year on streaming subs.

So back to our net adds in the trend line I do expect to see some change in seasonality. This year are relative to years past and some of that has to do with a year over year comps and the fact that we had a very a relatively strong quarter in the fourth quarter last year on streaming. So just maybe to give you a bit more color on that.

Yeah, obviously with the suspension of the federal regulation on click to cancel we should see a slightly better outcome as a result of not having that in place. Although it is rolling out in several states. So we continue to watch that but on the streaming side we would.

That's about a reduction of 300000 net adds this year on streaming startup. So that gives you some sense as to you know when we talk a bit about the that we would be better year over year absent. Some of these one time items or pull forward impacts are it gives you a better sense as to how the.

Jennifer Witz: That gives you some sense as to when we talk a bit about that we would be better year-over-year absent some of these one-time items or pull-forward impacts. It gives you a better sense as to how that looks. On the in-car side of the business, I feel really good about what we've been delivering. We are really focused on executing against the strategy reset we did in December, focusing on our in-car business. We have a number of acquisition programs that are delivering better demand ultimately. We continue to see very impressively low churn, and that has a lot to do with increased engagement. I think we have more to come there.

Look on the in car side of the business I feel really good about what we've been delivering we are really focused on executing against the strategy reset we did in December focusing on our in car business. We have a number of acquisition programs that are delivering a better demand ultimately and we.

Continue to see a very impossibly low churn and that has a lot to do with the increased engagement and I think we have more to come there.

Wayne Thorson: Thank you, Jennifer.

Thank you Jennifer.

Operator: The next questions are from the line of David Joyce with Seaport Research Partners. Please proceed with your questions.

The next questions are from the line of David Joyce with Seaport Research Partners. Please proceed with your question.

David Joyce: Thank you. A couple of things. I was wondering about the expenses in G&A and what was driving the legal expenses, and was any of that kind of non-recurring? Secondly, a little bit more detail, please, on the strength in podcasting ad revenue. Are you seeing greater marketer adoption? Are there more marketers coming to the platforms? Or are they allocating more? Or is it a volume, the trend of adding more content or monetizing more of that content? Just, you know, pricing and volume kind of concept. If you could provide some more color there. Thanks.

Thank you.

Things. So I was wondering about the expenses and G&A and what was driving the legal expenses and was then it was any of that kind of nonrecurring.

And then secondly, a little bit more detail. Please on the strength in podcasting AD revenue.

Is there are you seeing greater marketer adoption like are there more marketers coming to the platform or are they allocating more or is the or is it the volume.

Yeah.

Trend of adding more content or monetizing more of their content.

Pricing and volume kind of concept if you could provide some more color there. Thanks.

Thomas Barry: David, it's Tom. Good morning. To answer the first part of your question as it relates to expenses, in G&A, we have a legal settlement for about $28 million this year. That skewed the expense on the G&A side. Also, just as background, last year, we had an insurance recovery of legal expenses, which was a $10 million benefit last year. That closes the broader differential as it relates to G&A. Overall, SG&A is slightly down because of the reduction we've done in sales and marketing in the quarter.

David It's Tom good morning.

To answer the first part of your question as it relates to expenses in the in G&A, we have a legal settlement for about $28 million in this year, so that skewed the expense on the G&A side. It also just as background last year, we had an insurance recovery of legal expenses, which was 10.

Million dollar benefit last year, so that closes the blogger differential as it relates to G&A and overall SG&A.

SG&A is slightly down because of the reduction we've done in our sales and marketing in the quarter.

Jennifer Witz: Yeah, and on podcasting, it is really all of the above. I mean, we continue to attract more creators to our sales and tech platforms. We are distributing broadly, of course, their podcasts and including video distribution in many cases. We are helping monetize across audio, video, and social with our Creator Connect products. We have seen both improvements in pricing. We are taking advantage of the strong demand by including more inventory units in the podcast in certain cases. I think advertisers generally want to be associated with this great talent. So there is a real opportunity to continue to expand on that demand and add to their buying, their media plans, a broader set of our inventory across satellite broadcast and streaming, especially as we bring more measurement capabilities.

Yeah.

Pod casting I, it's really all of the above I mean, we continue to attract more creators to our sales and tech platforms are we are distributing broadly of course I their podcast and including a video distribution in many cases, we're helping monetize it.

Loss of audio video and social with our creator connect products and I, we've seen both improvements in pricing we're.

We're taking advantage of the strong demand by including more inventory units are in the podcast in certain cases, I and I think advertisers generally want to be associated with this great talent. So I, there's a real opportunity to continue to expand on that day.

And you know add to their buying their media plans, a broader set of our inventory across satellite broadcast and streaming, especially as we bring more measurement capabilities and this includes on the satellite broadcast side, bringing more visibility into $3.

Jennifer Witz: This includes on the satellite broadcast side, bringing more visibility into 360L with ad replacement capabilities that we think will be coming online towards the end of the year.

60, all with Abbott placement capabilities that we think will be coming online towards the end of the year.

Operator: Great. Thank you very much. Our next question is from the line of Kakun Mural with Evercore ISI. Please proceed with your questions.

Great. Thank you very much.

Our next question is from the line of cooking morale with Evercore ISI. Please proceed with your questions.

Cameron Perrone: Great. Good morning and thanks for taking the questions. Maybe following up on Steve's question on net adds, you mentioned that the full-year subscriber outlook hasn't changed despite the encouraging strength in the quarter, given the expected headwinds you previously called out dragging the back half. I was hoping you could unpack the Q2 trends a bit more and talk about the forward outlook. Thinking about Q2, I'm not sure how much you can share, but how should we think about the mix of the upside in terms of core trends being better than expected from the benefits from the new acquisition initiatives and continued execution on churn as opposed to maybe some of the timing shifts on the one-off headwinds?

Great Good morning, and thanks for taking the questions maybe following up on Steves question on net adds you mentioned that the full year subscriber outlook hasn't changed despite the encouraging strength in the quarter given the expected headwinds you've previously called out dragging in the back half. So I was hoping you could unpack the Q2 trends a bit more and talk about the forward outlook.

Thinking about Q2, I'm not sure how much you can share, but how should we think about the mix of the upside in terms of you know core trends being better than expected from the benefits from the new acquisition initiatives and continued execution on churn as opposed to maybe some of the timing shifts on the one off headwinds in longer term.

Cameron Perrone: Longer term, maybe thinking about the new acquisition initiatives, can you expand on the uptick you're seeing from what you have in place today and what the pipeline of initiatives looks like longer term, whether that's in the back half of this year or even 2026, just in terms of giving us better confidence on the trajectory of sustainability of improvement in core net adds? Thank you.

You'd be thinking about the new acquisition initiatives can you maybe expand on the uptick youre seeing from what you have in place today and what the pipeline of initiatives it looks like longer term, whether that's in the back half of this year or even 2026 I'm just in terms of you know, giving us better confidence on the trajectory of them sustainability.

Improvement in core net ads. Thank you.

Jennifer Witz: Sure. So I would say on net ads for the quarter, we saw year-over-year improvements on both the acquisition side and the retention side. Very low churn, strong performance across cancel demand, non-pay, vehicle-related, and came in slightly better absent the rounding and on the churn rate. We feel really good about that, especially, again, with the rate increase having gone in place in March. On the acquisition side, it had a lot to do with the new programs we have been putting in place over the last, say, 12 to 15 months. These include the three-year OEM programs where dealers are ordering three years of SiriusXM with their vehicle orders. We continue to roll that out to more and more OEMs. We announced that we added Ford, and that will be launching later this year. I think we will continue to see strong performance there.

Sure so the I'd.

I'd tell you on net adds for the quarter.

We saw year over year improvements on both the acquisition side and the retention side, so very low churn and strong performance across canceled them and non PE vehicle related I and came in slightly better I absent the rounding and I on the churn rate. So we feel really good about that especially again with the ratings we havent.

Got in place.

You know in March and then on the acquisition side. It had a lot to do with the new programs you've been putting in place over the last say 12 to 15 months and these include the three year OEM programs, where dealers are ordering three years of Sirius XM with their vehicle orders and we continue to roll that out to more and more.

Oh, Yeah, I, you know, we announced that we added for it and that'll be launching later this year. So it will we'll continue to see strong performance there.

Jennifer Witz: We have things like enhancement of data in our used car funnel, which is just adding volume to our opportunities of subscribers coming through on the used car side of the business. We have our Podcast Plus, and we have, of course, the EV launches that we have put in place. I would expect some of those to continue to contribute and perhaps on a larger level. Of course, we have a number of initiatives in place. As Wayne discussed with Play and the rollout of our broader pricing and packaging structure, we are selectively adding content like Stephen A. We are continuing our 360L rollouts and adding features there. We are improving our marketing capabilities. All of these things are going to take time. I am pleased with the execution we have on these various initiatives.

And then we have things like enhancement of data in our used car funnel, which is just adding volume to our opportunities of subscribers coming through on the used car side of the business. We have a podcast plus and we have of course EV launches that we've put in place so I wouldn't.

Some of those to continue to contribute and perhaps on a larger level I and and of course, we've got a number of initiatives in place I, you know as Wayne discussed with play and the rollout of our broader pricing and packaging structure.

Selectively adding content like Stephen a we are continuing our 360 L. Rollouts and adding features there we're improving our marketing capabilities and all of these things are going to take time, but I am pleased with the execution. We have on these various initiatives, we've kind of talked about these acquisition programs.

Jennifer Witz: We have kind of talked about these acquisition programs as helping improve the business while we get some of these bigger capabilities online. I think those are the ones that are ultimately going to help move us to a place where we are stabilizing subscribers and revenue and setting ourselves up for future growth.

Helping improve the business, while we get some of these bigger capabilities online and I think those are the ones that are ultimately going to help move us to a place where we are stabilizing subscribers and revenue and setting ourselves up for future growth.

Thomas Barry: I would only add that this is the fifth quarter that we have beaten year-over-year self-pay net adds. We have a good trend, and as Jennifer Witz outlined, a lot of these initiatives are starting to click.

And Cook and I'd only add that this is the fifth quarter of that year over year self pay net adds which you know we've got a good trend and we as Jennifer I will have a lot of these initiatives are starting to click.

Wayne Thorson: is perfect. Thank you both.

That's perfect. Thank you both.

Operator: The next question comes from the line of Cameron Perrone with Morgan Stanley. Please proceed with your questions.

The next question comes from the line of Cameron Perone with Morgan Stanley. Please proceed with your question.

Stephen Leshack: Thanks. Good morning. A couple if I can. First, for Jennifer Witz, maybe Wayne can weigh in. You called out leveraging AI to generate approved voice creation in the release in your comments. I was wondering if you could speak a little more on how you envisioned leveraging AI, GenAI, however you want to term it, going forward both in advertising but also, more broadly across the business going forward. Then one for Thomas Barry on capital allocation. You were a little bit more active this quarter in terms of share repurchase activity. Could you talk a little bit about how your thinking is evolving and how you weigh balancing moving towards your target leverage range but also buying back stock? Thanks.

Thanks, Good morning, a couple if I can first for Jennifer maybe Wayne can weigh in you called out leveraging AI to generate improved voice creation and.

And in your comments I was wondering if you could speak a little more on how you envision leveraging AI and AI whatever you want to however, you want to comment going forward both in advertising, but also.

More broadly across the business going forward.

And then one for Tom on capital allocation, you are a little bit more active this quarter in terms of share repurchase activity. Yeah could you talk a little bit about how you're thinking is evolving and how you weigh balancing moving.

Moving towards your target leverage range, but also buying back stock.

Jennifer Witz: Yeah, thanks, Cameron. So on AI, we have talked a lot about how we have used conversational AI with Sierra to help on the customer service side at SiriusXM. We are really pleased with the results we are seeing there. We continue to see strong business metrics, good and solid customer response, and lower cost, of course. We are containing a significant amount of our chat messages through Sierra, and we are starting to ramp up the capabilities in voice as well. There is a lot more to come in terms of better building out an engine to offer the right packages to the right customers based on listening data and other data. So we are just getting started there.

Yeah. Thanks, Kevin So on AI, we've talked a lot about how we've used conversational AI with Sierra to help on the customer service side at Sirius XM and we're really pleased with the results. We're seeing there we continue to see strong business metrics I, good and solid.

Ed at customer response, and lower cost of cars and we are containing a significant amount of our chat messages through Sierra and we're starting to ramp up our capabilities in voice as well and there's a lot more to come in terms of better building out.

And engine to offer the right packages to the right customers based on listening data and other data. So we're just getting started there on the agreement with narrative. So I. This is really about using synthetic voices, so, but they're they're actual I'm sorry, it's actually using real.

Jennifer Witz: On the agreement with Narrative, this is really about using synthetic voices, but they are actual, sorry, it is actually using real talent voices and approved by the talent to be able to create versioning. We will be working closely with our AdMaker tool with Studio Resonate to be able to deliver this. It just provides an opportunity for advertisers to scale their campaigns much, much more significantly. It allows us to work with a broader set of advertisers. Wayne, do you want to touch on some other areas for AI opportunities?

<unk> talent voices I and approved by the talent to be able to create version ing and we'll be working closely with our AD maker tool with studio resonate to be able to deliver that and it just provides them an opportunity for advertisers to scale their campaigns.

Much a much more significantly and you know work it allows us to work with a broader set of advertisers and then Wayne do I tried to touch on some other areas for AI opportunity yeah for sure I mean outs.

Wayne Thorson: Yeah, for sure. Outside of SiriusXM, which we have had so much success, there are other places where we have been using it that is maybe a little bit less visible, such as in search and adding to our capabilities in semantic and relational search as an example, where we are seeing much, much better results than we had before for users. At the same time, our costs have been taken down to a fraction of where they were before. We have a lot of our new marketing initiatives that are, of course, being driven by what we are able to do with AI, everything from being able to use some of those capabilities of Salesforce to some of the targeting capabilities that are making our rollout of Play so carefully targeted to avoid trade downs.

Outside of Sierra which we've had so much success, there's other places where we've been using it it's maybe a little bit less visible such as in search in and adding to our capabilities and semantic in relational search as an example, where we've where we're seeing much much better results than we had before for users but at the same time, our costs have been taken down to a fraction of where they were before.

We have a lot of our new marketing initiatives are of course being driven by what we're able to do with AI everything from being able to use some of those capabilities of salesforce to some of the some of the targeting capabilities that are making a roll out of play Ah. Yeah. So you know sort of carefully targeted to avoid trade downs, we have other things that we hope to announce soon in things like <unk>.

Wayne Thorson: We have other things that we hope to announce soon and things like tagging and improving our search abilities for our broader corpus across all of our content.

<unk> and and in improving our search abilities for our broader corpus across all of our content.

Thomas Barry: Cameron, just to close down, I would step back for a second and say we are very happy, as we outlined in the release, of where we are in our cost savings initiatives. We are focused on optimizing the cost structure, optimizing our CapEx. We have made a lot of progress. I think there are a lot of initiatives we have going on. We are very happy with that. Looking broadly at generating our free cash flow, we continue to be focused in that area. As far as the capital allocation, we continue and we hold to our previous format or premise, as we are reinvesting in the business, which we have done in the instances of Stephen A. Smith and some of the other things that we have invested more deeply in. We are maintaining our dividend at the current level. Right now, it is 4.5% yield, approximately.

And Cameron just to close down I mean, I would step back for a second and say you know, we're very happy as you outlined in the.

In the release, where we are and our cost savings initiatives were focused on you know obviously optimizing the cost structure optimizing our capex. We've made a lot of progress I think there's a lot of initiatives. We have going on we're very happy with that so looking broadly at you know generating or our free cash flow we.

To be focused in that area as far as the capital allocation, we continue and we hold to our previous.

Format of a premise is where we're.

We're reinvesting in the business, which we've done in incidences of Steven a Smith and some of the other things that we've invested.

It was easily and we're maintaining our dividend.

The current level right now at four 5% yield of approximately <unk> <unk>.

Thomas Barry: We are delevering in the quarter. We did delever and pay down some of the term loan A. So that is our third priority. Then buybacks, which came in at $45 million for the quarter, was a little higher, but obviously, it is dependent on the stock price. We are staying to the same structure that we have had on capital allocation. We are happy with the way it is structured. We are going to continue to work on free cash flow and continue to work on paying down our debt and leaning towards the back half of next year more focused on buyback.

De levering in the quarter, we did delever and pay down some of the term loan a so that is our third priority and then buybacks, which came in at $45 million for the quarter was a little higher but obviously, it's dependent on the stock price, but we're staying to the same structure that we've had on capital allocation, we're happy with the <unk>.

Way it structured and we're going to continue to work on free cash flow and continue to work on paying down our debt and elite and leaning towards the back half of next year or more focused on buybacks.

Stephen Leshack: is all really helpful. Thank you all.

That's all really helpful. Thank you.

Operator: Thank you. Our next and final question is from the line of Stephen Leshack with Goldman Sachs. Please proceed with your questions.

Thank you our next and final question is from the line of Steven The Shack with Goldman Sachs. Please proceed with your questions.

Cameron Perrone: Hey, great. Thanks for taking the questions. Maybe one on the ad-supported subscription plan. Jennifer, I am curious. You called out the $100 million customer opportunity over the long term. I would be curious if you could talk a little bit more about the pace of that rollout and what is going to govern the pace of that product rollout over the next couple of years, how much of it is supply-demand-driven on the ad market side with creating a marketplace for advertising versus maybe something on the technological or the way you plan to fit this product in amongst the different tiers.

Hey, great. Thanks for taking the questions maybe one on the AD supported and subscription plan, Jennifer Wayne I'm curious you called out the $100 million customer opportunity over the long term I'd be curious if you'd talk a little bit more about the pace of that rollout and what kind of govern the piece of that.

That product rollout over the next couple of years, how much of it is supply demand driven on the AD market side.

Great and a marketplace for for advertising versus maybe something on the technological or.

The way you plan to do.

This product and amongst.

The different tiers.

Cameron Perrone: Second, on conversion trends, Jennifer, I would just be curious if you could update us on the conversion trends you are seeing across the base, new versus you, high-end versus low-end, any certain demos that are standing out to you or that have changed meaningfully over the last couple of quarters, for better or for worse. Thank you.

And then second on conversion trends, Jennifer just would be curious if you could update us on the conversion trends, we're seeing across the base new versus you high end versus low end any certain demos that are sending out to fewer that have changed meaningfully over the last couple of quarters for better for worse. Thank you.

Stephen Leshack: Thanks. I appreciate the question. The way I would think about the rollout, as we are moving through this, is we are following.

Thanks, and I appreciate the question. So the way I would think about the rollout for right first as we're moving through this is we're following the plan we had talked a little bit about last quarter, where we're selecting in the very beginning cohorts across new and used in a very targeted way their focus on people where in the past we have had not had the same success from a conversion.

Wayne Thorson: plan we had talked a little bit about last quarter, where we are selecting in the very beginning cohorts across new and used in a very targeted way. They are focused on people where, in the past, we have not had the same success from a conversion perspective. We have selected an initial group and launched that about two weeks ago. Right now, what we are going to do is we are going to continue to build the number of cohorts we are targeting with this. Also, as we select those cohorts, as you know, every day those volumes fill in those cohorts. We are going to continue to build the number of people who this is available to. As we are going forward, in addition to that, inside the actual package itself, we are adding more ad-supported channels. We are doing that.

Aspectant. So we selected the initial group and and lock down on in about two weeks ago, and so right now what we're gonna do is we're going to continue to build the number of cohorts were targeting with this and then also as we select those cohorts as you as you know every day those volumes filled in in those cohorts. So we're gonna where we're going to continue to build the number.

If people who this is available too and then as we're going forward. In addition to that inside the actual package itself, we're adding more AD supported channel. So that is we're doing that and then we also add add replacement and then unimproved overall in addition to the things that Jennifer It said in the prepared remarks, the advertising and monetization opportunities. So as we get more subscribers. We also get more ad slots.

Wayne Thorson: Then we also add ad replacement, and that improves overall, in addition to the things that Jennifer Witz had said in the prepared remarks, the advertising and monetization opportunities. As we get more subscribers, we also get more ad slots. Those ad slots, of course, we are able to monetize that more effectively with new tools. Between now and the end of the year, we are ramping the number of cars where this is available. The target is to get to about 100 million cars by the end of the year and more as we move forward. As we are moving through in Canada, we are using this for initial trials in Canada. We are launching it with saves, and we are going to thoughtfully extend where we are testing and launching through saves, win-backs, not just trialers.

And then those that slots of course her.

We're able to monetize that more effectively with new tools.

So and then between now and the end of the year. We are ramping the number of cars, where this is available. So it is the target is to get to about 100 million cars by the end of the year and in more as we move forward. So in and then as we're moving through in Canada.

Here, we're using this for initial trials in Canada, where we're we're trying you know we're launching it with saves and we're gonna thoughtfully extend where we're testing and launching through saves win backs not just trailers.

Hooper Stevens: I think we will get a lot more information over the next, through the rest of the year. I would expect this to contribute more in 2026 to results. Just on conversion rates, we are seeing the rate of decline, at least on the new car side, slowing a bit. I think it has a lot to do with 360L penetration and our improved results there. Of course, on the new car side, we are at about 50% of new car sales that have 360L, and that will continue to grow with the launch of some bigger programs in the early part of next year. The conversion rates on new, again, the rate of decline is slowing a bit. We are seeing a little less of that on used as we continue to expand. I think penetration now is at about 60% on the used car side.

Yeah. So I think we'll get a lot more information over the next you know through the rest of the year and you would expect us to contribute more.

More in 'twenty 'twenty six odd to result.

Just on conversion rates. So we are seeing the rate of decline at least on the new car side slowing a bit and I think it says a lot to do with 360 L O penetration and our improved results there Oh, the new car side, we're at about 50% of new car sales that have a 360 all in.

That will continue to grow with the launch of some bigger programs in the early part of next year I know that the conversion rates on new again, the the rate of decline is slowing a bit and we're seeing a little less of that unused as we continue to expand I mean, you think penetration now is at about 60% on the used car side, but what I would just note.

Hooper Stevens: What I would just note is that we have brought a lot of these other acquisition programs to market, adjusting our availability and distribution really based on our two core strengths, our in-car availability and our content offering. You see that come through in the three-year programs with OEMs, the enhanced data that we have with Lexus Nexus, our EV launches. This all takes advantage of what we have in terms of unmatched distribution in the car. On the content side, we have taken advantage of the great podcast portfolio we have. We have launched Podcast+, a subscription available through Apple and everywhere else through Supporting Cast. These are just unique opportunities that we have, given the strengths that we have on the in-car side and our content offering. Those are not necessarily going to show up in conversion rates.

Is that we've brought a lot of these other acquisition programs to market adjusting how are you adjusting our availability and distribution really based on our two core strengths in our in car availability in our content offering. So you see that come through in the three year programs at all yeah, I'm stay enhanced data that we have with lexisnexis.

Our EV launches and this all takes advantage of what we have in terms of an unmatched distribution in the car, but then on the content side. You know we've taken advantage of the great podcast portfolio, we have with lunch podcasts plus as a subscription available through Apple and everywhere else, there's supporting cast and.

These are just unique opportunities that we have given the strength that we have on the in car side and our content offering and those are not necessarily going to show up in conversion rate. So what while we watch conversion rates very closely as a mechanism to assess demand I. It really goes beyond that in terms of looking at demand through these other.

Hooper Stevens: While we watch conversion rates very closely as a mechanism to assess demand, it really goes beyond that in terms of looking at demand through these other programs.

Program.

Wayne Thorson: Great. Thank you both.

Great. Thank you both.

Thomas Barry: Thank you very much, everybody, for your participation in today's call. We will speak to you soon.

Thank you very much everybody for your participation in today's call we'll speak to you soon thank you.

Wayne Thorson: Thank you.