Sirius XM Aktie

Good morning, everyone. I'm Sebastiano Petti, and I cover the cable, telecom, and satellite space at JPMorgan. I want to introduce Zach Coughlin, CFO of Sirius XM. Zach joined Sirius XM as CFO just in January of this year. So this is your first conference. So thanks for joining us today.

Of course, thank you for having me.

Great. So just to start off, since laying out your three strategic priorities before your time in December 2024, you delivered a strong 1Q with record low churn, positive ARPU inflection and 6% EBITDA growth. Where do you feel you are in the early innings of this transformation? And what does the next phase of execution look like from here?

Well, great. Well, thank you again for having me here at the conference. I've been on the stage before, but never by myself. So Sebastiano, you promised to take it easy on me. So -- we'll go from there. I think -- thanks for starting with asking about December 2024. I would say that it's important to go back to that point in time because at that point, we really focused in on 3 main pillars of the strategy.

And I think those really are what's driving the financial performance that we're seeing here in the first quarter. So first of those was strengthening the subscription business through exceptional in-car listening. And then secondly, accelerating growth across advertising with a big focus on off-platform monetization. And then thirdly, leveraging the scale of the Sirius XM portfolio to drive efficiency and long-term shareholder value.

So those have been -- those are the 3 main pillars. The results we're seeing in the first quarter are really coming off of improvements over that 18-month period in each of those. So starting on the subscription business, we've really worked hard at strengthening the core in-car experience. We've improved packaging and pricing. We've driven initiatives like continuous service, companion subscriptions.

And all of that is driving deeper engagement with the customers by really leveraging the data and information that we're getting through 360L. So that's showing up, and we could see that in the subscription metrics. We see it in ARPU being up. We see it in churn being record lows. It's a combination of all those pieces.

On the advertising side, we've continued to focus on the growth engine of podcasting, up 37% year-over-year in that off-platform piece. Programmatic continues to be a growth engine for us. And then the most recent announcement around YouTube, which I would guess will be things we'll get into here as well, and I think is a really important statement on how scaled and sophisticated our advertising platform has become, and we saw that with growth in the first quarter, following growth in the fourth quarter also.

And then lastly, on the piece of operational discipline and efficiency, obviously important to me as well, specifically, came off of 2025 where we drove a couple of hundred million dollars in gross savings. Another $45 million in the first quarter towards our $100 million objective for 2026 as we continue to work on streamlining the organization, working on modernizing the infrastructure and driving strong free cash flow out.

That was the big metric we wanted to drive growth for us this year towards the $1.5 billion target we've stated for next year. And specifically beginning to also be able to return more of that to shareholders. By the time we get into the second half of this year, we'll be inside of our target leverage range of low to mid-3s, which will allow us the freedom to be able to turn that free cash flow towards increasingly shareholder accretive opportunities.

And those plans are now well underway, and we feel great at where we're going to land for the end of the year. So I think it's really been a combination of the work and the focus of those 3 pillars that's led to this first quarter. And I think it also gives us the belief that the delivery -- the strength of delivery will continue to carry forward as well for the rest of this year.

Great. So I'm definitely going to come back and touch on a bunch of those topics. But first, starting around spectrum, right, big topic for Sirius XM of late. As you think about the spectrum opportunity, the monetization. I think you've talked about partnership-driven path is the path forward.

Can you help us unpack what that means in practice, including whether leasing, perhaps a joint venture, maybe other similar structures are on the table? And what a realistic time line looks like around that?

Yes. Yes. I think that really the three core pillars we talked about in December '24, spectrum has now continued to emerge as almost a fourth pillar. And I think first and foremost, today, spectrum is a core piece of the underlying operating business as we have that. I think as we look forward from here, though, it's really about building optionality and choices.

So just to sort of ground everybody for those of you who are not as familiar, we have 35 contiguous megahertz of spectrum right in the middle of the mid-band segment. That's really broken up into 3 key distinct elements. You have C&D blocks on each side of that, so 5 on each side that have been focused predominantly on satisfying elements of safety and security delivery.

Then for the main core, sort of, legacy 25 megahertz, you've got that split between 12.5 and 12.5 tied to the prior legacy of Sirius and XM being separate companies. That low band 12.5 is where some of our longer-term legacy subscribers have been landing or have landed over time.

And that still satisfies today in the millions of customers and subscribers. Then the more heavily utilized upper 12.5, which is where we've been focusing transition from a technology perspective over the last handful of years. So it's really those 3 distinct pieces. I think for us, what first and foremost is important is that we continue to deliver on the, sort of, stated licensed objective of what each of those 3 bands are, and we continue to do so across all 3, while at the same time, building the optionality for what is emerging as a valuable resource and asset.

And I think that will come through -- we don't see this as one single monetizing event. I think each of those 3 come with its own specific moments of timing. And I think what our focus for right now is really on building the optionality to make sure that as this sort of space and sector evolves that we have built the sorts of relationships required to make sure that we are active.

If we take a look at the ecosystem of partners that are interested in this area, the one core element across all of them is the core central element of spectrum in their business models, and I think we sit square in that space. It gives us a good position to be able to work with all of them.

And I think what's important for us is while the monetization of some of those elements of the spectrum may come in over a phased period of time, the work on building those partnerships and understanding what -- ultimately what is the right business model to optimize for that value over time begins now. And so I think the work on doing that begins and working with sort of that ecosystem of partners.

And as you -- just to really just follow up quickly there. So not a single monetizable event. So does that just mean -- is that -- should we think about that related to the different bands and the different -- the WCS, the C&D relative to the SDARS spectrum, right? Do those have different time lines? Is that kind of what you mean in terms of a single monetizing event?

Yes. And I think the time lines are gated to a certain extent based on the development of the technology and the partnerships that are available today, right? I think as we take a look at each of those 3 pieces we talked about, the ability for partners and the technology to take advantage of utilizing each of those pieces will develop in different phases and times from there.

And also, our underlying utilization today for our core highly profitable business model looks slightly different in timing across each of those. And so I think that's why we say that it doesn't have to be a single monetizable event. We expect that to be a, for lack of a bad pun, spectrum of utilization over a period of time.

Okay. And are D2D, is that the use case that, kind of, probably percolates or the maybe topic of conversation most often cited?

Well, it seems to be the most popularly talked about. And I think that in some ways, the development and interest in that by some of the largest players in the sort of telecom and connectivity space only helps to bring forward the value of spectrum overall, which we're sort of quite happy about.

But I think at the end of the day, we're not single technology -- we're technology agnostic, I suppose, and partner agnostic. I think for us, we're really making sure that we build that level of optionality to be able to deliver for our shareholders what is the best outcome from that space. Direct-to-device is obviously an area of growing interest, and we think likely to be one of the sort of most scaled and sizable monetizable opportunities.

That makes a lot of sense. Yes, definitely a big focus the last couple of weeks and particularly here this week at the conference. So definitely something to watch. So as we think about shifting to the core business and expectations around self-pay net adds, starting with the near-term outlook, I think management has reiterated expectations for "modestly lower" self-pay net adds in 2026, which seems somewhat conservative despite limited visibility around OEMs and expectations for lower SAAR this year or lower SAAR year-on-year. So I guess what, if anything, has changed in your view since the last update?

Yes. I mean I think it's -- if we take a look at the first quarter performance, we're really happy with how self-pay net adds came out. I think strength of self-pay net adds as a metric, paired with growing ARPU which third straight quarter of that, and churn at the lowest levels for the first quarter that the company has ever seen. And I think that those are a function of going back to a little bit, we talked about sort of the work done over the last 18 months to make sure that we're putting the customer at the center of the activities we're doing.

So if you think about the initiatives we put into place, we've had continuous service, which is really a core piece of cutting or making a seamless experience for the customer as they transition through elements of the vehicle life cycle. And I think at the core of that is the idea that our relationship has evolved from being with the car to being with the end customer and the ability to make increasing decisions looking at the end customer and what is good for them.

So continuous service has been a big piece as we take a look and drive those metrics in the right direction. And then the significant work around pricing and packaging that we've done over the last couple of years as well to really sharpen that idea of having sort of a good, better, best and making sure that pricing and content and value are matched at each of those points in time.

I think all of those initiatives are what's leading to the performance we've seen in the first quarter. All of those are the sorts of things that we also believe will continue to add value going forward. I think the -- as we take a look at the outlook for the year, the one piece that is still somewhat uncertain and as the year progresses, it gets more and more certain is the backdrop of the OEM environment, driven by the broader macro environment, whether it be gas prices, inflation, things of that nature that historically have impacted OEM sales and that has a knock-on effect to us. And so I think what we're just watching to see is how do those evolve over sort of these next few months, and we'll be able to give a better update as the year progresses.

Okay. And then just sticking with companion plan, I think you -- Jennifer described it as maturing. So I think how are you thinking about the durability of that program? Because I think 124,000 net adds here in the first quarter reported in the first quarter, 80,000 in 4Q. And then I think you've talked about using it as an acquisition as more of a "family plan." But -- so could we begin to see that latter initiative picking up and maybe supplementing some of the maturity this year?

I mean I think that we're really happy with the results of the companion plan. And the idea, obviously, of creating a family plan, not new and it's obvious in that regard. And I think we're seeing the results that we would hope from that, which is lower churn, better value proposition.

But I think what's important on the companion plan is really to pull back and look at it in the context of what it's been a key part of supporting. And so I'm going to go back to the point on this idea of packaging, getting sharper and sharper on packaging and pricing. The team has set out over the last couple of years to make sure that it's increasingly clear that the value you're getting for the price you're paying is more and more transparent.

And that as we move forward that we're going through a cycle of we add value, distinct and segmented value, then we build pricing power. And then we wait to see if the market is amenable to taking pricing. We've seen that in '25. And the value add for that was expanding access and for content. Then we got to the end of '25, we had a companion program, which was really a function of expanding access to larger numbers of people inside of there. That creates value.

We took pricing in February. First time we've taken pricing in back-to-back years. And as we've -- that's matured the cycle of time, we've seen the churn remain low, record low in that regard. So I think that strategy is working. Companion program was a key piece inside of this ecosystem that's allowed the sub base self-pay net adds to be stable. That's allowed ARPU to go up and churn to come down.

So I think it's -- I would look at the companion program as less a distinct single sort of subscriber self-pay net add help and really more of a value-add element of the ecosystem that's allowing us to broaden pricing power and ultimately capture that value over time through taking more frequent pricing actions.

So just relatedly, and I guess for those that have been following Siri for, I guess, for myself over a decade here, thinking about the -- as I think Jennifer has described it as the benefits of 360L or the promise of 360L, right, is kind of now beginning to kind of pay off. But because I do think there is -- and we've talked about data analytics from 360L, I think, have enabled better customer satisfaction, churn, engagement, right?

So how much of the, I guess, recent operating improvement is being driven by some of these data capabilities, which Siri didn't necessarily have because there was no return path on the legacy satellite system, but 360L, the app have kind of helped enable.

So I guess how much of that is shaping your product and packaging decisions? And I guess, what does that mean for conversion rates as 360L, I think, ramping to 70% of auto sales by the year-end, right, and mix shift improving there?

Yes. I think first and foremost, it's worth recognizing, as you said, that the prior communication signal was one way. And the talent individuals we have in the company and that insight to the customer to build the company and the successful basis we have with only a one-way signal, I think, is worth noting from there. Because I think as we, at the company, look like, what data then does is we're able to take that strong base of inherent understanding of what the customer wants and complementing it.

And so we're really just at the beginning of that journey because 360L has been rolling out and to work its way through car park of any sort of technology as its own cycle from there. We now have enough of an installed base to be able to look at that data and make assumptions that are, we believe, confidently actually extend across the non-360L base as well.

And that data and insight is increasingly growing and becoming embedded in the decision-making, and that starts with programming. There's not a single programming decision we make anymore without understanding true listening behaviors at an incredibly granular level. And I think consumers can feel that benefit in terms of how programming getting sharper and sharper from there. I think for pricing and packaging, our ability to really understand what it is of our service that customers value and how do we give them more of that to drive pricing power. That's embedded inside of there.

And I think lastly, in terms of the marketing communication, the ability to increasingly do personalized engagement with customers and making sure that they're aware of sort of the unique value add that we have. In many cases, they don't even realize that we're able to get to that point. So data is driving across all of those pieces. So it's impossible to put a single metric tied exactly to that, but I do not think it's accidental that we're seeing that.

And at the same time, I haven't mentioned we just recorded our highest internally recorded customer satisfaction in the company's history. So I think all of that is helping us give consumers more of what they want from us and expose them to more things that we know by customer cohorts that they're likely to be responsive to. I think that's increasing -- improving some of the stickiness leading some of the metrics we're seeing.

Yes. And I think first quarter churn, if I'm not mistaken, was a record low, right, 1.5% even with -- even through a February price increase. So it seems like obviously not guiding, but maybe some of this churn reduction, maybe there could be some additional opportunities or there's tailwinds there.

Yes. I think I'm glad you mentioned the pricing. We took pricing -- for the first time ever in back-to-back years. I think there's always a certain amount of uncertainty. We built confidence in the strategy of adding value, building that sensation of pricing power and then taking it. And I think that's happened quite successfully, right? We're now through enough of the pricing cycle to really monitor and watch the churn that comes after there.

And we see the performance around churn at the 1.5% level for the first quarter and the strength of that and not being impacted by the other actions we're taking negatively, the sort of the strong performance that continues as we move through into the second quarter as well.

Got it. And so with continued churn improvement, 3 quarters of consecutive ARPU growth, I think it reached $14.99 in the first quarter, but it appears your base is absorbing this back-to-back yearly rate increase that we kind of talked about. But as you -- as we layer in module, sorry. As we layer in module tiers and the ad-supported opportunity, I mean what are some of the puts and takes that we should be thinking about on ARPU, particularly at the lower price points or maybe there's some more contribution there from a mix perspective?

Yes. I mean I think that, first and foremost, we have -- we are a premium service. And as such, the premium pricing that we're taking in that sort of good, better and best, we want to make sure we're continually driving increasing values for our highest paying, in many cases, most loyal customers. And so I think we focus there first and foremost.

Below that then, where the focus is really making sure as we get sharper and sharper on what is the specific value add to make sure that we're delivering delineated sort of differentiated positioning between what customers are paying and what service they're getting and making sure that stays value.

So I would say I would look at less as, sort of the lower paying customers. I think our goal for them is very much the same. We want to make sure that we are understanding them better through utilization of data and listening patterns about what they're interested in. And then making sure that we continue to, as much as we can target to make sure they're getting -- they also are seeing increasing value or in some ways, I would say it's a combination of giving them increasing value or actually for us, understanding what value they already create and making sure that as well over time that we are able to improve ARPU against that set of customers as well, right?

So it's not a matter of taking -- capturing ARPU at the top and then trying to sort of manage growth at the bottom. I think what we want to see is all tides rise. And many of the initiatives we're putting in place around increasingly sophisticated levels of one-to-one consumer engagement, understanding what they want is enabling everybody to feel value.

Continuous service is a perfect example. Regardless of where you are in the ARPU sort of tiering, continuous service is an absolutely customer-friendly experience where we've cut seamlessness out of there. The integration between sort of the digital app and the vehicle, those -- all customers benefit from those things.

And so I think that's why what we're seeing in the ARPU improvement is the opportunity to be able to improve across all tiers of that. That's giving the confidence that this should remain sort of an improving factor. And while we've said for the rest of the year, we would expect ARPU to be up each of the quarters this year.

Okay. all right. Now shifting gears, obviously, a really big focus for the investment community has been your recently announced deal with YouTube. So you announced the deal to become the exclusive U.S. advertising representation for YouTube's audio inventory, which expands your reach to 255 million monthly listeners, if I'm not mistaken.

So roughly 90% of the U.S. population over 13 years aged. With the deal launching in the fall and financials expected to be more meaningful next year, can you help us frame the profile of revenue relative to your existing ad business, maybe margins?

Yes. I think that one of the most exciting parts of the YouTube partnership is actually it gives us a platform to talk more expansively about what already is a scaled and important advertising business. So today, around $1.8 billion, that represents already about 10% of the total audio sort of market segment from there.

So we are already a scaled player. And I think this is -- gets the importance of why we ended up with a partnership with Google for their audio -- for the YouTube audio advertising. That scaled business is made up of 3 major elements. One, we have the sort of the sales force to build the scaled relationships with the largest national advertisers and the big holdcos. So scale on that side of things.

We have scale on the inventory as we have both our fleet of our content with we think is some of the best-in-class podcasts as well as other content. And then you put in the middle, we have the scaled ad tech to be able to pair those 2 efficiently. Because I think for advertisers, what's -- all advertisers, what you're looking for is targeting and measurement.

That is something that on audio has been maybe behind the curve versus where video has been. We have been able to develop the ability to be able to give scaled measurement and targeting increasingly so for the advertisers. And I think that, that structure, as we look at it, has allowed us to engage with YouTube to be able to become their partner.

So -- because obviously, we're talking now about a scaled material size of inventory. So as you look at sort of looking forward from there, we've not sized yet quantified the size of what that is because we're still in the early stages of understanding sort of the substance and quality of that inventory. I think we'll be in a better position over the next few months to be able to talk more about what that looks like.

But what we do know now without giving specific numbers is that will be material. That means material growth not just for our advertising segment, but for -- this will be material growth with regards to total Sirius XM company revenue from there. And then from a profitability perspective, I think, again, we're not giving specifics there yet, but we would not have pursued the opportunity if we didn't believe that it would also be material from a profitability perspective.

So we'll work on communicating what that looks like. I think there'll be a ramp-up period. I mean my guess is that materiality will be unlikely to manifest itself in the financial statements probably for over the next few quarters where we get that ramped up.

But I think by the middle of next year, we'll begin to see that ramp up, and we'll be able to talk about the size that we're talking about. And with that will come more insight around profitability as well. We expect this to move the needle for the total company on both revenue and on profitability.

And as we think to January of 2027 and you're offering guidance, I would assume at that point in time, guidance should reflect your best judgment at that point in time of what the YouTube part...

Are you trying to get me into giving '27 guidance already? I see Jen, look in the audience now.

Don't want to get in trouble.

So we will absolutely be quantifying for everybody the YouTube impact. I think it is going to be big enough that we actually won't -- we won't be able to talk about the business without actually making sure that it's understandable from there. And I think it will be important to be able to make sure that we see how much of the growth is that versus the other pieces. So yes, we will be able to talk increasingly specific as we come to more deeply understand that body of work over the next few months.

It should be exciting. And sticking with the theme of scale. So in terms of strategic opportunities, I guess, -- it seems like the $255 million give you a lot of scale already in audio. I mean that's on the -- how are you thinking about scale as it pertains perhaps to ad-supported versus subscription? And I guess given where you are today, given some of the opportunities on the come, I mean, would you be willing to move above historical leverage ranges for the right opportunity should they avail themselves?

Yes. I mean I think, first and foremost, for us today, we're lucky that in both the subscription business and on the advertising business, we are already scaled. So there's nothing that we would see that we would need to pursue to take a further step up driven just by scale. In fact, we believe scale -- our scale today is already an advantage that would let us take advantage of -- again, I would say things like the YouTube opportunity is definitely available because we're already at scale from there.

I think speaking more broadly around leverage targets overall, I think we feel great about our opportunity to get inside of our target leverage range by the back end of this year. We said low to mid-3s. We worked hard on that over the last couple of years. Because what that does is -- and again, I guess, at the same time, stepping up the free cash flow to the $1.5 billion target we have set out for next year.

What that does is it increases a significant amount of optionality for us to continue to, of course, invest in our business and drive growth. I think we saw that in the first quarter growth across both the subscription business and the advertising business, really important to us, that idea of getting to growth. And also, importantly, increasingly be able to return value to shareholders, right?

And so I think we'll have more to talk about that over the next couple of quarters, but that gives us the optionality and the choices to work our way down the capital allocation strategy to make sure that we're increasingly putting that value back in the hands of shareholders, which is something they're obviously very interested with us.

So I think that being inside of that low- to mid-3s allows us the choicefulness to be able to do that and especially be able to continue to take advantage of things like share buybacks or otherwise that we think will be a core piece of that strategy.

Yes. And I think based on our conversations, lots of investors, right, that have hung in there with you. And I think now that you're light at the end of the tunnel in terms of the leverage target, I think pretty excited about that opportunity as well. And just sticking with that theme for a moment, how do you think about, obviously, not to put the cart before the horse here, but how should we think about the split between dividends and buybacks as we move towards that -- this more meaningful step-up or flexibility in capital returns as satellite CapEx starts to come down next year?

For sure. I mean I think as we think about the capital allocation strategy, that goal of getting low to mid-3s sort of sits at the top. I think we're well on our way to that. I think below that, we want to make sure we're continually to invest in opportunities in the business. The $1.5 billion target we've set out for next year contemplates already having the cash in there to be able to invest in whatever we need to continue to grow.

So what that then leaves is stepping down below there, you've got dividends, which we feel good about the dividend level as we have it now, healthy amount. So I don't think that we'd be looking with regards to increases there as a significant priority. So then you come down below that, and there's really the 2 pillars of share buybacks and M&A.

I think I'll put M&A to the side. I think we'll have to sort of see what would come up around things of that nature, recognize that anything we would do in that regard would be with a clear sort of value thesis, investor value-driven thesis inside of there.

So then you're really looking at share buybacks. And I would expect that, that will be a significant piece. And really, in spite of improvements in the share price over the last few months, which we're really proud of the work that we've done to earn that, we think there's still opportunity still ahead of us there, both the underlying business and the value proposition for the financial impact.

And then you bring to bear some of the emerging either business models like YouTube, which is still ahead of us as well as opportunities around monetizing spectrum. I think all of those leave a really compelling equity case that would say that share buybacks remain a good investment at this point in time, we see ongoing.

Great. And now thinking about the 2026 EBITDA guide, delivered 6% growth in the first quarter, very strong margin expansion of 140 basis points. Yet you reaffirmed the stable guidance for the year. I mean what potential headwinds do you anticipate or should we be thinking about for the balance of the year, whether it be macro uncertainty, some of these other factors that could maybe offset some of this early year outperformance?

Yes. I think that we set the goal for this year out to make sure we're stabilizing revenue trajectory. Stabilizing EBITDA trajectory and taking a significant step forward towards our $1.5 billion cash goal. So I think that if we take a look at the first quarter, accomplished all 3 of those pieces. And I would say to a certain extent, it's probably also important to look, fourth quarter was the beginning of that stabilization process.

So we're probably a couple of quarters into there. So we feel great about where the start of the year is. As we sort of finish out 3 months, there's still 9 months ahead of us. We just want to make sure that, that process of moving from stabilization maybe towards something a little bit better than that remains sticky in there. The fundamentals of the first quarter would seem to point to that being the case, but still 9 more months.

And I think the biggest overhang that we're looking at is the macroeconomic backdrop, keeping in mind as we gave guidance, there was a lot going on more broadly and the sort of things that could impact both inflation and gas prices, 2 things that being a customer-oriented business sort of embedded inside of the OEM cycle are sometimes exposed to from there.

And I think the goal would be just to take a look at another quarter, understand that underlying progression from stabilization to the beginnings of strength along with those external factors, and we'll be in a better position at the end of the second quarter to give updated outlook on both of those 2 competing factors.

And then just sticking with that macro theme for a moment. I think you or management has excited expectations for modest growth in advertising for the full year. Any updates on ad trends since the call? What are you seeing? Is there any pressure points given what's going on?

Advertising market remains quite constructive. And I think that the overall advertising market does. And I think especially underneath of their, inside of the audio space, sort of the capabilities and scale that we talked about earlier continue to build and the recognition by -- on one side of that, the sort of the content producers, the podcast leaders there continuing to be interested in how we can help them monetize and the big advertisers.

So I think that continues to go well. Last year was sort of an interesting year with regards to a softer first half and a stronger second half. And so we are, to a certain extent, comping an easier base last year. That gets a little bit tougher in the second half as things got more constructive in the second half from there. So -- but we see continued good demand from -- across the advertising ecosystem as we work our way through here in the second quarter as well.

Awesome. Well, Zach, thank you so much for joining us, and thanks, everybody.

Yes. No, thank you, everybody. Thank you for having me, and thanks, everybody, joining here today.

Greetings. Welcome to the SiriusXM's First Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce Jennifer DiGrazia, Senior Vice President of Investor Relations. Thank you, Jennifer. You may begin.

Thank you, and good morning, everyone. Welcome to SiriusXM's First Quarter 2026 Earnings Call. Today's discussion will include prepared remarks from Jennifer Witz, our Chief Executive Officer; and Zach Coughlin, our Chief Financial Officer. Following their comments, we will open the call for questions. Joining us for the Q&A portion are Scott Greenstein, our President and Chief Content Officer; Wayne Thorsen, our Chief Operating Officer; and Scott Walker, our Chief Advertising Revenue Officer. .

I would like to remind everyone that certain statements made during the call might be forward-looking statements as the term is defined in the Private Securities Litigation Reform Act of 1995. These and all forward-looking statements are based upon management's current beliefs and expectations and necessarily depend upon assumptions, data or methods that may be incorrect or imprecise. Such forward-looking statements are 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 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, please find a supplemental earnings presentation and trending schedule on our Investor Relations website for your convenience. With that, I'll turn the call over to Jennifer.

Good morning, everyone, and thank you for joining us today. We are off to a strong start in 2026, executing with focus and discipline against our 3 strategic priorities we outlined in December 2024, strengthening our subscription business by delivering exceptional in-car listening experiences, accelerating growth across our advertising business and leveraging our scaled SiriusXM portfolio to drive efficiency and long-term value.

In the first quarter, we made meaningful progress across each of these areas, supported by solid performance in our core business and strong operational execution. On the subscriber side, we delivered significant year-over-year improvement in net additions, grew ARPU and achieved the lowest first quarter churn and highest subscriber satisfaction scores in our history.

Through our recently announced landmark partnership with YouTube, we will significantly enhance our advertising capacity, and we continue to expand margins through our enhanced focus on efficiency, capturing $45 million toward our $100 million 2026 cost savings target.

Before turning the call over to Zach for a more detailed review of our financials, I would like to offer a few observations. Starting with our subscription business, performance in the quarter was strong with a meaningful year-over-year improvement in self-pay net additions to negative 111,000, an improvement of 192,000. This reflects the growing adoption of companion subscriptions among our most loyal customers, ongoing progress with our continuous service initiative and momentum in our automotive dealer extended duration plans.

Together, these offerings expand SiriusXM's presence across multiple vehicles and users within a household and make it easier for subscribers to seamlessly maintain service as they transition between vehicles, deepening engagement and reinforcing long-term loyalty. While we remain mindful of a more measured auto sales environment and its potential impact on trial volumes, our resilient in-car foundation and focus on controllable levers continue to support performance.

Churn remained a standout, improving to 1.5% despite our February price increase, which contributed to a 1% year-over-year increase in ARPU to $14.99. The combination of pricing discipline supported by continually adding value to our packages and the ongoing impact of our customer experience initiatives underscores the durability of our subscription model. Our strong retention is also supported by high customer satisfaction levels.

Our latest studies showed year-over-year improvement across all 5 core metrics: satisfaction, perceived value, likelihood to continue, likelihood to recommend and the essentialness of our service. Notably, both loyalty and perception metrics rose in tandem, an important signal of not only current satisfaction, but also growing confidence in the long-term value of our offering. We are also seeing traction across key demographics with the majority of the increase in satisfaction being driven by Gen X and Y. Gen X delivered strong gains, particularly in perceived value, intent to continue and essentialness, while millennials showed meaningful improvement in satisfaction and value, highlighting both the progress we are making and the opportunity that remains.

Content is a defining strength of SiriusXM and a key driver of perceived value and engagement. We continue to expand and evolve our programming in ways that fuel fandom and deepen engagement across music, sports, comedy and culture. In the first quarter, we introduced exclusive full-time artist-led channels from Global Stars, Morgan Wallen and John Summit, alongside pop-up channels from BTS, Luke Combs and Robin as well as distinctive programming such as John Mayer Grateful Dead listening Party.

We deepened our partnership with Metallica with the launch of the live call-in show, Tallica Talk, expanded Alt2K to our full subscriber base following 8 consecutive quarters of audience growth and broadened our comedy offering with a dedicated 24/7 channel featuring Sebastian Maniscalco.

Our news and top category is also gaining momentum with consumption up 15% sequentially. This reflects continued investment in both independent and exclusive voices from the launch of Como Mornings to the strong performance of the Megan Kelly channel, where listening has grown 28% since its launch in November. We are also creating distinctive high-impact moments for listeners from intimate performances to major cultural events, featuring artists like Noah Kahan during Super Bowl Week, Kenny Chesney at Flora-Bama, Morgan Wallen in Nashville and a recent SmartLess taping in Hollywood.

In sports, our offering is unmatched, spanning every major league and premier event from the NFL, MLB, NBA and NHL to college athletics, auto racing, golf and more, making SiriusXM a true year-round destination for fans. Our college sports offering continues to build momentum as a core part of our bundle with listening hours for March Madness and the College Football Championship up 22% and 37% year-over-year, respectively.

At the same time, our hardware and software evolution continues to enhance the listener experience. As 360L expands across nearly all major OEM lineups, we're driving sustained growth in 360L-enabled subscriptions and increasing adoption of more personalized nonlinear listening. This is fueling double-digit growth in both usage and time spent with features like extra channels and artist-seated stations, deepening engagement.

Turning to our advertising business. Momentum is accelerating. Advertising revenue grew 3% to nearly $407 million in the quarter, driven by a 37% increase in podcasting ad revenue. This reflects strong traction in video and social through our Creator Connect strategy as well as accelerating programmatic demand, where revenue more than doubled year-over-year through Google TV 360. Our partnership with YouTube marks a significant step forward. As the exclusive U.S. advertising representative for YouTube's audio inventory, we are expanding our reach to 255 million monthly listeners, nearly 90% of the U.S. population aged 13 and older.

For the first time, we will offer advertisers scaled access to premium audio across a wide range of content from iconic franchises like SNL to leading creators like Mr. Beast as well as podcasts beyond our own network and streaming music. Beginning this fall, advertisers will benefit from expanded high-quality inventory paired with advanced targeting and measurement capabilities. By combining SiriusXM Media's leadership in audio advertising with YouTube's scale and always-on engagement, we are delivering high attention inventory through a more seamless buying experience while advancing a more open connected ecosystem for advertisers.

In podcasting, we remain the #1 podcast network in the U.S. by weekly reach. As a launch partner for Apple's new video podcasting experience, we are helping shape the next evolution of the medium by unlocking dynamic video ad insertion and expanding access to a significantly larger advertising market. This uniquely positions us to power monetization across audio formats with greater flexibility and optionality for both creators and advertisers. These efforts reflect our commitment to an open podcast ecosystem that enables creators to grow across platforms.

Across the portfolio, we are leveraging our scale, data and technology to unlock new growth opportunities and deliver stronger outcomes for advertisers. At the same time, we remain focused on building a high-performing, future-ready organization. We recently welcomed Yves Constant as Chief Legal Officer, bringing deep expertise across media, technology and content and further strengthening our operating discipline in support of our strategic priorities. Our progress is also being recognized externally.

We were named by Forbes as one of the best brands for social impact and by Newsweek as one of America's greatest workplaces for culture, belonging and community as well as for women. Turning to our outlook. Our disciplined approach gives us confidence in delivering on our 2026 full year guidance, relatively flat revenue and stable adjusted EBITDA. While subscriber trends are expected to be modestly lower year-over-year, our focus remains on strong execution and driving continued free cash flow growth.

Importantly, the fundamentals of our business remain strong. We have a durable subscription model, predictable and growing cash generation and a unique combination of assets, including premium content, unmatched in-car distribution, scaled audience reach and leading ad technology. We believe these strengths position SiriusXM well for the future, and we remain committed to disciplined execution, thoughtful investment and delivering sustainable long-term value for our shareholders.

With that, I'll turn it over to Zach for more detail on the financial results.

Thanks, Jennifer, and thank you, everyone, for joining us today. We delivered a solid start to the year with 3 key financial takeaways. First, we delivered revenue of $2.09 billion, up 1% year-over-year, supported by the strength of our subscriber base and continued momentum in advertising, where revenue increased 3%. Second, our disciplined cost management and a continued focus on efficiency drove approximately 6% growth in adjusted EBITDA to $666 million. And third, the strength and stability of our earnings and cash flow continues to create significant shareholder value with net income up 20% and free cash flow more than tripling year-over-year to $171 million. Together, these results underscore the steady progress we are making against our long-term strategic initiatives to enhance profitability and drive free cash flow generation.

Looking first at the top line, consolidated revenue was nearly $2.1 billion, including $1.6 billion of subscription revenue, also up approximately 1% year-over-year. This growth reflects the early benefit of our recent February price increase as well as the full year impact from the 2025 rate adjustment, partially offset by a smaller average subscriber base. Advertising revenue increased 3% to $407 million as strength in podcasting, higher programmatic demand and technology fees more than offset softer demand in streaming music advertising.

Turning to profitability. Adjusted EBITDA grew 6% year-over-year to $666 million, with margins expanding 140 basis points to 31.9% -- this improvement was primarily driven by revenue growth, complemented by disciplined expense management across our customer service, product and technology and personnel-related costs. Importantly, we captured $45 million towards our goal of delivering an incremental $100 million in gross cost savings this year, which includes $27 million in operating expense run rate savings and $18 million in CapEx savings. As a result, we generated strong bottom line performance with net income improving 20% to $245 million and earnings per diluted share growing 22% to $0.72. Free cash flow was $171 million, more than tripling year-over-year, primarily driven by higher adjusted EBITDA and lower capital expenditures.

Turning to the segments. SiriusXM generated $1.6 billion in first quarter revenue, with subscriber revenue up 1% to $1.5 billion, supported by ARPU increasing 1% to $14.99. This reflects the benefit of recent pricing actions, including the February adjustment and the carryover benefit from the March 2025 change. SiriusXM advertising revenue declined 10% to $35 million, primarily due to softness in news, while equipment and other revenue at $41 million and $31 million, respectively, were relatively flat year-over-year.

Gross profit increased 3% to $966 million, with margin expanding to 61%. While a softer auto environment, particularly following last year's tariff-driven pull forward in vehicle sales, created headwinds for trial starts, new acquisition programs and retention are supporting healthier subscriber trends. Self-pay net additions were negative 111,000, a 192,000 increase versus the prior year period. This was driven in part by growing adoption of companion subscriptions, which contributed 124,000 incremental self-pay net additions in the quarter.

As a reminder, the companion offering is targeted to our most loyal subscribers and engagement has remained strong with continued marketing support and early indicators showing improved retention among those taking advantage of this benefit. This performance was further supported by continued progress in our continuous service initiative as well as momentum in automotive dealer extended duration plans, more than offsetting lower conversion rates. The stability of our subscriber base remains a core strength, reflected in first quarter self-pay churn of approximately 1.5%, the lowest first quarter level in our history.

Notably, churn remained resilient despite recent pricing actions as we continue to evolve our packaging and pricing structure to better meet demand across different customer segments. With more than half of our subscribers having been with us for over a decade, we believe this performance underscores the strength of our enhanced value proposition and sustained customer satisfaction.

Moving now to the Pandora and off-platform segment. Revenue increased 3% to $501 million. Advertising revenue grew 5% year-over-year to $372 million, driven by a 37% increase in podcasting revenue and higher programmatic demand and technology fees, partially offset by lower advertising demand for streaming music. We continue to expect modest growth in advertising for the full year 2026. Subscription revenue declined 2% to $129 million due to a smaller subscriber base. Segment gross profit for the quarter was $139 million with a margin of approximately 28%, representing a slight decline from 29% in the prior year period.

As part of our ongoing efforts to simplify the business and sharpen our focus on higher return initiatives, we recorded a $6 million charge in the first quarter associated with restructuring and severance costs, which compares to $48 million in the prior year period. I'd also like to provide some context on the higher depreciation this quarter. As part of our ongoing portfolio optimization, we have begun decommissioning and planning the de-orbit of our FM6 satellite, reducing its useful life from 15 to 13 years.

With XXM10 now in service, this capacity is no longer needed. We expect approximately $60 million of incremental noncash depreciation in 2026, including $3 million in the first quarter. This has no impact on free cash flow, but will reduce reported net income and EPS. Capital expenditures were $105 million in the first quarter, down from $189 million in the prior year period, primarily reflecting lower satellite spend and the timing of capitalized software and hardware investments. We continue to expect approximately $400 million to $415 million in non-satellite CapEx for the full year. Over time, total CapEx should trend lower with variability driven by the satellite replacement cycle.

Near term, spending remains elevated as we complete our next generation of satellites, after which we expect a step down to more normalized levels. Now moving to the balance sheet. During the quarter, we completed a successful $1.25 billion refinancing, allowing us to retire all 2026 notes and redeem $250 million of 2027 notes, effectively extending maturities and strengthening our overall capital structure. And we remain on track to achieve our target leverage range of low to mid-3x by the end of this year.

We also continue to return capital to shareholders, including $91 million in dividends and $21 million in share repurchase, driving efficiencies, optimizing the portfolio and prioritizing high-return investments. This positions us to reaffirm our 2026 outlook for relatively stable revenue and adjusted EBITDA modestly lower self-pay net additions versus 2025 and continued growth in free cash flow to approximately $1.35 billion with a path to $1.5 billion in 2027. The durability of our subscription model and the consistency of our cash generation continue to provide a strong foundation as we navigate the current environment and remain focused on long-term value creation.

With that, I will turn the call back over to Jennifer to address recent headlines in the media.

Before we open the line for Q&A, I want to briefly address recent media speculation regarding SiriusXM. As a matter of policy, we do not comment on rumors, and we ask that you keep today's questions focused on our operating and financial performance. Our Board and management team are always focused on creating long-term value for our shareholders, and we'll continue to pursue that objective in a thoughtful and disciplined way.

With that, I will turn the call back to Jen so that we can begin our Q&A session.

Thank you, Jennifer. Operator, we are ready to take our first question.

[Operator Instructions] And our first question comes from the line of Stephen Laszczyk with Goldman Sachs.

Jennifer, maybe on spectrum, it's become very much top of mind over the last few weeks. I would be curious just to get your latest thoughts around the opportunity that you see for SiriusXM to monetize some of its excess spectrum, perhaps the types of opportunities you're considering, whether that's building adjacent services, partnering with someone or an outright sale? And then how soon do you feel like these opportunities could come into focus here for the company?

Sure. Thanks, Stephen. Before we jump into Spectrum, I just want to acknowledge all that our team has accomplished since we refocused our strategy in December 2024. We are doing exactly what we said we would do. And as a result, we're seeing momentum really across the business. We continue to launch new in-car subscriber acquisition programs and maintain record low churn and high customer satisfaction. We are growing our ad revenue and leveraging our unique strength to support a significant new partnership with YouTube, which we'll talk more about today. And we're finding incremental efficiencies to lower our cost structure, resulting in an improving outlook for both revenue and EBITDA. And we're growing free cash flow to our target of $1.5 billion in 2027, reaching our leverage target later this year and giving us the opportunity to expand capital returns to shareholders.

And then on top of all this, there's what you're asking about, which is how we're exploring ways to highlight the value of our spectrum. So I'm going to start on that, and then I'm going to hand it over to Wayne to give a bit more detail. But clearly, recent activity in the market has supported the point that high-quality spectrum is increasingly strategic and particularly as these new use cases have emerged like direct-to-device. So from our perspective, just as a reminder, we have a very unique position. We control 35 megahertz of contiguous spectrum in the 2 gigahertz band, which is a scarce and valuable asset. And of course, 25 megahertz of that today supports our core satellite radio broadcast operations.

And we also recently acquired the 10 megahertz of WCS C&D block licenses, which are the 2 5 megahertz bands around the Starz band. These already support emergency and public safety services, but also obviously act as a guard band against potential interference from adjacent terrestrial use alongside Starz. So we have been regularly assessing monetization opportunities in our normal course of business. And as we have said in the past, we are in discussions with potential partners regarding various options because we see a path to value creation as starting with incremental partnership-driven opportunities, and that's going to allow us to capture some value while we maintain flexibility and upside over time. So maybe I'll turn it over to Wayne to give a few more details.

Yes. And just to add to that, importantly, we do see the path to value creation being partnership focused as well as evaluating things internally, which we've said in the past, and our position there remains consistent. We've also said previously that we're engaged in discussions around potential opportunities with partners, and we continue to evaluate those as part of our broader effort to maximize the value of these spectrum assets. That said, we're not going to comment on specifics of any discussion as is our policy.

What I would emphasize, though, is that we view spectrum as a strategic asset with meaningful long-term potential. And our priority here is ensuring that any potential use, whether internal or with third parties, fully protects our core services while creating the opportunity to generate incremental value over time. That includes support for, of course, our public safety initiatives, any new partnerships discussions, the in-house services that we may make use of given our dramatically increasing footprint of our wideband chipset and then, of course, making sure that we meet all of our regulatory commitments.

Our next questions are from the line of Jessica Reif Ehrlich with Bank of America.

I have 2 questions. The second one is a bit of a multiparter, so I'll start with the first. As media -- and I mean like video and audio continues to consolidate around scaled platforms, how do you think about the importance of incremental audience and advertiser reach, particularly across podcasting, streaming, national versus local ad sales relative to your current portfolio? And if you do conclude that there are assets or capabilities that could accelerate your strategy, how should we think about your willingness to use your balance sheet for more flexibility versus staying firmly within your current leverage framework? That's one, and I'll come back to the second.

Okay. I'll let Zach handle leverage in a minute. But first of all, I'm very pleased to have Scott Walker, our Chief Ad Revenue Officer and the Chief Architect of our partnership with YouTube on the call today. So I'm going to turn it over to him in a minute. But I think YouTube is so core to what you're asking about. So scale for us is 255 million listeners, which is access to 90% of the U.S. population, 13 and older. So we are very focused on this as our opportunity to expand scale. And a good way, I think if I just take a step back, to understand this partnership is to first focus on the consumer behaviors that you alluded to about video and audio and how these behaviors aren't necessarily fitting into these neat format boxes we've used as an industry, right?

So consumers are moving more fluidly between formats. They're watching and listening as they go about their days. And for instance, they might start a video on their phone and then minimize the screen on their commute while they keep listening. So this behavior is happening at enormous scale on YouTube. And as a result, YouTube has become one of the largest audio consumption platforms in the U.S. So there are numerous examples of this, whether it's listening to music on smart speakers or listening to a podcast or an interview while your phone is in your pocket. All of these are examples of content consumed the same way people use traditional audio platforms.

And this partnership that we have with YouTube brings that massive amount of untapped audio-first engagement to advertisers for the first time. And that's alongside a native ad format that actually matches the listening experience. So again, combined with our existing portfolio across music streaming, podcasting and SiriusXM, we will now reach 255 million monthly listeners, which is massive scale. And this tremendous reach positions us not only to grow overall ad spend, audio ad spend, but also to capture a greater share of that audio ad spend over time.

And maybe, Scott, you can give a couple of more comments, and then we'll go to the sort of broader leverage question.

Sure. Thank you, Jennifer. I want to touch on one of the things that Jennifer mentioned anytime you can match up the ad format and natively integrate it based on how consumers are actually experiencing the content, it's better for the user and better for the advertiser in terms of performance, and that's exactly what we're doing here with this partnership with YouTube. In the battle for finite attention that is increasingly scarce to your question, we've just unlocked this massive untapped opportunity based on the insights that Jennifer referred to earlier, that consumers are much more fluid in how they use YouTube, switching back and forth across listening and watching.

And one of the reasons why we are so confident in this opportunity is that it's a true partnership with YouTube. We are co-developing proprietary technology in terms of integration with our scaled systems with Google's ad platform, ensuring that we can scale our go-to-market and deliver a product that we know meets the criteria of the world's most discerning and largest audio buyers.

Okay. And then Jessica -- sorry, to your question, Jessica, around the balance sheet -- sorry about that. Our capital allocation framework remains consistent with what we've outlined previously. First, we're prioritizing investing in the business, funding those initiatives that support our key strategic priorities. And I think we saw in the first quarter, those investments are increasingly translating into tangible financial results, especially in profitability and free cash flow. Second, we remain committed to a disciplined balance sheet. Our target leverage in the mid- to low 3x range, which we've communicated previously.

We ended the first quarter at 3.6x and feel confident in our path to reach that target by year-end. And from there, it's really focused on returning capital to shareholders. We have a consistent dividend that we intend to maintain, and we see share repurchases as an important lever from that. So while buybacks have been more modest recently, as we've been working on deleveraging, achieving that leverage target will create additional capacity, giving us flexibility to potentially increase repurchases.

So I think -- and finally, we'll remain opportunistic around incremental value creation, areas like our spectrum assets, which we've talked about a moment ago, or places we see longer-term optionality to unlock additional value as well as selective inorganic opportunities that must meet our strategic and financial criteria. So I think we see -- overall, it's a balanced and disciplined approach, both investing in the business, strengthening the balance sheet and positioning ourselves to enhance shareholder returns as we execute against those leverage goals.

If I could just -- my second question is actually more specific on YouTube. If you could just dive a little deeper into like how you see this evolving. Google owned TV 360, which you mentioned earlier, does that now become your main programmatic DSP? And actually, maybe you can unpack a little bit about what you're seeing in programmatic in general, how -- what percentage is, how fast it's growing. But the other part of YouTube is that it is a global platform. And you have so many channels that lend themselves to global audience. I know this hasn't come up in probably years, but would you rethink that strategy?

So Scott Walker, why don't you start on the advertising side? And then Scott Greenstein pick up the content side.

Sure. On the programmatic question specifically, we feel like we're strongly positioned with our proprietary ad technology platform, as was in terms of our ability to plug into all of the major DSPs in order to make that buying as flexible and easy as possible. And as it pertains to this YouTube partnership, specifically, initially, programmatic is not part of the partnership, but we see a massive opportunity to unlock advertiser demand based on this incremental reach that we speak to despite that.

In terms of where programmatic is growing, it's certainly growing as a percentage of the overall spend in digital media. And that trend continues in our business as well. Programmatic is growing at a healthy rate. Our partnership with the Amazon DSP is an example of where we see incremental budgets being unlocked. And programmatic with respect to podcast is also growing. Jennifer mentioned triple-digit growth rate year-over-year in Q1, reaccelerating.

Great. And Jessica, on the international question, the podcasts are currently distributed where they make sense overseas on that side. And then as far as the content goes, we're open for any deal or any licensing situation. It just has to make sense. The good news is with the amount of content we have under license, a lot of it is worldwide and the relationships are there. So if ever it comes a point where whether it's through technology or a licensing deal, the relationships will be there, and it will be a pretty easy transition to open up negotiations to go further on that. And we also have the unique ability to create content for any market that might be adjacent to what we're doing.

Million more questions, but I won't hog the call. .

Our next question is coming from the line of Barton Crockett with Rosenblatt Securities.

Okay. Great. Congratulations, again, on the YouTube deal. To kind of ask a little bit more about this deal there could be such a large kind of funnel of revenue flowing through. But I was wondering if you could give any sense of the degree to which the lion's share of that would be stay on Google's kind of side of the ledger and how much of that you guys might be able to extract for your efforts? How do you kind of think about the take rate essentially on the deal? Anything you can say about that?

I think -- look, there's -- right now, we're prepared to talk about the size of this, the magnitude of the scale and how we're going to increase our reach. And we expect to launch in the fall, as we've said. And I think we're going to ramp this up over time. I don't think it will have a meaningful impact on this year's numbers. But as we go into 2027, we'll have the opportunity clearly when we provide guidance to give you a better sense as to the magnitude. But we've given you some general numbers on the scale of it. And I think we will be watching, obviously, the magnitude of the incrementality of this audience reach relative to where we are today, which is very significant, obviously, with $1.8 billion in ad revenue across our properties. So that's what we're prepared to share today, but we do believe it's a significant opportunity for us, and we can share more on general economics as we get closer to the end of the year.

Okay. All right. That's fair. And then I apologize if this has already been covered, but with all of the kind of activity around space with SpaceX and with Globalstar and Amazon and the recent kind of SEC weird space NPRM giving you guys some telemetry trafficking and control capability potential with your spectrum if that moves ahead. To what degree do you think there's potential for you guys to be meaningful players in the space ecosystem, leveraging some of your spectrum rights? And how could that kind of play out?

So look, I think you mentioned the weird space testing, so I'll just touch on that. We have had discussions with the FCC related to this. And from our perspective, this is a constructive step as it continues to formalize, clarify the rule of TT&C. And it's a legitimate important use of satellite spectrum. And so it recognizes that we have the right to be protected from interference and also helps direct how other parties could use the satellite spectrum productively. And look, there's going to be a lot of different ways that I think spectrum -- the use of spectrum evolves over time. And this is a good example of where multiple tenants could use the same spectrum in a very methodical way. And we -- that's one of the examples, I think, of the things that we could look at going forward to unlock more monetization opportunities.

Yes. Thanks, Barton. This is Wayne. And I would add that we do see optionality here, as we've mentioned previously, but we see this optionality will be realized over time. So not through a single step, but along a multiyear glide path sort of shaped by what we think of as 3 factors. First, the subscriber and hardware ecosystem that we have. We have an installed base throughout the entire satellite radio band, including on the legacy Sirius band and more importantly, millions of vehicles on the road with embedded radios and OEM commitments tied to the spectrum. Second, the technology migration. So we're already developing next-generation chipsets and 360L hybrid radios that can use both Sirius and XM bands. And so this gives us increasing flexibility over time to make use of this. So today, we have millions of vehicles that are already enabled with this new chipset. We expect this to grow to more than 65 million by 2029. And then third, regulatory obligations. Like our licenses come with requirements to provide specific services that, of course, we will need to continue to meet.

Our next question comes from the line of Bryan Kraft with Deutsche Bank.

I had a couple on advertising as well. I guess, first, could you talk about the capabilities that 360L has the potential -- sorry, the capabilities 360L has the potential to bring to your advertising business? And what plans you have to activate those capabilities? And also things like addressability, measurement, those sorts of opportunities? And could you give an update on the advertising supported tier and at this point, where you see that going?

And then I just had a follow-up on YouTube. Google is obviously quite a large sophisticated player in digital advertising with scale and technology. Can you just talk about why a player like YouTube would view working with Sirius as better than doing it themselves? And if you could also talk about whether you see this partnership maybe leading to additional major partnerships in the future? Does it sort of open the door to more opportunities like this?

So I'll let Scott address the second part, and I'll talk a little bit about 360L and Play. With 360L, we do believe there's an opportunity for more addressability for audio advertising in the car. And we're expanding, obviously, the volume of vehicles on the road that have 360L -- we haven't yet unlocked real targeted ad capabilities inside 360L. We are looking to do that over the course of this year even potentially. But clearly, the focus now is on executing on YouTube and making sure that we can launch that as it's a much bigger scaled opportunity.

And then on Play, I'd say it's similar. We are leveraging play as an opportunity to broaden the top of the funnel as with many other of our lower-priced packages, and it's been helping there to do that. The ads inside of it are -- today, the scale isn't as significant because, again, we're using it as a way to market and get customers into higher-priced packages. But in the future, as we unlock more addressability in the car, obviously, it would benefit Play as well. And Scott, do you want to handle YouTube?

Sure. When YouTube first came to us, the insight that they brought was that audio is a unique channel. And relative to other media channels, YouTube is very much considered a default video platform, and that was the focus for most of the advertisers. And the awareness that there was massive listening behavior happening on the platform was just not there. So the first point is that the recognition audio is a unique channel that requires a sales team that has honed a different approach or a different craft in terms of the relationships with the buy side, the creative nuances around audio, our measurement expertise, and we have a proven track record of over 20 years of defining the digital audio category and really the ad market within that.

So I think our reputation in the market with advertisers and with creators speaks for itself and Google and YouTube recognize that. And on that last piece, it was clear that we have delivered for YouTube creators on the podcast side. Some of our biggest podcast creators in our network, whether it's Mel Robbins, Konan O'Brien, Alex Cooper, they're all massive players in terms of usage and engagement on YouTube. And we have clearly demonstrated best-in-class monetization through our embedded sponsorships on YouTube, and that was yet another signal that we were the right partner for this opportunity.

And the last part of it was, do you think that this is something that could open up additional partnerships? YouTube is obviously very unique, but are there other potential players that may see this, what you're doing with YouTube and say that's probably a party that we ought to join?

Yes. We have certainly expanded and diversified our advertising business over the years by broadening into a larger network of both streaming partnerships with the likes of SoundCloud and our #1 podcast network, where we have the most shows in the top 20, 4 of the top 10 and #1 position in terms of weekly reach. So this was a natural evolution of that strategy of diversifying and leveraging this amazing demand engine that we've created on the audio side to help YouTube monetize this content. And success here and demonstration of our ability to be successful, I think, opens up doors beyond this certainly.

The next question is from the line of Sebastiano Petti with JPMorgan.

Just closing the loop on the spectrum stuff. So I guess, Wayne, based on your comments to "protect core services and that this will take a number of years and FCC obligations as well as OEM obligations. My interpretation is that any notion that you could "force migrate subscribers off of the lower 12.5 megahertz is probably outside the bounds of probably something you guys are contemplating? That's my first quick question, and then I have a follow-up.

Yes. Thank you, Sebastiano. I'd say that we don't have any plans at this point right now to force migrate, of course, but we're always evaluating how we can best serve our customers, and we have millions of customers currently on this band. And so as we're thinking about the opportunities to do something more strategic or create more strategic value here, certainly, we're thinking about timing. But timing in all of these cases, the timing of a start of an opportunity is, of course, different than the timing of being able to catalyze an opportunity. So we're -- all of these plans need to be thought through in multiyear stages, even if other things happen first and with partners or others.

Got it. And then in terms of timing, I mean, my understanding, I think, is you're unable to really kind of do anything with this lower 12.5% until it is fully cleared. And I think based upon I think, Jennifer, you may have touched upon in previous conferences recently, but we're looking at, what, 5 years for the spectrum to still be cleared. And so is that like the inside of how we should think about when monetization could potentially occur on the spectrum?

I don't want to be too specific because as we've said in the past, we've had a long runway on the spectrum with the subscribers there being very sticky. But I would suspect it's inside of 5 years. We've also talked about C&D, where there's maybe more opportunities in the nearer term, the 10 megahertz on either side. But I also think just with the NMPRM about weird space stuff, again, that there are some opportunities to do things while we have active subscriptions in that spectrum, probably limited, but there are opportunities. And of course, I think Wayne touched on this a little bit. There's just -- there's a long runway for how another potential partner would actually execute on this. And so that timing actually could be quite consistent.

The next question is from the line of David Joyce with Seaport Research Partners.

You had impressive uptake with the companion strategy earlier this year. Do you see that continuing? What strategies do you have to keep driving that for the overall subscriber platform?

Sure. So first of all, we're very pleased with our Q1 subscriber performance, especially after a strong Q4 last year. And the companion subscriptions clearly contributed to that, and we noted that they were 124,000 in the first quarter and as well as continuous service and expansion of our auto dealer extended duration plans. And with companions, the great thing about it is that we've been talking about kind of 2 themes as it relates to our subscriber performance and future growth as well as revenue, one being enhancing subscription value and the other being expanding access. And companion really does both, right? It expands access to SiriusXM to more listeners across the household and also enhances the value and improves retention of that subscription household. So we're really pleased.

I think the question really is, as we -- we've been successful in the marketing, I think beyond our expectations actually. But how long does that last? And does the -- sort of do the take rate start to mature at some point over the course of the year. But we're also looking at where it may make sense to expand availability. So that's why we're being cautious and not changing the context we've provided about subscribers for this year. That as well as what Zach noted earlier in terms of auto sales and how those could materialize. There's still pressure on gas prices and impact on the consumer.

The next question is from the line of Kutgun Maral with Evercore ISI.

I wanted to ask another one on advertising. You made a lot of progress building out the ad business with new capabilities and innovative partnerships. But it still feels like that opportunity doesn't get full attention from investors given the much larger satellite subscription revenue base. So as you think about the portfolio from here, is there any interest in reshaping the business to better highlight your advertising capabilities and opportunities, whether it's through additional scale via M&A or potentially a clear separation between the satellite subscription business and the Pandora and off-platform side. And I know we're, of course, not talking about specific deals, but what I'm really trying to get at more so is if there's a big focus right now to better match what I see as the strong execution you're demonstrating on advertising against unlocking value in the share price?

So we have the 2 segments, which gives you, I think, some exposure to the Pandora and off-platform segment, which is the vast majority of our advertising. And so -- and we provide a fair number of metrics there, but it's a good point. And obviously, with the increasing scale, we will find ways to provide, I think, more metrics around the advertising business going forward.

I do want to touch on M&A because you mentioned it. And just note that we see significant opportunity within our existing businesses and whether that's obviously executing and expanding our reach through partnerships like YouTube, but also improving monetization across our ad-supported businesses, like we've done with Creator Connect or Apple Podcast better targeting and measurement tools and of course, enhancing the value of in-car subscriptions and unlocking the value of our spectrum assets like we've talked about. So these are the areas we're focused on day-to-day, and we believe they offer the clearest line of sight to high-return opportunities. And Zach mentioned that we'll continue to look at and be opportunistic on inorganic M&A and inorganic growth, but we're going to be very disciplined about that.

The next questions come from the line of Steven Cahall with Wells Fargo.

So I just wanted to make sure I understand the subscriber guidance for the year. I think you said that you'll see modestly lower self-pay net adds. I think you lost around 300,000 last year. So should we kind of think about companion as slowing as you get through the rest of the year? Could we annualize what you did in the first quarter for companion for the rest of the year? I'm just kind of trying to understand what core net adds are doing. I don't think companion comes with any revenue contribution. So just trying to understand kind of what the core base looks like, excluding companion. And then I have a quick follow-up.

So I can ask Zach to comment on the sort of context we provide around subs. But I do want to note that you're correct about companion in terms of not adding specific revenue for those subscriptions. However, it was part of our strategy to ensure that we're adding value before we increase subscription prices. And so we've now done this 2 years in a row very successfully. And we see actually higher retention among households that are taking companion subscriptions. And it's logical because there is more engagement across the household.

So it does result in not only providing a benefit for us to successfully execute on rate increases, but also just driving more engagement. So I do believe it translates through to overall revenue. And as I mentioned a bit before, we're just being cautious, I think, about the year in general. But on companion specifically, that we continue to market and look for other opportunities to perhaps use it, especially perhaps in acquisition as more of a family plan. But I would expect the program to mature as we offer it to a specific set of our full-price subscriptions.

Yes, for sure. I think you've got it right, Stephen, regarding our guidance and the numbers around the self-pay net adds. I think one thing to add to what Jennifer was saying, just numerically, if we take a look at ARPU, we're actually really pleased with that as well. So we're getting the subscriber growth, partially companion program, and we're also seeing ARPU up 1% versus last year. Obviously, the primary driver of that was pricing, reflecting the rate actions. But I think what's important is that the ARPU growth is not coming at the expense of the broader health of the business. Alongside the higher ARPU, we're seeing improved subscriber trends, record low first quarter churn stronger engagement and continued gains in customer satisfaction. So I think you have to look at all these together.

And as is really a measure of the quality of the subscriber base. So we're driving higher monetization while strengthening retention and overall customer value. And I think this is our third quarter of ARPU growth, and we would expect that to carry through the rest of this year as well. So I think the composition of all of that shows the strength of sort of the actions that we're taking.

And just a quick follow-up on conversion. I think there's a few things going on in conversion. So I think a tailwind for how you account for the auto dealer duration plan. So can you give us any more color on contribution from those plans, which seem really positive? And then you did call out a little bit lower conversion, I think, on self-pay. I think those historically were in the mid-30s. Any sense of where they're kind of running today?

Yes, Steven, we continue to see some of the same trends we've seen in the past on conversion rates. And we have had slight declines as younger car purchases come into the trial funnel and then, of course, used conversion rates lower than new. And the good news is that we just have so much more data. And with all the personalized marketing capabilities we're building, and are coming even later this year, we can address customers in a much more personalized way in our marketing, whether they're listening or not or based on their content preferences.

So I think the single biggest opportunity for us continues to be with 360L rollouts. And we're at about, I think, 55% of sales by the end of the year with the OEMs that are ramping, we'll be at 70%. And we do continue to see 360L conversion rates better than non-360L. And as we ramp 360L on AAOS, which can be updated much more quickly, we see those conversion rates even higher. So these are the tailwinds. Our extended duration plans also help. And we're hopeful that we can start to stabilize some of these trends and we're intently focused on conversion rates as a measure of demand, but we also have many other demand-focused programs in place that wouldn't necessarily show up there, right, such as companion subscriptions or Podcast Plus and some of these other programs that we put in place.

The next question is from the line of Cameron Mansson-Perrone with Morgan Stanley.

Jennifer, you started the Q&A talking about the way the team has executed over the past couple of years. First quarter results are pretty encouraging. I'm wondering if you could provide some color given the reaffirmation of the full year guide, just how you're thinking about growth in the balance of the year.

Yes. Maybe I'll let Zach take that one.

Yes, for sure. I think thanks, Cam, for the question. I mean it was a really good first quarter, revenue growth of the 1% and importantly, growth across subscriber revenue and advertising, both sides of that. And then combined with the strong cost discipline, EBITDA growth of 6%, net income, 20% EPS, 22%. So some really good metrics. And I think in cash flow, cash flow -- free cash flow tripled and free cash flow per share increased 217% to $0.51. So when we provided guidance last quarter, we talked about how important it was to provide the stable outlook, and we're off to a great start.

So I think beyond that, we feel very good about the start of the year and the progress we've made, which does increase our confidence in the plan. But that said, it's still early in the year, and there's a lot of time ahead of us.

When we look at the full year outlook, the underlying assumptions of our plan really haven't changed. But we are continuing to monitor the auto environment closely. We've seen some softness there, particularly in the OEM funnel. And while we haven't seen any change in customer behavior to date, churn and engagement remains very strong. We're also mindful of the broader macro backdrop. So given that, we just think at this point in time, it's appropriate to remain disciplined order outlook while staying focused on executing through the rest of the year. So as we continue to see strength in the business, it's something we'll revisit as the year moves forward.

Our last and final question is from the line of Clay Griffin with MoffettNathanson.

I just got a quick one on the inventory scope attached to this YouTube partnership. Just if you could put some detail around what exactly it includes, for example, does this include the inventory on the ad-supported version of YouTube Music -- and then maybe just sizing the overall sort of impression scale at this point, given that, obviously, YouTube is dominated by video ads today. And then as a follow-up, just to confirm, Jennifer, it sounds like that this deal is likely to be accounted for on a net basis. Did I hear that right? Just maybe just walk through the mechanics of the accounting.

No, it will be like our other ad representation deals where it's growth, and it will be in the Pandora and off-platform segment. And Scott, do you want to address the inventory?

Sure. Thanks for the question. So in terms of the scope of this, -- the primary use cases are both YouTube Music, the ad-supported YouTube Music tier and the YouTube main app, where listener -- where users of YouTube are primarily listening versus watching. So this could be static image music videos or LYRIQ videos. This could be YouTube connected via Android Auto or CarPlay in the car. This could be long-form content, whether it's podcast or interview content on smart speakers in the home. All of these are examples. And the scale here is matched or commensurate with the reach.

We talked about the Edison research that we recently conducted where the reach of this YouTube listening-first audience is 212 million monthly listeners. And combined with our 170 million across our podcast network, our Pandora streaming network, et cetera, we're now reaching 255 million users overall. So the scale of this is significant. I'll reiterate Jennifer's earlier comments about the ramp of this. We are launching this in the fall during the Q4 planning cycle. So we expect the growth and the ramp to happen more in '27 and beyond.

Okay. So in closing, thank you all for joining. I'd just like to say that we're very pleased with the strong start to the year. and the early progress we're making across each of the strategic priorities we laid out in December of 2024, and we continue to see that strategy translating into tangible results. whether that's the strength of our in-car subscription model, our growth in advertising or the broader efficiencies across the organization. And we are well positioned to build on this progress as we move throughout this year. and we remain thoughtful and disciplined in how we allocate capital and invest for future growth.

So our focus remains on execution. And we're confident in our ability to deliver on our full year objectives and our guidance and drive sustainable long-term value for shareholders. So thank you for joining us this morning.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may now disconnect your lines at this time.

Good morning, everyone. I'm Cameron Mansson-Perrone, Morgan Stanley Music, Live Events analyst. Before we get started, I want to note that important disclosures, including my personal holdings disclosures and Morgan Stanley disclosures all appear as a handout available in the registration area and on the Morgan Stanley public website.

With that, I want to please welcome Jennifer Witz, Chief Executive Officer of SiriusXM. Jennifer, thanks for joining us.

Thank you, Cam. Great to be here.

Maybe we can start the conversation with just an overview of your priorities and vision for SiriusXM over the next, call it, 3, 4 years. Where are the areas of focus and opportunity for you and for the business over that kind of near to medium term?

Sure. So I guess I'd just start by saying we are a scaled audio entertainment company in North America, maybe for those of you that don't know us well. We have 33 million SiriusXM subscribers, 180 million cars on the road, 170 million listeners across our ad portfolio. And of course, we're the #1 podcast network in the country.

So the foundation of the business has always been the in-car subscription business. As you know, it represents the majority of our revenue and our free cash flow. And we have continued opportunity to enhance the subscription business at SiriusXM. We're looking at it as broadening the funnel, improving distribution, but also enhancing engagement, retention and ultimately, customer lifetime value as we focus on product, content and pricing and packaging opportunities. And hopefully, we'll talk more about each of those.

And then on top of this great foundation, we have a scaled audio advertising business where we have industry-leading reach and monetization. So for 2026, it's about disciplined and value-led execution. This is a continuation of the strategy we put in place at the end of 2024 and executed on in 2025. So I think you'll see us continue to focus on enhancing subscriber value, expanding our ads business, driving operational efficiencies and growing free cash flow to our target in 2027 of $1.5 billion. We're also strengthening our balance sheet that opens up a lot of opportunities. We have line of sight at the end of the year to achieve our long-term leverage ratio. And that means we'll have a lot more excess free cash flow next year to expand capital allocation and look at different opportunities there.

And then in addition, we have spectrum assets, right, that we're pretty uniquely positioned, and that opens up different kinds of opportunities for future monetization based on those. So really, it's about, say, over the next 3 to 4 years, and we'll talk about a lot of different opportunities, but it is the combination of recurring revenue and scale on top of operating discipline and these unique assets that I believe and have confidence that will allow us to continue to strengthen our position in audio and also enhance our revenue trajectory, cash flow growth and ultimately create shareholder value.

In the more immediate term, you recently gave financial guidance for this year last month, outlining kind of moderating revenue, adjusted EBITDA growth trends with a slightly smaller sub base offset by some pricing activity. What does success against those expectations look like this year? And where might there be opportunity for you to outperform those expectations?

I think it starts with -- we're really pleased with where we landed in 2025. So we overdelivered relative to the raised guidance we provided over the course of 2025. And that, again, is executing on the strategy that we laid out at the end of 2024. So for 2026, you sort of summarized it well. We are changing the trajectory of the last 3 years. We have guidance that reflects relatively stable revenue and EBITDA slightly lower subscribers, but also growing free cash flow, right, that last year, we delivered $1.26 billion. Our guidance for this year is $1.35 billion and next year, of course, $1.5 billion, and we would expect it to grow beyond that as well.

So it's -- success is, of course, delivering. We want to deliver on the expectations that we've outlined. But also it's not just about this year, right? It's laying the foundation for what we're going to accomplish in the future to drive growth both in the top line and in free cash flow. So I would say we have a lot of levers to pull to be able to execute on this year's guidance, but also making sure that we're focused on the long term.

If we maybe zoom back out, how would you characterize the health of kind of the music audio ecosystem overall? And how are some of the priorities that you just talked about positioning SiriusXM to kind of succeed within that backdrop?

Look, engagement with audio has always been about 4 hours of a consumer day, and that positions us really well. We are uniquely able to capitalize on the subscription monetization in the car, given our differentiated position there and then in audio advertising more broadly and mostly outside of the car. So we're looking to lean into where we're differentiated and where we have strength. So in the car, that's about driving subscription value. We have a -- there are sort of 2 components about what's important to our customers, and that's ease of use and the breadth of the content that we offer. And that's about live, exclusive and human curated content, which we do better than anyone else. And it's leaning into things like our live sports portfolio that no one else has the breadth across video or audio has the breadth of what we have to offer there.

So we'll continue to capitalize on those opportunities. And really, the biggest unlock in the car is for us to make sure that customers can find the content we have, right? Because we have such a breadth of content, but we need to make it easier for customers to explore and find that content as a way to improve both demand and retention over time. So we'll talk a lot about engagement and the metrics that follow.

And then outside of the car more broadly on advertising, Cam, we have a lot to build on there, considering we are scaled and we have industry-leading monetization. So there's a way for us to continue to add to our portfolio outside of what we have today in both streaming and podcasting. You've seen us take a position in podcasting, a really successful network opportunity there. And then beyond that, I think we have more opportunities to align with other platforms to help them better monetize in audio as well. So I feel really good about where we are in audio.

One of the kind of recent -- not so recent, but one of the meaningful developments within kind of audio, music and the broader entertainment ecosystem has been AI and the impact that has had, could have, obviously, a major theme of this conference. How do you see AI impacting the ecosystem across artists, consumers, business models? And what does that mean for SiriusXM's offerings over time?

Yes. I think there's some familiar themes for AI. It's just an accelerant really across every part of the business. And what we're seeing today, and I'm sure you all are seeing, too, is just how it helps creators and platforms to better produce and distribute content, how it helps marketers, better target and measure how it helps consumers find and discover new content. And so -- and then also just it's a better way to operate more efficiently across the business.

And so as it relates to music, there's been a lot of discussion about AI music. And for SiriusXM, I think we are really well positioned to really almost not embrace AI as it relates to what content we're providing. We're all about human, human curation. It's about the content that we decide to put on the platform. It's the hosts and the talent that we have on the platform and how they engage and connect with our audiences. And so there may be an AI song that we'll provide within the library, but we may have more opportunities really with AI music on Pandora.

And you see a lot of the music streaming services taking in a lot of AI music. There hasn't been a lot of positive feedback, I think, from consumers in terms of the reception to that AI music. I think it's less than 1% of engagement on Pandora and other streaming platforms as well. But we have opportunity to continue to explore and be flexible about AI music, I think, on Pandora, more so than we might want to do on SiriusXM just because we want to stay true to our value propositions for each of these services. And because we have these two different platforms, we can be opportunistic about how to take advantage of it.

Great. I want to drill into the business, maybe starting on the subscription side. The range of subscription offerings from Sirius, from a pricing and packaging perspective has evolved a lot over the past few years, including Companion, which you just launched as well as Play and Podcasts+. Do you think sitting here today, you have an adequately flexible array of offerings in order to kind of meet consumers with your -- the breadth of your content portfolio? Or are more offerings in the pipeline?

We've had a lot of success with what we've introduced over the last couple of years. And there's really two objectives. One is we want to improve value at the top end for our premium prices that we have across our subscription packages, and we want to expand access or create more demand. So in terms of improving value, you mentioned Companion, that was the latest effort we did to deliver more value to our subscribers, and we can talk more about that. But the real unlock, I think, is if we can expand choice, and that means providing different types of packages in the market, whether that's through distribution like our extended duration program, which is with OEMs through dealers where they're ordering 3-year subscriptions, that come included with a car. So that's opened up more demand because we're getting subscribers into our ecosystem that might not have otherwise converted, and they're listening and engaging with us.

So we have really great opportunities there with Podcasts+, where we're reaching new consumers on other audio platforms with a moderated portfolio of our podcast programming. And then we have things like low cost with ads, our play subscription or music only, which really broaden the funnel. So there's an opportunity for us to put those packages in front of customers so that they see a lower price point come into the sales force, but actually end up choosing different packages at higher price points that are more fully featured or have more content associated with them.

So we want to continue to explore opportunities to build out our pricing and packaging structure. And I think because we've been successful, you may see us do more. But really now it's about executing on what we have to continue to deliver more choice for consumers, expand that demand, but also add value across our platform.

You talked about Companion on the earnings call last month and characterized it as kind of a step toward offering a suite of family plans. How are you thinking about the opportunity both with this preliminary offering and with the opportunity for family plans more broadly across here?

Look, Companion has been a big success for us. We launched a little earlier than we expected, which helped drive the performance we saw in 2025. And we continue to see some solid momentum there. But again, it kind of comes on the heels of something we did in the fall of '24, where we provided more access to content, particularly our talk content, our sports content to a broader set of our subscription packages. And this allowed us to drive engagement more broadly across those content types. And what we see for our customer base, maybe not surprisingly, is that engagement with more types of content across more devices and in more locations among members of the household drives better retention, right, and ultimate customer lifetime value.

So when we added more content in the fall of '24, that positioned us really well to do the rate increase that we did in early '25. And we've seen enhanced retention as a result of adding that incremental value. So we did the same thing in the fall or at least in December of '25 when we added Companion. So it allows customers that have certain full price packages to add either an extra car or an extra streaming login. And for those customers. We've seen nice take rates on both of those. And we've also started early, but we're starting to see improved retention as well. So it's giving us a lot of confidence that this is the right path to continue to pursue.

Right now, it's actually added value to current subscribers. We haven't used it in acquisition yet, but there are probably opportunities going forward to market that as a family plan and acquisition as well. So again, it's all about improving engagement and delivering more value to our core in-car audiences so that we can improve our longer-term revenue trajectory.

One of the other recent changes or offering evolutions that you launched late last year with continuous service. which transition subscriptions to be identified more with an individual or household and less affiliated with a vehicle. Could you elaborate on how you expect that to benefit the business over time and whether anything else?

It's been a long-time focus for us in trying to modernize our product and technology infrastructure so that we're more customer-centric and less vehicle-centric. It opens up a lot more opportunities even on the bundling side of the business. But for now, we launched this late last year, and it just makes it easier for our subscribers to transition between vehicles, right? That we have a lot of that activity. Most customers still have to call and move the subscription from one car to another. This makes it easier for customers to do that over time. And then I think in the future, we'll be able to open up more capabilities where we can just make that auto transfer. For now, it takes the subscription that a customer has now and adds it on to the new car post trial. So whatever time is remaining. And it keeps all the account information. It keeps the streaming login in case there's a lapse of time between when they move between vehicles and all of the listening preferences and things like that.

So it just removes friction and also removes some of the leakage that we see typically when -- not a lot, but when customers move between cars, there's that natural point of like maybe I won't subscribe. And now it just makes it easier for them to continue, and we would expect to see better subscriber metrics ultimately as well.

Is that a back-end change? Or does that -- is that something that you transition someone on to when they -- going forward when they purchase a new car or start a new plan?

Right now, so it's a back-end kind of platform change, and we'll be more proactive about how we market it to customers when we have, I think, more auto transfer capabilities in place. But we've seen nice take-up. Customers are appreciating less friction in the process. And I think it will ultimately drive better retention, but also better customer satisfaction as well.

One of the other potential opportunities, I think, as a result, not only of continuous, but it seemed like also just a more flexible array of packages that Wayne referred to on the earnings call was the ability for all of that to kind of facilitate bundling activity and maybe more flexibility around partnerships going forward. What do you look for in an attractive partner when it comes to those kind of arrangements? And what kind of deal structures are you focused on?

I mean there were sort of two fundamental building blocks. One was making sure that we are customer-centric because it's easier to match a subscription from another platform to our platform if it's based on customer identity as opposed to car, but also having a broader array of packages at lower price points to match up with other subscription services. So for us, it's about either content or distribution opportunities and aligning with other companies that have similar goals, right? So we would want to make sure to deliver either more demand opportunities or more retention opportunities or both. And I think the logical array of partners spans other audio services, perhaps on-demand music services where we're a great discovery mechanism at SiriusXM and on-demand subscription services provides that catalog and true library. So you could discover on SiriusXM and save down to a library.

Now that -- it works really well if it's a true hard bundle with product integration. So that would really be a win-win, I think, especially for on-demand streaming services who maybe haven't captured the potential for reaching older audiences, which we are really well established in at SiriusXM. But also there's other content providers like video, where you might imagine it's an extension of you're watching content at home and then you can listen to that same content in the car. So there's a logical step there.

And then on distribution, we've done some select partnerships with telcos or broadband companies, and I think there's more we can do there. And again, that could take the form of value add for them as part of the loyalty program and potentially demand generation for us.

You've guided to subscriber net losses getting a little bit worse this year relative to last year. As we think about all of the initiatives that we've been discussing, is it momentum across what we've been talking about that gets you back to subscriber growth? Or what's the kind of path forward beyond 2026 on the net adds?

I mean part of the context we provided for '26 was as a result of some of the pull forward of the Companion subscription launch earlier than we expected and how that's delivering value to subscribers. So we've talked about continuous service, Companion subscription, kind of expanding distribution, maybe some partnerships. All of those will be key, I think, to ultimately improving subscriber demand, retention, engagement and revenue as well. And I think there's more to unlock across whether it's broadening the funnel with distribution or it's improving across product, content, marketing and pricing and packaging.

So we talked about some of the pricing and packaging improvements we've made. On the product side, 360L is core as we roll that out and deliver more personalization in the car. And we have also implemented versions on AAOS, which allows -- it's a much more updatable platform and it's fully featured. And we see better early days, small numbers, but better conversion results there. On the content side, it's again leading into what we do really well and making sure that we're taking advantage of the opportunity to put the right content in front of the right customers, right?

So it's a lot about capitalizing on what we're known for. There's a lot of perceived value in our sports offering, our live news in addition to music, which is core and habit forming for our customers. And we want to make sure that the marketing improvements that we're putting in place, the new marketing channels and things like device subscription and the sales flows that just makes it easier for customers to engage and ultimately transact with us to personalize marketing.

So a lot of the improvements that we've been putting in place over the last couple of years come to fruition this year, and we would expect to see a better result across all of our digital channels on the marketing side. And then again, unlocking that improved engagement, which ultimately drives both better demand and better retention, ultimately, I think, puts us on a better path for subscriber results in the future.

We've been focusing a lot on kind of drivers and outlook around subscriber volumes. If we roll up everything that we've been talking about from a pricing and packaging perspective on the pricing front and overall ARPU growth, how do all these initiatives kind of roll up into an aggregate ARPU outlook for the subscription business?

Look, it's about revenue maximization, right, which is both subscriber volume and ARPU or rate. And we want to make sure that we're not making the wrong trade-offs there. And so on the subscriber side, we've talked a lot about the opportunities that we have to continue to drive momentum there. On ARPU, we're already seeing it to some extent, right? The third quarter and fourth quarter numbers were both better year-over-year, and we expect to have a positive trajectory there as well.

So it really is about the two objectives in pricing and packaging, right, which is expanding demand, putting lower price points in front of customers, but optimizing that tiering and package mix and making sure that we're upselling along the way. It broadens the funnel, but then lets us upsell people into more fully contented packages. It's also about reducing our reliance on unpublished discounts, which, as you know, these lower-priced packages will help us do that in both acquisition and retention. And then adding value to our full price packages really positions us for future and ongoing rate increases.

And so all of these factors help put us on a positive trajectory for ARPU going forward. But again, we want to be really disciplined about how we look at ARPU relative to subscriber volume, and that's why we test very thoughtfully when we introduce new packages. And I think we have a strong revenue trajectory as a result.

Great. I want to turn to the advertising business. How would you characterize the success of overall industry growth in audio advertising over, call it, the past 3 to 5 years? And what factors do you think have contributed to the industry, again, overperforming or underperforming relative to what you might have thought?

I mean the industry has been relatively flat at about $16 billion. But of course, a large part of that has been terrestrial radio. And there's been a pretty significant share shift over the last several years from terrestrial into digital, and that's where we've really benefited, right? So started with Pandora, obviously creating the digital audio advertising business and extended through to podcasting where there's been a lot of tailwinds over the last few years. And we've been incredibly successful at building that business and continuing to take share in digital audio advertising.

And some of the reasons for that are, obviously, our investments that have paid off on podcasting and building out that premium network where we have the #1 position in the country today and alongside incredible creators like Alex Cooper and Mel Robbins and Conan O'Brien, and we just have such a great track record with talent that has given us the opportunity to add profitably to that network and expand our overall monetization there. So we've launched Creator Connect, which is a fantastic product that allows advertisers really to invest alongside these creators in multiple channels, audio, video or social, and that's expanding really rapidly.

We have more opportunities to provide in-car targeted advertising as well as we open up the SiriusXM broadcast inventory and make it more targeted. And then we've provided really unique ways for advertisers to capitalize on the demand for sports and live events. And we have a really differentiated position there. And so we also have kind of a quietly successful ad tech business in AdsWizz. It's a scaled global full stack audio ad tech platform and we have billions of impressions that run through there, and we've seen nice growth over the last few years related to that as well. So I like our assets here. I think we're really well positioned to continue to take share and also hopefully build the industry as well on the digital audio side.

Do you think that, that improves kind of targeting and ad tech supports a healthier audio industry ad outlook over the next?

Absolutely. I mean we -- at least on the digital side, right, where you can bring real measurement and targeting and just easier buying mechanisms because audio is underrepresented and undermonetized. We've said that for a long time relative to the 4 hours of day engagement. And so what we need to do is to make sure that advertisers can buy easily, certainly across our portfolio, which is SiriusXM and our podcast portfolio and music streaming, but also that there's better targeting and measurement. And so we've invested in a number of tools and platforms, clean rooms and MMM solutions because advertisers want to know that they're getting ROI on their investments. And I think that puts us in a really strong position given our tech stack and also our great sales resources as well.

Narrowing the focus a little bit, how is the ad market pacing today? Any changes for better or worse relative to when you guys reported earnings?

Pretty consistent with what we said a month ago. But in the categories, see similarly strong, pharma, tech, telco, I think we're seeing some of the same trends. I mean, overall, it's been positive. I think the second half of last year, we executed very well, and we continue to see some of those trends translate at least for the first couple of months, you never know with ads, but I'm hoping that we continue to see that momentum going into -- throughout the first half and for the rest of the year as well.

How has the low-cost ad-supported tier play been performing? And is that something that's been a material tailwind to the ad business since it launched?

That's really about subscription growth. Ultimately, it will provide more ad inventory. But right now, it's about having that entry-level price point at $7 that really gets more customers into the funnel. They end up taking different kinds of packages. It has helped us focus more on targeted ad opportunities in the car more broadly, which really applies to our non-music content across our subscription base as well.

Do you see it as more of a kind of top-of-funnel customer acquisition tool as you just referenced? Or do you think the ad business there can scale over time?

I think it can scale over time, but I think it's more top of funnel acquisition and also an opportunity for us, Cam, to maybe wean ourselves off of the unpublished discounts using it in retention, and we're doing more of that testing now. But it's really fundamental to good, better, best in our packaging structure, and I think it's going to be core going forward.

You called out the success that you've had in podcasting. That's an area where, obviously, you've invested into it. You mentioned Conan. You've also partnered with larger properties like Call Her Daddy, SmartLess. How do you think about the ROI from those investments? And how quickly does the -- do the financial benefits from those content deals kind of make up?

It's day 1, right? We have a really disciplined execution in podcasting. The business stands on its own. The profitability has improved over the last few years. And it has nice gross margins. So I think it's helpful in a number of ways to our overall business. We have great relationships with talent. It's another way for us to help talent and creators monetize more broadly, not just on SiriusXM through subscription, but through the broad distribution and availability because remember, we're supporting their ads monetization no matter where they want to be, whether that's Apple or Spotify or even on video platforms increasingly. So it's been a great business on its own, and it also enhances our ability to sell alongside it on music streaming or at SiriusXM even.

And then it also allows us to take -- to work with some of the creators to bring content that makes sense for the SiriusXM radio platform and designed specifically for that. So Alex Cooper's music channel is doing really well. Unwell Music or we have Conan O'Brien's channel. And I think there's more opportunities for us to work with Mel Robbins and other creators in the portfolio to reach new audiences on SiriusXM.

Awesome. In the time we have left, I want to make sure to hit on kind of areas of efficiency and capital returns. Maybe on the efficiency front, guidance for this year includes an expectation that you generate an additional $100 million of run rate savings by the end of the year. In the past few years, you've outperformed relative to kind of initial expectations on the cost efficiency front. What's helped you deliver those savings? And what gives you conviction in the runway there without sacrificing growth?

Yes. So we overdelivered in '25 with $250 million of in-year savings. We have another $100 million that we expect to deliver this year. Zach Coughlin, our new CFO, just joined, and he's been very focused on driving the structured transformation program that we have in place. Really, it's about visibility and accountability, right? And we executed on some of the earlier easy to implement cost reductions early on, and now it gets harder, obviously. Part of it was the refocused strategy we put in place at the end of '24 and making sure with Wayne Thorsen joining, one of his major objectives was let's make sure across our product and tech stack that we're investing in the things that have high ROI. So our in-car subscription business and our ads business, where we know we have momentum, we want to lean into those and make investments there.

So we talk about growth savings quite a bit. There are opportunities, and we'll continue to focus on opportunities to invest in high ROI projects and programs. And so it's really about finding the right overall cost base for the business. There'll be incremental opportunities, I think, to reduce OpEx and non-satellite CapEx to our longer-term goals. But we want to make sure we take advantage of the opportunities we have ahead of us, too.

Another area of focus more recently, it seems like that's gaining momentum is the investor focus on what you mentioned at the top of our conversation, which is spectrum efficiency. It seems like the focus, at least in the near term is more around those 5 megahertz of spectrum on either side of the SIRI and XM blocks in terms of what might be freed up more quickly. Is that the right interpretation of?

Yes. I think we've been talking about it more in part because there's been so much attention on spectrum, and I think people forget that we have 35 megahertz of continuous spectrum. And yes, like the C&D, which is guard band, there's been more opportunities to use that so that it won't interfere with SRs because it's 5 and 5 on either side. Of course, 12.5 is our what we call low band or the old Sirius radios, and we're moving customers slowly from low band to high band as they buy new cars, high band being the XM portion of the spectrum and also 12.5. And so C&D is easier to affect near term, but we don't believe we're getting enough credit really in the market today for the spectrum that we have.

And we ultimately want to make sure that we are delivering the best experiences for our subscribers, that future opportunities for monetization will likely focus on the car because that's where we have strength and maybe us delivering different types of content or more content or services or it may be us partnering with somebody to do that maybe more effectively. I mean there's lots of -- I mean, the technology keeps improving in ways that allow us to explore other alternatives, I think, too. So...

Yes. To follow up on that, I feel like freeing up the ability to deliver more content is something that investors can envision at least in some abstract way, but partnership is a little harder to imagine than external party. When you refer to partnership, what any -- care to put any meat on the bones of what...

[indiscernible] now.

Yes. Okay. On the capital allocation front, you've spoken consistently in the past to kind of target leverage in the low to mid-3 range, getting into that range by the end of this year. Is your intent to kind of get to that range as quickly as possible? Or is there a future in which you decide to kind of pursue a slower path of delevering?

End of year is right around the corner, and we have line of sight to that. So we're very comfortable that we'll get to that target range. And then again, $1.5 billion of target free cash flow next year. And if you think about the dividend as being, I think, around $350 million, that's a lot of excess cash to deploy. And of course, we want to focus on investments in the business that have high ROI. We don't see any near-term M&A opportunities, but that would be an option. And then otherwise, it's more capital returns for shareholders. And whether that's dividends or share repurchases, I think we'll have more opportunity to talk about that going forward.

Great. I think that brings us to time. But Jennifer, thanks so much for joining us.

Thank you.

Greetings. Welcome to the SiriusXM Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce Maggie Mitchell, Senior Vice President, Corporate Communications. Thank you, Maggie. You may begin.

Thank you, and good morning, everyone. Welcome to SiriusXM's Fourth Quarter and Full Year 2025 Earnings Conference Call. Today, we will have prepared remarks from Jennifer Witz, our Chief Executive Officer; and Zach Coughlin, our Chief Financial Officer. Scott Greenstein, our President and Chief Content Officer; as well as Wayne Thorsen, Executive Vice President and Chief Operating Officer, will join Jennifer and Zach 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 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. For more information about those risks and uncertainties, please view SiriusXM'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 supplementary presentation on our Investor Relations website for your convenience.

With that, I'll hand the call over to Jennifer.

Good morning, everyone. Thank you for joining us today. In 2025, we delivered on our commitments and finished the year with strong Q4 results, exceeding our guidance and growing free cash flow year-over-year. We achieved this by strengthening our subscription offering, growing our advertising business and leveraging the power of our broader portfolio to drive meaningful efficiencies and harness new opportunities. Following the refocused strategy we laid out at the end of December 2024, we have remained laser-focused on bolstering our core SiriusXM in-car audience and expanding the reach of our ad network. As a result, we've exceeded our revised guidance, achieving $8.56 billion in revenue, $2.67 billion in adjusted EBITDA and $1.26 billion in free cash flow with a clear path to our target of $1.5 billion in free cash flow in 2027.

Now let's dive into our subscription business. Throughout the year, we continued to deliver unique programming that drives connection and passion with our subscribers. First, we signed a new 3-year agreement with the King of all media, Howard Stern. Our long-standing relationship with Howard helped to define SiriusXM in its early days. And today, he's more relevant than ever, achieving 32% year-over-year increase in earned media with A-list interviews and must-hear moments. With this new agreement, we've cemented Howard's Place in our lineup for years to come.

Simultaneously, we've continued to grow and strengthen our bench of influential voices across music, sports, news, culture and more. We super serve passionate fan bases with dedicated league and artist channels, intimate live events and the ability to interact directly with on-air hosts, ranging from beloved personalities on daily formats such as the morning mash-up to industry heavyweights, including John Mayer, Mad Dog and many more.

Our new Metallica channel is commanding a strong audience outperforming our benchmarks. Additionally, we're seeing very positive engagement and passion from fans listening to our Unwell Music channel with Alex Cooper, part of our broader deal with the Call Her Daddy host. We also closed out the year with our fan favorite slate of holiday channels with even more time spent listening to these channels than last year. Our unrivaled offering of sports audio content remains a key differentiator for us. With agreements with every major North American sports league and rights to more than 100 college teams, SiriusXM gives sports fans access to more live games and events than any other single media outlet or service.

Sports listening is up year-over-year both in-car and on streaming with audience gains in areas including NFL, NHL and NBA play by play. In Q4, we extended our agreement with the NBA and launched new shows covering everything from the business of basketball to Italy's top soccer league. As we look ahead, we will continue to build programming around major events and milestones, including the Super Bowl and the World Cup.

And SiriusXM has always offered a broad set of perspectives across political lines. In Q4, we launched a full-time Megyn Kelly channel and to help kick off 2026 Chris Cuomo has joined our lineup with an exclusive daily political show on the POTUS channel.

From a product and service perspective, our focus has been on enhancing what we do best. In the fourth quarter, we launched our new automotive Pandora app with a select set of partners, including GM, which builds the music streaming platform more directly into the vehicle where we have a leading position.

360L penetration further expands each year, now in more than half of new SiriusXM-enabled vehicle sales and representing an increasing portion of our self-pay subscribers and the 180 million enabled fleet on the road today. This share will continue to grow with this next-generation platform now available in all new Volvos standard on enabled Audis and debuting in the 2026 Toyota RAV4. 360L, combined with our streaming platform, provides increased observability across listening, content and product usage with measurable insights allowing us to improve personalization and drive deeper engagement, leading to increased customer satisfaction.

We've also made major strides in simplifying the overall customer experience and driving value. In Q4, we launched continuous service, a new capability, which reduces the friction subscribers experience when changing vehicles as part of our efforts to remain consumer-centric. This functionality maintains the customer's listening history, account credentials and other attributes and also keeps their streaming service active, giving them the ability to continue enjoying the service while they move between vehicles. We expect this will have benefits in customer satisfaction and retention while also laying the groundwork for future enhancements that make the process even easier, solving a pain point for many of our dedicated listeners.

This quarter, we also introduced companion subscriptions as we continually improve the value of our plans and packages and provide greater differentiation between tiers. Our version of the family plan companion subscriptions allow our most loyal full-price customers to add a vehicle or streaming login at no additional cost. This is another step towards offering a suite of family plans that make it easier than ever for our loyal customers to share what they love across their households.

We've also seen positive growth in our newer tailored package offerings. Our multiyear automotive dealer subscription program, which first launched in 2024 is now in more than 15 brands across North America. We've also continued the thoughtful rollout of Play, which is now being expanded to a broader set of our new trialers. We are seeing positive indicators that it is driving conversion interest and subscriptions across all packages, widening the top of the funnel. Additionally, our Podcast+ subscription has scaled. It now includes new shows and is available for purchase across Apple, Spotify and more.

Moving to the topic of advertising. 2025 was the year we secured our leadership position in digital audio advertising across a scaled audience of 170 million listeners. Throughout the year, we continued to deepen our podcast bench with disciplined investments in top shows and creators. We are now the #1 podcast network in the nation and proudly had half of the nominees in the first-ever best podcast category at the Golden Globes last month. Our podcasting ad revenue grew 41% for the full year, on top of double-digit growth in 2024, a testament to all the work we've done to extend our lead in this arena.

Additionally, podcast programmatic demand has continued to grow up more than 92% over Q4 2024 as digital buyers recognize the channel's reach. Beyond our digital audio ad sales business, our advertising technology capabilities are expanding, offering services to major audio players around the world. Additionally, our cross-platform sales strategy incorporating social and video components from top creators such as MrBallen continued to scale with video and social revenue up 4x year-over-year. As audiences increasingly engage with podcast through video and social platforms, we are able to effectively monetize this shift with our omnichannel capabilities, allowing us to tap into brand budgets beyond audio.

As we look ahead to 2026, we are maintaining our sharpened focus and our commitment to strengthening our business and our leadership in audio. Our guidance anticipates mostly flat revenue on slightly lower subscribers, alongside stable adjusted EBITDA for the first time in 3 years with further growth in free cash flow. We are continuing to explore and capitalize on opportunities to leverage our assets moving forward, including our talent agreements, our ad sales expertise in ad tech, our 180 million vehicles in operation and our 35 megahertz of contiguous spectrum.

Overall, 2025 was a successful year where we were able to achieve both immediate impact and lay the groundwork for long-term results across the business. We delivered exceptional listener experiences and meaningful value to marketers, exceeded our cost savings target, maintained our dividend, strengthened our balance sheet and drove disciplined execution that improved free cash flow and positions us for continued momentum.

Enabling us to maintain our financial rigor and achieve our goals for 2026 is our new Chief Financial Officer, Zach Coughlin. Zach brings significant experience driving sustainable, profitable growth at a variety of public companies, and we're thrilled to have him leading our finance function here at SiriusXM. He has already hit the ground running and is focused on maintaining a strong balance sheet, driving margins and optimizing our cash flows, all with the goal of increasing shareholder value.

With that, I'll turn it over to Zach for more on the financial results.

Thank you, Jennifer, and good morning, everyone. Before I dive into the numbers, I wanted to start by saying how excited I am to be here speaking with you today on my first earnings call as SiriusXM's CFO. I officially joined on January 1, and I've been incredibly impressed by the depth of the team, the durability of this business and the passion behind our brands. I look forward to getting to know many of you in the analyst and investor community in the weeks and months ahead. I also want to extend a sincere thank you to Tom Barry for his leadership, partnership and for ensuring a thoughtful and seamless transition. Tom leaves this company in a position of strength, and I'm grateful for the foundation he and the rest of the finance team helped to build.

Turning to the business. We closed out 2025 with solid execution against our financial and strategic priorities. We sustained healthy margins, generated strong and growing free cash flow, continue to make disciplined investments in our platform and distribution and delivered another year of meaningful cost efficiencies. At the same time, we sharpened our focus on subscriber profitability and higher return marketing and technology initiatives.

For the full year, we delivered revenue of $8.56 billion, modestly ahead of our raised revenue guidance, which we had increased on our third quarter call. Total subscription revenue was $6.49 billion, down 2% year-over-year. Results reflected the benefit of our March rate increase, offset by a slightly smaller average self-pay subscriber base. Advertising revenue was $1.77 billion, roughly flat year-over-year, driven primarily by strength in podcasting and improving programmatic demand late in the year, offsetting ongoing weakness in streaming music advertising.

Full year adjusted EBITDA was $2.67 billion, resulting in a margin of 31% and modestly ahead of our most recent guidance, which we also increased during the third quarter call. Net income was $805 million, marking a significant increase from prior year's negative $2.1 billion, driven by the impairment charge associated with the Liberty Media transaction. Earnings per diluted share was $2.23, also significantly up from negative $6.14 in the prior year.

In the fourth quarter, we delivered $2.19 billion in total revenue, largely flat year-over-year. Subscription revenue totaled $1.63 billion, down slightly year-over-year, while advertising revenue was $491 million, up 3% compared to 2024's fourth quarter reflecting strong growth on top of elevated political spending last year. Overall, growth was driven by continued strength in podcasting and improving demand trends late in the quarter. Adjusted EBITDA for the quarter was $691 million, up slightly year-over-year from $688 million in 2024.

As expected, free cash flow remained heavily back weighted. Fourth quarter free cash flow was $541 million, a Q4 record and up 5% year-over-year, bringing full year free cash flow to $1.26 billion. This means we finished ahead of our original $1.15 billion guidance by over $100 million, reflecting continued operating discipline, lower cash taxes and lower capital spend following the completion of our 2 most recent satellites. Our full year free cash flow conversion was 47%, reflecting improved cash efficiency relative to the prior year, which included Liberty transaction-related impacts.

Turning to the segments. In the SiriusXM segment, we generated $1.61 billion of revenue in Q4 and $6.42 billion for the full year, including $5.96 billion of subscriber revenue. Full year revenue declined by 2% as the benefit of the March rate increase was more than offset by a slightly lower average self-pay subscriber base and planned mix changes within our base. Segment gross profit for the fourth quarter was $955 million and $3.82 billion for the full year, both representing a gross margin of 59%, close to last year's 60% for Q4 and full year.

On subscriber metrics, fourth quarter self-pay net adds were a positive 110,000. That reflects contributions from the continuous service initiative that Jennifer mentioned earlier, as well as the earlier-than-planned introduction of companion subscriptions, which contributed approximately 80,000 incremental self-pay net adds during the quarter. These benefits were more than offset by the expected reductions in streaming subscribers and lower conversion rates, resulting in net adds this quarter that were approximately $39,000 lower than last year's fourth quarter.

Our core subscriber base remained stable as reflected in full year churn of 1.5%, one of the lowest levels in our history and an improvement from 1.6% last year supported by a durable subscriber base with over half of our subscribers having been with SiriusXM for more than 10 years. We view our strong churn performance as a key result of improving our value proposition and overall customer satisfaction. And looking forward, we expect it to remain in the 1.5% to 1.6% range.

From an ARPU perspective, fourth quarter ARPU was up $0.06 to $15.17 as rate increases rolled through the base, partially offset by an increase in subscribers on promotional plans. For the full year, ARPU was $15.11, down $0.10 from last year.

Turning to the Pandora and off-platform segment. Fourth quarter revenue was $582 million and full year revenue totaled $2.14 billion. Advertising revenue continued to show momentum during the year, growing 1% year-over-year driven by strong podcasting and programmatic growth. As Jennifer mentioned, podcast revenue grew 41% in 2025. Segment gross profit in Q4 was $208 million, reflecting a gross margin of approximately 36% compared to last year's 34%. For the full year, gross profit was $670 million, a margin of around 31%, representing a slight decline from last year's 33%.

For 2025, we also achieved approximately $250 million of incremental gross cost savings, significantly exceeding our $200 million in-year cost savings target. Sales and marketing expenses declined 16% year-over-year as we reduced streaming marketing and leaned further into an ROI-based subscriber acquisition strategy, and we tightly controlled product and technology spending, which decreased 9% year-over-year, driven by lower hosting and labor costs. These savings not only establish a solid cost foundation heading into 2026, but also create additional capacity for reinvestment. In 2025 and continuing into 2026, we have continued to deploy capital selectively in key areas such as the in-car customer experience, platform technology and ad monetization tools.

As part of our ongoing efforts to simplify the business and sharpen our focus on higher return initiatives, we recorded $436 million of year-to-date impairment, restructuring and other charges, including $272 million in the fourth quarter driven largely by noncash impairment charges related to certain content-related agreements and terminated software projects. We also continue to actively manage our balance sheet and return capital to shareholders.

During 2025, we returned $501 million to shareholders, including $365 million in dividends and $136 million in share repurchases. We reduced total debt by $669 million during the year, including nearly $371 million in the fourth quarter. We ended 2025 with a net debt to adjusted EBITDA ratio of approximately 3.6x continuing our path towards our long-term target range of low to mid 3x, which we expect to reach by late this year. Liquidity remains strong with continued access to our $2 billion revolving credit facility, which remains largely undrawn.

Looking ahead to 2026, based on current trends, we are introducing the following outlook. We expect revenue of approximately $8.5 billion and adjusted EBITDA of approximately $2.6 billion, both largely flat to last year. And we are expecting to grow our free cash flow to approximately $1.35 billion as we take another important step towards our target of $1.5 billion in 2027. We also expect to capture an additional $100 million of gross cost savings exiting 2026 for a cumulative run rate impact of $350 million, driven by continued platform efficiencies, customer service automation and G&A rationalization.

Separately, while we're not providing specific guidance on self-pay net adds we do expect reported self-pay net adds to be modestly lower than 2025, primarily reflecting the timing impact of the earlier-than-planned introduction of companion subscriptions, which contributed approximately 80,000 incremental net adds in the fourth quarter of 2025. As always, we will remain disciplined in balancing shareholder returns, deleveraging and investments that drive sustainable long-term cash flow.

In closing, I'm incredibly excited about the opportunity ahead at SiriusXM. This is a business with strong competitive positioning, durable cash flow and a clear road map for continued efficiency and profitability. I look forward to working with this talented team and engaging with all of you as we execute on that strategy.

With that, I'll turn it back to the operator for Q&A. Thank you to everyone for joining.

[Operator Instructions] And our first question comes from the line of Cameron Mansson-Perrone with Morgan Stanley.

Jennifer, encouraging to see the positive sub growth in the period. Taking a step back, just wondering if you could elaborate on where you think SiriusXM sits competitively today and where we are really in the evolution to provide your customers with more pricing and packaging flexibility?

Sure. Thanks, Cam. We're really pleased with the fourth quarter results to start off. We added 110,000 in net adds, and this is a reflection of not only continued low churn but contribution from our new acquisition programs and the benefit of continuous service and companion plans that we launched in the fourth quarter. But -- so going forward, our competitive positioning, I think, is incredibly strong.

It's complementary to the music streaming services, especially because we have a unique position in the car. And remember, the vast majority of listening in the car is still to AM/FM. And we are opening up new packages, including music-only at $9.99 and low cost of ads at $7, that goes squarely off against that AM/FM listening, and we think we have more opportunities to take share there. So we're really well competitively positioned against the DSPs to be complementary and against AM/FM in the car, which is our primary point of leverage.

And if I could follow up on churn just for a second. I think Zach mentioned an expectation for it to be in the 1.5% to 1.6% range in '26. As we think about that within the 1.4% kind of record low churn in the fourth quarter, what drove the 4Q? You talked about it a little bit, but maybe elaborate on what drove the outperformance in 4Q? And then why you expect that to kind of edge back a little bit as we look forward into '26?

Yes. We did have a onetime benefit from continuous service in Q4, which reduced our vehicle-related churn. And this program allows our subscribers to continue their service while they're moving between vehicles. It removes a lot of friction in the process. This has been one of the points of leakage in terms of managing those vehicle changes and we have more functionality coming likely later this year to make that even easier.

So I do think we could continue to see some tailwinds in churn related to that functionality and expanding it. But otherwise, we've seen strong nonpay results. Our voluntary churn has been -- was flat year-over-year, even though we did a rate increase last year. So we're just -- we're being cautiously optimistic. We think there's a lot more we can do with the data and the capabilities we're building on the marketing side to put the right content in front of the right customers, not only to build demand, but also to enhance retention as well.

The next question is from the line of Steven Cahall with Wells Fargo.

I was just wondering if you could, and Zach elaborate on the outlook for self-pay net adds in 2026. I think you said that you expect those to be modestly lower than 2025 due to the introduction of companion. And I think companion was additive in the fourth quarter. So it sounds like it's more of a drag in 2026. So maybe you can just help us understand kind of how that flows in? And also, does it contribute to any trade down at the household level? Or is it additive at the household level?

And then second, just wanted to ask about the go-to-market strategy with the OEM dealers. Can you talk about what that does for churn? I imagine it's pretty positive. And do you have any meaningful SAC related to those subscribers as well?

Sure. Thanks, Steven. So in terms of self-pay net adds for 2026, we have guided a modestly lower companion subscriptions launched a bit earlier than we expected in December, which has been very successful, and I would expect to continue to drive solid performance there going into and through this year. That is adding value for our most loyal subscribers and positions us well for a rate increase this year. So we've seen nice results there and better than we would expect. But because we pulled it forward, it actually delivered better-than-expected performance on self-pay net adds in the fourth quarter and for 2025.

So I think -- look, we understand the importance of subscribers. We're very focused on improving the trends. We believe we have a number of initiatives that will enable us to do so. But I would say that even if we don't, we have incredibly strong and growing free cash flow generation for years to come. And we're being very disciplined about the interaction between subs and free cash flow. But just turning back to more specifically on 2026, we also are guiding for relatively stable revenue which in the face of slightly lower subs obviously indicates that we believe we have more room in ARPU and pricing.

So again, we have a number of initiatives in flight. Hopefully, we'll talk more about those this morning. Some of them we highlighted on the prepared remarks, but we are continuing to expand demand through our broader pricing and packaging in personalization and marketing. And we are launching with more and more OEMs, our dealer, 3-year subscription program, as you mentioned. And we expect to see more demand there where dealers are ordering SiriusXM and customers get the benefit of that 3-year subscription in their vehicles at point of purchase. And we are already in 15 brands, and we expect to continue to expand in new and used this year.

The next question is from the line of Kutgun Maral with Evercore ISI.

First, Jennifer, you just touched on ARPU and pricing in response to Steve's question. So can you help unpack your ARPU expectations for 2026 in a bit more detail? And then on spectrum, I appreciate that it's difficult to get too granular on any process. But is there anything you can share on whether you're still actively engaged in evaluating the portfolio and how you see the opportunity set ahead for at least parts of the 35 megahertz.

Okay. Great. Thanks, Kutgun. Maybe I'll take the first one on ARPU. I think ARPU is a great story for us. In the fourth quarter, we were up $0.06 to $15.17 driven by the flow-through of the pricing we had taken earlier in the year. And importantly, I think beyond just the fourth quarter, if you pull back a little bit, it's our third straight quarter of sequential improvement when comparing to last year and our second straight quarter higher than 2024. So as we look forward to 2026, that momentum we do see is carrying forward into the year and expect to see strong ARPU performance in 2026 as well.

Do you want to take the second?

Yes. Thanks Kutgun, And just as a reminder, the total 35 megahertz of contiguous spectrum with the 25 megahertz is currently used for our core broadcast operations. And then we have 5 on either side for 10 megahertz of the recently acquired spectrum, which is the WCS licenses. And so as a reminder, we noted last quarter that we are evaluating multiple approaches to creating value with these assets, including new products or enhancements to our services, either ourselves or with partners and building on core strengths, in particular, in the car. This has been a key focus for us overall. And with a bit more attention being paid to the C and D licenses within WCS, that's where the most near-term opportunities are. And we're looking forward to talking more as we -- as our thinking and the opportunities evolve.

Our next question is from the line of Jessica Reif with Bank of America Securities.

I have 2 topics, I guess. First on the podcasting advertising growth has been phenomenal, really strong. And Zach just said you're seeing improving ad trends later in the quarter. I mean it would be great to get some color on what you're seeing in the overall advertising market. And will '26 be driven maybe by the market or more a function of specific podcast inventory, you're onboarding? And then on that topic, on podcast profitability, I don't think you've ever said what it is. Can you talk about -- if you don't want to give a number, like how should we think about the swing factor on that? And then I have another question.

Sure. I'll take that, Jessica. So we did see really strong growth in podcasting in Q4 and last year in total. And Q4, in particular, was incredibly strong based on improvement in metrics across the board. So higher podcast audio RPM driven by really record sell-through, higher CPMs and a significant uptick in programmatic as well as growth in our Creator Connect product, which allows us to sell video and social also. So we think there's continued tailwinds here in the industry, not only because of listening trends and our particular portfolio, but our ability to continue to improve monetization.

We have incredibly high RPMs here well above what we see on the music streaming side. And I think there continues to be room for growth. We have great relationships with talent. We had half of the Golden Globe nominees, the first time they've had a Best Podcast category. And Scott and his team continue to actively discuss relationships with new talent there. So we feel really well positioned in the podcast business.

And just to touch on profitability. So this is a good business for us. It stands on its own. The margin has increased over time, and we think that the industry dynamics are in our favor here. And we also get added value from what we do on SiriusXM, not only with things like the Unwell Music channel or Conan O'Brien's channel, but working with the creators, we've been able to define exclusive content for our SiriusXM subscribers as well.

Any commentary on advertising? And then I'll go to the next question.

Sure. Yes. So we're cautiously optimistic for 2026. The year has started out solid. I think it has a lot to do with our trends in podcasting, but there's a few areas where we see sort of unique opportunity. Our events business, we are building great packages around things like the Super Bowl with our Noah Kahan event tonight or the World Cup. We also have a broader set of programmatic DSPs. We launched Amazon and we're seeing a nice uptick there. And just in terms of the categories, I mean, it's recent, but what we're seeing is tech is up the most financial services and pharma have been strong as well as CPG. And then where we're seeing some pressure is on retail, QSR and education.

Great. I'm not sure if you said Scott is on the call or not. So I don't know if this is for Scott or Jennifer for you. But you did -- you just re-signed Howard Stern for an additional 3 years. How should we think about the '26, '27 content renewal calendar and the puts and takes, the content expense growth? Like where do you feel you have negotiating leverage? Where do you think you should invest more to protect your franchise?

So that's a moving target as our lineup shifts due to many factors. People could go on to other parts of their careers. The economic and business models may not make sense. So it's really a shifting target. So we look at it. We feel really good where the lineup is right now, both on Sirius and for sure in podcasting. But we're opportunistic where we need to be, but we're also conservative if the podcast market or anything else gets too frothy in, we're not going to get into that, especially with the lineup we have right now.

The place that I'm most pleased where we stand right now is in sports, live sports rights because we're the only place where all the league rights and college and many other sports are under one roof. So down the road, sure, there could be pressure on that, but we're in a pretty good spot right now where our deals stand on that.

And I'd just say, Jessica, we have so much more data than we've ever had before. So we can make better decisions about what's in the portfolio based on that data in terms of engagement, but also how we're increasingly using it in marketing for acquisition and retention because the real objective is to get the right content in front of the right customers. And that kind of data and analytics will be supported clearly by perceived value as well.

The next question is from the line of Barton Crockett with Rosenblatt Securities.

Okay. Great. I was curious about -- if you could talk a little bit about how you think about what seems to be a little bit of a new development in the podcasting sector, and that is the idea of doing deals with another party like a Netflix to give kind of an expanded kind of presence for your podcast. Spotify has got a deal there and iHeart that's new. I was wondering if you could talk a little bit, Jennifer, about how you guys think about that in terms of the opportunity to do something like that and how important that could be specifically?

And then maybe segue into the idea of bundling. I mean, it would seem that one of the things that's been very prominent in like video streaming is guys coming up with bundled deals with other services like Disney+, HBO Max and that working. We don't see so much of that in audio and certainly maybe less prominently with you guys. So could you talk about partnerships bundling podcast, that would be interesting.

Thanks. I'll take the first part on that. So our podcast network reaches 1 in 2 podcast listeners in the U.S., and we're #1 on Edison, and it's been well documented about how dominant we are in that position. So it's been written about. It's no secret that any company looking to have our podcast, we're open for business. It's just we like our position where we are. We're able to maximize a lot of money for curators and us going wide with what we're doing. If they become another platform that we can monetize on, we're always open to that. If it becomes narrower or more exclusive, the economics have to dictate that for both us and the creator. So it's a work in progress, but it's something we pay attention to regularly.

This is Wayne. And on the partnership side, think the key work that we've been doing to do things such as fixing our identity stack, were key in order to do more effective distribution partnerships such as hard bundles, because when we -- when the main identity ends up being the vehicle versus the customer, it gets very clunky to put together a partnership where you have a hard bundle in the 2 services are joined. The other piece that we really needed, of course, was to have a lower overall persistent price point so that we weren't swamping our partners when we're putting together these joined-up offerings. And so now that these are in place, there's a lot of discussions that are of course, being evaluated and underway. So more to talk through in the coming months.

The next question is from the line of Stephen Laszczyk with Goldman Sachs.

Two, if I could. Maybe first for a combination of Jennifer and Wayne. We've seen some nice execution on the cost savings program this past year. I'm curious if you could talk a little bit more about the opportunity you see to take cost out of the business here over the next year or so? And then within that, some of the high ROI investments you're making with reallocating resources within the business where you see the most opportunity on that front?

And then second, for Zach, I'm curious just with this being your first earnings call, I would love to get your thoughts around leverage and capital allocation, maybe here over the next year or so, but also to, over the longer term, what gives you confidence in the low to mid 3x leverage ratio. And then how should investors expect capital allocation to evolve from here?

Okay. So just on high ROI investments. I think Wayne's team has been doing a fantastic job of rationalizing our product and tech spend and focusing on where we have the most opportunity. So on our in-car subscription business and our ads business. So I'll let Wayne talk a little bit about that and then Zach can address the others.

Yes. There's 3 main areas we're focused on. As you can see, this is where some of the identity work comes in, things like companion. It's really improving the overall go-to-market. The second is, of course, improving the experience in the car and all of these are all tied to the sharpened focus from December of 2024. And then I'd say the third big area where we're continuing to make a lot of investments is improving the way we merchandise the breadth of our content. So that's search, that's recommendation. And in other ways, we're going to push out recommendations and let people know all the wonderful things we have, which we have a huge opportunity to improve on. And of course, that helps with churn and conversion through trial.

Yes. And Stephen, maybe I'll sort of reorder the question just a little bit to dovetail what Wayne had to say. I think we're really clear on our capital return strategy. As Wayne had said, we're first focused on investing in those initiatives that drive our strategy. We've got plenty of opportunities for that. That's -- we'll feed that first. I think the good news is then with the OpEx efficiency work we're doing, which I'll talk about in a moment, we're able to create the capacity to both invest and improve free cash flow.

So that's well underway. So on the deleveraging piece, we made significant progress in 2025, going down to 3.6x and we do expect to get into our guided range of low to mid-3s by later this year. And so then if you sort of walk all the way down from there, the third return is to shareholders. Today, that's been more heavily weighted toward dividends and that will remain important to us. And so as we achieve our target leverage later this year, that will open up additional opportunities for us.

So then just to talk a little bit about cost reductions. And I think, first and foremost, obviously, it helps us to create that capacity to invest for the things that Wayne had talked about. And we're really focused on reducing complexity, getting more agile. So we call it getting lighter. There's always opportunities to do that. The most obvious piece we see is in satellite CapEx we've talked about. But even inside of OpEx, one example is the significant work in modernizing the tech stack that Wayne and the team are leading. And here, we expect to both be able to reduce OpEx and deliver more for our customers. So I think we see that as a win-win.

Our next question comes from the line of David Joyce with Seaport Research.

Could you please update us on the early learnings from your Amazon DSP relationship? Anything that contributed in the quarter? What do you think that can do for you in 2026?

Sure. So we're really pleased, by the way, with our programmatic partnerships. We've had a long-standing relationship with the Trade Desk, but we also have a significant business with DV360, Yahoo!, Verizon and growing with Amazon. So the diversification is really important. Certain brands work with certain platforms for various reasons. So we are seeing an expansion of marketers as we work with Amazon, and we've seen really nice growth there in the fourth quarter and continuing into the first quarter. So I think it will be a nice contribution to our overall programmatic business.

And again, we have a lot of runway here because as you know, with sort of CTV or video, programmatic represents a healthy share of overall ad revenue. And for us, on the streaming side of our business, it's been a long-standing component, but we're just starting to build on the podcasting side. So I think there's a lot of room to continue to invest and see returns there.

Our last and final question will be from the line of Bryan Kraft with Deutsche Bank.

I was wondering if you could comment on where conversion rates have been running for both new and used vehicles. And as well, if you could talk about how they compare between 360L and non-360L, is 360L helping there? And then separately, I was wondering if you could just talk about the trends you're seeing in used car trials. Are those still growing? Are there macro pressures? Would they be growing but for macro pressures? Any color you could provide there would be really helpful.

Sure. So I'll start with the first one. Obviously, a healthy trial funnel is great for the business. And we saw that throughout last year. I think there is some pull forward perhaps because of tariffs and just general consumer demand. In '26, there does look to be perhaps the first year of reductions in consumer purchases of new vehicles, at least from the third-party estimates, the first time since 2022. So we may be facing a bit of a headwind there. But again, expansion of penetration rates and expansion of 360L are helping offset that to some extent, and I'll come back around to that.

On the used car side, organically, obviously, penetration rates continue to grow there. We're at about 60%. And we have really strong relationships across our dealer network to be able to make sure that when a customer gets into their new used car that the radio is working for them. So we continue to invest in those programs to ensure that they can have the best consumer experience on the used car side. I say, overall, we're not quite at 50-50 in terms of trial starts across new and used, but it's getting closer as used grows.

So on conversion rates, we're seeing some similar trends that we've seen in the past. We have really strong programs and initiatives in place to, as Wayne even addressed to -- address demand through the trial funnel. And those include things like the expansion of the pricing and packaging that we've put in place, whether it's low cost of ads or music only at $9.99. We're seeing healthy take rates on when we put those price points in front of customers on our full price packages.

So again, it's opening the top of the funnel and getting people on the best package for them. But what's even more important, getting the right content in front of the right customers. So we have an incredible portfolio, but it's extensive. And we need to make sure our customers can find the content they love. When we've tested this in smaller ways, we see meaningful lift in conversion. So it's really about the capabilities that Wayne's team has been building.

This is taking our -- it's taken longer than I would like. admittedly. We've been on this path for 2 or 3 years, but a lot of things are coming over the finish line this year that I believe will help us to really drive personalization in marketing. And we do see, because with 360L, we get that data back on listening, even if you are listening or aren't listening and how much you're listening and what you're listening to.

And we can design our marketing and even in some cases, product recommendations to address that. So that's really core. We see 360L conversion rates better than non-360L. We even see -- it's pretty early, but we launched 360L on AAOS, which is a platform that we can more easily update and comes at launch fully featured. So we even see better conversion rates there. So we know there's something here to unlock. It's just about getting some of these capabilities across the finish line this year to support it.

Okay. And so with that as the last question, I want to thank everybody for joining. And as we're wrapped up 2025 and report out there, I think just to close by thanking the SiriusXM employees all around the world, it was a good year, and that was obviously driven by the contribution of all of you, and we're off to a good start in 2026 as well. So thank you.

Great. Thank you, everybody. Our next fireside is on SiriusXM. I have the pleasure being joined by Wayne Thorsen, the Chief Operating Officer.

Wayne, you all had some news out this morning. So I thought I'll just jump right into that.

You reaffirmed the recently raised guidance for the year which came simultaneous to some transition with the Chief Financial Officer's role. So maybe you could give us a bit of comment on that before we dive into the operation?

We raised in our earnings call across EBITDA and free cash flow and revenue. And actually, this is our second time raising, as you know, on free cash flow in the last few months.

Yes, we had some news this morning. We're welcoming in Zac Coughlin as our new CFO. We're incredibly excited. Wonderful background stewarding a lot of iconic brands and in particular, some great experience at Ford. So having that OEM experience is particularly exciting for us. But he's with that public company experience and a history of transformation, we're really excited. I know he's going to help us as we go through the next phase of our transformation as well.

And of course, we're grateful to Tom. He's been with us for 1.5 decades, and he's been a great partner to me, and we're grateful for all the leadership he has shown and we're excited for Zac to come in, and we like -- we're excited for the next steps in our transformation.

Yes. I mean what you mentioned with Zac and Ford Motor Company, I think, is a good segue into, I think, a lot of the focus of today, which will be about sort of the evolution of the product. I've used it for a long time. Pretty extensively. And there's been a lot of enhancements over the last 12 months. So you have play, I think the first ever ad-supported plan, the all-music plan, I think in my memory, it's the first time when you really had this choice as a user between just music or music and other stuff.

So maybe you can talk a little bit about what drove you to decide to change these plans to change the packaging into this more simplified structure but with a number of new kind of tiers all the way from ad supported up to the premium tier at $25 a month?

Yes. So we've been modernizing our price architecture for sure. So a lot of people -- a lot of streaming services, music and video and others as well have been all migrating towards really this good, better, best. So we've been doing the same, and that is continuing. And so as we're moving through there, the key thing for us, of course, is optimizing for EBITDA. That's the reason we're doing it.

So when we're going through, there's 3 things that we watch, of course, which is churn. So similar to your situation where you had a plan and you optimize towards one with a lower price point, but it's a better fit for you and what you're willing to pay, but I want to talk about that with you later.

The -- as we're moving through the easiest way and the most -- the highest ROI way for us to be able to generate a new net add is to not lose one. So churn certainly is a key focus for us as we're moving through and generating this price architecture.

Second is widening the top of the funnel. So having persistently low price points like play is incredibly important to getting people to generate consideration where maybe as they've gone through trials in the past or the price points seem too high, they don't even engage in the trial. So this has been really helpful for us.

And then third, of course, is ARPU. So managing those 3 things. And by the way, just as I said, no, when I say ARPU, I'm not just talking about the subscription price, of course, I'm also talking about the advertising revenue that we generate as well because ultimately, all of that is contributory. So if we're managing those 3 things, that's really a big guide.

So we still have a lot of work to do in generating this architecture, but we like what we've seen so far. And I'll use play as an example. The response to this so far has been really -- we've been really excited about this. So it's been widening the top of the funnel. And in general, when people come in and they come in through this funnel, the vast majority migrate to higher price points or full price plans, and that's the entire point.

So we've actually started to increase the volume of the people who are seeing that particular offering because it's, of course, accretive across those 3 things that we just mentioned.

And maybe you could just then touch on what you're seeing on the ARPU insurance side of things. And churn, I think, has been really impressively low for as many quarters as I can remember and certainly more recently.

ARPU, I think Jennifer has talked about, you think you can grow starting from Q4, but it's been sort of more in that flat to down range. So I would love to hear how you're thinking about those 2 components.

Yes. On churn, yes, that is -- we're really happy with what we've been -- the work that we've done in churn. So for churn right now, we're at 1.6%. That's a combination of a lot of the work that we've been doing behind the scenes to increase user experience, but it's also been some of the work that we've been doing to increase content. So that's been a big thing for us, as you know, is making more and more content available.

There's actually -- just to kind of take a side note, there's a product piece of this as well. So we have a lot of content that nobody even realizes we have. So a big part of making a higher level of utility and a higher level of satisfaction that people have for our services, all the work that we've been doing in the app and in search recommendations and more work that we're excited to talk about later and making sure that more people are aware of not just the content that we have, but the content that's upcoming or even events that are upcoming. So that's a big part of why we're seeing really good CSAT and we're lowering churn.

Another piece of this, I'll also share is we've been working on modernizing our identity framework. This is a very, very important part of what we've been doing. Like as an example, you heard Jennifer on the last earnings call, talk about continuous service. This is one of the first deliverables of this modernization of our identity stack. And so as an example, what ends up happening is like normally when you go to return a lease or you sell your car, you have to cancel your service.

Done that a few times.

And then you have to restart again. Yes, exactly. Yes, it is like every time you change a TV, you have to restart your Netflix subscription. So it's been -- it's a little bit -- it's been a little bit of an artifact of how the identity stack was built over the years. And so changing that, that's one example where this is going to be a huge headwind for us, both in churn and conversion over time.

And could you touch on the ARPU side of things?

Yes. On the ARPU side, a big part of this is we're, again, managing for overall EBITDA. So as we're widening the top of the funnel, and we're making -- we're offering other sorts of plans, we're very carefully managing the ARPU side of that. But the ARPU side also includes advertising. So we had a very successful price action this year. And our churn still remained low.

A big part of that is the continually -- continuing to offer more and more value for price, whether that's more content or improving the UX.

Moving to streaming. So I think that's a big debate overall for the stock and sort of how SiriusXM fits into the streaming world? Is it a complement to other streaming products? Does it compete against other streaming products in the car. Spotify talked up, it's in-car engagement on its last earnings call. I don't know if that's a sort of new area of competitive focus.

But you all have had a streaming strategy that's evolved over the last couple of years. Can you talk about just how you see SiriusXM sort of fitting into the streaming debate both with the customer and with the competitors?

So just to take that in 2 different parts for a second. So first, the in-car as an example. So we've had a lot of leadership historically in car, and we still do. One of the great things about 360L, which is now -- by the way, it's up to over 50% of our new car trials. And by 2030, we'll be close to 90% of new in-car trials.

The big -- one of the big advantages there for us is that has both the satellite connectivity as well as IP. So we're now getting a return path for data. The reason I think that's really important is that allows us to make content recommendations to deliver interactivity, to have artists seated stations, all of these things were before where we -- that was really not available for us. So that's a really important part when in December, when Jennifer announced the new strategy for us to focus on in car, the reason why she did that was because we still have a lot of headroom in car.

But that didn't mean that we were leaving streaming meant we were stepping back from acquiring unprofitable subscribers. We're still acquiring streaming subscribers, and we're being thoughtful in how we do that and making sure that, that's ROI positive. But we've still been also investing in the app. So we've been working on making sure that this product as a stand-alone is where we want it to be as well as a companion. I mean as an example, we're -- the app rating on the in the App Store right now is up over 4.8%. It's dramatically improved over the last year. So we're continuing to make -- we're continuing to make improvements in the UX, the content recommendation and so on and so forth.

And by the way, we're doing that as well as in CarPlay and Android Auto. So we're seeing massive lift in people using those services as well to access our service. So I don't really think of it as necessarily a streaming debate. I think of it is how are we in a place where we can offer our content in a way that is most easily accessible.

This year has certainly been kind of uncharacteristic for auto sales with all of the tariff noise that we've had I think that probably had some pull forward in the first half of the year. Maybe we'll see kind of the other side of that in the back half of the year.

Just overall, with a little bit of uncertainty probably in SAAR heading into next year, how are you thinking about what you need to do to build the trial funnel?

So we saw in Q3, as we noted, we saw higher in-car trials. And we are continuing to, not just in new cars, but also, as you know, we've been building a lot of our capabilities and used car as well. So we like what we have there.

I would say in terms of -- the macros are hard to predict for everybody on this is impossible. But because of the work that we're doing, such as continuous service, the work that we're doing with the increase of penetration of 360L. We like where we're at in car. All of the work that we've been doing in use, which I think is incredibly important for us is becoming a bigger and bigger funnel. In particular, since the size of our fleet is just becoming massive, the size of vehicles in operation that have SiriusXM installed.

Well over $100 million.

Yes. And so this is becoming a real opportunity for us. And as we improve our marketing capabilities because of things like improving the identity stack this is a lot more attractable for us. I'd also say we've also improved, as you know, and implemented with the EVs, and this has been a great opportunity.

But one thing I'd sort of tweak to the question is now that we've -- we also have a lot of opportunity outside of the in-car funnel. And so there's been a lot of partnerships that we've been starting to work on. But really importantly, the extended 3-year trials with auto OEMs is becoming a bigger and bigger piece of the puzzle for us.

Could you speak to that a little more? So if I understand that correctly, that when a car is purchased, the purchase price includes a 3-year subscription? So it eliminates the trial funnel, right? Because there isn't a trial period. And so maybe you can give us a bit more about the kind of significance of that to the business as it grows?

I don't think we're releasing any specific numbers on it. But here's what I will share is that it's definitely becoming a more significant -- it's definitely becoming a more significant part of the gross adds for us. But what's really interesting is we did a lot of work early on to think through what that's going to be cannibalistic. Are we generating more yield are we generating more expected revenue on per thousand trials? And the answer is yes, which is why we've been really leaning into it.

And is it new and used car?

New. Predominantly new. But there's an opportunity to use that we haven't approached yet.

I have to think about like when trying to see where sub trajectories are going. We've talked a lot about churn, which is the big component and a bit about gross adds. But to get to gross adds, like self-pay conversion has always been a big metric. And I don't think if memory serves me correctly, it sort of stays in sort of the low 30s has been the historical rate as the pen rate has come up.

So maybe first, just can you talk about how you've seen that trending over time? And again, it seems like one of those areas that operationally you sort of attack to get that conversion heading in the direction that you want. So what are you working on to drive conversion?

So it's interesting. So you're right. So penetration for us is at an all-time high. And obviously, as you penetrate deeper and deeper into certain make model trends, less expensive make model trims tend to have slightly lower tend to have slightly lower conversion rates.

However, what we have been seeing is an improvement in things like continuous service, which we've just talked about and some of the other unlocks that come from having an improved identity stack, such as our marketing capability are also generating real great offsets to that.

I think last year, we stopped investing in streaming in the same way, which, as you mentioned, and created some headwinds on comps, but our overall in car business is better year-over-year.

So this year, you have, I think, it's a few hundred thousand drag on net adds from kind of the pullback in streaming and maybe a little bit of promotion that you're cycling as well.

I think Jennifer has talked about that you would expect to be positive on an underlying basis, excluding those headwinds. So if I take some of the things we've talked about so far, you won't have that headwind next year. It sounds like continuous service and the opportunities outside of the funnel, those are all very constructive.

So I guess, how are you simply kind of feeling about the pace of net adds once this headwind is behind you?

Yes. So we -- the pace of -- the streaming net adds will be a headwind for us and the biggest headwind and we're going to lap the biggest comp on that in Q4. So that will be the biggest place where we have to -- where we're lapping into those streaming ads.

But again, as we just said, the underlying in-car business is going to be better year-over-year. I like where we're at from the way the business is set up right now. Obviously, you heard us just reaffirm and recently raised in the last earnings call. But the underlying business itself, a lot of the technological improvements that we've made, such as 360L, which is not recent, but it's just really finally getting to the place where it's the majority of new car trials.

It's becoming a bigger and bigger part of the used car fleet. So that's really helpful for us because that's a great headwind. The ability to use the app and other ways to recommend content is creating more and more engagement. So as an example, for 360L users who also stream, the average days -- the average day usage is 28 days a month. I'm not sure what that is in February. I got to talk to the analytics team, but 28 days a month. They are really heavily engaged.

So the more ways we can get people to use all of these services and be in a 360L car, we really like our chances there. In terms of what that means on a go-forward basis with things like continuous service, there's -- every few years, someone turns in a car, right? And then there's a leakage that happens for some people who don't go in and then renew or re-up or they're not -- they don't get the right trial or they're not contacted in the right way. So cleaning that up is going to be a huge unlock for us, not just in terms of conversion, but also in terms of churn. So if you think about net adds, that will be really positive for us.

But cleaning up the identity stack, that also means that our marketing capabilities. So our marketing has predominantly been very legacy-based because focusing on having the radio as actually the subscriber versus the person as a subscriber, if you don't come in through the natural funnel, you come to one of our landing pages, the first thing we'll ask is for like a radio ID or VIN. It's a really tough conversion. So being able to attach that to the actual subscriber themselves really opens up a lot of other marketing channels that we've never really been able to use effectively before. And so we're really excited about that opportunity as well.

And then just going back to pricing, you talked about how earlier in the year, you had a successful rate event. Is there any kind of easy way for us to think about the consistency of rate events every 18 months, every 24 months, something like that.

I don't think we have it calendarized right now, but we'll share more as our thinking evolves on this. But one of the things that's really important for us to be able to do is again, like going back to making sure that we're managing conversion, the ARPU/revenue and churn. So we're thoughtful about this when we approach.

And that means also as well as we're thinking about how can we add more value to those more premium plans in conjunction with any sort of price action we would take. So I think more to come from us later.

And just on that, so I think with all music in particular, that is a lower price tier than what you've had before and then premium is maybe a higher price year than what you've had before. Can you just talk about the skew between those? And just the idea that it doesn't create? I mean you talk a lot about the focus on EBITDA growth, it doesn't create sort of a revenue drag? Because you have -- everything you're doing seems to be giving the customer a more simple experience. So that's the risk/reward we're trying to balance.

Yes, for sure. I'd say with -- as we're setting up into a good, better, best price architecture, what often happens is people will come in because -- by the way, no one ever sees like all 3 is an option, right? They're coming in through 1 option or another.

What ends up happening is predominantly, and I'll use play as an example, which was our lowest price tier, and this is going to help us work on a lot of these things because it's not just about the new conversion. As you know, we also have a significant amount of unpublished discounts.

So things like all access, things like play, these are going to help us start to clean up some of these that are in these unpublished discounts. That also raises overall average ARPU and EBITDA for us. Huge, huge project for us to be able to do. But when people come into these lower-priced tiers, they're, they're much more likely to engage. We have much higher CTRs and performance when people see these lower-priced tiers, but then they come in and they're like, you know what, I actually do want to Play-by-Play sports. I do want some of the other potential news channels or I don't want ads. And so this is why we see the vast majority of people come in on these lower-priced plans, converting to higher.

And is that -- in general, you'd say you're seeing more of the uptrading than the downturn trading.

Yes, when people are coming in for these, yes.

Yes. Okay. Switching over to the digital side of the business. Maybe first, just a kind of general question. So Pandora is a relatively straightforward business to understand. A lot of the value that you're creating in digital is not on the Pandora music side. It's in sort of off-platform podcasting, a little bit more of like a B2B business, maybe rather than a B2C.

So just to level set initially, can you just talk us through what that business is in terms of what the assets are and what you're monetizing just separate from the Pandora streaming service?

Well, they actually all do work together because that creates a really significant center of gravity for marketers when they're coming in. But as you know, we have a business that manages advertising and generates revenue for many other publishers as well. I think there's a total of [ Hooper ], correct me if I'm around about 160 million people a month on that. 42 million of that 42 million a month is Pandora. So this is still a very significant business, a very significant business. And so we're really excited about the size of this. but different pieces are moving at different paces.

So our podcast business, as an example, which we're -- I think is it 11 out of top 20, a very significant number of podcasts where we're managing the advertising. This is up 50% year-over-year for us, very significant. On Pandora, we've been keeping the number of ad hours and that's holding steady, which is great, and there's been a flattening of the decline of the MAUs. We're struggling a little bit, I would say, on there is a -- on the ad units themselves, there's been more and more competition.

But the teams have been responding with deals such as the deal that we have with Amazon, for the new demand coming into their DSP and, of course, with the data deal that we have with Snowflake. But I would say there's probably really 3 components to this. There's the Pandora business. There's the ad rep business and then there's specifically the podcast business.

Yes. And is AdWizz, is that within the ad rep?

Yes, that is the ad rep. Yes, yes, correct.

And that is essentially doing what you do in podcast, but for non-podcast content?

For sure. Yes. SoundCloud and others. Correct.

And could you maybe then talk -- because again, I think this is kind of a lesser understood part of the business, like the strategy there and how you're tapping into programmatic demand and other opportunities to generate revenue acceleration?

Yes. So we have partnerships, and we're increasing the number of partnerships that we have with more and more programmatic providers. Amazon being one. Of course, we have a partnership with the Trade Desk. But even as you have those partnerships, there's a chance to optimize those and to do more with those.

And that ends up being quite technical where how do we bring more data partners and how do we get more match rates on those data partners because of the more data that we can bring in the more addressable, we can make any of the inventory, both for ourselves and for the partners that we ramp. So there's a continuing amount of work that we're doing there in order to improve the quality or the data around the advertising the advertising units and making sure that the actual quality and performance is much, much more measurable.

And do you have an outlook as to when segment profit might recover at this business? I think it's had some pressure on it?

Yes. I think we'll talk more about that maybe in future sessions. But right now, we've been cautiously optimistic with the overall advertising business.

That's maybe a good segue into just cost overall. So I know that cost cuts have been something that probably you've been driving very personally. And a focus of the conference calls as you all have managed through some of this revenue volatility.

So can you update us on kind of where you are on the internal cost program, and then we'll cover some of the costs like CapEx and things.

Yes. So as you know, we hit our $200 million a year run rate goal early. That was predominantly through improvements that we've been making in product and technology, by sharpening the focus, optimizing cloud. I mean, by the way, just as I said, it is -- there's not one silver bullet. It's many, many, many things. It's like as an example, going in to your cloud provider and choosing a less expensive chipset to be able to use on any particular workload.

Just a lot of tiny small things that aggregate into big, large structural cost savings that will continue to pay dividends. And similarly, on the marketing side, certainly, there was a pullback in streaming, but there's a lot of other things we're doing to make the dollars work better.

Again, this comes back to some of the identity work that we're doing, but there's a lot of other structural work as we make the funnel more efficient. It allows us to be able to spend less money to do the same thing. And then you get a path to a certain point and the inflection goes the other way, you can start more and more -- you have a higher ROI and more subscribers you can acquire.

So it becomes -- we may start seeing an inflection point in the other direction there. But yes, a ton of work there. On CapEx. As you know, our satellite program by '28 will be roughly at 0 expected CapEx on that. And on the non-set CapEx, we're at the lower end of our guide between $450 million and $500 million for this year and our guide is for $400 million into next year on non-tech CapEx.

So a lot of the work there is very similar is we're, again, sharpening our focus and allows us to rationalize certain platforms, put more resources behind programs like managing our identity stack versus trying to do a lot of different things.

And I know OEM relationships are a big source of value and cost, maybe with new CFO news announcement and his background with Ford, do you see some additional opportunity within those relationships to find savings.

I absolutely do. So I think that the OEMs have been incredible partners. We wouldn't have our business without them. And so we -- but we're always continuing to, I think, on both sides, figure out how we can be even more mutually beneficial. .

So there's a lot of things that we've been evaluating into how those partnerships can look in the future and how we can make it even more mutually beneficial. So I don't think we have anything to talk about now, but it is a very, very big focus for us.

When I kind of step back from it all, the complexity of the business is high when you get into the details, right? If you step back and it's pay for a service, enjoyed in the car and out of car. And then I think the stock sort of simply is usually sort of net adds and EBITDA growth. And we do a lot of work to try to figure those things out. But if we do kind of zoom out because we've gotten into a lot of detail, if you just think about sort of long term, what subs can do long term, what EBITDA growth can do, what framework would you put around the business?

So I think that -- I mean I think if you take a look at the potential we have in optimizing cost structure over time, that's a really good place to start. So we're in, I would say, early to mid-innings of things that we could do right now in terms of rationalizing the cost structure. We've gotten a lot of the easy wins in. But we're in early days on being able to do things as an example with AI.

So -- and that's -- and as an example, in care, we've been, I think, one of the leaders in the work that we've been doing with Sierra. That has been incredibly beneficial both for the people who call in and interact, but also for our cost profile. But there's potentially other things, other ways we can use that as we start to think through outside of care, how do we work with our customers in a way or even acquire customers in a way using AI. That's we're in very early innings.

There's in our P&T team, we're in early innings early innings, I should say, on how we use AI to structure costs there. So I think if you look around a lot of our big cost bases, there's a huge amount of opportunity to continue to rationalize for sure. So I think there's a cost opportunity.

On the subscriber piece, this is where most of our revenue is generated. As we talked about, we really like where we're at with the increasing penetration of 360L in new car trials. We like where we're at with our new pricing architecture. And we like where we're at with our marketing funnel continuing to dramatically improve due to some of the product improvements we made like identity structure.

So we're really happy there. And we talked about the opportunities in the advertising business as well. So I like where we're at from a revenue and from a cost perspective. And I think there's certainly even adjacencies that we're going to talk through at some point down the road.

One, maybe adjacency at least for shareholder value is spectrum. It's something that for the first many, many years, I covered the stock never came up. And now all of a sudden maybe due to some other deals we've seen in the space? It seems like both that there's value there and maybe some realizability within the horizon. I think that's another one, but that's actually the point I wanted to ask on.

So I think there's I don't know it's 2 million or 3 million legacy Sirius Radios that are probably out there longer than you expected. That seems to be the opportunity for monetization. I think that's 35 megahertz that they're on.

So maybe talk about what you think kind of needs to happen for that installed base to become de minimis and then whether or not a monetization event could follow. And I think Jennifer kind of indicated that a spectrum sale may not be on the horizon on the last call. So just trying to understand what you see as some of those shareholder value opportunities?

Yes, for sure. And let me level set exactly what those holdings are and then great. I think there's like 3 different ways to maybe think about value on this.

So we have total right now, our spectrum holdings consist of 35 megahertz of contiguous spectrum. And so 25 megahertz of that right in the center is what we generally use for our broadcast business. I think that the spectrum you're referring to in sort of an interesting artifact of the original merger between Sirius and XM, there's 12.5 megahertz it was serious and then just above that at a slightly higher frequency is the 12.5 megahertz it was XM. So we kind of refer to those as a lower band and high band.

So over time, what we've been doing is a lot of new cars have been traditionally in that higher band. We still have millions of customers in that lower band. And as those vehicles slowly come out of service, those subscribers have been shifting over into new vehicles, which predominantly use the high band.

An important note, and I think it's important when we talk about the 3 ways we could realize value here, is we've also been shipping out what we call a wideband chipset that actually can take the spectrum from both rather than one or the other.

So if you start thinking through -- and then, of course, by the way, there's the other 5 and 5 on each side for a total of 10, which is the WCS spectrum that we acquired last year. Now within that, there's the 3 ways you sort of think about the value of this the intrinsic value overall of the spectrum, I think, is what is maybe attracted some attention as it's been going up. So certainly, the intrinsic value increasing is great for us as holders. We're very excited about that.

However, I'd say that I don't know that that's necessarily the highest utility use of this. So as we think about either using some of the spectrum assets over time, perhaps for something else. The great thing about it is we have this installed base with radios in the car. We have birds already orbiting that can actually talk to those radios in the car. And over time, we expect to have tens and tens of millions of these wideband chipsets installed that can actually talk to both. So that gives us an opportunity to do something.

There's also an opportunity to perhaps partner with somebody else to make use of the spectrum in a way that our own technology wouldn't necessarily allow us to do. But we become a very attractive partner because, again, we have these spectrum assets we have all of these radios and installed already in cars. And then if you're thinking through a partnership and perhaps the distribution of the different service, we also just for SiriusXM alone, we have 33 million paying subscribers.

So that allows us to be a really attractive partnership opportunity for others. And so we're actively considering all of those opportunities. And so nothing new in China to talk about right now, but we're excited to continue to work on this. And there's a lot of energy around it.

And then last question, asking this one for a friend and loved one. But Yacht Rock spends every summer at Channel 15 and then in the winter, it migrates like rare bird. So I'm wondering if there's a point when it might be solidified down into the all music tiers channels, which I think max out at about 100. And maybe just how you think about the programming lineup overall.

Yes. So on Yacht Rock specifically, it's really interesting. So when we had the Taylor Swift pop-up channel that replaced it, I've never had so much -- I got more LinkedIn messages about this than anything that we've ever done. There was a lot of activity around it. And some of the -- a lot of the responses were around this, sometimes you get comp between the moon and a new Taylor Swift channel. So for those who prefer those at Yacht Rock jokes. There's actually more puns I was saying that there are actually Yacht Rock on. So it's unfortunate.

But part of this is right now, Jimmy Fallon's holiday channel is on this right now. And so channel 15 and a lot of this is our bandwidth management. So we end up using this particular channel to promote a lot of wonderful opportunities that may be a little bit less permanent. But I would also say, though, for those of you who maybe you're an older radio or you wouldn't be able to find it. This is a great time to use the app. It's always available in the app as well as Yacht Rock Solo, Yacht Rock '80s and '90s and even we even have Al Roker in there as a guest, DJ. So I'll tell your friend to download the app.

I sure will. Okay. Thank you, Wayne.

You bet. Thanks.

Greetings, and welcome to the SiriusXM's Third Quarter 2025 Earnings Call. [Operator Instructions] 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.

Thank you, and good morning, everyone. Welcome to SiriusXM's Third 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 Thorsen, 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 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. For more information about these risks and uncertainties, please view SiriusXM'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 would like to remind our listeners that today's call will include discussions about both actual results and adjusted results. All discussions of adjusted operating results exclude the effects of stock-based compensation. Additionally, we have posted a supplementary presentation to our IR website for your convenience.

With that, I'll hand the call over to Jennifer.

Thank you, Hooper, and thank you all for joining us this morning. As we enter the final months of the year, we remain committed to enhancing the subscriber experience, growing our ad-supported offerings and finding new opportunities to drive efficiencies and leverage our portfolio strengths. In the third quarter, we made good progress in each of these areas, delivering solid financial results and positive early indicators of our focused approach. With this backdrop, we are increasing our full year 2025 guidance by $25 million across revenue, EBITDA and free cash flow.

We are confident improvements in our business will drive continued growth in free cash flow towards our target of $1.5 billion by 2027 and beyond. In addition, we are actively exploring ways to unlock the long-term strategic value of our spectrum assets. We're seeing solid momentum in our new SiriusXM acquisition initiatives with ongoing expansion of our 3-year automotive dealer subscription program and our Podcasts+ offering as well as continued strength in retention as we provide more value to our subscribers. Subscribers for Q3 were in line with our expectations, with self-pay net adds down versus last year, almost entirely due to our pullback on streaming marketing spend.

Enhancing the subscriber experience begins with programming. We are consistently providing our core audience with new, relevant and engaging content and leveraging our unique platform and long-standing relationships to do even more with the voices driving culture today. Within music, the heart of our service, we hosted a variety of live events alongside channel launches. This included the return of Channel 13 to celebrate Taylor Swift's new album, a pop-up channel and small stage concert with Ed Sheeran and an exclusive Metallica event to launch their new full-time channel, Maximum Metallica. The latter was announced with a special appearance on Howard Stern, who consistently books A-List guests.

Additionally, this quarter, we celebrated 10 years of Radio Andy and extended our agreement with Andy Cohen to keep the channel as our definitive home for pop culture. Howard and Andy are just two examples of the talent creating impact at SiriusXM. Stephen A. Smith is making a splash with his new political and sports programs as well as the launch of the digital destination, Get Serious with Stephen A., which gives fans a fresh way to interact with the host. Earlier this month, we also announced the renewal of our agreement with Megyn Kelly, which has expanded to include the soon-to-be launched Megyn Kelly Channel. With each of these personalities, we are able to utilize our platform to elevate their voices and deliver exclusive programming to our listeners.

Our efforts to include more content across package tiers is providing even more value to our dedicated subscribers. We've seen more than a 50% increase in NFL and MLB play-by-play listeners, and almost tripled the usage of our artist-seated stations, reflecting the expanded access to our programming introduced late last year. Initiatives such as these, which encourage our subscribers to engage with a wide range of content across devices and even introduce new members of the household to our service, not only result in higher satisfaction, but also drive greater retention.

Our programming is just one way, we are delivering meaningful value to our subscribers. 360L penetration continues to expand, launching in Toyota's new RAV4 as we announced this month, and we are always rolling out new updates to enhance the in-car experience. Features such as Xtra Channels, for example, deliver listeners more 24/7 music both in car and in app, with significant increases in both usage and time spent listening. Streaming engagement has remained high across the board, showcasing how our service accompanies many subscribers throughout their day. In particular, subscribers with 360L, who also stream listen almost daily, an average of 28 days a month.

Beyond product enhancements, we remain focused on improving the overall customer experience. This quarter, we began rolling out our new identity framework, which shifts subscriptions from vehicle-based to customer-based. This change eliminates friction when customers add, replace or exchange vehicles. For example, subscribers no longer need to cancel and resubscribe at the end of a trial when replacing a vehicle. This framework also lays the foundation for future initiatives that will simplify the sign-up experience for new customers. Together, these improvements are expected to drive stronger customer acquisition, higher retention and sustained revenue growth.

We've also made progress within our pricing and packaging. While we have been thoughtful in the rollout of Play, our low-cost, ad-supported subscription tier, we are seeing positive early indicators from the limited targeted marketing efforts we've rolled out in tandem with the launch. There is no evidence of cannibalization of our existing full-price population with the introduction of this new tier. In fact, within the test population, we are driving interest and subscriptions across all our packages, effectively widening the top of the funnel. This also gives us an additional solution to leverage as we gradually move away from unpublished discount offers in both acquisition and retention. While initial impacts are small, Play is an important part of our broadened pricing and packaging structure, which we believe, alongside improvement in our content-led marketing efforts will help drive improvements in future subscription trends.

Switching to the topic of advertising, we saw another positive milestone in the third quarter. SiriusXM Media now reaches more than 170 million listeners a month, and our podcast network is now the largest in the nation per Edison Research. Ad revenue grew 1% year-over-year and podcasting in particular, continues to boom, once again up almost 50%, offsetting declines in music streaming. We are expanding our inventory to meet marketplace demand with a variety of new shows launched over the last few months from our partnership with SmartLess Media and a new agreement announced this week with MrBallen. The latter deal, in particular, with a video-first podcaster underscores our ability to support creators by growing podcast monetization across all platforms. We're seeing significant year-over-year and quarter-over-quarter expansion of our Creator Connect social and video offering, where we are growing both our inventory and CPMs.

We're also expanding monetization opportunities with new partnerships such as our integration of the Amazon DSP this quarter, which provides further runway for programmatic advertising, which was once again up year-over-year. Additionally, we are leveraging our broader network to take the podcasting tailwinds and help brands find their audiences across Pandora and SiriusXM, bringing more ad dollars to both platforms. We see even more opportunity to own the digital in-car ad experience across Pandora and SiriusXM through 360L as well as CarPlay and Android Auto, usage of which is up for both services this quarter. And with our open ecosystem approach, we are utilizing our industry-leading strengths in selling and monetizing audio ads to expand our streaming and podcast networks.

Across the company, we are exploring further options to do more with the valuable assets we have within the broader business, whether that is with spectrum or by leveraging our ad capabilities with additional third parties. As we continue to drive profitability, achieve our target leverage ratio and move towards our free cash flow target of $1.5 billion in 2027, we expect to have expanded opportunities for capital returns to drive long-term value creation for shareholders.

With that, I'll turn it over to Tom for more on this quarter's financial results.

Thank you, Jennifer, and good morning, everyone. In the third quarter, we executed with strong discipline, sustaining healthy margins, delivering operating efficiencies and allocating capital to initiatives with clear returns. At the same time, we leaned into new content and distribution initiatives that reinforce our long-term competitive position.

Looking at the financial results for the quarter. Total revenue for the third quarter was $2.16 billion, essentially flat year-over-year, down less than 1%. Subscriber revenue declined by $16 million to $1.63 billion, while advertising revenue grew by $5 million to $455 million. Total cash operating expenses were $1.48 billion, also flat compared to the prior year. Adjusted EBITDA was $676 million, down 2% year-over-year with a 31% margin. Net income for the quarter was $297 million and free cash flow was $257 million, up from $93 million in the third quarter of 2024. The year-over-year improvement in free cash flow was primarily driven by the absence of Liberty Media transaction-related costs recorded in the prior year period as well as lower cash taxes paid and reduced capital expenditures.

Turning to the segments. SiriusXM total revenue finished the quarter at $1.61 billion, down 1% year-over-year, primarily driven by lower subscriber revenue due to a modest decline in the average subscriber base. Advertising revenue remained steady, down $2 million to $39 million for the quarter. Average revenue per user rose slightly to $15.19 from $15.16 in the prior year period, benefiting from the March rate increase. Segment gross profit was $958 million, down 1% year-over-year with a gross margin of 59%, a 1 point decline from the prior year.

Churn remained healthy in the third quarter at 1.6%, improving slightly year-over-year, driven by declines in vehicle-related, nonpay and voluntary churn. Self-pay net adds were negative 40,000, driven by consistently low churn, higher trial volumes and continued progress in new acquisition initiatives. These were partially offset by lower conversion rates and softer streaming net additions. We continue to anticipate some headwinds in the fourth quarter from reduced streaming marketing and acquisition channels.

Turning to the Pandora and Off-platform segment. Total revenue was $548 million, up $4 million or 1% year-over-year. Subscriber revenue declined 2% to $132 million on a smaller sub base, while advertising revenue grew 2% to $416 million. We saw encouraging signs of increased spending late in the quarter with momentum building through September. Programmatic revenue continued to strengthen and podcast demand remained robust, driving nearly 50% year-over-year growth in podcast revenue.

During the quarter, we continue to see growth in advertisers buying across two or more of our platforms, reflecting the growing success of our multi-platform reach. As we roll out our unified buying capabilities next year, we expect this trend to strengthen further. Segment gross profit in the quarter decreased 9% to $170 million, reflecting a gross margin of 31%. Third quarter operating expenses reflect the ongoing benefits of our cost savings initiatives. Sales and marketing expense declined 15% to $176 million, driven by reductions in brand and streaming marketing. Product and technology costs fell 5% to $54 million due to ongoing optimization efforts. G&A expenses increased 2% to $115 million, primarily due to higher software and telecom costs.

Overall, for 2025, our cost savings program continues to outperform expectations, achieving our $200 million target in year while we continue to reinvest selectively in areas that drive clear payback in engagement, ad monetization and OEM distribution. Subscriber acquisition costs totaled $107 million for the quarter, up from $90 million in the same period last year. This increase was driven by the expansion of our OEM programs, including broader adoption of 360L and ongoing migration to the wideband chipset. These investments are expected to yield favorable economics and improved listener conversion over the life of the agreement.

During the quarter, we increased and extended our revolving credit facility to $2 billion with just $30 million drawn as of September 30, preserving significant liquidity and financial flexibility. We ended the quarter with a net debt to adjusted EBITDA ratio of 3.8x, slightly above our long-term target in the low to mid-3s. Our strong and consistent cash generation continues to support our ability to delever and enhance capital returns over time.

During the quarter, we reduced total debt by $120 million and returned $111 million to shareholders, including $91 million in dividends and $20 million in share repurchases. As we work towards our leverage target by late next year, we remain committed to prudent investments and maintaining our dividend policy. We expect to have increased flexibility to enhance shareholder returns and pursue strategic opportunities.

Finally, we are increasing our guidance on revenue, adjusted EBITDA and free cash flow by $25 million to approximately $8.525 billion in total revenue, $2.625 billion in adjusted EBITDA, and $1.225 billion in free cash flow. This is in addition to the $50 million free cash flow guidance increase we announced in September. These increases reflect the continued strength of our operations and our disciplined execution, and we remain confident in our ability to close this year strong.

With that, I'll turn it back to the operator for Q&A.

[Operator Instructions] And our first question comes from the line of Stephen Laszczyk with Goldman Sachs.

First, Jennifer, subscriber net adds continue to improve here in the third quarter. I know we've had some onetime impacts coming in and out of focus this year. You've had to cancel some streaming-only churn. I think Tom called out some factors in the fourth quarter to consider. But maybe I was curious if you could just spend some time talking about where we stand on each of these factors, just moving parts as we close out the year and as we begin to look into 2026 on the net add front and as some of the underlying momentum in the business might start to come through?

Sure. Thanks, Stephen. So as we came into the year, we said that we expected self-pay net adds to be better year-over-year, but for a few specific items. Mostly that's because of the streaming reduction as a result of the pullback in the marketing spend there. And the performance this year so far and our expectations for the fourth quarter has been consistent with our thoughts coming into the year. So we discussed on our last call that we would expect about a 300,000 net add reduction because of the streaming adjustment. And the biggest quarters of impact for that are the first quarter and then the fourth quarter of this year in terms of the year-over-year impacts.

But we still expect our in-car business to be better year-over-year as a result of many of these new acquisition programs that we've been talking about, including the 3-year automotive dealer subscriptions, better used car data, EV implementations, and we continue to see nice movement there. So as we look at next year, of course, we'll provide better indications on the fourth quarter call, but a number of positives that we continue to believe that we'll see contributions from these new acquisition initiatives.

We would be through the bulk, obviously, of the streaming net add reduction this year. And we really believe we're going to see continued progress on -- as a result of the expanded pricing and packaging we put in place, better personalized and content-led marketing, leveraging 360L, other third-party data to really get the right content in front of the right customers. And we talked a little bit about it in our prepared remarks, but continuous service should remove friction with our current subscribers transferring vehicles, and we've got future opportunities in bundles and partnerships.

So I'd say the one thing we're watching closely for next year is just what happens with auto sales in general, just because of the ever-evolving tariff situation and potential impacts if that were to affect consumer demand. But otherwise, we feel good about the trends.

Great. That's helpful. And then on the ARPU side, I was curious if you could talk a little bit more about the receptivity you're seeing across the base to the rate increases earlier this year and then also to the pricing and packaging changes you made on the SXM side earlier in the year as well. I think we've seen ARPU trends improve throughout the year. Just curious how much more opportunity you see for them to continue to improve as you look into 4Q, maybe into 2026 as well as we think about the balance of rate increases versus maybe some SiriusXM Play subs coming into the base in a more meaningful way over the next couple of quarters?

Yes. Again, we're on track on ARPU in terms of better year-over-year comparisons, as we said, as we go throughout this year. And yes, we've talked about introducing lower-priced packages like our $9.99 music only, and add ads on top of that and our low cost of ads or Play subscription. And we think what we're seeing in both of those cases is that they are great headline prices, but that customers are typically taking higher-priced packages even with those used for promotion. So we do feel good about the mix on acquisition. And I think we continue to have opportunities to add value to support future rate increases. And so I would expect that we have the opportunity to continue to improve ARPU over time. But of course, it really is about revenue maximization and balancing rate and volume.

The next question is from the line of Cameron Mansson-Perrone with Morgan Stanley.

First on a follow-up on pricing. I was just wondering if we should still think about you deploying kind of an every other year philosophy? And then relatedly, how might pricing activity from peers influence those decisions around pricing near term?

Yes. Thanks, Cameron. So I think we're open to looking at rate increases on a different frequency perhaps. We had a very strong execution against the rate increase earlier this year. We've developed a good model for how we execute those by delivering more value for our subscribers ahead of those rate increases. And we expect to continue to do that along a number of factors, right, with product features, with new content, and with things like service continuity, which just make it easier to transfer vehicles.

And so there's a possibility that we'll do it maybe more frequently or on a slightly -- maybe it's not exactly every other year, it's 18 months. But obviously, we're very, very watchful of the market in general. As you mentioned with other services, whether they be audio or video, we're seeing pretty consistent rate increases there. And I think that signals both an opportunity because we look well priced, but also we need to be monitoring for potential subscription fatigue. We haven't seen any of that yet. But of course, those factors are sort of the backdrop for how we'll make the decisions going forward.

That's helpful. And then on advertising, some good sequential improvement in ad trends this quarter. You highlighted the strength of podcasting. I was wondering if you could help provide any help in terms of thinking how podcasting has increased as a share of the overall ad business. And as part of that, just helping us frame the opportunity maybe for that outperformance to come through in total ad growth over the next few years.

Our podcasting performance has been very strong. Again, another quarter where ad revenue in podcasting was up about 50%. And we're really pleased with the investments we've made here and the innovations that we've launched, including things like Creator Connect to sell across audio, video and social. So it is representing a larger portion of our overall ad revenue, and we would expect that to continue. But we do have opportunities to improve on the streaming side and on the satellite side. As we bring things like Tom mentioned in the prepared remarks, being able to sell better across our platforms, and we're just launching now a unified buying process for salespeople and marketers so that it's much easier to buy across all three platforms. So we'd expect to see some tailwinds there.

And also, as we launch ad replacement in the car, we've been talking about this for quite a while, but we are going to start that evolution early next year, and that will continue to progress to allow us really as the only provider of the ability to execute against addressable inventory in the car. So there are opportunities for us to continue to expand across the other aspects of our portfolio, but we're really pleased with where we are in podcasting and expect to see continued tailwinds there.

The next question is from the line of Kutgun Maral with Evercore ISI.

I wanted to ask about spectrum and see if there's any more you could share on how you're viewing the portfolio and scope for monetization. If you just take a look at recent market transactions, it certainly seems like this could be quite a significant opportunity for the company even if you take a big haircut to recent comps. And relatedly, it might be premature to ask, but how should we think about how you could look to allocate any potential proceeds, particularly since you're not too far off from your target leverage?

Thanks, Kutgun. I'll take that. Just to level set, our spectrum holdings total about 35 megahertz right now of contiguous spectrum with 25 megahertz being used for our core broadcast operations and 10 megahertz of the recently acquired spectrum that are positioned either side of the 25 megahertz, and those are the WCS licenses. So you're right, that does give us a lot of flexibility to create value in multiple ways and whether that's expanding or enhancing our service or building on core strengths, in particular, in the car. It also includes opportunities for new partnerships or services built potentially in conjunction with partners. So we are evaluating multiple approaches to creating value right now, and we'll share more as our thinking and the opportunities evolve.

Yes. I'd just say, Kutgun, on the last part of your question about proceeds. Obviously, it's way too early to be thinking about that. But we have the usual approach in terms of capital returns, right? We want to make sure that, first and foremost, we're executing against opportunities we have to invest in the business organically with high ROI. We've been very disciplined about that. There's, of course, an ongoing evaluation of M&A opportunities. We don't believe there's anything near term that we need for the portfolio, but we continue to be open to that. And clearly, the focus right now is on delevering. And as we've said, we're consistently measuring against our long-term leverage target of low to mid-3x EBITDA and expect to get there late next year. And beyond that, of course, there's opportunities for other capital returns to shareholders, whether that's dividends or share repurchases.

Our next question comes from the line of Barton Crockett with Rosenblatt Securities.

I wanted to follow up a little bit on the spectrum question and just drill in a little bit, which is part of the question was referring to the possibility of selling spectrum and the value that could come looking at comparable transactions. I was wondering if you could comment on whether selling spectrum is something that would even be considered. And if so, a little bit of color on how you could think about licensing given that your spectrum is licensed for a specific satellite radio use right now.

And I think there's a lot of interest in other uses like potentially satellite connectivity to cell phones that's been in the background of some of these other transactions. Whether that specific use case is something that could be applicable to your spectrum and whether there's any licensing steps that could be taken -- maybe would be best taken in this current FCC environment, if you could comment on that.

Yes. Sure. Thanks, Barton. So Wayne mentioned how we're really approaching the process. And I think there's a number of different use cases. I'm not sure that really is going to involve selling spectrum. We do believe the FCC has been more open to different types of uses and transactions. But really, it's like what Wayne said, like let's find the best opportunity for our business given the strengths that we provide, particularly in automotive and perhaps there's a partnership that would let us better execute there. But that's really the main focus.

Okay. That's helpful. And then if I could just switch to another topic on auto relationships. There's been some disclosures, I think, from automakers like GM of a desire to move to their own kind of interface versus kind of CarPlay and Android Auto. I'm just wondering in this environment where GM might be doing that and others perhaps over time. If that potentially advantages those who are economic partners of the automakers who will have greater control over the interface if they do this versus those who don't. So you guys are an economic partner, you pay them a split. Others like Spotify don't. Does that advantage you potentially in the interface?

Thanks, Barton. It's Wayne, I'll take that. I think that as you probably know, over the course of the year, we've enhanced our abilities in CarPlay, which is why we're seeing some of the increased usage. So that's where a lot of our users like to consume a service. And so we want to be wherever our users are. And of course, we do partner deeply with the OEMs, and we want to be as deeply embedded as we can in their IVIs and create the best experience that they want for their consumers. And so we feel like we're really well positioned in both directions. It's a -- we've created a lot of deep relationships, both for the consumers and with both platforms and with OEMs. And so we're going to continue to develop in both directions, and we like both directions for us and for our consumers.

The next question is from the line of Matthew Harrigan with Benchmark Company.

I couldn't frame an OEM question more articulately than Barton, so I'll leave that one alone. But it's interesting on video, particularly with micro content on YouTube and other forms. It always feels to me like music video content has been undermonetized. And certainly, you have marquee content or podcast content really embracing the entire political spectrum. But how significant an opportunity is that? And how does the -- and this is probably a little too early, but how does the potential ad tech on the video side -- ad tech stack on the video side compare to what you're doing in audio? Clearly, you're a leader in audio. There's a lot of press on what just about everybody is doing on the video side these days in that regard. But it does feel like you've got a lot of room to roam in terms of monetizing on the video side to complement your audio leadership in the car.

Great. It's Scott. Thank you. So a couple of things. So as you pointed out, we're the #1 podcast network now in terms of reach in audio in the U.S. So that lane is vibrant and growing, and we continue to be the leader there. In video, our YouTube partners that we have on there, whether it's Unwell and Alex Cooper or SmartLess or anything else, we're seeing enormous growth there. As many of you read, you saw the Spotify announcement with Netflix and other things. With our lineup of content, there's no shortage of opportunity where we'll go in video. Right now, we like the way we're monetizing. We're flexible. We can have video behind the paywall. We can have video with YouTube or any distribution partner. And with 11 of the top 25 podcasts, it feels like we're in a good position to see what's out there, field some offers and decide what's best for the company.

I'd just add on to that, that I think that we are -- most of our engagement, of course, is in the car, right? And we believe we still have lots of opportunity with audio in the car. But that video is a great complement. And to the extent we can work, like Scott said, with other partners, especially where we've seen success with YouTube, it gives us a real opportunity to build complementary engagement outside of the car and even promote back to SiriusXM content in audio in the car.

At this time, our next and final question is from the line of Steve Cahall with Wells Fargo.

This is Omar on for Steve. One quick one for me. Cost cuts have been a major opportunity for SIRI over the last couple of years. And recently, you've talked to an improving outlook for non-satellite CapEx. And obviously, you guys have hit your targets for the year. Just curious, what inning are you in for cost reductions? And where have you been able to find the most efficiency in the operating model?

Omar, it's Tom. So just addressing that, when you look at our financials this year, we've had a lot of progress on sales and marketing and optimization, and we've worked our way through cutting back, obviously, some of the streaming, marketing and some of the other direct marketing. So we've optimized more of the marketing side this year. We've had impact on product and tech. But we are looking -- we continue to look at all our initiatives, and we're continuing to look across the company.

We've had success to date. We've had also a lot of success on reducing CapEx, which we've talked about, I mean you noted earlier. So I think we're looking at across the board. We've hit our target for the year of being in excess of $200 million. And we're not stopping there. A lot of these are structural changes, but a lot of them are also ongoing projects that we continue to work through in our overall cost structure.

Yes. I'd just add on. We've made great progress on the cost side. But really, it's about we're doing what we set out to do when we focused our strategy last December, and we're really pleased with our progress across the board. So we've been enhancing the in-car experience, super serving our core audiences. We are driving our ad business, particularly within podcasting, but even more broader, and we're driving profitability. So ultimately, we're focused on increasing free cash flow and driving future value creation for our shareholders, and I'm confident we're on the right path.

Thank you, everybody, for participating today, and we look forward to speaking to you offline in next quarter. Thank you.

All right. Great. Let's get started with our next session. Thank you everyone for taking the time to join us today. My name is Stephen Laszczyk and I'm the firm's lead entertainment analyst, and we are excited to welcome back to the Communacopia Technology Conference this year, Jennifer Witz, the CEO of SiriusXM. Jennifer, thank you for being with us today.

Thank you, Stephen, for having me here. Maybe before we jump in, I can just note that last week, we announced that we were raising our free cash flow guidance for 2025, new information. I wasn't sure if you've seen that. So we increased by $50 million free cash flow guidance for this year, raising it to approximately $1.2 billion. And this has a lot to do with -- we've indicated that this might be a possibility on the earnings call, tied to the [ OPB ] and lower cash taxes, but also we expect to come in towards the lower end of our range of non-satellite CapEx which was -- we had stated previously was $450 million to $500 million. And we also reiterated our revenue and adjusted EBITDA guidance for this year as well.

Fantastic. And we'll dive a little bit into that later and some of what you're seeing in the current business. But maybe to start for those who are a bit newer to the SiriusXM story and just thinking back over how the strategy has evolved over the last year or so. Last December, you went through a little bit of a strategy refresh. I was just curious if you can maybe take us back through the decision to pivot away from maybe the streaming service and into refocusing efforts on the satellite -- core satellite business and how that has played out over the course of the last couple of years?

Sure. So yes, as of December, we really sharpened our strategic focus at SiriusXM on our core in-car subscription business. This has everything to do with the fact that we deliver tremendous value for our in-car subscribers because of that embedded easy-to-use interface in the car alongside our differentiated content offering. And so it's about leaning into the strengths we have there and continuing to capitalize on those. But big picture, our areas of focus are the same. So to strengthen our in-car subscription business, to continue taking advantage of growth opportunities in our ads business and also executing on our cost program across the company.

And then on top of that, we do have optionality in our spectrum assets, and hopefully, we'll talk about that a bit more. But since December, the things that we've focused on are for the in-car side of the business, broadening our pricing and packaging structure, which opens up new price points at the lower end of the spectrum to really open up demand in-car for those segments. We've leaned into our 3-year dealer-driven subscription program and delivered real success there. We scaled our podcast business on the ad side. And we've also really driven efficiencies in the business. And this is one of the areas that we focused on is intentionally pulling back, as you mentioned, on the streaming subscriber side at SiriusXM.

So we are focused more now on higher engaged subscriber segments with higher ROI and driving real improvement there. So again, driving efficiencies across the business, leaning into our areas of strength on the in-car side and advertising and capitalizing on these improvements in spectrum assets, we think these various investments in the business are going to result in higher free cash flow, sustained free cash flow growth. So this year, we raised our guidance, as I mentioned, to $1.2 billion approximately. We have a target for '27 of $1.5 billion.

So along the way of getting to that '27 target, we expect to also come into our target leverage range by the end of next year, low to mid EBITDA times. And that will ultimately give us the opportunity to expand on our capital returns program. So these elements of improving the business across in-car subscription adds, driving efficiencies in the cost structure, leading to growth in free cash flow, which should be our best measure of success and optionality around future capital returns and our spectrum assets are really what we believe will drive sustained long-term value creation for stockholders.

You mentioned strengthening SiriusXM's presence in the car. And one of the more frequent debates I have with investors is really around how the satellite business can evolve or the presence it can maintain in the car as the business becomes more competitive, the dashboard becomes more competitive. Could you maybe talk a little bit more about the steps you're taking to strengthen SiriusXM in the car and really the opportunity for the subscription business to return back to levels of growth?

I think the main -- the real key statistic here is time spent listening in the car for those 35 years and older is focused on radio, right? So 80% of time spent listening is to AM/FM or SiriusXM. And then when you go to 45 and up, it's even more concentrated. 85% is to that embedded radio service in the car. And obviously, it's dominated by AM/FM. We're a much smaller part of that. So I think that gives you an opportunity of what we believe the future is for our growth profile. So we have a very -- it's been the foundation of SiriusXM, the in-car business. And I'm really pleased with some of the efforts we've put into place here. So we talked about what we're doing on pricing and packaging. We'll talk more about that 360L, also just opening up the funnel.

So we've put a number of programs in place that have actually brought in new customer segments into the subscription service. And these are things like our 3-year dealer-driven subscription program, which is continuing to grow with new OEMs being added, opening up more used car data partnerships so that we can identify more of those customers at point of sale and put them on trials, integrating with more EV partners. And then we're leveraging the strength of our podcast content portfolio more broadly to do podcast plus subscriptions as well.

So this has allowed us to open up the funnel, bring new customers into the service. And then, of course, the 360L pricing and packaging. And then ultimately improving our ability to get the right content in front of the right customer with better marketing is going to unlock both conversion and I think actually improve ultimately on our already low churn rate as well.

You mentioned 360L and how that plays into the in-car strategy. Can you perhaps provide an update on where we are in the 360L rollout today, what that penetration curve looks like over the next 5 or so years? And then some of the benefits that you're either seeing or expect to see out of 360L, whether that relates to conversion or the ability to get customers in the right package.

I'm really pleased we're over 50% of our new car trial starts with 360L today, and that's going to grow to 60% and 70% and then ultimately will be fully distributed in the years ahead. It's been slow and steady progress since we originally started developing this. And we see it in at least 10% of our used car trial starts as well. So again, proliferation of 360L will continue to grow and the feature set will also grow. So where we really see improvement and really, it's across the board in our metrics. So better conversion, better retention and better ARPU on 360L, subscribers with 360L in their cars versus subscribers without. And it's the combination of this really advanced platform in terms of personalization and getting customers into new content that we are either having more personalized and discovery features like our extra channels or our personalized artist stations, on-demand content.

So it's really been increasing the breadth of content that customers are consuming, and that's what leads to better metrics overall. So I'm confident this is going to continue to improve the trajectory of the business. It's been slow to get started. And all the data coming back as well has been key. We make better content decisions as a result. And ultimately, it's this unlock on marketing that we still have to capitalize on, and that's a big area of focus for us as we go into 2026.

That's great. And I do want to come back to content. But maybe first, you mentioned pricing and packaging a few times. It's been a few quarters since SiriusXM has rolled out its new pricing and packaging strategy based around core music plan and then modular add-on sports, news, talk, et cetera. Could you talk a little bit about how this strategy has -- how adoption has played out in the strategy and then some of the benefits you're seeing in the core business as uptake...

Yes. So as we take a step back, our pricing and packaging strategy is pretty simple, right? It has to do with adding more value and creating more options, right? So it's -- we're really focused on building out good, better, best, right, which is sort of the classic subscription packaging structure. And we've just started last year, as you mentioned, with our modular pricing and packaging, which is $9.99 for music only in the car and then added tiers on top of that with additional content. And then we've also launched more recently in July, a low cost of ad subscription package, which is very new to the lineup, but it is really the good sort of the foundation of the good, better, best. And that's at a sub-$10 price point, and I think that will give us more opportunities to open up demand as well.

So again, adding value and creating more choice. And this is really about making sure that customers get on the right package for them. So on the modular pricing that we put into place, we started putting that in front of new trailers last year. And look, we're watching the metrics that you would expect us to watch. We want to make sure that customers are taking the right package and staying on those packages, right?

So in terms of $9.99, when we put that in front of customers, most customers are actually taking the $25 package. So really good metrics there. We're very pleased with the progress. And then after the trial and the promotional period, most customers are staying on those full price packages. So getting customers into the right package for them means ultimately better retention, and we believe less reliance on those unpublished discounts, which is kind of the thing we'd like to get off of overall as we clean up the pricing and packaging structure.

How do you balance that? There's been a fairly sizable cohort of SiriusXM that's been on those unpublished discounted plans for quite some time. And this new pricing and packaging plan aims to be -- to move those customers off that plan. How do you balance maybe stepping those customers up versus churn? And maybe you can speak a little bit about how the ad-supported tier comes into the conversation.

Yes. So there's 2 opportunities on the broadening of this pricing and packaging structure, and that's on both creating new demand with more price-sensitive segments because, again, we're focused on the car. We want to go after AM/FM because they have a majority share there. But over time, we've raised rates in such a way that we probably priced ourselves out of competition for that. So opening up price points like $9.99 for music only and a sub-$10 price point for low cost of ads gives us that opportunity to go after that demand. And then we're going to have opportunities to upsell over time as well.

But on the other side of the spectrum, we have -- are very satisfied and engaged full-price subscribers who are happy to pay, and we've been able to implement rate increases over time. One of the real success stories we've had in the recent past is we pushed more content down to many of those packages last fall and implemented the rate increase in the early spring, and we saw very little churn as a result. So again, it's about having better transparency, a broader set of options, making sure that we can keep customers on the full price packages. But having these lower-priced packages circling back to where you started should allow us to reduce our reliance on these unpublished discounts. So as customers call up, they may land on a significantly discounted price for the overall content offering. We're going to slowly move ourselves away from that and give them options for price points like low cost with ads for that package, which is a sustained lower price point.

SiriusXM launched its ad-supported subscription service play just this last July. Can you maybe talk a little bit more about the strategy behind play, how it's ramped since July? I'm sure it's still early days. And then as you look forward over the next 12 to 24 months, how you expect that to play out?

Yes. So it's kind of a logical addition to our pricing and packaging strategy, right, at the good level. So sub-$10, it has a reduced set of channels and ads in the music for the first time. So it doesn't have some of our premium content. It's an entry-level price point. It has been very slow in terms of our rollout because we want to be very disciplined about where we're using it. So we're targeting customer segments in trial that don't typically convert very well that tend to be more price sensitive, right? So going after that group that's likely to use AM/FM, again, very focused on likely older segments, right, that are more invested in an in-car embedded experience.

And so far, what we're seeing, again, very early low volumes, but we are seeing improved demand among these segments. And ultimately, they aren't just choosing that package. They're choosing a broader set of packages when they come into the sales flows. So we're going to be watching that package mix. We're going to be watching how they retain on this low cost with ad subscription. And then just overall, we are going to have an opportunity to improve the ad side of that ARPU equation as well, even though the subscription price will be lower than $10.

Can you talk a little bit more about the potential to increase monetization on the ad side of that of that package goals as you look out for this year and the small number of subscribers that you have on play, if there's a number in your mind. And as you think about layering on either more inventory or more monetization, what that could look like over time?

Yes. Yes. So it's not even just about play. It's really about opening up better monetization for SiriusXM in general on the ad side. So we generally have just broadcast ads. And we've been working on ad replacement to create more digital addressable targeted ads in the car that would be in subscriptions for the non-music content more broadly, but also for play in the music channels as well. And that's going to take time to build out. So in the meantime, it's going to be more broadcast ads. So the ad ARPU is generally probably more limited in the initial stages. But over time, we'll have the opportunity to add that into our broader ad platform across broadcast, music streaming and podcasting and really package it as one buy. So there'll be opportunities to improve that yield over time.

I think one of the natural concerns of investors when you launch a plan like this is the potential for cannibalization play expands the TAM, it brings down the price point, sort of bring in a set of customers that are new -- potentially new to the SiriusXM ecosystem, but it could also potentially result in a trade down effect. I'm just curious how you got comfortable with that risk and how you're balancing that opportunity versus the potential for...

We hear this concern a bit, as you might imagine. And we're really looking at opportunities to improve demand, and that's going to come with lower price points. And I think the thing that we can rely on is that we have a really satisfied long tenured and engaged subscriber base on full price packages. And in the past, when we've introduced packages like this, whether it's streaming only at $9.99, music only at $9.99, we just haven't seen that much movement down for existing subscribers.

So yes, when they call and try to maximize rate, they end up oftentimes on unpublished discounts. We're going to leverage the fact that we have these sort of long-term lower-priced packages in place now to get those subscribers on those packages. So ultimately, I don't see any incremental cannibalization beyond some of the things that have been happening already in the business. And this improves the health of our subscription business if we can actually move customers away from those unpublished discounts into these packages with sustained lower price points. And then we're going to have the opportunity to raise price over time or move people up with upsell programs as well.

On ARPU more holistically, as we look into 2025, I think on your second quarter earnings call, you mentioned that you expect ARPU growth to improve into the back half of the year, the pricing and packaging changes, some price increases that you pushed through earlier this year. Just curious if you could talk a little bit more about the outlook for ARPU this year, how pricing actions have been digested by the base. And as you look into '26, the sort of setup into -- for ARPU to grow next year?

Yes. We expect to continue to improve the year-over-year comps on ARPU as we go through this year. And then the pricing and packaging structure that we've been talking about really sets us up, I think, for more opportunities for revenue maximization going forward, right? So it's a combination. We want to drive both volume and rate. And on the volume side, that's only going to come if we're opening up more demand. And on the rate side, that's going to come as we move people up the packaging structure, but also have the opportunity to increase rate.

And I think our experience in this year's rate increase with a lot of uncertainty, frankly, in the first quarter in terms of the health of the consumer and the economy in general, I think it just shows that we have the opportunity, if done right, combined with more value add, to continue to raise rates in the future as well. And I think that bodes well for ongoing rate maximization.

If I look back, SiriusXM has historically grown ARPU in this 2% to 3% rate on an annualized basis. Should that be investors' expectations looking ahead? -- or you mentioned maximizing revenue, maximizing the overall revenue pool that is available to you. Should there be a different framework that investors maybe view success by -- on the SiriusXM side in terms of ARPU versus revenue?

Yes. I mean output -- it's always an output, right, ARPU. And so we aren't running our models based on how much are we going to increase ARPU specifically. It's really about getting customers onto the right packages for them. And there are so many metrics that we're watching to make sure that we're doing that effectively. Getting customers in the funnel is priority #1 to increase demand. And then alongside that, continuing to add value to the subscription so that we can increase price over time. And hopefully, that results in exactly both of those volume and rate increasing over time to drive overall revenue maximization.

That's great. Maybe moving over to the content side of the story and the strategy on content. SiriusXM has historically been the leader in premium audio content for the better part of the last 2 decades. That said, the market has become more competitive over the last couple of years with Spotify, Amazon, Apple and others all coming into the premium audio category. I guess, looking ahead, how does SiriusXM's content strategy evolve from here? And how are you planning on maintaining that leadership?

Yes. So core to our differentiated content value is really offering exclusive premium content, making sure that we have live and timely programming and then that we have this human curation aspect that really lets creators, artists, hosts, talent connect directly with fans. And so the opportunities we have on the content side are the areas where we can kind of unlock all 3 of those in one investment. And I'd say the best example of that recently is Stephen A. So he's a big personality. We have exclusive audio with him. We will distribute some of it more broadly, but he brings a lot of brand value and awareness to SiriusXM.

He's on other platforms and will promote back to us. But it's that idea that we have real live timely content, so daily radio on both the sports side and then he's going to be doing some political talk for us as well, combined with this connections that he offers to fans. So he's going to take calls. And there's something really compelling that our subscribers find being able to connect with talent that way. So that's the real significant opportunity for us if we continue to find those talent or other areas of content to invest in. We're going to be very disciplined as we do that going forward. But it's really what differentiates us against other platforms.

So you mentioned other music streaming companies or even the proliferation of podcasts, which are widely available. Those don't offer live, timely and real human connection like we do. We are always going to be complementary. Most customers are going to have another version of their music library or maybe listening to another podcast platform, but we really believe in this curated approach because there's such decision fatigue really. I mean customers coming into these platforms where it's all about the vast amount of content, they are really differentiating themselves on features, and we're differentiating on the content we provide.

Are there any other content categories or genres? You mentioned sports political that SiriusXM is focused on?

Yes. I think sports is really interesting for us, but also wellness and culture as well. We've made some additions there with like Page Six radio. Hopefully, we'll do more with Mel Robbins as well, who's really just been a rocket ship on the podcast side. But it's all about ROI. And we have a lot more data now than we ever have with the number of subscribers we have with 360L and also using the app. So we're leveraging this data to look at things, not only evaluate the content we already have on the platform, but look at future opportunities based on what customers are gravitating towards.

So we're looking at metrics like engagement, of course, and the breadth of content consumers actually consume, but also cost per listener or cost per listening hour, and we can make better content decisions as a result on what to keep on the platform. But in terms of additions or new areas, like once we see trends in terms of the data, we can invest in other additional like extra channels like we have, whether that's -- we have really strong listening to the message, so create another version of the message or we see something on Pandora, where consumers are increasingly searching for the sleep channel or music for dogs.

We can bring those things over to SiriusXM. But any decision we make is not just going to be about the data, right? It's about -- like we talked about overall brand investments, awareness and really the optionality, which is, again, circling back to sports. So I was on a plane last night. SiriusXM is playing the Bills game. And it's off and on, on DIRECTV, but I know I can go to SiriusXM to listen to the Bills game. So it's the idea that it's there. I may not be listening to it all the time, but the optionality of being able to listen to it when I need to is really important to the value proposition.

I have to ask about Howard. He's made some news earlier this morning. Perhaps you could just give us an update on the latest with Howard's contract, which is up at the end of this year.

He certainly had fun with the press recently, and he actually attracts quite a bit of it. So yes, I mean, look, we are -- as we've said consistently over the years, Howard is core to our platform, and we want to continue working with Howard. So it's really about making sure that the agreement not only works for Howard, but works for SiriusXM as well.

And maybe just to clarify, Howard mentioned he was happy on SiriusXM. It doesn't sound like a contract has been signed quite just yet.

So typically, if you followed these things in the past, usually, any announcement typically comes later in the year. So that seems to be probably more the right timing.

Fair enough. Maybe just a broader question on Howard, which I have with investors more often around marquee content, which is -- how do you think about post these artists either leaving the platform or retiring in general, where their content stays? And Howard has been at SiriusXM, I think, for over 2 decades. At this point, he has back catalog, the thoughts around owning that, keeping that or the risk of it potentially ending up on a separate platform.

You do see most content even on audio more broadly distributed, right, that -- there aren't as many examples of purely exclusive content like we've had with Howard in the past. And so I'm hopeful that we'll get to the right place with Howard, of course. I mean the listeners that are true passionate Howard fans, of course, over the years as they've come in, they've continued to expand what they listen to, like most other subscribers, they're listening to a broad set of content.

So I mean, obviously, these are going to be considerations as we approach any new agreement. But I'm confident we'll get to the right place, and that may mean different aspects of the library or live content going forward. Just those kinds of considerations we would take into account no matter what the talent or the agreement would be. So we want to make sure we're doing the best by our subscribers, talent and the business overall.

Maybe pivoting over to the advertising strategy. So over the last couple of years, SiriusXM has pulled together some of the strongest collection of ad assets in audio. You've had Pandora, SiriusXM Media, which sells advertising for third parties and then Play, which will continue to grow. Can you maybe just take us back over the last couple of years, the strategy behind bringing these assets together. And then as you look ahead, the ability to improve monetization in audio advertising and then your position as a marketplace for audio.

Yes. We're really pleased with the portfolio we put together, and we made a bet early on in podcasting, and it's really paid off. I think the breadth of what we have to offer across SiriusXM broadcast now, including Play, Pandora and other music streaming and podcasting is -- really lets us capitalize on all the assets we have, whether it's the Salesforce and SiriusXM Media, programmatic capabilities or ad tech.

And we continue to bring these capabilities to other third parties. So we've done that with podcasting very successfully over the last few years. We brought the industry-leading monetization we put in place on the music streaming side to podcasting and continue to help creators build their businesses accordingly. And I think we have more opportunities to do that with additional third parties going forward, whether it's on the podcasting side or with other audio platforms as well.

Where do you think audio is in terms of its hierarchy within the broader ad market? And I bring this up, it seems like over the last 5 years, audio was, at one point, experimental with podcasting really starting to take hold. It feels like that's matured a little bit. What are you hearing from your ad partners in terms of their commitment or their desire to increase their exposure from a top-down perspective on audio as a...

Audio has been undermonetized forever, right? And we're still in that situation despite all the capabilities we brought. But I think the real unlock in terms of better monetizing audio is about not only for us selling better across our platforms, and making it easier to buy that way, but also better targeting and measurement ultimately is what it's going to come down to in terms of driving better CPM. So that means making sure that we have clean room integrations, and we're leveraging MMM. And so we have to build out more of these capabilities more broadly with additional partnerships to take advantage of really unlocking that under monetization. And we're making good progress there. And we have a lot of -- we keep reinventing this business. It's amazing.

So one of the things we brought to market more recently on the podcasting side is Creator Connect. So being able to offer to marketers the chance to align with the talent across their channels. So whether it's audio, video, social or live events or experiential. And we're doing that really well with Alex Cooper. We're also unlocking a lot of opportunities with Trevor Noah as we launch that. So I think you'll see us doing more of those and being really creative in how we bring these assets to market.

Podcasting has been another big component of the ad revenue for SiriusXM. I think it's grown 50% year-over-year despite some weakness locally in the ad market this year elsewhere. What continues to drive the podcasting business? And how much more room do you see to invest in the space?

I think there's a lot of tailwinds still in podcasting. I mean just the listener and viewership keeps growing. We are monetizing in video very well. I think you see more and more video platforms wanting to offer podcast. It's become the new TV. And we are going to be investing right alongside that in terms of being able to unlock that monetization for creators. So it's things -- it's products like Creator Connect that allow us to take advantage of that. And I think we have, I think, half of the top 20 podcasts and we're the #1 ad rep firm for podcasting. And I think there's more opportunities to bring creators into our network because we're offering them the ability to build their monetization and build their businesses.

I want to spend a minute or 2 on the financial guide and as we look into the back half of the year, I think you reiterated your financial guidance. So I won't ask you that question. But maybe as you think about trends going into 2H, whether that's on the self-pay net ad line or even advertising, different trends that you're seeing play out, upside, downside risks that you're watching. If things were to outperform or underperform relative to your expectations, why would that be the case?

Yes. We've talked a little bit about the headwinds coming into the year on self-pay net adds. And we talked earlier in the session about streaming and how we intentionally pulled back on some of the marketing there. And that means we expect to lose about 300,000 streaming subs this year. But for that, we would actually be better on the in-car side of the business, and this would be the second year in a row that our in-car subscriber net adds would outperform the prior year, still negative but getting better. And hopefully, that's a good setup or a good foundation going forward. So that's kind of what we're seeing on the subscriber side of the business.

And on the ad side of the business, there has been some uncertainty. And the third quarter started off a little soft, but really cautiously optimistic is the phrase I'm using in terms of how we're seeing demand build out across categories and even with them -- within them. Our programmatic has been rising as we enter the sort of the second half of the quarter. And hopefully, that's going to continue to extend into the fourth quarter as well.

We continue to make real progress on our cost program. We had started out with a $200 million goal for exiting this year on an annualized run rate, and we're actually going to achieve that in year now, and that's across OpEx and non-satellite CapEx. And on top of the trajectory that we're going to deliver on declining satellite CapEx as well. So I think we're focused on obviously delivering against our guidance and setting up for a really strong '26.

You mentioned CapEx and non-satellite CapEx coming at the low end of your guidance this year. As you look out into '26, '27, the ability to bring non-satellite CapEx down, what would you say is the appropriate rate? Do you feel like you can get to? I know there's an internal focus on making that as efficient as possible?

Yes. I mean we're trying to balance, obviously, being more efficient and making sure that we're focused on the right things. So making disciplined investments that we believe will support, the strengthening of our in-car business and growing our ads business. But also looking to pull back on other investments that haven't been as productive.

So you see that in both the OpEx side and the non-satellite CapEx side. And so there's areas like product and tech where we pulled back on and then across the OpEx side, marketing and overhead and customer service as well. And I think we -- one of the things we've recognized as we've over-delivered on our expectations for this year is that there's more opportunities to be efficient going forward.

I want to touch on capital allocation. But first, a question on Spectrum. So we've seen 2 notable Spectrum deals over the course of the last couple of weeks. SiriusXM potentially has Spectrum coming available that you can either utilize internally for other use cases or potentially even sell. I'm curious how you're looking at the opportunity to monetize that Spectrum perhaps in light of what we've learned over the last couple of years.

There's certainly been a lot more attention on Spectrum lately. And so we have sort of 2 components. We have WCS licenses and C and D blocks, which we acquired late last year. And there's -- we're using that for some emergency services, but there's probably a broader set of opportunities there in the nearer term. Longer term, obviously, it relates to the low band and our ability to free that up. But right now, we have a meaningful number of subscribers and free cash flow coming from that. But there's real optionality as we continue to investigate areas where we can deliver returns for our shareholders based on areas where we have strength. So in-car services, whether that's audio, video, other data services that we think we're well positioned there.

And then lastly, on leverage and capital returns, 3.8x leverage, SiriusXM generates a tremendous amount of free cash flow that will only increase as CapEx comes down. Just curious update on how you're thinking about capital allocation, capital returns over the next year or 2, share buybacks versus increasing the dividend and to the extent there's any M&A that you feel like would be additive, where that is?

And we're well positioned. We want to focus on investments in the business that make sense, and we're disciplined about that. Those have to be focused on strengthening our in-car business on the subscription side or building our ads business, as we've discussed, and finding more efficiencies across the business on the cost structure, leading to our target leverage ratio, which we believe will come into towards the end of next year in the low to mid 3x EBITDA. And then our target free cash flow number that we'll make progress towards in 2027 is $1.5 billion. So the combination of those 2 things, I think, really lets us expand capital returns, whether those be dividends or share repurchases certainly beyond the levels that we have today. And then on top of that, we have optionality around our spectrum assets.

Amazing. We'll have to leave it there. Please join me in thanking Jennifer for attending the conference this year.

[Audio Gap] SiriusXM and we're thrilled to welcome back Jennifer Witz, CEO; and to welcome Scott Greenstein, Chief Content Officer and President of Sirius.

So let's just start with Jennifer, what are your top 3 priorities over the, let's say, next 3 years? And is there a single metric or KPI that would best demonstrate to investors you're successfully executing.

So first of all, thank you for having us. We're really excited to be here and talk about the business and also have Scott here to lean into the content side even more. And I want to start, if it's okay, with -- we had talked on our second quarter earnings call about the possibility of increasing our free cash flow guidance for 2025. So we are raising guidance for this year by $50 million to approximately $1.2 billion of free cash flow. And this ties very much to OBBB and lower cash taxes, but also refinement that we've made to our non-satellite CapEx number.

We've been making progress on our cost program and expect to come in at the lower end of that range we provided on non-satellite CapEx for this year of $450 million to $500 million. So again, increasing free cash flow to approximately $1.2 billion for this year and reiterating our revenue guidance of $8.5 billion approximately and also adjusted EBITDA guidance of approximately $2.6 billion. And feel really good about those numbers.

So going to your next question, so 3 priorities. We remain focused on continuing to lean into our core in-car subscription service as well as building on our ads platform and executing on our cost program across the company. And we think the best single metric to evaluate our performance against those priorities is really free cash flow because it encompasses everything, of course. So we've raised this year's guide to $1.2 billion. We have a target for 2027 as you know, of $1.5 billion in free cash flow. So growing from the $1.2 billion that we expect to be able to deliver this year. That's going to allow us to, at that point, when we should be towards the end of next year, we should be closer to our target leverage range to further expand on our capital returns program.

And then beyond that, we have optionality with our satellite spectrum. Hopefully, we'll come back to that at some point today. But it starts with WCS with the C&D blocks. And then, of course, in the future, we have the low band, which we have opportunities to potentially repurpose longer term. So it's really the combination of the operational improvements leading to growth in free cash flow, which allows us to expand our capital returns as well as optionality for spectrum that we believe drives future shareholder value.

There was a lot there. But thank you for that. I'm going to thinking now like more than a decade ago when Mel was -- Mel Karmazin was in your seat, this was the place where he always gave his annual guidance update. So thank you. And it usually was up and not down. So that's great.

Scott, how does the content road map help drive those business goals? And is there a single piece of content that most directly moves any of your key KPIs?

Sure. So the content is the engine and the linchpin of most of what we do in the sense the content drives subscriber interest and then hopefully, subscriber, subscriber retention, it grows an audience for our ad sales group. As far as a single piece of content, it's more like lately, we've been blessed with a lot of data and information. So we've seen how our listening in our audience breaks down into roughly 10 groups of segments or clusters, however you want to see it.

And inside any one of those, there is one piece of content that is likely the driver of that. And so we're aware of that. And again, everything is looked at through a lens of cost analysis and benefit, and everything that goes with it. So it's a question of figuring out how important that piece is to keep. Is there a backup? And is there something out there better?

And then, Jennifer, like how do you drive sustained growth moving forward? I mean that's kind of been the key question for the last few years. And what will be the biggest growth driver over the next few years?

It has a lot to do with what Scott just highlighted, how do we get the right content in front of the right audience. And like many media companies are struggling with this. It's a little bit of a unique problem for us given our primary engagement mechanism is through the car. But we have this great in-car distribution really unmatched. That's where 80% of listening among those that are 35% and up is to radio, right, whether it's AM/FM or SiriusXM, and we have opportunities to expand there with new pricing and packaging. But the fact that we have this great in-car distribution, we have a broader set of prices and packages in place now for the first time. And we have this great content offering really, the next unlock is making sure that we can get the right content in front of the right customer.

And look, we haven't made enough progress here. I've said in these conferences before that we're working on it. We have been working on it. We have some unique challenges. We've built out a lot of technology to support it and we're making slow and steady progress, and I expect to have more to talk about here, but that's the big unlock is getting the right content in front of the right customer. It supports improved demand. It supports better retention, and it supports rate maximization, right? So it really is core to overall revenue growth and putting us on the right trajectory there.

I just want to amplify a little on what Jennifer said. Most content companies virtually all content companies go through the exercise of does this content really work? How happy are they, the focus group, we've all heard about the top 2 boxes, all of that. We've had -- you can pick any point in time, but let's call it the last 5 years. The satisfaction level, and we've tested it internally multiple services, there's no longer any debate. We have a highly, highly satisfied group of subscribers that love our content.

And then as you break down into those segments, there's certain pieces of content they absolutely love and would leave without it. So we know, on one hand, we've already solved one problem. We have content that a mass amount of people, roughly 30 million people subscribers know they like this. So as Jennifer mentioned, when the technology gets to a point where we can find all the look-alikes, that might like the same content. It's highly likely some portion of them will want to subscribe because we've already tested it with millions who are not only liking it, they're paying for it.

So let's just dig a little deeper into content, including podcasting. I'll start with podcasting. So Scott, you had a great New York Times article recently. And the quote from that was that SiriusXM has quietly become a dominant player in podcasting. And you do have -- you do have more than top 20 podcasts than any other network. And a major key to that success has been signing top talent. But on the other hand, you've also been focused on cost-cutting over the past few years while podcasting has been an area of investment, particularly for top talent. So like balancing that, how are you thinking about renewing or maintaining some of these contracts in podcasting, which typically run 3 years?

Yes. And just for the record, it's 4 of the top 10 and the top 20. So it's all good there. But the podcasting part of our business is much more data-driven and analytical in many ways, especially as you get to large podcasts. They already have a built-in audience. You can roughly tell through our ad sales group and their data, what potential revenue streams are. And then once we have them, we're actually in it and we know exactly what we're doing on that. So the ability to decide whether to sign something, there's often enough data out there like we had for Unwell and Call Her Daddy. And then there are others we renew that we have, and we know exactly what we're doing on that. So it's a lot less of guests and much more science on this. It's almost like a math exercise with that.

Now having said that, that's only part of the game. How do you grow it? How do you get the talent, for instance, Unwell created a 24-hour music channel for us. As part of that, that's doing well, and Conan O'Brien has a top 20 podcasts, but also as a channel with us. So there's things around the edges besides the math that we're looking at and how we can grow with that.

Do you believe that you have all the right pieces to move forward with podcasting -- with your podcast strategy? Or are there areas that you'd like to have a better presence in or a better technological capability?

So from a content point of view, our ability to acquire audio content right now is unparalleled. They understand we know how to grow it, monetize it, treat talent correctly and all that. Video has become a major player in YouTube, obviously, in podcasting. So over time, we have to figure out what we're going to do there. It could be a partnership with somebody that's important in video. It could be growing it. It could be just being selective and all that. But it will all depend on the economics on that.

Okay. Just keep going, but Howard Stern, I don't even have to bring this up, but it's been all over the Internet news lately. And obviously, Howard has been a centerpiece of SiriusXM for 2 decades. His contracts, as everybody knows, is expiring this year. And there's tons of speculation both recently in the press about it. I'm not asking you to publicly negotiate but can you talk about like what are your thoughts on how important the show is to the content on your platform right now?

So Howard, for all these years and right up until now, is as important a content, single piece of content as we've had from the sense of being a lightning rod to get awareness for the service and publicity and all of that. He's the best interviewer out there, period, bar none. And we've always had a series, as all of you know, of renewals. With any talent at that level, you're always going to have an extended period of negotiations. We've been pretty lucky all these years. We'd love them to stay. It certainly has to make sense, but we feel pretty good that we've done this before, and we'll see where it goes.

Yes. I think he's been core to our platform for over 20 years. So I'm confident we'll get to the right place.

And then last one, Scott, on this, but how do you evaluate ROI on talent? Like what are the metrics that you use when you consider renewal or redeploying spend? Like within that you've recently signed a deal with Stephen A. Smith, what made you sign that deal?

Okay. So the first question, we look at both quantitative and qualitative. So we'll look at hours listened, ad revenue, social media and publicity, which is basically in-kind free marketing and other things that go to that. So those metrics will be there when considering a renewal. On the qualitative side, it's really just looking at what do they mean to the service, what do they mean potentially to this segment. What does it mean to have it be part of a spectrum of content that we have that's out there. So Stephen A is a good example.

While being relatively definitive and certainly polarizing, which is good for radio in sports, so we knew what we were getting with Stephen A. We had him on the service for a little while through our ESPN deal and other things. He's emerged as probably the leading voice in sports. But much more importantly, Jennifer and I took a bet on where he was going to end up in his political commentary, and he's become a factor. He can get almost anybody on the air. He's the only person I've ever seen be on Hannity at night and the view in the morning, and he's just uniquely suited where politicians and potential politicians want to be on a show. So we have that.

And with all that, he can be monetized from subscriber value because we think we'll get subscribers, add revenue on his channel and on his show and his political show, and it will be released in podcast and will result in podcast revenue as well. So all those factors went into that.

Yes, I would just add on, we have so much more data, and I know we'll probably talk more about that. And Scott alluded to it earlier, with the volume of 360L trials and self-pay subs and the millions of subscribers who are streaming that we have a lot more analytics to bring to the table, right? We look at metrics for any individual piece of content like cost per listener or cost per listening hour. But as Scott said, we have to supplement that with research because research and other sort of ways to attribute the perceived value or optionality of content. So something like sports, you may not be listening every day. But the fact that you get into the car, you love the NFL and your team is playing and you know you can find it on SiriusXM has a lot of value for us. So there is value beyond the analytics, but having all this data has just been a game changer for us.

And it's definitely the quantitative data, but also in our passion studies, what is most important to you, what would you leave the service for. It becomes pretty clear that while in certain listening data, some sports maybe, as Jennifer mentioned, may not register and yet it could be #1 for why they have to service.

Jennifer, how are you thinking about CRB Web 6 outcomes and the potential for 2026 to 2030 rate changes?

Yes. We just wrapped the case and we would expect to see a decision from the CRB by the end of the year, so by December. And I think we're hoping for a fair and logical resolution to this based on the value that we bring to artists, whether it's extending their reach, bringing that exposure, allowing them to connect with fans directly, especially on SiriusXM, but really something that a structure that represents both the value that we bring to artists and really supports the sustainability of our business model.

And then Scott, for sports content, can you talk about how you think about broad-league rights versus shoulder programming with team-centric feeds or others kinds of sports-related content?

So again, the benefit of data in hindsight, when you look at what's broken through on live TV, sports is definitely -- live sports is definitely the anchor on a lot of this. And the idea that that's all been fragmented in video. The NFL has probably 8 or 10 deals out there and other leagues have all of that. We have all the play-by-play rights, under one roof. So including college and automobile racing, tennis, golf and other things.

So there is some comfort in knowing our subscribers and our potential subscribers know we have those rights. So that's the game stuff. We also try, whether it's music or sports to build a sense of live community where you can interact with others on this. So the 24-hour channels are 2 things. One, they allow 365 days a year, 24/7 you to feel part of your favorite sport and interact with it. And they have the imprimatur of the leagues that they're official channels. And nobody else has that. So those are important to make it a full sort of passion service for any sports fan.

In addition, not to be beholden, we have independent channels like Mad Dog Sports, which now has Christopher Russo, who is accomplished as sports broadcaster as anybody. And now Stephen A. Smith on that channel, Katie Nolan, a young sportscaster who's great. So we have as complete a sports package as you can have. And as Jennifer mentioned earlier, where that fits in the dynamic is some of it comes out in listening data and other comes out in why they subscribe.

Right. Jeff, can you talk about your overall advertising business strategy and also how podcasting plays into that?

Yes. What's key is the breadth of our portfolio, right? So broadcast, music streaming, podcasting and kind of the scale and the precision that we offer to marketers as a result. So audio, we've talked about this for so many years. Audio is undermonetized, right? And the way to improve that based on the vast amount of consumer engagement with audio is with better targeting and measurement. And we have developed a number of partnerships on the MMM side or the clean room side to be able to offer solutions to marketers to provide better targeting and measurement or predictive audiences so there's a lot of opportunities for us to continue to unlock just monetization in general.

On the podcasting side, and Scott referenced this a bit, we have unbelievable monetization. So our second quarter podcast ad revenue was up almost 50%. But we've always had industry-leading monetization in music streaming. We've been at this for 20 years due to ads. And now we're bringing that to podcasting. So we're transitioning. We're bringing a lot of the skills that we have with the sales organization and the tech stack that we have into podcasting. But podcasting is so key to our future strategy because it not only supports the ad platform. But as Scott said, we brought content over to SiriusXM to support our subscriber base too with exclusive content. So it's really core.

How much of future growth depends on advertising?

We have opportunities for growth across both sides of our platform. Obviously, subscription revenue is closer to 80% of our revenue overall. So we're very focused on driving that. And the growth opportunities there really come down to what we've talked about getting the right content in front of the right consumers. So they understand that we have something for them. And that's unlocking a lot of personalized marketing and bringing kind of the technology that we put in place really to accomplish that.

On the ad side of the business, there's a number of opportunities. We have continued to improve monetization, including at SiriusXM, right, which is mostly broadcast inventory but also with our Creator Connect product on the podcasting side, which lets advertisers really buy alongside a creator. So whether they're buying the audio, video or the social feed, they can really align with the creator. So we've continued to reinvent this business in really interesting ways, I think, to bring better monetization on the ad side. So we really have growth opportunities on both sides of the business.

And maybe a little more here and now, but what are you seeing in the advertising marketplace currently?

Yes. I guess I'd say, overall, I'm cautiously optimistic. I think the second quarter started out -- sorry, the third quarter started out a little soft. And the last few weeks have been a bit more solid. You've got categories, again, that are strong like tech and telco and CPG and pharma, but others, like retail where I think there's a little uncertainty going into the sales season. We are the holiday sales season. We are seeing retail accounts starting to step up. So I'm encouraged with that. And we're just seeing broader demand across categories, but also deeper within categories. So again, it's -- I'm cautiously optimistic is, I guess, how I would answer that.

And one other category just to complete it is live events. We've grown a very healthy live event business over the last 20 years. And as you know, probably the first 15 years of those, we wouldn't allow any advertising at those events. And the demand built for them, they're usually the biggest artists in the world playing very small venues, 1,000, 1,200 people or less.

And so now we've started to open that up. And we've done it at Super Bowl fairly regularly in the last 3 or 4 years. And they're now starting to generate real money and the ability to do it is, I wouldn't say unlimited, but the demand from artists for us to do more and more with them is there. So I think the ability to get great live content for the content side meets ad sales for the actual physical event side is an interesting mix going forward.

Where are you taking SXM Media on targeting and measurement? Can you talk about what the road map is there?

Yes. I think -- so we not only have the scale of SXM Media across all of these platforms within our portfolio, we also have a really strong tech stack with AdsWizz. So the goal for us, certainly programmatic is a big piece of the puzzle. And adding more DSPs will help drive growth there. And then on targeting and measurement, there's -- we talked a bit about this on music streaming. So we'd always kind of led the pack there. But now that there has been a lot of changes to data privacy and marketers are looking for different kinds of solutions, we've integrated with clean rooms and MMM and use other solutions to bring better targeting and measurement.

So we're really, we feel like we're in a good position on the music streaming side, there's more to unlock. But podcasting is a bit farther behind. A lot of that's because we're distributing podcasts off-platform to many other distribution platforms, but confident we can get that to parity over time.

And then SiriusXM broadcast. We have an opportunity to just make it easier to buy because right now, it's broadcast inventory, but we can cut it up, make it look more like digital. There'll probably be a manual process to start, but actually let advertisers buy on impressions with targeted audiences. And over time, the targeting will get better with 360L in the market because we can actually deliver authenticated impressions in that environment.

And how do you plan to grow or maybe stabilize Pandora's active users and listening hours? Like what do you think the role is for that company 5 years from now?

Yes, it starts with ad hours. We have seen declines on the listener base side. It's still a massive platform in the U.S. But for instance, on the ad hours side, the trend line is a bit better. A lot of that's because we have a loyal listener base and their engagement keeps increasing. So we actually saw a decline on ad hours of only about 1% in the second quarter. So it's key to our app portfolio. It's key as a consumer listening platform, especially on the music side. And maybe, Scott, you can talk to some of the data we're using and leveraging.

Sure. So Pandora is very valuable. One, the labels, the record labels truly value the promotion on Pandora because they know a lot of people listening to Pandora, that's what they listen to. So you have that. Secondarily, it's provided data to us. So we saw the term sleep continue to pop up on Pandora. And eventually, we realized that people were using it to create a sleep channel and we move that over to Sirius and now that's become an important digital channel for us on Sirius.

Artists like Teddy Swims, we saw a tremendous action on Pandora well before Sirius was playing it or [ the rest ] or anybody was playing it. So that data led us to be the first to really play that on Hits 1 and move that along. So Pandora is there. And as Jennifer said, it's stable in that sense, but it is a valuable tool, and it's very valued by the labels.

Moving on, like a core pillar of your strategy is to deepen engagement with your in-vehicle sub base. But the world is increasingly shifting towards streaming entertainment and there are maybe not unlimited streaming options, but a lot of options. What in-vehicle advantage do you think Sirius has in this world? And how do you adapt that advantage to out-of-vehicle listening?

Yes. It starts with this unmatched presence we have in the car, right, where 80%, again, of the listening for those 35% and up are -- is to radio, right? AM/FM or SiriusXM. And we have a real opportunity there with the content portfolio that we have to get people into lower-priced subscription packages who probably given the rate increases we've done over the years have been priced out of the market, right?

So our -- and we'll talk more about Play, our low cost with ad subscription, but we have a real opportunity to take share from AM/FM with a subscription that's sub-$10, right, with our low-cost with ads, subscription package. And that helps us unlock more opportunity in the car because, frankly, there are still a lot of customers who just love that embedded experience. They just don't want to deal with CarPlay or Android Auto.

That said, we've also improved the app in Carplay and Android Auto, and we have seen increasing engagement through that platform for the SiriusXM app. And we'll continue to make improvements to that experience because there are a lot of consumers there. Those consumers will probably look very similar to our in-car consumers. They're not going to be radically younger, but they're going to appreciate the uniqueness of what we deliver in terms of a live premium content and human-curated bundle. So there's more to tap into there.

And then outside of the car, it's really about our subscribers listening more in more locations and that's been key to our really low churn rate because we have more opportunities to expand engagement even just across the household with more listeners on more devices there.

Okay. We kind of -- you guys touched on this a little bit at the beginning, but let's move on to 360L and how 360L and deeper OEM integrations are improving your trial conversion rates, the churn, your ARPU?

Yes. It's -- I mean, again, this has been a game changer for us. And you've known us for a long time, we've been talking about this for a long time. And we're finally now to the point where we have 50% of our new car trial starts with 360L. We have, I don't know, something like over 10% of our used car trial starts now with 360L and over 5 million of our self-pay subscribers.

So we have a lot of data coming back. But it's really about the advanced personalization that 360L brings and the better consumer experience where we've seen increased engagement across the board. And so it's every metric, better conversion rates. So when we look at 360L versus non-360L, it's always hard to adjust for other variables, but everything we can see is better conversion rates, better churn rates and better ARPU because of that enhanced engagement.

Impressive. So Scott, then also we kind of touched on this before, but does 360L have enough critical mass to meaningfully inform your content decisions, your marketing choices?

Sure. I mean now it's had enough of a mass plus our other data we have that it's very valuable in looking what subscribers are using, what they like with that. The other thing, it's allowed much more content to go in the car. So by virtue of that, that's more cross-promotion, that's more everything. And again, it all stems from can they find the content they want and when they want it and also what they're listening to now may not be what they're listening to in a year or 2. And so that content has to be readily available. And 360L offers that.

The other thing is we've had a number of homegrown channels that have become very big, whether it's the Highway or Yacht Rock or others, and we grow subsidiary channels off of that. So Yacht Rock has Yacht Soul. LL Cool J and his Rock The Bells has 3 channels on our service that can run through 360L and all that. So it's really allowing us to maximize a lot of our content in.

We've seen a lot of increased engagement with those what we call extra channels, at least internally. Digital channels that are offshoots of some of our big brands as well as the ability to do basically what Pandora offers in the car and in the app, which is create a station based on an artist. So that's something we never could have done without 360L in place.

And even the ability to have mashups on the channels, our decades channels are huge. So but people have always wanted to combine '70s and '80s, '80s and '90s. So a lot of the stuff that you would have to do almost by hand are done in extra channels and now those are available in the car. So you can -- especially on long drives, you may like a certain body of work, but you may want it in a different format than you normally do when that's available now.

Jennifer, how do you return to positive self-pay net subscriber growth? And if you can, how much runway remains for Sirius' subscriber growth overall?

So there's really 3 areas of focus there. There is how do we continue to increase the funnel? How do we stabilize conversion rates? And how do we at least lean into our sustained low churn rate or perhaps improve it. I actually think there's opportunities to potentially to improve it.

In terms of the funnel, it's about new acquisition. So we have our very strong in car funnel, high penetration rates. But more recently, we've added EV implementations. We've done a 3-year dealer-driven subscription programs. We have better used car data to identify the owners at point of purchase. And we have podcast plus. And all these things have helped us reach a broader set of customers and bring them into the service. So we've had success there building the funnel, and we have opportunities beyond that, probably more like 12 months out or beyond that on distribution, right?

And then we have to do some work on identity. This is a very noninteresting thing. But we -- our whole data structure is based on the car, and we need to flip that to people, consumers, and that's going to give us the opportunity really to do hard bundles, to align with other distribution partners to increase our distribution beyond what we have today. So that's funnel.

And then in terms of improving conversion, it has a lot to do with right content in front of the right customers, right? Like Scott and I have been talking about, that's the big unlock for us. We think we have the content we have. We just need to make sure we have marketing in a place where the capabilities allow us to do that off-platform and with our own channels.

And then on churn, it's about increasing engagement always. And we have more data so we can -- we want to make sure that our subscribers are experiencing more of our content on more devices across more members of our households. And those are the 3 things that I think are really going to help propel us and drive growth ultimately in our subscriber base.

But is there a content strategy that can reduce churn like...

The content strategy. Yes. I mean, again, what I mentioned before, I'm extremely bullish on to have close to 30 million subscribers knowing what they like over a long period of time to find, as Jennifer said, get the right content in front of the right people. If you find any portion of local likes out in the world there, it's likely they're going to like the content similar to what we've already proven they like. And these are mass scale clusters and segments. So there's no reason not to believe that. It's just a question of doing that.

And then from the churn point of view, not everybody listens to the same 5 things they started with. So over time, it would be great that everybody would know what we have it may not seem appealing or whatever in the beginning. But as time goes on, they may want to try other things, and it's there for them. So it's an awareness issue, not a content issue.

I think one good example of this is last fall, we pushed down a lot of our news talk and sports content to a broader set of subscribers in advance of doing a rate increase like 6 months later. And we saw very little churn impact as a result because -- and that was a rate increase that was on average, I think, $1.50 or something across all of our full-price packages. So it's that idea of giving customers more value, they had access to more content and we couldn't even tell many of them because we could tell some of them because we have marketing channels, but some of them may never have received the marketing. They just found it on their own. So it's a great example, I think, of what Scott is saying, where if we can make sure customers are seeing or experiencing more of the content we have, they're going to be stickier.

Any initial thoughts on how things are shaping up for the 2026 self-pay subscriber growth?

It's a little early. We'll probably provide better context on that early next year. But again, we've seen real improvement in the funnel, like I talked about with some of these new programs. And we actually, this year, expect our in-car net adds to be better than last year. And last year, they were better than the prior year. So the trajectory on in-car adds has been solid.

On the streaming side, as you know, we've gone through this rationalization on where we were spending to get streaming trialers. And we're now to a point where this year, we'll probably lose around 300,000 streaming net adds. I mentioned that on the last call. So that, I mean, that's not going to happen again next year, right? We've rationalized that, so we should be in a better trajectory. So those are a couple of data points that might help give you some context.

Can you walk us through the strategic intent for your new ad-supported tier? And how will that guard against cannibalization of full-price subs?

Yes. I'm really excited about this. We launched it in the middle of July. It's fewer channels and ads. And it gives us a price point below $10. I don't see risk of cannibalization, but of course, we're going to be really targeted at how we use it in both demand and retention, and we'll watch those metrics to make sure that we're not seeing any downgrades. I think the retention opportunity, which is where you might see the most cannibalization if somebody is calling to cancel is really for us to reduce our reliance on these discounted promotional plans, right, that customers are getting the full service for a much lower price.

Now we can put them on something like low cost of ads or our music-only subscription. And we've got our music-only subscription at $9.99 in the market for 1.5 years or so, and we have not seen any evidence of downgrades to that. So it's a real opportunity for us on both demand and retention. And the thing I would say is that, that's how we unlock and take more share from AM/FM, right? Because we just at a $25 price point, we're probably not going to get somebody to go from free to $25, but it's something less than $10, it looks much more attractive.

And any price point that gets people in initially to try our content will feel pretty good that they'll at least have a shot at wanting to subscribe to one of our plans.

And we can upsell from there.

Exactly.

And then just how do you think about the trade-off between like higher pricing, driving ARPU versus maintaining low churn. It's always a balance.

Yes. And I think the example of what we did last fall, leading into a rate increase this early spring is a model we're going to use going forward. And we've talked about every other year rate increases, we may be able to do that more frequently based on the experience that we just saw but we have to deliver value in advance of that. And it has so much to do with right content in front of the right customer, right? That drives value, but also just making sure that more members of the household are listening because essentially, our service is a family plan, right? You have the in-car subscription and streaming, and we need to take advantage of that more.

No, we see it across other companies and industries like absolutely. So at the very beginning, you touched on spectrum, so let's go there. Can you update us, first of all, on the time line to consolidate SiriusXM platforms?

Yes. I might start in advance of that just with WCS. We acquired the licenses for the C&D blocks late last year. We're currently using that for some emergency services. But I do think we have more monetization opportunities there and we're actively in discussions about what those could look like. So that's two 5 megahertz bands. Then the low band, so another is half of when we sat here many years ago, right, is just we talked about possibly being able to free at the low band in the middle of this decade. Well, we're here now but we really. I don't think we're in the right position to do that because we still have several million subscribers on the low band. And so what's changed? Well, the churn rate was materially lower. So it's a good thing. We still have a long runway on sort of cash generated by those subscribers, and we don't want to disrupt their experience. So they're slowly moving to high band.

And I think what you're getting at transitioning to the other platform, so I don't know, it's somewhere between a few years and several years that we'll be able to free that up. And in the meantime, there are a lot more opportunities as to how to be able to use the spectrum that are emerging now.

So exactly, what do you expect to do with the extra spectrum that you'll eventually have?

I mean there's, of course, so we're going to know a lot about Play and what low cost with ads opportunity we have. And we could expand, for instance, the opportunity there by offering it in more vehicles. We also have wideband vehicles coming to market, right? So we had started several years ago building modules that cover both bands. So we can do more services for our subscribers or for trialers today, either audio or video or other adjacent services or we can look to pursue some form of relicensing to be able to get additional capabilities and offer different types of services. So that may, in fact, be where the bigger opportunity is ultimately.

You both mentioned video as a possibility. Do you need that spectrum before you can do that? Like how do you...

Yes. I don't think there's -- we used to have a small video service on Sirius for backseat. I don't see it as being feasible through 360L, through IP in the car or through our current broadcast spectrum, but you could free up the low band and do more video there.

The video that I referenced is really purely to do with podcasting. Off-platform with a video, so it's YouTube friendly.

Okay. And then Jennifer with SXM10 having commenced service in late August and SXM9 beginning service earlier this year. Can you help us think through the step down in CapEx, you mentioned you'll be at the low end this year. But what about like over the next several years? And...

Yes. On satellite CapEx, in terms of the next 10 years or so, we're actually -- this year is sort of at a peak, right? We'll be and last year was bigger. But this year, is it about $200 million of satellite CapEx. Next year is $115 million. I think these numbers are all on the website. We have $50 million in 2017, and we expect it to be close to 0 in '28. And that's because we're launching SXM11 next year and 12 in '27. And then we're going to be done for probably a decade. So you can imagine that being and then we have to decide, are we going to launch more satellites. We have to make those decisions.

You talked a little bit about risk mitigation, I think. So we have satellite and IP in a lot of vehicles now. It's not the majority of the vehicles on the road, so we would have to balance that. But it does provide us with an opportunity to manage risk by having both of those delivery mechanisms. It also provides a lot more opportunities for features like we've talked about with 360L and things like better targeting in the ads in both low cost with ads and just generally in our subscription service. So that's on the satellite side.

Non-satellite CapEx, we talked about being at the low end of the range of $450 million to $500 million this year, and we expect that to be closer to $400 million next year. We're completing a pretty massive repeater upgrade in the next kind of 12 months or so. So it's a $100 million project. That won't be done for another 10 years. So we get beyond that. And we just continue to look for opportunities across the cost structure, including on the non-satellite CapEx side. So I think we have a solid trajectory there to support free cash flow growth.

I'm going to squeeze in one more question. Can you talk about your capital allocation strategy? You talked a little bit about CapEx, but your plans to delever and how you think about share buybacks versus increased dividends as we look to the future?

Right now, we're -- our priorities haven't changed. We're focused on getting to our target leverage range, which we expect to do by the end of next year. And that coincides with our path to growth and free cash flow toward our target for 2027 of $1.5 billion. So that gives us a lot more opportunity to expand capital returns beyond the levels that we're at today for the dividend or share repurchases. And I think in terms of the mix, we have to really see. There's so many factors that go into that. And largely, that won't change until we move towards the end of next year. And so I think we'll have more to share on what's appropriate at that time.

Right. I mean, acquisitions have not been like a big part of your...

We've done some small ones over the last few years, mostly on the podcasting side, and we'll continue to look, but we're really focused on delevering. We don't see anything that make strategic sense that would change our perspective on that. But of course, we're opportunistic to the extent something becomes available where we think it makes sense for our portfolio.

And anything on the content side that we should be thinking about? Any last thoughts before leaving...

I mean, content is as it always, it's a moving target. Certain things are stable like live sports rights. And then other things, whether it's Call Your Daddy or Smartless on the podcast side emerge. The other thing just to mention on that is the podcasters are so incentivized to grow their audience because with or without us, they want that audience for their ad sales. And as we look at the data and find those segments, we have we're going to start to look to lean more on our content partners and talent to use their social media as part of the marketing thing. So one of the factors down the road will be when we look at someone is, yes, their audio and content talent first, but what other social media and other marketing benefits that they bring to the equation.

There could always be an exclusive content play, and we have a lot more data on what's working today. And there may be an opportunity to do something new there.

Yes. The way, I mean, Howard went behind the paywall from free radio. Maybe one day, there will be a podcaster that has a large enough passionate enough audience that makes sense to go behind the paywall.

Amazing. Thank you both so much.

Thank you.

Greetings. Welcome to the SiriusXM Second Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Hooper Stevens, Senior Vice President, Investor Relations and Finance. Thank you, Hooper. You may now begin.

Thank you, and good morning, everyone. Welcome to SiriusXM'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 Thorsen, 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 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. For more information about these risks and uncertainties, please view SiriusXM'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.

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.

Beginning with content, it's 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. 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'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 32,000 over the same quarter last year. 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 3-year subscription program, which earlier this month kicked off with Audi, our eighth 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. But 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. 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. 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. 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 a 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.

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 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 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, while overall advertising was down approximately 2% from Q2 2024, podcast ad 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 podcast, 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.

This quarter, we also hosted a variety of live events, including John Mayer joining SmartLess Live in Los Angeles, which provide both subscriber exclusives and opportunities for deeper brand integrations.

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

Thank you, Jennifer, and good morning, everyone. In the second quarter, we executed a 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. 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 and execution across our business.

In the quarter, sales and marketing expense declined 20% year-over-year benefiting from a more efficient campaign mix and the timing of planned brand and in-car initiatives. That said, we do expect some reinvestment in the second half as we reaccelerate 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 noncash write-off of approximately $100 million in capitalized software assets that are no longer aligned with our streamlined road map.

We also reduced our product and tech workforce by 20% among contractors and 10% among full-time employees. 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 in 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 is essentially flat at $15.22, improving our recent trends as the impact of the March rate increase continued to roll through. Segment gross profit was $966 million, with a gross margin of 60%. The 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 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, nonpay and vehicle-related deactivations.

In 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 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%. 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 3.8x. We returned approximately $137 million to shareholders in the quarter via $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 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.

[Operator Instructions] And the first question today comes from the line of Jessica Reif Ehrlich with Bank of America.

Quickly a question on maybe what Tom just -- two questions, about what Tom just mentioned, on the guidance for free cash flow, you said you may -- you'll revisit maybe because of tax and CapEx, but it was a huge beat in the second quarter. I'm just wondering why not the flow through for the full year? And then a question for Scott. You've been 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 seemed like it would be more like advertising supported. So any commentary on that would be great.

So Jessica, it's Tom. So to address the first one as it relates to free cash flow. Yes, we did have a sizable beat on free cash flow year-over-year in the quarter. Some of it was timing. And as you look at the first quarter, we are a little bit behind as far as where we are 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 has been working on the cost structure and continuing to focus on CapEx and the optimization of CapEx. And honestly, the new Tax Act, we're 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 '25 and '26, the benefit. And so we're just working through that. We should have an update on that in this fall time frame.

Great. And 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's SmartLess, Even Mel Robbins and Rotten Mango, those are younger than our core. And even Stephen 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, but yet ripe for subscription. And while we're weighting that out, we're going to continue to monetize heavily younger content in the podcast market.

Yes, I'd just add on to that, Jessica. We just heard this week that with Edison's new Q2 report, we're going to be the #1 podcast network in monthly listener reach for audiences 18 and up. So as you highlighted, we've got a much broader audience with our podcast content, and that does give us the opportunity that Scott outlined to perhaps bring more of those younger listeners into SiriusXM. But as you know, we're being very disciplined in focusing on our core audience there.

Our next questions come from the line of Barton Crockett with Rosenblat Securities.

I wanted to maybe lean in a little bit more on what you're doing with podcasting in 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 the mix. It was up 50%, just to get -- trying to get a sense of when that's going to be large enough to really move the needle on the overall kind of ad line?

And then secondarily, I know that there's some development, some efforts on your side and also some others in the sector on more fulsomely developing the digital kind of programmatic ad tech capabilities. And 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?

Yes. Thanks, Barton. We are really pleased with our broadcast offering. It's -- we were up nearly 50% in the quarter. We continue to see strong growth going forward there. In terms of the mix, so 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. But 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. 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.

So I think on the programmatic side or maybe just speak a little bit more broadly about the advertising revenue outside of podcasting on 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. And 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.

And we've talked about this before, audio is significantly undermonetized 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 Innovid to improve our integration with MMM 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.

Our next question comes from the line of Steven Cahall with Wells Fargo.

So 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. So can you just update us a little bit on that strategy and like what kind of customer benefits or churn benefits you're seeing as you step into these new simplified plans. And what does it mean for ARPU 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?

Sure. Thanks, Steven. 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 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. And that is going to be sort of an operating model for the future.

In our in-car modular pricing and packaging with the $9.99 price point you mentioned, we're rolling this out slowly to new customers only in trial first with alongside shorter-term promos, which means they roll to the full price packages more quickly. So we have a number of different price points there, as you alluded to, with $9.99 being kind of the entry-level price point all the way up to $25. The vast majority of customers coming through those marketing campaigns are choosing the $25 package. And the real benefit of this is that we see stronger retention ultimately on these full priced packages. So we not only get off of these longer-term discounts we've been using in acquisitions 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.

And I'll 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'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 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. And then I'll come back to net adds after Wayne comments on Play.

Yes. And thanks. As Jennifer said, I mean, this is priced play, which we just launched about 2 weeks ago is in the U.S. and Canada. It's priced below our lowest music-only offering, which you're 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 ARPU that we have through a balanced mix of subscription and, of course, advertising revenue and very similar to what we've seen become quite standard with SVODs. So we're still testing price points as we're 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 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've 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.

Yes. So back to net adds and the trend line. I do expect to see some change in seasonality this year relative to years past. And some of that has to do with the year-over-year comps and the fact that we had a relatively strong quarter in the fourth quarter last year on streaming. So 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. So we continue to watch that. But on the streaming side, we would expect about a reduction of 300,000 net adds this year on streaming subs. So 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 onetime 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. And we continue to see a very impressively low churn and that has a lot to do with increased engagement, and I think we have more to come there.

The next question is from the line of David Joyce with Seaport Research Partners.

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?

And then secondly, a little bit more detail, please, on the strength in podcasting ad revenue. 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 a volume -- the trend of adding more content or monetizing more of that content, just pricing and volume kind of concept. If you could provide some more color there.

David, it's Tom. 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 in this year. So that skewed the expense on the G&A side. And also, just as background, last year, we had an insurance recovery of legal expenses, which was $10 million benefit last year. So that closes the broader differential as it relates to G&A. And overall, SG&A is slightly down because of the reduction we've done in sales and marketing in the quarter.

Yes. And on podcasting, it's really all of the above. 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're helping monetize across audio, video and social with our Creator Connect products. And we've seen both improvements in pricing. We're taking advantage of the strong demand by including more inventory units in the podcast in certain cases, and I think advertisers generally want to be associated with this great talent. So there's 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. And 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.

Our next question is from the line of Kutgun Maral with Evercore ISI.

Maybe following up on Steve 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 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 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. And longer term, maybe thinking about the new acquisition initiatives, can you maybe 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?

Sure. So I'd say 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, strong performance across cancel demand, nonpay, vehicle related and came in sort of slightly better, absent the rounding on the churn rate. So we feel really good about that, especially again, with the rate increase having gone in place in March.

And then on the acquisition side, it had a lot to do with the new programs we've been putting in place over the last, say, 12 to 15 months. And these include the 3-year OEM programs where dealers are ordering 3 years of SiriusXM with their vehicle orders, and 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. So I think we'll continue to see strong performance there. 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 our podcast plus, and we have, of course, the EV launches that we've put in place.

So I would expect some of those to continue to contribute and perhaps on a larger level. And of course, we've got a number of initiatives in place as Wayne discussed, with Play and the rollout of our broader pricing and packaging structure, we're selectively adding content like Stephen A. We are continuing our 360L rollouts and adding features there. We're improving our marketing capabilities. And all of these things are going to take time. But I'm pleased with the execution we have on these various initiatives. We've kind of talked about these acquisition programs as 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.

And Kutgun, I'd only add that this is the fifth quarter that we've beaten year-over-year self-pay net adds, which we've got a good trend. And we -- as Jennifer outlined, a lot of these initiatives are starting to click.

The next question comes from the line of Cameron Perrone with Morgan Stanley.

A couple if I can. First, for Jennifer, 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 envision leveraging AI, GenAI, whatever you want -- however you want to term it by going forward, both in advertising, but also more broadly across the business going forward. And then one for Tom 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?

Yes. Thanks, Cameron. 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 SiriusXM, and we're really pleased with the results we're seeing there. We continue to see strong business metrics, good and solid customer response and lower cost, of course. And we are containing a significant amount of our chat messages through Sierra, and we're starting to ramp up the capabilities in voice as well, and there's 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're just getting started there.

On the agreement with narrative. So this is really about using synthetic voices, so -- but their actual sorry, it's actually using real talent voices and approved by the talent to be able to create versioning, and we'll be working closely with our ad maker tool with Studio Resonate to be able to deliver this. And it just provides an opportunity for advertisers to scale their campaigns much more significantly and allows us to work with a broader set of advertisers. And then, Wayne, do you want to touch on some other areas for AI opportunities?

Yes, for sure. I mean 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 and adding to our capabilities in Symantec and relational search as an example, 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 that are, of course, being driven by what we're able to do with AI, everything from being able to use some of these capabilities of Salesforce to some of the targeting capabilities that are making our rollout of play so carefully targeted to avoid trade downs. We have other things that we hope to announce soon in things like tagging and improving our search abilities for our broader corpus across all of our content.

And Cameron, just to close down, I mean I would step back for a second and say, we're very happy as we outlined in the release of where we are on our cost savings initiatives. We're focused on, 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 generating our our free cash flow. We continue to be focused in that area. As far as the capital allocation, we continually hold to our previous format or premises. We're reinvesting in the business, which we've done in the instances of Stephen A. Smith, and some of the other things that we've invested more deeply, and we're maintaining our dividend at the current level right now at 4.5% yield approximately. We're delevering 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 way it's structured, and we're 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.

Our next and final question is from the line of Stephen Laszczyk with Goldman Sachs.

Maybe 1 on the ad-supported subscription plan. Jennifer, Wayne. I'm curious, you called out the $100 million customer opportunity over the long term. Just curious if you can talk a little bit more about the pace of that rollout? And what's kind of governing 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?

And then second, on conversion trends, Jennifer, just to be curious, if you could update us on the conversion trends you're seeing across the base, new versus used, 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?

I appreciate the question. And so the way I would think about the rollout for -- 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 perspective.

So we've selected an initial group and launched that in about 2 weeks ago. And so right now, what we're going to do is we're going to continue to build the number of cohorts we're targeting with this. And then also, as we select those cohorts, as you know, every day, those volumes fill then in those cohorts. So we're going to continue to build the number of people who this is available to. And then as we're going forward, in addition to that, inside the actual package itself, we're adding more ad-supported channels. So that as we're doing that, then we also add ad replacement and then that improves overall in addition to the things that Jennifer said in the prepared remarks, the advertising and monetization opportunities.

So as we get more subscribers, we also get more ad slots and then those ad slots, of course, are -- 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 more as we move forward. So -- and then as we're moving through in Canada, we're -- here, we're using this for initial trials in Canada, we're trying -- we're launching it with saves, and we're going to thoughtfully extend where we're testing and launching through saves, winbacks, not just trialers.

Yes. So I think we'll get a lot more information over the next -- through the rest of the year, and we would expect this to contribute more in 2026 to results. 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 has a lot to do with 360L penetration and our improved results there. Of course, the new car side, we're 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. So the conversion rates on new, again, the rate of decline is slowing a bit.

We're 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. But what I would just note is that we've brought a lot of these other acquisition programs to market, adjusting how -- adjusting our availability and distribution really based on our 2 core strengths, our in-car availability and our content offering.

So you see that come through in the 3-year programs with OEMs, the enhanced data that we have with Lexis Nexus, our EV launches. And this all takes advantage of what we have in terms of unmatched distribution in the car. But then on the content side, we've taken advantage of the great podcast portfolio we have. We've launched Podcast Plus, a subscription available through Apple and everywhere else through 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 rates. So 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.

Thank you very much, everybody, for your participation in today's call.