Sirius XM Holdings Inc at JPMorgan Global Technology, Media & Communications Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : So the new management team at Sirius has been in place since January 21, when Jennifer took over as CEO following your appointment in late 2020. What have been the team's priority since that time? And as you look out over the next 12 to 24 months, what are you most excited about?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : Great. So why don't we start off with auto sales in the trial funnel. April saw $14.3 million, improved modestly versus March. However, inventories are still very lean just 23 days supply, given ongoing production and supply chain challenges. But on the call, you noted expectations for the substantial majority of self-pay subscriber growth to occur in the second half of the year. What have you been hearing from OEMs and your dealership partners? And what are the team's expectations for new auto sales?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : And IHS is, I think, looking for $15.2 million in terms of SAR for the year. What is the team looking for in terms of the guide?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : Okay. Any color on how things are progressing perhaps this far in 2Q?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : Awesome. So a lot of concern about the macro environment that you touched on the health of the consumer due to inflation, among other things, but churn has remained quite low at SIRI over the last few years, even before the pandemic. But SIRI is a premium product. What's contributed to those strong churn trends over the last several years and maybe into the pandemic?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : And Jennifer indicated that you would expect trying to pick up at some point through the course of the year. Are you beginning to see any signs of that, consumers tightening their belt or is that just more predicated on some normalization we would perhaps call it?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : So digital net adds partially offset the self-pay net losses on the satellite side in the first quarter. So while digital starts will pick up from here, likely leading to improved subscriber growth, satellite net adds, I think the team talked about on the call are expected to constitute the majority of growth going forward, as the new auto sales and used auto sales trial funnel rebounds, can you help us think about the strategic focus to grow the digital-only subscriber base? And you touched on the addition of Joe joining, but as he helped accelerate efforts there? Or is it still kind of ramping up?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : Okay. And then as we're thinking about the digital subscriber base versus the satellite sub, how should we think about the economics? What are the different kind of puts and takes of those different sub code?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : Can you give us any color perhaps on the consumption engagement trends across that digital-only subs?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : And how should we -- how should investors measure success in the digital-only initiative? How big could the base be over time?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : Okay. Great. So legacy SIRI ARPU grew 8.6% in the first quarter, nice acceleration. How should we think about the level of growth from here? Should we expect it to moderate somewhat through the rest of the year? Is there any obviously, outside of the late 2021 increase? Are there other underlying factors or trends within the ARPU that we should be thinking about?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : That's a good segue to the advertising business at SIRI. A lot of questions on the visibility of advertising in the market due to the macro uncertainty. What is the tone of conversations with national advertisers? What are you seeing at a category level and obviously, retail sales data and the data out from last week with the major retailers suggest some softening of consumer spending and demand? What are you seeing?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : And so on the Pandora side, obviously, continue to have some -- face some headwinds of declining MAUs, but RPM growth remains strong, probably touching upon a lot of the stuff you just hit on, but -- so what is -- can you break down some of the drivers of the strong RPM growth? I mean, obviously, strong demand that you just touched on, but how long can perhaps the lower volumes offset the higher -- how long can the rates offset the lower volume as you think about the on-platform business at Pandora? And I mean, how can you perhaps enhance that value prop?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : So you touched on podcasting and some stuff we had some news out this morning and I want to come back to it a bit. But off-platform at Pandora grew 43%. I mean can you unpack some of the strength there? I mean just from the podcasting, the rep deals, ad tech, you're winning some share. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 23, 2022 / 3:20PM, SIRI.OQ - Sirius XM Holdings Inc at JPMorgan Global Technology, Media & Communications Conference I mean, maybe take us through some of the levers there. What does the podcasting strategy now with Stitcher unfolds? Like how is it, and maybe with Conan in the fold now?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : Yes. So touching on that last point, I think it came up on the call. Is the expectations from a profitability or gross margin perspective? Is that the off-platform business will approximate or look something like what Pandora at a segment level looks like over time? Is that the...

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : Can you touch on perhaps what you're seeing in terms of CPMs in podcasting? How have they perhaps trended this -- the age of podcasting or the allure of podcasting? It's been pretty robust or invoked for, call it, the last 12, 24 months. I mean, so obviously, penetration among the U.S. population still going higher, engaging likely still going higher. CPMs held firm or... REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 23, 2022 / 3:20PM, SIRI.OQ - Sirius XM Holdings Inc at JPMorgan Global Technology, Media & Communications Conference

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : Awesome. So the first quarter revenue growth was solid, as we touched on, but EBITDA reflected higher investments in digital growth and content and product as the team had identified coming out for some time -- coming out of the fourth quarter as well when you gave the guidance. But does the '22 EBITDA guide also reflect a step-up in technology platform investments particularly following the appointment of a new Head of Product and Technology?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : So following the special dividend in January, share repurchases have slowed and as the company prioritizes delevering to your target of low to mid 3s and why did the special dividend makes sense for SIRI and its shareholders?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : And should we expect special dividends to remain the predominant form of capital returns going forward? Is there any reason why that might make sense versus... REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 23, 2022 / 3:20PM, SIRI.OQ - Sirius XM Holdings Inc at JPMorgan Global Technology, Media & Communications Conference

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : And so just thinking about that balance and your capital allocation priorities, if EBITDA free cash flow trends better, is the preference to lean into perhaps some of the more organic investments? Just how should we think about the levers that the team is thinking about within capital allocation if growth comes in better? If EBITDA comes in better, does that mean more investments? Or does that mean more delevering?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : So yes, so just kind of following up on that, but I think you've been pretty clear. And just audio advertising is just increasingly larger portion of the base. You've done some additional -- you've done some tuck-in acquisitions. Is that how we should think about it? I mean, is there other assets beyond what the team has been doing that maybe makes sense for SIRI? What else looks interesting?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : Got it. And I guess thinking about -- just maybe perhaps remind us about -- just the satellite CapEx build out -- just over the next couple of years launch timing, what should we be thinking about from an investment?

Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst : Great. And last question in a year from now and we'll be returning Sean, what we'll be thinking about? What will we be talking about that at that time?