The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: <_ALACRA_META_ABSTRACT>Great. And so just starting at high level, 2023 is an investment year at Sirius as you look to update and reposition the product suite,
while also managing through lingering macro headwinds. So could you maybe just zoom out and update us on how you're setting
the company up for long-term growth as you work through these headwinds? And what are some of the levers that will return SIRI
to growth?
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: Great. I want to come back to a bunch of the points you touched on there. So shifting gears, thinking about guidance, the company
raised 2023 EBITDA and free cash flow on the 1Q earnings call. Take us through what drove the upgrade and why no change to
revenue.
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: Maybe just sticking with ad sales for a second. What are you -- any update on trends that you're seeing here thus far into the second
quarter relative to how you exited the first quarter a little bit better than you anticipated in some of the late in-quarter bookings,
but any update on 2Q?
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: Yes. I definitely want to come back to the podcasting in a moment. But just thinking about -- and back to like thinking about guidance
for a second. You said, SIRI -- on the call, you said SIRI is well positioned even if the ad market doesn't come back and that was kind
of the cost related. But how should we think about the drivers of the ramping EBITDA or the improving EBITDA as we kind of sequence
through the rest of the year?
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: Great. What have you been seeing in terms of self-pay net add trends recently? New auto sales were very strong in April. Obviously,
that should help your 3Q and beyond. But is there upside to the expectations about -- for modestly negative self-pay net adds in '23
as you look at things?
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: And I think expectations were maybe sequential improvement through the course of the year in terms of the net adds...
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MAY 22, 2023 / 2:00PM, SIRI.OQ - Sirius XM Holdings Inc at JPMorgan Global Technology, Media and
Communications Conference
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: And that still makes sense.
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: Possible. And so now in terms of conversion rates, new and used car conversion rates have -- reasonably been in the low 30s, low
20s percent, respectively, and below levels we've seen historically as well as over the last several years. I think we've talked about
relative to the higher pen rate. And that makes sense that increased penetration would cause that to drift lower. But we get questions
from investors, is there a structural shift in the business? Has something caused the lower conversion rate? Is it maturation, anything
we should be thinking about?
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: I think on the call, you said that customer satisfaction is at the highest level since 2009. And as you said, some of these different
efforts that you're trying to drive, helping improve retention, but we got to -- there's always been the concerns of disintermediation
from Apple CarPlay, Android Auto, the Aux-in Cable for the older folks in the crowd. I mean how should we think about competition
in terms of self-pay or just in terms of the car as -- and I want to get to 360L, but as technology evolves in dash and you've had a
great real estate in dash, but how do we think about the concerns about churn, the concerns about technology in light of best churn
since 2009? It just seems...
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MAY 22, 2023 / 2:00PM, SIRI.OQ - Sirius XM Holdings Inc at JPMorgan Global Technology, Media and
Communications Conference
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: So you touched on 360L. And on the call, you said that the promise of 360L is now delivering. And it's expected to reach 40% of new
car trials by the end of the year, I think you said, and ramping thereafter. How meaningful could conversion and engagement
improvements be to the business as that hits 80% ultimately over time?
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: And on the ARPU front, is it just being able to drive like up tiering? Is that how you're thinking about the ARPU increase -- ARPU
benefits of 360L?
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MAY 22, 2023 / 2:00PM, SIRI.OQ - Sirius XM Holdings Inc at JPMorgan Global Technology, Media and
Communications Conference
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: So there's a headline of GM and Android Auto operating system out there recently came up on the call. But I mean, is the increased
adoption from OEMs of Android Auto actually beneficial to SIRI and its 360L rollout and could it help perhaps catalyze or help with
the evolution of the platform? How should we be thinking about that?
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: And I imagine the pandemic didn't help with the ramp of 360L take rate. I mean is there still an 80% target date out there that we
should be searching on the calendar?
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: So we have 360L and then there are also the other investments that you're making in the next-gen platform. Could you maybe
remind us what are some of those investments that you are making in the back end that will help not only engagement inside the
car, but also help set you up well for outside of the car and app?
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MAY 22, 2023 / 2:00PM, SIRI.OQ - Sirius XM Holdings Inc at JPMorgan Global Technology, Media and
Communications Conference
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: And will the app relaunch, I mean, is that more of a -- we should see those benefits accruing more inside of 2024 versus just given
the timing?
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: And although the streaming-only space is quite competitive, I think you are pretty -- you feel pretty confident about your ability to
grow that over time, and you have been spoken about that in the past. Is it just that differentiation and what you kind of touched
on and that gives you confidence in SIRI's ability to drive growth in streaming only despite the competitive...
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: So shifting gears to the advertising business. We touched on what you're seeing in the second -- here in the second quarter. But the
second half recovery, you kind of alluded to, that is the expectation broadly across the industry, but, I mean, it's still kind of early to
just call...
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: Yes. And that's -- so that's what I think Tom was referring to on the call the tailwinds that you're seeing in podcasting, which is just
bringing in the brands and -- great. I mean -- so touch -- if you could give us maybe a little bit more detail on how you're selling the
audience-based products versus perhaps how they traditionally have been sold in the past?
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: Now before -- just 10 minutes here, as we're closing in, shifting back a moment to the satellite platform. On the earnings call and
earlier, you touched upon just the simpler pricing and packaging as you kind of target specific demos. How does that -- can you
maybe touch on how you're thinking about overall segmentation within the base and how maybe some of these packages or some
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MAY 22, 2023 / 2:00PM, SIRI.OQ - Sirius XM Holdings Inc at JPMorgan Global Technology, Media and
Communications Conference
of this change in go-to-market and pricing and packaging impacts how we think about long-term ARPU growth within the satellite
business because it's been relatively stable or consistent over...
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: Increased engagement gives you that feedback loop to an extent that can...
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: Great. It wouldn't be a SIRI fireside chat without capital return question. So Tom Barry mentioned that -- CFO, Tom Barry mentioned
that SIRI would remain opportunistic for the remainder of the year given macro factors. Is low to mid-3s leverage still the right way
to think about it near term?
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: So in terms of recently expectations for a combination between Liberty SIRI and stand-alone SIRI have picked up. What form could
that take? And does SIRI's current leverage and the elevated CapEx cycle make that any less likely or more likely in near term?
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: And it does not change day to day or does not...
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: And then maybe sticking with M&A. Thinking about advertising, you've been quite opportunistic with some of the podcasting
investments you've made. Obviously, difficult ad market right now. But as you think -- as you look across the SIRI enterprise, whether
it'd be advertising, podcasting, other adjacencies, is there anything -- are you strategically complete? Is there anything that could
help accelerate growth as you look out here and...
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: What are some of the revenue opportunities that could emerge from the new satellite fleet? I mean in the past, we talked about
video or besides extra channels, but anything else that maybe screens interesting to you as you think about additional...
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MAY 22, 2023 / 2:00PM, SIRI.OQ - Sirius XM Holdings Inc at JPMorgan Global Technology, Media and
Communications Conference
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: Great. Two minutes left here, and maybe we'll open it up to the audience. Any questions?
Great. And maybe the quick question on the -- following up on the CapEx and the satellite fleet. We got the question, why do you
have to build 4 simultaneously? Is it just about pulling forward -- I mean, obviously, building 2 at a time, right, there's some efficiencies
in that. But...
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: And that's -- how long should we think about the -- as we build out our models to 2040, how long should we think about the CapEx
holiday or satellite...
Question: Sebastiano Carmine Petti - JPMorgan Chase & Co, Research Division - Analyst
: Great. Well, thank you, Jennifer, again, for joining us. And thanks, everyone, for joining us as well. Thank you.
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