SIRIUS XM HOLDINGS INC. Q3 FY2024 earnings call

• Milestone quarter as completed transaction with Liberty Media and emerged independent. - Delivered 14,000 self-pay net additions, improvement from last year. - Advertising revenue softer due to market factors, expect impact on Q4. - New initiatives: expansion of free ad-supported tier, premium interactive bundle, new pricing and packaging structure starting at $9.99. - Walmart collaboration, agreement with ESPN+ for extended trials. - Invest in ad tech stack, collaborations like with LiveRamp. - Opened Irish technology center. - Podcasting updates, app improvements for listener experience.

Sirius XM segment: Revenue $1.63B in Q3, subscriber revenue $1.51B (-5% Y/Y), ad revenue $41M (-2% Y/Y), total ARPU $15.16 (-$0.53 Y/Y), gross profit $969M (-7% Y/Y), gross margin 60% (-1 pct), subscriber acquisition costs $90M. Pandora and Off-Platform segment: Revenue flat at $544M, sub revenue +2% Y/Y (rate increases), segment ad revenue -2% Y/Y, Pandora ad hours 2.47B (-7% Y/Y), average monthly listening 21 hours, gross profit $187M (+4% Y/Y), gross margin 34%

• Lowered revenue guidance by $75M due to softer ad revenue. - Reiterate adjusted EBITDA guidance ~$2.7B and free cash flow guidance ~$1B. - Revised free cash flow guidance to ~$1B incorporating deal-related cash costs. - Expect CapEx on non-satellite ~$450M - $500M this year, similar next year, decline to below $400M by 2026; satellite CapEx ~$300M this year, steady reduction to near 0 by 2028.

• Advertising revenue impacted by flood of new CTV supply, advertisers shift to performance products, truncated election cycle, lower podcast inventory. - Subscriber declines in recent past, need to stem and reverse. - Impact of pricing and packaging strategy on ARPU and cannibalization risk. - Execution risk of new initiatives like free ad-supported tier and premium interactive bundle.

Q: Encouraging to see efforts on pricing and packaging, balance expansion of TAM vs risk of pricing down existing base?

A: Jennifer Witz said new pricing starting at $9.99 just rolled out, initial testing shows good retention post-trial, have levers to manage cannibalization with enhanced content, access, features.

Q: Content strategy, profitability of podcast division, monetization of Call Her Daddy, Howard's contract?

A: Scott Greenstein said podcasting strategy to get mass to supplement ad sales, monetization clear, Unwell and SmartLess doing well, Howard is singular talent, many demos covered by other talents.

Q: Self-pay net adds complexion, streaming subscriber adds, engagement of customer cohorts, streaming audio evolution?

A: Jennifer Witz said lower churn and higher automotive volumes contributed, streaming subs grown, early trial engagement important for retention, focus on migrating to new tech platform for interactive bundle.

Q: State of ad market, visibility of ad partners adding budgets, trade-off between churn and ARPU?

A: Jennifer Witz said ad market headwinds include CTV supply, advertiser shift, shorter political cycle, focus on content and tech initiatives; Tom Barry said churn favorable, ARPU balance with promotional plans and $10 entry point.

Q: Advertising initiatives, when to see contribution offsetting ad market challenges?

A: Jennifer Witz said Free Access in test, 360L rollout, need years to build scale for ad offering.

Q: ARPU, price increase philosophy, sales and marketing efficiency?

A: Jennifer Witz said on every other year price increase trajectory, added value to packages; Tom Barry said sales and marketing cost efficiency improving with data from replatforming.