SiriusXM Holdings Inc.

Good morning and welcome to the SiriusXM's fourth quarter 2020 financial and operating results conference call. Today's conference is being recorded. A question and answer session will be conducted following the presentation. If you have a question at that time, please press star 1 on your telephone keypad. If at any time you'd like to be removed from that queue, please press star 2. At this time, I would like to turn the call over to Hooper Stephens, Senior Vice President, Investor Relations and Finance. Mr. Stevens, please go ahead.

Thank you, and good morning, everyone. Welcome to SiriusXM's fourth quarter and 2020 earnings conference call. Today, we will have prepared remarks from Jennifer Witts, our Chief Executive Officer, and Sean Sullivan, our Chief Financial Officer. Scott Greenstein, our President and Chief Content Officer, will join Jennifer and Sean to take your questions. 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 on 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. We advise listeners to not rely unduly upon 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 results will include discussions about both actual results and pro forma adjusted results. All discussions of pro forma adjusted operating results assume the Pandora transaction closed January 1, 2019 and exclude the effects of stock-based compensation and certain purchase price accounting adjustments. With that, I turn the call over to Jennifer.

Good morning and thank you for joining today. I'm very pleased to welcome Sean Sullivan, our new Chief Financial Officer to his very first earnings call at SiriusXM. We turned in a truly phenomenal 2020 that highlighted the resiliency of our business and the teams that make it work. We were able to grow SiriusXM self-pay subscribers by 909,000, which actually exceeded our original pre-COVID guidance. We added 400,000, 7,000 net new self-pay subscribers in the fourth quarter alone. Our self-pay base stands at an all-time high of 30.9 million and churn improved for the fourth consecutive year. Revenue, adjusted EBITDA, and free cash flow all climbed in 2020. After working our way through the worst of the pandemic's impact on auto sales and advertising in the second quarter, The trajectory of our results improved throughout the year. By the fourth quarter, we attained record high quarterly revenue of $2.2 billion, including record advertising revenue of $474 million. Adjusted EBITDA climbed 12% in the fourth quarter to $660 million, and free cash flow climbed to $448 million. Along with these outstanding results, we made significant progress in 2020 towards our long-term goals of improving our SiriusXM service with greater 360L distribution, bolstering our leading content position, and growing our reach in digital advertising. We also closed on our acquisition of Stitcher, greatly expanding our footprint in podcasting and magnifying the reach of our platform to some 150 million consumers. We have assembled massive audio entertainment audiences that can be monetized by our world-class digital ad sales team and technology suite. John will provide more details about our guidance, but in 2021, we expect to see strong subscriber growth, growing subscription and advertising revenue, and significant cash generation. The outperformance in 2020, driven primarily by a significant reduction in SAC, combined with exciting investments we are making across our business in expanded OEM distribution, programming and content, and digital product development will certainly make year-over-year adjusted EBITDA comparisons more difficult. Nevertheless, I'm very pleased with our outlook, and we are committed to offering the best content lineup in audio entertainment, investing in our customer experiences, and of course, continuing to build our leading digital ad business. We reached our goal of 80% new car penetration in the fourth quarter, and this figure is set to rise modestly in 2021. Put simply, automakers are more committed than ever to include SiriusXM in new cars. The enabled fleet has reached nearly 135 million cars and should climb to more than 220 million over time. SiriusXM's technology was in almost 50% of all used cars sold in the U.S. in 2020, up about four points over 2019. This will continue heading north as the fleet turns over continuing to grow our opportunity in used cars. As we have said before, the adoption of 360L is quickly growing. Roughly 25% of SiriusXM-equipped new vehicles sold this year will be on our 360L platform in 2021, and this should rise to about 80% in 2025. Customers love the new feature set, ease of use, and interface of our 360L products. While still very early, we see encouraging conversion trends in 360L vehicles and are continuously improving the personalized marketing efforts enabled by and tailored to 360L and its unique features. In-vehicle connectivity will also enable future revenue opportunities, such as a persistently free version of SiriusXM with targeted digital ads and an improved presentation of Pandora in vehicle. We plan to test various approaches to an ad-supported version of SiriusXM starting this year in order to determine the best way to run a scaled offering like this in the future, although the 360L-enabled fleet will take time to build out. This is yet another exciting way we are making significant long-term investments to drive more share of ear, wallet, and ad budgets across our platform. In addition to the in-vehicle benefits of connectivity, we are successfully growing digital engagement of SiriusXM out of car on smartphones and connected devices. In December, households that streamed SiriusXM climbed more than 40% year-over-year to a new all-time high, with especially sharp increases in listening on Google and Roku devices. When customers use SiriusXM outside of the car, we see tangible benefits in better conversion, better churn, and we believe in opportunities to drive pricing in the future. We're also growing digital-only subscribers. And in the fourth quarter, we saw our biggest ever contribution to self-pay net ads from this channel. The base is still small, but our investments in extra music channels, digital sports rights, the launch of podcasts, and focused packaging and marketing are beginning to pay off with growth in digital-only subs. SiriusXM's value proposition rests on having a bundle of expertly curated music plus a variety of news, talk, comedy, sports, and as I mentioned, now select podcasts as well. We now have the opportunity to invest more in content than ever before because we have more ways for our subscribers to enjoy it. And we have more ways for this content to be monetized across our platforms that reach 150 million users. and indeed, even in the broader podcasting distribution universe. We're thrilled that Howard Stern extended his agreement to continue live shows at SiriusXM for another five years and licenses archives to us for another seven years beyond that. Howard is at the top of his game with remarkable interviews, comedy, and commentary. Stay tuned, but in the meantime, we are excited for a big expansion of Kevin Hart's content in podcasting. which he announced on Howard's show Wednesday morning. Our new and expanded deal with Kevin's Laugh Out Loud comedy brand highlights our growing ability to package and distribute our unmatched content in new ways given the scale and reach of our advertising and subscription business. Our strength in podcasting accelerated in the fourth quarter with our acquisition of Stitcher, the launch of podcasts within the SiriusXM streaming service, and further expansion of the podcast library on Pandora. Stitcher is a premier full-service podcasting platform that dovetails nicely with Simplecast, a hosting and analytics company we purchased earlier last year. Through its network of shows, Stitcher has the largest share of the U.S. podcast listening audience available to advertisers, and the fourth quarter was its biggest ever in terms of ad dollars. This year, we plan to leverage the capabilities of Stitcher and Simplecast with our ongoing leadership in audio advertising to roll out a new podcast advertising solution that integrates enhanced targeting, transparent delivery and measurement, bespoke creative, and exclusive programming access. This growing position in podcasting nicely complements our leadership in free digital music streaming as advertisers increasingly look to strategically buy across multiple formats. Through Stitcher, we now have some of the most popular podcasts available today, either owned and operated or through sales and distribution, including Freakonomics, Hidden Brains, and My Favorite Murder. And don't forget Office Ladies, which was recently named Podcast of the Year. And many popular SiriusXM hosts and stars have enthusiastically debuted new podcasts with us, including Jeff Lewis, Mad Dog Russo, the original MTV VJs, Stormy Warren, and health experts from NYU Langone Health and SiriusXM's Doctor Radio Channel. You will see us use a multi-platform, windowed approach to content in more ways. It gives us new potential to further invest in content, always in a smart, disciplined way, and to attract new talent that, frankly, might not have considered a deal with SiriusXM alone. Kevin Hart's new agreement is a good example of the potential here. Clearly, the same can be said for our arrangement with Marvel Entertainment. While we love the additional engagement podcasting can drive on our platform, we continue to be business model oriented. By driving monetization and advertising, we can grow our podcasting business and help deliver more value to content creators. Music is also vital to our offering, and we recently announced the launch of a Foo Fighters channel, which includes an exclusive performance from our garage space at our LA Studio Hub airing this Friday. We also just launched four new limited run channels to celebrate Black History Month. The channel salutes powerful, pioneering artists, including Aretha Franklin, Jimi Hendrix, Miles Davis, and a channel recognizing artists from the legendary label Motown Records. Our relationships with key media brands and our growing advertising business benefits us in multiple ways. In December, we renewed and extended our rights for the Today Show full-time channel on SiriusXM with NBC Universal News Group, as well as the simulcast of MSNBC and CNBC. But under the new agreement, SiriusXM also became the exclusive advertising representative and end-to-end ad tech platform for a broad slate of podcasts from NBC News, MSNBC, and CNBC. We know live sports and sports talk are beloved by our subscribers. We just became the exclusive audio broadcaster of the Masters, and we're looking forward to producing and airing one of the biggest events in sports this April. We also continue to expand our streaming rights with major pro sports leads, recently with the NFL and NBA, to deliver play-by-play to more of our digital subscribers and to make it easier to hear their favorite teams on our app. We continue to see success from our mode feature on Pandora, which puts control in the listener's hands to further personalize their experience. The popularity of modes among Pandora users has continued to accelerate. with listeners using the feature nearly doubling in the second half of 2020. Pandora also launched Wake Up, a series of hosted playlists featuring Black artists and the thought leaders sharing the music that reflects their day-to-day experiences and the songs that move them to action. And our Pandora, our popular Pandora Live virtual concert series has recently featured Carrie Underwood, Dolly Parton, and Brandy with Summer Walker. As I close my comments, I want to remind all of our stakeholders that we are continuously reinforcing our efforts at diversity, equity, and inclusion. We are taking even more focused actions to broaden our talent pipeline through collaboration with diverse professional organizations for both recruitment and development opportunities. I firmly believe that a diverse and inclusive workforce is both the right thing to do and simply good for business. As we look ahead, our priorities remain building on our leadership position in North American audio with premium content and unmatched distribution, driving penetration of SiriusXM and 360L to improve our in-vehicle service, accelerating digital subscriptions and engagement, and bolstering our leading position in digital audio advertising. By executing on these priorities, we intend to continue our long-term history of delivering significant EBITDA and free cash flow for our stockholders. With that, I'll turn the call over to Sean.