SiriusXM Holdings Inc.

Good morning and welcome to the Sirius SM third quarter 2021 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 one on your telephone keypad. If at any time you'd like to be removed from the queue, please press star two. At this time, I would like to turn the call over to Hooper Stephens, Senior Vice President, Investor Relations and Finance, Please go ahead.

Thank you and good morning everyone. Welcome to SiriusXM's third quarter 2021 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 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 would like to advise our listeners that today's results will include discussions about both actual results and adjusted results. All discussions of adjusted operating results exclude the effects of stock-based compensation and certain purchase price accounting adjustments. With that, I'll hand the call over to Jennifer.

Thank you and good morning. SiriusXM's third quarter was nothing less than phenomenal. 616,000 self-pay net subscriber additions is the highest quarterly figure we've ever recorded. It was powered by, among other things, conversions stemming from the second quarter's record high trial starts and continued low churn of just 1.5% in the third quarter. We attained our full year subscriber guidance in just nine months. even after taking it up by 38% on our last earnings call to approximately 1.1 million net self-pay subscriber additions. Truly remarkable. Our financial performance was also remarkable. We delivered the highest revenue and highest adjusted EBITDA of any quarter in our history. Our revenue was bolstered by steady subscription revenue growth and outstanding growth of more than 30% in our ad revenue. We invested across our business, particularly in marketing, content, and digital product and capabilities to strengthen our leadership position in audio, but still manage to grow adjusted EBITDA in line with revenue. Today, once again, we are increasing all of our 2021 financial guidance, and we are taking up our expectation for full-year subscriber growth modestly. Because of the well-known supply constraints hitting the auto industry, The new car SAR went from nearly $17 million in the first half to $13 million in the third quarter. The spike in used car prices and limited inventory has caused volumes to fall there too, albeit to a lesser extent. Our new car trial starts fell 21% in the third quarter from the second quarter's record high, and used car trial starts fell 6% sequentially. This means that the fourth quarter will see more than 1 million fewer conversion opportunities than we saw in the third quarter, meaningfully reducing but not eliminating our ability to grow our self-pay base in the near term. Based on their public comments, most automakers and industry forecasters believe the timeline to recover from supply chain related issues is sometime between mid-year 2022 and early 2023. Most expect recovery from these issues to be gradual next year as opposed to a sharp bounce back. With extremely healthy year-to-date subscriber performance and strong loyalty among our customers, we are availing ourselves of the opportunity to increase the promotional pricing floor for some subscribers in addition to a modest price increase on certain full-price plans. We believe that these steps to drive revenue are in the best interest of the business long-term and reinforce the value of SiriusXM's premium subscription packages, but they also come at a slight cost in near-term subscriber growth. As we navigate the current environment and take those steps to drive revenue, we remain intensely focused on advancing the three key strategic growth objectives discussed on our last call. First, we intend to continue winning in-car. Second, we are determined to substantially increase engagement of SiriusXM outside of the car both with existing subscribers and new ones that may be digital only. Third, we will continue to grow our digital audio advertising business, which is unmatched in North America, both in size and capabilities. And of course, advancing these strategic goals will be enabled by the market-leading content we create and curate in close collaboration with renowned talent and brands. We are making outstanding progress on all of these fronts, and I'm particularly excited by the volume and quality of new content we've recently announced, which I will highlight shortly. In CAR, we are continuing to win with higher penetration and improved service with 360L. Our new CAR penetration was more than 81% in the third quarter, up from 78% a year prior. As one example of how automakers remain committed to providing SiriusXM as an entertainment option for their customers, We recently signed a multi-year extension with Mercedes-Benz that includes plans for higher penetration rates. And remember, our service is getting even better with all of the new features, functionality, and content made possible by 360L. Significant 360L volumes are now rolling out across nine automakers, including Audi, BMW, Ford, GM, Stellantis, and Volkswagen, and more are on the way. Just yesterday, we announced the new Range Rover will feature SiriusXM with 360L as standard equipment and that it will also be included in most upcoming Jaguar and Land Rover models. This new platform more closely integrates the car experience with what our subscribers are doing on mobile, and it lets us provide additional content, personalized recommendations, and makes it easier to transact with SiriusXM. All of this is helpful in a competitive audio market, and in particular with younger generations of car buyers. We continue to have a leading position in car, both in terms of our best-in-class user experience and our significant share of ear, and we are poised to benefit from the rebound in new car sales. On the digital side, we are making substantial progress getting existing in-vehicle subscribers to engage with SiriusXM outside of the car, which enhances the value proposition of and overall satisfaction with our service. This effort starts early while listeners are still in trial, and out-of-car listening has become a strong predictor of in-vehicle conversion and retention. Our subscribers' total monthly listening to SiriusXM on average nearly doubles when they also listen outside of the car, and this listening is 100% incremental to what is being done in-car. And as I mentioned this summer, our research shows that subscribers who say SiriusXM is their number one source for audio outside the car has doubled in the past three years. We are also investing more than ever in digital subscriptions not tied to a vehicle. The SXM app has been rebranded and updated, and we now have an extensive array of programming that is exclusive to the digital environment. In late summer, we began allowing digital subscription purchases directly in the iOS and Android versions of the SXM app, which makes it easier for consumers to subscribe to our packages. This will increase the appeal of our digital trials to younger, more diverse audiences and makes for less friction when converting to a self-pay subscription. To support growth in an awareness of our digital offering, in September we launched our largest ever nationwide multi-platform advertising campaign SiriusXM House, which brings to life the diversity that lives on our platform. It shows how audio legends, emerging creators, and superstar athletes can all be heard on SiriusXM in unique and engaging formats, and how our content can be consumed anywhere on mobile phones, smart speakers, and other connected devices. The trade and consumer reception has been positive, and the campaign has increased app downloads, along with lots of social engagement between artists and fans. While our subscription business continues its steady growth, on the advertising sales front, we grew revenue 31% year over year in the third quarter, and we continue to build our ad platform in a variety of ways. In the past 12 months alone, our scaled user base, podcasting business, and ad monetization capabilities powered by best-in-class ad tech and sales teams has generated $1.7 billion in revenue. At FXM Media, our umbrella ad sales organization, we're using data to deliver superior solutions for advertisers with a reach of 150 million listeners across live radio, streaming, and podcasting, always keeping listener privacy and experience a top priority. We're operating from a position of strength and less reliant on third-party identifiers because we activate a rich first-party data set. Since the launch of SXM Media, we have closed a number of significant advertising deals with major brands crossing all of our platforms and ad formats. Underpinning our strength in-car and out-of-car in both subscriptions and ad-supported audio is, of course, our content. It will always be the core of what we do, and during the third quarter, we demonstrated our focus and execution with new talent and distribution deals across the SiriusXM, Pandora, and Stitcher platforms. On SiriusXM, we launched multiple new and limited time streaming channels based on iconic, beloved artists, established and emerging, such as the ones for Bon Jovi, Grateful Dead, Halsey, Metallica, and SoundCloud Radio. We celebrated Latinx and Hispanic Heritage Month recently across SiriusXM and Pandora with new channels and initiatives highlighting artists like J Balvin, Andres Calamaro, Becky G, and many more. We're seeing success in multi-platform deals, where we have established podcasters beginning to do live shows on SiriusXM. For instance, the hosts of the last podcast on the left will be doing a weekly call-in show on SiriusXM's Faction Talk channel starting early next year. And also the other way, where we bring live broadcast shows to broader podcast distribution. For example, fans can hear directly from Tom Brady and Larry Fitzgerald immediately on SiriusXM each week and then those individual conversations are later available as podcasts on multiple platforms, expanding our audience even wider. While we will remain financially disciplined, we have been opportunistically bringing major podcasting talent to SiriusXM's platform and securing exclusive ad sales rights. To name just a few, Crime Junkie, the top-ranked podcast for colored nerds, Storytime with Seth Rogen, Last Podcast on the Left, 99% Invisible, the Bellas, and Rory and Mal. We recently led the Series B financing for Audio Up, an innovative podcast and audio entertainment studio. Under the agreement, Audio Up will create new original scripted podcasts for our platform, and SiriusXM gets an exclusive first look option for new concepts, as well as distribution and sales opportunities. Whether growing an existing but niche audience, expanding a powerhouse brand in audio, or supporting audio superstars throughout their careers, SiriusXM's platforms give creators opportunities to flourish in unmatched ways. And we continue to see curation, both human and AI augmented, as the cornerstone of delivering unique experiences for our listeners, be that on SiriusXM or Pandora or across our podcasting business. A great example of this is our close collaboration with U2, to build selectable modes on Pandora centered around U2's first three albums. The band members walk our listeners through a unique experience, sharing stories behind the making of each album and guide our listeners to other classic songs from the artists who influenced each album. These modes were launched as a follow-up to U2's full-time SiriusXM channel and show how we can leverage the strength of our multiple platforms to benefit artists and create great content, truly a competitive differentiator. And I'm thrilled we're producing live content and experiences again with our small stage series, which features music and comedy performances in iconic, intimate venues. We've recently hosted Dave Matthews, Brandi Carlile, Cole Play, Jay Cole, comedian John Mulaney, and we just announced upcoming shows at the Apollo with her and Alicia Keys. As SiriusXM now celebrates the 20th anniversary of our service launch, we can rightfully say that we have transformed the way Americans consume entertainment inside the vehicle. We are now hard at work growing that reach outside of the vehicle, expanding our advertising business, and continuing to shape the future of audio with further innovation and investments in new kinds of content and authentic audio experiences. I'm incredibly proud that our listeners love SiriusXM's offerings and of our company's very powerful and profitable business model. I couldn't be more pleased with our position and the long-term opportunities that sit in front of us. With that, I will turn it over to Sean for additional remarks.