SiriusXM Holdings Inc.

Please stand by, we're about to begin. Good day and welcome to the SiriusXM's first quarter 2022 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 the queue, please press star 2. At this time, I'd like to turn the call over to Hooper Stevens, Senior Vice President, Investor Relations and Finance. Mr. Stevens, please go ahead.

Thank you and good morning, everyone. Welcome to SiriusXM's first quarter 2022 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 remind our listeners that today's call will include discussions about both actual results and adjusted results. All discussions of adjusted operating results exclude the effects of stock-based compensation. With that, I'll hand the call over to Jennifer.

Thank you for joining us today. SiriusXM reported solid first quarter growth in both subscription and advertising revenue and healthy cash generation even after substantial investments in our business. we are reaffirming all of our subscriber and financial guidance for the year. Each day, we make progress in shaping the future of audio entertainment in North America with curated, distinct, and original content, exclusive live events, and a growing podcast business. Audio in America is thriving, and so is SiriusXM. According to recent Edison research, monthly online audio listeners in the U.S. grew to 73% of the 12 and up U.S. population. up from 68% a year prior. Daily audio time is also increasing, with Americans on average spending 17 more minutes per day with audio, compared to the same time in 2020. At SiriusXM, consumption of our unique content via streaming is contributing to this growth, as we are seeing time spent listening to SiriusXM growing meaningfully faster than our subscriber base. These industry trends are also driving enhanced monetization, as is evident in the IAB's new Internet Advertising Revenue Report, which found that digital audio was the fastest-growing advertising segment last year, climbing to almost $5 billion. This underscores the continued opportunity for scale within this segment of our business. SXM Media has established itself as a leader as the number one-ranked podcasting ad network, powering significant growth in our advertising revenue. Across all of our platforms, we reach approximately 150 million monthly listeners, and we are extremely well positioned for future growth. As you saw in the release, Series XM self-pay net additions were slightly negative in the first quarter, with growth in digital subscriptions partially offsetting a decline in our traditional in-car subscriptions. First quarter net additions, much as in the fourth quarter, were impacted by the lower auto sales we began to see in the second half of last year as supply constraints became more pronounced. These conditions have not yet eased. SAR actually declined sequentially each month in the first quarter, and inventories remain very tight. We're always working very hard to outperform our guidance, but we will be closely watching supply chains and sales volumes, and we'll of course keep you updated as the year progresses. With all this uncertainty in the general economic environment, consumer demand for both new and used vehicles and our service is healthy. We continue to retain subscribers with an excellent monthly churn rate of just 1.6%, and ARPU reached a record level in the first quarter, climbing 9% year-over-year as pricing actions we took late last year continue to yield benefits. Our new car and estimated used car penetration rates grew modestly to 83% and 52%, respectively, and our enabled fleet is now nearly 146 million cars. We continue to make progress deploying 360L at many automakers. The rollout of 360L and the enhanced features that come with it is a long-term investment that will enable us to grow subscription revenue and eventually even our ad platform for years to come. Don will talk more about the financials, but we are making substantial investments to build additional paths to grow beyond our traditional vehicle funnels. We have doubled down on brand marketing to position ourselves for younger audiences and out-of-car streaming. and in performance marketing to drive digital acquisitions. We believe building out a digital funnel is the right thing for the business long term. Remember, our economics on our digital subscribers are very strong, especially compared to other audio streaming companies, and enable us to invest to grow this funnel. Subscribers listening on our digital platforms to on-demand content are up more than 50% year over year, demonstrating growing demand for more control and personalized content within Series XM, and this will increase as awareness grows. During our last earnings call, we discussed the new hire of Joe Inzerillo, our head of product and technology. One quarter into the job, he is already having an impact on our company as we accelerate the current state of our tech across the organization and map out the future of our business. By improving personalization and recommendations in the SXM app and in 360L, easing digital onboarding, widening distribution on 10-foot devices, and speeding innovation in-car, we are broadening the attractiveness of SiriusXM to potential subscribers across the board. We are adding talent with diverse experience building customer-centric digital products, and we plan to increase our velocity to market. We believe these investments will benefit subscriber growth long-term, whether in-car or purely digital. Our best-in-class content drives engagement and subscriber loyalty. We've introduced listeners to first-time artist channels from the legendary Joni Mitchell, rock and soul icon Tina Turner, Avril Lavigne, Maren Morris, and a year-long channel from one of the best-selling acts in music history, Red Hot Chili Peppers. We also brought back artists and partner-branded channels that drew headlines and subscriber attention, such as Neil Young Radio and the David Bowie Channel. Our programming regularly honors important groups that are being recognized throughout the country. During Women's History Month, we created a channel devoted to the defining female-led festival tour of the 90s, Lilith Fair. It aired alongside other programming dedicated to female artists across genres. During Black History Month, we worked with artists and their representatives to create curated channels for the Aretha Franklin Channel, Miles Davis Radio, and the Motown Channel. We created the Grammy Channel to showcase this year's artist nominees leading up to Music's Biggest Night. Pandora continued to create new ways for listeners to experience the music they love by creating a personalized station mode curated by LeBron James on uninterrupted radio. adding a number of top Latin artists to our suite of billionaire stations, and by teaming up with SoundCloud to highlight innovative emerging artists with the new DigiCore by SoundCloud station. This is an extension of SiriusXM's collaboration with SoundCloud, which boasts an existing channel, SoundCloud Radio, and an original show, The Lookout by SoundCloud on Hip Hop Nation. The live experience is so important to our subscribers and listeners. and SiriusXM and Pandora continued to offer great live performances for thousands of fans with major artists including Avril Lavigne, John Legend, John Mayer, and Kelly Rowland. Our multifaceted relationship with TikTok allowed us to amplify and extend the reach of some of these events to younger audiences. In the comedy world, we launched its Showtime at the Apollo Comedy. The channel showcased the very best stand-up from the program's decades-long run, including early performances from some of today's biggest comedians. Our approach to podcasting is purposely multi-tracked. Some agreements are with major podcast brands for exclusive global rights to advertising inventory, and others go beyond that and involve close collaboration in the content of the shows or in which podcasters have the opportunity to expand their audience and profile by appearing on SiriusXM channels. It's our experience that great podcasts can also make great content on SiriusXM. And so we launched new cross-platform endeavors, such as the first-ever streaming channel dedicated to a podcast, Freakonomics, serving as a curated collection of the best of the award-winning series. We launched two new live shows, Open Lines on Faction, in which the hosts of the popular horror comedy podcast, Last Podcast on the Left, talk directly with listeners about a paranormal topic of their choice, and It's Me Tinks Live on the Starz channel, in which the well-known digital creator and host of the popular podcast gives advice directly to listeners. We are the top network in the Triton Digital Podcast Report in average weekly users and downloads, and several of our shows received high honors, including seven Ambie Award nominations and a win for the Best Comedy Podcast. and we just received seven Webby Awards, including two for our popular Conan O'Brien Needs a Friend. Additionally, SXM Media, the company's combined advertising sales group, is the undisputed leader in podcast ad sales, and we are the number one podcast advertising network in weekly U.S. listener reach, per Edison Research, and the representative of four of the top 15 podcasts in the country, including Crime Junkie, Office Ladies, Dateline NBC, and soon Pod Save America. Over the past several months, we've signed even more exclusive podcast sales and distribution agreements with a variety of publishers, including Crooked Media, which showcases some of the most popular and critically acclaimed podcasts in the country, such as the aforementioned Pod Save America, and Revolver, a leading multicultural audio-on-demand content creator and publisher. We're also seeing more digital content creators turning to podcasting to expand their brand and partnering with us to scale their audio presence. Along with Tinks, we recently signed new deals with both Critical Role and Therapy Gecko, both of which gained niche but significant fame through live video streaming and are now extending into the audio space. So many of our listeners love sports, and we are seeing significant year-over-year increases in the consumption of sports content. We are committed to the best live coverage of the biggest events. SiriusXM and I Am Athlete, the media network founded by former NFL All-Pro receiver Brandon Marshall, have teamed up on a new content deal that includes a live nightly show on our Mad Dog Sports Radio channel. As part of the agreement, SXM Media is also now the exclusive global ad representative for the popular I Am Athlete audio podcast. Last year, we signed an agreement to become the exclusive audio provider of the Masters Tournament, and this year, we provided top-notch coverage across all four rounds of the tournament for golf fans and added new voices to our team, Mike Tirico, Curtis Strange, Susie Whaley, and Steve Melnick. The NFL continues to be one of our most popular sports offerings, and we capped the season by offering multiple broadcasts of the Super Bowl from L.A., NFL Radio, Mad Dog Sports Radio, SiriusXM Fantasy Sports Radio, ESPNU Radio, and other channels broadcast daily from Radio Row at the LA Convention Center, while several star personalities, including Kevin Hart, Conan O'Brien, and Sway Calloway, hosted Super Bowl week specials from our LA studios. SiriusXM covered two inaugural events featuring athletes from historically black colleges and universities, the NBA HBCU Classic and the HBCU Legacy Bowl. giving listeners live access to these two great games in their first year. From sports and music to news, talk, and entertainment, we continue to bring our listeners a best-in-class listening experience across platforms, ranging from can't-miss live programming to standout music and comedy curation to award-winning podcasts. All in all, I'm pleased with how SiriusXM is weathering the challenging auto sales environment investing to improve and accelerate our digital distribution, and growing our ad platform via podcasting. We also continue to generate significant cash flows that enable us to shape our future and reward our stockholders. For more details on those financials, I'll turn it over to Sean.

Thank you, Jennifer. To highlight Q1 results, revenue increased by 6% in the first quarter, with advertising revenue up 8% to $383 million. Adjusted EBITDA grew 1% to $690 million, a new first quarter record, even as we continue to make meaningful investments in sales and marketing plus revenue share associated with our podcasting ad rep deals. Diluted earnings per share were $0.08 versus $0.05 in last year's first quarter when we had the impact of $245 million in non-cash impairment charges. We generated $258 million of free cash flow during the first quarter, up 22% from the prior year, primarily on higher receipts from customers, partially offset by higher satellite capital expenditures. Turning to our operating segments, for SiriusXM, total revenue in the first quarter increased 6.4% to $1.7 billion, driven by the 9% growth in ARPU, offset by lower paid trial subscribers. Gross profit in the SiriusXM segment climbed 8% to $1.07 billion, representing a margin of 62%. In the Pandora and off-platform segment, advertising revenue of $336 million increased 8% in the first quarter, with Pandora's ad revenue per 1,000 hours reaching a first-quarter record of $90. In the first quarter, our podcasting and off-platform businesses generated $95 million in revenue, an increase of 42% year-over-year. We expect these businesses will represent a growing portion of this segment's revenue over time. Gross profit in the Pandora and off-platform segment was flat at $137 million in what is typically a seasonally light ad revenue quarter with a 29% gross margin. slightly lower than last year given meaningful investments in new podcast content that are still early in monetization. Today, we reiterate our existing guidance for 2022, revenue of approximately $9 billion, adjusted EBITDA of approximately $2.8 billion, and free cash flow of approximately $1.55 billion. And as Jennifer mentioned, we continue to expect approximately 500,000 net new self-pay SiriusXM subscribers this year. We continue to expect that supply constraints impacting auto sales will push the substantial majority of our projected self-paced subscriber growth to the second half of the year. Both advertising and subscription revenue will contribute to growth in 2022 as advertising momentum continues and subscription revenue benefits from rate action. Our adjusted EBITDA guidance this year reflects meaningful investments in product, content, and marketing to drive growth in digital. On the capital allocation front, we were pleased with the reaction to February's $1 billion special dividend to our stockholders, and even with that and the 50% increase to our recurring dividend last fall, we still repurchased $200 million of stock during the quarter. We ended the first quarter at 3.5 times net debt to EBITDA, flat with year-end 2021 pro forma for the special dividend, and within the low to mid-threes range we've told you to continue to expect. Our balance sheet remains extremely well positioned, and earlier this month, we availed ourselves of an opportunity to take on an additional $500 million two-year term loan to reduce our revolver balance at even lower rates. As always, we retain significant flexibility to continue investments to grow the business, examine acquisition opportunities, and to continue returning capital to our stockholders via dividends and share repurchases. With that, operator, let's open it up to Q&A.

Thank you. At this time, we'd like to open up the call for questions. I would like to remind everyone, in order to ask a question, please press star 1 on your telephone keypad. If at any time you'd like to be removed from the queue, please press star 2. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Jessica Reef-Elrich with Bank of America Securities. Please go ahead.

Thank you. I have two questions. Impressively, you did not reduce your self-pay unit ad guidance. I'm wondering if you could talk a little bit or give us more color on what you're seeing in the digital-only channel. And do you think it will – sorry, I'm freezing. Will it represent a meaningful portion of your net ads this year, given what's going on in the auto sector? And when would you expect it to be an overall – a meaningful part of your overall sub-base? That's the first question, then I have a follow-up.

Hi, Jessica. So look, I think we talked a little bit about this on the last call. And as we expected going into this year, there are going to be quarters where we see low or negative satellite net ads. And as I mentioned in the comments, we did have positive digital net ads outweighing negative satellite net ads in part. And I expect as the trial funnel continues to build over the course of the year, we could see more of that. I still don't – it's not going to be a significant proportion of our overall self-pay base in the near term, right? This is a long-term build for us. We're definitely seeing some success and an uptick in, you know, the digital trial starts from our efforts, not only on the marketing side with performance media, but also through in-app purchase in the app stores. and our partnerships, and we'll have more to launch there. So, you know, again, it's a steady uptick in trials leading to more growth in the digital trial funnel and more digital net ads. But, you know, I still expect satellite net ads to ultimately be the majority of our net ads going forward as the trial funnel starts to come back.

Right. I mean, it's such an impressive performance. And then just like switching gears here, Maybe Scott, talk about a little bit of the investment focus. There's so much going on in the content side from podcasting to artist channels to live. It just feels pretty diverse. You talk about the kind of build versus buy. It seems like most of it's build, but you did allude or Sean alluded to possible M&A.

I'll speak to the content. Sean can touch on any M&A. We're, as you know, always opportunistic in what we look at in content. The goal is ultimately, as we laid out in earlier calls, that they feed as many of our platforms and in a synergistic and organic way sort of grow. When you look at whether it's Tinks, who has a podcast, has a play on TikTok radio and music, will do playlists on Pandora, or any of the other things that we look at, it's where do they feed and best sit. As you know, content... is a creative thing and when opportunities pop up, we look at them, see where they fit in our plans and some things, you know, obviously we don't do. But the goal really is to look at the blend of things that will make an impact immediately and others that we can grow and figure out where they go. If you look at, you know, early days of satellite radio, it was much more focused on a very established demo As time has gone on, we've created pop-ups and a regular rhythm and routine of having artists of all types from young to old and diverse in every genre. And that's really going to be the model going forward where there's, you know, something that's really big and matters. We'll look at it and in some cases do it. And in others, we're looking to sort of broaden and widen the portfolio of content to serve as many, you know, new audiences as much as holding the old audiences.

And I think, I'm not sure we had any reference to M&A, Jessica. You know, obviously we did the 99 PI deal. last year, and we'll continue to look at opportunities there, but a lot of the deals we've been doing have been focused on, you know, repping the ad sales, you know, with some pretty significant additions, you know, over the last few months. And, you know, that shows up in the Edison Report, which was a nice win for us. We're number one in listener reach, and since then we've signed Crooked Media. So, yeah, I think what Sean mentioned on the margin side is, is as we ramp up sales for these new arrangements, we would expect that the margins will get better over time in podcasting. But we see a lot of great tailwinds in podcasting in general. The listening growth is coming from, I think, our core demo, the 35 to 54. We're seeing also, I think, growth coming in the car generally, which is obviously a strength for us. So we feel really good about our position here.

And last thing, expect to see more of the big podcasting, you know, turning into SiriusXM channels like Freakonomics. I think there's a plan there to really grow that area, and that will also obviously expand the growth and the revenue.

Thank you.

Thank you. We'll take our next question from Stephen Cahill with Wells Fargo.

Thanks. Jennifer, I was wondering if you could just talk a little more about how the trial funnel is shaping up now that we're almost four full months into the year. You talked about the deceleration in SAR that you saw in the first quarter. I know there's a churn benefit in these environments on vehicle churn, but obviously the ad side of things is probably running a little tough. So maybe just give us a little more color on how you think about the reaffirmed net ad guidance as we move a little closer to the back half of the year. And then, Sean, you talked about the positive reaction to the special dividend. Just wondering, you know, how the company thinks about those and what conditions are right for the potential for future special dividends. Is it the stock price? Is it something in regards to the balance sheet? And would you ever consider inching up your leverage for even more cash deployment? Thanks.

Sure. So I'll talk a little bit about the net ad guidance, Stephen. Look, we Going into the year, in the fourth quarter of last year, which set up our trials for the first quarter of this year, last year in the fourth quarter, we saw significant downtick in trials as we addressed on the last call. They were down about 20% from the peak in the second quarter of last year and nearly as low as we saw really at the lows of the pandemic in the Q2 of 20. So that was you know, a real downtick. And then we've seen a little bit of an uptick in the first quarter, you know, which will help in the second quarter. And then I would expect that, you know, that'll just continue to uptick during the course of the year. Look, there's a lot of dynamics here. You're all seeing this. It's very public. You know, there's new challenges in the auto supply chain due to the war in Ukraine and, you know, shutdowns in China because of COVID cases, which we obviously hadn't expected at the beginning of the year. But I think we're very keyed into the third-party estimates for SAR, and that suggests that the auto sales will continue to come up over the course of the year. I feel good about some of the comments from the automakers and their earnings calls over the last couple of days. It sounds like they continue to see strong demand, as evidenced by the higher prices, and are looking for production to increase throughout the year. The used car dynamics are shifting around a bit. I mean, we definitely have seen some pressure on used car sales generally in the industry because of the high prices. Now they've come down a little bit. But we have this organic increase in our pen rates and are continuing to grow our distribution channels. So we feel good about the trial funnel starting to come back over the course of this year. And on the churn side, you mentioned vehicle-related. We did have a tick down in the first quarter to 1.6%, slightly lower than the 1.6% I think we had last year in the first quarter. It was a really strong result. We continue to see, I think, really strong performance on the voluntary side. Vehicle-related was actually up a little bit, and non-pay continues to hold it relatively low. low level. So, you know, I think 1.6 is, you know, not where I would expect the rest of the year to be, but it's a good start to the year and really encouraged, you know, by the retention among our self-pay base, which, you know, clearly shows up in the voluntary side.

And Steve, just on capital allocation, again, we are continuing on focused on the organic investments. We talked about content. We talked about sales and marketing. We really want to build the funnel around digital. So obviously that's our highest and best use. We'll look at M&A. I think we're very comfortable in the low to mid threes. To the extent we would take that higher would be something opportunistic, but probably temporary and short term at the moment. So we'll be guided by EBITDA growth. We'll be guided by free cash flow. We'll be guided by the stock price in terms of our grid and the activity and the pace of our share repurchase. So I think what we did in the first quarter is not dissimilar to what you would expect in terms of pacing. But, again, we're going to be opportunistic, and the beauty is it's a flexible allocation policy that we have, and we can pull the levers as the situations and facts and circumstances change. So that's how we look at it. No real change from what we said historically.

Great. Thanks for all the color.

Thank you.

Thank you. We'll take our next question from Barton Crockett with Rosenblatt Securities.

Great. Thank you for taking the question. I wanted to ask about the inflationary environment, which really hasn't come up on your call, which is curious because it's coming up everywhere else that people are talking about business right now. So I'm wondering, from your perspective, in this environment, do you have greater ability to drive up pricing Do you feel that with an inflationary backdrop like this? Does that matter? And on the cost side, does it impact you? I suspect there might be a situation where you can raise prices more than you see costs grow, so it might be margin positive, but I was wondering if you could address that.

Yeah, I think, thanks for the question, Barton. On the inflation side, from a pricing standpoint, we took some rate actions, which we've talked about in the fourth quarter, both on our full price side and our promotional plans. And we've benefited. I think we saw some initial subscriber reaction, but we're through that. And I think the timing was actually pretty good. In the past, we've had a large amount of success in terms of raising prices. But we're always mindful that our primary competition, certainly in a vehicle, is free. And we need to be very careful about how we look at rate increases going forward. And we, again, we're not just focused on the rate increase. We look at revenue overall. So, you know, there is some balance clearly on demand. You know, I suspect there is more demand at the lower end. And so, you know, we'll continue to look at opportunities there. But I think the inflationary trends have only helped on the pricing side and on the cost structure. John, you can chime in, but I think a large part of our cost structure is not tied to rises or increases in commodity prices or things like that. I mean, we have a lot of our economics tied into relationships with third parties that are a percentage of revenue. So that's affected by where revenue is going in general. Is there anything else on that?

Yeah, nothing more material. Again, some of the module costs, obviously wages and labor, really, at the end of the day. I think Scott talked about the content marketplace. So all in all, I think we feel good about the resiliency of the business in the context of an inflationary environment.

Okay, that's great. Thanks a lot for the color. Thank you. Our next question comes from Kevin Monroe with RBC Capital Markets.

Good morning. Thanks for taking the question. I just wanted to dig into advertising. You continue to see strength there with strong monetization on Pandora and off-platform as well as continued growth with podcasting. That said, a number of other companies have called out some recent pressures or at a minimum some limited visibility heading into Q2 given the broader macro issues. So I was hoping for some more color on the trends that you're seeing and expectations throughout the year. Thanks.

Sure. So, you know, from an advertising, I certainly have heard the comments from some of the other conference calls this week. I guess from our perspective, you know, top line feel great about digital audio advertising over the long term. As you know and we talked about, we are making meaningful investments in our podcast business, and some of those big deals that we've done are just onboarding and really need to be fully absorbed to ramp monetization. So from a supply side, we feel very good about the available capacity to monetize. The sales team has done a wonderful job in terms of you see our RPM, you see the ability to monetize. You know, again, there's definitely some caution out there around certain advertisers, CPG specifically. So I think there may be some near-term, you know, I guess hesitancy, deferrals, et cetera. But over the 22 timeframe, we feel good about the supply. We feel good about where the demand is and our ability to monetize it. I don't know if Jennifer has anything you want to add to that.

Yeah, I would just add that, you know, I think what's been great about adding podcasting to the mix is that we have a really strong brand presence on the Pandora side of the business where we have really extensive relationships there. And we have really strong D2C representation on the SiriusXM broadcast side of the business. And so we can ultimately build the right mix in podcasting. Podcasting has largely been a DR brand. advertising opportunity. And we are bringing more brands to the podcasting opportunity. And we also have the opportunity to build the relationships across SiriusXM and podcasting on the VR side. So the cross-selling opportunity is something I think is really strong for us and unique to us. And again, any kind of headwinds that are coming, Given the hesitancy that Sean mentioned, I think we can offset in some part based on what we have in terms of opportunities in that area in cross-selling.

That's great. Thank you both.

Thank you. Our next question comes from Steven Lessig with Goldman Sachs.

Great. Thank you. Maybe a follow-up for Jennifer on podcasting. You mentioned the sales and distribution deals. You added the podcasting in the quarter. Could you maybe talk about how much opportunity, how much more opportunity you think is out there to sign more of these representation deals going forward? And then maybe for Sean, could you talk a little bit about maybe what the economics for these representation deals look like for you to help us think through the revenue and EBITDA contributions as more of these deals come on?

I'd say, and Scott, you can jump in, but on the ad rep deals, a lot of the big podcasts, the top 10, top 15, have really traded. I'm not sure there's a lot of opportunity to add large amounts of inventory there. Of course, there'll be up-and-comers and other podcasters emerging, but we have a lot of strong names and that, as we talked about, we have three soon to be four in the top 15. The inventory we have is largely set, I'd say, probably for this year. Of course, we'll be opportunistic in looking at other deals as they might come available. But that's, I think, largely set for the year. Scott, did you think?

Yeah, Jennifer's statement is obviously correct as to where it stands today. What I do think is going to emerge is you're going to see genres become very strong. So true crime, comedy, and I think politics as we get into election season will continue to grow. So having anchors like Crime Junkie, Crooked, and Coco and things like that allow us to be in a position where we'll be able to grow brands underneath that that hopefully will be the next group that hits the top 10 or 20 on that and will be in early on those. So I think those will have a different economic portfolio. And a lot of those won't be just ad rep deals. They'll be deals that we have broader rights on and broader creative involvement with. So I'm optimistic that while the top 15 is, and we love our position in that, is somewhat static right now, it's clearly going to evolve and is evolving where things will come out of those genres. And like normal succession in music or film or others, there'll be others coming in there. And we think we're positioned pretty well in the big genres.

Yeah, and then, Steve, just to follow up on your last point on the economics, they're generally revenue-shared deals with minimum guarantees. Obviously, they do need to ramp as onboard. You saw some of that pressure in the margin in the first quarter. And our hope and expectation is that these deals have a gross margin profile that's not dissimilar to where the segment is today.

Great, thanks for the call, Isaac. Operator, next question, please. Sorry about that.

So we'll now take our next question.

We'll take our next question from Grant Jocelyn with Credit Suisse.

Hey, good morning. Could you help us take apart the really strong CRI ARPU growth in the quarter and understand how much of 1Q's strength was flow through the fall price increase versus subscribers choosing to tear up to the premium plans or other factors? Thanks so much.

Yeah, I mean, certainly a big part of it is the roll through of the rate increase in the fourth quarter and also some of the actions we took on promotional pricing. at the lower end, but we are seeing strong demand for our Platinum VIP plan, and I do believe there's opportunity probably even above that. We have such loyalty among our subscriber base that there are, I think, other creative ways that we can add value and create packaging above that, and some of that's just become clear because of the demand for PVIP, and Yeah, PVIP, it's a $35 price point. We haven't seen any decrease in kind of the take rate on our platinum plan, which is, you know, right below that from a pricing standpoint. But the other factors in ARPU are, you know, clearly that, you know, the ad revenue continues to recover and perform nicely on the SiriusXM side. So that's helped as well. Is there anything, Sean, I missed on?

No, I think that covers it. Thank you.

We'll take our next question from Jim Goss with Barrington Research.

Thanks. A couple of questions. One, I'd like a little more discussion about the ad sales process. You have a great breadth of the audience, but a variety of demos and geographic focuses. And between Pandora, Sirius, and podcasting, there are a lot of opportunities, a lot of complications, and I'm just wondering if you can discuss the process you go through and the sales group you try to assign and the incentivization you might provide in order to advance the whole ad sales category.

So, look, I can give you some more color. You know, there's We are, as I mentioned, I think being effective in cross-selling with broadcast on the Series XM side, with podcasting, and with, of course, the significant contributor we have with Pandora. And the teams, we are continuing to find ways to sell more effectively across the teams. It was just last year that we really brought everything together under SXM Media and that banner. And so bringing kind of the best practices we've had in these individual areas all together collectively, I do believe is going to continue to help us sell more effectively and take advantage of opportunities. I mean, we have not exhausted every opportunity here, right? There is more opportunity in programmatic. You know, there are probably more opportunities on our self-serve platform through ads with You know, there's definitely some opportunity for us to continue to roll out our audio ID product, you know, in terms of better targeting for advertisers. And, you know, as I talked about earlier, we have these great relationships with brands. We also have these great relationships with, you know, kind of the direct response advertisers and making sure that we're bringing them you know, effective products across our inventory, there's just, there's more room there. And, you know, we have, as we've talked about, I think a lot on the call, we have great representation deals on the podcasting side, you know, with Conan and, you know, Megyn Kelly and NINPI and NBC and Last Podcast on the Left and Crooked and Crime Junkies. So we're well represented across, you know, the inventory with different demos and you know, in younger around podcasting all the way up to, you know, probably slightly older demo on SiriusXM. So, you know, I believe we are really well positioned here.

Okay. And one, thank you. And one other area, I thought it was a good point that your improved usage is offsetting the softness in auto sales. And there's somewhat of a capacity utilization aspect of this, if you will. Because you're hitting an inflection point where the relative importance of the other listening avenues are creating a benefit that might provide an upward bias in the revenue opportunities. And I'm wondering if there are metrics you use or we should embrace to evaluate the growth progress in the absence of some traditional drivers, especially SAR, for example.

Look, the usage, of course, we're hampered in some ways on the satellite side. We don't have a lot of usage statistics. But with 360L rolling out, we're getting more and more data. And as we've talked about, our satellite subscribers are using our digital products more and more, and we get usage information there. And I referenced a stat in my comments about on-demand listening increasing in 50% year-over-year, you know, the listeners of on-demand content. And we've also had a nice uptake on extra channels listening as well. And I believe that's just a sign of our customers wanting to be able to customize their listening more and more, right? It's happening, you know, all over media. And in some ways, we've achieved this tremendous success over all of these years of without that capability. And there's just more and more for us to do in the car and on the apps, which will help with satellite subscriber acquisition and retention and digital acquisition and retention in terms of providing more personalized recommendations. We have, I believe, improvements coming in the next few months here that will roll out to 360L vehicles on the road and all of the apps, of course. And it's just I really am confident there's an untapped opportunity here because we know it works with other companies, whether it's video or otherwise, and if we can provide those personalized recommendations to our customers, they will listen to more content, find more great content that they love, and we just haven't been able to do that in the car, and we will.

No, thanks. I mean, I agree. I think there's an upward growth bias that tends to get lost in the shuffle of focusing on auto sales alone with the various things you've been doing. And trying to measure that is a good thing too. Okay. Anyway, thank you very much.

Thank you. We'll take our next and final question from Sebastiano Petty with JP Morgan.

Hey, guys. Thanks for the question. I just wanted to see if you could help us think about the off-platform growth in the quarter, you know, obviously talked about it here during the call and we're pretty positive on it coming out of the fourth quarter call as well. And can you help us think about what, you know, the revenue growth there, what is, you know, owned and operated for lack of a better term, you know, stuff that you guys are now just kind of integrating, I think, you know, as Scott mentioned, or just bringing online. versus new partnerships and just new, perhaps, inventory that you're getting from some of these deals outside of the SiriusXM family or ecosystem. Just some color around that would be great.

Yeah, I'll start, Sebastian, and, John, you can pick up if you have something to add. But, you know, look, Auth Platform is, by its nature, not owned and operated. And that's why we've provided some clarity in kind of the segment name. And the growth there covers everything from podcasting to tech fees from AdsWiz, as well as some of the marketplaces we have where we're selling third-party inventory. And we're seeing nice growth across all of those pieces. Of course, Podcasting is growing in particular because of the new ad rep deals we've been adding, and so we have more inventory there. But we have a lot of other relationships out there, whether it's SoundCloud, and we're ramping up in Europe, or Adobe, and we've set up these various marketplaces for both general advertising on the music streaming side, but also in podcasting. So, you know, there has been growth across all three of those areas, I'd say, you know, podcasting, the tech fees, and, you know, the other off-platform audio sales that we do in music and otherwise.

Yeah, so, you know, we'll continue prospectively, especially auto, to provide some color in terms of, you know, what's O&O, what's on Pandora. Obviously, you see the dynamic around MAUs and ad hours. and we've added a bunch of ad sales representation deals. So we'll try to continue to provide an update in terms of what those podcasts off-platform are driving in terms of growth on a quarter-to-quarter basis.

Thank you. And Sean, one quick follow-up on, I think, in your prepared remarks, the substantial majority of growth coming in the back half of the year. I mean, does that imply some growth for the first half of the year in terms of self-painted ads?

Yeah, I don't think we're providing a second quarter. Again, I'm going to leave it there, Sebastiano. We talked about where SAR is, where the trial funnel and trial starts are. Certainly coming into the year was probably a little more optimism than where we sit today in terms of the marketplace. But, again, we feel confident for the full year number and the majority of it coming in the back half.

Great. Thanks again. Thank you, Sebastiano. Thank you everyone for joining today. We'll speak to you soon.