SiriusXM Holdings Inc.

Good morning and welcome to Sirius XM's second quarter 2022 financial and operation 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 would like to turn the conference over to Hooper Stephens. Senior Vice President, Investor Relations and Finance. Mr. Stephens, please go ahead.

Thank you and good morning, everyone. Welcome to SiriusXM's second 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 on duly 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.

Thanks, Hooper, and good morning, everyone. Thank you for joining us today. We are pleased with our results in the second quarter of 2022. While we continue to navigate variability in customer and market demand, we delivered strong financial performance with record low churn. By leveraging our balance sheet and scaling key growth initiatives to deliver best-in-class content to our customers, we are setting SiriusXM up for future expansion and solid financial performance. Into the second half, we remain committed to building on that momentum, by making the strategic investments necessary for our long-term success while continuing to exercise financial discipline. SiriusXM added 23,000 net new self-paid subscribers and 54,000 paid promotional subscribers in the second quarter. Despite a slight sequential uptick in April, SAR saw further weakness in May and June and ended the quarter down 4% from Q1 and 20% year-over-year. While we are confident we can deliver positive self-pay subscriber growth, we no longer expect to attain our prior subscriber guidance due to challenges and uncertainty in new and used auto sales. However, with strong, predictable, subscriber-driven revenue, we are able to reiterate all of our financial guidance. There is growing uncertainty in the advertising market where we generate significant revenue with high variable margins, so we are prudently implementing a variety of cost-saving measures such as limiting our headcount growth to priority roles and taking a more measured approach on discretionary spending. While we manage through prolonged supply-related challenges in the auto industry, the strength of SiriusXM's brand and uniqueness of our product, which is evidenced by our large subscriber base and outstanding churn rate of 1.5%, remains extremely attractive to automakers, which continue to see us as the premium audio entertainment provider of choice in North America. Our new and used car penetration rates grew to 84% and 51% respectively, and our enabled fleet is now approximately 145 million cars. In the second quarter and looking ahead, we continue to build on these long-term relationships. We completed several extensions with automakers this quarter, including Mazda and Mitsubishi. We continue to make progress in deploying our 360L platform and saw an uptick of two points in our mix from Q1. While we aren't announcing anything specific today, we are also making progress with several EV startups and look forward to sharing more with you in the coming months. While our in-car subscription growth continues to see the impact of the macro auto environment, we are seeing solid uptake of our streaming-only subscriptions, and these offerings are a meaningful driver of subscriber growth this year. Recognizing this growing opportunity, we are evolving our business to focus on listening both in and outside the vehicle. SiriusXM holds a differentiated content position, and we are building on the strength of our in-car business, brand awareness, and robust business model to expand our streaming business and our total addressable market in an exciting and meaningful way. The initial consumer response to our streaming efforts has been encouraging, and we expect this to be a much more significant part of our business in the future. In the second quarter, we also continued enhancements to our commerce experience to enable and ease signups on key connected TV platforms, including Amazon Fire, Android TV, LG, and Roku. We also closed on a new agreement with Comcast, our first broadband TV provider, which includes launching a fully integrated SiriusXM audio experience to millions of Comcast customers on the Xfinity platform, which will also support video later this year. All of these initiatives create new ways to reach and engage consumers, both those who already have a satellite subscription in their cars and those who may be new to the service, enhancing the SiriusXM brand and its relevance as we work to build the future of curated audio entertainment. Consumers have multiple options to stream their favorite music and playlists. However, SiriusXM remains the premier provider of live, human-curated music and audio entertainment, and combined with interactive and on-demand capabilities, we create unparalleled listening experiences to meet the needs of our audience. Fans can interact live with their favorite hosts like Sway, Megyn Kelly, or Howard, or enjoy curated content experiences with major artists, including our exclusive special invitation-only events. In addition, this quarter we created pop-up channels for Black Music Appreciation Month to celebrate the music of Black artists such as Whitney Houston, Tupac, Biggie, and Prince. We also hosted a diverse roster of events, including a concert cruise in New York City with Yacht Rock stars Kenny Loggins and Christopher Cross, and small stage series concerts with the Grammy award-winning rapper 2 Chainz in Atlanta and Def Leppard in Los Angeles. While traditional content still drives the majority of in-app listening, unique content like this contributed to a 41% year-over-year increase in on-demand music listening in the SXM app. Tonight's Monoskin Small Stage Series event and Pearl Jam at the Apollo this fall in New York are just two examples of the exclusive experiences we continue to deliver to our subscribers this year. In addition to our exclusive and on-demand content, the SXM app is home to over 200 extra channels. These have the DNA of SiriusXM channels, but are more finely curated for mood and activity-based listening. These extra channels continue to drive the largest share of listening outside of live programming in our app. Looking holistically across both in-car and streaming listening, this quarter we saw strong performance in music, sports, and comedy. In music, Drake's SiriusXM channel, Sound 42, which launched last year, showcases boundary-pushing hip-hop and R&B and continues to bring in new audiences. Last month, he surprised fans with the premiere of his new SiriusXM radio show, Table for One. The first episode dropped in tandem with his surprise album, which broke multiple industry charts. Looking at our streaming metrics, total daily listeners and time spent listening to Sound 42 were up 50% on average following Drake's June 16th album drop. In sports, SiriusXM offers a differentiated value proposition in an increasingly complex and fragmented media space. With video, sports fans are required to have multiple subscriptions to watch it all, whereas SiriusXM offers one-stop shopping for all of a sports fan's audio needs. This quarter, we saw one of the strongest sports calendars post-pandemic, and SiriusXM subscribers had a front-row seat to all the action. We delivered coverage of the biggest events, including the Masters, the PGA Championship, and the U.S. Open, the Men's and Women's NCAA Final Four and National Championship Games, every MLB game starting with opening day and the Indianapolis 500. As a result, overall sports listening in the SXM app continues to increase, and we are investing in exclusive content rights to expand our offering. Most recently, our NFL renewal and expansion agreement makes SiriusXM the exclusive third-party home to all NFL games and gives us additional rights and opportunities to expand our coverage, plus original content produced by the teams that will be available only on the SXM app. Also, in May, we announced a multi-year extension with Formula One, ensuring our listeners continued access to every F1 race, a fan favorite. Lastly, comedy continues to be a key content vertical for SiriusXM, and our recent acquisition of Team Coco marks the latest addition to our ever-growing portfolio. The deal provides significant value on the podcast ad network side, and opportunities for us to grow paid subscribers with exclusive content. Team Coco staff, now part of the SiriusXM team, will continue to produce the network's slate of popular podcasts while collaborating on content exclusive to SiriusXM. Today, I'm excited to announce that we will be launching the inaugural Team Coco channel this fall, a full-time, original Team Coco comedy channel available only to SiriusXM subscribers. Conan and team are hard at work creating a unique experience for the channel, and we'll have more to share on this in the coming months. But you can expect to hear all new original and exclusive content, along with his most popular podcast, stand-up clips, and interviews from his long-running TBS show. Before I turn it over to Sean to review the financials, I also want to spend a few minutes on SXM Media, our combined advertising sales group. We continue to be a leader in digital audio advertising. and in podcasting specifically. Per Edison Research, we are the number one podcast advertising network in weekly U.S. listeners and represent four of the top 15 podcasts in the country, including Crime Junkie, Office Ladies, Dateline NBC, and Pod Save America. People are listening to more audio on more platforms than ever before. According to the Edison Research Share of Ear report for the second quarter, Americans are spending 20 more minutes per day listening to audio, a 9% increase compared to Q2 2021. We are well positioned to benefit from these trends, both in our listening platforms and in our ability to bring broad solutions to advertisers. While our advertising business is not immune to the macro trends felt industry-wide, we are seeing growth in our ad business, particularly on the podcast side, as we continue to build our off-platform relationships and capabilities. Our total audience reaches 150 million listeners, including SiriusXM, Pandora, SoundCloud, and our broader podcast and off-platform network. Additionally, we continue to deliver best-in-class technology solutions, advancing the podcast ecosystem. Earlier this month, we released new AI-powered podcast audience targeting capabilities as part of an expanded agreement with Comscore to help accelerate our opportunity to monetize impressions and transform the market as we did in music with Pandora. SiriusXM remains an industry leader in podcasting, producing continuous positive gross margins thanks to our disciplined approach, rich content, and constant efforts to bring value and entertainment to listeners, content creators, and advertisers. Looking ahead, we remain focused on increasing the underlying resiliency of our business to continue delivering one-of-a-kind content and value for our customers and strong and sustainable financial results for our shareholders. We remain committed to our long-term focus of shaping the future of audio and broadening our revenue base into non-automotive markets, and we are excited by the early strides our new team is making on the technology and product side. Later this year, we will deliver improved in-app personalization to drive content discovery and enhance CarPlay and Android Auto integration, and we will continue to expand and innovate our product offerings. Ultimately, this translates into solid revenue growth margin expansion, and strong cash flow generation, which can be reinvested in the business to create better products for our customers and more robust capital returns for our stockholders. With that, I'll turn the call over to Sean to go through the financial highlights in more detail.