SiriusXM Holdings Inc.

Greetings. Welcome to SiriusXM's third quarter 2024 operating and financial results conference call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If you'd like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to withdraw your question from the queue. For participants using speaker equipment, It may be necessary to pick up your handset before pressing the star keys. If anyone today should require operator assistance, please press star zero from your telephone keypad. Please note that this conference is being recorded. At this time, I'll turn the conference over to Hooper Stevens, Senior Vice President of Investor Relations and Finance. Mr. Stevens, you may now begin.

Thank you, and good morning, everyone. Welcome to SiriusXM's third quarter 2024 earnings conference call. Today, we will have prepared remarks from Jennifer Witts, our Chief Executive Officer, and Tom Berry, our Chief Financial Officer. Scott Greenstein, our President and Chief Content Officer, will join Jennifer and Tom to take your questions during the Q&A portion of this call. 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'd 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 and the Liberty Media transaction. Additionally, we have posted a supplementary presentation on our investor relations website for your convenience. With that, I'll hand the call over to Jennifer.

Thanks, Hooper, and thank you all for joining us this morning. It was a milestone quarter for us at SiriusXM as we completed our transaction with Liberty Media and emerged as a fully independent public company. We are excited to reintroduce our business to the market, showcasing the actions we are taking to stem and reverse recent subscriber declines and enhance free cash flow generation, driving toward our long-term targets of 50 million subscribers and $1.8 billion in free cash flow. To achieve these goals, we expect to leverage the power of our full portfolio to grow our core business through the expansion of a free ad-supported tier of SiriusXM and the introduction of a premium interactive bundle both in-car and in-app. With each of these initiatives, we will be building upon the broader tech replatforming we began last year, as well as the insights we've gained from Pandora and our other business units, to deliver more value to our customers across an expanded set of offerings, drive discovery of our exclusive content, and give subscribers the control they crave. As we continue making progress in the evolution of our business, we will share key updates to illustrate how we are measuring against each of our objectives, from enhancing our subscription business across content, technology, and price, to building our advertising business and maintaining our financial strength with ongoing business optimizations. Jumping into the third quarter, we are pleased to have delivered 14,000 self-pay net additions and improvement of 110,000 from last year's third quarter, and we still expect our full-year subscriber performance to be slightly better than last year's. Our advertising revenue was softer than expected. With lower demand due to a flood of new CTV supply entering the market, advertisers spend shifting toward performance products, a truncated election cycle, and lower-than-expected podcast inventory. We expect this shift to also impact fourth-quarter ad revenue, and as a result, we are lowering our revenue guidance by $75 million. While we aren't happy with these near-term numbers, I want to reiterate our confidence in our advertising business and the long-term potential it has to support growth of the company. One of the biggest announcements from the past few months was our new exclusive agreement with Alex Cooper's Unwell. The podcast network, including its flagship Call Her Daddy, has strong resonance among millennials and Gen Z. We see enormous opportunity here to both bolster our ad offering, where we are already seeing positive momentum in the market with presenting sponsorships selling out quickly, and drive subscribers to SiriusXM with exclusive new programming from Alex and the entire Unwell Network coming early next year. We're proud to be home to so many powerful voices like Alex and a platform for important conversations across every topic and fandom. In the past six months, the sitting president, as well as both presidential candidates and their vice presidential nominees, appeared on SiriusXM Talk and podcast programming for exclusive in-depth conversations showcasing the power of our platform and the impact of our audience. News, politics, and sports are areas where live, up-to-the-minute content is critical, and we are the go-to audio destination for listeners who don't want to miss a moment. We are seeing double-digit percentage increases in news and politics programming, both in terms of the number of listeners and hours listened. This quarter, we launched new shows from former U.N. Ambassador Nikki Haley and rising political voice for Gen Z, Dylan Douglas, providing perspectives from both sides of the aisle. And with sports listenership rising quarter over quarter and the football season now underway, we've introduced new expert commentators into our lineup, including legendary football coaches Jimbo Fisher and Bill Belichick. As podcasting's role across our business continues to expand, this quarter we released a series of updates to our app focused on improving the podcast listener experience and enhancing discovery. These features allow us to better serve our current and future customers as we continue to see upticks in podcast listenership across both our core and growth audience segments. We also launched a new feature, which makes it seamless for in-car subscribers to download and sign into our app from the vehicle display, allowing them to easily access even more content and features such as on-demand. Over the last few weeks, we began scaling our new personalized customer journeys to the majority of our new and used car trialers. Initial results show these journeys are leading customers to listen at higher rates early in trial. In addition, our streaming journeys continue to evolve and are driving an increase in the number of days active in the first month for some key cohorts. All of these are key leading indicators for the business, and it will be critical for us to scale and sustain these increases throughout the trial and self-pay lifecycle in order to drive improvements in conversion, retention, and overall customer satisfaction. This quarter, we continued to expand our wholesale three-year subscription program with the addition of Toyota, and we now have nine OEMs participating. Early results for this initiative are encouraging, as dealers are showing interest in ordering vehicles with this added value feature. This program and additional automotive initiatives, such as expanded used car programs that help us identify and provide trials to new owners at point of sale, are driving subscriber performance, while some of our bigger picture initiatives ramp up. The same can be said of our Podcast Plus subscription in relation to our streaming subscribers, where positive momentum contributed to our sub-growth this quarter. As we look to build value with new customers, earlier this month we began to roll out our new in-car pricing and packaging structure. Now, pricing for both streaming only and in-car begins at $999, a compelling price that makes SiriusXM competitive with other audio subscriptions and a strong complimentary service for audio enthusiasts. For in-car subscribers, the $999 price point offers access to every one of our incredible music channels in the car and on the app, with the ability to purchase add-ons for sports, talk, and news, providing subscribers with more flexibility than ever before. We believe this will both attract listeners who may have been left behind by our premium price packages and allow us to move away from discounted pricing by enabling price-conscious subscribers to tailor the package to their interests and budget, instead of relying on short-term promotional packages. We've also been pushing more features and content into our plans, which help drive broader demand, reduce churn, and support future price adjustment. These updates provide expanded content, additional features, and greater accessibility across our most popular offerings. This includes access for all our subscribers to artist stations, allowing for greater personalization to be enjoyed by all, and the ability for platinum subscribers to stream on up to three devices simultaneously, which should help introduce new listeners within families. as younger generations take advantage of their parents' subscriptions and become fans themselves. And in an effort to continue providing even more value to our Platinum customers, as well as win-back subscribers who did not convert, we launched the next phase of our Walmart collaboration this quarter, giving six months of their Walmart Plus service to our customers at no cost. Walmart will also be providing extended trials of SiriusXM to their customers, And this month, we announced a new agreement with ESPN Plus to provide extended trials of each service, highlighting the sports prowess of both brands to dedicated fans. Switching gears to our advertising business, as noted, several factors are impacting our digital audio ad business in the second half. We are responding by investing in our ad tech stack and pursuing collaborations with industry leaders where we can offer better targeting and measurement, such as our new agreement with LiveRamp, which enables a first-to-market data cleanroom for audio for Group M clients. And within podcasting, recent agreements with Unwell and SmartList are opening up new opportunities and inventory. Across the board, we are committed to maintaining our financial strength with ongoing business optimizations. We are advancing scalable AI and automation tools across our business, and our AI customer agent work is already exceeding our expectations. Additionally, this quarter we opened our Irish Technology Center, which will allow us to manage our product and technology investments in a tax-efficient, business-minded way. In closing, we remain focused and disciplined in our approach to continuing our long-term financial success and putting ourselves on a path for both subscriber and free cash flow growth. We are spearheading rapid initiatives each quarter to capture demand and retain our base. Simultaneously, we are building long-term solutions to enhance our value and drive sustainable growth. With subscriber growth for the quarter, consumer excitement around our exclusive programming, and new features and pricing now in market, we are excited about the opportunity ahead. And now I will pass the call over to Tom to share more on the financials.

Thank you, Jennifer, and good morning, everyone. Today, I'm excited to walk you through our third quarter financial performance, highlight some key operational milestones, and share more details on our outlook. Afterwards, Jennifer and I will be happy to take your questions. In the third quarter, SiriusXM delivered revenue of $2.17 billion, a decrease of 4% compared to the same period last year. primarily driven by a 5% drop in subscriber revenue to $1.65 billion and a 2% decline in advertising revenue to $450 million. Self-pay SiriusXM subscribers increased by 14,000 this quarter, a notable improvement compared to the same quarter last year, driven primarily by lower churn. Additionally, we saw an expected decline in paid promotional subscribers, as new agreements with certain OEMs move new car trials from paid to free. These changes will benefit the company over the lifetime of the vehicle by maximizing profitability of subscribers coming from those OEMs. Turning to advertising revenue, we saw a modest $10 million decline year over year to finish the quarter at $450 million. As Jennifer highlighted, the decline was due to softer market conditions, increased competition, a shorter election cycle, and lower podcast inventory. However, we are actively investing in technology and distribution arrangements to position our advertising business for positive momentum in the years ahead. We saw a 6% increase in podcast revenue with demand outpacing supply, including the fourth quarter launch of Unwell on the SiriusXM podcast network. Looking ahead, we see a significant opportunity to capture a larger share of non-audio ad dollars by expanding our 360-degree marketing solutions, integrating social and video to drive growth. Adjusted EBITDA for the quarter of $693 million decreased by 7% year-over-year, driven by softer subscriber revenue offset by savings and cost of services, personnel-related, and certain G&A expenses. This produced a relatively stable adjusted EBITDA margin of 32%. We are maintaining a disciplined financial culture and remain firmly on track to achieve our $200 million cost savings target for the full year 2024. Most of these savings are being reinvested in the business to fuel our transformation and longer term strategic goals. Let's dive deeper into our segments. Starting with the SiriusXM segment, which generated 1.63 billion in revenue in the quarter. This includes subscriber revenue of 1.51 billion, a decline of 5% year over year, and advertising revenue of 41 million, down 2%. In the third quarter of 2024, our total ARPU declined by 53 cents, ending the quarter at $15.16, compared to $15.69 last year. This reflects an increase in subscribers on promotional rates and streaming-only self-pay plans. As Jennifer mentioned, our long-term focus is on driving overall subscriber revenue and all of our efforts. From new pricing and packaging options now being rolled out to the recent subscription value adds designed to improve demand and support future rate adjustments are in the furtherance of this goal. Gross profit in the SiriusXM segment reached $969 million, a 7% decline compared to the previous year. This brought our gross margin down to 60%, a 1 percentage point drop. Subscriber acquisition costs were $90 million compared to $87 million the same period last year. Shifting to the Pandora and off-platform segment, revenue remained relatively flat at $544 million. This was driven by a 2% year-over-year increase in sub-revenue tied to rate increases on our Pandora subscriptions. Segment ad revenue declined by 2% to $409 million. Pandora ad hours totaled $2.47 billion, a 7% decline, while average monthly listing among ad-supported users remained stable at 21 hours. Gross profit in the Pandora and off-platform segment was $187 million. an increase of 4% year over year, reflecting a point of improved gross margin at 34% as we get better at monetizing our podcast portfolio and seek to refine and improve upon existing deals. There are a couple of housekeeping items that I'd like to talk about that are related to the closed Liberty Media transaction, including impairments and the transaction's impact on free cash flow. In connection with the Liberty transaction in the third quarter, Prior to the close of the transaction, Liberty completed an assessment of the fair value of the company's goodwill based on sustained lower share price, as SiriusXM's share price converged with those of the Liberty tracking stocks heading into the close. As a result, a non-cash impairment charge of approximately $3.36 billion was recorded. This non-cash charge does not impact the company's cash flow, ongoing operations, or liquidity. Additionally, following the transaction's close, we revised our guidance for free cash flow to approximately $1 billion. This adjustment incorporates an additional $215 million in deal-related cash costs, which includes transaction fees, year-to-date legacy liberty operating and interest expenses allocated to the serious tracker, and post-close interest costs. Of this, approximately $180 million has been paid by September 30, with an additional $35 million expected in the fourth quarter. Free cash flow for the third quarter was $93 million. The decrease from last year was due to approximately $72 million increase in Liberty transaction-related costs, along with lower cash receipts, higher programming payments, and elevated CapEx. partially offset by lower cash taxes paid. Looking at CapEx on the non-satellite side, we continue to expect spending this year of about $450 to $500 million. This will continue at a similar level next year, driven by continued investments in our new tech platform and upgrades to our repeater and broadcast infrastructure. Starting in 2026, we anticipate a decline in non-SAT CAPEX to below 400 million. We project satellite CAPEX spending of approximately $300 million this year before seeing a steady reduction to near zero by 2028 and beyond. Along the way, we expect about 180 million in SAT CAPEX in 2025, 95 million in 2026, and 45 million in 2027. Our capital allocation priorities remain consistent. First, investing in our business. Second, returning to our long-term leverage target of low to mid three times adjusted EBITDA. And third, continuing our opportunistic capital return posture with priority on maintaining our regular quarterly dividend while we deliver. And remember, economically, The Liberty transaction represented a leveraged share shrink that reduced our shares outstanding by 12%. During the third quarter, SiriusXM paid $103 million to shareholders through our dividend, and we closed the quarter with a net debt-to-adjusted EBITDA ratio of 3.8 times. And as Jennifer mentioned, for the 2024 guidance, we are adjusting total revenue down by $75 million to approximately $8.675 billion on softer ad revenue. However, we are reiterating our guidance to adjusted EBIT of approximately $2.7 billion and free cash flow of approximately $1 billion. Lastly, we remain committed to enhancing communications with our shareholders. As Hooper noted, we added an earnings presentation to our IR site, which will continue to evolve as part of our effort to improve transparency. We are also exploring additional ways to further enhance our disclosures around operating performance and financials. More to come. Operator, let's open the line, and Jennifer and I will be happy to take questions.

Thank you. At this time, we'll now be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to withdraw your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, so we poll for questions. Thank you. Thank you, and our first question comes from the line of Cocon Moral with Evercore ISI. Please proceed with your questions.

Good morning, and thanks for taking the question. Just one, it's certainly encouraging to see the efforts on the pricing and packaging side. I was hoping you could expand a bit more on how you're looking to balance the opportunity to expand your TAM and go after new subscribers. versus the risk of pricing down your existing subscriber base over time. Thank you.

Sure. Thank you, Cook. And we actually have not seen a lot of the impact of the pricing and packaging strategy in the current numbers yet. We're just starting to roll out on the in-car side of the business, the $9.99 lead price point. And we're starting to roll that out in trial starts this quarter, which means that Those trials will convert on a promotional plan, but they will have selected the new price point, which starts at $9.99 for music only plus streaming, but also we have a series of $5 add-ons on top of that. So we'll start to see the impact of that going into next year, but we are very encouraged by the results we saw in initial testing, which shows that after that post-trial promotion, retention is much higher because there's a lot more transparency and consumers value the persistent lower price point. Now, I don't expect it to have a lot of cannibalization impact as these are new subscribers rolling through on trials, but we do have a lot of levers to pull in order to manage that, whether it's you know, value through enhanced content, access, or features, and we've already started to roll that through our packages ahead of this new pricing going in place. So, you know, Tom and I mentioned some of this earlier, but adding, putting our better programming around live sports and Howard, for instance, in our broader package, moving that down in the packaging stack as well as, you know, adding at the top, more concurrency so people with streaming logins can listen in multiple places at the same time. So I do believe we'll be able to manage this very effectively. We also have a $10 streaming price point in market, as you know, and the audiences that are choosing streaming only are very different than the in-car audiences, and I think we have the opportunity to continue to increase our overall revenue optimization by strategically focusing on those segments very differently.

Perfect. Thanks, Jennifer. Our next question is from the line of Jessica Ehrlich with Bank of America. Please proceed with your questions.

Thank you. This one's for Scott. There's just a lot going on in content, and I was hoping you, I mean, you've added big name podcasts and talent, which you mentioned, but there's been several over the last few years. I think next year Howard Stern's contract comes up, so could you just talk about your Overall podcast strategy, how profitable can this division be? How quickly can you monetize Call Her Daddy? And then any preliminary thoughts on Howard's upcoming contract?

Okay, thanks. We'll take the podcasting first and then the Howard part. So on the podcasting, as we mentioned earlier on, there was always a strategy of getting to a point of mass to supplement our ad sales business as digital advertising was shrinking and all that went with that. Podcasts were the fastest growing digital audio for advertising demand. And we've seen that as recently as the fourth quarter. So at the time, a lot of the bigger shows had not settled into ad rep deals. So the goal was to get those and have a critical mass so the advertising business would fund it. I think we've done a pretty good job in showing that we can monetize podcasts as a company. Then the next goal, as you've heard me mention on the calls, was to look for talent and other content that could come out of those podcast deals. So what we did was in each of the deals we built in, in increasing amounts, exclusive content to test at SiriusXM or in our micro subscription at Apple. For instance, our Conan O'Brien channel now, according to Edison, is It got much more listeners than it had even a month ago. Unwell will launch two new channels in the first quarter. Smartless has given us early access to content and, as you know, major subscriber events, starting with the interview of Howard earlier this year. Mel Robbins just resigned with a weekly live show. So we're going to continue to look at that with the goal of testing and using data to figure out at what point something might make sense to go behind the paywall, either in all or in part. And obviously that shifts directly into our subscription business. The last point, which I think can't be overlooked, one of the core competencies of the company is curation. And podcasts continue to grow. They're all over the map. And it's very hard to sort them. Eventually, I think we'll be in a position on top of all of the above to be the definitive source of curating them into people's interest buckets and genres and other things. So I feel really good where we are. It's been consistent with what we've said all along and continuing to grow. The monetization is clear. You know, Unwell is already off to a great start. Smartless is well ahead of our projections, and we feel really good where those will go. As for Howard, he's a singular talent. No one pretended when Johnny Carson or others retired that the new group would replace them. They were just simply filling in on those slots. So Howard, we hope he continues forever. You heard last week his Bruce Springsteen interview. He continues to excel, get us awareness, and everything else that goes with what he does. Having said that, there's many demos that he may not hit as strongly, and whether it's Alex Cooper, Smartless, Conan, Andy Cohn, Ashley Flowers, we have so much talent hitting the top level of audio and different demos. We feel really good where we stand on that. And we're always opportunistic looking at talent, and the podcasting arena provides a lot for us to look at.

Great. Thank you so much.

Thank you. The next question is from the line of Stephen Cahill with Wells Fargo. Please proceed with your question.

Thank you. First, I was wondering if you could just give us any more color on the complexion of the self-pay net ads in the quarter. You talked about the promotional and the streaming subscriber additions. I think streaming total subscribers or net ads is something we're all focused on at this point. So I was wondering if you could just give us any more information on what those did, as well as maybe how the engagement looks like with those customer cohorts. And then, you know, Jennifer, as you continue to focus on the streaming audio product and you think about the competition in streaming audio, I was wondering if you think there's an opportunity to eventually shift that product to having some amount of on-demand music functionality. I know that would change the margins, but just wondering how you think about the evolution of the streaming-only experience as an addition to the in-car experience and what those tools might be. Thank you.

Sure. Thanks, Steven. Starting with the third quarter performance, we're really pleased with where we landed and still expect to be positive in the second half and better year over year on net ads in total. And I think the largest contributing factor in the third quarter was lower churn. We also saw higher automotive volumes, which helped offset the lower conversion rates we've seen year over year. Our new car conversion rates have started to stabilize a bit, and on the streaming side, as you highlighted, we have grown subs this year, and I would expect that to continue. I think the key for the quarter is because a lot of the bigger initiatives we're rolling out on pricing and packaging and personalized marketing are just starting to roll out and we would expect those to take time to generate increased demand and improve retention. But the key for the quarter was really a lot of different campaigns and initiatives that we launched because we're not waiting for these bigger initiatives to fall into place. So we have the Podcast Plus subscription, as we've talked about. We've had win-back campaigns focused on older cars. We've had three-year subscriptions with the OEMs and many others. So on your point on the engagement side, so we have, and I think in our earlier comments, we commented on what we're seeing in early and trial engagement, which again are the important leading indicators for improve retention and conversion in streaming and on the in-car side. And we continue to see consumption of content expanding, and that is one of the most important indicators for conversion. We know that when customers, either in streaming or in-car, listen to a broader set of content, including non-music content, that we see ultimately better conversion and retention. We're very pleased with what we're starting to see there. Obviously the key is to make sure that we can sustain those improved early in trial engagement metrics and scale them across our trialers. And then your last question about streaming audio and on demand. So that's a big factor for us longer term. So the key first is to make sure that we have launched and fully migrated our subscriber base to the new tech platform. which will give us a lot more capabilities, not only in features and content delivery to subscribers and trialers, both in streaming and in the car, but also in pricing and packaging flexibility and identity and things like that. And off that platform, we will then be able to look at an interactive bundle. So we believe that's key to growing subscribers over the long term alongside an ads tier. And with an interactive bundle, we would expect to use basically the rights we have today with Pandora alongside the rights we have today with SiriusXM, emphasizing SiriusXM's very unique place for human-curated discovery of music alongside the choose a song, listen whenever you want of Pandora. What's key to the success there, obviously, is ensuring that those services are bundled and integrated in a way that removes the friction from the customer experience. Because clearly we could co-sell them today, but the consumer experience needs to be such that It's very easy to listen to a song on SiriusXM, discover or rediscover something, and then save it into a playlist on Pandora Premium. So that's our focus over the longer term, and we do think there's a real opportunity to unlock demand and retention there associated with our very affluent and, frankly, older base where streaming on-demand services have not effectively penetrated that to date.

Thank you.

Our next question is from the line of Steven Leshak with Goldman Sachs. Pleased to see you with your question.

Hey, good morning. Thank you for taking the questions, too, if I could. First, for Jennifer, just in the state of the ad market, could you talk a little bit more about what you're hearing from your ad partners as we head into the fourth quarter? How much visibility do you feel like they have into ad budgets? going into year end and then perhaps even early 2025. Then within that, how much visibility do you feel like you have into your ad partners choosing premium audio? I think you called out some of the competing ad inventory that's out there. Just curious if you could give us an update on that. And then secondly, just on the trade-off between Churn and ARPU, would appreciate any of your latest thoughts on how you're approaching balancing the two. Churn came in towards the lower end of the historical range this quarter. But at the same time, I think you called out some promotional pricing. Just curious how we should think about these two levers trending as you look to maximize revenue. Thank you.

Sure. I'll start off at ads, and then I'll turn it over to Tom to add any other color. We provided some context for some of the headwinds we're seeing in our earlier comments. Certainly, there's been a flood of CTV supply, and advertisers are shifting to more bottom of the funnel performance-based media opportunities as opposed to brand building. And then, you know, we've seen some impacts from a shorter political cycle and the iOS changes on podcast inventory. So our focus is really on counteracting the trends where we can, investing in where we see tailwinds. So our programmatic overall was up 9% in the quarter. Podcasting was up 6%. And the real opportunity is in the intersection of those two. Programmatic podcasting, which is really small to date, but has seen significant growth at about 50% in the quarter. So our areas of focus are content and technology here. On the content side, Scott talked about some of the podcasting moves we've made. There's, as Tom mentioned, I think an opportunity for us to pursue broader 360 solutions. And then on the technology side, we have a number of efforts underway. We've mentioned, I think, on the call, earlier in the call, what we've done recently with LiveRamp in terms of the clean room. It's all about better targeting and measurement. And we're working closely with the trade dress to continue to integrate with UID2. And there's a number of other technology implementations we're undertaking to just make buying easier for smaller businesses. So those are the areas we're focused on. As we go into next year, we'll reevaluate, of course, and provide guidance at that point in time, but we're certainly hoping and looking for a return for brands focused on brand building as opposed to just bottom of the funnel conversion.

And Steven, the only thing I would add on that is, you know, as we've looked, you know, our talented ad sales group has been, you know, the headwinds that we outlined in the initial comments, we've been pivoting with our offering and, you know, being down 2% in Q3, you know, wasn't terrible. But I think, you know, as we assess the full year, a lot of those factors is what drove down and caused us to adjust our revenue guidance. So that was, you know, there's multiple headwinds and factors in there, but, you know, I think the team's aggressively focused on trying to ensure that we can get the optimal package and the optimal offering to marketers. As far as ARPU, you know, if you look at, you know, our churn, yes, our churn was very favorable at 1.6, so we were very happy with that. ARPU is down 53 cents roughly. When you look at it overall, we continue to leverage across the board our promotional pricing plans. We use the promotional pricing plans to build out and maintain our subscriber base. So it's attracting and retaining subscribers. And by doing that, I think it makes the health of our overall subscriber base stronger and gives us optionality in the later periods as far as pricing or expanding our offering or upgrading. So we're really focused on the subscriber base. The ARPU is obviously an output. But overall, I would say I think we're continuing to aggressively work on our subscriber numbers and our subscriber strategy.

Yeah, I think as we've talked about, because of what Tom highlighted in terms of the pressure of these promotional plans, we do have the opportunity with the $10 entry point to ensure that customers are getting on the right package from the start and they're not getting on a much higher price premium package with more content, frankly, but that may not meet their needs. And so as opposed to having them you know, call and try to cancel and get on a much lower discounted plan, we have the opportunity to leverage these, you know, more discreet price points and I think bring ARPU up for our, you know, subscribers on promotional plans.

That's great. Thank you both.

Thanks, Dan.

Thank you. The next question is from the line of David Joyce with Seaport Research. Please proceed with your question.

Thank you. Another question on advertising, if I could. Kind of looking at your various initiatives such as turning on the ads in CAR for the non-subscribers and also working on re-platforming so all the streaming and satellite services and 360L are all on the same kind of platform. When do you expect these to start contributing and showing through and offsetting the broader ad market challenges that you've been discussing? Thanks.

We talked a little bit about free access last quarter and we're still in a very select set of vehicles there and in test and learn mode. And we are seeing customers engage with the service post trial if they had chosen not to convert. The numbers are small. I don't have any reason to believe that there's going to be a cannibalization impact there because the content set is small. It's about 40 channels. And of course, there's advertising in the music channels. So we'll continue to learn there. I think it's an opportunity for us to adjust content over time to different users. We're leveraging the 360L platform. Over time, we can use ad replacement technology to make sure that those ads are more targeted to the specific consumers listening. That's going to take time to build. We are at about probably 13 million cars on the road that are 360L enabled. We will have this year a total of 40% of our new car trial starts with 360L. That should ramp up next year to over 50%. And then, you know, key to that really accelerating in the year following in 26 is the launch in one other major OEM. So as we continue to roll that out and it starts to roll through used car trials, we'll have a much larger base in 360L where we can look to build scale for a more prominent ad offering in the car, not just in free access, but also with the ad replacement technology providing IP-targeted ads in the subscription business as well. We do about, I don't know, $180 million in SiriusXM ad revenue. So there is opportunity to continue to grow that in our subscription service. as long as we can provide these more targeted opportunities. So it's going to take years to build up the scale here, but we're really excited about how that complements a future ad-supported offering on the streaming side in our apps as well.

All right. Thank you, Jennifer.

Thank you. Our next and final question is from the line of Cameron Madison Perrone with Morgan Stanley. Pleased to see you with your questions.

Thank you. Morning. First, I wanted to follow up on ARPU. You guys in the past have kind of talked about every other year kind of philosophy or cadence of price increases. Is that still something we should expect heading into 2025 and just any color on kind of how selective across the packages that any activity might be or whether we should expect anything more holistic on the satellite side? And then on the sales and marketing front, you know, that was down nicely year over year, even as you guys were able to drive improvement in net ads. So wondering, you know, if you could just comment on what's allowing you to find efficiency there while still driving nice funnel improvement and net ads improvement. Thanks.

I'll take the pricing question, and then Tom can comment on sales and marketing costs. We are on a every-other-year trajectory for rate increases, and I want to withhold any further guidance on how broad-based it will be, but we have recently, as I mentioned earlier, added more value to our full-price packages so that customers can experience that at least for a few months before we might take a price action there. And that's a series of things, including content and features, as well as access. And so we are looking at that for early next year. And I think that will bode well for ARPU. We still face the same trends that we've seen in terms of promotional plans and the impact on acquisition and retention. So it'll be a balance of how those things play out in terms of the ARPU trajectory.

Tom? I would say, Cameron, on the sales and marketing side, you know, we have spent a fair amount of time of analyzing our costs on the sales and marketing side, reviewing the effectiveness of our marketing campaigns and sales campaigns. And, you know, I think whether it's on the Pandora side or the Sirius side, the success that we've had, you know, in looking at costs is starting to bear more fruit. And I think as we look at the year ahead, we're going to spend more time on As we get more data from our re-platforming and we start getting more information, I think we'll have more effective use of our sales and marketing spend. So I think for right now, we're happy with the efficiency we're getting, but we're also looking for enhanced efficiency as we go forward.

Very helpful. Thank you both.

All right. Thanks, Cameron. Thanks, everybody, for participating in today's call. We'll speak to you soon.

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