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Sirius XM Holdings Inc. beats earnings expectations. Reported EPS is $0.72, expectations were $0.7.

Operator: Greetings. Welcome to the SiriusXM’s First Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Jennifer DiGrazia, Senior Vice President of Investor Relations. Thank you, Jennifer. You may begin.

Jennifer Digrazia: Thank you, and good morning, everyone. Welcome to SiriusXM’s First Quarter 2026 Earnings Call. Today’s discussion will include prepared remarks from Jennifer Witz, our Chief Executive Officer; and Zach Coughlin, our Chief Financial Officer. Following their comments, we will open the call for questions. Joining us for the Q&A portion are Scott Greenstein, our President and Chief Content Officer; Wayne Thorsen, our Chief Operating Officer; and Scott Walker, our Chief Advertising Revenue Officer. . 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. Additionally, please find a supplemental earnings presentation and trending schedule on our Investor Relations website for your convenience. With that, I’ll turn the call over to Jennifer.

Jennifer Witz: Good morning, everyone, and thank you for joining us today. We are off to a strong start in 2026, executing with focus and discipline against our 3 strategic priorities we outlined in December 2024, strengthening our subscription business by delivering exceptional in-car listening experiences, accelerating growth across our advertising business and leveraging our scaled SiriusXM portfolio to drive efficiency and long-term value. In the first quarter, we made meaningful progress across each of these areas, supported by solid performance in our core business and strong operational execution. On the subscriber side, we delivered significant year-over-year improvement in net additions, grew ARPU and achieved the lowest first quarter churn and highest subscriber satisfaction scores in our history.

Through our recently announced landmark partnership with YouTube, we will significantly enhance our advertising capacity, and we continue to expand margins through our enhanced focus on efficiency, capturing $45 million toward our $100 million 2026 cost savings target. Before turning the call over to Zach for a more detailed review of our financials, I would like to offer a few observations. Starting with our subscription business, performance in the quarter was strong with a meaningful year-over-year improvement in self-pay net additions to negative 111,000, an improvement of 192,000. This reflects the growing adoption of companion subscriptions among our most loyal customers, ongoing progress with our continuous service initiative and momentum in our automotive dealer extended duration plans.

Together, these offerings expand SiriusXM’s presence across multiple vehicles and users within a household and make it easier for subscribers to seamlessly maintain service as they transition between vehicles, deepening engagement and reinforcing long-term loyalty. While we remain mindful of a more measured auto sales environment and its potential impact on trial volumes, our resilient in-car foundation and focus on controllable levers continue to support performance. Churn remained a standout, improving to 1.5% despite our February price increase, which contributed to a 1% year-over-year increase in ARPU to $14.99. The combination of pricing discipline supported by continually adding value to our packages and the ongoing impact of our customer experience initiatives underscores the durability of our subscription model.

Our strong retention is also supported by high customer satisfaction levels. Our latest studies showed year-over-year improvement across all 5 core metrics: satisfaction, perceived value, likelihood to continue, likelihood to recommend and the essentialness of our service. Notably, both loyalty and perception metrics rose in tandem, an important signal of not only current satisfaction, but also growing confidence in the long-term value of our offering. We are also seeing traction across key demographics with the majority of the increase in satisfaction being driven by Gen X and Y. Gen X delivered strong gains, particularly in perceived value, intent to continue and essentialness, while millennials showed meaningful improvement in satisfaction and value, highlighting both the progress we are making and the opportunity that remains.

Content is a defining strength of SiriusXM and a key driver of perceived value and engagement. We continue to expand and evolve our programming in ways that fuel fandom and deepen engagement across music, sports, comedy and culture. In the first quarter, we introduced exclusive full-time artist-led channels from Global Stars, Morgan Wallen and John Summit, alongside pop-up channels from BTS, Luke Combs and Robin as well as distinctive programming such as John Mayer Grateful Dead listening Party. We deepened our partnership with Metallica with the launch of the live call-in show, Tallica Talk, expanded Alt2K to our full subscriber base following 8 consecutive quarters of audience growth and broadened our comedy offering with a dedicated 24/7 channel featuring Sebastian Maniscalco.

Our news and top category is also gaining momentum with consumption up 15% sequentially. This reflects continued investment in both independent and exclusive voices from the launch of Como Mornings to the strong performance of the Megan Kelly channel, where listening has grown 28% since its launch in November. We are also creating distinctive high-impact moments for listeners from intimate performances to major cultural events, featuring artists like Noah Kahan during Super Bowl Week, Kenny Chesney at Flora-Bama, Morgan Wallen in Nashville and a recent SmartLess taping in Hollywood. In sports, our offering is unmatched, spanning every major league and premier event from the NFL, MLB, NBA and NHL to college athletics, auto racing, golf and more, making SiriusXM a true year-round destination for fans.

Our college sports offering continues to build momentum as a core part of our bundle with listening hours for March Madness and the College Football Championship up 22% and 37% year-over-year, respectively. At the same time, our hardware and software evolution continues to enhance the listener experience. As 360L expands across nearly all major OEM lineups, we’re driving sustained growth in 360L-enabled subscriptions and increasing adoption of more personalized nonlinear listening. This is fueling double-digit growth in both usage and time spent with features like extra channels and artist-seated stations, deepening engagement. Turning to our advertising business. Momentum is accelerating. Advertising revenue grew 3% to nearly $407 million in the quarter, driven by a 37% increase in podcasting ad revenue.

This reflects strong traction in video and social through our Creator Connect strategy as well as accelerating programmatic demand, where revenue more than doubled year-over-year through Google TV 360. Our partnership with YouTube marks a significant step forward. As the exclusive U.S. advertising representative for YouTube’s audio inventory, we are expanding our reach to 255 million monthly listeners, nearly 90% of the U.S. population aged 13 and older. For the first time, we will offer advertisers scaled access to premium audio across a wide range of content from iconic franchises like SNL to leading creators like Mr. Beast as well as podcasts beyond our own network and streaming music. Beginning this fall, advertisers will benefit from expanded high-quality inventory paired with advanced targeting and measurement capabilities.

By combining SiriusXM Media’s leadership in audio advertising with YouTube’s scale and always-on engagement, we are delivering high attention inventory through a more seamless buying experience while advancing a more open connected ecosystem for advertisers. In podcasting, we remain the #1 podcast network in the U.S. by weekly reach. As a launch partner for Apple’s new video podcasting experience, we are helping shape the next evolution of the medium by unlocking dynamic video ad insertion and expanding access to a significantly larger advertising market. This uniquely positions us to power monetization across audio formats with greater flexibility and optionality for both creators and advertisers. These efforts reflect our commitment to an open podcast ecosystem that enables creators to grow across platforms.

Across the portfolio, we are leveraging our scale, data and technology to unlock new growth opportunities and deliver stronger outcomes for advertisers. At the same time, we remain focused on building a high-performing, future-ready organization. We recently welcomed Yves Constant as Chief Legal Officer, bringing deep expertise across media, technology and content and further strengthening our operating discipline in support of our strategic priorities. Our progress is also being recognized externally. We were named by Forbes as one of the best brands for social impact and by Newsweek as one of America’s greatest workplaces for culture, belonging and community as well as for women. Turning to our outlook. Our disciplined approach gives us confidence in delivering on our 2026 full year guidance, relatively flat revenue and stable adjusted EBITDA.

While subscriber trends are expected to be modestly lower year-over-year, our focus remains on strong execution and driving continued free cash flow growth. Importantly, the fundamentals of our business remain strong. We have a durable subscription model, predictable and growing cash generation and a unique combination of assets, including premium content, unmatched in-car distribution, scaled audience reach and leading ad technology. We believe these strengths position SiriusXM well for the future, and we remain committed to disciplined execution, thoughtful investment and delivering sustainable long-term value for our shareholders. With that, I’ll turn it over to Zach for more detail on the financial results.

Zachary Coughlin: Thanks, Jennifer, and thank you, everyone, for joining us today. We delivered a solid start to the year with 3 key financial takeaways. First, we delivered revenue of $2.09 billion, up 1% year-over-year, supported by the strength of our subscriber base and continued momentum in advertising, where revenue increased 3%. Second, our disciplined cost management and a continued focus on efficiency drove approximately 6% growth in adjusted EBITDA to $666 million. And third, the strength and stability of our earnings and cash flow continues to create significant shareholder value with net income up 20% and free cash flow more than tripling year-over-year to $171 million. Together, these results underscore the steady progress we are making against our long-term strategic initiatives to enhance profitability and drive free cash flow generation.

Looking first at the top line, consolidated revenue was nearly $2.1 billion, including $1.6 billion of subscription revenue, also up approximately 1% year-over-year. This growth reflects the early benefit of our recent February price increase as well as the full year impact from the 2025 rate adjustment, partially offset by a smaller average subscriber base. Advertising revenue increased 3% to $407 million as strength in podcasting, higher programmatic demand and technology fees more than offset softer demand in streaming music advertising. Turning to profitability. Adjusted EBITDA grew 6% year-over-year to $666 million, with margins expanding 140 basis points to 31.9% — this improvement was primarily driven by revenue growth, complemented by disciplined expense management across our customer service, product and technology and personnel-related costs.

Importantly, we captured $45 million towards our goal of delivering an incremental $100 million in gross cost savings this year, which includes $27 million in operating expense run rate savings and $18 million in CapEx savings. As a result, we generated strong bottom line performance with net income improving 20% to $245 million and earnings per diluted share growing 22% to $0.72. Free cash flow was $171 million, more than tripling year-over-year, primarily driven by higher adjusted EBITDA and lower capital expenditures. Turning to the segments. SiriusXM generated $1.6 billion in first quarter revenue, with subscriber revenue up 1% to $1.5 billion, supported by ARPU increasing 1% to $14.99. This reflects the benefit of recent pricing actions, including the February adjustment and the carryover benefit from the March 2025 change.

SiriusXM advertising revenue declined 10% to $35 million, primarily due to softness in news, while equipment and other revenue at $41 million and $31 million, respectively, were relatively flat year-over-year. Gross profit increased 3% to $966 million, with margin expanding to 61%. While a softer auto environment, particularly following last year’s tariff-driven pull forward in vehicle sales, created headwinds for trial starts, new acquisition programs and retention are supporting healthier subscriber trends. Self-pay net additions were negative 111,000, a 192,000 increase versus the prior year period. This was driven in part by growing adoption of companion subscriptions, which contributed 124,000 incremental self-pay net additions in the quarter.

As a reminder, the companion offering is targeted to our most loyal subscribers and engagement has remained strong with continued marketing support and early indicators showing improved retention among those taking advantage of this benefit. This performance was further supported by continued progress in our continuous service initiative as well as momentum in automotive dealer extended duration plans, more than offsetting lower conversion rates. The stability of our subscriber base remains a core strength, reflected in first quarter self-pay churn of approximately 1.5%, the lowest first quarter level in our history. Notably, churn remained resilient despite recent pricing actions as we continue to evolve our packaging and pricing structure to better meet demand across different customer segments.

With more than half of our subscribers having been with us for over a decade, we believe this performance underscores the strength of our enhanced value proposition and sustained customer satisfaction. Moving now to the Pandora and off-platform segment. Revenue increased 3% to $501 million. Advertising revenue grew 5% year-over-year to $372 million, driven by a 37% increase in podcasting revenue and higher programmatic demand and technology fees, partially offset by lower advertising demand for streaming music. We continue to expect modest growth in advertising for the full year 2026. Subscription revenue declined 2% to $129 million due to a smaller subscriber base. Segment gross profit for the quarter was $139 million with a margin of approximately 28%, representing a slight decline from 29% in the prior year period.

As part of our ongoing efforts to simplify the business and sharpen our focus on higher return initiatives, we recorded a $6 million charge in the first quarter associated with restructuring and severance costs, which compares to $48 million in the prior year period. I’d also like to provide some context on the higher depreciation this quarter. As part of our ongoing portfolio optimization, we have begun decommissioning and planning the de-orbit of our FM6 satellite, reducing its useful life from 15 to 13 years. With XXM10 now in service, this capacity is no longer needed. We expect approximately $60 million of incremental noncash depreciation in 2026, including $3 million in the first quarter. This has no impact on free cash flow, but will reduce reported net income and EPS.

Capital expenditures were $105 million in the first quarter, down from $189 million in the prior year period, primarily reflecting lower satellite spend and the timing of capitalized software and hardware investments. We continue to expect approximately $400 million to $415 million in non-satellite CapEx for the full year. Over time, total CapEx should trend lower with variability driven by the satellite replacement cycle. Near term, spending remains elevated as we complete our next generation of satellites, after which we expect a step down to more normalized levels. Now moving to the balance sheet. During the quarter, we completed a successful $1.25 billion refinancing, allowing us to retire all 2026 notes and redeem $250 million of 2027 notes, effectively extending maturities and strengthening our overall capital structure.

And we remain on track to achieve our target leverage range of low to mid-3x by the end of this year. We also continue to return capital to shareholders, including $91 million in dividends and $21 million in share repurchase, driving efficiencies, optimizing the portfolio and prioritizing high-return investments. This positions us to reaffirm our 2026 outlook for relatively stable revenue and adjusted EBITDA modestly lower self-pay net additions versus 2025 and continued growth in free cash flow to approximately $1.35 billion with a path to $1.5 billion in 2027. The durability of our subscription model and the consistency of our cash generation continue to provide a strong foundation as we navigate the current environment and remain focused on long-term value creation.

With that, I will turn the call back over to Jennifer to address recent headlines in the media.

Jennifer Witz: Before we open the line for Q&A, I want to briefly address recent media speculation regarding SiriusXM. As a matter of policy, we do not comment on rumors, and we ask that you keep today’s questions focused on our operating and financial performance. Our Board and management team are always focused on creating long-term value for our shareholders, and we’ll continue to pursue that objective in a thoughtful and disciplined way. With that, I will turn the call back to Jen so that we can begin our Q&A session.

Jennifer Digrazia: Thank you, Jennifer. Operator, we are ready to take our first question.

Operator: [Operator Instructions] And our first question comes from the line of Stephen Laszczyk with Goldman Sachs.

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Stephen Laszczyk: Jennifer, maybe on spectrum, it’s become very much top of mind over the last few weeks. I would be curious just to get your latest thoughts around the opportunity that you see for SiriusXM to monetize some of its excess spectrum, perhaps the types of opportunities you’re considering, whether that’s building adjacent services, partnering with someone or an outright sale? And then how soon do you feel like these opportunities could come into focus here for the company?

Jennifer Witz: Sure. Thanks, Stephen. Before we jump into Spectrum, I just want to acknowledge all that our team has accomplished since we refocused our strategy in December 2024. We are doing exactly what we said we would do. And as a result, we’re seeing momentum really across the business. We continue to launch new in-car subscriber acquisition programs and maintain record low churn and high customer satisfaction. We are growing our ad revenue and leveraging our unique strength to support a significant new partnership with YouTube, which we’ll talk more about today. And we’re finding incremental efficiencies to lower our cost structure, resulting in an improving outlook for both revenue and EBITDA. And we’re growing free cash flow to our target of $1.5 billion in 2027, reaching our leverage target later this year and giving us the opportunity to expand capital returns to shareholders.

And then on top of all this, there’s what you’re asking about, which is how we’re exploring ways to highlight the value of our spectrum. So I’m going to start on that, and then I’m going to hand it over to Wayne to give a bit more detail. But clearly, recent activity in the market has supported the point that high-quality spectrum is increasingly strategic and particularly as these new use cases have emerged like direct-to-device. So from our perspective, just as a reminder, we have a very unique position. We control 35 megahertz of contiguous spectrum in the 2 gigahertz band, which is a scarce and valuable asset. And of course, 25 megahertz of that today supports our core satellite radio broadcast operations. And we also recently acquired the 10 megahertz of WCS C&D block licenses, which are the 2 5 megahertz bands around the Starz band.

These already support emergency and public safety services, but also obviously act as a guard band against potential interference from adjacent terrestrial use alongside Starz. So we have been regularly assessing monetization opportunities in our normal course of business. And as we have said in the past, we are in discussions with potential partners regarding various options because we see a path to value creation as starting with incremental partnership-driven opportunities, and that’s going to allow us to capture some value while we maintain flexibility and upside over time. So maybe I’ll turn it over to Wayne to give a few more details.

Wayne Thorsen: Yes. And just to add to that, importantly, we do see the path to value creation being partnership focused as well as evaluating things internally, which we’ve said in the past, and our position there remains consistent. We’ve also said previously that we’re engaged in discussions around potential opportunities with partners, and we continue to evaluate those as part of our broader effort to maximize the value of these spectrum assets. That said, we’re not going to comment on specifics of any discussion as is our policy. What I would emphasize, though, is that we view spectrum as a strategic asset with meaningful long-term potential. And our priority here is ensuring that any potential use, whether internal or with third parties, fully protects our core services while creating the opportunity to generate incremental value over time.

That includes support for, of course, our public safety initiatives, any new partnerships discussions, the in-house services that we may make use of given our dramatically increasing footprint of our wideband chipset and then, of course, making sure that we meet all of our regulatory commitments.

Operator: Our next questions are from the line of Jessica Reif Ehrlich with Bank of America.

Jessica Reif Cohen: I have 2 questions. The second one is a bit of a multiparter, so I’ll start with the first. As media — and I mean like video and audio continues to consolidate around scaled platforms, how do you think about the importance of incremental audience and advertiser reach, particularly across podcasting, streaming, national versus local ad sales relative to your current portfolio? And if you do conclude that there are assets or capabilities that could accelerate your strategy, how should we think about your willingness to use your balance sheet for more flexibility versus staying firmly within your current leverage framework? That’s one, and I’ll come back to the second.

Jennifer Witz: Okay. I’ll let Zach handle leverage in a minute. But first of all, I’m very pleased to have Scott Walker, our Chief Ad Revenue Officer and the Chief Architect of our partnership with YouTube on the call today. So I’m going to turn it over to him in a minute. But I think YouTube is so core to what you’re asking about. So scale for us is 255 million listeners, which is access to 90% of the U.S. population, 13 and older. So we are very focused on this as our opportunity to expand scale. And a good way, I think if I just take a step back, to understand this partnership is to first focus on the consumer behaviors that you alluded to about video and audio and how these behaviors aren’t necessarily fitting into these neat format boxes we’ve used as an industry, right?

So consumers are moving more fluidly between formats. They’re watching and listening as they go about their days. And for instance, they might start a video on their phone and then minimize the screen on their commute while they keep listening. So this behavior is happening at enormous scale on YouTube. And as a result, YouTube has become one of the largest audio consumption platforms in the U.S. So there are numerous examples of this, whether it’s listening to music on smart speakers or listening to a podcast or an interview while your phone is in your pocket. All of these are examples of content consumed the same way people use traditional audio platforms. And this partnership that we have with YouTube brings that massive amount of untapped audio-first engagement to advertisers for the first time.

And that’s alongside a native ad format that actually matches the listening experience. So again, combined with our existing portfolio across music streaming, podcasting and SiriusXM, we will now reach 255 million monthly listeners, which is massive scale. And this tremendous reach positions us not only to grow overall ad spend, audio ad spend, but also to capture a greater share of that audio ad spend over time. And maybe, Scott, you can give a couple of more comments, and then we’ll go to the sort of broader leverage question.

Scott Walker: Sure. Thank you, Jennifer. I want to touch on one of the things that Jennifer mentioned anytime you can match up the ad format and natively integrate it based on how consumers are actually experiencing the content, it’s better for the user and better for the advertiser in terms of performance, and that’s exactly what we’re doing here with this partnership with YouTube. In the battle for finite attention that is increasingly scarce to your question, we’ve just unlocked this massive untapped opportunity based on the insights that Jennifer referred to earlier, that consumers are much more fluid in how they use YouTube, switching back and forth across listening and watching. And one of the reasons why we are so confident in this opportunity is that it’s a true partnership with YouTube.

We are co-developing proprietary technology in terms of integration with our scaled systems with Google’s ad platform, ensuring that we can scale our go-to-market and deliver a product that we know meets the criteria of the world’s most discerning and largest audio buyers.

Zachary Coughlin: Okay. And then Jessica — sorry, to your question, Jessica, around the balance sheet — sorry about that. Our capital allocation framework remains consistent with what we’ve outlined previously. First, we’re prioritizing investing in the business, funding those initiatives that support our key strategic priorities. And I think we saw in the first quarter, those investments are increasingly translating into tangible financial results, especially in profitability and free cash flow. Second, we remain committed to a disciplined balance sheet. Our target leverage in the mid- to low 3x range, which we’ve communicated previously. We ended the first quarter at 3.6x and feel confident in our path to reach that target by year-end.

And from there, it’s really focused on returning capital to shareholders. We have a consistent dividend that we intend to maintain, and we see share repurchases as an important lever from that. So while buybacks have been more modest recently, as we’ve been working on deleveraging, achieving that leverage target will create additional capacity, giving us flexibility to potentially increase repurchases. So I think — and finally, we’ll remain opportunistic around incremental value creation, areas like our spectrum assets, which we’ve talked about a moment ago, or places we see longer-term optionality to unlock additional value as well as selective inorganic opportunities that must meet our strategic and financial criteria. So I think we see — overall, it’s a balanced and disciplined approach, both investing in the business, strengthening the balance sheet and positioning ourselves to enhance shareholder returns as we execute against those leverage goals.

Jessica Reif Cohen: If I could just — my second question is actually more specific on YouTube. If you could just dive a little deeper into like how you see this evolving. Google owned TV 360, which you mentioned earlier, does that now become your main programmatic DSP? And actually, maybe you can unpack a little bit about what you’re seeing in programmatic in general, how — what percentage is, how fast it’s growing. But the other part of YouTube is that it is a global platform. And you have so many channels that lend themselves to global audience. I know this hasn’t come up in probably years, but would you rethink that strategy?

Jennifer Witz: So Scott Walker, why don’t you start on the advertising side? And then Scott Greenstein pick up the content side.

Scott Walker: Sure. On the programmatic question specifically, we feel like we’re strongly positioned with our proprietary ad technology platform, as was in terms of our ability to plug into all of the major DSPs in order to make that buying as flexible and easy as possible. And as it pertains to this YouTube partnership, specifically, initially, programmatic is not part of the partnership, but we see a massive opportunity to unlock advertiser demand based on this incremental reach that we speak to despite that. In terms of where programmatic is growing, it’s certainly growing as a percentage of the overall spend in digital media. And that trend continues in our business as well. Programmatic is growing at a healthy rate. Our partnership with the Amazon DSP is an example of where we see incremental budgets being unlocked. And programmatic with respect to podcast is also growing. Jennifer mentioned triple-digit growth rate year-over-year in Q1, reaccelerating.

Scott Greenstein: Great. And Jessica, on the international question, the podcasts are currently distributed where they make sense overseas on that side. And then as far as the content goes, we’re open for any deal or any licensing situation. It just has to make sense. The good news is with the amount of content we have under license, a lot of it is worldwide and the relationships are there. So if ever it comes a point where whether it’s through technology or a licensing deal, the relationships will be there, and it will be a pretty easy transition to open up negotiations to go further on that. And we also have the unique ability to create content for any market that might be adjacent to what we’re doing.

Jessica Reif Cohen: Million more questions, but I won’t hog the call. .

Operator: Our next question is coming from the line of Barton Crockett with Rosenblatt Securities.

Barton Crockett: Okay. Great. Congratulations, again, on the YouTube deal. To kind of ask a little bit more about this deal there could be such a large kind of funnel of revenue flowing through. But I was wondering if you could give any sense of the degree to which the lion’s share of that would be stay on Google’s kind of side of the ledger and how much of that you guys might be able to extract for your efforts? How do you kind of think about the take rate essentially on the deal? Anything you can say about that?

Jennifer Witz: I think — look, there’s — right now, we’re prepared to talk about the size of this, the magnitude of the scale and how we’re going to increase our reach. And we expect to launch in the fall, as we’ve said. And I think we’re going to ramp this up over time. I don’t think it will have a meaningful impact on this year’s numbers. But as we go into 2027, we’ll have the opportunity clearly when we provide guidance to give you a better sense as to the magnitude. But we’ve given you some general numbers on the scale of it. And I think we will be watching, obviously, the magnitude of the incrementality of this audience reach relative to where we are today, which is very significant, obviously, with $1.8 billion in ad revenue across our properties. So that’s what we’re prepared to share today, but we do believe it’s a significant opportunity for us, and we can share more on general economics as we get closer to the end of the year.

Barton Crockett: Okay. All right. That’s fair. And then I apologize if this has already been covered, but with all of the kind of activity around space with SpaceX and with Globalstar and Amazon and the recent kind of SEC weird space NPRM giving you guys some telemetry trafficking and control capability potential with your spectrum if that moves ahead. To what degree do you think there’s potential for you guys to be meaningful players in the space ecosystem, leveraging some of your spectrum rights? And how could that kind of play out?

Jennifer Witz: So look, I think you mentioned the weird space testing, so I’ll just touch on that. We have had discussions with the FCC related to this. And from our perspective, this is a constructive step as it continues to formalize, clarify the rule of TT&C. And it’s a legitimate important use of satellite spectrum. And so it recognizes that we have the right to be protected from interference and also helps direct how other parties could use the satellite spectrum productively. And look, there’s going to be a lot of different ways that I think spectrum — the use of spectrum evolves over time. And this is a good example of where multiple tenants could use the same spectrum in a very methodical way. And we — that’s one of the examples, I think, of the things that we could look at going forward to unlock more monetization opportunities.

Wayne Thorsen: Yes. Thanks, Barton. This is Wayne. And I would add that we do see optionality here, as we’ve mentioned previously, but we see this optionality will be realized over time. So not through a single step, but along a multiyear glide path sort of shaped by what we think of as 3 factors. First, the subscriber and hardware ecosystem that we have. We have an installed base throughout the entire satellite radio band, including on the legacy Sirius band and more importantly, millions of vehicles on the road with embedded radios and OEM commitments tied to the spectrum. Second, the technology migration. So we’re already developing next-generation chipsets and 360L hybrid radios that can use both Sirius and XM bands. And so this gives us increasing flexibility over time to make use of this.

So today, we have millions of vehicles that are already enabled with this new chipset. We expect this to grow to more than 65 million by 2029. And then third, regulatory obligations. Like our licenses come with requirements to provide specific services that, of course, we will need to continue to meet.

Operator: Our next question comes from the line of Bryan Kraft with Deutsche Bank.

Bryan Kraft: I had a couple on advertising as well. I guess, first, could you talk about the capabilities that 360L has the potential — sorry, the capabilities 360L has the potential to bring to your advertising business? And what plans you have to activate those capabilities? And also things like addressability, measurement, those sorts of opportunities? And could you give an update on the advertising supported tier and at this point, where you see that going? And then I just had a follow-up on YouTube. Google is obviously quite a large sophisticated player in digital advertising with scale and technology. Can you just talk about why a player like YouTube would view working with Sirius as better than doing it themselves? And if you could also talk about whether you see this partnership maybe leading to additional major partnerships in the future? Does it sort of open the door to more opportunities like this?

Jennifer Witz: So I’ll let Scott address the second part, and I’ll talk a little bit about 360L and Play. With 360L, we do believe there’s an opportunity for more addressability for audio advertising in the car. And we’re expanding, obviously, the volume of vehicles on the road that have 360L — we haven’t yet unlocked real targeted ad capabilities inside 360L. We are looking to do that over the course of this year even potentially. But clearly, the focus now is on executing on YouTube and making sure that we can launch that as it’s a much bigger scaled opportunity. And then on Play, I’d say it’s similar. We are leveraging play as an opportunity to broaden the top of the funnel as with many other of our lower-priced packages, and it’s been helping there to do that.

The ads inside of it are — today, the scale isn’t as significant because, again, we’re using it as a way to market and get customers into higher-priced packages. But in the future, as we unlock more addressability in the car, obviously, it would benefit Play as well. And Scott, do you want to handle YouTube?

Scott Walker: Sure. When YouTube first came to us, the insight that they brought was that audio is a unique channel. And relative to other media channels, YouTube is very much considered a default video platform, and that was the focus for most of the advertisers. And the awareness that there was massive listening behavior happening on the platform was just not there. So the first point is that the recognition audio is a unique channel that requires a sales team that has honed a different approach or a different craft in terms of the relationships with the buy side, the creative nuances around audio, our measurement expertise, and we have a proven track record of over 20 years of defining the digital audio category and really the ad market within that.

So I think our reputation in the market with advertisers and with creators speaks for itself and Google and YouTube recognize that. And on that last piece, it was clear that we have delivered for YouTube creators on the podcast side. Some of our biggest podcast creators in our network, whether it’s Mel Robbins, Konan O’Brien, Alex Cooper, they’re all massive players in terms of usage and engagement on YouTube. And we have clearly demonstrated best-in-class monetization through our embedded sponsorships on YouTube, and that was yet another signal that we were the right partner for this opportunity.

Bryan Kraft: And the last part of it was, do you think that this is something that could open up additional partnerships? YouTube is obviously very unique, but are there other potential players that may see this, what you’re doing with YouTube and say that’s probably a party that we ought to join?

Scott Walker: Yes. We have certainly expanded and diversified our advertising business over the years by broadening into a larger network of both streaming partnerships with the likes of SoundCloud and our #1 podcast network, where we have the most shows in the top 20, 4 of the top 10 and #1 position in terms of weekly reach. So this was a natural evolution of that strategy of diversifying and leveraging this amazing demand engine that we’ve created on the audio side to help YouTube monetize this content. And success here and demonstration of our ability to be successful, I think, opens up doors beyond this certainly.

Operator: The next question is from the line of Sebastiano Petti with JPMorgan.

Sebastiano Petti: Just closing the loop on the spectrum stuff. So I guess, Wayne, based on your comments to “protect core services and that this will take a number of years and FCC obligations as well as OEM obligations. My interpretation is that any notion that you could “force migrate subscribers off of the lower 12.5 megahertz is probably outside the bounds of probably something you guys are contemplating? That’s my first quick question, and then I have a follow-up.

Wayne Thorsen: Yes. Thank you, Sebastiano. I’d say that we don’t have any plans at this point right now to force migrate, of course, but we’re always evaluating how we can best serve our customers, and we have millions of customers currently on this band. And so as we’re thinking about the opportunities to do something more strategic or create more strategic value here, certainly, we’re thinking about timing. But timing in all of these cases, the timing of a start of an opportunity is, of course, different than the timing of being able to catalyze an opportunity. So we’re — all of these plans need to be thought through in multiyear stages, even if other things happen first and with partners or others.

Sebastiano Petti: Got it. And then in terms of timing, I mean, my understanding, I think, is you’re unable to really kind of do anything with this lower 12.5% until it is fully cleared. And I think based upon I think, Jennifer, you may have touched upon in previous conferences recently, but we’re looking at, what, 5 years for the spectrum to still be cleared. And so is that like the inside of how we should think about when monetization could potentially occur on the spectrum?

Jennifer Witz: I don’t want to be too specific because as we’ve said in the past, we’ve had a long runway on the spectrum with the subscribers there being very sticky. But I would suspect it’s inside of 5 years. We’ve also talked about C&D, where there’s maybe more opportunities in the nearer term, the 10 megahertz on either side. But I also think just with the NMPRM about weird space stuff, again, that there are some opportunities to do things while we have active subscriptions in that spectrum, probably limited, but there are opportunities. And of course, I think Wayne touched on this a little bit. There’s just — there’s a long runway for how another potential partner would actually execute on this. And so that timing actually could be quite consistent.

Operator: The next question is from the line of David Joyce with Seaport Research Partners.

David Joyce: You had impressive uptake with the companion strategy earlier this year. Do you see that continuing? What strategies do you have to keep driving that for the overall subscriber platform?

Jennifer Witz: Sure. So first of all, we’re very pleased with our Q1 subscriber performance, especially after a strong Q4 last year. And the companion subscriptions clearly contributed to that, and we noted that they were 124,000 in the first quarter and as well as continuous service and expansion of our auto dealer extended duration plans. And with companions, the great thing about it is that we’ve been talking about kind of 2 themes as it relates to our subscriber performance and future growth as well as revenue, one being enhancing subscription value and the other being expanding access. And companion really does both, right? It expands access to SiriusXM to more listeners across the household and also enhances the value and improves retention of that subscription household.

So we’re really pleased. I think the question really is, as we — we’ve been successful in the marketing, I think beyond our expectations actually. But how long does that last? And does the — sort of do the take rate start to mature at some point over the course of the year. But we’re also looking at where it may make sense to expand availability. So that’s why we’re being cautious and not changing the context we’ve provided about subscribers for this year. That as well as what Zach noted earlier in terms of auto sales and how those could materialize. There’s still pressure on gas prices and impact on the consumer.

Operator: The next question is from the line of Kutgun Maral with Evercore ISI.

Kutgun Maral: I wanted to ask another one on advertising. You made a lot of progress building out the ad business with new capabilities and innovative partnerships. But it still feels like that opportunity doesn’t get full attention from investors given the much larger satellite subscription revenue base. So as you think about the portfolio from here, is there any interest in reshaping the business to better highlight your advertising capabilities and opportunities, whether it’s through additional scale via M&A or potentially a clear separation between the satellite subscription business and the Pandora and off-platform side. And I know we’re, of course, not talking about specific deals, but what I’m really trying to get at more so is if there’s a big focus right now to better match what I see as the strong execution you’re demonstrating on advertising against unlocking value in the share price?

Jennifer Witz: So we have the 2 segments, which gives you, I think, some exposure to the Pandora and off-platform segment, which is the vast majority of our advertising. And so — and we provide a fair number of metrics there, but it’s a good point. And obviously, with the increasing scale, we will find ways to provide, I think, more metrics around the advertising business going forward. I do want to touch on M&A because you mentioned it. And just note that we see significant opportunity within our existing businesses and whether that’s obviously executing and expanding our reach through partnerships like YouTube, but also improving monetization across our ad-supported businesses, like we’ve done with Creator Connect or Apple Podcast better targeting and measurement tools and of course, enhancing the value of in-car subscriptions and unlocking the value of our spectrum assets like we’ve talked about.

So these are the areas we’re focused on day-to-day, and we believe they offer the clearest line of sight to high-return opportunities. And Zach mentioned that we’ll continue to look at and be opportunistic on inorganic M&A and inorganic growth, but we’re going to be very disciplined about that.

Operator: The next questions come from the line of Steven Cahall with Wells Fargo.

Steven Cahall: So I just wanted to make sure I understand the subscriber guidance for the year. I think you said that you’ll see modestly lower self-pay net adds. I think you lost around 300,000 last year. So should we kind of think about companion as slowing as you get through the rest of the year? Could we annualize what you did in the first quarter for companion for the rest of the year? I’m just kind of trying to understand what core net adds are doing. I don’t think companion comes with any revenue contribution. So just trying to understand kind of what the core base looks like, excluding companion. And then I have a quick follow-up.

Jennifer Witz: So I can ask Zach to comment on the sort of context we provide around subs. But I do want to note that you’re correct about companion in terms of not adding specific revenue for those subscriptions. However, it was part of our strategy to ensure that we’re adding value before we increase subscription prices. And so we’ve now done this 2 years in a row very successfully. And we see actually higher retention among households that are taking companion subscriptions. And it’s logical because there is more engagement across the household. So it does result in not only providing a benefit for us to successfully execute on rate increases, but also just driving more engagement. So I do believe it translates through to overall revenue.

And as I mentioned a bit before, we’re just being cautious, I think, about the year in general. But on companion specifically, that we continue to market and look for other opportunities to perhaps use it, especially perhaps in acquisition as more of a family plan. But I would expect the program to mature as we offer it to a specific set of our full-price subscriptions.

Zachary Coughlin: Yes, for sure. I think you’ve got it right, Stephen, regarding our guidance and the numbers around the self-pay net adds. I think one thing to add to what Jennifer was saying, just numerically, if we take a look at ARPU, we’re actually really pleased with that as well. So we’re getting the subscriber growth, partially companion program, and we’re also seeing ARPU up 1% versus last year. Obviously, the primary driver of that was pricing, reflecting the rate actions. But I think what’s important is that the ARPU growth is not coming at the expense of the broader health of the business. Alongside the higher ARPU, we’re seeing improved subscriber trends, record low first quarter churn stronger engagement and continued gains in customer satisfaction.

So I think you have to look at all these together. And as is really a measure of the quality of the subscriber base. So we’re driving higher monetization while strengthening retention and overall customer value. And I think this is our third quarter of ARPU growth, and we would expect that to carry through the rest of this year as well. So I think the composition of all of that shows the strength of sort of the actions that we’re taking.

Steven Cahall: And just a quick follow-up on conversion. I think there’s a few things going on in conversion. So I think a tailwind for how you account for the auto dealer duration plan. So can you give us any more color on contribution from those plans, which seem really positive? And then you did call out a little bit lower conversion, I think, on self-pay. I think those historically were in the mid-30s. Any sense of where they’re kind of running today?

Jennifer Witz: Yes, Steven, we continue to see some of the same trends we’ve seen in the past on conversion rates. And we have had slight declines as younger car purchases come into the trial funnel and then, of course, used conversion rates lower than new. And the good news is that we just have so much more data. And with all the personalized marketing capabilities we’re building, and are coming even later this year, we can address customers in a much more personalized way in our marketing, whether they’re listening or not or based on their content preferences. So I think the single biggest opportunity for us continues to be with 360L rollouts. And we’re at about, I think, 55% of sales by the end of the year with the OEMs that are ramping, we’ll be at 70%.

And we do continue to see 360L conversion rates better than non-360L. And as we ramp 360L on AAOS, which can be updated much more quickly, we see those conversion rates even higher. So these are the tailwinds. Our extended duration plans also help. And we’re hopeful that we can start to stabilize some of these trends and we’re intently focused on conversion rates as a measure of demand, but we also have many other demand-focused programs in place that wouldn’t necessarily show up there, right, such as companion subscriptions or Podcast Plus and some of these other programs that we put in place.

Operator: The next question is from the line of Cameron Mansson-Perrone with Morgan Stanley.

Cameron Mansson-Perrone: Jennifer, you started the Q&A talking about the way the team has executed over the past couple of years. First quarter results are pretty encouraging. I’m wondering if you could provide some color given the reaffirmation of the full year guide, just how you’re thinking about growth in the balance of the year.

Jennifer Witz: Yes. Maybe I’ll let Zach take that one.

Zachary Coughlin: Yes, for sure. I think thanks, Cam, for the question. I mean it was a really good first quarter, revenue growth of the 1% and importantly, growth across subscriber revenue and advertising, both sides of that. And then combined with the strong cost discipline, EBITDA growth of 6%, net income, 20% EPS, 22%. So some really good metrics. And I think in cash flow, cash flow — free cash flow tripled and free cash flow per share increased 217% to $0.51. So when we provided guidance last quarter, we talked about how important it was to provide the stable outlook, and we’re off to a great start. So I think beyond that, we feel very good about the start of the year and the progress we’ve made, which does increase our confidence in the plan.

But that said, it’s still early in the year, and there’s a lot of time ahead of us. When we look at the full year outlook, the underlying assumptions of our plan really haven’t changed. But we are continuing to monitor the auto environment closely. We’ve seen some softness there, particularly in the OEM funnel. And while we haven’t seen any change in customer behavior to date, churn and engagement remains very strong. We’re also mindful of the broader macro backdrop. So given that, we just think at this point in time, it’s appropriate to remain disciplined order outlook while staying focused on executing through the rest of the year. So as we continue to see strength in the business, it’s something we’ll revisit as the year moves forward.

Operator: Our last and final question is from the line of Clay Griffin with MoffettNathanson.

Clayton Griffin: I just got a quick one on the inventory scope attached to this YouTube partnership. Just if you could put some detail around what exactly it includes, for example, does this include the inventory on the ad-supported version of YouTube Music — and then maybe just sizing the overall sort of impression scale at this point, given that, obviously, YouTube is dominated by video ads today. And then as a follow-up, just to confirm, Jennifer, it sounds like that this deal is likely to be accounted for on a net basis. Did I hear that right? Just maybe just walk through the mechanics of the accounting.

Jennifer Witz: No, it will be like our other ad representation deals where it’s growth, and it will be in the Pandora and off-platform segment. And Scott, do you want to address the inventory?

Scott Walker: Sure. Thanks for the question. So in terms of the scope of this, — the primary use cases are both YouTube Music, the ad-supported YouTube Music tier and the YouTube main app, where listener — where users of YouTube are primarily listening versus watching. So this could be static image music videos or LYRIQ videos. This could be YouTube connected via Android Auto or CarPlay in the car. This could be long-form content, whether it’s podcast or interview content on smart speakers in the home. All of these are examples. And the scale here is matched or commensurate with the reach. We talked about the Edison research that we recently conducted where the reach of this YouTube listening-first audience is 212 million monthly listeners.

And combined with our 170 million across our podcast network, our Pandora streaming network, et cetera, we’re now reaching 255 million users overall. So the scale of this is significant. I’ll reiterate Jennifer’s earlier comments about the ramp of this. We are launching this in the fall during the Q4 planning cycle. So we expect the growth and the ramp to happen more in ’27 and beyond.

Jennifer Witz: Okay. So in closing, thank you all for joining. I’d just like to say that we’re very pleased with the strong start to the year. and the early progress we’re making across each of the strategic priorities we laid out in December of 2024, and we continue to see that strategy translating into tangible results. whether that’s the strength of our in-car subscription model, our growth in advertising or the broader efficiencies across the organization. And we are well positioned to build on this progress as we move throughout this year. and we remain thoughtful and disciplined in how we allocate capital and invest for future growth. So our focus remains on execution. And we’re confident in our ability to deliver on our full year objectives and our guidance and drive sustainable long-term value for shareholders. So thank you for joining us this morning.

Operator: Thank you. This does conclude today’s teleconference. We thank you for your participation. You may now disconnect your lines at this time.

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