Sirius Xm Holdings Inc. Q3 FY2021 Earnings Call

Good morning and welcome to SiriusXM Third Quarter 2021 Financial and Operating Results Conference Call. Today's conference is being recorded. A question-and-answer session will be conducted following the presentation. At this time, I would like to turn the call over to Hooper Stevens, Senior Vice President, Investor Relations and Finance. Please go ahead.

Thank you. And good morning, everyone. Welcome to SiriusXM's Third Quarter 2021 Earnings Conference Call. Today, we will have prepared remarks from Jennifer Witz, our Chief Executive Officer, and Sean Sullivan, our Chief Financial Officer. Scott Greenstein, our President and Chief Content Officer, will join Jennifer and Sean to take your questions. I would like to remind everyone that certain statements made during the call might be forward-looking statements as the term is defined in the Private Securities Litigation Reform Act of 1995. These and all forward-looking statements are based upon management's current beliefs and expectations and necessarily depend upon assumptions, data, or methods that may be incorrect or imprecise. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. For more information about those risks and uncertainties, please view SiriusXM's SEC filings and today's earnings release. We advise listeners to not rely unduly on forward-looking statements and disclaim any intent or obligation to update them. As we begin, I would like to advise our listeners that today's results will include discussions about both actual results and adjusted results. All discussions of adjusted operating results exclude the effects of stock-based compensation and certain purchase price accounting adjustments. With that, I'll hand the call over to Jennifer.

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

Thank you, Jennifer. And good morning, everyone. To quickly hit some financial highlights: total revenue increased 9% to $2.2 billion, led by 31% growth in consolidated ad revenue. Adjusted EBITDA grew 9% to $719 million, a new quarterly record. Diluted earnings per share were $0.08 versus $0.06 in Q3 2020. We generated $588 million of free cash flow during the third quarter, which included $208 million of insurance proceeds related to SXM-7. As of quarter end, we had received all $225 million available under the policy. We have also entered into contracts for SXM-9 and SXM-10, and have commenced early-stage CapEx spend for these satellites. Turning to our segments: in the SiriusXM segment, revenue increased 5% to $1.66 billion, with ARPU growth of 5% to $14.84. Revenue grew in line with ARPU because the self-pay subscriber base increase of 1.5 million year-over-year was offset by a decline in paid trials versus last year's third quarter, given new trial structures at two major OEMs and a lower SAAR. Gross profit in the SiriusXM segment grew 4% to $1.0 billion, resulting in a gross margin of 61%. In the Pandora segment, advertising revenue of $404 million increased 32% from last year and grew 28% compared to the same period in 2019. Pandora's ad revenue per 1,000 hours was $109, up 29% from $84 in the third quarter last year. Revenue growth in the Pandora segment was aided by our off-platform business centered around AdsWiz and AdWave and by the addition of Stitcher. Together, these contributed $89 million of revenue in the third quarter, and excluding Stitcher grew 41% year-over-year. As a reminder, Stitcher was acquired in October 2020. Ad bookings were again impressive in Q3, with Financial Services and Retail leading as the largest categories. Insurance companies are targeting major lifestyle changes as people continue to relocate and change jobs. Retail momentum is tied to the economic reopening as people head back to stores and shopping malls. Entertainment is also showing strong growth given increased streaming competition and the expectation of a back-to-normal holiday season with big-budget movie releases. Pandora monthly active users and total ad-supported listening hours were 53 million and 2.9 billion, respectively, and average monthly hours per ad-supported user were 20.1 in the third quarter, up from 19.5 a year prior. Pandora ended the third quarter with 6.5 million total self-pay subscribers. Gross profit in the Pandora segment grew 22% over the third quarter of 2020, while gross margin was flat at 37%. Turning to capital allocation: as announced earlier this week, we are increasing our quarterly dividend by 50%. The 50% increase is driven by our continued confidence in the company's strong operating results and cash generation, and this increase will better align our dividend yield with the broader market. Through the first three quarters of 2021, we returned approximately $1.35 billion of capital to stockholders, comprised of $1.17 billion in stock repurchases and $180 million in dividends. Over the summer, we took advantage of very favorable credit markets to issue $4.5 billion of new senior unsecured notes across 5-, 7-, and 10-year maturities at a weighted average interest rate of roughly 3.75%. Proceeds were used to refinance existing notes, reducing future interest costs and extending maturities, as well as eliminating the outstanding balance on our revolving credit facility, which we also extended until August 2026. At quarter's end, our $1.75 billion revolver was completely undrawn and we had $164 million of cash and equivalents on hand. In short, we have a very strong balance sheet that provides significant flexibility to continue investing in the business, making opportunistic investments and acquisitions, and delivering cash to our stockholders. To recap our new full-year guidance in this morning's release, we now expect self-pay net additions to exceed 1.1 million. Revenue is expected to be $8.65 billion, and adjusted EBITDA is now expected to be approximately $2.75 billion. Our free cash flow guidance has increased to more than $1.8 billion, which is driven by the higher adjusted EBITDA and satellite insurance recoveries, partially offset by spending on new satellites and programming investments. With that, we will open up to Q&A.

At this time, we'd like to open the call up for questions. I would like to remind everyone, in order to ask a question, please follow the conference call procedures. We will pause for just a moment to compile the Q&A roster. Your first question comes from Steven Cahall from Wells Fargo.

Jennifer, maybe first I was wondering if you could elaborate on the comment you made about the promotional floor and the price increases. It sounds like with a little bit less on the new car side next year you're going to try to drive a revenue acceleration and I guess SAC costs should be down on that as well. So is it logical for us to include that you might have a one-off year for EBITDA or free cash flow growth next year based on that commentary? And then Sean, at the beginning of the year, investors were a little bit concerned about the initial free cash flow guide and now you've raised it a couple of times and it looks really strong. So maybe just a few comments on what's changed as you've moved through the year. Is this related to the satellite recovery? Is it just good operating performance? I would love any context on the free cash flow raises. Thanks very much.

Sure. Thanks, Steven. I'll take your first question on promotional pricing. We're actually doing two things in the fourth quarter: we're doing a rate increase on some of our full-price packages, and on the promotional side, we're raising the promotional pricing floor for certain subscribers. We've done rate increases over time and our base, as you know, has been very sticky and loyal, so we've been able to pass through these rate increases very effectively in the past. We have a pretty robust packaging structure from lower-priced plans all the way up through our PVIP plan that we launched a couple of months ago. We have always been very effective at managing demand across the various price points we have, and we viewed this as an opportunity. It's somewhat an inflationary environment; other services are raising rates. We see it as a positive environment to do this. While it could have a slight impact on subscribers, we don't think it's material, and again, we tend to optimize this very effectively.

And Steve, on your free cash flow guide: as we step back to the beginning of the year, there was a lot of uncertainty. Fast forward, and the first half of the year was incredibly strong in terms of our operating performance, especially on the SiriusXM side of the business. Operating performance on advertising continues to be really positive in delivering strong operating performance. So we've been able to raise our EBITDA guide by almost a couple hundred million from where we started the year. Free cash flow conversion on a year-to-date basis has been very strong as well. No question the insurance recovery is assisting a bit in terms of the raise. We are, as I said in the comments, making investments against SXM-9 and SXM-10 and continuing to advance our content and programming initiatives. So all-in-all, it's a mix of everything and some unexpected occurrences around the satellite, but it's incredible performance across both subscription and advertising. We're really pleased with where we're at and where we expect to finish the year.

Thanks very much.

Hi, this is Ken on for Ben. Thanks for taking the question. Turning continues to trend really nicely. Can you guys talk a little more about what you're seeing there? How much of the Q3 level was driven by vehicle-related churn? And then another one for Sean on capital return: is $2 billion of capital returns between buybacks and dividends on an annual basis still the right general ballpark to think about going forward? Thanks, guys.

Okay. Ken, first on churn. The third quarter was actually pretty close to the second quarter in terms of churn overall at 1.5%—it did round down to 1.5%. As we said in the past, I don't believe this is sustainable in the long term, but we're really pleased about where we are. There are some slight movements and shifts between the categories in Q3. On the non-pay side, vehicle, and voluntary side, they ticked up a little bit; vehicle-related churn came down, as you would expect, considering trial starts came down in the third quarter, but no material changes there. As we go into next year, if spending levels continue to increase for healthy consumers, there could be some reversion to a more normal level of non-pay churn. We are significantly down from where we had been two years ago on non-pay. Some of that I do think sustains just based on the operating improvements we've made. But as consumer spending levels go up, I would expect to see non-pay tick up a bit. Then of course, we're hopeful that over the course of next year, automotive sales continue to recover and we would see some impact on vehicle-related churn. On the voluntary side, cancellations have been really low. There has been strong satisfaction with the product, and I believe that has a lot to do with us having added streaming to our packages a couple of years ago and how effective that's been in this environment where consumers aren't in their cars as much and they're listening much more in other locations.

And then on the capital returns front: as you know, we put out a release on Monday in connection with our announcement to increase the dividend by 50%. To reiterate our capital allocation philosophy, we're still very focused on growth and investing both organically and inorganically to drive the business long term. We will be guided by a target leverage where we operate comfortably in the low-to-mid threes. You should expect us to continue to operate on that basis. The expanded disclosure we provided on Monday hopefully gives you some insights prospectively in terms of what type of return to capital to expect. Continue to expect us to be very active in both dividends and share repurchases, while maintaining financial and operational flexibility to take advantage of opportunities as they arise. I don't know that I'd ground you in the $2 billion per se, but I think we've given enough information relative to our performance and guidance to manage expectations going forward.

Great. Thank you both.

Thank you. I have a question for Scott. Scott, this is podcasting related, as it seems to be the hottest topic these days. As much as in focus as it is, it still seems to be in the early stages. What would you consider a full content slate? How long do you think it takes to get there? And what do you think the ultimate margins are in this business?

Okay, thanks. So a couple of things. One is there's certainly plenty of podcasting out there to have a full slate. The question is, is there enough out there to have a business? That's what we're trying to build. By doing shows like Crime Junkie, we're going to look at being the leader in certain categories in podcasting, much the way we did with audio sports rights and news and some other things for audio and satellite radio. Some categories will have tougher economics and others will cause young and emerging podcasters to want to come to that vertical. By doing that, I think we'll be able to have a solid business model with good blended margins. As you know, right now, podcasting economics is heavily skewed to the creator based on how podcasting evolved. But we feel pretty good about our opportunity. What we feel great about is that podcasting is a great pool for us to find audio talent. Previously, talent sources included terrestrial radio and some bloggers and YouTube creators; now we have this rich pool of audio talent that we draw on. Once they're in, as Jennifer mentioned, podcasters can go upstream and be radio hosts—as Last Podcast on the Left will. Whether it's Megyn Kelly or Kevin Hart, talent has been moving between radio and podcasting. So I view podcasting as an emerging business model that we have to pay attention to margins on. But at the same time, our unique three-pronged approach between SiriusXM, Pandora, and Stitcher to monetize, market, and create and figure out how that audio content works makes me more confident than in an isolated podcast model.

I think I'd just add two things to that, Scott. The fact that we are offering broad distribution of podcasts to talent—like with Crime Junkie—gives us an opportunity to more effectively monetize than we would have if we were trying to keep everything exclusive. We'll consider exclusive opportunities, but broad distribution helps monetization. Also, we look at the ad business increasingly together: SiriusXM broadcast ad business, Pandora music-focused advertising, and podcasting. As the sales team now has the capabilities to sell across all of these formats and genres, there's a lot of demand out there for audio advertising right now, which is a fantastic tailwind for participants. I think we have the best set of capabilities to bring advertisers solutions across many different formats, and this combination really positions us well to better and more effectively monetize. Margins on each format are a little different, but overall we feel really good about where that's heading.

We will take our next question from Jason Bazinet from Citi.

So I just have a quick question. You guys have put up phenomenal numbers this year. Your stock has not reacted to those. My hypothesis is a lot of investors on the buy-side are playing the LSXMA series spread by going long LSXMA and hedging it by shorting your stock. It would seem that if that were true, the buyback— you should be using every dollar you can for buybacks and yet you chose right at that moment to increase your dividend by 50%. So my question is: do you disagree that something is going on with your share price that has to do with Liberty? Is that the right interpretation?

I will start and then Sean can jump in. I'd certainly like to see the stock react more positively to the fantastic results we've had this year. I'm sure there's some truth in what you're saying. We believe there is opportunity in the stock, which is why we're maintaining a healthy buyback as part of our capital returns process. The dividend increase was an acknowledgment that our yield was generally below median for comparable companies, so it puts us more in line with peers. But we still have a lot of flexibility to buy back shares and I think there is opportunity to do so.

Jason, it's a fair question. We're very confident in the long-term opportunity here. We're deploying significant capital. Bringing the dividend more in line with sector comparables, I think given the non-Liberty shareholder base, what we're doing in terms of capital allocation puts us more in line with their expectations. I think it opens us up to more assets under management that are investable against SiriusXM. We're obviously focused on continuing to deliver strong operating results and deploying capital appropriately, and we think we'll be rewarded long term. I won't comment on how investors are playing LSXM versus SiriusXM, but we're focused on fundamentals and long-term value creation.

Okay. Can I just ask one pedantic follow-up? When we're calculating the 80% threshold for the tax sharing agreement to kick in, what do we use for the denominator—basic shares or diluted?

I believe it's the diluted shares, Jason.

Okay. Thank you.

We will take the next question from David Joyce from Barclays.

Thank you. The sales and marketing expenses were elevated in the quarter—I think you called out it was more to drive podcasting listenership. What should we expect from that investment going forward, at least through next year when you're going to be challenged on the gross adds from new cars? Will you be focusing more marketing on the enormous installed base of cars in the secondary market as well as podcasting? I'm just wondering how we should think about that cost down going forward. Thanks.

There are a couple of big components to sales and marketing. There's the direct marketing associated with trial starts that's directly tied to new and used car trial starts. To the extent new car trial starts are lower—as we saw in the third quarter—that expense comes down. But we've actually taken the opportunity this year to invest in more media, whether it's performance-based media or a campaign like SiriusXM House to drive awareness and trials on the digital side of the business. So you'll see two large components to sales and marketing fluctuate based on where trial starts are and how we're investing in overall media. We do a lot of performance media on the Pandora side and have sophisticated modeling that helps us decide when and how to invest to bring listeners onto the platform. That's pretty steady. Where you'll see fluctuations is more on the SiriusXM digital side as we try to bring more trials onto the platform for those packages.

Great. Thanks. And could you please update us on the effectiveness of bringing in the used car gross adds?

The dynamics on the used car side have been impacted in part by what's going on in the overall industry. Used car prices are at an all-time high, so trial starts were down slightly in Q3 versus Q2, but they don't have the same supply issues as new cars in terms of chips and other parts. We think the used car market will continue to be strong going into next year. Our fundamentals help there: organically, our penetration rate continues to grow as more cars in the fleet turn over, and we have robust programs on the trial start side to make sure that when vehicles are sold, we get consumers on trials. We have field teams ensuring radios are on so when a buyer gets into a car they can easily listen to SiriusXM, and we have robust marketing programs to convert them. It depends on where new car production ends up next year, but I think we could see a pretty strong year on the used car side.

Okay. Thank you.

We will take our next and final question from James Ratcliffe from Evercore ISI.

Morning. Thanks for taking the question. Two, if I could. First, conceptually, how do consumers think about their subscription cost in the context of their car payment? If car payments are going up, is that conceptually one bucket of cost that could risk crowding out a satellite radio subscription? And secondly, on the auto production and chip shortage side, are there situations where the satellite radio or the portion that you're contributing is the bottleneck or are you still good on that front? Thanks.

We've looked at subscription cost relative to car payments and we haven't really seen any tie between those two things. If anything, consumers look at their overall subscriptions and what they're paying for different types of services. I don't believe it's tied to the car payment. We've had a strong history of managing rate increases, and I believe we will continue to see that given the robust nature of our subscription packages and the real loyalty of our subscriber base, which speaks to the breadth of content we have—exclusive and non-exclusive—and the unmatched bundle we've been able to offer subscribers. On the supply side, we really haven't had material issues. We're working closely across the supply chain with chip manufacturers, Tier 1 suppliers, and OEMs. Our teams on the engineering side and OEM partnerships are doing an amazing job making sure we can fulfill demand through the supply chain. It takes a lot of coordination, but the team has done a terrific job managing that. I haven't seen any issues that concern me going into the rest of this year and into next year at this point. Automakers are managing many parts and supplies and we're just one piece of the puzzle, but we haven't had any challenges that would concern me.

Okay. Thank you.

Thank you, James. Thank you, everyone, for participating in today's call, and we'll speak to you in the coming weeks. Take care.