Sirius XM Holdings Inc. (SIRI) Q4 2014 Earnings Report, Transcript and Summary

Good morning, and welcome to the SiriusXM's fourth quarter 2014 earnings conference call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the call over to Hooper Stevens, Vice President, Investor Relations and Finance. Mr. Stevens, please go ahead.

Thank you, and good morning, everyone. Welcome to SiriusXM's fourth quarter and full year 2014 earnings conference call. Today, Jim Meyer, our Chief Executive Officer, will be joined by David Frear, our Executive Vice President and Chief Financial Officer. At the conclusion of our prepared remarks, management will be glad to take your questions. Scott Greenstein, our President and Chief Content Officer, will also be available for the Q&A portion of the call. First, 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 on 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 these risks and uncertainties, please view SiriusXM's SEC filings. We advise listeners not to 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 will now hand the call over to Jim Meyer.

Good morning, everyone, and thank you participating in today's call. SiriusXM turned in an excellent performance in 2014 on all fronts. And we are excited about the guidance we've given you for the continued growth in 2015 and the many long-term opportunities that are before us today. In 2014, we originally projected that we will grow our subscriber base by 1.25 million, but we actually delivered growth of 1.75 million net new subscribers in 2014, ending the year with 27.3 million paying sub, making us one of the largest subscription media companies in the world. We added over 0.5 million in the fourth quarter alone, which incidentally marked the biggest fourth quarter we have ever recorded since 2007. Our revenue increased by 10% to just under $4.2 billion. Combining revenue growth, high variable margins and tight expense management, we grew our adjusted EBITDA by 26% to nearly $1.5 billion. And we converted more than $1.15 billion of this into free cash flow, up 25%. Once again we have beaten all of the guidance we gave you for 2014. We believe growing our free cash flow and even more specifically our free cash flow per share will enhance value for our shareholders. By this count, we also had an exceptional year, growing free cash flow per share to about $0.20, up 36% from 2013. We delivered this growth with a combination of higher cash flow and a lower share count, as we return capital to our shareholders via stock buybacks. You should expect this combination again in 2015. Our subscription growth in 2014 certainly benefited from growth in new car sales, which were up 6%; a slightly higher penetration rate, up 2 points to 71%; significant growth in pre-owned volumes; and a very strong retention performance, with churn coming in at 1.9% for the year. New and used car conversions reached all-time highs in 2014. And our trial funnel heading into the first quarter stands at 7.4 million, up from about 6.5 million at the same time a year ago. These strong metrics and our outstanding subscriber growth point to a very healthy business. Our content driven service is something that the carmakers overwhelmingly support and more importantly consumers increasingly demand. The year is early and we have 11 months to go, but we are off to a good start. That coupled with strong expense controls, and we are well-positioned to achieve our guidance this year. More ever, it is very clear to me that in the next few years, we have plenty of runway ahead of us to continue growing our business on all fronts. Our success has proven that consumers are willing to pay for an easy to use package of great content in the car. We know each and every automakers plans for satellite radio installations. While we don't know exactly what new car sales would be, we are very confident in maintaining a high penetration rate. This high new car penetration rate paired with the natural turnover of the auto fleet means that our enabled vehicle count will continue to grow rapidly. At the end of 2014, this number was just a shade over 70 million enabled vehicles. We expect this to cross 100 million by the end of 2017, a near 50% increase in just three years. There are many ways we plan on capitalizing on this. We are increasing our ability to offer trials in the used car market, now at over 15,000 participating dealers, and we are finding more information on subsequent owner transactions. Our service continuity program, which we implemented in mid-2014, ensures that existing subscribers who buy a different vehicle have an easy time moving that subscription over. To drive greater household spending and increase retention, we are testing household plans as an alternative to per radio pricing. And we are building new ancillary revenue streams with weather, live traffic and our growing connected vehicle business, which provides safety, security and convenient features to end-users. Since we have contribution margins of 70%, our objective is to increase revenue and the resulting free cash flow from the growing base of enabled vehicles. We intend to be well-positioned to succeed in a world of fully connected cars. We think that nearly all new cars by the end of decade will have some form of connectivity. While more competition is inevitable, SiriusXM strategy is to turn this connectivity into a tremendous positive for our business. I want to point out something. Our main competition has been and will remain free ad-supported entertainment. This doesn't change in the connected vehicle. So our focus will continue to be on convincing people to pay for a premium experience with great content that is extremely easy to use. Let me be clear, we have major efforts that are now well-underway to avail ourselves of the enhanced capabilities of connected vehicles to supplement our satellite network. And this work will be the next step in solidifying our competitive advantages. The joining of our IP and satellite technologies will let us offer more features to subscribers and will help us better understand and manage our customer relationship with them. Another underappreciated asset we have is the unique value of our network and spectrum. Today, they provide tremendous value to us for our core service, but in the future we will have significantly more flexibility, as we adopt wide-band radios and increase ancillary uses of our nation-wide system. We are extremely excited about the long-term benefits to our business of this growing network flexibility and in-car connectivity. In the near-term, you will see us implement an all new streaming product, including new apps for iOS and Android in a new web experience. Quite frankly, in my opinion, our apps weren't good enough and we needed to put more resources into making them better. These new SXM apps are the result of a year-long effort to completely re-architect our streaming platform, bringing more services in-house and giving us flexibility to push out more frequent updates and enable our service for additional platforms. Our subscribers will be able to easily discover content and search through SiriusXM's vast archives of entertainment. Users will also see improved speed when signing in or changing channels, as well as enhanced reliability in low bandwidth situations. We are beta testing these new apps now and we hope to roll them out to our broader subscriber base within the first half. Being the leader in curated, exclusive and compelling content is central to our company's mission. We will continue to add and refresh our programming line up. We know the variety of our bundle, music, sports and talk is what attracts subscribers and convinces them to pay. In 2014, we solidified our leadership in women's programming by carrying The Ellen DeGeneres Show, producing a daily exclusive show with Jenny McCarthy and adding the TODAY Show. Also, with NBC News, we launched broadcast of Meet the Press and the Nightly News with Brian Williams. In sports, we continue to improve our offering. We launched the channel in conjunction with Bleacher Report and added a new exclusive daily show hosted by Stephen A. Smith, the popular ESPN broadcaster. We also recently launched SiriusXM Insight, a new talk channel that has already gathered significant national media coverage. We also continued our track record of music discovery, giving first national airplay to acts such as Vance Joy, Hozier, Cole Swindell and 5 Seconds of Summer, among the many others. We launched three new music channels with unique format not heard on traditional radio; Venus, which is rhythmic pop; Y2Kountry, which is country hits from the 2000s; and Utopia, which is a dance hits channel. We also began co-producing two new and exclusive music shows with YouTube, the YouTube 15 and the YouTube EDM15. We think SiriusXM is unique in the discipline we bring to investing and using our free cash flow. We start with looking at our existing business to make sure we are investing in all the projects needed to ensure the business is well-managed and poised for further growth. Of course, this includes frequent new investments and programming, as I mentioned, but we are also making substantial R&D investments that we expect to yield returns in the future. Consolidating the OEMs around the single chipset platform, expanding network capacity, adding new in-car features to make the radio experience more enjoyable and easier to use, and finally, significantly reducing the form factor of our satellite radio modules and their cost, making future OEM installations easier and cheaper. These investments along with our focus on IP connectivity will give us the most powerful entertainment platform in the vehicle in my opinion. We also look continually at external investment and merger and acquisition opportunities, businesses that would be a logical fit, growing businesses with scaleable models, and of course investments that result in long-term accretion to free cash flow per share and other key metrics. These are extremely hard to find, but we do value having dry powder should such opportunities arise in the future. We also see our own stock as an investment. We believe it represents a good value today. We've spent $2.5 billion last year to retire 739 million shares, which was roughly 12% of our outstanding share count at the beginning of the year. I believe you'd be hard-pressed to find many companies with such a disciplined approach to rewarding shareholders. We have $1.7 billion of remaining buyback authorization from our Board of Directors. Given our low leverage and growing free cash flow, we have a sizeable ability to continue returning capital to our shareholders. So there you have it. I am very proud of the hard work of everyone on our team. We executed our plan and then some in 2014. We have set goals to further grow our business with more subscribers to produce more cash flow in 2015. And we are taking all the necessary steps to invest in the long-term platforms needed to produce a very durable franchise in the connected car. With that, let me turn it over to David.

Thanks, Jim. SiriusXM finished a very strong year with excellent results in the fourth quarter and we estimate guidance for solid continuing growth in 2015. Our fourth quarter revenue and adjusted EBITDA were at all-time highs and free cash flow set a new fourth quarter record. Fourth quarter revenue was up 9% over the prior year, as total subscribers grew 7% to 27.3 million and self-pay subscribers also grew 7% to 22.5 million. With the addition of 577,000 paid subscribers, we had our best fourth quarter for subscriber growth since 2007. Contribution margin increased by 80 basis points year-over-year to 70.6% in the quarter, driving adjusted EBITDA to $381 million, up 17% against the very strong comp in the fourth quarter of 2013. This represented an EBITDA margin of close to 35%, up 240 basis points year-over-year. We converted 87% of our EBITDA to free cash flow, which set a new fourth quarter record at $331 million. Free cash flow per diluted share climbed by 20% to an all-time quarterly high of $5.09, up from $4.09 in the fourth quarter of '13. Our full year results were ahead of expectations by virtually every measure. Total and self-pay net adds at 1.75 million and 1.44 million beat the heck out of our original guidance by 40% and 15% respectively. Better than expected new car sales in '14 boosted trial starts and conversions, our used car program ramped solidly and our churn rate was better than expected, all of which contributed to the upside. Full year 2014 revenue was up 10% to nearly $4.2 billion. Contribution margin expanded by 90 basis points to 70.8%, slightly ahead of the historical norm of 70%. Subscriber acquisition cost in 2014 as a percentage of revenue were just 11.8%, easily the best in the company's history, an improvement of nearly 300 basis points, even as new car sales rose by 6%. Adjusted EBITDA margins of 35% were up more than 4 full percentage points from 2013, driving 26% growth to a record $1.47 billion. We continue to convert nearly 80% of adjusted EBITDA into free cash flow. Free cash flow grew 25% to $1.156 billion. And we returned more than double our free cash flow to shareholders as stock buybacks reached $2.5 billion in '14 repurchasing 739 million shares. Leverage was 3.1x EBITDA at yearend, roughly unchanged from '13 as the 26% growth in adjusted EBITDA offset a $900 million increase in debt. Interest coverage remained very strong at 5.5x for the year. For 2015, we expect continued growth in subscriptions, and in all of our key financial measures we are projecting net subscriber additions of $1.2 million, revenue of $4.4 billion, adjusted EBITDA of $1.6 billion, and free cash flow of $1.25 billion. We believe subscription-driven satellite radio is the brightest spot in the media landscape. We have a recurring revenue model with strong monetization per user, high margins, a rapidly growing fleet of satellite-enabled vehicles, and a rapidly expanding subsequent owner opportunity as satellite-enabled vehicles begin to turn over in the previously-owned car market. Those revenue on growth drivers, combined with tightly controlled fixed cost and new opportunities from the connected vehicle business will continue to produce strong growing free cash flow in the coming years. Lastly, the recent spectrum auctions underscore what we all know, spectrum is valuable. With the R&D investments, Jim, mentioned earlier, our 25 megahertz of nation-wide spectrum can be redeployed to generate even more growth in the future. And with that operator, let's open it up for questions.

[Operator Instructions] And your first question comes from Barton Crockett with FBR Capital Markets.

Two things, I guess, around new technologies that you're working on, the comment about spectrum and also the app. I think with spectrum, you're emphasizing, daily ability to take this 25 megahertz, redeploy it in the future. Could you give us a sense of how far away is this future that you're thinking about? I mean is this very, very long term, over a decade plus or are there opportunities nearer term to do something with that, that could be interesting and meaningful?

So I'll start and then David will jump in. I mean it's obviously an iterative and long process, but we've already taken steps to get it underway. As you know, both the strengths and kind of I will call it the frustration of our model is that it takes OEMs longer to implement a change in product, than what people are used to in an aftermarket product. But when they change, they stay focused and change, and it goes for a long, long time. And so we are in the middle of that transition. And then there are still pieces within our spectrum. We are just figuring out how to use more, either more efficiently or through new technologies are enabling us to open those up. And David, you want to add some stuff there?

I think, Barton, it's not within five years, but it is within 10.

And when you look at this, is this something that will require a lot of investment at the outset, maybe at that point would be a redraw on the model or are there ways to get value here without necessarily changing the EBITDA trajectory.

We've already taken the investments required to go there. And I don't think you should think of there has been some incremental investment outside of our normal business model.

And then I mentioned the apps, which in our family, we're very active users of the apps. But my sense is that the broader public is not so actively using their apps, but this happens to be the way it seems people want to consume entertainment more and more. What do you think needs to happen to increase awareness and usage of the apps? And strategically, how important do you think that is for Sirius long term?

So look, I think the trend is clear and that is that satellite broadcast and streaming are all going to co-exist for a long, long time. And so I think people are going to listen to content a variety of ways. And frankly, I think the issue, what's going to be more important than the method of delivery is making it simple, easy, and in our case, attractive enough to get people to pay. And so that's the way we're focusing. I have to tell you, I am not disappointed with the amount of people that use our app today. And we charge for it, okay. Let's be clear. So it's not something that we just put out there and say, just signup and take it. Our strategy has been to make it a up-sell from our core subscription. We'll see where that goes in the future. Right now, what I am more concentrating on is the front-end of the equation and that is making sure our technology, our platform, and our apps are as good as they need to be to deliver the experience we want to deliver to customers. And I think if we want more to use it at any point, that's just the factor of how hard we drive our marketing engines.

We'll take our next question from Jessica Reif Cohen with Merrill Lynch.

I have a couple of questions. The first is on, Jim, you mentioned that you're testing household plans, is that for existing subs or is that a separate plan? And how you're pricing them?

We're going to test a lot of things, Jessica. And it's funny we had a debate on this yesterday. Look I think an area of growth for us is, I think I'll get the statistic roughly right, which is I think close to 80% of the households in this country have more than one vehicle. And I think -- have more than two vehicles. And I think it's in the low 20% of our subscribers, have a matching subscription count. And so you can argue either measurement, what you can't argue is how vastly wide they are, and that to me smells opportunity. And at least our premise is, the way to get at that opportunity is with simple, easier family plans. But we've got to walk through that carefully, so that it both benefits our ARPU -- I mean benefits our revenue and benefits our subscribers count. So we're testing it in more than one acquisition funnel. This is going to take a while, because the one thing I've learned in this business, you've got to wait for a pretty long time to watch these results go through, before you can truly, truly rely on the metrics. But I think we're in an area that in the future is going to provide benefit to us.

I have two more questions to David. Leverage is just 3.1x versus the target you stated of 4x. How eager are you to reach your target leverage either through M&A or buyback. In any direction you want to talk about on how you'd spend the money.

Well, I wouldn't say that we're necessarily eager. We certainly aren't holding back from getting there. But the other thing we don't necessarily want to do is in the absence of seeing a near-term acquisition opportunity that would get us there, we don't necessarily want to just lever up in foreclose sizeable acquisitions by virtue of doing that. So I think that we see an ability to operate the business at what we think would actually be very conservatively a 4x leverage needle for the long term. But we really don't want to foreclose what are just a lot of different investment opportunities we keep looking at. So I think you should -- we're really not in the rush to get there, but there is no hesitation in going there either.

And then one last one for Scott. You guys have talked about in the past and even today on the call, you talked in the past about the West Coast prime time focus. Jim talked about the women's programming and country music. I'm just curious, is there another target area where you think you can really make a dent and something that would move the needle in one way or another.

Sure. One thing, you brought up the West Coast, I just wanted to give an update on that. I'm not sure everybody realizes, our Foxxhole channel led by Jamie Foxx is permanently launched out on the West Coast and going. San Francisco has become a place that we've grown a little bit with Bleacher Report having a live show out of there as well as Business Radio with Randi Zuckerberg and Dot Complicated are show on that channels out there. And I'm sure you can expect the logical extensions from Entertainment Weekly and Hits 1 out in L.A. So that is underway.

And more to come.

And more to come. And Nashville, as we all know is there and Austin and a few other markets. I think right now it's less about geography with the exception in the West Coast, as it is opportunistic wherever it is. The great thing about the way media and the digital world is, interesting people and interesting things can pop up anywhere in the country or the world. So it's really about that concept. Last point is, are there genres and other things to look at that I want to grow, that there is opportunity? Sure. I think in the tech area, I'd like to get a little deeper. Our TechCrunch radio keeps getting some attention. The Public Radio spectrum hasn't really been touched for a while, so that was inside. So we're going to just keep looking at those kind of opportunities and try to grow from there.

We'll take our next question from Vijay Jayant with Evercore ISI.

You mentioned not foreclosing opportunities on M&A. Would music label be a strategic opportunity, broadly speaking. And then just economic question, this is the first time we've seen oil at such low levels. Has it changed tick-up rate, given consumers are going to save $750 annually. Is that driving incremental subscription at all? Is it too early to call that?

So I'd start with the second question, which is, my personal opinion is lower oil prices are great for our business. And the number one reason it's great for the U.S. car industry. And so in terms of how customers are behaving, I think it's clear, they're behaving a lot better than they did in 2008 and 2009, there is no question. There is somewhat of a recovery underway. And I think every index shows there is at least been a rise in confidence. I don't think we've seen any material change that we could point to, because of this change. In terms of the areas we're looking, we continue to look. I quite candidly don't understand why a label would makes sense for us for instance, because there business model is entirely different than ours. If you're a label and you want to make money, you want mass distribution of your product on every platform, and by the way so do major artists. And what we're looking for is having all of that content, and then our own suite of very unique and compelling content. So I wouldn't say, never, but I would say and the things I look at, it's not on the top of our list.

Our next question comes from Ben Steinberg with Morgan Stanley.

Could you please update us on the used car activity in the quarter? It looked like it was up nicely year-over-year. So any update on trial activations in Q4? And then how are you guys working to improve your conversion on used and if you could talk a little bit about some of your initiatives there? And then I just had a quick follow-up on the telematic side.

The development of the used business continues, honestly a little bit ahead of our expectations. That funnel development is strong. That we continue to sign-up new dealers. We continue to source new information on ownership, and so we continue to sort of set records in terms of the level of trial, not only activations, but conversions in that channel. And I don't see that stopping in the next several years. I mean I think we have long-term sustainable growth from the used car business. And we're very happy with the conversion rate that we've got in the subsequent owner business today. That being said, we continue to slug it out everyday, looking at our campaign strategies, looking at the operational processes so to underpin them. And we continue to drive, like we do, honestly in ever part of the business, look to drive excellence in the results. But at this point, we're thrilled with the results of the used channels.

Yes. And I think it's safe to say, we surpassed the guidance we gave you for 2014 in that area, right. I think one other point, Ben, that's really important, is those 70 million cars that are out there, that I very specifically told you, are going to grow to 100 million in three years. I can tell you the vast majority of those 70 million are never going to see connected technology. And I have my doubts exactly how many of the next 30 million will have this connectivity that everybody talks about. There is no question where the industry is going. But I think when you also look at what's out there in the fleet and you compare that to the 230 million cars that are on the road, I really like where this is going in terms of our opportunity to continue to market into that growing base of enabled vehicles with our service. And I think that's something investor should really focus on. That this change, and while I spend a lot of time in my comments talking about it, because it's clear to me where it's going. This is going to take time. This is not going to happen in six months. This is not like when a new smartphone comes out and everybody jumps to the new platform. It will not work that way.

And then just on, when you brought Agero, Jim, I think you said one of the reasons you bought it was the OEMs wanted you to or thought it was a positive for your business and your relationship with them. What's the latest there? Have you had the OEM wins that you expected? And have you had the product take up that you expected? And where do you go with telematics in general, maybe over the next year to try to kind of sort of ring fence the business better with OEMs in dashboard?

So number one, Ben, I will tell you there is absolutely zero, that I've seen since we acquired Agero that would have changed my mind on the original reason we bought it. Number two, I guarantee you, right now we have our head down. And you can assume what that means with the OEMs, but I guarantee that you'll be hearing more about this space, if not by the middle of summer, certainly late summer.

Our next question comes from Kannan Venkateshwar with Barclays.

Just a couple of questions. The first is when we look at the whole buyback program that you guys have undertaken, does it make a sense at some point to essentially buy your shares back at a discount by buying Liberty Media shares? And then secondly, when you look at the marketing expenses this quarter more operationally as a percentage of revenue that seems to have stepped up quite meaningfully. So just wanted to see if there is something there in terms of trend line, if that's something we should expect going forward?

On the last question, there is nothing special about the fourth quarter that would change the trend, but we did run a number of initiatives in terms of testing out various strategies with radio as well as television advertising in the quarter. And those were things that we do from time-to-time. So it was a little more concentrated this year in the fourth quarter, but nothing that would change the trend. On Liberty, so I hear that, right. People ask that question, buy your own stock at a discount by buying Liberty. And I guess it's theoretically possible. I mean we all know how the valuation models work and in investment Liberty would be an unconsolidated asset that you would presumably value our operating cash flows, and then add on consolidated asset into the valuation. There is no current consideration doing that kind of thing. And we of course have to look at why Liberty trades at a discount to its net asset value. It seems that it always has, but it's a theoretical possibility. I will grant you that.

Our next question comes from John Tinker with Maxim.

Could you just give us a quick update on your tax NOLs? And how do long you think you'll be able to keep that high conversion of EBITDA to free cash flow?

I think based on current outlook, we will become a tax payer in '19, I think. So we'll have the benefit of full tax yield through the end of '18, anyway.

And just another quick question on the programming side. At one point, you were quite focused on -- I think you touched on all the base to see expansion women and so forth. At one point you were quite focused on Hispanic, where is that at the moment?

So I want to be clear, we haven't lost or we haven't given up on Hispanic. I've had some people ask me that, that's simply not true. What I will tell you is we tried some things and they didn't work. We thought Piolín for instance, would be something that we could monetize, and I give us a lot of credit. We tried it, we put our heart behind it, and it didn't work and we cut our losses, okay. And that doesn't mean Piolín is not a great talent. He's just a great talent and free radio. It didn't turn out that people were willing to pay for his. You will continue to hear more from us in the Hispanic area. And we are continuing to work on it. Scott, you want to add anything?

Yes, so couple of things. One is, when we do the research we do and look at different segments of programming, the bilingual, bicultural Hispanic today looks a lot like, in your case, what all of our subscribers look like. So we have gone with our traditional strategy of trying to find out what would be attractive to that audience, but also to our mainstream audience. So the first sort of programming launched in that area will be Pitbull and his radio channel, which will have bilingual material in that. And he was at the Super Bowl launching that and all that. So that will be one prong. And you should expect other major Latin artists that cross over the both segments to be part of this process, because that will be more consistent and a natural fit with what our existing programming line up is. In addition, you should assume, as we do with MLB, we have Spanish broadcast, we have the Super Bowl and other things from the NFL in Spanish. And in the sports area, soccer included, you should expect to see that kind programming continue.

And we'll take our next and last question from James Ratcliffe with Buckingham Research Group.

Two, if I could. One, on the G&A line, there was a meaningful step-down in the quarter. I'm wondering if there's anything particular driving that. And secondly, to dig into ARPU for a bit, can you update us in your thinking about the relative appeal of monthly subs within your higher ARPU, but probably higher volatility versus annual contracts and the ARPU volatility trade-off there?

Yes. On the G&A front, we actually got some insurance recoveries in the quarter, which helped sort of move things down a little bit. Other than that I don't think there was very much remarkable in there. And the insurance recoveries were a few million dollars. It wasn't a real big item. On the ARPU front, we talked about this before. It's not the way we manage the business, it's a calculation, right. And so Jim and I actually had a meeting with some of our people yesterday talking about what we're going to emphasize in selling this year. And one of the things that just doesn't factor into that as a discussion is an ARPU target. And the reason is, is that every good salesman always finds a way to make their target. And for us we're looking to, as Jim said, maximize the free cash flow that we can drive out of the enabled fleet. And so we are looking to sell as many plans as we can, that with the second owner market that if we were very successful in the short run selling into -- sorry the second car market, that second car in the driveway, that could actually force ARPU down, but it would be a good thing for the business, because we'd be driving more total subscriptions. So to be honest ARPU is just not something we manage.

So James, I think it's a good question that you're asking about kind of, do we see a higher revenue profile over time from an annual customer versus the monthly customer. And you're absolutely right, monthly's churn higher. And I will tell you we have a lot of stuff underway. And I don't think we've concluded yet. And I don't think the answer is going to be clear. I think it's going to be messy, as we work our way through it. But Dave is 100% right, we are trying to maximize revenue and cash flow and ARPU is kind of the number that falls out from where we end up, not the other way around. End of Q&A