Sirius XM Holdings Inc. (SIRI) Q2 2015 Earnings Report, Transcript and Summary

Please standby, ladies and gentlemen, we are about to begin. Good day and welcome to Sirius XM's First (sic) [Second] (00:06) Quarter 2015 Results Earnings Conference Call. Today's conference is being recorded. A question-and-answer session will be conducted following the presentation. [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. Hooper Stevens - Vice President, Investor Relations & Finance, Sirius XM Radio Inc.: Thank you and good morning, everyone. Welcome to Sirius XM's second quarter 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, is 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 those risks and uncertainties, please view Sirius XM'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, certain one-time items and historically purchase price accounting adjustments. I will now hand the call over to Jim Meyer. James E. Meyer - Chief Executive Officer & Director: Thank you, Hooper. The exceptional results we've produced in the second quarter of 2015 should leave no doubt that demand is strong for SiriusXM, and we are once again raising guidance across the board on the back of great performance in the quarter. We grew net subscribers by an astounding 692,000. The total paid subscriber base reached a record, 28.4 million, up 8% over this time last year. Even more importantly, we grew self-pay net subscribers by 519,000, the most in a second quarter since 2007. Total self-pay subscribers now reached a record 23.4 million, also up 8% from the second quarter of last year. Our churn rate and new car and used car conversion were very strong. Self-pay churn was just 1.6%, one of the best results in the company's history. Vehicle related and non-pay deactivations were up slightly year-over-year, but this was offset by a huge decline in voluntary churn. Put quite simply, fewer people called us to cancel. When you have a subscriber base as big as ours, every tenth of a point change in monthly self-pay churn equals the difference of about 70,000 subscribers in a quarter or 280,000 net subscribers in a year. So this improvement in churn of nearly 20 basis points drove a lot of upside in the quarter. We believe our retention performance will continue to be extremely solid in the back half of 2015 although we don't see 1.6% churn as the new normal. Our new vehicle penetration rate in the second quarter was 72%, up from 69% a year ago. With growing confidence, we now see long-term penetration rates settling near 75% of total production, up from our previous expectation of around 70%. More automakers like Toyota and Honda are increasing penetration rates and these long-term plans are the best statement that – or are the best statement that OEMs believe satellite radio is a must-have feature for the future car market. SAAR was $17.1 million in the second quarter, up 4%. As auto sales touch new highs, we continue to set new records for convergence, and our second owner business is booming. By partnering with more dealer management system providers, going into more dealerships, now, over 17,000, getting more timely leads from non-dealership sources, and accelerating our Service Lane Program, which is now, by the way, over 7,000 dealers. Used car conversions once again set a record in the second quarter. And record high trial starts, up 33% from the last year's second quarter bode well for future growth and conversions as well. Bottom-line, in the second quarter, when looking at combined new and used car conversions, more people than ever before chose to become satellite radio subscribers after purchasing a car with a trial included. More of our subscribers than ever are also moving their subscriptions from one car to another. Our service continuity program has not only greatly improved our retention of these subscribers, but has also found great success in adding another active subscription to the household. And of course, we are helped by the improving economic client – climate. Growing employment and lower gas prices, down 25% year-over-year in June, are likely helping generate new demand and contribute to higher retention. With the upside in the second quarter, we are raising full-year guidance for the second time this year to approximately 1.8 million net sub-additions, with approximately 1.6 million of those being net self-pay subscribers. Remember that when we gave you our initial guidance in January, we projected 1.2 million net subscribers this year. Our performance has been so strong that we've already done 94% of the original full year net add projection in only six months. New and used car trial starts totaled a record 4.8 million in the second quarter. And the all-important trial funnel is now at an all-time high of 8.2 million, and retention trends look strong. Put simply, we feel confident that we can deliver our new higher subscriber guidance this year. With record quarterly revenue of over $1.1 billion, up 8.5% in the second quarter, coupled with the upside of subscriber growth, we're also raising our 2015 revenue guidance to approximately $4.5 billion. Again, our results demonstrate the scalability of our model. We grew revenue at a faster clip than expenses in the second quarter, sending adjusted EBITDA up 12% to a quarterly high of $415 million, and margins up 120 basis points to a record high 37%. This margin expansion was quite an accomplishment, particularly given the significant increase in SAC expense associated with higher auto sales and production. Remember we have again and again stressed that business models matter. Scalability and high variable margins remained a key reason why we love SiriusXM's business model so much. So with a strong first half under our belts, we now see full-year adjusted EBITDA of approximately $1.62 billion, which includes approximately $19 million of incremental expense for the settlement we struck with the major record labels relating to pre-1972 recordings. That amount will be reflected in the second half of 2015. Apples-to-apples, this means we see higher adjusted EBITDA of about $40 million compared to the guidance we gave you in late April. The vast majority, about 80% of our incremental EBITDA versus last year's second quarter went straight to free cash flow, which was also a quarterly record high of $371 million. This was up 11% on an absolute basis, but on a per share basis jumped 25% to $0.067 as weighted average diluted shares declined by 11% to 5.5 billion from 6.2 billion shares, thanks to our capital return program. Our new increased guidance calls for free cash flow of approximately $1.3 billion, about $50 million higher than our previous guidance, which will exclude the cash payment we expect to make this month under our settlement with the major record labels. The $210 million settlement we reached with the major record labels regarding pre-1972 recordings ensures we can keep playing approximately 80% of the pre-1972 recordings we used through the end of 2022. In my opinion, this deal is a win-win, and David will speak more about this settlement in a moment. At a time when competition in the audio entertainment space has reached new heights, we are witnessing yet again that demand for our differentiated, curated and expertly presented content remains very high. Our unique bundle of content and services is what sets us apart from our competitors. Our quarter included more exclusive radio broadcast of major events for our music fans. Many people couldn't trek to Chicago for the historic Grateful Dead concerts. But we brought to the nation nightly broadcasts of the three-day event, adding expert commentary before and after the shows. We've made acquiring the radio broadcast rights to all the major music festivals a high priority. In the second quarter, we broadcast the performances from Coachella, Bonnaroo and the Electric Daisy Carnival, and we also presented two live exclusive subscriber concerts at Harlem's epic Apollo Theater, the first with Pitbull to launch his new SiriusXM channel. The second, with James Taylor as part of his exclusive limited run channel, which we created to celebrate his new album, which debuted at number one. In sports, we brought boxing back to radio with exclusive broadcast of the acclaimed Premier Boxing Champion series. We hired Soccer Hall of Famer, Michelle Akers, for our Women's World Cup coverage, and we continue to create buzz around the sports world with timely and news making commentary and interviews on many of our channels. Looking ahead to the fall, we will bring our subscribers, Radio Andy, a new exclusive channel created by the talented Andy Cohen. It will be fun, uncensored entertainment and talk channel, featuring Andy himself, and meant for anyone who loves pop culture, celebrities and lifestyle. We will be announcing several new hosts for this channel soon. Another area I'm very excited about is later this fall, we will also debut the all-new exclusive FOX News Headlines 24/7 channel, a fast-paced digest of the latest news, entertainment, sports, business, weather and more, available only to SiriusXM subscribers. Our next generation series, SiriusXM 17 and connected vehicle platforms, continue to develop. SiriusXM 17, which marries two-way IP connectivity with satellite broadcasting to deliver unmatched audio experience is continuing to resonate well with automakers. It will give our subscribers a best-in-class experience with more content and more personal control of that content. We planned to show a full demonstration of SiriusXM 17 at the Consumer Electronics Show in Las Vegas this January, so stay-tuned. Our connected vehicle business, which adds a strategically important vertical of safety, security and convenience services for the automakers and their customers, is also seeing increased traction. Our second quarter launch of NissanConnect Services powered by SiriusXM has gone off without a hitch and we look forward to working with Nissan and rolling out these services to more and more vehicles. We also continued to work with other significant global automakers on several new enhanced deals and we expect to have more to say on this in the coming months, again stay-tuned. Our moves to take better advantage of connected vehicles by enhancing our audio service and providing new non-audio services are a long-term play that will take many years to develop. Of course, streaming and smartphone makers move faster with new services. Quite honestly, most of them copy cats, launch all the time. But don't forget just how big terrestrial radio still is and how much listener and revenue share it still attracts. It is quite simply a huge industry that presents plenty of growth opportunities for newer entrants like SiriusXM and streaming players. When a listener doesn't convert to a self-paying subscription or cancels our service, it's almost always because they don't want to pay. Today, most of these listeners migrate back to the default-free option, which is terrestrial radio. There will be additional free options in the future, but our fundamental challenge really doesn't change. Quite simply, as the satellite equipped fleet grows, that challenge is convincing more and more people to switch from free to pay. We are going to find long-term success by producing great content and offering a variety of packages and price points to go after free radio's massive audience. Our hardware is already installed in 32% of the vehicles on the road or approximately 76 million, but with our long-term penetration rate settling in the mid 70s as a percentage of new vehicles built, our addressable market will double over the coming years. This is a big deal. Finally, during the second quarter, we repurchased 144 million shares of our stock for $560 million. So far this year through yesterday, we have spent about $1.3 billion to repurchase 338 million shares. This is a massive return of capital that we think benefits our shareholders long-term, and we will remain disciplined and diligent with our use of our shareholders' money. We also continue to maintain prudent leverage and the flexibility to pursue value creating strategic options that may arise. With that, I'll turn it over to David. David J. Frear - Chief Financial Officer & Executive Vice President: Thanks, Jim. Good morning, everyone, and thanks for participating today. I thought our first quarter was pretty hard to beat, but the second quarter was even better. Self-pay sub additions were up nearly 37% and revenues up 8%, adjusted EBITDA 12% to a margin of 37%, free cash flow is up nearly 11%, and free cash flow per share is up 25%. So, it's an extraordinary performance. For the third quarter in a row, we have been pleasantly surprised by the strength of our subscriber performance. Similarly to the prior two quarters, we performed a little better than we expected on all fronts, resulting in a lot better than we expected in total. All acquisition channels, new car, used car, win-back and aftermarket are performing well, and with improved churn, it was the best second quarter for self-pay net adds that we have had in eight years. You have to go back to the second quarter of 2007 to find a bigger second quarter for us. 519,000 self-pay nets bring our self-pay base to over 23.4 million, 692,000 total net additions bring the total paid subscriber base to over 28.4 million. Based on our new guidance, we'll exceed 29 million subs by the end of the year. Our new guidance for net additions of approximately 1.8 million is up 50% from our original guidance of 1.2 million. Additionally, we expect 1.6 million of these 1.8 million net adds to be self-pay subscribers with about 200,000 of the additional net adds coming from expansion in pay trial inventories, driven by higher auto sales and higher penetration. With auto sales near 17 million, our penetration rate up a record high OEM trial balance and low self-pay churn, and we are well-positioned to hit our increased subscriber guidance. Second quarter revenue was up 8% to more than $1.1 billion and we are taking up our revenue guidance to approximately $4.5 billion, once again advertising outperformed overall revenue growth in the radio ad market with a gain of 13% in the second quarter. You'll find the continuation of our cost disciplined, efficient growth as we make substantial investments to grow our business by building up the used car business, new programming, the streaming platform and connected vehicle services. Contribution margin expanded 10 basis points to 71%. After considering pre-1972 cost going forward, we continued to maintain our long-term expectation of a contribution margin of about 70%. SAC per install improved 3% to $32, while overall SAC costs were up 10% on higher installation volumes, and our fixed costs were flat year-on-year, producing an adjusted EBITDA margin expansion of 120 basis points to 36.9%, tying the first quarter for a record high margin. Adjusted EBITDA of $415 million in the quarter was the highest amount ever for a single quarter. We converted nearly 90% of that adjusted EBITDA to free cash flow at $371 million, up almost 11% from last year. As Jim discussed in June, we agreed to settle litigation brought by the major record labels on pre-1972 music for $210 million. The settlement covers about 80% of the pre-1972 recordings we play. As part of the settlement, we have the right to enter into a license with each of the labels to continue broadcasting pre-1972 recordings from 2018 through 2022. The royalty rate for each license will be determined by negotiation or binding arbitration if we can't reach an agreement on the rate, and as Jim said, it assures our continuation of pre-1972 programming for the next seven years to eight years. The accounting for the settlement attributes $107.7 million to the past, and the balance of $102.3 million will be amortized over the next 10 quarters to the end of 2017. So you can think of the annualized cost of the settlement we announced as about $40 million or less than 1% of revenue. The $210 million settlement to be paid this month will be excluded from free cash flow calculations when we report the third quarter, we feel comfortable with our new higher guidance of $1.3 billion in 2015 free cash flow. In the last 12 months, we have repurchased over 633 million shares driving free cash flow per share up by 25% in the second quarter. Since we started the capital return program, we have repurchased more than 1.5 billion shares in an average price of $3.49. In June, we extended and expanded our revolving credit facility, which was completely undrawn at the end of the second quarter from $1.25 billion to $1.75 billion. Total debt now stands at a shade above $5.1 billion with no maturities in the next five years, leverage is at 3.2 times trailing EBITDA, we have lots of liquidity. The second quarter ended with $294 million in cash, and as I mentioned, an undrawn $1.75 billion revolver, we feel very good about the momentum of our business. Operator, let's open it up for questions.

Thank you. And we'll go first to Brett Feldman with Goldman Sachs. Brett Joseph Feldman - Goldman Sachs & Co.: Good quarter and thanks for taking the question. I want to go back to churn. Obviously, it was one of the highlights of the quarter. You indicated you're not so sure that you're going to be able to sustain such a low run rate, which I think is understandable. But could you maybe just walk us through historically what have been the moving parts in terms of what drives churn and maybe just give us some sense as to where you think you can come out for the rest of the year? David J. Frear - Chief Financial Officer & Executive Vice President: So the churn is included in the guidance. So we're just going to point you back to the guidance on subs. In terms of the drivers of churn I mean it's three primary components: you have non-pay, you have vehicle turnover and you have other voluntary churn. And where we've seen a real departure from expectations is in the other voluntary, and there're just fewer people that are going out and effectively choosing that free option that Jim talked about than we had expected. It's a good beat, we're glad to have it, but very difficult to predict how people are going to act going forward. So we've had a long-term expectation of churn in sort of the 1.8% to 2% range. We are beating that this year. We hope to continue to beat it, but we're cautious on the outlook. Brett Joseph Feldman - Goldman Sachs & Co.: You'd noted some of the positive trends in the economy, and it seems reasonable that that likely helped the performance in the quarter. Let's just be optimistic and assume that economic trends continue to go well. Would that change anything about how you go to market? Would you maybe actually advertise or promote more aggressively because the return might be better. Would you revisit pricing? Just trying to think about if things keep going well outside the company, how things could change inside the company? James E. Meyer - Chief Executive Officer & Director: Yeah. Look, Brett, I think we constantly evaluate those things. And I can tell you David and I and our teams look at them a lot with a lot of different options. We've developed frankly other options going forward that we haven't made decisions on. But I think – and I think in my comments and David said it in his, having a strong economy helps a lot, okay? And so we certainly feel good wind at our backs at this point, and I think that's all I got to say on that. Brett Joseph Feldman - Goldman Sachs & Co.: All right. Thanks for taking the questions.

We'll go next to Jason Bazinet with Citi.

I just had a question regarding how you all are thinking internally about the tradeoff between your price point, the ARPU, and the impact on gross adds and churn. Do you feel like you've got that sort of nailed and you have a good sense in terms of the utility that consumers ascribe to this? Or is it still sort of a bit of a juggling act as you're try and to find optimal tradeoff? Thanks. James E. Meyer - Chief Executive Officer & Director: I've been involved with some subscriber businesses for a while, and I think it's always a juggling act in tradeoff. And I think one of the reasons is is the economy also certainly plays an impact in this and shifts over time. I think we've learned an awful lot. Jason, back to your question, an awful lot. I think our marketing organization and the amount of analytics we're now applying to our businesses at a different level of sophistication than where we were even a year ago in terms of evaluating those tradeoffs, but I will admit to you there's still a lot to learn going forward particularly as we begin to get into this very, very big deployment from approximately 75 million vehicles to 150 million vehicles, and the much wider demographics associated with that about how are we going to position our price points to best optimize, and I want to repeat this, to best optimize the strongest EBITDA performance.

Right, okay. And, could you.... James E. Meyer - Chief Executive Officer & Director: Other subs are revenue are ARPU, EBITDA.

Understood. And if I can ask just one follow-up. As music becomes more pervasive to other platforms, you spend a lot of time talking about sort of a – the sort of special events and things you're doing from the Grateful Dead to boxing matches on an on. Do you think there are opportunities to go acquire additional talent that might be on terrestrial radio, while it's available before the market heats up and gets more competitive to sort of take advantage of your strong free cash flow and your scale and size? James E. Meyer - Chief Executive Officer & Director: Sure. I think there is always a chance to acquire strong new talent, and we're constantly – I wouldn't just – I frankly wouldn't just say terrestrial radio for that. And we challenge ourselves hard on that, and honestly, it's something you should hold us accountable for going in future as well. It's what our subscribers pay for; they pay for variety, and so, yes, I think there are other opportunities, but I'm not going to mention where.

Understood. All right. Thank you very much.

We'll take our next question from Amy Yong with Macquarie Securities. Amy Yong - Macquarie Capital (USA), Inc.: Following up on the ARPU question, I think you've recently raised prices for XM Select. Can you just talk about the ARPU trajectory and maybe how we should think about that versus some discounting efforts that you might offset? Thank you. David J. Frear - Chief Financial Officer & Executive Vice President: Amy, nothing has really changed for us that we think with the price grid from time-to-time, and so we – and we don't actually manage to an ARPU number, it's something that we, quite honestly, as a management team we rarely look at. We're looking at other drivers in the business and ARPU ends up being a calculation. But all that being said, as we've said before, media prices go up over time and you should expect ours to go up over time as well. Amy Yong - Macquarie Capital (USA), Inc.: Great. Thank you.

We'll go next to Jessica Reif Cohen with Bank of America Merrill Lynch.

Hello, thanks for... sorry about my voice. I have two topics. One is on SX17. Can you talk about the underlying costs like as you go into the rollout and the timing of the benefits 2017? James E. Meyer - Chief Executive Officer & Director: Well, I'm not – I think I have said most of what I want to say about the timing because it's going to be contingent on our auto partners – rollout and our auto partners prefer to keep those rollout plans confidential. I will tell you SiriusXM 17, the development of it is fully funded within the guidance we've given you for this year, and I certainly don't expect it to be a reason why next year's guidance would be different than what you normally would think it would be, okay? And so, we're investing heavily, but we're investing within the parameters, I think you would expect for us going forward. Jessica, we'll have more to say at the CE Show in January. We're putting a lot of effort into this. You know very well that you've been a very patient follower of this company for many, many years. This stuff takes time, okay, which is one of the reasons why occasionally when I read about how fast everybody thinks every new entrants going to enter the vehicle, I kind of get a little skeptical because I've lived it for 12 years. This will take time.

Absolutely. And then the second topic was on advertising, yet another amazing quarter. I mean your growth is so far above most media. And I think you said last quarter that it was part – a good part of it was Fantasy Sports. Can you just give us some color on what's really driving that growth, where is it coming from?

It's coming from all over sports, our news products, and comedy and some other things. What's going on, I think, as the base is growing and more and more advertisers are trying the product, frankly the old fashion answer is they're getting the results they want, it's a very smart affluent audience with the credit cards and they are getting great responses and they keep coming back. Fantasy continues to grow as big as it is, it continues to grow, and there'll be more action in that. But generally, I think the platform's matured as a true alternative vehicle for advertisers and it wasn't always seen that way and it is now. So, we are optimistic on it.

All right. Thank you.

We'll go next to Ben Swinburne with Morgan Stanley. Benjamin Swinburne - Morgan Stanley & Co. LLC: Thank you. Good morning. I have two questions. First, David, you talked about the trial funnel, I think you said it was 8.2 million which is a really nice increase, and I think it actually – the growth rate accelerated in Q2. Can you help us think about the benefit in the used channel there, and did anything happen in the quarter that really helped it accelerate from Q1 and Q2 or any color you can give us and sort of what's happening under the hood, pardon the expression around used, so we can think about that piece of the puzzle? David J. Frear - Chief Financial Officer & Executive Vice President: Well, the growth in used is fantastic, right, which in some way as you'd kind of expect with the sort of built-out distribution network we have – gathering sales information just the organic growth with cars turning over in the marketplace. So we are seeing great growth there. And then with the increased growth, it's really satisfying to see the conversion rate hanging in there, in the low 30s. I mean we've been saying for a couple of years now that we're surprised at the level we're at there. I'd stop saying it because I think after three years, I'm saying I'm surprised, I should – very sound stupid, so. But yeah, used is going great, it's a great tailwind for the business. Benjamin Swinburne - Morgan Stanley & Co. LLC: Great. And then, Jim, I wanted to ask about maybe a bit of a random question, about your artist and labor relationships. And how big of an advantage is – how you're viewed by the industry on the promotion front? You talked about the Grateful Dead in the quarter. But as we look at Apple, we use that again with Pandora and Spotify sort of the relationships with the music community has ebbed and flowed, so to speak over the last few years, but it seems to be more of a focus for them. And I'm wondering because you've been at it for a long time, how much does that help you guys in your business, and do you think there is an opportunity to even improve that from here? James E. Meyer - Chief Executive Officer & Director: Well, I'll ask Scott to comment in a moment. But I think our relationship with the artist is as strong as it's ever been. And quite frankly, I can't think of anything that we've asked artists to do where we haven't been able to get the cooperation that we would like together. And frankly, I think is creativity that it's – we need to put more focus into the creativity to do even more. It's not a relationship issue. That said, there is an awful lot of demand out there for their focus and their time, and we fully recognize that, and we're working hard and continuing to nurture those things. And, Scott, you want to add a little?

Sure. So from the beginning, I mean now at times it's again similar to ad sales, it gets a little easier as our base is bigger and we have a track record in performance, but from the beginning whether it's E Street Radio or Jimmy Buffett or Eminem and some of those, and then on the younger scale the biggest DJs in the world have been involved and most of them have regular shows with BPM in Electric Area. The artist community has always seen a nature of both the uncensored and the ability due to our volume of channels to be able to play virtually any cut that we want to. So the artist relationship, I mean there is a lot of things we could talk about. But I would say that's among the strongest assets of the company. Even in light of Apple and other announcements and beats and things like that, you can't find any media company in the world that has more musicians on a regular basis both working here in addition to having a direct relationship. Not to mention, everyday, there is a major artist up here on promotion. So I think that's among the strongest assets we have as a company right now. James E. Meyer - Chief Executive Officer & Director: And I think one other point is it's not just our relationship with the true music stars out there. There is an insatiable appetite of emerging talent to get their music played and we think we've done a great job of shifting through four customers as opposed to customers to have to shift through to identify who we think are great, emerging, really great talent. If you look at the amount of artists we've broke over the last 12 months to 24 months, it's truly an impressive list. So I think it's at both ends that we're pretty confident. Benjamin Swinburne - Morgan Stanley & Co. LLC: Thank you, all.

We'll take our next question from Barton Crockett with FBR Capital Markets. Barton E. Crockett - FBR Capital Markets & Co.: Okay. Thank you for taking the question. I wanted to talk a little bit more at the subscriber guidance. You guys and your guidance would be adding, I think, 676,000 subs in the back half, after adding 1.12 million in the first half, now that would be a much lower back half than first half than, I think, I've ever really seen from you guys. And I was wondering mechanically what's driving that? Are you assuming that new car sales slow a lot or that churn picks up a lot or is it really just kind of a conservatism that drives your guidance? David J. Frear - Chief Financial Officer & Executive Vice President: We do expect auto sales to sort of flatten out, right? The lift relative to prior years has got to be declining. Hey, and you might remember, we had a monster fourth quarter last year, and so I think when you're looking at the year-on-year comps that the expectations of growth in the top of the funnel have got to moderate a little bit. Then, look, we've got this bigger subscriber base so that the actual number of accounts churning is going to be larger. So, I think it's just the math. James E. Meyer - Chief Executive Officer & Director: And I think David has been clear. The wild card going forward frankly, not just for the second half of the year, but going, going forward is what our churn will be, and I just don't expect 1.6 million to be the normal, okay? I'd love it to be, and boy, I'd love to be sitting here a year from now and having all of you say, boy, you were too conservative in the way you thought about this. But I think you will see our churn rate higher in the second half of the year than the first half of the year. Barton E. Crockett - FBR Capital Markets & Co.: Okay, all right. And then, switching gears a little bit, I wanted to ask about the – a question really pertaining to your relationship with the labels. Now that you've got the pre-1972 issue largely settled, you would seem to be on better terms with the labels maybe than at any other time that I've been covering you, and I was wondering if now might be the time to leverage that relationship with the labels into trying to pursue a global deal and what you think about the possibility of taking subscription radio global, not via satellite but by Internet streaming where people like Netflix are aggressively pushing, Spotify is pushing. There seems to be an environment of global demand for streaming subscription services with a real bias towards American kind of driven services. That might be an opportunity for you guys and I was just wondering how you think about that? James E. Meyer - Chief Executive Officer & Director: Well, so I think there is a part of your statement I absolutely agree with and there is one I'm more cautious about. So, one of the main reasons we settled pre-1972 was to improve – was to ensure and improve -- and I think your observation is correct. Our relationship today with the labels has never been better, and I've challenged myself personally as well as the key members of our team to figure out how we take better advantage of that to get our customers a better experience and a better offering. And so, you'll see us working hard on that in the months to come. In terms of global, we just really – that's just not -- a global license, quite candidly, it's not on our radar right now. And we've got our heads down and concentrating really, really hard on the U.S. market. David J. Frear - Chief Financial Officer & Executive Vice President: And, Barton, just that I'd like to point out that we have looked at every music streaming service that has been on the market raising money in the last couple of years. None of them are making money. And as Jim said early on, at the end of the day business models matter, and we are business model people. So, just going global is not worth doing if you can't make money on it. Barton E. Crockett - FBR Capital Markets & Co.: Okay, great. Thank you.

We'll go next to Kannan Venkateshwar with Barclays.

Thank you. Just a couple from me. So, first on the music royalties. There seems to be a slight increase in your music royalty fees starting June of this month. So, just wanted to understand if the royalty (41:30) settlement is a part of that, and how you are thinking about it from a pass-through perspective? And secondly, the inevitable balance sheet question. From the buyback side of it, given the increase in revolver, and given the kind of visibility you have going forward for the rest of the year, how should we think about the use of capital given that you still have a lot of room under your guidance? Thanks. David J. Frear - Chief Financial Officer & Executive Vice President: I don't – there won't be any change in our capital return policy. We've been going along at a good clip and we don't anticipate any change in that. On the music royalties, maybe what we can do, Kannan, is take it offline with you. I don't – other than the fact of accounting for the settlement that I don't really see much that's out of line in these results. But why don't we take your first question offline.

All right. Thank you.

We'll take our next and final question from James Ratcliffe with Buckingham Research Group.

Good morning. Thanks for taking the question. Two, if I could. First of all, on the higher install rate, can you give us a little more color about what's driving that? Is it automaker mix or different – mix of different tiers or just, all else being equal, automakers are choosing to expand satellite radio to a wider array of their vehicles. And secondly...

It's – just let me answer that one first. It's really simple. It's automakers expanding the commitment within their vehicle lines. And I mentioned in particular who are the two that are increasing. They started – we started those discussions with them years ago and they are now coming to fruition as – in particular about Honda and Toyota take their corporation rate up.

Got it. And secondly, given the significance of the connected car for the business going forward, do you anticipate any impact at a positive or negative from the recent publicity around the Chrysler hacks going in through the connected car system into the actual auto function themselves? James E. Meyer - Chief Executive Officer & Director: So, look, I have spent a lot of time dealing with automakers, in particularly, the technologists on the automakers side, our teams spend a ton of time. This is an area they've always been petrified of. It's a reason why – and I have talked about it before on these calls that for their true connected services like safety and security or using software to update vehicle warranty things like that, they want a very secure path involving an embedded secure modem. I think in this case, it's a case of a situation they didn't – that arose they didn't anticipate. There will be more of that in the future, but I think the automakers are very committed to making sure they keep those doors close, and I don't want to expect it in any way to slow down their product lanes going forward.

Great. Thank you. Hooper Stevens - Vice President, Investor Relations & Finance, Sirius XM Radio Inc.: Thanks for participating today.

And that concludes today's conference call. Thank you for your participation.