Sirius XM Holdings Inc. (SIRI) Q3 2015 Earnings Report, Transcript and Summary

Good morning and welcome to SiriusXM's Third Quarter 2015 Results Earnings 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, Vice President, Investor Relations and Finance. Mr. Stevens, please go ahead. Hooper Stevens - Vice President, Investor Relations & Finance, Sirius XM Holdings, Inc.: Thank you and good morning, everyone. Welcome to SiriusXM's earnings conference call. Today, Jim Meyer, our Chief Executive Officer, will be joined by David Frear, our Senior 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 those 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. I will now hand the call over to Jim. James E. Meyer - Chief Executive Officer & Director: Good morning. We had an extremely strong third quarter. We are increasing our full year subscriber guidance for the third time this year and also increasing our revenue and adjusted EBITDA guidance on the back of another great quarter. Here at SiriusXM, we remain incredibly focused on what we do best. We simply make great radio. A diverse offering of highly valuable news, talk and spo5rts content combined with curated commercial free music, radio that's worth paying for. And by the look of our subscriber growth, many, many Americans agree. We added 381,000 net self-pay subscribers, taking the self-pay base to a record high of 23.8 million. So far this year we've grown self-pat subscribers by 1.3 million, almost as much as we did in 2014 during the entire year. And boosted by strong new car sales, we added 525,000 total net subscriber additions, pushing the paid subscriber base to a record high of approximately 29 million. While first half auto sales were quite good, the third quarter was exceptional. SAAR in the third quarter was $17.7 million, up 6% from last year's $16.7 million and up from $17.1 million in the second quarter. The September rate of $18.1 million was even higher. Time will tell how long this pace of sales can be maintained. Our penetration rate reached a record of about 75%, up nearly 4 points from the third quarter of 2014, resulting from gains at virtually all of our OEMs. This is a strong indicator that satellite radio is a must have feature for most cars sold in the United States. As we mentioned on our last call, we see long term penetration rates settling around the current level, which is up from our previous expectation of around 70%. The strong sales numbers this year combined with our growing penetration rate and new cars produced increased trial starts and conversion opportunities. And, here too, we've done a good job. Our new car conversion rate was 41% in the quarter. And, I think, maintaining this in the low 40%s is exceptional because the rising penetration rate means our radios are being deployed in an increasing number of lower-priced models interim packages. Our long history of steadily growing new car penetration has led to a sizable satellite radio-enabled fleet of today approximately 79 million vehicles or about 33% of the total vehicles in operation in the United States. We continue to see this growing by a couple percentage points a year for the next decade. And the SXM-enabled fleet should eventually approach a massive 180 million. This also means the fastest growth in our radio distribution will happen in the previously owned segment. This segment produced exceptional growth during the quarter. Approximately 18,000 dealers now offer three-month trials of SiriusXM to all of their used car buyers who acquire an enabled vehicle. Also, improving our marketing efforts, over 8,000 of these dealerships run our Service Lane Program. This program lets us selectively offer trials and obtain ownership information when car owners get their cars serviced at participating dealers. With the conversion rates steady in the low 30%s and more conversion opportunities than ever before, we produced our highest ever quarter of used car additions. So far, most of our effort in the pre-own market has been focused on offering trials via dealerships, but there are still many new areas for us to explore. For instance, nearly everyone insures their vehicle and the majority of car purchases are financed. During the quarter, we signed an agreement with a major insurer to pursue co-marketing of SiriusXM subscriptions to previously owned cars. Stay tuned for more about this exciting program and other efforts we are making in this area. The previously owned segment is an incredibly significant long-term opportunity for us, which we will capitalize on. So, with subscribers up 8%, strong growth in advertising, and other revenue streams, we grew revenue double digits to a record $1.17 billion for the quarter. On the expense side, I feel we did a particularly fine job considering both the additional SAC to accommodate higher auto installations, and the absorption of new pre-1972 music royalty expenses. Excluding these, our cash operating expenses were up just 3%. Fixed expenses actually declined 1% during the quarter. The combination of double-digit revenue growth and tight management of expenses produced expansive growth in adjusted EBITDA to $447 million, an increase of 17% year-over-year. But even more notable for me, was the EBITDA margin of 38.2%, up almost 220 basis points from last year's third quarter, and easily the highest single quarter margin in our company's history. We've long said that business models matter and we have one of the best models in media today. Just as we told you years ago, we are moving steadily towards 40% plus adjusted EBITDA margins. SiriusXM's powerful and scalable model has become the envy of our competitors and other media companies. With de minimis cash taxes and CapEx of only $30 million in the quarter, the bulk of this adjusted EBITDA flowed into our free cash flow, where we produced $369 million, up 38% year-over-year. One key reason we attract so many paying subscribers and the reason we're able boost about these financial results rest heavily on our outstanding content. It's our mission to deliver to subscribers the best line-up of audio entertainment available anywhere. Our original, exclusive, and easy to access programming are our hallmark and differentiate us from almost everyone else. And our focus on programming excellence was demonstrated again this quarter. We renewed our longstanding agreements with the NFL and NHL. We can bring live sports to subscribers in the car or wherever they have internet access and surround it with exclusive expert and very often news making sports talk programming. SiriusXM provided wall-to-wall coverage when Pope Francis made his historic visit to the U.S. Re-branding our Catholic Channel as Pope Radio, I kind of liked that one. We've gotten an early start doing much the same for the 2016 election with half a dozen channels dissecting the news and broadcasting headline making interviews and conversations with top candidates. We are making our bundle of great programming bigger and even better. This quarter, we successfully launched FOX News Headlines 24/7, an exclusive new channel that gives busy listeners an entire update on news, business, sports, weather and even social media in less than 15 minutes, anytime day or night. This is the first time this format has ever been created for national radio. We also launched another fulltime talk channel, Andy Cohen's Radio Andy featuring Andy himself as well as an assortment of his talented friends. We also enhanced our already strong comedy offering with the launch of SiriusXM Comedy Greats, our eighth channel devoted entirely to comedy. Live and exclusive music performances are important for our fans and SiriusXM took our subscribers to America's top music festivals all year long. Just this quarter, we broadcast from Austin City limits and Lollapalooza and we held exclusive Town Halls and interviews with music's biggest stars including Don Henley, Keith Richards, and U2. We have also led the way in creating innovative new radio formats by adding several new fulltime music channels such as Velvet and FLY as well as special pop-up music channels like Yacht Rock and Road Trip Radio!. These expertly curated channels address the evolving case of our subscriber base and satisfy the next generation of core subscribers. The one question many of you ask me about frequently is Howard Stern and whether he will be staying with the service in the coming years. We certainly hope so. Most of you would agree that his show has never been bigger or better. You should assume we speak quite often and stay tuned for updates. And of course, the best way to hear any news regarding his renewal is to turn into Howard's show every morning, heck, that's what I do. Since 2008, our programming costs have fallen by about a third, even as our revenue has nearly doubled. That reflects the power and efficiency of merging Sirius and XM, but those pre-merger contracts have all been renegotiated. And as we've said a couple of times, we do expect programming costs to begin rising next year. We still have a great position as the destination for premium nationwide audio content and this is not going to change. We will continue to invest more in content to further our programming leadership. In addition to our focus on new programming, we are also growing our connected vehicle service business and investing in the next-generation of SiriusXM designed for the connected car. In CV services, I'm thrilled that we signed a new and expanded long-term agreement to be the telematics provider to Toyota. We look forward to delivering new and enhanced services and higher penetration rates for Toyota with our platform over the many coming years. You should expect to see more announcements with additional automakers this year, as we solidify our position as the leading provider of connected vehicle services. We are also investing significant resources in our program called SXM 17. I am very excited about this platform, which I've told you before will marry two-way mobile connectivity with our satellite broadcast platform. Our team is pushing ahead rapidly and we look forward to reaping major benefits of two-way connectivity for our business and for our subscribers. As I've said, we plan on detailing more about this platform next year. We also have a vision to enhance the value of our spectrum and this should be a very significant long-term value driver for our shareholders. Today, we are well into migrating all of our OEMs on to a single chipset technology and we are developing flexible wideband chipsets for deployment in cars towards the end of this decade. This technology could allow us to add up to 400 new audio channels, deploy video services or use that spectrum to make it easier for autonomous or self-driving vehicles to operate in harmony or some combination of these and other applications. The bottom-line is that we are taking significant steps now to ensure that our technology remains relevant and to maximize the long-term value of our network, our technology, and our spectrum. In August, our Board of Directors authorized an additional $2 billion of share repurchases, taking our total authorization to a massive $8 billion. We have used the growing free cash flow, I talked about earlier, to return an excess of $0.5 billion of capital to our shareholders for the sixth quarter in a row. Last week, we passed a cumulative total of $6 billion in buybacks, since we began repurchasing stock in early 2013. Put in other terms, we have removed 1.7 billion shares from circulation. The effect on our free cash flow per share, which we think drives the ultimate value of our company is remarkable. During the first nine months of 2012, before the capital return program began, we generated $6.4 per diluted share of free cash flow. During the first nine months of 2015 just three years later, we have delivered free cash flow of $18.5 per diluted share, an incredible increase of 188% in just three years. The growth and underlying cash flow, massive share shrink and the resulting huge growth and free cash flow per share is an astounding accomplishment, especially given that we've done it while maintaining extremely reasonable leverage of just 3.3 times. The players sometime change, but the game for SiriusXM remains the same. Terrestrial radio remains our biggest competitor, but it's languishing today with no growth. While, Internet radio continues to grow, I feel that growth is slowing and profitability remains a distant dream. We, at SiriusXM will keep marching to the beat of our own drum. We have a plan to grow our subscribers and revenue, continue scaling our margins and generate more free cash flow, which we will use in a very focused way to benefit our shareholders. We always look for opportunities to invest inside and outside of our business and I remain committed to do that today. With that, I'll hand it over to David. David J. Frear - Chief Financial Officer & Executive Vice President: Thanks, Jim. Good morning, everyone. Thanks for participating. Our third quarter results continued along the strong trajectory started in the first half of the year. Revenue grew 11%, adjusted EBITDA grew 17%, free cash flow 38% and free cash flow per share grew a whopping 54%. We feel this is just extraordinary performance. We're also pleased by the strength of our subscriber performance. In the third quarter, we added 525,000 net new subscribers, 21% growth over the third quarter of last year, bringing us within a stone's throw of 29 million paid subscribers. Self-pay net subscriber additions in the quarter were 381,000, in line with last year, and taking us close to 24 million self-paying subscribers. Both new and used car trial starts set records in the third quarter. New car trial starts were up nearly 15% on the higher sales volume in the auto industry as well as the higher penetration rate that we achieved. And third quarter trial starts in the previously owned segment were up 24%. Both of these figures bode extremely well for future subscriber growth. Churn was 1.9% in the quarter, unchanged from the prior year's quarter and consistent with the range of 1.8% to 2%, we've seen as a long-term trend. We did battle a regulatory headwind in the quarter. In July, the FCC issued new rules, effective, believe it or not, the day they were issued governing outbound telemarketing calls to cell phones. For us and many other companies in the direct marketing business this meant a temporary cessation of calling efforts while we and our vendors ensured that our calling complied with the new regulations. We are increasing our subscriber guidance for the third time this year. Our new guidance for net additions of approximately $2 million is up nearly two-thirds from our original guidance of $1.2 million. We expect more than $1.6 million of these $2 million net ads to be self-pay subscribers with between 300,000 and 400,000 of the additional net ads coming from expansion in pay trial inventories driven by the higher auto sales and higher production penetration. With auto sales running at $17.7 million during the quarter and our penetration rate of approximately 75%, we have a record high $8.3 million OEM trials in the funnel. We have consistent self-pay churn and we exited the third quarter in a great position to achieve our increased subscriber guidance. With a little bit of a tailwind here we have a shot at delivering sub growth that is equal to or greater than any other year we had since the merger of Sirius and XM. Third quarter revenue up above 1% to $1.17 billion and we are taking up our full year revenue guidance to approximately $4.53 billion. Once again advertising outperformed overall revenue growth in the radio ad market and I'd have to say outperformed is an understatement. We had a gain of 31% in the quarter and we could not be more pleased with the efforts of our ad sales team. Contribution margin declined 30 basis points to 70.8% as higher royalty rates were partially offset by lower customer service and billing expenses. We continue to expect the contribution margin in the neighborhood of 70% going forward. SAC per install improved by 3% to $34, while overall SAC costs were up 11% on the higher installation volumes. Overall fixed costs declined by nearly 1% on savings and G&A, insurance recoveries and our general tight expense management. All this produced an adjusted EBITDA margin expansion of 220 basis points bringing EBITDA margin to 38.2%, a record high for the company. Seven of our nine cash expense line items improved as a percentage of revenue over last year. In eighth SAC was up only 4 basis points despite strong auto sales and record high production penetration and that leaves just one, revenue share and royalties as the sole line item that increased as a percentage of revenues. We add it all up in adjusted EBITDA of $447 million in the quarter was our best ever. It's up $66 million after absorbing $13 million of increased SAC, which will obviously benefit subscriber growth in the future. Based on this strength, we're taking up our full year EBITDA guidance up $30 million to approximately $1.65 billion. In the quarter, we converted 82% of our adjusted EBITDA to free cash flow totaling $369 million, up 38%. We continue to feel comfortable with our current guidance of approximately $1.3 billion. In the last 12 months, we've repurchased over 601 million shares, roughly 10% of our stock. Combine that with 38% growth in free cash flow and you drive free cash flow per share up by 54%. Since we started the capital return program, we've repurchased more than 1.7 billion shares at an average price of $3.51. Total debt now stands at $5.4 billion with no maturities until 2020, leverage is still at 3.3 times trailing EBITDA. We have lots of liquidity ending the quarter with $153 million in cash and nearly $1.5 billion available balance on our revolver, we feel very good about the momentum of our business. So, operator, let's open it up for questions.

Thank you. And we'll take our first question from Vijay Jayant with Evercore ISI.

Thanks. Good morning. Looking at your website, there was sort of a dollar rate increase for certain tiers of programming. Can you sort of talk about – sorry, I'm thinking June 30, can you sort of talk about what the implications of that should be to ARPU and what percent of the base gets impacted by that? Thank you. David J. Frear - Chief Financial Officer & Executive Vice President: Yeah. Vijay, as we've said for a long time, we have an awful lot of price plans in the system. And as opposed to just general across the board price increases, that you'll see us tinkering with the price grid from time to time that we have deeply discounted plans that we use in retention and acquisition activities that as we've been moving up prices on the full price service that we left those in place for a long time. So we've began to – we decided this time around to take them up a little bit and it is one of these things that, believe it or not, I think I've said this before, if you look at our rating engine. We have something like 22,000 price combinations in there. And so you can expect us from time to time to be tinkering with the price growth.

And just a follow up on the pre-1972 litigation related to New York and California, can you give us an update on what the status of that is? Thank you so much. David J. Frear - Chief Financial Officer & Executive Vice President: Well, it's winding its way through the courts that we've had a decision go our way in Florida. The other side is appealing that we had initial decisions go the other way in New York and California that are – that we are appealing. And so it's working its way through the process and honestly it's going to take a long time.

It's a long road.

Okay. Thank you so much.

And we'll take our next question from Jessica Reif Cohen with Bank of America.

Thank you. I have a couple of questions. The first Jim, I know you talked about a lot of the new programming that you've introduced. It feels like you've really stepped up the programming initiatives. Can you talk a little bit about what's behind that? James E. Meyer - Chief Executive Officer & Director: I don't know that we've – I think we've always been committed to be the programming leader and to provide our subscribers with the widest breadth of program that we can. I just feel like we're really focused on our game right now, and our team is continuing to develop some really I think clever and meaningful programming ideas. Our organization knows that there is no, literally, no programming suggestion that we won't evaluate. And I'm dead serious about programming is the core of our offer and we are going to be the leader. But I don't think there's been any notable change. I just think maybe a lot of hard work that's been going on for a long time happened to hit just kind of all at the same time.

And also, it's like anything else. There's always an evolution process where a lot of these channels and ideas were in development for a long time. Andy Cohen for instance was very tied up at Bravo and those discussions were going on for a bit of time and then once he was a little more free on time, same thing with the all news new channel. We always wanted one of that, but we needed the right sort of back office to work with us to get there. So as Jim said, there's many ideas that are going on including some that are coming to fruition down the road as well, and this just all sort of hit at once, so occasionally you get that. James E. Meyer - Chief Executive Officer & Director: And Jessica, sometimes the leader is the problem, because I thought Yacht Rock was a dumb idea and then I ended up listening to it for almost every day for the 30 days it was on our servers. There's some clever stuff going on and I'm proud of what they're doing.

Yeah. That's amazing, it just feels like it's accelerated, but moving on, and maybe this is for Scott, I'm not sure, but the advertising growth is extraordinary, for any of us who follow the media sector, can you talk about what's driving it and what some of the categories are?

Sure. So, if you look at it from, we'll cover it in two ways. Categories first, if you look at between Howard, news, sports, comedy and yes, there is a fantasy component and a fantasy sports component in there that we're getting the wave on, but right now, we have a critical mass that is finally at a level where the advertising community realizes that this is not only working and they've all – all is too strong. A lot of them have had their toe in the water for a while and getting tremendous results at ad agencies from the clients, et cetera. And so they're back in much, much heavier right now. The other thing is, which you can't underestimate, we're looking at programming differently, clearly on the non-music side. So, when you look at the Headlines news channel that was something we believe an all news channel was always going to work. So the content goal, like it's always been was number one. But, we knew from our news advertising and that came out of the box and already has significant advertising revenue attached to it. So the old model of only content is now matched with the content first, but the new – the advertising right behind it. So we're pretty excited with that. The other thing is, there's a lot of things we haven't done. We haven't sold powered by or sponsorships on any of these channels. We have live events constantly. Our Town Hall series has a request a week practically on it to be a sponsor and advertiser. So, there is a lot of highway still to go beyond the traditional advertising model.

Very exciting. And just – I've one last question. But the used car or the secondary car market opportunities are obviously humongous. Your now – I guess, I think, I heard Jim say 18,000 dealers, can you talk about the other two-thirds of the market, what you're doing with the independent dealers in the consumer-to-consumer market? James E. Meyer - Chief Executive Officer & Director: Sure. So we're – my comments I meant I said, I think this is the single biggest subscriber opportunity, growth opportunity we have over the next many, many years. And, we're not going to let this one go by. Okay. We're going to be very, very focused and in my nomenclature use every club in the bag. I hinted at, I think, where we're going next, which is virtually every car that's in operation in this country is insured, and a high percentage of them are financed. All of those are insured or financed starting with the VIN number and then the owner, which to us is a very valuable way to be able to understand who owns those cars. So that's just one area where we've been working for awhile to gain ground. As I said in my comments we've broken through with one major insurer which we'll be talking about more later. And you'll see more from us on that area and we're learning a lot more, whether it's credit unions or things like that that we can work with and then finally, there are quite a few, call it, purchase services or co-ops that operate in that independent dealer structure that we're learning about how they manage their back rooms and I see opportunities there for us to get the data. So we're just going to keep going everywhere we can to make sure we're getting a timely supply of that data and it's a very high focus for us.

Okay. And we'll take our next question from Bryan Kraft of Deutsche Bank.

Hi. Good morning. I just wanted to ask you two things, one just if you could talk about maybe about the magnitude of the increase we should expect for content cost next year given the renewals and maybe getting to a more normal stage where these legacy contracts renewals are no longer providing benefits. And then also wondering just what you think of what TuneIn is doing? They seem to have signed contracts similar to what you guys have with the NFL and Major League Baseball, do you think this is – do you think they're for real? And more broadly, how insulated do you think you are from your content suppliers providing content to streaming providers like TuneIn or others? Thank you. David J. Frear - Chief Financial Officer & Executive Vice President: Okay. So on content cost, when we come around to give you guidance for next year I think that that will address that. We aren't providing that at this point, so we're just going to defer that for a couple of months. On the TuneIn side.... James E. Meyer - Chief Executive Officer & Director: Sure. So number one I'll go on record right now and tell you the plans I've heard that TuneIn plans to launch which is maybe an all sports package at $8, $10 a month. I personally think it'll be a hard road to home, okay. And for me today, I'm not particularly focused on TuneIn right now. That said, the major sports holders and by the way nothing has changed here. It is funny, I was having a conversation with one of our directors who was very instrumental in the early days of SUNDAY TICKET on DIRECTV. And the conversation we were having is how thinly the rights continue to get sliced and sliced over time. And look I don't blame them for the way they run their business and you should assume that will continue. I think our model is about a whole lot more than just packaging live sports together and bringing the product to the customer. Our customers want a wide array of content, a wide array of content. And number two, and no one should forget this, easy to use really matters a lot, okay. There is a reason over 200 million people listen to terrestrial radio. Freeze one of them, but easy to use is another one of them. And it's an area where we're working really, really hard. And that's kind of my comments there. Scott, do you want to add anything else?

Yeah, just one other thing – the other thing. Over many years, we've developed complementary 24x7 lead channels that are very definitive and very well set both in the sports community and in the fan subscriber base community. And we continue to believe that it's much more live games have always been everywhere in different ways for years. What makes it is what you surround it with and how easy it is to go back and forth when you're not just interested in the live games, first, to business channels and then often to news and music and other things. And so we're still fairly confident that our menu of offerings is fine weighted. James E. Meyer - Chief Executive Officer & Director: Yeah, to be clear, I would prefer these guys didn't license these guys. But I understand why they did. It doesn't make me happy, but it's what they do.

Okay. Great. Thank you for the thoughtful answer.

And we'll take our next question from James Marsh with Piper Jaffray. James M. Marsh - Piper Jaffray & Co (Broker): Great. Just two quick questions here for David. First, David, I was hoping if we could circle back and discuss that change in regulations from the FCC regarding marketing calls to cellphones. And maybe could elaborate on what changed there and how you might expect to kind of replace that previous effort? And whether there might be any impact on cost or sub-growth? And then just secondly related to expenses, you mentioned fixed expenses down 1%. Just what could change that trend going forward or how sustainable might that be? David J. Frear - Chief Financial Officer & Executive Vice President: Well, generally I don't think fixed expenses are going to continue to decline as we grow, right. But we are, I think,, over a long period of time you've seen us really laser focused on cost efficient growth and so you should expect that in the future. We do anticipate to continue expanding the EBITDA margin. To be honest, we were all pretty surprised by 38.2% in the quarter, but we believe in our 40% plus target. On the FCC rules that came out, it's got to do with what constitutes an automated telephone dialing system. And without being – without judging the quality of the rules issued. We don't write the laws, we just follow them. So rules came out on a day, we really didn't have any notice of what was going to be in the rules. And so we and our vendors read hundreds of pages of material and worked our way through a process that would leave us compliant. Now, the way that you can think about it is that we basically now – our vendors now push buttons to dial cellular phones. And so when you think about it, it takes a little longer to push a button and to or to push 10 buttons as opposed to push one button to select the number and have that number dialed. So it'll take them more hours to work their way through the calling list. And then we'll end up making the decision as to – well, do we want to get the same depth in list penetration that we did before? Do we want to reduce that a little bit? And we'll look – and we've been doing this for years. We look at the edges of our marketing efforts to see whether or not those last few attempts are actually worth the money that they're truly costing. That I think in terms of causative effect either our cost or subscriber figures going forward, you can safely assume that we have a pretty good understanding of that now having operated this way for about 2.5 months. And that will incorporate it in our future guidance, including what our expectations for this year are. James M. Marsh - Piper Jaffray & Co (Broker): Okay, great. Thanks very much, David.

And we'll go to our next question from Brett Feldman with Goldman Sachs. Brett Joseph Feldman - Goldman Sachs & Co.: Thanks for taking the question. You were noting earlier how most of your success in the used car funnel is still coming out of dealerships where you're already operating. So it's just an enormously cost efficient way to win customers in that segment since you don't have to spend a lot more, you're in the channel. So as you really start thinking about some of the initiatives where you're targeting the rest of the market where a lot of used car sales happen, how do we think about spending that you're going to have to incur? Could that potentially put an upward pressure on SAC for example? David J. Frear - Chief Financial Officer & Executive Vice President: It won't put any pressure on SAC that – SAC is really driven by subsidies on new car installations, right. So, I guess, the question is would you find more in marketing costs and the answer to that is probably, yes. But there is a good news part of that story, that as we reach out to these alternative channels, what we're really doing is we're driving the higher trial starts. And so while the dollar is being spent in marketing costs, sales and marketing costs may rise. They're actually driving trial starts and so it's like all of the other customer marketing costs that we've been incurring for years, which are really oriented towards driving trials and conversions that will manage that but what we're really doing is increasing the size of the funnel, which is I think very bullish in this sort of business. Brett Joseph Feldman - Goldman Sachs & Co.: And, just as a follow-up. As you sell into the used car space, what's the ARPU profile of those customers? Are you finding that they're picking rate plans that are comparable to what new cars are or do you find that pricing is a bit more of an important tool? David J. Frear - Chief Financial Officer & Executive Vice President: Given the fact that – I think, it's 80% of car owning households have two or more cars that there is really – so far we don't see much of a difference, right. But most of the households that participate in the new car market also own a used car, right. So you're not necessarily getting to a radically different market. So so far we don't see much of a difference. James E. Meyer - Chief Executive Officer & Director: One other comment I'd like to make just in general is – and I touched on it in my comments, I want to reiterate again. I think, if you're trying to value our company, this news that we keep giving you of growing from today an embedded base of 79 million and I really do believe it's growing very steadily towards 180 million. When you think about the power of that base and – there's no question that connectivity in vehicles is coming in a big way and we can debate the pros and merits and cons of that, but when you look at that 180 million, I want to remind you something else, the vast majority of those will not be connected in anyway. Okay. And so, again, we are very, very focused on how do we capitalize on this installed base that we're building, and I think it's going to bode very, very well for growth for us for a long time. Brett Joseph Feldman - Goldman Sachs & Co.: Great. Thanks for taking the questions.

We'll go to our next question from Ben Swinburne with Morgan Stanley. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Thank you. Good morning. Jim, just going back to those pros and cons of connectivity and as you navigate speaking about two way services and evolving your product, what do you take from through the Apple Music experience so far, I mean if you look at the numbers there, they came out with a lot of fanfare and we're all trying to figure out sort of the demand in the U.S. market for interactive on-demand listening versus broadcast radio, do you take much from what you see in the market from competitors and inform how you think about the strategic direction of your company? James E. Meyer - Chief Executive Officer & Director: Well, I mean Apple does just fine without my advice. So I actually think the number they achieved was a pretty – from being in the subscription business now for 12 years, I don't think 6.5 million is a trivial number, but I have no idea how many of them are in the U.S. and what they're made up of or anything like that, and frankly has not really been what I focused on. I think there is no question that stream – and by the way I've been very, very, I think, clear about what I think. I think streaming is a technology, not a competitor, and I think streaming will be a fundamental part of what we offer our subscribers over the next decade, okay. And I think frankly it has as much benefit to us as anybody, particularly on the frontend of the equation. So while I think it's really interesting to be able to enhance the entertainment experience and all of those things that's important, but I think for us it makes the whole – the whole application of how do you get our service, how do you renew our service, how do you make it easy to do? All those kind of things I think is going to have a dramatic impact on our business and frankly just letting us know a whole lot more about how often do our customers really listen and when do they listen, and what do they do. So I'm excited about the connected world, not afraid of the connected world. That said, there is – you look at for instance Pandora, their growth in listenership over the last five years, seven years has been extraordinary. And yet when you take all of this, Ben, and you add it all up, and you and I have talked about this not that long ago, you add it all up, there are still 230 million people in this country listening to terrestrial radio. That is still the big thing, okay. And that's where we continue to distill the focus to try to get new subscribers. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: It makes sense. Just a separate follow up. You mentioned 75% penetration rate, very strong number up year-on-year. For either you or David, do the economics for you and/or the OEMs ever makes sense to go standard. I know you've been standard in some – with some partners historically, but I'm just wondering if sort of the math makes that a no brainer at some point in your view? David J. Frear - Chief Financial Officer & Executive Vice President: You know I think, Ben we've been saying for a long time that we're sort of happy at the penetration level we're at and I probably said that when we were in the 65%, 66% range and so I am happier today that it's at 75%. I think it probably makes a lot of sense just from a production efficiency perspective for the automakers to go standard, but that being said that's some radio guy telling an automaker what he thinks makes sense and I think the automakers are capable of deciding that on their own. That getting the penetration to a 100% isn't something that we would pay for, right? So we wouldn't take the hardware subsidies up or boost the revenue share to try and drive the automakers to go standard. It may very well happen with just the natural evolution of technology in cars and as you can see in our SAC per install that we've made over the years just an unbelievable amount of progress in driving those costs down and in the future we should be able to continue to drive them down while increasing the functionality of the technology in the cars. So, I guess we'll just, short answer is we'll wait and see what happens. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: And just if I could sneak one more in on churn. You guys were very clear not to extrapolate Q2 churn into Q3. You didn't comment on it in your prepared remarks. Any color on churn either voluntary or involuntary and any comment on credit card chipset trends which have gotten an outsized amount of attention this quarter as you know? David J. Frear - Chief Financial Officer & Executive Vice President: Yeah. It's funny there was – the guy from Visa that covers us was in here yesterday and we were chatting about it a little bit. This year, we've probably processed 50 million credit card transactions .We're something approaching $3 billion of volume and we can't find any evidence of there being a chip related breakage issue that's driving churn. We just don't see it. So I'd say it may not be there for somebody else, but it doesn't appear to be there for us. James E. Meyer - Chief Executive Officer & Director: And Ben, just if you look at voluntary and non-voluntary. It's funny David and I actually, yesterday, it's timely question because yesterday was my monthly churn review with our organization. And after the meeting, David and I just kind of went into a quiet room and if you take the last three years and lay them out, there's virtually nothing new to report, nothing, okay, which is great news. And so I'm really pleased with where we are. That said, I think our range is where we've always told you, it is kind of in the 1.8% to 2%. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Thank you, all.

And we'll take our final question from Barton Crockett with FBR Capital Markets. Barton E. Crockett - FBR Capital Markets & Co.: Okay. Thanks for squeezing me in there. Just one kind of thing you mentioned in passing, I want to make sure I understand, I think you said something about an insurance impact, when you were discussing G&A. Was this anything notable that we should think about? David J. Frear - Chief Financial Officer & Executive Vice President: We've had – as you know, just from watching things, we've had a whole bunch of lawsuits in different areas over the last couple of years and we're like other companies, we buy coverage for various things. We did for things we started processing with the insurance companies last year earlier this year that we finally got some recoveries through in the course of the third quarter, it was big enough to be worth noting, but not big enough that I would – that I've incorporated now into some fundamental changes in our economics going forward. Barton E. Crockett - FBR Capital Markets & Co.: Okay. All right. And then, one other kind of bigger question on the topic of connected cars. Could you update us, I mean, how many of these things are actually being sold now, cars that are having Internet bundled into them? And, is there any change in kind of what you were seeing before that, the connected car buyers, if anything, a more loyal subscriber to Sirius? James E. Meyer - Chief Executive Officer & Director: So, the easier part which is today, we still don't see – we don't see any meaningful – we can't find any meaningful impact on our conversion or churn, when you take a group of vehicles, that's quote unquote, connected and a group of vehicles that's quote unquote, not connected. That doesn't mean, it might not one day, we don't see it today. Your first question is a harder one and I actually can't recall and I can't recall the number right now off the top of my head. It's something we track and maybe David or Hooper can get back to you later on that.

It's probably – I think, it's approaching 40%, but we'll circle back around to you. James E. Meyer - Chief Executive Officer & Director: That would have been my guess – but we'll get back to you. Barton E. Crockett - FBR Capital Markets & Co.: Okay. That's great. Thanks a lot, guys.