Sirius XM Holdings Inc. (SIRI) Q1 2016 Earnings Report, Transcript and Summary

Good morning and welcome to SiriusXM's First Quarter 2016 Results Conference Call. Today's conference is being recorded. A question-and-answer session will be conducted following the presentation. At this time, I'd 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, Taylor, and good morning, everyone. Welcome to SiriusXM's first 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. 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'd 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 Meyer. James E. Meyer - Chief Executive Officer & Director: Thanks, Hooper, and good morning. We had a fantastic first quarter, with solid execution and progress in advancing all of our long-term strategic goals. During the first quarter, we grew revenue and EBITDA by double-digits, while still making major investments in content and technology. We added 465,000 net new subscribers and crossed the 30 million subscriber mark, a number that few media companies in the United States or anywhere can match. All in all, a quarter to be proud of. And now, we are increasing our full year guidance for net subscriber additions by 200,000 to 1.6 million. The first quarter proves yet again how important it is to have unique high-value content in a way that's extremely easy for consumers to access and use. The quarter also proves, as I have told you many times, that business models really do matter, and our business is thriving. We continue to add new, on-point content, renew key content assets, and strengthen our excellent relationship with OEMs. For the quarter, the auto SAAR was about 17 million, up 2% from last year. You know times are pretty good when the March auto SAAR of 16.5 million was considered modestly disappointing. OEMs that I speak to expect a rebound through the summer and general economic conditions remain strong. We continue to be optimistic. During the first quarter, we were incorporated in 75% of all new cars that were sold in the United States, up about three percentage points from the first quarter of last year. I think 75% is a good estimate for you to use going forward. To put it simply, our relationships with our OEMs has never been stronger. This relationship is also helped by our push into the connected vehicle services business. We are quickly becoming the leader here in this business, which provides safety, security and advanced convenience features to OEMs and car buyers. Here, we continue to gain traction with OEMs and we are working with them to deliver new platforms, some of which will not be deployed for many years. It's a long haul to build this business, but we are convinced as ever that it is the right course. Our high new car penetration, combined with strong auto sales, will continue to increase the number of cars on the road with our equipment factory installed. We ended the quarter with approximately 85 million satellite radio enabled cars in operation, up from 73 million at this time a year ago. As our embedded fleet grows from 85 million today towards 185 million over the next decade, we are very confident we will continue growing our trials levels and our ability to add paying subscribers across a diverse and evolving spectrum of car owners for a long, long time to come. As the fleet of enabled vehicles grows and cars find their way into the used car sales channel, our used business in particular will continue to trend favorably. The vast majority of dealers, more than 16,000, now offer trials on all used cars sold with satellite radio. We are increasing our focus on independent dealers, where we now have more than 4,000 reporting relationships. Beyond the straightforward dealer trial programs, we are experimenting in many other channels and learning about what works best. The goal is to understand in a timely manner who owns cars with satellite radios, to figure out how we can offer them a trial and to show car owners how a subscription to SiriusXM can make any and every car ride more enjoyable. And of course, to do all of this with our partners that protects the privacy of customers. In this process, we have learned that our Service Lane Program works, and we are now busy expanding it. Service Lane now has over 10,000 locations participating. These locations help us capture owner information and offer trials when vehicles are being serviced at participating dealerships. We have also begun offering second owner trials with Liberty Mutual Insurance, one of the nation's biggest insurers, and we will soon be adding another significant insurance company. We also now have an association of credit unions on board to explore how we draw from both of our strengths. And this is just the beginning. We have many similar initiatives on the drawing board to help us capture the large long-term growth potential in used car subscriptions, and we will continue investing and testing to optimize this channel. I'm particularly pleased that churn has remained in the 1.8% to 1.9% range as our business has grown, and as we've worked our way through changes in telemarketing rules dictated by the U.S. government last summer. This consistently low churn rate highlights the strong consumer demand for our service and the steady, predictable nature at which most of our subscribers renew their plans. Our deep relationship with car makers and our focus on next-generation technology are vital to our future, but so too is the constant refreshing and rethinking of our content lineup across channels, shows and hosts. We recently expanded our unmatched offering of country music as we welcomed Kenny Chesney's No Shoes Radio, a full-time channel curated by Kenny himself. This new channel, now our seventh country music channel, is only available on SiriusXM. Last week, we launched a limited run channel to celebrate the music of Prince, one of the biggest artists of his generation. We brought back our critically acclaimed Billy Joel Channel, and this time it included Garth Brooks, Don Henley, and other special guest DJs playing their favorite top 10 Billy Joel songs. We celebrated our 10th year broadcasting performances from the Ultra Music Festival, and we launched our exclusive Coachella Radio channel earlier this month, examples of our broad coverage of major music festivals around the country. SiriusXM subscribers also have access to the most extensive schedule of live sporting events, all in one place. In the first quarter alone, there was great content on Sirius from the NFL, Major League Baseball, NBA, NHL and NASCAR, plus many major college football bowl games, every game of the NCAA basketball tournament, and the most comprehensive golf programming available on radio. We now have more than a dozen channels doing daily sports talk. Some of our original programming includes a series of documentary style shows on some of college football's biggest rivalries. A two-hour retrospective show on Kobe Bryant's career, daily Fantasy Sports advice, and a reality-style series on baseball's Texas Rangers. Our coverage of the presidential primaries takes listeners directly to the battleground states. So far, we've aired over 125 exclusive interviews with the presidential candidates. We will be following the action all the way to Cleveland and Philadelphia. We know our subscribers value variety. They want a bundle of content, and not just one part of it. And we are extremely committed to maintaining and strengthening our content bundle. When it comes to the future of our service, we are fully embracing the connectivity that is coming to vehicles. In future connected cars, with the SiriusXM17 platform, we will be able to offer even more new services to consumers, from non-linear content like on-demand shows and personalized music, to interactive program guides, with personalized recommendations. Simplified in-car, on-screen account management will lower friction associated with subscribing to our service. No matter what we do to innovate with SiriusXM, we will always remember that ease of use is paramount. My goal for our team is a simple one. You're never going to need an instruction manual to operate your SiriusXM Radio; that I promise you. In short, moving from a one-way world to a two-way world will help us better understand and serve our customers. We couldn't be more thrilled with the progress we're making on our SXM17 platform and the reception we're getting from the focus groups who've tried this new platform and the OEMs who are eager to deploy it. We are very confident that these investments in our long-term platform are the right course, and we are also encouraged by early research highlighting our performance in connected vehicles. In its 12th annual Tech Survey, which I think was published about three weeks ago, Jacobs Media found that consumers continue to spend a majority of their time in the car listening to terrestrial radio, whether they are in connected cars or non-connected cars. This shouldn't be news that surprised anyone. What is surprising is that in connected cars, the Jacobs Media research showed that time spent listening to SiriusXM actually climbed significantly. The demand for our differentiated bundle in cars remain strong, even as technology platforms evolve. This survey data reminds us once again that terrestrial radio is the 800-pound gorilla in the room and by far our largest competition. Most people who don't subscribe at the end of their trial do so for the simple reason that they don't want to pay for radio. When trialers don't convert to self-pay or subscribers churn, research shows that they're overwhelmingly turning to free ad-supported terrestrial radio. So I would like to remind investors that we're not locked in a zero-sum battle with streaming players. Like a proverbial ice cube melting in Alaska, terrestrial radio isn't going anywhere quickly. It will remain a massive, slow-moving yet still widely used incumbent that we at SiriusXM and streaming entrants can continue growing against for years and years to come. We have a huge opportunity here to tap this potential and provide a better bundle of radio to those who are willing to pay. In sum, our track record of operational excellence continued in the first quarter and we expect to have another year of record operating and financial performance. We are doing what we said we would do. We are investing in the content and technology to maintain our competitive advantages in the radio and in the car. We are generating tons of cash and always looking for the smartest way to deploy this cash. So far we have returned to our shareholders nearly $7 billion with our share repurchase program. And with tremendous cash flows and liquidity, we remain flexible to continue these capital returns, while also looking at other internal and external investments. I am thrilled with the performance of our team in driving this business to more than 30 million subscribers, and now onward and upwards towards 40 million. David?

Thanks, Jim. Good morning, everyone, and thanks for taking the time today as we celebrate reaching 30 million subscribers and a very strong start to 2016. New car sales were up 3% in the quarter and with our penetration rising to 75% from under 72% in the prior year, sales of SiriusXM-enabled vehicles rose 8% to more than 3 million vehicles. Total trial starts in the quarter rose 17%, while used car trial starts grew 24%. People often write of our sensitivity to new car sales. And while conversions of new car buyers remains our largest acquisition channel, it represented just slightly more than half of all self-pay additions this quarter. Conversion of used car buyers has been growing rapidly and is expected to grow for many years to come. It accounted for 23% of self-pay additions in the quarter. In the first quarter of the year, we added 465,000 total net new subscribers, an 8% increase from the first quarter of 2015, which pushed us over 30 million total subscribers. This was our strongest first quarter for total net adds since the merger. Self-pay net additions totaled 348,000 compared to 394,000 in the prior year, bringing us to a total of 24.6 million self-pay subs. Our self-pay churn rate in the quarter was 1.9%, up from 1.8% in the first quarter of 2015 on increased vehicle-related churn and to a lesser extent increased voluntary churn. But it still came in right at the midpoint of our 1.8% to 2% range we view as our long-term range. Based on these strengths and trends in the first quarter, we are increasing our total subscriber guidance to 1.6 million net adds for the full year and maintaining our guidance of 1.4 million expected self-pay net subscriber additions. Revenue in the quarter was up 11% to just over $1.2 billion on the strength of our subscriber additions as well as growth in ARPU. ARPU in the quarter was $12.66, growing more than 3% from $12.26 in the prior year. Subscriber revenue overall increased 11% while advertising turned in yet another great quarter with 17% growth. We feel extremely good about our revenue guidance of approximately $4.9 billion in 2016. Contribution margin in the quarter was 70.3%, down 80 basis points versus the first quarter of last year due to higher music royalty rates and cost related to pre-1972 music, but still right in that 70% long-term range we have told you to expect. While fixed cost increased $23 million or 9% in the quarter, close to half of this increase was due to higher programming costs associated with some big contract renewals. We also absorbed another $10 million of higher SAC associated with stronger auto sales and higher penetration rates, a good investment in growing our new and used car trial funnels long-term. Together, all of this produced adjusted EBITDA of $441 million, up 11% over the prior-year period, resulting in an adjusted EBITDA margin of 36.7% in the first quarter, very close to last year's first quarter margin despite the higher SAC, music royalties, and a step-up in programming costs. All major programming assets are now under multi-year agreements lasting at least through the end of the decade. In the first quarter, we converted 74% of our adjusted EBITDA into free cash flow, totaling $328 million, up 19% year-over-year. We remain on course to meet our guidance for our full year 2016 adjusted EBITDA of approximately $1.78 billion and free cash flow of approximately $1.4 billion. Year-over-year free cash flow per share was up 31% to $0.064, as our cash flow growth was applied across a lower overall share count. In the first quarter, we spent $588 million to repurchase 159 million shares. In over the past 12 months, we have purchased 539 million shares for just under $2.1 billion. Total debt now stands at $5.7 billion with no maturities in the next four years. Leverage is 3.4 times trailing adjusted EBITDA. We ended the first quarter with $102 million in cash and $1.15 billion available under our revolver. This is plenty of liquidity to invest in the business, pursue strategic investments, and return capital to shareholders. We're also pleased that we recently – previously discussed TCPA related litigation, removing potential risks associated with the suits. The vast majority of the expense of the settlement was accounted for by the charge we took in the fourth quarter and expected insurance recoveries. Subject to court approval of the settlement, we expect to pay out the $35 million later this year. Additionally, in last month, we fully completed the transition of our Sirius network from the original three highly inclined orbiting satellites to two geostationary satellites. The transition went off without a hitch. This transition clears the way for us to begin de-orbiting our fully depreciated Sirius 1, Sirius 2, and Sirius 3 satellites in the coming months, all of which have served us faithfully since their launch in 2000. With that, operator, let's open up it for questions.

And your first question comes from Vijay Jayant with Evercore ISI.

Hi. If I can, two questions. Just the secondary market, can you give us any sense on what percentage of gross adds are coming from that funnel, how is that trending, and is conversion still holding at about 30%? And second, as you think about your XM17 product, is there any strategic interest in owning radio station assets across the country, given some of those assets may be available? Thank you. James E. Meyer - Chief Executive Officer & Director: So I'll just take early part of it, and then David will answer the front part of your question. I don't see any reason for us to own those stations. We don't rule anything out. I can tell you, we look at everything. And as you know, there is a lot for sale right now. But it's – I just don't see any obvious strategic rationale for doing that right now. And David, do you want to go back to the question on used cars?

Yeah. Sure. The conversation rates continue to holding at 30% range. And in terms of the contribution of what you called a secondary market, again, the new car business was just slightly more than half of our distribution in the first quarter, and the rest of it is obviously coming from the aftermarket and used cars. And we effectively operate four channels of distribution: the new car conversion funnel, the used car conversion funnel. And what distinguishes those two is that there are trials that are very closely tied to the sale of a vehicle. But then we have two other significant channels of acquisition: one is the old aftermarket businesses, as we used to note that launched satellite radio a long time ago. It's still pretty healthy. But there are an awful lot of inactive satellite radio-enabled vehicles out there, and we have a group that we call our Gross Add Win Back team who continuously markets to owners of those vehicles, whether they are original owners or subsequent owners, and they obviously do a great job of bringing them through.

Great. Thanks so much.

And we'll take our next question from Jason Bazinet with Citi.

I appreciate the color you gave on the progress you're making signing up dealers, both independent dealers and franchise dealers. I just had a question on the comments you made around insurance companies. Is that really designed to go after the cars that are sold privately? Is that what your objective there is? Or is it...? James E. Meyer - Chief Executive Officer & Director: So, Jason, I think the way we look at it is, as you know, the used car business is gigantic, okay? And it fundamentally goes through three channels: the franchise dealers, let's call it the same guys that sell new cars; independent dealers, which is a little mom-and-pops that are in every little town and – around the country. And a whole bunch of those sales are also one-to-one, me to David, David to me. And so what we're after is, as many sources as we can find that give us accurate owner data on a very timely basis. And I can emphasize timely, because our research says, we do a lot better on conversion if we get to you very early on in that purchase decision, than down the road. So, we are trying to get accurate good data from as many places as we can. I look at the data from the insurance companies. I don't really actually care where those cars were being sold. I just want to make sure that this master VIN database we keep, of the 85 million cars I talked about, we have as good a record as possible, who owns them.

Okay. Thank you. James E. Meyer - Chief Executive Officer & Director: And because every vehicle needs to be insured, we think it's a natural path to try to find that stuff.

I agree. I agree. Thank you very much.

And we'll take our next question from Amy Yong with Macquarie. Amy Yong - Macquarie Capital (USA), Inc.: Thanks. I wanted to focus a little bit on just the ARPU increase that we saw this quarter. It seems like the 3% was one of the biggest we've seen in a while. What drove the beat this quarter? And can you talk about trends going forward? Thank you.

I was a little surprised at the growth in the ARPU, too. It certainly is more than I expected, that tells – some of it is just favorable mix that we do – we have a very complicated price grid. And so we took – as we said a number of times over the years, that we're constantly tinkering with the grid, tinkering with what we emphasize in our marketing efforts. And we had a great combination of things here. We did change some rates last year, and so we have the effect of that still rolling through. Every time we change rates, it takes about a year-and-a-half for things to roll through. So I think it's just a confluence of factors that generally, we try to encourage you to think of us as having sort of gently rising ARPU over time, and that's what – that's still what we expect. Amy Yong - Macquarie Capital (USA), Inc.: Great. Thank you.

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

Oh, thanks. I have a couple of questions. Can we start on XM17? Have you started any trials? And if you have, can you discuss what you've done so far? And I just wanted to clarify the rollout. Will the rollout be across the board in all 75% penetrated, the OEMs? And I guess, can you be more specific on the actual rollout? And what you expect the benefits to be, whether decreased churn or further opportunity in increased ARPU? James E. Meyer - Chief Executive Officer & Director: So, Jessica, let me take those kind of in a little piece. And I'll start with the easiest part, which is, our goal clearly is, and it's a long march, is to have SiriusXM17 in every car, eventually, that has satellite radio in it. So, our goal would be to have – to match right up against the 75%. That's going to take quite a long time to accomplish. Where are we today with the SXM17 platform is, as I've said a couple of times, we are doing extensive user testing here. And the size of our focus groups has expanded, the number of vehicles that we now have equipped with this product out there that we can do real-time testing with has expanded, and we're right where we want to be. We're not ready yet to give you rollouts with the OEM specifically because, A, they're very guarded of their own product plans and we'll have more to say about that later on this year. But what I will guarantee you is that the trajectory of where we're going with SXM17 is moving along, frankly, right at the pace that I want to see it. One of the benefits of it are, I think, three kinds of things to think about. One, it eliminates all of, let's call it the technical hurdles of our satellite technology platform, in that it changes our relationship from one-way to two-way. And with that two-way, it allows us to do all of those things that you can think about: from interactive music and on-demand and much more advice (29:03) customized things to you as an individual owner. Where I think it's going to have one of its biggest impact is it's simply going to be much easier to deal with us. And we're not that far from one button to renew. Okay? And so the team is all excited. The one-half of the team is all excited about what we can do with all the cool technology. But where I've been driving this platform and David is driving this platform is what can it do to really take away any of those hassles or barriers to subscribe to our service or to make dealing with us a lot easier and I think what you're going to find when we're done with this, it's going to satisfy both of those very well.

Let me just add a couple of things to that, Jessica. So we do expect benefits in churning conversion. If you ask us to quantify, we couldn't do it at this time. We'll have to wait and see as product gets in the marketplace. But we also expect to be able to lower costs through it, that this – what Jim described is one-button push to effectively convert from your trial into a subscription means that we're deflecting calls away from the call center. And so I think there are benefits in churn conversion and more efficient operations in terms of on-boarding customers. Every major OEM is very engaged with us, and I would tell you almost every OEM is engaged on this product. They are excited about it and want to see us get it into their vehicles as quickly as possible. All that being said, then you get right back into the OEM roll-out mode where they love an idea and they want to go right now and then they go back and they coordinate with the engineering team and they say, well, when's the next change in this head unit or when's the next change in this part of the infotainment system, and then you end up with multi-year roll-outs. I think you can think about the roll-out of SiriusXM17 trailing slightly the roll-out of Connected Vehicles.

Okay, great. And then the second question. In your press release you specifically called out acquisitions, which is a slight nuance to historical language. As you look around what areas are most interesting to you, is it the streaming businesses, is it related to connected cars, is there anything else that we should be focused on?

You know, I would say the answer to that is no. We took a very hard look over a couple of years at the interactive streaming marketplace and we do not think it has attractive economics, and that the participants in it, almost every one of them have been out raising money over the years or have been for sale, and we just don't see the value proposition there. Look, we try and stay open-minded. One of the things that we have to be cautious about with things going as well as they are in satellite radio, we don't want to be complacent. In fact, I don't think the language is really anything more than the team here pushing itself to make sure that we're open-minded. We're looking at ways to diversify the business. James E. Meyer - Chief Executive Officer & Director: And Jessica, I look at also – and I probably look at it differently than almost most people. By my own calculation, okay, radio in the United States is actually a $25 billion business, and it surprises you how big it is. We're getting about 20% share of that revenue, or roughly $5 billion of $25 billion. Obviously, our hard look is, well, where is the other $20 billion going and should we play there or not. We have not found any obvious answer to that, I can tell you. In the Connected Vehicle space, we look at everything. And as I said, I'm really happy with the vector that business is on. If we could find a really killer application that could sit on top of our platform or something that could sit on top of our platform, that we could figure out how to either make it really valuable to our customers or how to get more revenue from it, we would certainly acquire something in that area if we found it. Again, it's frustrating, we have lots of money, we can do whatever we want, but we remain very disciplined in what we look at.

Great. And kind of just one last small one, but can you give us an update on video offer, you talked about that when you re-signed Howard? James E. Meyer - Chief Executive Officer & Director: Yeah. I don't have anything to say today. I will soon. I'm not playing a game with you. We're working with Howard's team. And I think what we're going to have is going to be pretty interesting, and then obviously we'll talk about what else we might do. But right now, I'm really – got the team concentrating on Howard and there's really nothing more to say at this moment.

Thank you.

And we'll take our next question from Ben Swinburne with Morgan Stanley. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Thanks. Good morning. I just want to come back to a couple of things. David, first for you, could you give us a little more color on the ARPU? Was the extra day in the quarter material? And were there any price adjustments that might explain the increase in voluntary churn that you called out, any color around sort of those two counterbalancing forces? And then Jim, I'd love to hear – we hear a lot about your fantastic relationship with the OEMs. What about with the labels? I mean, if you guys were to look at getting into new kinds of businesses on the music front that required direct deals, is that even a possibility? Or do you look at the industry landscape and say that's just a bridge too far given sort of the tension in the space? (34:54) James E. Meyer - Chief Executive Officer & Director: So David will take the first one and I'll take the second. Go ahead, David.

What, on the ARPU? James E. Meyer - Chief Executive Officer & Director: Yeah.

Yeah, okay. So yeah, I mean the math is the math, Ben. So you've got x number of days in the quarter and there's one extra day. And so it's going to be a little more than 1% increase that's going to be associated with the extra day. Last summer, we moved up prices for, what we call, our deeply discounted plans. And we changed the kind of plans that we kind of feature and offer in a number of our acquisition channels, trying to get people to go a little longer to a little higher price point. And I think there was an adjustment of the music royalty fee that's sort of still working its way through. So all of those things were at play in the first quarter. I don't really think there was anything about the increased ARPU that had a meaningful impact on voluntary churn. I think there's probably a little bit of it associated with the, what I'd call, a price walk in the deeply discounted plans, but I think it'd be hard pressed to get too precise about the attribution there. So generally, look, Jim said that the biggest reason why people leave us is they don't want to pay, and then they go back to listening to free radio alternatives. And so our voluntary churn bumps around a little bit, but it's within a few basis points. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Thank you. James E. Meyer - Chief Executive Officer & Director: So Ben, I'll address our relationship with. So of course, we work hard on our relationship with the labels, and why wouldn't we? And I don't think any of us believe it needs to have any kind of contentious nature to it. For me, it's funny you asked, it's a goal I kind of set for myself about 12 months ago. And as an example, I speak quite oftenly with Lucian Grainge at Universal, okay? The fact of the matter is though, at the end of the day, Lucian's question for me is really simple, which is, "Well, what do you want? What do you want from us?" And my answer back to him today is I haven't given it to him yet. So we continue to look at all the possibilities there. We value our relationship with the labels. We obviously very much value our relationship with our artists, and it's a dance that we continue to do every day. But I will tell you, my goal is not for this to be a contentious relationship and we'll just keep at it. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Thank you, both.

And we'll take our next question from Stan Meyers with Piper Jaffray. Stan X. Meyers - Piper Jaffray & Co. (Broker): Thanks, guys. So I wanted to discuss a little bit your subscriber acquisition costs. So we've seen a meaningful step-down in 2014. Since then those costs have been fairly flattish. So I just wanted to see if you have any color there. Is there room for another step-down in the future? Any trends there would be helpful. Thanks.

I think that SAC should come down a little bit over time that it's got a lot to do with mix and timing that as newer generation radios go into vehicles, the SAC tends to come down. There is a pretty long lag from the time that we develop these newer generation radios that have lower costs and then when they get actually incorporated into automotive production. So, I think you can expect to see SAC come down a little bit as we go forward. But the other thing about SAC is that we're pretty happy with the level it's at. And so one of the things that we look at in those vehicles is or in the product is ways to improve the capabilities of the product within the money that we currently spend. But all that being said, I do expect it to drift down a bit over time. Stan X. Meyers - Piper Jaffray & Co. (Broker): All right. Thank you.

And we'll take our next question from Brett Feldman with Goldman Sachs. Brett Feldman - Goldman Sachs & Co.: Thanks for taking the question. Your programming costs were up considerably year-over-year, which is not surprising based on some of the new programming agreements you renewed. I was just hoping we could get a little help in terms of thinking about how to model that line item for the rest of the year, particularly in light of some of the seasonality. Are we going to see the same year-over-year step-up as we saw in 1Q or is that going to start flattening a bit as we move into the second half?

You should see the same seasonality. The contracts aren't different in structure. So you should see the same kind of seasonality you've seen in prior years. James E. Meyer - Chief Executive Officer & Director: Yeah. And I just want to comment on top of what David said is, we have been very clear about the renewals we had and, as you said, there's no surprise. I think what you should focus on though is, in a lot of other media business, programming costs move directly with subscribers, okay. In our business, programming moves much more like a stair-step now, and obviously that got convoluted when we merged and we were able to take out a significant chunk of cost from the content line item. I want to go back to one item David had in his comments, because I think it's really, really important. The vast majority, and I think it's actually fair to say all of the major content that we need to have under license is now under license at a fee that will not grow for many, many years to come. And so I think, as you're modeling our business longer term, that's a better way to think about it. Brett Feldman - Goldman Sachs & Co.: So just as a follow-up to that then, as we think about into next year, does that effectively mean that programming costs would be fairly flat as we exit 2016?

Yeah, I mean there is always going to be an inflationary component to it, but all the major contracts, as I've said and as Jim has said, they're set through the end of the decade and beyond. James E. Meyer - Chief Executive Officer & Director: Yeah. Now that said, if I find something, my team rather, finds something that we think either can help us keep subscribers or generate more subscribers, boom, we will go – this isn't a matter of we're not willing to spend the money, this is a matter of keeping our discipline of the way we do it. Brett Feldman - Goldman Sachs & Co.: Great. Thank you so much for that color.

And we'll take our next question from Jim Goss with Barrington Research.

Thanks. Back to SXM17 a bit, I was wondering if the Internet version of your service may be redesigned to be consistent with SXM17 to sort of feed the habit of using the service home and away, and could there be any logical streamed version of SXM17? James E. Meyer - Chief Executive Officer & Director: So Jim, I'm not going to comment except to say, that's a really good question, okay? And we'll have more to say about it later in the year.

Okay. And maybe just one last thing. Your subs are up, your guidance is up 200,000, but your revenue guidance is flat, and I was just wondering what the assumption going into that is, given that you were just talking about ARPU increases.

I think that we feel, first of all, confident in all of our guidance. It's tough to move a $5 billion number in a subscription business that, while we're certainly thrilled with the increased subscriber growth that the – we did increase the trials, there is a little bit of a delay in revenue recognition associated with some of those trials, right, because they get shipped first and then sold through to customers, and it's after the sell-through that the revenue recognition starts. So it's tough to move a $5 billion number, Jim.

Okay. Well, thanks very much.

And we'll take our next question from Eric Pan with JPMorgan.

Morning, guys. Thanks for taking the question. So your new subscriber guidance implies a rather conservative pay promo add compared to last year. Are you anticipating a slowdown in new car sales?

No. We're not anticipating a slowdown in new car sales. The way it works is that, for the paid promo adds to grow year-over-year or even remain the same, actually kind of requires a similar increase in auto sales year-over-year for our paid trial partners, right? So if auto sales were flat one year to the next among our paid trial partners, they sold exactly the same number of cars, that paid promotional additions would probably be zero for those guys in the year, right, because it's based on the change, not based on the absolute volume of sales. James E. Meyer - Chief Executive Officer & Director: Yeah. And I just want to comment on your question on SAAR. I think we probably have – I don't – we pay for probably at least 15 or 20 different sources. We don't predict SAAR ourselves, obviously. We get a lot of input from our OEM partners, but we also get an extensive amount of research from various outside firms. And I just have to tell you, right now we haven't seen any change in any of that thinking for the year.

Got it. James E. Meyer - Chief Executive Officer & Director: And so that's what we're betting on. We just don't gamble here, okay?

Got it. And then, back to the used car topic. You guys had over 6 million used car trials last year. How many trials can we expect from that funnel this year and going forward? And then, what kind of commission, if any, do you pay to used car dealers or the Affinity partners for reaching those used car market?

We've found that paying the dealers doesn't really work. (45:38) at the dealer level don't really work. So the payments we have are about access to the data with the information system providers who sell systems to the dealer world. So there aren't really any commissions there. We did say that trials for the used car guys grew 24% in the quarter. That kind of strong double-digit trial start growth is what our expectations are from used cars.

Got it. Thank you very much.

And we'll take our next and final question from Barton Crockett with FBR Capital Markets. Bart E. Crockett - FBR Capital Markets & Co.: Okay, great. Thanks for taking the question. Switching gears a little bit. Your controlling shareholder, Liberty Media, has just gone through this very kind of interesting split into three different tracking stocks, including one that tracks our holdings of your equity. So if I am pretty vocal about saying that they think over time it would make sense potentially for Liberty and Sirius to be one company presumably by splitting all the stuff up, it's easier to kind of value what the pieces are there at Liberty and maybe it would make it easier to come to terms on some type of agreement. And I was wondering if you could update us on your thoughts about that? I mean, does the tracker split make it in any way easier to think about a combination of these two ways of holding your equity over time, do you think that's at all important or interesting in any way for your base of equity holders? James E. Meyer - Chief Executive Officer & Director: So, Barton, let me start and then I want David to weigh in because this is a topic David and I probably only talk about once every two or three days. So, number one, there is zero, and I mean zero drama with Liberty, none. Okay? So, some compelling reason for us to say, gee, having them in the position they are in, let's take it out and get rid of it or something just simply is not an issue. They've been active in our board now for more than seven years, they are great board members. And for me and for my team, we couldn't have a better working relationship with Liberty. By the way, you don't know how hard I practiced this morning, Barton. I was dead afraid that I was going to say Liberty Media instead of Liberty Mutual and I was reading my insurance company comments. That said, we look at – we've obviously looked at both sides of the equation. Certainly, Liberty believed that setting up the trackers was a better way for them. We'll see. Trackers have been trading for, what, a week, week-and-a-half or something, and so we're still waiting to see kind of where everything settles out. I want to be clear: we fully understand they are accreting every quarter as we buy back shares. And we fully understand at some point that has to be dealt with. Okay? More importantly, our board fully understands that and we have strong independent directors who fully understand that. And they'll deal with it. I've said many times, I don't know what the difference is to us whether they own 51% or 71%. Clearly, as you get up approaching 80%, it becomes a lot more important issue. So we're acute – we're very – we understand this very, very well. Liberty certainly hasn't indicated anything to us in terms of what they want or where they might go, and our board is well aware of it. We discuss it at every board meeting, and we'll keep you posted.

So, look, I mean, just logically, one equity makes sense. And at the moment, there doesn't appear to be any compelling reason for the public shareholders of Sirius to try and rationalize the equity structure. And then knowing the way that Liberty is owned, it really comes down to one of what would they like to accomplish. I mean, the trackers certainly look like they were good for their shareholders. It looks like kind of their aggregate discount has narrowed a bit. The discount on Sirius tracker still seems to be around 10% or so, which seems big. But really I think the rationalization of the ownership structure is clearly going to be a Liberty decision, do they see something in it for them to squeeze out the remaining discounted (50:22) Sirius stock. And look, we're open-minded about it, but I think it really is their decision. Bart E. Crockett - FBR Capital Markets & Co.: Okay. And then if I could ask one another question here on another relationship with SiriusXM Canada. Could you just update us on what's going on there in terms of their disclosure of a demand, I guess, from you of some fees that they object to? And if this is having any impact on your P&L now and what your current thinking is about the impact going forward?

There is no impact on our P&L now. We have been talking to them for about a year about an interpretation they have under the XM license agreement that we think defies any rational reading of the agreement. And we just haven't been able to make progress with them. So we sort of reached a final impasse. I couldn't take it anymore and so we sent them a demand letter. We actually never heard back from them about our demand letter until we read it in the press that they're seeking arbitration, which I thought was sort of a bizarre response. Look, we believe they are underpaying us for fees due us under the agreements, as I can tell from my discussions with them previously as well as from their press release. They disagree with us and apparently we'll go to arbitration over it, which I'm thrilled about because I think we'll end up with a satisfactory resolution. All that being said, we have a great business up in Canada. They are happily serving 2 million subscribers up there and it's been a good investment for us. James E. Meyer - Chief Executive Officer & Director: Yeah. Barton, I want to be clear. I characterize this as a squabble between two partners. We obviously feel strongly in our position or we wouldn't be going down the path we are. But there is nothing wrong with our relationship with Sirius Canada. Okay? Nothing at all. And as David pointed out, it's a good business, it's a business we're happy to have a significant shareholder and financial relationship with, but these things happen sometimes. And I wouldn't make more out of this than that. Hooper Stevens - Vice President, Investor Relations & Finance, Sirius XM Holdings, Inc.: Thank you, everybody, for participating this quarter and we look forward to speaking next quarter. Take care.