Good morning, and welcome to the SiriusXM Third Quarter 2017 Earnings 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 conference over to Mr. Hooper Stevens, Vice President, Investor Relations and Finance. Mr. Stevens, please go ahead, sir.

Thank you, and good morning, everyone. Welcome to SiriusXM's third quarter 2017 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. We'll also be joined by Scott Greenstein, our President and Chief Content Officer, for the Q&A portion of the call. First I would like to remind everyone that certain statements made during the call might be forward-looking statements as the term is defined in the Private Securities Litigation Reform Act of 1995. These and all forward-looking statements are based on management's current beliefs and expectations and necessarily depend upon assumptions, data or methods that may be incorrect or imprecise. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. For more information about these risks and uncertainties, please view SiriusXM's SEC filings. We advise listeners to not rely unduly on forward-looking statements and disclaim any intent or obligation to update them. As we begin, I would like to advise our listeners that today's results will include discussions about both actual results and adjusted results. All discussions of adjusted operating results exclude the effects of stock-based compensation. With that, I'll hand the call over to Jim Meyer.

Thanks, Hooper. Good morning. SiriusXM delivered a very strong third quarter in a challenging environment. We've added over 1 million net new self-paying subscribers so far this year. In the third quarter, we added 311,000 net new self-pay subscribers and are on track to attain our full-year guidance of approximately 1.4 million. We've reached 27 million self-paying subscribers and have more than 32 million paid subscribers overall. Our ARPU, total revenue, adjusted EBITDA, and free cash flow all reached new quarterly highs in the third quarter. We are pleased to once again increase all our full-year 2017 financial guidance across the board. David will go into more detail in a moment. But I want to point out that our 39.9% adjusted EBITDA margin is a full point above our previous record, and completely consistent with what we've been telling you for many years to expect from our business. We first told you in early 2011 when we had just barely reached the 20% margin for the first time that we would eventually attain 40% margins. And we have methodically marched our way to this milestone, maybe even a bit faster than some of you might have expected. All men may be created equal, but all business models are certainly not. Business models do matter. Once again, you see the strength of our model. We were able to grow revenue, maintain high variable margins, and convert a very high percentage of our EBITDA into cash flow. Clearly, our model is scaling and the financial engines of our company are firing on all cylinders. A booming September notwithstanding, U.S. new auto sales continued to soften in the third quarter. The SAAR was down from $17.5 million a year ago to 17 million in the third quarter of 2017. SXM-enabled vehicle sales were…

Thanks, Jim. Good morning, everyone, and thanks for joining today. Our third quarter results continued the strong performance we saw in the first half of 2017. As Jim noted, we're increasing our full year guidance for revenue, adjusted EBITDA and free cash flow, as the business continues to outperform our expectations. Similar to the second quarter, the third quarter saw the total number of SiriusXM-enabled vehicles on the road increase 14% even as SAAR in the quarter declined 3%. However, SAAR declines were offset by an increase in new car penetration to 76.5% from 75.7% in the prior year, resulting in flat sales of SiriusXM-enabled vehicles year-on-year. Our installed base is currently at 104 million vehicles on the road and is headed to 185 million vehicles in 2025. Total trial starts rose 5% in the quarter to 5.5 million. This was driven by a 14% growth in used car trial starts totaling 2.2 million, while new car trial starts were flat year-over-year at 3.3 million. At the end of the quarter, the new and used car total trial funnel was a very robust 8.9 million. The funnel contracted slightly sequentially in the quarter, as trial wins grew from strong prior quarter trials starts and shipments fell as SiriusXM-enabled vehicle inventory days contracted by 6 days to 81. And I'll tell you the contraction of inventory days is a very good thing. Used car gross additions in the third quarter 2017 represented just over 35% of the total self-pay gross adds in the quarter, a nearly 180 basis point increase versus the third quarter of 2016. We expect this share to climb higher in the future as our penetration rate in used car sales increases from about 35% today to eventually match the approximately 75% penetration rate in the new car…

Thank you, sir. And we will take our first question from Amy Yong with Macquarie. Amy Yong - Macquarie Capital (USA), Inc.: Thanks and good morning. So just on the margin expansion, maybe, Jim or David, can you walk us through some of the cost buckets for next year and some of the initiatives you have going, and I guess specifically, the programming and content acquisition and maybe some of the SAARs (26:34) and cost initiatives you have going on? If you could talk through just kind of that 40% margin bucket? Thank you.

So, Amy, first, congratulations on the birth of your son Chase. We know you're not getting a lot of sleep, so I know you're probably doing a little extra analysis on our company, but congratulations. That's really, really a neat thing. Amy Yong - Macquarie Capital (USA), Inc.: Thank you.

David, why don't you start on trying to dig deeper, and then I'll jump in?

So, Amy, we've got sort of a long-term consistent record on margin expansion. We don't really see anything different next year that – the big nuts in programming renewals were done over the last couple of years. And while the absolute dollars spent on programming, for instance, will probably continue to increase, we think revenue will grow faster, so we'll get a little margin expansion out of it. We've always said that 40% or 40%-plus is not necessarily the most important goal, since what we're trying to do is drive the maximum free cash flow we can out of the currently 104 million vehicles we have on the road, and moving up to 185 million over the next several years. And so, if lower margins drive more total free cash flow, that's a more valuable company. Right now, we don't see that happening. But for instance, even in the third quarter, we could have driven the margin higher by backing off another spending, but we just think we're still spending – productively spending as much as we can to drive the organic growth of the business and still deliver great results for shareholders.

Next?

Operator, can we go to the next question?

And we will take our next question from Vijay Jayant with ISI Group.

Thanks. I have a couple. First on just your buyback intensity and given what I think the true active ownership of your stock is when you back out Liberty, I think Berkshire Hathaway and all the index funds. I mean, is it possible to keep having the same intensity of buyback given the float is so small now and your 10b5-1 is a function of the trading volume, which seems to be declining? So, can you just talk about your buyback opportunity and the limitations you may have there going forward? And the second question really is, given the mix shift that we've seen over the years, it seems – I think if you can correct me that – but self-pay funnel is about 75% of gross adds when you look at your various distribution and the mix of your OEMs, is that a fair number? Thank you.

Yeah. Vijay, to be honest, I'm not sure I understand the last question. Do you want to try it again? If not, we can always take it offline.

Yeah, I can take it offline, but it just looks like your paid promotional net add numbers that we always get wrong. I'm trying to understand how we sort of think about growth – net adds goings forward given the various funnels and the mix shift between the OEMs...

Got you. Got you.

... when it comes to paid (29:48) promotional versus self-pay. Thank you.

Okay. Yeah. So from our perspective, what we're focused on is the self-pay net additions. And then we're focused on how many trials are running through the funnel. And to be honest, we don't spend a whole lot of time looking at paid promotional net additions. We have this – because we have a bunch of trials that generate revenue, we do report total revenue-generating subscribers. But the paid promotional net additions isn't something we spend a lot of time on because the unpaid trials are just as good as the paid trials. They're all potential customers.

Yeah. I think just one other point on that, Vijay, we obviously have OEM economics that are constantly kind of seems like moving through for renewal. And I can tell you, when we go through those negotiations and the logic for those renewals, we simply concentrate on getting the best out of economics. We don't care – we don't care whether it's paid or not paid. What we care is, net-net, what's the best for us.

So on the buyback, Vijay, to be honest, we don't really look at the first way you described it, which is sort of backing out certain large holders, that we keep an eye on the second thing that you mentioned, which is the trading volume. And so we're looking at average daily trading volume. I can tell you we've been at this for, what, four years now, and pretty consistently over that period of time, including this year that we've been in sort of the mid-single digit ranges as a percentage of average daily trading volume. Now, needless to say, as the stock price rises and it's risen considerably over the life of the program, it takes fewer shares to buy back that same dollar amount. And so, so far, we're not seeing any restrictions placed on us by the liquidity of the stock in terms of meeting buyback sort of volumes. I would note that we talk about a $2 billion a year excess capital opportunity that we have that between the growth and EBITDA, the leverage you can put on that, as well as the free cash flow that we think for the foreseeable future we've got $2 billion a year to do something with outside of the normal business plan execution. Obviously, the first thing we'd like to do is spend that money to drive organic growth. The second thing that we'd like to do is find smart acquisitions and investments to sort of extrinsically drive growth. And then the last option is that, if we don't exhaust all of our capital with that, well then it's to prudently return it to shareholders. And so, I think all the elements are holding together. I will say that in the most recent quarter, we saw the same sort of declines in trading volume that I think the general market has seen, that I think it's probably happening in a lot of your universe. There's just – there's less stock being traded right now.

Great. Thanks so much.

And we will take our next question from Barton Crockett with FBR Capital Markets. Barton Crockett - FBR Capital Markets & Co.: Okay. Thanks for taking the question. I know it's very early days in your relationship with Pandora, but there's one thing that I was very curious about. They obviously are a much bigger presence in ad sales than you guys are. But advertising has been a source of strength for you. So I was wondering if there's any early thoughts you could offer about the opportunity to partner with Pandora to help both of you guys do better on the ad front.

So, let me start. And first, I couldn't be more pleased with where we are on our own ad selling efforts. If you look at how we've grown over the last particularly four years in that, it's really, really impressive and I'm – it's funny, I actually have a meeting with the ad sales team this afternoon to finalize our targets for next year. And I'm confident they got it right and that we've got the right leadership. In terms of your question on Pandora, I'm going to go back to what I said. David and myself are spending a prudent amount of time understanding how things work there. Frankly, we're spending most of our time on the advertising side of Pandora, just understanding how their model works and what the various levers are and how they are working. We just really haven't gotten – I'll be honest with you, we haven't gotten to the question yet of, is there any real foreseeable leverage between the two. Barton Crockett - FBR Capital Markets & Co.: Okay. All right. Well, if I could switch to one other question, you cited that the decline there in the paid promotional and there's some timing of car shipments, did the hurricane have any impact on the timing of car shipments that might have affected that subscriber number that came at the end of the quarter, maybe people didn't make as many cars, was that any impact there?

I think two points. One for sure, and I want to reiterate what David said in his comments because I think it's important. The inventories needed to come down, period, okay? And so I'm really anxious to see where they are at the end of October. But I will tell you, from our standpoint, seeing the overall industry – inventory in the industry pull back in the third quarter was something that I think was overdue and bound to happen, okay? And so while that impacted our paid net – our paid additions, it was something that needed to happen, and frankly I'm glad it did happen. It's really hard for us right now to be real definitive on the hurricane. I can tell – and I want to be clear, the vast majority of the impact we felt in terms of car sales and replacement of cars is certainly the tragedy in Houston, and we're working our way through that. But I just don't feel that we can give you a credible number yet exactly what the impact of that was. And frankly, we're still trying to figure out where exactly the insurance checks lie, how many of them have worked their way through. And I just think it's going to take us another probably four to eight weeks to be able to fully understand what's happened. Barton Crockett - FBR Capital Markets & Co.: Okay, great. Thank you.

And we will take our next question from Jessica Reif with Bank of America.

Thank you. I have a couple of follow-ups to the call. Jim, you kind of just mentioned briefly Automatic Labs. Can you give us any color on how you plan to integrate that?

Yeah. So, we spent a lot of time understanding the capability of the organization. We spent time obviously doing that before we purchased it. But now, how can we accelerate it? There's many startups, as you're well familiar, Jessica, they get capital-starved. And we think that by being able to prudently put capital to work at Automatic Labs, we can accelerate the product road map. And so that's been our first focus. And I feel really good about where we are. As I've said before – I didn't say in my comments today – we hope to have more to say about this strategically in the first half of next year. I'm pleased where we are. We have a lot of conversations under way with various distribution channels. We don't have anything concrete to say yet, but I will tell you, today I'm more pleased that we bought Automatic Labs even than I was three months ago.

And then I have a couple more questions, so I'll just throw them out now. You had several comments, you spoke about 360L. Can you talk about how that will impact, or how you're thinking about programming and advertising once that rolls out? You had also mentioned, Jim, Howard's video, but it was like such a quick comment, I'm not sure I got that. And then David had mentioned like what – where you're going with that. And then David had mentioned the music royalty negotiation (38:32) that you finished presenting your arguments and it's in the judges' hands. Are you likely to pass through any change as you have in the past? Can you give us any comments on that? Thank you.

Well, let me take them kind of one at a time. So on – I'll take the easiest one first. That Howard video, we're – as I reported before, we're working really hard. We've very, very close to what we think is a nice addition to our product lineup. We're going to take it to market thoughtfully, and test it before we make it available to all our subscribers. It will be a key part of our new app functionality, which we certainly will have available in the first half of next year. And I think, just stay tuned on that one, and I'm pretty excited about that. One other point on that, Jessica, and thank you for asking, you should probably expect something new from us in the app about every four or five months, in terms of, with video – Howard video being the first and then kind of enhancements all along. And I think why that's important is, it tells you the way we're thinking about the combined experience we want our customers to have. In terms of 360L, when you see it working in the first vehicle, it's going to become really, really clear how much it enhances our content experience with our subscribers, fundamentally in two different ways. It gives us a real link to be able to understand what they're listening to and, more importantly, what they've asked, what they've shown interest they would also like to listen to. And as importantly, it lets us, in a much finer way than satellite, customize and personalize that experience across all of our content for those subscribers. We haven't really evaluated what 360L might do for us in the ad world right now. That's still to come. As I said, it's going to take some time for the 360L base to grow. And so I think we have plenty of time to grow into that. And then, David, do you want to answer the last question?

Yeah. The Music Royalty Fee, I think at this point, Jessica, that we'll wait and see what we get out of the judges. And then, just like we did five years ago, we'll evaluate what comes out. We'll – if there's any change in royalty rates, up or down, we'll talk with the marketing team and take a look at what we want to do with the MRF. Any change to that, we do look at and evaluate in the same way as we do any price increase. And even though we are just passing through the royalty cost, we still treat it as a price increase, and we're pretty cautious about (41:30) price increases.

Great. Thank you.

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

I just had a longer-term question. When we speak to bears about your company, a lot of them focus on the fact that it's satellite delivery, right? And you guys are sort of focused on 360L to make it more interactive. But at the same time, because of the way I think the royalty regime works, once you sort of make that pivot in a big way, it sort of makes it a worse business, because of the royalty payments. So, can you just sort of talk about how philosophically you're thinking about giving the consumer sort of more interactive capabilities, but sort of not damaging the business and the health of the business and the cash flow the business generates, as we sort of make this pivot?

So, Jason, let me say a couple of things, and then I'll turn it over to Jim. I'll tell you, I think you're on the wrong track. So, one – and maybe I'm old school, but satellite delivery in what are increasingly burdened and challenged terrestrial networks, which is not going away as they expand bandwidth, the ability to broadcast 25 megahertz into the car for the foreseeable future is just huge. The second thing on the royalties that our Internet – we charge for Internet listening. It's not a free service.

Sure.

And so, actually, when you do the math on what the webcaster rates are, how much of our content – how much of the content on our platform consumed is not royalty-bearing because it's talk, news, or sports, and then consider the utilization actually of sound recordings and apply the rates, I don't know that you would get to the conclusion that it's a worse business model. I don't think that's the right thing, at least not for us. I mean, for a long time now, the royalties as a percentage of our Internet revenues have actually been below, as a percentage of revenue, what the satellite radio business has been.

Yeah. So, Jason, I just want to make one comment also, and I appreciate the question.

Sure.

And that is, this will really surprise you, but I think the bears just get it wrong, okay? And I think we're proving every quarter they got it wrong. And by that I mean, I start with a really simple concept, which is however our customers want to get SiriusXM, we're going to give it to them. Okay? And the public – we didn't drive the deployment of these huge IP networks, the public did. And so I think as you see these things deployed over a long period of time, the bears kind of assume that we're only going to deliver through satellite, that's simply not true. We're going to deliver it in a thoughtful and easy-to-use way any way our customers want it. And that's what we're driving. My key concern, quite candidly, is we don't actually know where the mix will go over a long period of time. What I want to make sure is that there is no reason technically we can't do whatever we want, and the customer then will choose how they want to – how they want – the key to me is that they still continue to listen, and that's what we're concentrating on.

Understood. Thank you very much.

And we would take our next question from Steven Cahall with Royal Bank of Canada.

Yeah, thanks. A couple of questions. Maybe first, just wondering with the new relationship with Pandora, how you're thinking about your current average demographics and how you might look at possibly diversifying particularly getting your average SKU a little bit on the younger side and how that relationship might help you retarget. And then also if you could just maybe size what marketing step-down was in the third quarter related to the storms? And if you're thinking tactically about how you can market in those areas to the probably million-plus homes that are going to be looking for new cars with insurance checks and what you might be able to do from a boots-on-the-ground perspective to capture that market? Thank you.

So two things, first on Pandora, I want to remind you again. Our position on Pandora today is an investment, okay? And I think my comments were right down the middle. We are taking our time and evaluating that. Now, that said, we have research that shows us that somewhere between 50% and 60% of our customers – our customers, our paying customers, also bringing (46:33) Pandora. So certainly, I don't think this is a demographic issue going forward. I think one of the issues we'll try to evaluate thoughtfully over the next year to 18 months is what type of an opportunity is there to cross-promote perhaps to drive on equation where for both companies one plus one might be more than two. But there's really no more to say about that than purely the thought I just gave you. There's not a lot of definition beyond that. Number two, I didn't give a number on the marketing because the truth is I don't know, okay? I don't know what the impact of the storms was. I do know we lost some business during the period. I do know that we believe we behaved absolutely the right way out of respect to those areas that were hit so hard by backing off on our marketing initiatives during that timeframe. But what I can tell you is we're back to normal. I would expect the change in the replacement of the vehicles to work itself out over a period of time. But you have to remember that lot of those cars are going to come back in with 3-month trials, 6-month trials and 12-month trials, and we'll just have to wait and see what that mix is as it averages out over the next 6 to 12 months.

Okay. Thanks, everybody.

And we will take our next and final question from Bryan Kraft with Deutsche Bank.

Hi, good morning. I had two questions on subscriber trends, and I'm sorry on the first one if I missed it in the prepared remarks. But can you talk about what the trends were in the used car trial starts this quarter, and is it still ramping with the same intensity as you're getting deeper into the independent dealers? And then the second question is on win-backs or straight to self-pay. Curious as to what kind of trends you're seeing there. Is that still growing alongside of the used car dealer program growth, or is that used car channel starting to substitute some of the demand that have been coming through the straight to self-pay? Thank you.

So, the used car trial starts were up 14% in the quarter, and so continuing to show strong growth. As you point out, as we get deeper and deeper into dealer penetration that the growth rates, just as the business get bigger, have got to slow a little bit. And as our network of reporting dealers increases, there is going to be less of that sort of win-back or over the transom activity where things just come straight to self-pay on their own. But all that's factored into the overall numbers that we got. We still have the used car additions with a 35% share of total self-pay growth. And that is going to slowly but steadily drive up higher and higher and higher for the next several years.

Okay. Thanks, David.

Thank you.