Good morning and welcome to SiriusXM's Third Quarter 2018 Results Conference 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, Senior Vice President, Investor Relations and Finance. Mr. Stevens, please go ahead.

Thank you and good morning, everyone. Welcome to SiriusXM's third quarter earnings conference call. Today, Jim Meyer, our Chief Executive Officer, will be joined by David Frear, our Senior Executive Vice President and CFO. 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'd 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 to not rely unduly on forward-looking statements and disclaim any intent or obligation to update them. As part of this call, the participants may comment on the proposed merger, involving Sirius XM Holdings and Pandora Media. SiriusXM intends to file a registration statement on Form S-4 with the SEC, which will include a proxy statement of Pandora and a prospectus of SiriusXM, and each party will file other documents regarding the proposed transaction with the SEC. 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. With that, I'll hand the call to Jim Meyer.

Thanks, Hooper. Thank you and good morning for participating in today's call. I can't think of a more exciting time for all of us at SiriusXM and I'm thrilled with the results we were able to deliver in the third quarter. With this momentum, I'm once again pleased to increase our guidance for 2018 subscribers, revenue and EBITDA growth. We are driving more subscribers through a bigger enabled fleet and maintaining our strong content lineup as you would expect us, both of which position the company for tremendous future success. But we're going even further with our proposed acquisition of Pandora Media, our investments in 360L, our next-generation in-vehicle platform and our vastly expanded push to drive engagement outside of the car with better streaming apps, including our new marketing agreement with Amazon. SiriusXM added about 300,000 net new self-pay subs in the third quarter, similar to the level we attained in last year's third quarter. We overcame the headwind inherent to a bigger base by achieving one of our lowest ever churn rates for any third quarter and our self-pay base now stands at 28.5 million subscribers with total paid subscribers reaching 33.7 million. David will speak more about the financials, but I'm thrilled we attained our highest ever quarter of revenue at $1.47 billion, our highest ever adjusted EBITDA at $589 million and our highest ever EBITDA margin, reaching 40% for the first time. We attained this margin by coupling strong revenue growth with equally impressive expense management. Auto sales continued at a high level in the third quarter, with a SAAR of about 16.9 million units, and I'm hearing in my conversations with the OEMs they expect solid numbers to finish out this year. Our OEM relationships remain strong. Since the start of the third quarter alone,…

Thanks, Jim. Good morning, everyone, and thanks for joining the call. SiriusXM continued this year's strong results as we moved into the back half of 2018. Strength in converting our trial funnels and retaining subs with a better churn rate produced nearly 300,000 self-pay net adds in the quarter. Auto sales year-to-date are up slightly over 2017 despite the softer third quarter and are still tracking toward a remarkably healthy 17 million units. At the end of the quarter, over 113 million vehicles on the road were equipped with SiriusXM-enabled radios, growing 13% over the prior year and representing approximately 43% of all the cars in the country today. Our used car penetration rate recently hit 40%, approximately 400 basis points above the prior-year period. As this rate nearly doubles to eventually match the new car penetration rates, we expect our enabled fleet to exceed 200 million cars over the coming years, growing more than 80% from where it is today. Total trial starts in the quarter rose 4% to approximately 5.7 million, including 8.5% growth in used vehicle trial starts to over 2.3 million. The total trial funnel stood at more than 9.2 million at quarter-end, up nearly 300,000 over the third quarter of 2017. New car conversion rates were about 39% and used car rates were in the high-20s for the third quarter. Self-pay churn continued the year's extraordinary performance. Churn rolled in at a rate of 1.75% for the quarter, the lowest third quarter churn performance on record. The decrease over the third quarter of 2017 was entirely driven by reductions in non-pay and other voluntary churn. We actually had fewer deactivations for those categories despite our larger subscriber base. We ended the quarter with 298,000 self-pay net additions, bringing the self-pay sub base to 28.5 million.…

At this time, we'd like to open the call up for questions. We'll pause for just a moment to compile the Q&A roster. And your first question comes from Jessica Reif with Bank of America.

Thank you. I have a couple of questions. On the programming cost and the content cost, is there anything specific in the quarter going on or should we expect that to continue to decline despite increased – it seems like you're rolling out a lot of new programming? And then, second, on the Amazon deal – I'm sorry. Can you hear me?

Yeah. You were a little garbled. Yeah. Jessica, it was a little garbled. Yeah. I know you asked about content cost, anything special. Was there another cost item you asked about?

There was also one on the Amazon deal, if there's any color that you could give on SAC or revenue share? And Jim said this is the first step. The press release actually says that as well. So can you talk a little bit either about the Amazon deal or how you'll approach other opportunities for in-home?

So, Jessica, this is Jim. Let me start, and then David will come back to your question on cost. Okay? The Amazon deal does not – remember, we don't give the details of our distribution deals. Okay? The Amazon deal as it's structured is a pure promotion deal among both of our platforms as it looks. Obviously, we're cooperating together to help deploy our free trials among their millions and millions and millions of users. And at the same time, we've agreed to help them deploy in a big way their brand-new Echo Dot 3, which by the way is a tremendous product if you haven't used it, across our user base. I think it's a great first step in other things we've talked to Amazon about. You can kind of think those through pretty easily, Jessica. Obviously, Amazon has had success as a reseller of other service providers' services. We certainly don't have an agreement to do that yet, but that would be something we both might talk about. And then, we talk quite a bit about the Alexa voice interface and areas where perhaps we can work together to help with its deployment. That's just one example or two examples of where that relationship might go. Furthermore, I think you've hit on a kind of a double-edged question, and that is I would expect us to announce more distribution-type arrangements over the next several months as we are intently focused on making our products significantly easier to access and to use anywhere customers want it. And we will work with any kind of a distributor that shares that vision with us.

Right. And on the – on the content costs, Jessica, there's nothing special that happened in the quarter. We continue to have all the content. There is an adjustment that runs through the quarter that disturbs the second to third quarter relationship that has to do with a change in the way the FASB accounts for non-employee-based stock options. And so, we sorted through that in the quarter and there's an adjustment running through. We can circle back around you with more on that later.

And then, can I just throw one last question? And I think Scott is on the call.

Yes.

Can you give us any color on what's going on with your video products?

Sure. So, Howard video, as most of you know, is up and running and getting significant traction among Howard fans and others with that. As Jim always stated, that was the first step in getting the video up working and running. We're busy in outfitting a number of studios and places for, what I'll call, live complementary video on that and we're excited for that. You see the pickup on the Sarah Silverman clip and other things that come out of video. And the combination of video clips are serving two purposes. They are great content for our subscribers, but they are also tremendous sort of snackable bites of what we do as they go out into social media and other free places that more and more access we have now. So, that'll be the plan, but there'll be other announcements on other video things connected with our audio platform as we roll out.

Thank you.

And we'll take our next question from Amy Yong with Macquarie. Amy Yong - Macquarie Capital (USA), Inc.: Thanks and good morning. With the go shop period over for Pandora, I think a lot of us are anticipating some cost synergy numbers. Can you help us think through some of the buckets that you're looking at and maybe some of the top line revenue opportunities beyond the cross-promotional activities that you mentioned? And then, I guess, linking back, are there any obvious investments that as you look at Pandora that are needed? Thank you.

So, with the go shop over effectively at midnight last night, Amy, we're going to get started and sitting down with the Pandora guys and understanding their business a little bit better over the next few weeks. We still do have Hart-Scott outstanding. And then, until the Justice Department gives us the all clear, we can't really engage in actually changing anything there. But we will start the planning activities. We'll get going next week and then we'll have more to say in the future. We do expect that we'll find synergies between the business. We do expect that we'll find top line synergies. We expect there's going to be some cost synergies, but like we said in the last call, the deal isn't about cost synergies, it's about expanding the product set and we'll be back to you in future calls to talk about what we find and what our expectations are. Amy Yong - Macquarie Capital (USA), Inc.: Got it. Thank you.

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

Hi. Good morning. I had two questions. First, how should we think about the OpEx investment that you need to make to support the new Automatic Labs' Dealer Program? Is that significant, where it will hit the P&L? And also, would you be paid by the dealers during the free period, the trial period prior to the car buyers switching to a paid subscription? And then, separately, I wanted to ask you what you're seeing so far with conversion rates on 360L. Is it still too early to ask that question or do you have any good data at this point? Thanks.

So, Bryan, on Automatic, Hooper will have to get back to you on how the numbers actually were. It is not significant in our either 2018 or 2019 financials. I can tell you in all of our programs, there is a commitment from – a financial commitment from the deal. I'm not entirely sure which way it works. Hooper can get back to you with that. But I can tell you, I felt it was important to have that commitment. The dealers will pay more attention when they have a little more skin in the game than if it's just a kind of another one-off, right. And so – and I have to tell you, I'm really encouraged by our early signs here and think there's opportunity. I will caution you. I tried to be deliberate in my comments. This is going to be just like the connected vehicle business that we've launched through the OEM space. Our strategy is going to be slow and deliberate as we work our way through what works and what doesn't work, but I'm confident in the opportunity at the end. In 360L, the answer to your question is, yes, it's still too early to be able to give you any meaningful sound bites. I'm not aware that we have any of that that we're relying on. David, you...

Yeah. Yeah. Bryan, I mean, rolled out in Chrysler vehicles with a 12-month trial starting in the spring. So, we're really not going to see anything material until next spring.

Okay. All right. Great. Thank you.

And our next question comes from Vijay Jayant with Evercore.

Thanks. As I understand it, Pandora's music licensing structure is different than yours. They pay a percentage of revenue. I think you guys pay per song. Is there one that you like better? Is there a chance of combining them into sort of a single deal once the transaction is closed? And second, you guys seem very optimistic on the Amazon partnership. Is that an exclusive arrangement? Is there a chance you could get Google or Apple or some other platforms to be part of the Sirius opportunity? Thank you.

So, I'll take the second one first, which is the – while we're certainly focused on delivering with Amazon, it is not an exclusive agreement. And we're obviously – we're – put this way, I want again our service to be as easy to listen to on anything and any platform that any customer wants to listen to and I want to make it as easy as possible. And so, as I said, I'm certainly hoping we'll continue to work down that path. It's why I included the comment about distribution models in my comments. On licensing, I'll let David take it in a second, but you did spark something in my mind, I did want to point out and that is with the Music Modernization Act passed a couple of weeks ago and there's certainly been a lot of conversation and a lot of drama around that, one thing that was included in that, that I think is important to note, is that we agreed to essentially now what is nine years remaining on now a constant rate of how we will compensate for performance rights with the music industry. Both David and I think this is a really, really good outcome. While we can argue about the rate and trust me we have argued a lot about the rate, we believe that having predictability and finiteness to the rate for the next nine years is a really important thing for our business. And I think something that's important should be important to investors as well.

So, Vijay, we aren't looking at the licensing structure going in as something that we would try and blend into one thing that – each company has negotiated a licensing structure with the industry. It applies to the products that we have and I don't see us going in and changing that. Somebody asked in the announcement call whether we could switch the traffic from one license to another and so the game of the system, so to speak, we have absolutely no intention of doing that. But the fact is, is that we have a really material relationship with the world's music industry now, that we -the combined company will be paying them couple billion dollars a year. And we think that that could lead to an interesting dialogue for sort of future opportunities. There's still – there's a lot more that we could do with the music industry than we've been doing so far. And so, we think it all plays well together.

Great. Thanks so much.

And our next question comes from Barton Crockett with B. Riley FBR.

Okay. Great. Thanks for taking the questions. A couple of things I was curious about. One is with this Amazon deal and your discussion around that, you're flagging kind of direct subscriptions – consumer direct subscriptions as a more meaningful opportunity than I've heard you say in the past. Can you give us some sense of the materiality of that in new subscriber addition activity at this point? Is it still pretty small or is that starting to ramp up a little bit?

It's still very small.

Okay. All right. And also, when you talked about on Pandora...

And to be honest with you, we're still trying to understand the churn characteristics of that business and the various ways that you can promote in that business for stickiness and all those kinds of things. And so, I would expect 2019 to continue to be a learning year, but we're going to go from kind of the elementary school and move up to intermediate or high school. Okay? Because we're going to test our way into this, not just run ramshack into it.

Okay. All right. That's helpful. On Pandora, I also heard you talk about an opportunity to promote them to the people who don't sign up for SiriusXM. Do you guys have any data on what – the Pandora usage among those people who don't sign up for Sirius who decline? I mean, is there a real greenfield opportunity, or is Pandora pretty well-penetrated in that group? And you had also mentioned kind of a potential kind of improved content offering at Pandora. Just wondering if you could flesh that out a little bit in terms of what you're thinking about. Could they share your content? Could you help them get new content? What are you thinking there?

So, number one, I think everything is on the table after – by the way, I mean, the end result will be obviously for one plus one to be more than two. It's not from – the idea here is not to have $16 customers move to $10 or $5 or free. Okay? The idea here is I think there is a big opportunity to expand Pandora's listening in the vehicle. They already do really, really well in mobile and they already really do really, really well in-home. They don't do particularly well in the vehicle. It's just a fact that even though we're thrilled with our business and we're thrilled with approaching 35 million – 34 million subscribers, the point is is that the vast majority of people still reject us as they go through our trials because – and the biggest reason being they don't want to pay. By being able to help them and point them towards another alternative which may include things that are not in that alternative today that we either learn through the trial or learn through our discussion with them are important to them that do not cannibalize the ability to be able to monetize those funnels in a way we've been monetizing for SiriusXM existing business I think will be a big opportunity. In terms of the data, I got to tell you, until we can get under the hood and until David and his team can spend more time on – I just – we have some anecdotal data on the question you asked. I'm not confident whether it's right or wrong yet.

So Barton, again, the go shop expired a few hours ago, right? And so, we'll start now the activity of planning for the integration. Certainly one of the early things we'll do is get the tech teams together to figure out how to match up the data that we have, the data that they have, and there's a little bit of work to do to just do that. And then, once we can mash the databases together, then we can get people to start looking at where the overlap is, where the gaps are and what the opportunities are, and that's exactly what we're going to be doing over the next few months.

And we'll see.

Okay. All right. That's great. Thank you.

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

I just had a two-part question. On Amazon, are we to infer from your comments that that's a domestic-only sort of agreement with Amazon in terms of cross-promotion?

Yes. It's U.S.-only.

Okay. And then maybe a defensive question. Do you mind just giving us an update on sort of where we are in terms of the number of cars on the road that you would estimate that have some other music subscription service that's sort of embedded in the dash, you know, next to the Siri icon?

Well – so, Jason, I think there's two important points here. One is I can't give you that answer off the top of my head. Okay? What I can tell you and what I think everybody needs to be careful before they draw conclusions is that the pie is getting bigger, number one. There's no question in my mind, and the data says, you know, you hear it today from a variety of places. I think Bob Pittman a couple weeks ago spoke quite a bit about research they had done that show, in his words, audio's never been hotter and how much bigger the pie is, and we see the same thing. I think you have to be careful about drawing conclusions on things like Apple Music or Spotify in the car and taking that back to, oh, gee, this is part of that expansion of the pie, because I got to tell you, most of what at least I think we're seeing in the car today is those are substitutive. And basically what they're taking away from is what used to be the package media business for music that then morphed into the MP3 business for music. And so, yes, I think they are growing, don't misread me, but I would absolutely expect Apple Music and Spotify to continue to grow in the vehicle as people choose that as their fundamental way to listen to their music collection, which they've done for 40 – for 50 years, okay, ever since it became mobile, whenever the 8-track made it easy to take mobile products into your car. And so, I think we got to be careful. And again, we've been clear. I see these as two different businesses. They overlap and they – certainly one promotes the other and it always has. Radio has always been a key component to promoting music. We have never intended and we've tried to be very careful about being in a music distribution business solely. We are focused on being in the radio business and that doesn't mean we may or may not offer down the road a $10 music service if our subscribers say they want that, but that won't be the sole focus of our business.

Thank you.

And we'll take our next and final question from Brian Russo with Credit Suisse. Brian Russo - Credit Suisse Securities (USA) LLC: Hi. Thanks. I have another Amazon question that's kind of following up on one that you answered a question or two ago. So, you said Amazon is a domestic deal and you've been asked in the past about the potential for a global offering. And given you do have proprietary content outside of music and what could be a global distribution partner in Amazon, I just wanted to revisit the question and ask if you see an opportunity to offer a global streaming product or maybe just your proprietary content.

Well, first and foremost, I mean we do have a strong business in Canada that we're very happy with. That is a good profit contributor to us. I can't – I don't remember the reason why the Amazon deal doesn't go to Canada. There's a reason why. And so, I am sure it's a U.S.-only deal. I think I'm just going to answer you straightforward. We haven't done a lot of thinking about our service outside of North America. And I'm not saying that's off the table at all once we complete the acquisition of Pandora. What I am saying is it's way down on our list of things to think about. Brian Russo - Credit Suisse Securities (USA) LLC: Understood. And if I could just ask a follow-up, of your content, of your non-music content, the news and sports and talk, can you give us a sense for how much of that content that you actually own like global rights for? Do you ever wanted to do this? How much of this could you do?

It's complicated. And there's no one answer for any of it, quite honestly. Brian Russo - Credit Suisse Securities (USA) LLC: Understood. All right. Thank you.

Thank you very much for participating in today's call and we'll speak to you later in the year or in the fourth quarter call. Thank you.