Sirius XM - Earnings Call - Q2 2025

Executive Summary

• Q2 revenue was $2.14B, down 2% y/y, with Net Income of $205M and diluted EPS of $0.57; Adjusted EBITDA was $668M with a 31% margin, and Free Cash Flow rose 27% y/y to $402M.
• Revenue modestly beat S&P Global consensus ($2.14B actual vs $2.13B estimate), and S&P Primary EPS (normalized) indicated a beat; GAAP diluted EPS was lower due to legal settlements and restructuring/impairment charges. Management reaffirmed FY25 guidance ($8.5B revenue, $2.6B adj. EBITDA, $1.15B FCF). Values retrieved from S&P Global.*
• Positive catalysts: improving subscriber trend (self-pay net adds -68k, +32k y/y), podcast revenue up ~50%, and disciplined cost program with ~$200M gross savings expected in-period this year; continued $0.27 quarterly dividend and $45M buybacks signal capital-return commitment.
• Key watchouts: Pandora margin compression (29%), advertising RPM down and macro/CTV inventory pressure, higher SAC and G&A from a $28M legal settlement, plus a non-cash ~$100M software write-off to streamline the roadmap.

What Went Well and What Went Wrong

What Went Well

• Subscriber trends improved: self-pay net adds were -68k, an improvement of 32k y/y; churn remained low at 1.5% as acquisition programs (three-year OEM subscriptions, used-car data, EV expansion) gained traction.
• Podcast momentum: revenue up nearly 50% y/y, supported by video/social monetization and new creator deals (e.g., Trevor Noah; SmartLess Live with John Mayer), broadening off-platform reach.
• Strong cash generation and cost discipline: Free Cash Flow of $402M (+27% y/y); sales & marketing and product & technology down ~20% y/y; management expects ~$200M gross savings in OpEx/CapEx in-period this year.
  • “Our renewed strategic focus continued to deliver this quarter... unlocking significant cost efficiencies.” — CEO Jennifer Witz.
  • “We maintained a healthy EBITDA margin, generated strong free cash flow... returned $137M to shareholders.” — CFO Tom Barry.

What Went Wrong

• Revenue and net income declines: total revenue -2% y/y to $2.138B; net income down to $205M vs $354M in Q2 2024; Adjusted EBITDA down 5% y/y to $668M.
• Pandora margin compression and RPM pressure: Pandora gross margin fell to 29% (33% prior year); RPM dropped to $85.97 from $98.99 amid competitive pricing and CTV inventory flood; broader ad demand softness in streaming music.
• Rising SAC and G&A: SAC rose 16% y/y to $107M (SAC/installation $18.04); G&A up 23% on higher legal expenses (legal settlement ~$28M) and lack of prior-year insurance recovery; non-cash write-off of ~$100M capitalized software to streamline strategy.

Transcript

Operator (participant)

Greetings. Welcome to the SiriusXM second quarter 2025 earnings call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Hooper Stevens, Senior Vice President of Investor Relations and Finance. Thank you, Hooper. You may now begin.

Hooper Stevens (SVP of Investor Relations and Finance)

Thank you, and good morning, everyone. Welcome to SiriusXM's second quarter 2025 earnings conference call. Today, we will have prepared remarks from Jennifer Witz, our Chief Executive Officer, and Tom Berry, our Chief Financial Officer. Scott Greenstein, our President and Chief Content Officer, and Wayne Thorsen, our Executive Vice President and Chief Operating Officer, will join Jennifer and Tom to take your questions during the Q&A portion of this call. 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 upon 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 and today's earnings release. We advise listeners to not rely unduly on forward-looking statements and disclaim any intent or obligation to update them. As we begin, I'd like to remind our listeners that today's call will include discussions about both actual results and adjusted results. All discussions of adjusted operating results exclude the effects of stock-based compensation. Additionally, we have posted a supplementary presentation on our IR website for your convenience. With that, I'll hand the call over to Jennifer.

Jennifer Witz (CEO)

Thank you, Hooper. Good morning, everyone. The second quarter was a period of great progress as we continued to deliver meaningful value to our subscribers, listeners, and advertising partners, and optimize our organization through the lens of our renewed strategic focus. From deeper engagement with our loyal listeners to early momentum associated with our operational improvements and continued strong results across key performance indicators, we are confident we are on the right path for the long-term success of the business. Beginning with content, it's been an exciting few months as we announced new talent and programming, produced one-of-a-kind subscriber events, and tapped into the full power of our platform with major moments in news and culture. One of the highlights of the quarter included our new agreement with Stephen A. Smith, who will be joining us this fall.

SiriusXM offers multifaceted personalities and creators a place to connect deeply with their fans on many topics. This deal, for example, has Stephen A. helming both a live daily sports show on Mad Dog Sports Radio and a political and culture program expected to air on the POTUS Channel and then run as a broadly distributed podcast. The collaboration with Stephen A. leans into many of our strengths, including our leadership in sports audio, live coverage, real-time fan interaction, and effective monetization of listeners across both subscription and advertising-supported audio. These are the types of thoughtful content investments we will continue to make moving forward. Within our SiriusXM subscription business, we're pleased to deliver year-over-year improvements in self-pay net adds for the fifth quarter in a row, which in Q2 improved by $32,000 over the same quarter last year.

This quarter's results were primarily driven by the expansion and positive impact of new acquisition initiatives combined with continued low churn. These initiatives include our automotive dealer three-year subscription program, which earlier this month kicked off with Audi, our ACE OEM partner, enhancements to our used car owner data, our EV expansion, and Podcast Plus package. We still anticipate the headwinds we highlighted heading into 2025, particularly our intentional pullback of streaming marketing spend to impact comparisons in the back half of the year. While our full-year subscriber expectations remain unchanged, the first half of 2025 underscores the success of these acquisition efforts and the strength, health, and resilience of our core subscriber base. We are committed to delivering even greater value to our dedicated customers.

After successfully incorporating additional content into various packages last fall, we are pursuing further value adds, as well as continuous enhancements to our in-app experience as a complement to in-car listening. This quarter, we launched a new call-in button, which appears on live talk programming in the app as the phone lines open up for listeners, making it as easy as one tap to chat live with favorite hosts. This is just one of the ways we are super serving our core audience, deepening their connection with our content through the timeliness of our service. We are also seeing increased usage of our streaming offerings more broadly, with in-app time spent listening up year over year in both listening hours and days for our self-pay subscribers. Additionally, consumption of our streaming extra channels and artist stations continues to increase both in-car and in-app.

Building engagement across content types and devices has been a major factor in sustaining our incredibly high customer satisfaction and low churn. As we look to highlight our unique differentiators to new potential customers and thoughtfully grow our subscriber base, we are building additional packages to meet their needs. Earlier this month, we began rolling out SiriusXM Play, our new in-car and in-app ad-supported subscription plan. Featuring a compelling subset of our music and talk programming available at a low monthly price, we expect Play to be available in almost 100 million vehicles by the end of this year. Play presents a logical solution for price-sensitive customers with SiriusXM already built into their vehicles who are looking to complement their on-demand audio platform of choice with a more curated, live, and connected experience with the same ease of traditional radio.

The introduction of Play rounds out our broader pricing and packaging work, which now includes a variety of plans and price points suited to different types of listeners. While we believe Play has the potential to contribute to improved subscriber results, we are scaling this new solution at a thoughtful rate, leveraging the marketing investments we've made to target the right potential customers with the right content and package. Play also introduces opportunities into our portfolio of advertising solutions, taking advantage of the continuous improvements we are making to our AdTech stack. This includes the addition of ad replacement capabilities on 360L vehicles toward the end of this year and updates which will make it easier for marketers to seamlessly purchase across satellite broadcast, streaming, and podcasting in a single order.

This quarter, we announced an agreement to improve audio's representation within media mix models, an important step forward in the measurement landscape. We also launched a new capability which allows advertisers to leverage AI voice replicas in audio ad creative to quickly launch more scalable campaigns at a lower cost. Each of these advancements is part of our larger goal of getting audio in every media plan by addressing many of the complexities in creative planning, buying, measuring, and targeting that have traditionally held marketers back. We continue to see challenges in the ad market due to economic, consumer, and tariff uncertainty, ranging from budget pullbacks to dollars shifting to lower funnel channels to drive short-term sales, with categories such as retail more adversely impacted. Additionally, we are seeing pricing pressure in streaming from an excess of CTV inventory and audio competitors reacting. Podcasting, however, remains a bright spot.

While overall advertising was down approximately 2% from Q2 2024, podcast revenue climbed almost 50% year over year. The investments we've made in the podcast space, new content, significantly expanded video and social inventory, and ongoing measurement and technology enhancements are paying off for both our creators and our business. This week, we announced an agreement with one of the top true crime podcasts, Morbid, and in Q2, we signed a deal with comedian Trevor Noah, which brought his show, What Now?, to our network this month. When a creator's reach suddenly expands, such as Mel Robbins' show, which is up more than 500% year-over-year, or Conan O'Brien adding full-length podcast video on YouTube, we are able to quickly and effectively monetize that growth.

This quarter, we also hosted a variety of live events, including John Mayer joining SmartLess Live in Los Angeles, which provide both subscriber exclusives and opportunities for deeper brand integrations. Overall, we've made strong progress across many of our key initiatives in the quarter, with disciplined investments that will enhance experiences for our subscribers and advertisers to support the future growth in our business. At the same time, we continue to drive efficiencies across our organization, and we remain focused on delivering on our guidance for the year. I'll turn it over to Tom for details on the quarter's financial results.

Tom Barry (CFO)

Thank you, Jennifer, and good morning, everyone. In the second quarter, we executed with strong financial discipline, delivering results that highlight the strength of our model and the consistency of our strategy. We maintained healthy margins, accelerated our cost savings program, and generated substantial free cash flow, all while continuing to invest in what matters for long-term success. With that, let's jump into the results. Revenue for the quarter totaled $2.14 billion, down 2% compared to the second quarter last year, with similar results across our subscription and advertising revenue streams. Adjusted EBITDA in the quarter was $668 million, down 5% on a year-over-year basis, reflecting a healthy margin of 31%. Free cash flow rose 27% to $402 million, driven by timing of payments, lower capital expenditures, and the elimination of Liberty-level overhead in prior year.

On the topic of costs, we had previously articulated a $200 million run rate cost savings goal across OpEx and CapEx exiting this year. Thanks to early action, we now expect to achieve approximately $200 million of gross savings in period this year. While the majority of this is in OpEx, we also now expect to land near the lower end of our previously articulated non-satellite CapEx range of $450-$500 million this year. We expect non-satellite CapEx to decline to approximately $400 million next year, in addition to the significant decline we will see in satellite CapEx. The success of our cost program reflects continued strong discipline in execution across our business. In the quarter, sales and marketing expense declined 20% year-over-year, benefiting from a more efficient campaign mix and the timing of planned brand and in-car initiatives.

That said, we do expect some reinvestment in the second half as we re-accelerate select campaigns and, of course, we begin to lap lower spending quarters from late last year. Product and technology costs fell by 20% in the quarter to $48 million, driven by ongoing optimization of vendor contracts and cloud infrastructure. Gross cost savings were partially offset by several anticipated items. G&A was $124 million, an increase of 23%, reflecting higher legal expenses against a positive insurance recovery in the prior year period. During the quarter, we took decisive steps to sharpen our organizational and product focus with a comprehensive technology and workforce realignment. This included a non-cash write-off of approximately $100 million in capitalized software assets that are no longer aligned with our streamlined roadmap. We also reduced our product and tech workforce by 20% among contractors and 10% among full-time employees.

These changes position us to operate more nimbly and with greater use of AI-enhanced development in the future, enabling stronger execution of our core mission. Subscriber acquisition costs were $107 million in the quarter, up 16% year-over-year. This rise reflects continued investment in high-quality subscriber acquisition channels, including contractual changes with select automakers. SAC per installation was about $18, reflecting our focus on expanding penetration and encouraging adoption of SiriusXM 360L and the latest generation of our chipset in vehicles. These investments are part of our broader strategy to optimize expenses across revenue share, data costs, and marketing. Looking at the segments, SiriusXM revenue was $1.61 billion, down 2% from prior year, driven by a smaller self-pay subscriber base. ARPU was essentially flat at $15.22, improving our recent trends as the impact of the March rate increase continued to roll through.

Segment gross profit was $966 million, with a gross margin of 60%. Subscriber performance improved meaningfully year over year, driven by strength in gross ads and continued strength in self-pay retention. Self-pay net sub additions were negative 68,000 in the second quarter, an improvement of 32,000 compared to the prior year. This improvement reflects meaningful contributions from our new acquisition programs, paired with a continued low churn rate of 1.5%, with strong performance across canceled demand, non-pay, and vehicle-related deactivations. In our Pandora and off-platform segment, revenue was $524 million, down 3% on a year-over-year basis. Subscriber revenue declined 6%, driven by a smaller average subscriber base, while advertising revenue fell 2%, reflecting reduced advertiser demand in streaming music and broader competitive pressures. These trends were partially offset by growth in podcast monetization, with podcast advertising revenue increasing substantially year-over-year at close to 50%.

We also saw expanded reach through video and social platforms, including contributions from new creator partnerships. Segment gross profit was $154 million, with a 29% margin. Our capital structure remains healthy and flexible. We ended the quarter with a net debt to adjusted EBITDA ratio of 3.8x. We returned approximately $137 million to shareholders in the quarter, by $92 million in dividends and $45 million in share buybacks. Finally, we are reaffirming our full year 2025 guidance, approximately $8.5 billion in total revenue, $2.6 billion in adjusted EBITDA, and $1.15 billion in free cash flow, reflecting continued confidence in our strategy and execution. While the advertising environment remains the largest risk to our outlook, the company is closely monitoring the related macro-economic trends.

At the same time, we see potential upside to our free cash flow guidance, given potential tax-related benefits from recent legislation and some degree of lower CapEx. We plan to update you in the fall. To close, we remain confident in our strategic priorities and our ability to deliver on our financial targets. Strong cash generation and ongoing focus on cost efficiency positions us well to navigate near-term headwinds. At the same time, we're investing in what matters: our core subscription business, enhanced in-car experiences, and growing off-platform monetization. We are optimistic about our future and committed to driving meaningful value to our listeners and shareholders. With that, I'll turn it over to the operator for Q&A.

Operator (participant)

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question at this time, please press star one on your telephone keypad and a confirmation tone to indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. The first question today comes from the line of Jessica Reif Ehrlich with Bank of America. Please proceed with your questions.

Jessica Reif Ehrlich (Analyst)

Oh, thank you. Good morning, everyone. A quick question on maybe what Tom just mentioned on the guidance for free cash flow. You said you may revisit maybe because of tax and CapEx, but you know it was a huge beat in the second quarter. I'm just wondering why not the flow through for the full year? A question for Scott. You've been so creative consistently introducing new content. How are you thinking now about trying to skew younger, and particularly when that's maybe more challenged from a subscription level? It would seem like it would be more like advertising supported. Any commentary on that would be great.

Tom Barry (CFO)

Jessica, good morning. It's Tom. To address the first one, as it relates to free cash flow, yeah, we did have a sizable beat on free cash flow year over year in the quarter. Some of it was timing. As you look at the first quarter, we are a little bit behind as far as where we are looking number-wise year over year. Year to date, we think we're in pretty good shape when we look at the timing of the payments going into the full year. We do have two things that have been going on. The team's been working on the cost structure and continuing to focus on CapEx and the optimization of CapEx.

Honestly, the new tax act, we're just looking through the final strokes of it just to make sure that we got the spread of it between multiple years because you can actually spread it over 2025 and 2026 to benefit. We're just working through that. We should have an update on that in this fall timeframe.

Scott Greenstein (President and Chief Content Officer)

Great. On the question about getting younger, a couple of things. One, obviously, the podcast market has been ripe for us to look at that and still monetize heavily in that. When you look at Alex Cooper, Smartless, even Mel Robbins and Rotten Mango, those are younger than our core. Even Stephen A. Smith, which is in radio and podcasting, is a little younger than our core. With that, we have the ability to see how that works. Now, Alex Cooper's music channel on Sirius is doing really well, and that's obviously geared to a younger audience. We are going to look at where that calibration is and start to see where something might be younger but yet ripe for subscription. While we're waiting that out, we are going to continue to monetize heavily younger content in the podcast market.

Jennifer Witz (CEO)

I'd just add on to that, Jessica. We just heard this week that with Edison's new Q2 report, we're going to be the number one podcast network in monthly listener reach for audiences 18 and up. As you highlighted, we've got a much broader audience with our podcast content. That does give us the opportunity, as Scott outlined, to perhaps bring more of those younger listeners into SiriusXM. As you know, we're being very disciplined and focusing on our core audience there.

Jessica Reif Ehrlich (Analyst)

Thank you.

Operator (participant)

Our next question is coming from the line of Barton Crockett with Rosenblatt Securities. Please proceed with your questions.

Barton Crockett (Managing Director and Senior Research Analyst)

Oh, thanks for taking the question. I wanted to maybe lean in a little bit more on what you're doing with podcasting and the digital side of advertising. I guess a couple of things. One is, you know, if you could give us just some type of sense of how to think about podcasts in the mix. It was up 50%. You know, just to try and get a sense of when that's going to be large enough to really move the needle on the overall kind of ad line. Secondarily, you know, I know that there's some development, some efforts, you know, on your side and also with some others in the sector on more fulsomely developing the digital kind of programmatic AdTech capabilities.

I was just wondering if you could update us on where you guys are with that and, you know, how you think that could contribute over time to that ad revenue line for you.

Jennifer Witz (CEO)

Yeah, thanks, Barton. We are really pleased with our podcast offering. We were up nearly 50% in the quarter. We continue to see strong growth going forward there. In terms of the mix, I think we've said in the past that Pandora represents about 55%-60% of our total advertising revenue. That gives you some indication. The rest is obviously SiriusXM, Pandora, or SiriusXM podcasting and other off-platform. We do think there's room for this to continue to grow as a portion of our total ad revenue. We have a lot of opportunities, not only just given the talent and, as Scott mentioned, sort of creators coming to us because of our industry-leading monetization and how we've approached sort of cross-platform distribution more broadly.

We've worked really well in terms of distribution with YouTube and others to take advantage of the massive growth in video podcasting, as well as monetizing through social. I think on the programmatic side, or maybe to speak a little bit more broadly about the advertising revenue outside of podcasting on music streaming and other digital audio, our biggest opportunity there, Pandora RPM was down in the quarter, and we continue to see challenges with really the macro-economic backdrop and the flood of inventory from CTV. What we need to better do is to make sure audio isn't competing with CTV but is increasingly seen as a way to extend reach. We've talked about this before. Audio is significantly undermonetized relative to other media. One of the ways to unlock that is through things like better targeting and measurement.

We did announce a deal with Innovate to improve our integration with models. We'll have more of those to come, but we are seeing some nice take-up by advertisers there, and it really does help extend the value of audio and prove the ROI, where in this environment, advertisers are really focused on making sure that they're seeing those specific returns.

Barton Crockett (Managing Director and Senior Research Analyst)

Okay, that's great. Thank you.

Operator (participant)

Our next question comes from the line of Steven Cahall with Wells Fargo. Please proceed with your questions.

Steven Cahall (Managing Director and Senior Analyst)

Thanks. Jennifer, I think you all have done a lot of simplifying of the in-car plans. I think the most notable one is your all-music plan. I think prior to this, music has always had a bit of a tiering structure to it. Can you just update us a little bit on that strategy and what kind of customer benefits or churn benefits you're seeing as you step into these new simplified plans? What does it mean for ARPU over the medium term? Should we still expect growth in the second half of the year? Just on net ads, historically, Q4 has been your best quarter for net ads. This is kind of an abnormal year given all the tariff impacts on the auto market. How do we think about net ad trends as we get through the year?

Should we still expect that year-on-year improvement in net ads, excluding the impact from streaming? Thank you.

Jennifer Witz (CEO)

Sure. Thanks, Steven. First, on pricing and packaging, I'm really pleased with the progress we've made here. We continue to focus on three primary efforts. One is enhancing value of our full-price subscription plans. As you know, we did a rate increase in March, and we were really well positioned, I think, to manage through that because of the content we provided to more subscribers last fall. That is going to be kind of an operating model for the future. In our in-car modular pricing and packaging with the $9.99 price point you mentioned, we're rolling this out slowly to new customers only in trial first, alongside shorter-term promos, which means they roll to these full-price packages more quickly. We have a number of different price points there, as you alluded to, with $9.99 being kind of the entry-level price point all the way up to $25.

The vast majority of customers coming through those marketing campaigns are choosing the $25 package. The real benefit of this is that we see stronger retention ultimately on these full-price packages. We not only get off of these longer-term discounts we've been using in acquisition more quickly, but we also retain customers on these full-price packages. We think that has a lot to do with the enhanced transparency there. I'll turn to Wayne in a minute to talk a little bit about the introduction of Play, which is part of the good, better, best packaging structure we've put in place. I really feel good about the balance of demand and retention in terms of this full packaging structure.

I think we've said in the past, and we still believe that ARPU trends will continue to improve as we go out through this year, generally because of the roll-through of the rate increase we did in March. I'll come back to net ads after Wayne comments on Play.

Wayne Thorsen (EVP and COO)

Yeah, thanks. You know, as Jennifer said, this is priced to Play, which we just launched about two weeks ago, in the U.S. and Canada. It's priced below our lowest music-only offering, which you're noting. It does extend our good, better, best pricing strategy, which we're getting much more disciplined with. The goal here is to reach these new price-sensitive audiences but still preserve the ARPU that we have through a balanced mix of subscription and, of course, advertising revenue. You know, very similar to what we've seen become quite standard with SVODs. We're still testing price points as we're moving through, but we expect it to stay under $7 for the MSRP to the user, of course, with the advertising revenue on top of that.

As noted in the last call and as noted elsewhere, a big part of this is being thoughtful as we thoughtfully roll this out and being guided by some of the investments that we've made in our martech stack to be able to target people who we found in the past or we have targeted and modeled as much more price-sensitive or in the past have been guided towards other plans or deep discounts from the beginning.

Jennifer Witz (CEO)

Yeah. Back to net ads and the trend line, I do expect to see some change in seasonality this year relative to years past. Some of that has to do with the year-over-year comps and the fact that we had a relatively strong quarter in the fourth quarter last year on streaming. Just maybe to give you a bit more color on that, obviously, with the suspension of the federal regulation on click-to-cancel, we should see a slightly better outcome as a result of not having that in place, although it is rolling out in several states. We continue to watch that. On the streaming side, we would expect about a reduction of 300,000 net ads this year on streaming subs.

That gives you some sense as to, when we talk a bit about, that we would be better year over year absent some of these one-time items or pull-forward impacts, it gives you a better sense as to how that looks. On the in-car side of the business, I feel really good about what we've been delivering. We are really focused on executing against the strategy reset we did in December, focusing on our in-car business. We have a number of acquisition programs that are delivering a better in demand ultimately. We continue to see very impressively low churn, and that has a lot to do with increased engagement. I think we have more to come there.

Steven Cahall (Managing Director and Senior Analyst)

Thank you, Jennifer.

Operator (participant)

The next questions are from the line of David Joyce with Seaport Research Partners. Please proceed with your questions.

David Joyce (Senior Equity Analyst)

Thank you. A couple of things. I was wondering about the expenses in G&A and what was driving the legal expenses, and was any of that kind of non-recurring? Secondly, a little bit more detail, please, on the strength in podcasting ad revenue. Are you seeing greater marketer adoption? Like, are there more marketers coming to the platforms, or are they allocating more, or is it the volume, the trend of adding more content or monetizing more of that content? Just, you know, pricing and volume kind of concept, if you could provide some more color there. Thanks.

Tom Barry (CFO)

David, it's Tom. Good morning. To answer the first part of your question as it relates to expenses, in G&A, we have a legal settlement for about $28 million this year. That skewed the expense on the G&A side. Just as background, last year we had an insurance recovery of legal expenses, which was a $10 million benefit last year. That closes the broader differential as it relates to G&A. Overall, you know, SG&A is slightly down because of the reduction we've done in sales and marketing in the quarter.

Jennifer Witz (CEO)

Yeah, and on podcasting, it's really all of the above. I mean, we continue to attract more creators to our sales and tech platforms. We are distributing broadly, of course, their podcasts and including video distribution in many cases. We're helping monetize across audio, video, and social with our Creator Connect products. We've seen both improvements in pricing. We're taking advantage of the strong demand by including more inventory units in the podcast in certain cases. I think advertisers generally want to be associated with this great talent. There's a real opportunity to continue to expand on that demand and, you know, add to their buying, their media plans, a broader set of our inventory across satellite broadcast and streaming, especially as we bring more measurement capabilities.

This includes, on the satellite broadcast side, bringing more visibility into 360L with ad replacement capabilities that we think will be coming online towards the end of the year.

David Joyce (Senior Equity Analyst)

Great. Thank you very much.

Operator (participant)

Our next question is from the line of Kutgun Maral with Evercore ISI. Please proceed with your questions.

Kutgun Maral (Director and Equity Research Analyst)

Great. Good morning, and thanks for taking the questions. Maybe following up on Steve's question on net ads, you mentioned that the full-year subscriber outlook hasn't changed despite the encouraging strength in the quarter, given the expected headwinds you previously called out dragging the back half. I was hoping you could unpack the Q2 trends a bit more and talk about the forward outlook. Thinking about Q2, I'm not sure how much you can share, but how should we think about the mix of the upside in terms of core trends being better than expected from the benefits from the new acquisition initiatives and continued execution on churn as opposed to maybe some of the timing shifts on the one-off headwinds?

Longer term, maybe thinking about the new acquisition initiatives, can you expand on the uptick you're seeing from what you have in place today and what the pipeline of initiatives looks like longer term, whether that's in the back half of this year or even 2026, just in terms of giving us better confidence on the trajectory of sustainability of improvement in core net ads? Thank you.

Jennifer Witz (CEO)

Sure. I'd say on net additions for the quarter, we saw year-over-year improvements on both the acquisition side and the retention side. Very low churn, strong performance across canceled demand, non-pay, vehicle-related, and came in slightly better, absent the rounding on the churn rate. We feel really good about that, especially, again, with the rate increase having gone in place in March. On the acquisition side, it had a lot to do with the new programs we've been putting in place over the last, say, 12-15 months. These include the three-year OEM programs where dealers are ordering three years of SiriusXM with their vehicle orders. We continue to roll that out to more and more OEMs. We announced that we added Ford, and that'll be launching later this year. I think we'll continue to see strong performance there.

We have things like enhancement of data in our used car funnel, which is just adding volume to our opportunities of subscribers coming through on the used car side of the business. We have our Podcast Plus, and we have, of course, the EV launches that we've put in place. I would expect some of those to continue to contribute and perhaps on a larger level. Of course, we've got a number of initiatives in place. As Wayne discussed with Play and the rollout of our broader pricing and packaging structure, we're selectively adding content like Stephen A. We are continuing our 360L rollouts and adding features there. We're improving our marketing capabilities. All of these things are going to take time. I am pleased with the execution we have on these various initiatives.

We've kind of talked about these acquisition programs as helping improve the business while we get some of these bigger capabilities online. I think those are the ones that are ultimately going to help move us to a place where we are stabilizing subscribers and revenue and setting ourselves up for future growth.

Tom Barry (CFO)

Kutgun, I'd only add that this is the fifth quarter that we've beaten year-over-year self-pay net additions, which, you know, we've got a good trend. As Jennifer outlined, a lot of these initiatives are starting to click.

Kutgun Maral (Director and Equity Research Analyst)

That's perfect. Thank you both.

Operator (participant)

The next question comes from the line of Cameron Perrone with Morgan Stanley. Please proceed with your questions.

Cameron Perrone (Lead Analyst)

Thanks. Good morning. A couple if I can. First, for Jennifer, maybe Wayne can weigh in. You called out leveraging AI to generate improved voice creation in the release in your comments. I was wondering if you could speak a little more on how you envision leveraging AI, GenAI, whatever you want, however you want to term it, but going forward both in advertising but also, you know, more broadly across the business going forward. One for Tom on capital allocation. You were a little bit more active this quarter in terms of share repurchase activity. Could you talk a little bit about how your thinking is evolving and how you weigh balancing moving towards your target leverage range but also buying back stock? Thanks.

Jennifer Witz (CEO)

Yeah, thanks, Cameron. On AI, we've talked a lot about how we've used conversational AI with Sierra to help on the customer service side at SiriusXM. We're really pleased with the results we're seeing there. We continue to see strong business metrics, good and solid customer response, and lower cost, of course. We are containing a significant amount of our chat messages through Sierra, and we're starting to ramp up the capabilities in voice as well. There's a lot more to come in terms of better building out an engine to offer the right packages to the right customers based on listening data and other data. We're just getting started there. On the agreement with Narrative, this is really about using synthetic voices, but they're actual, sorry, it's actually using real talent voices, and approved by the talent to be able to create versioning.

We'll be working closely with our Ad Maker tool, with Studio Resonate, to be able to deliver this. It just provides an opportunity for advertisers to scale their campaigns much, much more significantly and, you know, allows us to work with a broader set of advertisers. Wayne, do you want to touch on some other areas for AI opportunities?

Wayne Thorsen (EVP and COO)

Yeah, for sure. I mean, outside of Sierra, which we've had so much success, there's other places where we've been using it that's maybe a little bit less visible, such as in search and adding to our capabilities in semantic and relational search as an example, where we're seeing much, much better results than we had before for users. At the same time, our costs have been taken down to a fraction of where they were before. We have a lot of our new marketing initiatives that are, of course, being driven by what we're able to do with AI, everything from being able to use some of those capabilities of Salesforce to some of the targeting capabilities that are making our rollout of SiriusXM Play so carefully targeted to avoid trade downs.

We have other things that we hope to announce soon and things like tagging and improving our search abilities for our broader corpus across all of our content.

Tom Barry (CFO)

Cameron, just to close down, I would step back for a second and say, you know, we're very happy, as we outlined in the release, of where we are in our cost savings initiatives. We're focused on, you know, obviously, optimizing the cost structure, optimizing our CapEx. We've made a lot of progress. I think there's a lot of initiatives we have going on. We're very happy with that. Looking broadly at, you know, generating our free cash flow, we continue to be focused in that area. As far as the capital allocation, you know, we continue and we hold to, you know, our previous, you know, format or premises. We're reinvesting in the business, which we've done in the instances of Stephen A. Smith and some of the other things that we've invested more deeply in.

We're maintaining our dividend at the current level right now at 4.5% yield, approximately. You know, we're delevering in the quarter. We did delever and pay down some of the term loan A. That is our third priority. Buybacks, which came in at $45 million for the quarter, was a little higher, but obviously, it's dependent on the stock price. We're staying to the same structure that we've had on capital allocation. We're happy with the way it's structured, and we're going to continue to work on free cash flow and continue to work on paying down our debt and leaning towards the back half of next year, more focused on buyback.

Cameron Perrone (Lead Analyst)

That's all really helpful. Thank you all.

Operator (participant)

Thank you. Our next and final question is from the line of Stephen Laszczyk with Goldman Sachs. Please proceed with your questions.

Stephen Laszczyk (VP and Equity Research Analyst)

Hey, Greg. Thanks for taking the questions. Maybe one on the ad-supported subscription plan. Jennifer, Wayne, I'm curious. You called out the 100 million customer opportunity over the long term. I'd be curious if you could talk a little bit more about the pace of that rollout and what's kind of governed the pace of that product rollout over the next couple of years. How much of it is supply-demand-driven on the ad market side, with creating a marketplace for advertising versus maybe something on the technological or the way you plan to fit this product in amongst the different tiers? Second, on conversion trends.

Jennifer, just would be curious if you could update us on the conversion trends you're seeing across the base, new versus you, high-end versus low-end, any certain demos that are standing out to you or that have changed meaningfully over the last couple of quarters, for better or for worse. Thank you.

Wayne Thorsen (EVP and COO)

Thanks. I appreciate the question. The way I would think about the rollout for, you know, first as we're moving through this is we're following the plan we had talked a little bit about last quarter where we're selecting in the very beginning cohorts across new and used in a very targeted way that are focused on people where in the past we have not had the same success from a conversion perspective. We've selected an initial group and launched that about two weeks ago. Right now, what we're going to do is continue to build the number of cohorts, targeting them with this. Also, as we select those cohorts, as you know, every day, those volumes fill in those cohorts. We're going to continue to build the number of people who this is available to.

As we're going forward, in addition to that, inside the actual package itself, we're adding more ad-supported channels. That is, we're doing that. We also add ad replacement, and that improves overall, in addition to the things that Jennifer had said in the prepared remarks, the advertising and monetization opportunities. As we get more subscribers, we also get more ad slots. Those ad slots, of course, are we're able to monetize that more effectively with new tools. Between now and the end of the year, we are ramping the number of cars where this is available. The target is to get to about 100 million cars by the end of the year and more as we move forward. As we're moving through in Canada, we're using this for initial trials in Canada.

We're launching it with saves, and we're going to thoughtfully extend where we're testing and launching through saves, win-backs, not just trailers.

Jennifer Witz (CEO)

Yeah. I think we'll get a lot more information over the next, you know, through the rest of the year. We'd expect this to contribute more in 2026 to results. Just on conversion rates, we are seeing the rate of decline, at least on the new car side, slowing a bit. I think it has a lot to do with 360L penetration and our improved results there. Of course, on the new car side, we're at about 50% of new car sales that have 360L, and that will continue to grow with the launch of some bigger programs in the early part of next year. The conversion rates on new, again, the rate of decline is slowing a bit. We're seeing a little less of that on used as we continue to expand. I think penetration now is at about 60% on the used car side.

What I would just note is that we've brought a lot of these other acquisition programs to market, adjusting how, adjusting our availability and distribution really based on our two core strengths, our in-car availability and our content offering. You see that come through in the three-year programs with OEMs, the enhanced data that we have with LexisNexis, our EV launches. This all takes advantage of what we have in terms of unmatched distribution in the car. On the content side, we've taken advantage of the great podcast portfolio we have. We've launched Podcast Plus, a subscription available through Apple and everywhere else through Supporting Cast. These are just unique opportunities that we have given the strength that we have on the in-car side and our content offering. Those are not necessarily going to show up in conversion rates.

While we watch conversion rates very closely as a mechanism to assess demand, it really goes beyond that in terms of looking at demand through these other programs.

Stephen Laschick (Analyst)

Great. Thank you both.

Wayne Thorsen (EVP and COO)

Thank you very much, everybody, for your participation in today's call.