2023-05-22 13:09:05 ET
Sirius XM Holdings Inc. (SIRI)
51st Annual J.P. Morgan Global Technology, Media and Communications Conference Call
May 22, 2023, 10:00 AM ET
Company Participants
Jennifer Witz - Chief Executive Officer
Conference Call Participants
Sebastiano Petti - JPMorgan Chase & Co
Presentation
Sebastiano Petti
Good morning. I'm Sebastiano Petti. I cover the media and communications space at JP Morgan. I want to introduce Jennifer Witz, CEO of SiriusXM. Jennifer became CEO of SiriusXM in January 21, has been with SiriusXM since 2002. Thanks for joining us today.
Jennifer Witz
Thank you. Great to be here. Can you hear me okay?
Question-an d -Answer Session
Q - Sebastiano Petti
Great. And so just starting at high level, 2023 is an investment year at Sirius, as you look to update and reposition the product suite while also managing through lingering macro headwinds. So could you maybe just zoom out and update us on how you're setting up -- setting the company up for long-term growth as you work through these headwinds? And what are some of the levers that will return Sirius to growth?
Jennifer Witz
Sure. Yeah. It's a great place to start. We're certainly facing a lot of the same macro headwinds that other companies are dealing with on the ad sales side of our business. And then maybe some more unique macro factors related to auto sales and the softness we've seen there in recent years, as well as some unique cost impacts that we're seeing on our businesses here with increases in royalties and CapEx and cash taxes as well. But I'm really pleased at the foundation we have in the business to be able to position us for future growth. We have an incredibly strong and loyal subscriber base with very high customer satisfaction and low churn. We have very strong business model. You've heard us say time and time again. Business models matter. We have high ARPU and we have high gross margins, and we have a really flexible and solid balance sheet.
So I believe all of this comes together in a way that positions us really well to make these investments into our new platform, which is squarely focused on addressing demand challenges. We have the younger listeners. And the way the platform's going to enable us to do this is that we can solve for these somewhat unique pain points we have there with customers looking for -- especially younger listeners, looking for more flexible pricing arrangements, more control and more discovery. So we are building out a platform that's going to be let us be able to address those challenges. And in the meantime, the business is really well positioned to move through kind of this cycle. And I would expect that at -- while we're launching this new platform and better positioning ourselves to address the demand challenges. We'll also have hopefully recovery on the ad sales and auto sales sides as well. So those are all levers that will position us for future growth.
Sebastiano Petti
Great. I want to come back to a bunch of the points you touched on there. So shifting gears, thinking about guidance, the company raised 2023 EBITDA and free cash flow on the 1Q earnings call. I mean, take us through what drove the upgrade and why no change to revenue.
Jennifer Witz
So we did raise EBITDA and free cash flow, as you said, by $50 million each. And it's largely a function of two things. We had better than expected ad sales in the first quarter. We came in at slightly down about 2% year-over-year on ad sales, which was certainly better than we expected coming into the year. So that gave us more confidence in the year and how it was shaping up. But also the strategic approach we've taken to looking at the cost structure, we have more confidence in how that is going to roll through our P&L over the course of the year. And EBITDA and free cash flow, those impacts play through.
I think the -- that your question on revenue really is function of the uncertainty we're seeing in the ad sale side of the business and we just have less control over that. We would expect some recovery in the second half, but it's still too early to tell if that's actually going to materialize. But we have obviously more control over the cost structure and can be flexible in how we're addressing that to the extent that the ad sales doesn't come back in in the second half.
Sebastiano Petti
Maybe just sticking with ad sales for a second, what are you -- any update on trends that you're seeing here thus far into the second quarter relative to how you exited the first quarter a little bit better than you anticipated some of the late in quarter bookings, but any update on 2Q?
Jennifer Witz
Yeah. I think what you're referencing is, we saw a lot of -- and look, the first quarter is typically pretty soft in ad sales across the industry and it's no different for us. But we did see things pick up late in the quarter, especially on the programmatic side, where we have sort of a unique set of programmatic offerings on the audio side of the business that we've had in place with Pandora and we've been rolling out through podcasting as well. And that positioned us really well to take advantage of brands coming into the market late in the quarter and freeing up budgets, that sort of resets when you start a new quarter. And so in the second quarter we have seen some momentum in certain categories, the ones that I think you'd expect. Travel, for instance, has been really strong year-over-year. We're up about 50% in travel in the second quarter.
I've also seen strength -- some recovery in auto sales, so that's showing up in auto advertising as well. Where you see some categories more soft is on the financial services side, obviously banks, insurance, and in pharma as well. So we were just talking before this call or before our meeting now about how well positioned we are across advertisers on both the DR and the brand side to be able to take advantage of the categories that are growing and offset some of the categories that are a little softer. But I feel good about our programmatic position and our ability to capture latent quarter demand. Again, the dynamics might not be quite as similar as they were in the first quarter, and I feel really good about our position in podcasting with the properties that we represent and how that will help us, not only this quarter and the rest of the year.
Sebastiano Petti
Yeah. Definitely want to come back to the podcasting in a moment. But just thinking about, and back to thinking about guidance for a second, you said Siri on the call -- you said Sirius is well positioned, even if the ad market doesn't come back, and that was kind of the cost related. But how should we think about the drivers of the ramping EBITDA or the improving EBITDA as we kind of sequence through the rest of the year?
Jennifer Witz
It's going to show up in both revenue and EBITDA. So on the revenue side, we're rolling through a rate increase right now that started in the middle of March and that'll continue to roll through subscription revenue on the SiriusXM side of the business. And then, again, we are expecting, and this is not unique to us, but the industry in general is expecting recovery in ad sales in the second half. So we would expect our ad sales to also increase over the course of the year. And it has been typically back half weighted anyway, especially in the fourth quarter, which is really strong.
And then on EBITDA it's -- in addition to the revenue impacts flowing through, it's the impact of our cost reduction strategy, which we are looking at every line in the P&L and we've already affected some change obviously in the headcount side. And we're also looking across the cost structure, whether it's marketing, content costs, and technology really is a mechanism to fund the investments we're making in the product and tech side to position us for this launch in the fourth quarter.
Sebastiano Petti
Great. What have you been seeing in terms of self-pay net add trends recently? New auto sales were very strong in April, obviously that should help your 3Q and beyond. But is there upside to the expectations about for modestly negative self-pay net adds in 2023 as you look at things?
Jennifer Witz
We're comfortable with modestly negative. And part of that is just -- there is uncertainty on the auto sales side of the business. And we have seen improvements on the new car side in the first quarter. The numbers looked really strong. A lot of that was driven by fleet, which doesn't help our business as much. Consumer was up only about 2% to 3% in the first quarter year-over-year. And April was up stronger on the consumer side. So it'd be nice to see that continue. We are expecting slight tailwinds going into each quarter on auto sales, but used has been really soft still. Last year was, the lowest used car sales in about 10 years, and this year has been down off of that number. We really need both pieces of the funnel to come back to drive net adds going forward.
But I think if we see that tailwind in auto sales, in general, if we continue to maintain our really low churn, which has been really record low over the last couple of years, and we can at least stabilize conversion rates in the near term until we launch this new platform, then I feel -- I certainly feel confident of our guidance, but that'll position us really well going into next year.
Sebastiano Petti
And I think expectations were -- maybe sequential improvement through the course of the year in terms of the net adds and …
Jennifer Witz
And second half positive.
Sebastiano Petti
And that still makes sense.
Jennifer Witz
Yes.
Sebastiano Petti
Awesome. And so now in terms of conversion rates, new and used car conversion rates have recently been in the low to -- thirties, low twenties percent respectively and below levels we've seen historically as well as over the last several years. I think we've talked about relative to the higher pen rate, and that makes sense that increased penetration would cause that to drift lower. But we get questions from investors. Is there a structural shift in the business? Has something caused the lower conversion rate? Is it maturation? Anything we should be thinking about?
Jennifer Witz
So we have talked a lot about penetration rates increasing, and we're now showing up in lower trim models. And that's been pretty consistent over the last several years. We did have some pretty significant jumps in pen rates in sort of the 2020/2021 timeframe. But at the same time, the younger generations, younger consumers buying cars, particularly millennials, really jumped during the pandemic as a percentage of total. And that has leveled out a bit. Of course, it's going to continue to grow just with the shift in the population, and we absolutely are focused on addressing the unique challenges we have with younger generations with our service in the car, which has fundamentally been less flexible as we've only delivered over satellite in the past. But now with 360L, we are really starting to see our investments there pay off, because we can not only provide a more customized experience in the car, but we're getting a lot of data out of that platform to be able to personalize our marketing outside of the car.
So it helps address those pain points that I mentioned. More flexible pricing, better control and more discovery, but we need these investments that we're making on the platform in general to be able to make sure that the listening in the car can continue more seamlessly outside of the car. And that's really helped with both conversion and retention over time too. So it's the combination of continuing to roll out 360L and investing in the streaming platform so that we're getting more of our customers to listen to us outside of the car and those devices.
Sebastiano Petti
I think on the call you said that customer satisfaction was at the highest level since 2009. And as you said, some of these different efforts that you're trying to drive, help -- helping improve retention, but we get the -- there's always been the concerns of disintermediation from Apple CarPlay, Android Auto, the aux in cable for the older folks in the crowd. I mean, how should we think about competition in terms of self-pay or just in terms of the car as. I want to get to 360L, but as technology evolves in dash, and you've had a great real estate in dash, but how do we think about the concerns about churn, the concerns about technology in light of best churn since 2009? It just seems to…
Jennifer Witz
And in light of recurring rate increases as well, we have a really loyal subscriber base. And I believe that is a factor of the really tremendous value that we've been able to deliver through our service. And we're just very differentiated. So no matter what the technology is, and you highlighted it, so people have been using other services in the car forever, right? It was the thread of the iPod or the thread of aux in or the thread of iTunes or now these other services, whether it's music streaming services or podcast services, bringing them in with your tethered device and using CarPlay and Android Auto, and we would expect our customers to do that. We view ourselves as a complimentary, but very differentiated service, right? So in the face of growth in algorithms and automation and AI, we're pretty unique. We deliver a very human curated service that -- it's a premium service, right? And we're not going to be for everyone, but there is demand for a complimentary audio service that has a great set of content across every genre, and we offer that like no one else can in the car.
So I think it's less about the technology and more about what's in the service and the value that provided -- we're providing to our consumers, but that technology, well, may be disruptive for some customers. It's also additive for us because you may choose to listen through what we believe is our best platform, 360L because it offers everything in one place in the car. You also may choose to listen through the streaming aspect of your subscription in another car through CarPlay Android Auto. And so we need to make sure that we have the best possible service there as well.
Sebastiano Petti
So you touched on 360L and on the call you said that the promise of 360L is now delivering. And it's expected to reach 40% of new car trials by the end of the year, I think you said, and ramping thereafter. I mean, how meaningful could conversion and engagement improvements be to the business as you know, that hits 80% ultimately over time.
Jennifer Witz
We are really excited about what we're seeing on 360L and really excited for it to continue to roll out quickly so that we can leverage that across all of our trial starts. It really is meaningful because not only just the presence of 360L, which consumers may or may not know that they have a 360L version of SiriusXM. It's what we can deliver through that platform. So personalized recommendations, increasingly we'll have that at ignition on, so that we can offer you some guidance as to how you actually enter and onboard the service, which in the past, our customers and trialers were happy to sort of flip the dial to discover content. But now with streaming services, they've set a different expectation, right? It should be a guided experience to find the content you love. And so we can increasingly match those expectations in the car with 360L. So again, we see better conversion rates. We see better retention. And I expect over time we'll see better ARPU too because we can deliver more through -- more content and more features through 360L in the car. And as we build out this new platform, we'll be able to connect people to out of car listening experiences much more seamlessly as well.
Sebastiano Petti
And on the ARPU front, is it just being able to drive like up tiering? Is that how you're thinking about the ARPU increase -- the ARPU benefits of 360L?
Jennifer Witz
Yeah. I think there are a couple ways we can capture more demand with flexible pricing even at the low end, but I do think there's room for us to position ourselves to even capture more demand at the high end, because we have such a loyal subscriber base. So really the question is what more could we deliver to our listeners in or outside of the car to support higher price points. So we have a platinum VIP plan, which is $35 a month. There's more opportunity to improve our take rate of that product by getting more awareness out there to our subscribers as well as new listeners about the content offering that we have, which again, very unique and differentiated from the other competitors out there.
Sebastiano Petti
So there's a headline of GM and Android Auto operating system out there recently came up on the call. But I mean, is the increased adoption from OEMs of Android Auto actually beneficial to Siri and its 360L rollout? And could it help perhaps catalyze or help with the evolution of the platform, how should we be thinking about that?
Jennifer Witz
Regardless, we're going to be flexible as to what the OEM partners want to do. We work really closely with the automotive companies on their technology roadmap to make sure that our collective customers have the experience that they expect in vehicle. So yes, we're working with both Google and the automakers on the launch and rollout of AAOS, or Android Automotive Operating System. It's going to give us a lot of capabilities that even other services won't have, will have the same sort of preferential treatment on the screen. We'll have the same great onboarding experience you would expect from us when you get a new car where you come into the car, the trial is just active and working, the service is on and no other service has that. We're also covering the data costs in those cars. So it helps us because you don't need to sign up for a WiFi plan or otherwise. And then we'll be able to take advantage of all these other aspects where we can develop really one client to use across the OEMs. And we can update it frequently. But the bottom line is it's going to take a long time for this to rollout through the automotive companies. And we've all seen that in the past. So the product cycles take a while to work through, but we'll be really well set up to take advantage of that.
Sebastiano Petti
And I imagine the pandemic didn't help with the ramp of 360L take rate. I mean, is there still an 80% target date out there that we should be circling that calendar?
Jennifer Witz
There is -- a little later than we expected, but in the next few years we should be at 70% or 80% of our trials with 360L on the new car side. They're already starting to roll through on the used car side as well. But yeah, I mean, the pandemic disrupted a number of things. Not really from our standpoint in terms of supplying, the technology in the car, but just as product plans changed and adjusted.
Sebastiano Petti
So we have 360L and then there are also the other investments that you're making in the NextGen platform. Could maybe remind us what are some of those investments that you are making in the backend that will help, not only engagement inside the car, but also help set you up well for outside of the car and app.
Jennifer Witz
Sure. It -- so our streaming service was largely created as a companion to the in-car service, and that's worked really well for us. We've been very focused on getting more of our in-car subscribers to stream outside of the car. It improves engagement in and out of the car as they discover more content. So what we're building is an enhanced streaming experience that we'll launch later this year, which will include new consumer apps, but also a set of foundational capabilities that are going to fundamentally help consumers find the content they love, transact more easily with us, listen more seamlessly in and outside of the car, and better equip us to use the data that we're getting outside of the car through the streaming devices, but also through 360L to customize and personalize our marketing capabilities as well.
So it's not just new streaming apps, it's really all these foundational capabilities on commerce and identity and MarTech that are going to position us to improve our products over time. And the launch in the fourth quarter is just the first step right after that we'll be able to iterate in a way that we just haven't in the past with like -- many other media services where we're launching upgrades to our experiences on a quarterly basis or more frequently.
Sebastiano Petti
And will the app relaunch, I mean, is that more of a -- we should see those benefits accruing more inside of 2024 versus given the timing?
Jennifer Witz
Yes. I think as it works its way through our experiences, of course, on the streaming side, we can update the apps pretty quickly, but in car that's going to take time for some of. It's some things we can update on the backend and there's some things that we can update in the client immediately, but it's going to take time to work through in terms of trial conversion and streaming trial acquisition and retention. So our big -- the metrics that we're really focused on are engagement, so that's early in-car trial engagement and then engagement in the streaming products as well. And we're going to be watching that every day and every week to make sure that we're seeing the improvements there and adjusting at the same time. But in terms of the actual metrics that roll through to subscribers, that'll take, I would say, at least into the first half of next year for us to see.
Sebastiano Petti
And although the streaming only space is quite competitive. I think you are pretty -- you feel pretty confident about your ability to grow that over time. And you have been spoken about that in the past. Is it just that differentiation and what you kind of touched on and that gives you confidence in Siri's ability to drive growth and streaming only despite the competitive?
Jennifer Witz
Yes. Well, first of all, the investments we're making in this streaming platform are very key to even just retaining and continuing to improve the retention of our base because -- and more engagement, more discovery of the content outside of the car helps with conversion rates of our core audience and retention over time. But yes, we're absolutely focused on how is this experience going to help us drive streaming only subscriptions, and it is about being differentiated. So this human curation, I can't emphasize enough. I think in this environment people are looking for connections. They're looking for community. They're looking to feel part of something. And we have that, whether it's our curated -- human curated music channels that people fall in love with the hosts or otherwise, or it's -- the broad set of sports properties we have, which you can't get anywhere else in audio or in video, or it's the exclusive talk personalities that we have on our service or the broad set of comedy content we have. And I could go on. We just have a massive amount of content that our key challenge is making sure people can discover and find all that content in an easy way.
Sebastiano Petti
So shifting gears to the advertising business, we touched on what you're seeing in the second -- here in the second quarter, but the second half recovery kind of alluded to that is the expectation broadly across the industry, but I mean, it's still kind of early to call.
Jennifer Witz
It's choppy.
Sebastiano Petti
Yeah.
Jennifer Witz
It's definitely choppy out there. Watch it every week and it's a tough environment. I think brands are -- some brands are sitting on the sidelines until they see is the strength of the consumer really there. I mean, there's certainly been a lot of demand for services, as you all know, and I think it's going to be really strong trends again in travel and QSR, people getting out more and more. But there are -- there are these headwinds for other brands and DR in particular, DR D2C businesses that's really fallen off, especially in the first quarter. And podcasting really grew up around that. Host-read ads with DR firms. And so we've brought our brand relationships to the podcasting space in a really big way. And we're seeing a lot more appetite from the brands to come into the podcasting world, especially as we open up these audience based products. So you don't just have to do a host-read ad on a specific show or podcast, but you can buy across an audience within our podcast network, which -- we have incredibly strong properties there, whether it's AudioCheck or Crooked Media or NBC Dateline. So we're well positioned to take advantage of those tailwinds.
Sebastiano Petti
Yeah. And that's -- so that's what, I think Tom was referring to on the call. The tailwinds that you're seeing in podcasting is just bringing in the brands and -- great. I mean, so touch -- if you could give us maybe a little bit more detail on how you're selling the audience-based products versus perhaps how they're traditionally have been sold in the past.
Jennifer Witz
Yeah. It has a lot to do with -- again, podcasting grew up around a host-read ad, typically purchased by a DR advertiser. And now it's sort of grown up, right? The industry has grown up and we have this broad opportunity across our properties, whether it's -- advertisers can buy broadcast on SiriusXM. We have a great sports offering there, for instance. We use that a lot of times to anchor buys across music streaming and podcasting, and vice versa. We have a lot of great brands advertising on Pandora that have been in the space since the early days, and we're bringing those brands to SiriusXM and into podcasting. So it's kind of the network that we have of all of the capabilities we bring to the table across the sales organization, the technology we have, as well as just the value add we provide, whether it's creative services or research and analytics and other things like that.
Sebastiano Petti
Now, before -- just 10 minutes here as we're closing in, shifting back a moment to the satellite platform. On the earnings call, and earlier you touched upon just the simpler pricing and packaging as you kind of target specific demos. How does that -- maybe touch on how you're thinking about overall segmentation within the base, and how maybe some of these packages or some of this go to -- this change in go-to-market and pricing and packaging impacts, how we think about long-term ARPU growth within satellite business because it's been relatively stable or consistent over there?
Jennifer Witz
It has. And I was looking at something yesterday that showed that Netflix has nearly doubled its price over the last decade. We nearly doubled our price over the last 20 years, right? So we've had sort of this consistent increase in ARPU about 2% to 3% on an average basis since we launched the service. And we're certainly looking to -- look at -- continuing that going forward. But we've got to be really careful because our headline price is $19 a month on our core subscription package. And while our base of subscribers is very clearly loyal and willing to pay, if we want to keep growing the company, then we have to have more flexible pricing for younger listeners who in general will our product as complimentary to other music streaming services. And that's a great position to be in because we can offer headline price points $10, $11. We have a streaming only package at $11. We actually have one that's even at $5 for just our music offering. So in some ways, we're already setting lower price points on streaming only. That doesn't include 360L and the experience that we think is by far a premium experience in the car. But we can get people or consumers into our streaming experience, upsell them into the car. We just have a lot more flexibility when we have this new commerce engine in place to put different price points in front of consumers to encourage demand.
So I don't want to focus so much on ARPU as a metric. I think we want to maximize yield and revenue overall. And then again, we'll work on what we can do at the top end as well with our highly affluent, loyal subscriber base to make sure that we're delivering a need for better value proposition and be able to work rate increases in the future.
Sebastiano Petti
Increased engagement gives you that feedback loop to extent that could …?
Jennifer Witz
Which we never had before. So we're -- we finally have the data to be able to act on that.
Sebastiano Petti
Great. It wouldn't be a Siri -- fireside chat without capital return question. So Tom Berry mentioned that -- CFO, Tom Berry mentioned that Siri would remain opportunistic for the remainder of the year, given macro factors. Is low to mid threes leverage still the right way to think about it in near term?
Jennifer Witz
Yeah. By the way, thrilled to have Tom Berry as our CFO. He's been -- worked with him closely over many, many years. And I -- we have the same philosophy that we've had in place I think over the last several years, which is to be very disciplined to maintain that leverage and the low to mid threes and to be flexible, right? And so we'll have a -- continue to have a combination of capital returns around share purchases and dividends and we'll be opportunistic looking forward. But it really want to be -- especially in this environment, this macro environment, really want to make sure that we continue with the strong balance sheet we have and we have flexibility going forward to the extent something changes.
Sebastiano Petti
Now in terms of -- recently expectations for a combination between Liberty Siri and standalone Siri have picked up. What form could that take? And does Siri's current leverage and the elevated CapEx cycle make that any less likely or more likely in near term?
Jennifer Witz
I'm sure you have your own thoughts on this. But there's certainly been a lot of speculation and it seems to have grown over the past year or so. And I think there are a lot of different scenarios that many people are writing on. And I don't have any particular perspective on what, Greg or Liberty may choose to do. I know that they love optionality and they love to be flexible based on the environment, and so we'll have to see what happens.
I think we have a very strong -- I know we have a really strong special committee that will be ready to the extent that they make a proposal. And we as the management team are just really focused on running the business, making sure that we're making these investments to better position us to address demand going forward. And at the same time, making sure that we are reviewing the cost structure for opportunities so we can fund as much of that investment as possible.
Sebastiano Petti
And it does not change to the day-to-day or does not…?
Jennifer Witz
Does not change our focus day-to-day. I mean, we have a strong relationship with Liberty. I talked to Greg probably once a week or every other week, and he's a great thought partner, but he lets us run the business.
Sebastiano Petti
And then maybe sticking with M&A, thinking about advertising, you've been quite opportunistic with some of the podcasting investments you've made, obviously, difficult ad market right now. But as you think -- as you look across the Siri enterprise, whether it be advertising, podcasting, other adjacencies, is there anything -- are you strategically complete? Is there anything that could help accelerate growth as you look out here?
Jennifer Witz
I believe we are strategically complete. And I -- our best opportunity for investment is organic, right? And so we are building out our fleet of satellites. We have four under construction at the same time, which we'll launch over the next several years. And we are investing in our core product and technology architecture, which is -- it's in our guidance. So it's not like it's a material investment, but it's really fundamental to positioning the business for growth going forward. And of course, we'll be opportunistic if something comes up. But there's nothing we're sort of on the hunt for that we think we need to complete kind of the portfolio that we have today.
Sebastiano Petti
And what are some of the revenue opportunities that could emerge from the new satellite fleet? I mean, in the past we talked about video or besides extra channels, but anything else that maybe screen's interesting to you as you think about that additional?
Jennifer Witz
Yeah. The main reason we decided to launch the two satellites that will address the low band is just the continued retention we've had on the low band subscriber base. So we still have several million subscribers there and the churn has been lower, right? And we've built the penetration rate on the used car side, so we still have a nice business there. So it doesn't make sense to disrupt that today. But yeah, over the next several years we'll be able to look at freeing up the low band. We are continuing to roll out our -- what we call our Gen 8 or our wideband chipset, which addresses both the low band and the high bend. And that'll open up a lot more opportunities.
And then one of the easiest things to say is audio. Even though 5G will be more available in cars, really wireless has not been effective at addressing kind of the coast to coast availability. And we hear it sort of time and time again from subscribers and some of these auto -- automotive implementations, who may have streaming only services outside of us where there's just too many disruptions. And we've been known for delivering kind of that nonstop service without interruptions through satellites. So I do think there's a long runway for us there. But as you said, we could do video, there's an opportunity to do more data services, software downloads to the car, either with OEMs or other technology partners. So there's a lot of opportunities there, but I think we have years ahead of us to sort of maximum what we're doing today in our current business.
Sebastiano Petti
Great. Two minutes left here and maybe we'll open it up to the audience. Any questions? Great. And maybe the quick question on the -- following up on the CapEx and the satellite fleet. We got the question, why do you have to build four simultaneously? Is there an -- is it just about pulling forward? I mean, obviously building two at a time, right? There's some efficiencies in that, but -- yeah.
Jennifer Witz
Well, the way -- the reason for the timing is just the end of life and wanting to be prepared for redundancy in orbit. And so the timing -- the last one is going to launch in 2027, right? And that still gets us a couple years of leeway, but given sort of the life cycle of the satellites, the end of the contract life, most of our satellites have extended well beyond the contract life of 15 years. But we just want to be cautious about that and making sure that we have nonstop availability obviously for our paying subscribers.
Sebastiano Petti
And that -- how long should we think about the -- as we build out our models to 2040, how long should we think about the CapEx holiday or satellite …?
Jennifer Witz
2040, I'd like to see that. So the launch in 2027, there'll be several years after that. And there's a lot of flexibility. I mean, we can choose to extend the life and run the low band and look at different business models for the low band, or we can decide that those satellites, because they cover both spectrum, could be repurposed to the high band. We could just choose to not use the low band and just maximize the life on the high band. So it just gives us a lot of optionality going forward.
End of Q&A
Sebastiano Petti
Great. Well, thank you Jennifer, again, for joining us. And thanks everyone for joining us as well. Thank you.
Jennifer Witz
Thank you.
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Sirius XM Holdings Inc. (SIRI) Presents at 51st Annual J.P. Morgan Global Technology, Media and Communications Conference Call Transcript