It's a pleasure to welcome Jennifer Witz back, the CEO of Sirius. So welcome. Great to see you in person.
Thank you, Jessica. Always nice to be here.
Thank you. So Jennifer, you remain focused on driving three pillars of growth for Sirius. First, continuing Sirius's strong in-vehicle presence; second, increasing usage and subscriptions outside of the vehicle; and finally, driving growth through your extensive advertising platform. What do you consider the biggest growth driver over the next, let's say, three to five years?
I really believe we have opportunities in all three of these areas. So like you said, our in-car subscription business, our streaming business, both in and out of the car, supporting subscriptions in both areas and through our ad platform. And increasingly, once we build this new platform, I think we have more time to talk about that. That is going to enable us to allow each of these to reinforce one another in even more meaningful ways. So I believe there'll be growth across all three. You know, just as an example, in terms of the platform we're building, we're gonna be able to make it much easier for our in-car subscribers to carry their listening forward into streaming devices and vice versa, in a very seamless way.
So ultimately, I think it's not gonna be about streaming subscribers or in-car subscribers, but really just about subscribers, because we're pretty indifferent as to how they listen or where they listen. But what we're building is gonna definitely improve our ability to drive growth in those areas. And then on the ad platform, similarly, what we're doing for SiriusXM will increase our digital MAUs, if you will, both in the car through 360L and over streaming devices. That'll give us a lot more data on what customers are doing and listening to, and provide us a lot more targeting capabilities, which will enhance our ad business as well. So on top of, I think, what the growth opportunities are in the core business segments, we also have a tailwind in free cash flow beyond that.
So incrementally, in terms of improving working capital, improving cash taxes over time, and also, you know, as we've talked about our CapEx cycle, and we're in kind of the height of that with the build-out of these four satellites, and we'll be through that in a few years, and we'll have several years after that of zero satellite CapEx. So just great tailwinds on the free cash flow side, on top of the opportunities in the core business that will drive better free cash flow generation in the years to come, improve free cash flow conversion and better yield.
That's great. Let's just get this one out of the way, but how would you like to see the structure between Liberty, Sirius, and Sirius handoffs? And can you give us any sense of timing on when you expect Liberty to deal with this issue?
I would be surprised if you didn't ask.
Mm-hmm.
I think the first couple of transactions have, you know, been completed in terms of the Braves and Live Nation, and that, you know, would certainly seem to mean that Liberty can focus more on what might make sense for LSXM and SIRI. You know, I've said this before, I think a simple structure makes more sense. You know, I would think they agree. Certainly, we've seen these dynamics in terms of the technical impacts on our stock, you know, that are driven by the sort of complicated corporate structure that we have. But I have no particular insights on the timing. You know, we have a great relationship, I think, as you know, with Liberty on the board, and we have a very strong board overall and a very strong special committee who will be able to evaluate whatever comes forward.
I'd just say, as I typically do, that, you know, we remain focused. The vast majority of our time as a management team is on-
Right.
How do we profitably grow the business?
So I'm gonna quote you, because you've said that you've been able to... This is a quote: "Con-- You know, you'll, you'll, you'll be able to attain continued improvement in subscriber performance and a positive back half of the year." What gives you the confidence that you'll achieve positive self-pay net adds in the second half of 2023? And can you give us any update on third quarter self-pay and trial starts?
I mean, I'm not going to provide any specific guidance on the quarters, but I continue to believe that we will show progress on our self-pay net adds each quarter. Meaning that the third quarter will be better than the second, and the fourth quarter will be better than the third. And then I also believe that we'll be slightly positive in the second half, and there's still a fair amount of variability. Obviously, as we get through September, the trials are pretty much locked. So the fourth quarter, I would say, the sort of biggest uncertainty is vehicle-related churn, and that's just a function of how strong is the market for auto sales, which ultimately is good for the setup going into next year and the growing of the funnel. But, you know, it has the near-term impact on churn in the fourth quarter.
And so that's the thing that we can't really navigate. But again, continued progression throughout the year. I still feel very confident about that.
What do you see as the greatest risk to Sirius generating sustained subscriber growth on a long-term basis?
Look, I think ultimately, we have to keep delivering value to our subscribers, right? We're a premium price product. We provide an exceptional bundle of content across many different genres, and our focus on how do we continue is how do we continue to drive value there. Future subscriber growth is going to be certainly tied to, like we talked about, the auto funnel and how does that build over time. But then on the other side of the business, in really supporting all parts of the subscription business, is the launch of this new platform, which is really the next generation of SiriusXM and will enhance our capabilities to provide better value to subscribers because they will be able to find the great content we have in much easier ways, and hopefully we'll have a chance to talk more about that.
Yeah. You've raised your financial guidance a couple of times this year. And what gives you that confidence? I mean, it's, you know, it's really kind of turbulent times, but, you know, you seem pretty confident. What gives you the confidence that you will attain these, you know, this financial guidance?
We've held our revenue guidance, in part because of the volatility in the ad market. I think going into the year, we felt pretty strongly that the second half would start to materialize in better year-over-year trends. There was a general feeling across the industry. Now we're seeing that probably materialize more in 2024. For this year, I would expect ad revenue to largely be flat year-over-year. You know, which really means that, you know, guidance is approximately $9 billion, but, you know, that sort of outcome on ad revenue probably really drives whether or not we're slightly below or we're at the $9 billion in total revenue. Then on EBITDA, we increased our guidance once, and I think that's so we're at $2.75 billion.
That has a lot to do with the cost transformation work that we've put in place, and we're just having better visibility into how that's materializing in the P&L, the various expense item, line items this year. And then on cash flow, we've increased it twice. We're now at $1.15 billion, and, you know, I spoke about this a little bit before, but improving working capital, obviously, EBITDA rolling through, but improving working capital and lower expected cash taxes helps give us a lot more confidence in the cash flow guidance we have.
So let's talk about advertising a little bit, since you're not expecting it to really improve until next year. What's going on in the current ad market? Can you give us any color on, like, what you're seeing in terms of cancellations or categories?
Yeah. There haven't been that many cancellations, but I think advertisers are slow to book. So we have seen this trend, which is, you know, one of the things that creates a bit more uncertainty in terms of how the year is going to shape up, is that brands are coming in, they have budgets, they're willing to spend, but they're tending to wait until later to see what's materializing on the consumer front, especially. And so, you know, we see strong momentum on the travel and tourism side, on restaurants, QSR, and on CPG. And then, you know, there's traditionally, but just over the last year, we've seen kind of some downward pressure from financial services, healthcare. Of course, political year-over-year is down with no election. We'd expect that to pick up next year.
Then a bit of uncertainty, obviously, around entertainment spend, just with the strikes in place and then what could happen on the auto side. But I really like our position here. We've grown our programmatic tools. We can take a lot of, you know, close in buys, and, you know, we've got a great set of assets across the board with the different platforms we have.
So, I mean, everyone says, but churn, it comes up all the time on your calls, but it's just incredible how you've managed churn and how low it is. Second quarter was, you know, roughly 1.5%. What has been the most significant driver of your, like, really incredible churn results over the last few quarters?
It really comes back to value, right? And we think we have a really unique value proposition with the set of content that we have, and we keep reinforcing that with new content, whether it's new channels, new formats, new talent or hosts on the platform. And, you know, we do continue to see, you know, it's a slow march, but we do continue to see improvements in our in-car subscribers streaming outside of the car. We definitely see better retention as a result of that. So that's reinforced, you know, improved churn. And, you know, the dynamics are really... We have not seen a lot of concerns. We don't have a lot of concerns around involuntary and entry rates there. We watch that really closely in terms of a sign of, you know, the consumer health.
Voluntary, we talked about in terms of value, and then vehicle-related is sort of the big unknown in terms of how that shapes up with the growing auto funnel.
Right. What are you hearing from your OEM partners or, you know, on auto production and car sales moving forward? There's the risk of a strike, I guess, tonight.
Yes, tonight, yeah.
So could you talk about how that would, you know, how you think that will impact you and, you know, like-
Yeah.
Anything-
It's hard to say how it's going to materialize. It sounds like it's going to be all three domestics, but probably targeted to specific plants, and maybe it rolls out to something bigger. They certainly seem to be closing the gap a bit on the negotiations. We've been through this before, obviously, with GM. It won't have a material impact on our business unless it's really prolonged. But, you know, we could see lower SAC this year, possibly lower promotional revenue, but next year is really when we'd see the impact, if anything, onto self-pay net adds. But in general, you know, absent a strike, I think there's been progress on the automotive side. You know, clearly, this year, the estimates for SAR without a strike are in the low 15s, and last year, you know, it was 13.8.
So it has been growing, and there have been, you know, sort of progress in terms of availability of inventories. Prices seem to be holding. There's a bit more on the incentive side coming out on new car, and then there's been growth on the used car side, which we really haven't seen as prices have dropped there. We've seen more used car sales, which helps with our funnel because, you know, we're happy to have either. So it'll be interesting, obviously, to see how it shapes up over the next few months, but, you know, obviously, we are very focused on we'd love a healthy auto funnel and would love to get up to the, you know, 16, 16.5, 17 million to give us a tailwind going into next year.
... So, you kind of touched on a few times the new digital launch later on this year. Can you give us a better sense of timing, what the product will look like, what you're thinking in terms of pricing, and obviously, how it would help subscriber growth? Because you said you're indifferent, or it sounds like you expect subscribers to be on, like, both in the car and out of the car.
Yeah, it really is. First, I'd say we have a really strong foundation on which to grow and to build this platform. And it's really about how do we continue to enhance the value of our subscriptions? And we've got this tremendously valuable set of content that, you know, really speaks to every audio genre, music, news, talks, sports, entertainment, comedy. We have live, on demand. We have, you know, exclusive, non-exclusive, and it's just been. I think the biggest gap we found is being able to get consumers into the content they love. Obviously, in the car, it's been very much about turn the dial or hear the on-air promotion or get the email and then go find the content.
But now, we're in the process of building the next generation SiriusXM platform, and that's going to give us a tremendous amount of capabilities to personalize these journeys across marketing and in the product. So you know, in terms of the content marketing, to bring consumers into the funnel, to sign up for trials, or in terms of our direct marketing, email, push, all those other channels, or even just in the product itself, in the car or outside of the car, we'll have a lot more data-driven personalization capabilities. So we can get consumers and listeners directly into the content they love, you know, using all of these capabilities. We also have so in later this year, we're planning for the first step in this launch, and it'll be a new streaming experience.
I will say it's a bit of a, you know, a march and not a sprint. So this is the first of many steps. We'll have more releases following that. New set of consumer apps later this year, new releases following that, you know, at least every quarter throughout next year and beyond. And then ultimately bringing these new capabilities in terms of better martech, commerce, and identity through to the in-car business as well. So it starts with new streaming subscribers and having the benefit of this new platform, new consumer apps, which will drive improved experience for our listeners, both existing streaming subscribers, whether they're subscribers or they're listening, in-car subscribers listening outside of the car, where we have millions of customers already doing that, or new subs that we're bringing into the funnel.
Again, kind of continues through next year in updating our existing base of subscribers. In terms of pricing, I'd just say, as we've looked at the opportunity to grow among our core and growth segments, there is clear opportunity to provide different packages at different price points and just be more flexible. So the commerce platform we're building will allow us to do that, and we think that's going to be key to attracting more of the growth segments, which we've talked about as being younger, more diverse, clearly looking at SiriusXM as a complementary product to an on-demand music service that they already have.
Because of the broad set of content that we have, and it was particularly all the live content and non-music that we're a very attractive option for these growth segments, but we need a more flexible set of pricing and packages to appeal to them.
Can you provide any color on what the commerce part of it will be?
Yeah, there's... So we're going to use a new. I don't think we've talked about the vendor, but, you know, we're using Salesforce for martech. That's going to leverage the new commerce engine that we're building. And it's just gonna. Today, it takes us an inordinately long time to just get a rate increase in market. So things like that will be much simpler, but it'll also allow us to test different pricing packages much more easily in market to get a better idea as to what the impact is on both growing the funnel and retaining subscribers, and also really just protecting from any downgrades in the base.
And so on the sub growth, like, how much of the runway do you think will come from digital versus in-vehicle as you go out?
It's really going to be tough to delineate, I think, over time. But again, the platform's going to support both sides. So I would expect our in-car subscribers to increasingly stream. That brings more value to the subscription, improves retention. It also helps to the extent we can make it really easy as a new trialer gets into the car with their new experience embedded in the car, to just, you know, the click of something on the screen to download the app. So the sooner we get people streaming and experiencing all of our content in other places, the better our conversion rates will be for in-car.
And then we absolutely have a trajectory of growth ahead of us on the streaming-only side as well, you know, with the launch later this year and supporting that throughout next year with new features and functionality. There's not. I would say there's not, like, one hero feature, but there's just all of this, these capabilities that we've built and in market to support, again, the sort of easier discovery, access, navigation, and control of the service which consumers are looking for.
Can you walk us through the difference in economics from an in-vehicle sub versus a digital if they're the same, like, how is each sub different?
They're a little different, but, you know, overall, we have very strong margins on both sides. Yeah, I guess the differences are, our streaming product is priced a little lower, so the ARPU there is lower than on the in-car side. The in-car side obviously includes both the integrated experience of the car and streaming, so we price that at a premium. You know, margins, percentage margins on the streaming side are a little higher, given the licensing structure there, and we don't have OEM revenue share. So on the in-car side, obviously, we have those things which means a slightly lower percentage margin. But ultimately, margins are healthy across both, and, you know, the way we bring those subscribers in is very different.
So our cost to acquire, for instance, we have a long history on the in-car side of driving down our SAC per install and our marketing cost per trial. On the streaming side, it's much more a function of performance media and content marketing, and that is really very flexible in terms of how we put that marketing in place and our spend levels based on the relative difference between the lifetime value of a streaming subscriber and the cost to acquire. So we've been able to drive down our cost to acquire on the streaming side, 20% year-over-year, and I would expect that to continue to get more efficient as we put these new capabilities in place.
How do the listening habits differ from subscribers inside the car versus outside the car?
It's interesting. We see, and I think it depends on whether or not we have an in-car subscriber who's listening outside of the car. They'll carry forward a lot of the same listening habits. It may be somebody else in the household, in which case it would look a little different. On the streaming-only subscription side, which is, you know, a smaller percentage of our streaming MAUs, we do see, because that audience tends to be a bit younger, we see them listening to more of the, you know, more popular music genres today, pop, hip-hop, even, you know, country, obviously, has exploded this year, and Latin as well, and also more non-music listening, outside of the car, which, you know, continues to help with the overall value proposition.
Interesting. And then I guess one more question on this, but where are these digital subs coming from? Are they, you know, new to the audio ecosystem? Are they, you know, listeners to radio? You know...
Our streaming-only subscribers, it's not that they're really leaving other services to come to us. I can't, you know, reinforce enough that we are a very strong complement to the on-demand music services. Consumers have always had music, you know, it's just taken different forms of distribution over time. And today, you know, the easiest way, obviously, to get a little music is through another music streaming service. And so we view the set of content we have as very differentiated from a streaming service. So usually, we're a complement in that case, and not actually bringing people over from an on-demand music service.
Right. So, let's just talk a little bit about 360L. It's, it's still relatively small. Can you give us any of the statistics on, you know, conversion rates relative to traditional equipment? Let's start with that.
Yeah, I, I feel really good about what we're seeing here with 360L conversion rates and how they are materializing relative to non-360L, and that has a lot to do with the features and functionality. We really are, like you said, we're just getting started. We're growing the volumes over time in terms of the enabled vehicles out there, but the platform we're building is going to enable us to even better serve recommendations. So recommendations is the single biggest feature, if you will, and I don't know that customers really see that as a feature, but it just enables us to help the consumer in the car, especially navigate all of this content. Because, you know, linear audio listening is still the vast majority of listening in the car, and it's just because it's easy.
So this is sort of the next generation of what's easy. What was easy in the past was turning the dial, and now what's easy is serving up these great recommendations. So, so we do see higher conversion rates with 360L. I think that will continue to improve as we roll out, you know, the base, but also we roll out these capabilities, and we have more standardized features across 360L that we just launched with our first OEM, AAOS, which gives us, with Android Automotive operating system, to be able to actually provide a more common set of features, across the various OEM instances as we roll that out.
At what point, how much scale do you need to, you know, with 360L to, before it begins to impact some of your decision making, whether it's content or marketing or, you know, anything else?
I think we're already there because we have millions of streaming data points today. We have, you know, millions of subscribers streaming, whether they're doing that as an accompaniment to their in-car subscription or just their streaming subscription. And so we're using that data today to inform decisions about marketing, about content, and that's only going to get better over time, obviously, if we as we grow 360L penetration and streaming engagement in general through the devices outside of the car, whether it's mobile or connected devices. So we're already seeing the benefits of some of that data today.
And then earlier, you were talking about free cash flow and CapEx winding down on the satellites. Like, what are your plans? Will you consolidate Sirius and XM platforms?
You know, look, this question about spectrum and how do we use it and satellites, I think we have a lot of optionality, bottom line, but really right now, heads down, focused on rolling out this new platform. So I... And I think we'll learn a lot more that will inform whether or not we need to use the low band for more audio, or we could repurpose it for something else entirely. Yeah, or we can just leverage the satellites that we're building. So the second two that we're building and will launch in 2026 and 2027 are to support the low band because we still have several million subscribers there. But ultimately, we could use those, repurpose those to extend the life of high-band satellite fleet, and just not use the low band.
So I think the idea is that we have lots of options there. We're not prepared to make a decision yet, but we're going to have a lot more insights, you know, as we roll out this platform and gather more listening data and better understand what's the relative amount of IP delivery into the car versus satellite going forward.
... Sirius has always been innovative in terms of content offerings. I mean, you started with, like, your, I mean, currently, every time you come up with something new, I'm always surprised that, you know, there's, there's room. But you, you've come up with amazing, amazing content, new genres, new channels, live events, et cetera. So what are some of the things that, that you guys are most excited about in the coming year or so?
I really love some of the things we've done already this year. So we launched Carrie's Country with Carrie Underwood, and she was just in yesterday, bringing new content to the channel. You know, she's just a fantastic talent to have on the platform, and great timing in the sense that, you know, country really just listening country has risen massively again this year. So we're thrilled to have her, and she's done a lot of crossover work with heavy metal, too, which is always interesting. And then what we've done on the Latin side has really been helpful to attracting younger audiences and more listening to Latin music, which is also exploding on the platform. We have a new state-of-the-art facility in Miami, bringing a lot of local talent in there.
You know, many of the hip-hop artists and Latin artists in the community are coming in. They see our studio as really a great way to get more exposure to different audiences, and so thrilled. We have Hits Uno that just launched, which crosses many genres in Latin otherwise. And then just really across the board, TikTok has been a great success for us. We're bringing a lot more discovery to younger audiences with that channel. A lot of great hosts there, countdown, things like that. Different format and new audiences for them. We just signed Megyn Kelly for an extension, multi-year. She did an interview with Trump yesterday, which I haven't even heard. I'm really excited that'll be on the platform in just a couple of hours, I think.
Sports has been, just continues to be a, an exciting value prop for us. We really are the only place that you can get all these sports, and we love that we just kicked off the NFL season. We've got a lot of great content, shoulder content, of course, the games. And it's really great because, you know, you might be going somewhere watching the game, and you jump in your car, and you just know you can get it on SiriusXM. So that's been great for our value proposition. Of course, Howard was back in the studio this week interviewing Demi Lovato. So it's really every week, there's something new.
Yeah. No, it's incredible range of content. Okay, let's move on to Pandora. How do you plan to grow or at least stabilize Pandora's active users and listening hours?
We've seen a bit of a stemming in the decline, you know, not quite where we want to be, but over the last several months, and I'd say that has a lot to do with the efforts that we've put in place in bringing more genre and branded channels to the Pandora platform, to improving the marketing around directly addressing, whether it's performance media for recaptured listeners or CRM, you know, better email campaigns and otherwise, to bring customers back in.
We just have this really strong base of loyal listeners on Pandora and, you know, considering our main focus has clearly been on SiriusXM, but once we roll through the iterations of launching this platform over the next year or so, we really can turn our attention to platform to Pandora and deciding if we're going to re-platform it. That'll give us a lot more optionality for Pandora today, but I really like where we are. I mean, it's a profitable business for us. It's a key part of our advertising strategy, and, you know, we really like the progress that we've made so far, but more to come.
Can you continue to drive monetization improvement and advertising growth if you're unable to at least stabilize the listening base?
We did have, you know, I'd say several years of improving monetization despite the listener declines before we sort of went into this downturn in the ad market. So, you know, I am hopeful that we'll be able to get back to that trend line with Pandora, but the real objective is to have... So Pandora today represents, the owned and operated platform represents probably about 60% of our ad revenue, and we continue to grow, off-platform, you know, SiriusXM, tech fees, marketplace revenues, with podcast being really just a great tailwind there. So, you know, we see Pandora as a strategic asset, obviously, in our advertising offering, but, you know, there's been, great progress.
You know, we took a strong position early on in podcasting, and I really, you know, think we have a great set of assets there to grow our ad business over time.
On podcasting, what is your overall strategy related to podcasting?
Look, we've been, from the start, we've been very focused on podcasting as a medium where the creators really want broad distribution. You see some of the other parties kind of coming that way now. And, you know, we've really delivered on, you know, offering a great set of podcast content and opportunities for advertisers. We have, you know, five of the top twenty podcast relationships with all the networks behind them, so, you know, really great podcast offering in virtually every top genre in podcasting. So our strategy, first and foremost, is to make sure that we have a broad set of offerings for our advertisers, great relationships with brands and DR advertisers, so podcasting is sort of key to that in digital audio.
But also, you know, it plays a really important role in, you know, eventually, and over time, improving the value proposition of SiriusXM kind of in two ways. I mean, we will have a stronger podcast experience within SiriusXM when we launch the new consumer apps, and then over time, that will continue to build. Because we believe that a curated set of podcasts is really important to the listening experience in SiriusXM, but also how we're working with the creators of podcasts is to find more unique ways to distribute their content on the SiriusXM platform. So, that could be exclusive content, like the Conan O'Brien channel, that helps supports the podcast and vice versa, or it's just different formats, like with Freakonomics, bringing those podcasts to a more linear format in a channel.
We've also worked with Crooked to have pop-ups during the elections, and, there's just a lot more examples of, I think, how we can do that going forward.
I mean, do you think you have all the right pieces, not content, but all the right pieces, to move forward with your podcasting strategy, or are there areas where you need a bigger presence or better technological capabilities?
We're always open to, you know, looking for opportunities to in the M&A space or otherwise, to add to our tech stack. I think, you know, that's where podcasting probably is lagging a bit. You know, we've been in the digital audio advertising business in Pandora for, you know, close to 20 years, so we really did start that, and we've grown it over time. We've got great relationships there. But extending kind of the tech support for podcasting has been a key focus for us, and one of the ways that we've really delivered better capabilities to advertisers is through partnerships. So whether it's, you know, two of the primary issues, I think, for brands and advertising coming to the podcasting space is, you know, better identity and tracking and then better brand suitability and safety tools.
You know, on the predictive audiences tool that we have with Comscore, we are giving brands a better way to target, even if there's not a lot of first-party data, because, you know, distribution is across many platforms. On the brand suitability and safety, we did a partnership with Barometer and with Arts AI to provide mid-campaign and third-party verification of brand suitability. So, advertisers can come in and assess, you know, how well they're doing on these campaigns. Are they getting the right kind of traction and content that they want to be in, and then evaluate the campaigns midstream?
You could turn that Spotify scale is a competitor with global reach as opposed to just, you know, obviously domestic. Will that enable them to outbid Sirius for key exclusive content?
I guess I'd say two things there. One is Spotify's been at scale for many years, and, you know, we still have a very unique value proposition. And I think by focusing on North America, that gives us, you know, a leg up. We have a great live platform. You know, a lot of other streaming services have live capabilities, but, you know, Spotify hasn't really tapped into the breadth of content that we have. And, you know, we also just have a really strong business model. I mean, obviously, they're facing even more competition from, you know, the major tech companies in music streaming and in podcasting.
So, you know, they have a lot more margin pressure than I would say we have, whereas we have the flexibility, you know, if we decided we really needed something to add to the value proposition, we can do that within the margin structure we have today.
I guess just one more competitive question. You know, but do you, do you expect them to expand their appetite, you know, content appetite for beyond music to other things like, you know, podcasting is one thing, but, like, live stuff like sports? I mean, you, you have all sports, as we just said, and nobody else does. Is that, is that a concern?
We keep a close eye on, you know, what the competition is doing. The tech companies obviously have taken a stab at live sports. We love our position there, you know, as we've talked about. You know, we're gonna continue to watch it, but again, I think we have the resources and the team in place to be able to act quickly if we needed to, to make broader content decisions to deliver value to our subscribers.
Are audiobooks any part of your strategy?
You know, I really like audiobooks. I don't think they're necessarily critical, but, you know, given kind of the new platform we're gonna put in place, we'll have the opportunity to look at a lot of different audio formats, and, that could be one way to continue to enhance the value of our subscription, whether it's integrated or there's a partnership. But, but again, I don't, I don't necessarily think it's critical. There's a lot of probably overlap in the audience in terms of, you know, we have a very affluent audience, in-car listening, you know, college-educated, so, it could make a lot of sense and, and in the future.
Last question, can you just talk a little bit about your capital allocation strategy? How do you think about capital returns? You are generating significant free cash flow, which will increase, you know, further. How do you think about buybacks versus dividends?
We've clearly focused and allocated more capital returns toward dividends over the past several years, and since inception, we've raised the dividend by 10% every year, except for, I think it was 2021, where we raised it 50%. So it's about $375 million in terms of a recurring annual dividend today, which is, you know, approximately a third of our cash flow, and so we have more room there, I'd say, to focus on dividends going forward. But capital returns in the form of share repurchases have always been part of, part of our returns program, and so I think we'll just try to, to stay flexible and opportunistic.
One of the things I think is really important in this environment, in terms of financing costs, is that, you know, we look to maintain sort of our leverage ratio in the sort of mid-threes, and that, you know, will frame up, you know, obviously, capital returns going forward, too.
Great. Thank you so much for coming.
Thank you. Thank you.