Good morning, and welcome to SiriusXM's fourth quarter 2021 financial and operating results conference call. Today's conference is being recorded. A question-and-answer session will be conducted following the presentation. If you have a question at that time, please press star one on your telephone keypad. If at any time you'd like to be removed from the queue, please press star two. At this time, I would like to turn the conference over to Hooper Stevens, Senior Vice President, Investor Relations and Finance. Mr. Stevens, please go ahead.
Thank you and good morning, everyone. Welcome to SiriusXM's fourth quarter and full year 2021 earnings conference call. Today, we will have prepared remarks from Jennifer Witz, our Chief Executive Officer, and Sean Sullivan, our Chief Financial Officer. Scott Greenstein, our President and Chief Content Officer, will join Jennifer and Sean to take your questions. 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 those 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 would 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 and certain purchase price accounting adjustments. With that, I'll hand the call over to Jennifer.
Thank you for joining today's call. SiriusXM turned in phenomenal 2021 financial results, added over 1 million SiriusXM self-pay subscribers for the 10th time in the past 11 years, and made significant progress on all of our strategic objectives. Sean will go into more details on the financials, but in 2021, we beat all of our original guidance targets. All of these financial metrics and our self-pay subscriber base ended at record high levels. With these great results and our solid balance sheet, we are very pleased to be in a position to announce a special payment to our stockholders this month of $0.25 per share at an approximate $1 billion payout. We also announced new guidance today for continued growth in SiriusXM self-pay subscribers, revenue, and adjusted EBITDA.
In 2021, we forged ahead on our vision to shape the future of audio while advancing our key strategic growth objectives. We continue to earn the privilege of capturing the highest share of our listeners' audio time by bringing our premium experience to listeners wherever they are, starting with our stronghold in the car. Our new vehicle penetration reached an all-time high of 82%, and we exited 2021 with just over a quarter of these SiriusXM-equipped vehicles incorporating 360L, our latest platform that delivers an enhanced consumer experience, including personalization. In 2021, we launched 360L in more than 30 new vehicle models across various OEMs, ending the year with nearly 4 million 360L-equipped vehicles on the road, and 360L volumes are set to climb for many years to come.
Automakers like Stellantis and BMW now offer drivers the ability to customize their own ad-free music channels powered by Pandora's personalization engine housed within 360L in select vehicles. Our pace of innovation in-vehicle is only set to accelerate as the operating systems of the car evolve, such as with the introduction of AAOS at various automakers, which will speed our time to market with new features and capabilities. Of course, we also seek to superserve listeners throughout their day, not just in-car, and we continue to focus on providing an excellent digital experience with curated premium content anywhere one might listen. By including streaming in virtually every SiriusXM plan, we made it easier for our existing subscribers to listen everywhere.
We also made it easier for potential new subscribers to try our digital service by enabling free previews and in-app purchases through both Apple and Google. Today, millions of our SiriusXM self-pay households stream our service, and when our subscribers stream, they roughly double their consumption of SiriusXM content. They listen twice as many hours and on twice as many devices. While we clearly have a long way to go, the growth in SiriusXM streaming has provided an important value add and meaningfully contributed to our strong churn performance in recent years. In the months ahead, we plan to make it easier to use the SXM app in many more places people want to listen, and this should drive usage by both our satellite streamers and our standalone digital subscribers.
The addition of streaming with the enhanced features and content that comes with it is an important driver of value to SiriusXM subscriptions, but we are always looking to make our plans even more attractive. For example, we have recently provided new and existing subscribers to SiriusXM's Platinum VIP plan, the power to unlock access to Apple Music and Discovery+. As our focus on streaming continues, I'm particularly delighted with Joe Inzerillo's decision to join the SiriusXM team, leading all of our product development, IT, and broadcast and satellite engineering. I'm sure many of you know Joe's extraordinary track record at Disney+, ESPN+, Hulu, and as CTO and founder of BAMTech. Best of all, he is deeply passionate about our products and agrees that we have a unique opportunity to continue to shape the future of audio.
While you can expect more on our specific product and architecture plans in the coming quarters, our focus remains on improving and investing in our digital products and the customer experience. We intend to dramatically increase the speed at which we improve and bring new features to market. We are also investing in offering intuitive digital-first interactions to our prospective and existing customers. This benefits both our cost structure and our attractiveness to younger consumers. It's also a priority that we continue building upon our leading ad tech stack, which is central to our success at SXM Media, our unified sales organization. Yesterday, we announced the introduction of AudioID, powered by AdsWizz, a first-to-market listener identity solution offering marketers new avenues to reach, target, and connect with consumers at scale.
AudioID puts content and audiences first, providing an improved customer experience across multiple platforms and a better way for brands to buy audio advertising. Growing our digital ad business is a key part of our strategy in the coming years. In 2021, we delivered an impressive $1.7 billion of digital advertising revenue, up 29%, driven by strong demand for our advertising solutions and meaningful growth in podcast revenue, bolstered by our acquisition of and investments in Stitcher. With further tailwinds in monetization, podcasting, and off-platform distribution, we expect this number to grow meaningfully in 2022. Whether ad-supported or subscription-based, we will continue to connect listeners to the best, most compelling, and timely content across music genres, areas of talk entertainment, and in sports and comedy.
We partnered with Audible to create Chapter and Verse, a new monthly series exclusively on Pandora, SiriusXM, and the SXM App. The series features several of the brand's most popular authors, such as Nicholas Sparks, discussing how music inspires the writing process. We remain focused but disciplined in our approach to podcasting and signing more deals with top and influential creators. In the fourth quarter, we struck deals with leaders in podcasting, including exclusive global advertising deals with the top-ranked true crime show, Crime Junkie, and its entire Audiochuck network, with ad rights to new podcasts coming shortly. Comedy favorite, Your Mom's House, and its YMH Studios network, and Last Podcast on the Left, which will also launch a live weekly show on SiriusXM's Faction Talk this month.
We are proud to work with many creators who have built substantial and loyal audiences over the years to help them grow this reach and to favorably monetize it. Several of our podcasts ranked in the 2021 best of lists at The New York Times, The New Yorker, Vulture, Entertainment Weekly, Time Magazine, The Atlantic, and more. The Adweek Podcast of the Year Awards acknowledged two of our shows, People I (Mostly) Admire for best interview podcast, and SiriusXM original, Black Diamonds, which highlights the history of the Negro Baseball Leagues for best sports podcast. We are experts in the curation and presentation of music, whether on our SiriusXM and Pandora platforms or at our live and virtual events. Pandora honored the first-ever Hip Hop History Month with a dedicated music station, plus four artist-curated takeover modes. With Baby Einstein, we created a wide variety of kids' music content.
We brought back Foo Fighters Radio on SiriusXM and launched a limited run channel with Latin superstar J Balvin. We debuted ABBA Radio, one of pop's biggest music groups of all time, which coincided with the release of their first new album in 40 years. SiriusXM remains at the forefront of pop culture, amplifying both emerging artists and music icons. In December, we launched limited run channels with Neil Young and Alicia Keys, coinciding with their new album releases and featuring career-spanning music and new exclusive content. These partnerships are a testament to the trust and deep artist relationships that are foundational to our success. We continued the successful Small Stage Series, which showed we could work with top artists to regain that great connection with fans that comes from live intimate performances.
We recently held shows in L.A. and New York in legendary venues featuring premier artists spanning a variety of music genres, including Alicia Keys, Ed Sheeran, The Go-Go's, H.E.R., J. Cole, and next week, yet again with John Mayer in L.A. Pandora launched a national multimedia brand campaign featuring longtime Pandora listener and enthusiast DJ Khaled. We finished the year with two long-running annual artist roundups, the Pandora Ten Artists to Watch for 2022, and the Pandora Top Thumb Hundred, which Cardi B topped for the second year in a row. SiriusXM also announced its Future Five Artists for 2022, our predictions for which artists will break through across pop, R&B, country, hip-hop, and rock genres. Year after year, our Future Five picks have proven to be well-founded and spotlight artists that we were first to champion.
We also welcomed the class of 2021, artists that we were first to commit airplay and playlist support to and subsequently went on to have a major breakthrough year. Our listeners love the live access to marquee sports events as well as sports talk from trusted personalities found only on SiriusXM. We agreed to a multiyear extension with the PGA Tour and added a new show hosted by David Feherty. Our extensive schedule of live play-by-play across so many professional and college sports makes us a must-have for sports fans. For example, throughout the college football postseason, SiriusXM covered every bowl game live all the way through the national championship. Original sports programming is the perfect companion to our live coverage. Duke legend Mike Krzyzewski is hosting the seventeenth season of his show, Basketball and Beyond, as he coaches his final season.
Coach K is part of a sports programming lineup that our subs love and one that generates buzz every week with exclusive shows like the Let's Go podcast hosted by Tom Brady, Larry Fitzgerald, and Jim Gray, Brett Favre's SiriusXM NFL radio show, and many others. The examples I highlighted confirm our commitment to be the leader in audio content, whether that means licensing premium audio, directly employing talented creators, or even investing in and owning content assets or studios that produce best-in-class material. Such content asset purchases, where they make sense, are one part of our overall M&A and investment strategy. We will continue to pursue other opportunities which will further SiriusXM's in-vehicle leadership, expand our digital subscriptions, and strengthen our ad business. Today, we have a tremendous foundation by our acquisitions of Pandora and its AdsWizz unit, plus Stitcher, Simplecast, and 99% Invisible.
As a leading force in consumer subscriptions to premium audio services, we are increasingly positioned to meet the listeners wherever they are, at home, in vehicle, at work, or on the go. We recently acquired CloudCover Music, one of the fastest-growing music for business services. It will complement SiriusXM Music for Business and Pandora for Business in our commercial music portfolio. As part of SiriusXM, CloudCover will have new resources and capabilities to better serve businesses looking for the perfect soundtrack and atmosphere for their customers. Before I hand it over to Sean, I wanna reiterate how pleased I am with our strong operating and financial performance in 2021. Even with our record revenue, we have many opportunities to capture greater share and also contribute to the growth of the $50 billion audio industry.
SiriusXM has continued to aggressively develop and deliver one-of-a-kind audio experiences for our customers for two decades, and it is our vision to connect listeners to the content they love anytime and anywhere. With that, I will turn it over to Sean for additional remarks.
Thank you, Jennifer, and good morning. To give you just a few financial highlights for 2021. Total revenue increased 8% to $8.7 billion, led by 29% growth in consolidated ad revenue. Adjusted EBITDA grew 8% to $2.77 billion, a new annual record. Diluted earnings per share were $0.32 versus $0.03 in 2020 when we absorbed the impact of a non-cash impairment charge. We generated $1.831 billion of free cash flow during 2021. Note that free cash flow in 2021 was boosted by a full recovery of $225 million against our insurance policies on SXM-7, partially offset by new accelerated spending on SXM-9 and SXM-10.
In 2021, this recovery drove conversion of approximately two-thirds of our adjusted EBITDA into free cash flow, a ratio that will drop modestly in 2022 as cash taxes increase materially, CapEx remains elevated and in line with 2021, and working capital remains a modest drag as we continue the transition of subscribers to shorter-term plans to drive profitable growth. Longer term, as the CapEx cycle abates and working capital normalizes, we expect free cash flow conversion to improve. Turning to our segments. In the SiriusXM segment, total revenue in 2021 increased 4.4%, roughly in line with ARPU growth, as growth in the self-pay subscriber base of over 1 million was offset by lower revenue from paid trials and by lower equipment revenue resulting from reduced module delivery on account of limited auto production.
Gross profit in the SiriusXM segment climbed 3% to $4 billion, representing a margin of 61%. In the Pandora segment, advertising revenue of $1.54 billion increased 30% in 2021, with Pandora's ad revenue per thousand hours reaching a record $103. In 2021, our podcasting business, Stitcher, combined with our off-platform businesses such as AdsWizz, generated $348 million in ad revenue, an increase of 81% from 2020, benefited by organic growth in the acquisition of Stitcher in October of 2020. We expect these businesses will continue to represent a growing portion of the Pandora segment revenue over time. Gross profit in the Pandora segment grew 30% to $743 million, representing a margin of 36%, up 2 full basis points.
As announced in this morning's press release, this year's new guidance calls for revenue of approximately $9 billion, adjusted EBITDA of approximately $2.8 billion, and free cash flow of approximately $1.55 billion as cash taxes increase, and we normalize for 2021 one-time satellite insurance recovery. We expect to add approximately 500,000 net new self-pay subscribers this year. While we do not provide quarterly guidance, it appears that given continuing semiconductor shortages and other factors limiting vehicle sales in late 2021 and into 2022, we expect that the substantial majority of our projected self-pay subscriber growth will come in the second half of the year.
Further, we believe price changes implemented in the fourth quarter, particularly to discount floor pricing, somewhat reduced subscriber growth in late 2021 and will continue to impact early 2022. We have a long track record of successfully balancing rate and volume to create optimal long-term outcomes for the business. Both advertising and subscription revenue will contribute to growth in 2022 as advertising momentum continues and subscription revenue benefits from rate actions and subscriber growth in 2021. Our adjusted EBITDA guidance this year reflects investments in products, content and marketing to drive growth in digital. Turning to capital allocation, we are very pleased with today's announcement of $1 billion special dividend to our stockholders.
We and our board believe now is the opportune time to put cash into the hands of our stockholders, given our strong 2021 results, expectations of meaningful cash generation in 2022, and our rock-solid balance sheet, which was levered at just 3.1x net debt to EBITDA at year-end. By that measure, pro forma for this dividend, we would have ended 2021 at 3.5x, still within the target range we've articulated. This special dividend comes on top of the 50% increase to our recurring dividend announced in October, and on top of the $1.5 billion of our shares we repurchased in the open market last year.
We continue to maintain tremendous flexibility to continue investments in the business, pursuing inorganic growth opportunities, and to continue returning capital to our stockholders via dividends and share repurchases. With that, operator, let's open the call to Q&A.
Thank you. If you wish to ask a question at this time, please press star one on your telephone keypad. If you'd like to remove yourself from the queue, please press star two. Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, it is star one to ask a question. We can now take our first question from James Ratcliffe of Evercore ISI. Please go ahead.
Thanks for taking the question. Two, if I could. First of all, you mentioned 3 million vehicles out there with SiriusXM with 360L. Can you give us some idea of what you're learning about usage of these SiriusXM service from those vehicles and how that's driving into engagement or monetization? Secondly, on the capital return, should we be thinking about this as sort of a catch-up to get sort of to your targeted leverage or more of an advance on what you expect capital returns to be in 2022? Thanks.
Great. James, this is Sean. Why don't I start with the capital returns? You know, again, as we've highlighted and articulated over the last several quarters, I think we've been fairly prescriptive about our capital allocation priorities and what we expect to operate in terms of target leverage. Again, pro forma for this, it takes us to 3.5 times as of the end of the year. We continue to have a flexible program. We continue to buy shares in the marketplace. You'll see when we file the 10-K today, I believe we have purchased almost $116 million worth of shares through the end of last Friday.
Again, it's you know, we come into a new year, a new planning cycle, really strong confidence in the business, free cash flow generation, so at 3.5x , again, in line with what I think I said back in October. You know, you'll see that likely the buybacks will abate a bit over the next several quarters, in the context of our philosophy, but we will continue to be an active participant in the market. We still think it's a good value. We continue to have substantial liquidity in our stock. You know, you should expect us to continue to be the participant, but it will be scaled back from historical levels.
James, just on your first question on 360L, we actually ended with just about 4 million vehicles on the road and over 25% of our trial starts were 360L capable in the fourth quarter. What we're seeing so far is, you know, we have so much more data than we've ever had in the past, and we can do things like if people haven't started listening, you know, we can market to them to encourage them to listen during the trial. Clearly, listening impacts ultimate conversion rates. We also know that when customers use the features like Pandora Stations on Demand, or the extra channels, that they tend to convert at higher rates. We're very focused on driving that activity in our marketing materials as well as on platform through recommendations.
Great. Thank you.
We can now take our next question from Bryan Kraft of Deutsche Bank. Please go ahead.
Hi, good morning. Just wanted to ask you about the net add guidance. Given the number of trials in the funnel today, adding 500,000 self-pay customers seems like an aggressive target unless that funnel is gonna start growing again fairly soon. I guess, you know, first, do you agree? Any color on what you're seeing on the OEM side and how you expect to add the 500,000 this year. Thanks very much.
Look, we've been watching the third-party estimates for auto sales really closely. There have been revisions down over the last month. A lot of that, I think, is attributed to the relatively soft auto sales in December, under 13 million. We fully expect that, you know, the auto sales on the new car side will remain relatively low for the first half. We're hoping, and I think this is consistent with public comments in general, that, you know, the supply chain issues start to alleviate a bit in the second half. Our guidance is tied into the third-party estimates. Of course, you know, we're being cautious.
I mean, the way the trial funnel works, as you know, is if we get you know the ramp in trials in the second half of the year, it really doesn't materialize in a lot of subs in year. That will set us up really well, you know, going into 2023. On the used car side, we see some of the same phenomenon where there are inventory constraints you know prices that are at an all-time high. So we're watching that really closely too. Our expectations are that the trial funnel will support 500,000 net adds. Of course, we're watching non-pay churn really closely in an inflationary environment and how that tracks to consumer spending, which is very much a factor in non-pay churn.
We would expect, and you saw, you know, our churn rate in the fourth quarter at 1.7%, we would expect something like that or more consistent in the 1.7%-1.8% range, which is, you know, similar to what we saw pre-pandemic.
Okay, thanks for the color, Jennifer. Appreciate it. We can now take our next question from Benjamin Swinburne of Morgan Stanley. Please go ahead.
Hi, good morning. Maybe just a little bit more detail on the expectations built into guidance. I don't think you gave it, Jennifer Witz or Sean Sullivan, but what do you expect in terms of install rate for auto sales in 2022? Any sort of update on how you think conversion trends in both new and used, just to help us think about that guidance a little bit more. You guys have talked a little bit, and I'd say increasingly over time, about your streaming-only customer base, including at the Liberty Investor Day last year.
Anything you can share with us, Jennifer, on sort of KPIs or attributes of that group and help us think about how you are expanding the TAM and what the opportunity is ahead as you guys really lean in there?
I'll start with installs and conversion rates. You know, we talked a little bit about auto sales and our expectations there. In terms of pen rate, we ended the year at 82%. I would expect that, you know, to stay relatively consistent or tick up a bit this year. You know, I think we're really well positioned on the penetration rate there. On, you know, the used car side, that organically continues to increase, and I would expect that to go up to, you know, help support trial starts this year as well. On conversion rates, things have been pretty consistent. We're in, you know, about the mid-30s on the new car side and, you know, kind of the low- to mid-20s on the used car side.
You know, it's a function, obviously, of, where we are on penetration rates and, you know, continued increases in penetration into lower trim models, which typically ties to, younger generations and lower income levels. That's very consistent with what we've seen in the past. We, you know, as we talked about a little bit earlier, you know, we are focused on using SiriusXM with 360L as a mechanism in the new car side to improve conversion because when we see people using these features, we do see improvements in conversion rates. It's really about improving the awareness and usage of the features.
On the used car side, one of the biggest thing we're focused on is making sure the radio is active when customers get into the car because then they can experience, you know, our product very seamlessly, very consistent with, you know, our ease of use in the car. We have many programs focused on driving that on the used car side. To digital subs, you know, today it's not a meaningful part of our overall subscriber base, but I would expect, you know, going into this year, certainly in quarters where satellite net adds are lower, that, you know, you may see a higher proportion of our subs coming from the digital side. You know, the metrics are, look, we have 32 million self-pay subscribers, right? We are already D2C.
This is incremental opportunity for those listeners who don't necessarily want or need the radio in the car. We are very well positioned to offer the broad set of content that we have, you know, the great features and functionality through our apps in CarPlay or Android Auto or anywhere else for that matter. The improvements that we make there on the digital side will eventually come into SiriusXM with 360L as well.
Thanks, Jennifer.
We can now take our next question from Jessica Reif Ehrlich of Bank of America Securities. Please go ahead.
Thanks. I have a couple of questions. First, on digital advertising, digital audio advertising, could you give us some more color on AudioID and you know, what that gives you know, some color on what that gives you that you didn't have before?
Sure. We just announced the launch of AudioID, and, you know, there's certainly a need in the market given the constraints around data on customers, and, you know, this is just another competitive advantage we bring to advertisers. It just enhances the accuracy and understanding of any individual user, which improves obviously targeting, frequency, attribution, and it helps, you know, not only ourselves, but also other publishers where we're selling their inventory. It's just, you know, instead of matching just an email or a mobile device ID, on those IDs alone, that we're building this broader inferred understanding based on all the data we have across our platforms.
Since this is such an important part of growth, I mean, you highlight, both of you and Sean highlighted the momentum you have in advertising. Do you have all the necessary components for this, you know, for this area, or do you think you need more in digital audio advertising?
I think our ad tech stack is very strong, you know, with AdsWizz and, you know, the Simplecast capabilities we added as well on the podcast side. Our ad sales force is very strong, and we have a number of other value-added capabilities, whether it's Studio Resonate to help advertisers, you know, create compelling creative in the audio advertising side and, you know, research and now, you know, enhanced targeting through AudioID. We have a lot of the capabilities we need. I certainly am open if there are opportunities to add capabilities either through M&A or investment to continue to improve our tech stack there. I believe we're really well-positioned.
Just one more on podcasting. Like, how will the content change in terms of like, however you measure it, like the number of episodes or the types of content going into it. Because it's been such a big driver and such a big focus. From 2021 going into 2022, can you just talk about positioning and how we should think about the growth there?
Scott, you wanna start with that?
Sure. You know, we're really pleased with Stitcher, where we're at right now. You know, the organization is really together now, and as Jennifer mentioned, with Crime Junkie and a new show coming from Ashley's Audiochuck to Death, which is gonna be an exciting podcast. We feel we have a couple of things going into 2022. We sort of know what we are, and we know what we want. There's an ad sales bucket. There's a series of podcasts we'd like to own and/or create, and then there are others that are somewhere in between, where they start. There's categories that are emerging. Some are new, like true crime for podcasting, as they've been around, but they're gonna be audio performers, I think, on the satellite side as well.
The other thing I'm excited about, we've isolated where comedy and sports and some other things are very big in podcasting, and we're gonna continue to drive that. What we like most about that is it complements, both from a content and a marketing and an advertising point of view, our existing assets that are quite strong and obviously in sports and in comedy. We're gonna have the ability to go back and forth between content marketing and ad sales between those platforms. I think it's gonna be more attractive to podcast producers because they're gonna realize the marketing throw weight that will come with signing with Stitcher and the whole company on that front. Lastly, you know, when you look at the top 10 podcasts, they don't change a lot.
The fan base is pretty set in that way, and we're fortunate, you know, to have some of those. That means everything else is wide open. As you know, there's a huge number of big names, emerging talent, brands that have not entered the podcast space. You know, it would be the equivalent of the Billboard Top 10 not moving much over time. It's just gonna move, and we think we're perfectly positioned with our three-prong approach in being able to grow the podcasting. We'll be disciplined as always, and we're gonna try to look where we can to have that discipline apply to areas that complement our other two platforms.
Thank you.
We can now take our next question from Kutgun Maral of RBC Capital Markets. Please go ahead.
Good morning. Thanks for taking the questions. One on free cash flow and one on leverage, if I could. First, on free cash flow, it seems like 2022 might have more headwinds than you've seen for a while now, whether it's the ramp spend on SXM-9 and SXM-10, cash taxes or working capital. I guess, thinking longer term, is it fair to assume 2022 is a trough for free cash flow and that we can start to perhaps see more meaningful growth in 2023 onward, or is it too early to tell at this point? I know you're not going to provide multi-year guidance right now, but maybe if you just touch on your confidence in the continued strength of the company's ability to drive and grow free cash flow, that would be helpful.
Just second, you know, you ended the year at 3.5X net net leverage. Would the board's confidence in raising the regular dividend by 50% last October and now announcing the $1 billion special dividend extend to maybe comfort in perhaps operating at a higher leverage going forward as well? If so, what's the potential ceiling investors can expect? Thanks.
Sure. In terms of free cash flow, just to reiterate what I said in my prepared remarks around 2022, you know, the biggest driver, again, is the cash taxes. You'll see in the 10-K that our NOL and tax credit position will be fully utilized in 2022. You know, the biggest headwind for us in 2022 from a free cash flow perspective, again, normalizing for what happened in 2021 with the insurance recovery, is cash taxes. I think I've indicated that, CapEx, both satellite and non-sat CapEx shouldn't be materially different from what we experienced in 2021 for the 2022 year. We do believe those are elevated levels as we go through this spending cycle.
I do expect those to abate. We can continue to cycle through the deferred revenue as it relates to people transitioning to shorter monthly plans. All in all, the 2022 conversation is mostly around the cash taxes. You know, I absolutely feel this business continue to generate and grow free cash flow. You're right, I'm not gonna give you a multi-year guide on it, but I do think that you know, 2022 should be a trough. Again, keep in mind you know, we continue to invest for growth in this business. We're making the proper investments in technology and product and content across the board. Again, I'll hesitate to go beyond 2022.
Again, lots of confidence in our ability to grow free cash flow as some of these items normalize. As it relates to leverage, we've talked about low- to mid-3s. The special dividend puts us at a pro forma 3.5x . You know, obviously, the board approved that and has an incredible degree of confidence in the business, the team. Again, I'm not gonna sit here. We're not raising our indications. I think I said we intend to operate in the mid-3s, so I guess that's where we're at today. We'll certainly be opportunistic as we always have been, whether it's an organic investment, whether it's an inorganic opportunity, but those are our intentions today.
you know, I'm sure there are many that think this business can support a higher leverage target. Today, this is what we are comfortable operating at, given the demands on our free cash flow and capital allocation.
Fair enough. Thank you.
We can now take our next question from Sebastiano Petti of J.P. Morgan. Please go ahead.
Hi. Thanks for taking the question. I just wanted to follow up on the CapEx comments, Sean. I think in the past, we kind of talked about, you know, the baseline being about $300 million for the underlying business and then some accelerated CapEx spend related to the satellite above and beyond that. It looks as though, I mean, is it based upon your comments, is it fair to say that between the launch in early 2021 and maybe some late-year spend that the satellite related portion of that kind of is equivalent year on year? I mean, should we expect satellite spend, like, is it lumpy and should accelerate from 2022 levels? And then another question, just kind of thinking about shifting to the Pandora ad-supported business.
If you can give us any color on how to think about the near-term, long-term expectations there. The decline in ad-supported MAU seems to be accelerating. What's going on there? And do you expect, you know, on-platform revenue to grow in 2022 and beyond? Thank you.
The CapEx first.
Yeah, I'll take the CapEx again. I'm not sure, Sebastiano, I'm going to say much more. Again, as I said, I think 2022 versus 2021, consistent level of spending. You know, we are in the build phase of SXM-9 and SXM-10. I think the first launch for SXM-9 is 2024. I think I'll let the guide stand for itself, for 2022, and we can certainly revisit at a later date what to expect for 2023 and 2024.
Yeah. On the Pandora side, Sebastiano, we you know we have seen continued declines in MAUs. Ours are not declining as quickly, which is more a function and a driver of you know the ad revenue. The mix is shifting to more loyal customers which have you know longer listening hours. You know I certainly hope you'll see us make some meaningful changes to the apps this year. That's our expectation. Advertising growth you know will clearly become more challenged. We've been able to offset the declines in listener hours with you know significant improvements in monetization. You know we've done really well here, even in the fourth quarter. If we were up 4% year-over-year, it's the fourth quarter you know has a really exceptionally high sellout and that becomes increasingly challenging to drive above that level.
We do expect, you know, growth overall this year in our advertising revenue. Pandora is a key asset there and you know, helps us continue to grow on the ads platform side and podcasting and even in, you know, the SiriusXM broadcast side of the business where selling under SXM Media enables us to, you know, provide advertisers with these very complete solutions across all forms of audio. I feel good about the continued growth in our ad revenue.
Thanks again for taking the questions.
We will now take our next and final question from Steven Cahall of Wells Fargo. Please go ahead.
Hey, thanks. Maybe just first, Jennifer, on the used car market. I mean, new car inventories, as you talked about, those are obviously down and under some pressure. There is a lot of activity going on on the used car market. Once upon a time, you all used to talk about some of the connectivity you had into those used car channels. There's new companies like Carvana that are driving this a lot. I'm just wondering what used cars are doing in terms of the gross adds or the trial funnel at the moment and what you might be targeting for 2022 in order to drive that side of the business. And then you talked about that SiriusXM with 360L product that was powered by Pandora with the custom channels.
I was wondering if you could just expand on that a little bit. Is that a Pandora subscriber in a new car or is that just a SiriusXM with 360L functionality of a SiriusXM subscriber? And where I'm kind of going with this is with the connected car, it seems like you could start to offer Pandora into the same trial funnel that you've historically done with SiriusXM. I'm just wondering how you're thinking about that evolution over time. Thank you.
Sure. On used cars, it's a function of clearly the sales levels and, you know, the funnel is, and our penetration rate there, which is just, you know, governed by how quickly the base turns over. Then our ability to find those transactions ideally at point of sale. You mentioned some of the used car programs. You know, we have, you know, most of the franchise dealers signed up so that we get information when a customer buys a car, a used car in those dealerships. We've signed up a significant number of independent dealerships as well. There's still growth there to continue to drive those programs. I mentioned through the same dealerships, we're working to make sure that the radios are on at the time of purchase. We also do that at auction houses and in other places as well.
We're very focused on the growth in, you know, online, you know, dealerships or car sales and hope to have, you know, more programs launched there as well. It's again the sales, the pen rate, you know, our ability to get the new buyers of used cars on the trials and then converting them through that drives the overall funnel. You know, the funnel is still, you know, pretty evenly split between new car and used car trial starts, and I would expect over time. You know, clearly it's a function of what happens on the new car side, but I would expect over time that you could see used outpacing new car trial starts. Okay, and then the second question on 360L and Powered by Pandora. Do we have this capability today?
We have this capability today on the apps, where if you are a customer of our Platinum plan at SiriusXM, you get ad-free Pandora stations in our apps. We introduced this actually probably at least a year ago, maybe more in Stellantis. It is, you know, a really powerful feature for those in the car because it's a real easy way, again, in the interface in the car to be able to set up, you know, an artist base station with the Pandora functionality. You know, going forward, could this become an opportunity to get Pandora subscriptions? This is not a Pandora subscription. It is included within the SiriusXM subscription. But going forward, we certainly could look at those opportunities.
You know, we will work with our auto partners to, you know, see what might make sense there.
Great. Thank you.
Thanks, Steve. Thanks everybody for participating today. We'll speak to you soon.