All right, great. We can get started with our next session. Thank you everyone for taking the time to join us today. My name is Steven Mauskopf, and I cover entertainment here for Goldman. We are excited to welcome back to the Communacopia + Technology Conference again this year, Jennifer Witz, the CEO of Sirius XM. Jennifer, thanks for being with us today.
Thank you, Steven. Good to be here.
Great. Maybe you could start off high level. You've talked a good bit over the last couple of quarters on a few different vectors. First, improving subscriber trends, second, executing against some cost savings, some growth opportunities in the advertising business of yours, as well as some possible execution against spectrum value, which I know has been much discussed. Maybe just as you take a step back, I'd be curious from your perspective, what's changed in the story over the last year? As you look ahead over the next couple of years, what do you think the biggest drivers of value creation will be for the business?
Sure. I guess it starts with the strategy reset we did in late 2024, where we outlined the three priorities you highlighted. Strengthening our subscription business by enhancing our in-car listening experience, growing our ads business, and really leveraging the scale of our portfolio to drive efficiencies and also unlock new monetization opportunities to enhance shareholder value. The good news is these priorities haven't changed. They've remained the same. I think what's changed meaningfully over the past year is just that we now have tangible evidence that the strategy's working, right? I think one of the best places to see that is in our Q2 results. On the subscription side, really solid subscriber performance, growth in ARPU, strong customer satisfaction, very low churn.
We've established a baseline, I think, where we will continue to improve the durability of that subscription business and the number of initiatives underway that will continue to play into that. On the ad side of the business, growth in ad revenue in the second quarter of 5%. As you know, we've launched additional partnerships. We're engaging with other platforms like Apple on the podcast side, Amazon for DSP, and of course, YouTube, which will be launching soon. So we continue to see a strong growth path on the advertising side of the business. We've unlocked efficiencies across the organization. We're on track this year to deliver another $100 million in gross savings, and that all plays into our strong cash flow generation. Last year, we delivered $1.25 billion in free cash flow.
This year, we expect to deliver $1.375 billion, and next year on target to deliver $1.5 billion. So it's all of the operating results that play into that, but also a decline in capital intensity as we lower our capital expenditures for our satellite fleet as we complete that next year. That opens up significant opportunities for capital returns for shareholders. So we'll talk more about that, I'm sure, but we would expect share repurchases to be a bigger portion of use of capital going forward. As you mentioned, on top of all of that, which is a pretty strong investment thesis, we have optionality in our spectrum assets. We'll talk more about that, I'm sure, as well. But that's something that we've always known was going to be an opportunity.
But I think over the last year or two, there's certainly been more attention on the space, and I think that's brought more attention to our assets as well.
Definitely, I want to come back to a lot of those themes and topics. But maybe starting first with the core business, the in-car satellite radio business. Could you maybe talk a little bit more about some of the steps you're taking to improve Sirius XM's in-car position, as well as improve the long-term growth profile of that subscription business that has been around for the last few decades?
We have a really unique business in-car that no one else has, and it's a massive competitive advantage for us. I think maybe the impression has been that this is going to decline really rapidly, maybe like pay TV. But the underlying metrics just don't show that. Our subscribers are incredibly loyal, that we've built in a number of new initiatives to expand access. That's the usual, so we're going to increase penetration rates at the right economics, of course. We have organic increases in our penetration rates on the used car side of the business, and that's a meaningful contribution for us today. We've launched things like our extended-duration plan, which brings new subscribers into the service who might not otherwise have experienced it through our normal conversion funnel. All of those bring more customers into the service.
Beyond that, we're improving the customer experience. Everything from SiriusXM with 360 L, which provides a much more personalized experience in the car. For better content, comedy launches, artist channels, continue to increase the content in our unique bundle, and SiriusXM with 360 L helps us serve that to customers in a more personalized way, of course. Then better pricing and packaging to open up demand at lower price points, and then also enhanced value to be able to position ourselves for taking price, probably annually, going forward. All of that, I think, improves our economics for the subscription business in a way that gives us confidence in the durability of that business going forward. So we feel really good about the progress we've made and how it's setting us up for the future.
You mentioned SiriusXM with 360 L. I believe it's in about 20% of the self-pay base at the moment.
Yeah.
I'm curious what you've learned in terms of maybe data and customer engagement with the product and with the channels and with the service itself that is enhancing your understanding of subscriber behavior and maybe helping you better manage that business.
It's really a game changer. We now have access to all of this data on customer engagement, and it's in 20% of self-pay subscribers, and it's in just probably by the end of the year, just over about 60% of our new car sales as well. It just continues to ramp, and the data we're getting back helps us make better decisions about the content portfolio. Who was listening to what? Should we take certain things down and put other things up?
We made a decision recently to add local sports to the platform, for instance. It's all about what are we learning about what our subscribers want. Combining the data that we're getting back on listening with obviously, the research that we might do as well to make better decisions about what goes into the content portfolio, how we can better personalize the product.
We saw a really strong increase in, or continue to, really, in our personalization features in car, like the personalized artist stations, where you plug in an artist name, and it creates a channel for you, as well as our extra channels. It's just a much more advanced, personalized experience, and our subscribers are reacting really positively.
Do you see that show up in metrics like churn or ARPU on the 360 days?
It has better conversion, better retention overall, and better ARPU. It just gives us a lot more flexibility in terms of different kinds of packages that we can create and different kinds of enhanced features that we can provide because of that interactivity in car.
That's helpful. Maybe turning to this year on the subscriber side, your guidance for 2026 calls for modestly greater self-paid net add losses this year relative to last year. Could you maybe just touch a little bit on the puts and takes you're seeing in the self-pay metric?
Sure. Yeah.
This year on what we should expect to see as we go into the back half of the year, maybe 2027?
Yeah. First of all, we're really pleased with retention. We had churn in the second quarter of 1.4%. That's below where I certainly ever thought it would be, and I think we continue to see really strong retention going forward as well. On the sort of top-line metrics in terms of demand, we've had this slow decline in conversion rates, but we've been able to offset that to a large extent with our Companion subscriptions and our extended-duration plans as well, which is again, bringing new customers into the service. They might be part of the household, or they may not have chosen to subscribe, and we're getting them through EDP. So those have both helped bring in new demand.
I think the real opportunity in terms of how we look at subscribers this year, the two things that are maybe impacting our thoughts on slightly lower self-pay net adds this year versus last year are opportunity to really stop using as many unpublished discounts. Traditional subscription services tend to use a roll-to-pay trial, where you roll to a full-price package, and we're slowly moving our acquisition programs to that process. That'll result in some near-term net add degradation, but long-term, much better revenue profile. It all speaks to strengthening the overall subscription base. We expect to see more of that in the coming months.
In the fourth quarter in particular, because we launched continuous service last year in the fourth quarter, so subscribers had stayed in a state of suspend until they resolved what they were going to do with a new car that they purchased, right? Some subscribers will transfer the subscription, and some might choose to cancel because they added a car to their household, and they chose not to add it to that car. But in the beginning when we launched it, there were more customers in that state of suspend before they corrected that. While it continues to build, it starts to level out in the fourth quarter. It's just going to contribute less in the fourth quarter than it did last year.
Understood. You mentioned the Companion Plan additions this year. Could you talk a little bit about the strategy of Companion, and then how you would encourage investors to think about the economic profile of these subscribers, as well as the lifetime value, perhaps, of the account that these companions are a part of?
Yeah. We've been really pleased with the performance of Companion, and while they are $0 ARPU, they do enhance the overall value of the household. So you have a current paying subscriber who has access to a companion, whether it's a radio or a streaming subscription. Most customers who take advantage of it are giving it to another member of the household, including an adult child who's driving a new car.
It does, in that way, I think, open up some new demand and more engagement with our service with a broader set of members of the household. But it's also supporting retention because you're less likely to cancel if more members of the household are using the service. We've been very pleased with what we've seen there and hoping that there's maybe more ways to broaden it going forward.
There's been some very slight cannibalization, but overall, it's supported the rate increase that we did earlier this year. It could be, I think, very valuable to retention going forward. Because something like over 80% of customers who have taken advantage of it say that it's actually added value to their subscription, and over three-quarters say that they're more likely to stay as a result.
Any way to size how large the Companion Plan add-on service could get across the base or maybe where we're at today or where you've gotten so far?
I think we've provided some estimates so far, so we're probably close to about 300,000.
Sure.
I'm not sure how much more we will expand it, but so far, we continue to see progress in terms of customers adding these, and it again is net positive, I think, overall for revenue and for retention forward. So we'll continue to look at opportunities going forward.
That's great. You also mentioned continuous service. I was just curious if you could maybe expand on some of those comments around continuous service, what the initiative is, and then as you anniversary the initiative, the extent to which it could perhaps continue to be a benefit to churn.
It's really about reducing friction in that process of moving from one car to another. We keep the subscription on until you decide when you add another car. You may not buy another car right away, or maybe you've bought a car and you're trying to decide which car you're going to keep the subscription on when it's during a trial. Most customers have reacted incredibly positively to just having the capability to retain their profile, their preferences, and their streaming credentials. It just makes things easier as they go through that process. When we launched it, of course, the incremental subscribers taking advantage of it at a growth level was higher than what we'll see because now it's on more of a run rate basis.
But again, this is just the first step in moving to an identity structure that's based on a customer and not a car. Then also moving forward, we'll have things like auto-transfer where we automatically, if the matching is obviously appropriate, we'll automatically move the rest of that subscription to the new vehicle that somebody's purchased. So it just continues to, I think, remove some of that leakage, and it's a net positive overall for churn.
Yeah. Maybe as you think of future initiatives that could potentially reduce leakage or reduce churn or add value to the lifetime customer. Any other initiatives that are on the horizon or thoughts or ideas in terms of what could be added to the service?
Well, one in particular that, and we'll talk a little bit about Sports Pass perhaps, but I think in general, in terms of acquisition and opening up new demand, there's an opportunity for us to create packages that are maybe content-focused. We launched Play, of course, which was ad-supported music stations at a price point of $7. Sports Pass, which we're launching now, is $5 for all of our sports content, and we have an incredible lineup of sports content that I think could be appealing to a broader set of subscribers.
Maybe you already have a music service that you're satisfied with, but you can't possibly get the breadth of sports content anywhere else but SiriusXM . For $5 a month, you could add that to one of your services. I think it's really compelling and could open up the addressable market for us.
Sports is obviously incredibly powerful as an asset, and I think we have a really unique set of across all of play-by-play, the four major leagues. We have all kinds of other sports, golf, tennis, racing, and soccer. We have all the sports talk around that, and now we have local sports stations through Audacy as well to add to that. The content itself is enhancing the value of the subscription, and I think will work towards supporting retention. The package, though, I think could build new demand. Could also be used for retention as somebody comes through our saves process and we find that they most like sports. You could offer them that as opposed to some other discount.
Maybe to extend the conversation on adding value, the next logical topic from there, ARPU, and taking price after adding value to packages. I think this year marks the first year of consecutive annual price increases at Sirius XM. Maybe just taking a step back, I'd be curious to get your updated thoughts on how you're thinking about balancing pricing versus retaining customer value, retention, and then expanding the addressable market of the service.
Yeah. You know many of our package price points are $20, $25, and we've been hesitant to maybe take price annually. Given the success we had earlier this year, it's probably a model that we'll use going forward. Always, and we started this in late 2024 as well, always adding value first. Initially in 2024, it was pushing more of our sports and our premium sports and talk content down to more of our subscribers. This past fall, we did Companion, obviously.
There are opportunities, I think, as we talked about, maybe to expand Companion. I also think lean more into superfan and fandom and what it means for us. Because that really is what's unique and differentiated for Sirius XM, right? That you can get music in a lot of other places, but how we deliver music is incredibly differentiated and very human-curated.
I think there's an opportunity to build that out so customers better understand all of the things they have access to, whether it's contests for special access to private events, or it's call-ins or listening to special artist interviews or all of the exclusive content we have. There's just a breadth of things that I think we do very differently than any other service, so that's going to enhance the value as well.
Yeah. Maybe just a follow-up question on that, because we've seen others in the music space be hesitant to take pricing over the last two, three, four, five years. What are you seeing in the customer base on the back of some of the pricing that's maybe giving you the confidence to move to this annual model.
You see it in the churn rate, right? Yes, we've had continuous service providing some support for that. Even with Companion, those who take Companion, the retention is two points higher. So I think, despite the rate increase, we feel really good about where our churn rates are. That's even before we've fully taken advantage of all the data we're getting back from SiriusXM with 360 L to better personalize all of the experiences, right? We only have 20% of our subscribers out on SiriusXM with 360 L, so we don't have the full set of data available for us yet across the subscriber base to meaningfully enhance those personalized experiences through our marketing to make sure that customers are listening to a broader set of content, right, across more devices, in more locations, and across more members of the household.
Those are the things that drive engagement and value.
Let's pivot. I would love to talk a little bit more about the product offering and the content strategy moving forward. We touched on sports, but maybe even taking a step back as you think about the home of fandom strategy that you've been talking about. Where do you see this strategy going for Sirius XM? What opportunities do you see to deepen engagement, and what do you think that could mean for the business longer term?
Yeah. I think maybe an example would be best here. If we take something like The Highway, we have an amazing set of country music content, and The Highway's kind of at the core of it. It's our single biggest channel across every demographic from age 18 to 65. 25% of our subscribers are tuning in to The Highway every single month. It has so much to do with the content and the music that we play. But it's also about, we have things like Highway Finds or On the Horizon or Future Five, where we're actually bringing new artists to our listeners. We've obviously built many careers across country, but Luke Combs and Lainey Wilson are two examples that have come up through those areas.
I think listeners really respond to being a part of that, and they feel a part of this Highway community. It's the being able to discover our artists early on. It's having access to these special events like the Highway Happy Hour that Buzz Brainard does every Friday down in Nashville. It's the other on-air personalities like Ania Hammar or Cody Alan or Macie Banks, where they have such incredible passion just themselves. I think customers and our listeners feel part of this community because they can call in and request songs, or they can listen to artist interviews, or they have the chance to attend some of these artist events. There's just the breadth of our country music in general is massive.
We have our channels beyond The Highway, like Y2Kountry or Prime Country, and all these artist channels as well, including Morgan Wallen that we just launched last quarter, who has been massive. He's obviously a huge artist in his own right, but he's launched a channel with us, which is exclusive to Sirius XM. He did a small stage show for us down in Nashville as well, and it's been an incredibly powerful channel, growing rapidly. I think the idea that we have access to all of this exclusive content, which is at the core of that fandom strategy, but then we build all of this community around it.
It is this flywheel, right, of exclusive access drives participation, which drives community, which drives loyalty, which drives growth, and underlying strength in our business, which then gives us more opportunities to provide more exclusive access because more and more artists want to work with us. That is the core of what fandom is for Sirius XM. Again, so unique to us. I think the reason it matters now, even though we have been doing this for, in some ways for 20 years, is that there is just so much content out there. AI-generated, some of that very low quality.
Customers are looking for platforms with trusted voices, where there is real human curation, and they feel part of something. I think that is what we do incredibly uniquely, and we have the opportunity to do it in many other places.
Sports Pass is kind of like that, but I think there is comedy and dance music and hard rock, where we have all these fantastic personalities that our listeners love, and we can build more and more events and call-in and participation around that to, I think, support retention and a better, stronger, durable subscription business going forward.
The Highway is one of my favorite channels on Sirius XM.
Thank you. Thank you for being a listener.
You touched on Sports Pass a bit earlier, but maybe to broaden that part of the conversation out a bit, thinking about the segmentation opportunity for Sirius XM moving forward, reaching different audiences, perhaps having some different price points and different use cases, whether that is in the car or on the app. How do you think about the segmentation strategy evolving from here? Sports is a great example. Are there other use cases or possibilities on that front?
Definitely. I think that goes to creating a set of packages at lower price points to open up the addressable market, right? In combination with finding ways to enhance the value of our overall bundle. Most of our customers still want the bundle, right? We need to continue to enhance value so we can take price going forward. Yes, having a set of packages at $5 a month or $7 a month, I think can really open up new demand, whether that is through our typical conversion funnel in-car or outside of that, just through prospecting. Could be streaming only or could be in-car and streaming.
We will be able to also, I think, leverage partnerships better because at a $5 price point, it is much more attractive to work with one of, I do not know, the wireless companies or pay TV companies as distribution or a bundle going forward. I do think it opens up more opportunities to improve demand going forward.
Very good. Maybe just to extend the conversation on content. Over the last two decades, Sirius has been the leader in premium audio content, although over the last couple of years, we have seen some competition come into the space. You have had Spotify, Amazon, Apple, all get interested in premium audio content, podcasting, some sports content perhaps as well. What do you think differentiates Sirius XM from some of these other platforms, and what would you expect to keep the competitive edge in Sirius' favor on the content front as you look ahead?
It really has to do with human curation, exclusive content, and live. Those are the things I think differentiate Sirius XM. As we've said many times, we expect to be a complementary service to many other services. You're going to have a music collection. You may choose to use Spotify or Amazon or even Pandora. We provide something really different, and I think that what we do really uniquely in the car is also really differentiated. As we continue to add more personalization, we're going to be able to, I think, reach broader audiences because we can actually put the right content in front of the right customers. They understand with the breadth of what we have, what's meaningful for them.
Any genres that stand out or trends?
I think we've built out comedy and we've been adding, obviously, we have comedy and entertainment. We have Howard and Conan O'Brien and Andy Cohen, and then we added Sebastian Maniscalco recently. I think there's more we can do around the comedy genre. Then true crime as well, which is, of course, on fire in podcasting, and we have a lot of podcasts in our app and in 360 L. There's more linear channels that actually have been pretty successful for us, like Dateline. We're launching one with ABC 20/20. So I think there's probably more around true crime we can do as well.
Very good. I want to get into your advertising strategy for a moment. Advertising's become increasingly a second avenue of growth for Sirius XM, spanning podcasts. You have Pandora programmatic. Now some third-party inventory that you're bringing on. I guess as you look across your advertising strategy, what do you still feel is underappreciated amongst the investor community in this part of the business?
Yeah. I think it is probably the value of the third-party representation deals that we have been doing. The core of the advertising strategy from many years ago is Pandora. We have a really strong owned and operated platform there. Pandora probably represents 50% of our ad revenue now. We have built out an extremely profitable podcast business after staying really true to our original strategy of broad-based distribution.
We have the most shows in the top 20 of any other network, and talent keep coming to us. We have the opportunity, I think, to do responsible deals in that world. Because we have industry-leading monetization in both music streaming from what we did with Pandora and we added SoundCloud as a third-party deal. We have extended that industry-leading monetization to podcasting. We were able to work closely and define this new arrangement with YouTube.
They have a lot of music streaming and podcasting inventory as well, and then all of this other talk inventory too. It was just a natural extension of what we already do well. I think as investors look at the business, advertising is a significant competitive advantage for us in terms of the breadth of what we bring to the table with all of the unique assets we have, whether it is our sales force, our audience insights, or our ad tech, and increasingly premium content and the massive audience that we have access to. With YouTube now, we are going to be at 255 million monthly listeners, and that is 90% of the U.S. population above the age of 13.
It is the scale of the audience that we have, the scale of the types of content we have, and the scale of the advertiser relationships that I think maybe are not fully appreciated.
On YouTube, I am curious strategically, what do you think the YouTube partnership says about Sirius XM and the role that it can play in the broader advertising ecosystem, especially on this more digital side?
I think it says we're the best. We're the best in audio advertising. We have this unique set of assets that, again, we've developed industry-leading monetization as a result of that. I think YouTube, look, they are the best at video, and they've been so focused on video. I don't know, until more recently, if they had a good appreciation for how much was actually audio engagement. There's so much that's multimodal. I think we can bring real strengths in audio advertising that will help monetize that. It really benefits both of us because we can sell it alongside a lot of other inventory we have. So it's complementary, and we already have the advertisers and the supporting insights and targeting measurement to be able to continue to grow that for them.
Do you feel like this partnership creates a blueprint for potentially other third-party partners to-
I do.
-come into this space?
I do.
If so, I'm curious what types of partners you think are still out there.
Yeah, it started with SoundCloud and podcasting. It's a natural extension of that, and I think there are other partners as well, perhaps similar to YouTube, where consumers might be listening as opposed to watching. Look, the audio advertising market is something like $18 billion in the U.S. today, and we're 10% of that. I think with new partnerships, we have an opportunity to grow our share of that market. I also think with more targeting and measurement, we can bring more attention to audio as a medium as well. Because it's just under-monetized versus everything else, and yet there are so many situations where consumers are not in front of a screen, and so they can only listen, and that's something that we can uniquely deliver on.
I'm curious, as you settle into this YouTube partnership, as we think about commercialization over the next several quarters, maybe even a year or two, what key development should investors from the outside in look forward to as we start to look ahead to the monetization path for this deal?
What we are watching, obviously, is advertiser demand. Like how many advertisers, how many advertisers come initially, how much they repeat the business. Are there new advertisers? Are they increasing the size of their buys, right? All of those things are going to give us a good sense for demand. As we better understand what type of inventory it is, that will give us a better sense as to how big it can be over time. But the ultimate test for investors is going to be revenue, right?
Like, how does it show up in revenue? As we have said, we are just starting to launch now. It is going to have a small contribution this year. But as we go into next year, especially the second half of next year, we really expect it to scale and show up meaningfully in the numbers.
Any sense of how big this could be from a revenue perspective for Sirius XM over time?
I do, but I am not ready to share yet.
Okay.
We'll have 2027 guidance early next year.
We'll wait for that then. Maybe turning to the cost structure for a moment on the margin front. Margins have improved meaningfully over the last couple of years. There's some nice operating leverage in the business. I'm curious as you sort of think ahead about how the cost structure is changing, where could margins go, and as you think about being more efficient, what are some areas of focus?
I think we still have opportunities across the cost structure in many areas, and as many companies have talked about, it's really about AI enablement, AI workflows, enhanced productivity. We've seen a lot of great progress on customer service and billing. Our call center expenses are down like 25% year-over-year, and we still see opportunities there. We're just getting started in voice. Most of that is coming just from messaging, and so there are a lot of opportunities across the cost structure like that, and so I would expect us to continue to execute on growth savings in the cost structure.
Some of that will be reinvested, and then of course, on the capital side, we're going to complete this satellite fleet next year, and so 2028, we're looking at close to zero in satellite CapEx, if not zero, and that's for many years as we go forward.
It's a real positive tailwind to free cash flow.
Yep. Turning to spectrum, it's one of the most frequent debates we've had on the business this year. Just be curious for those newer to this story, if you could talk about the opportunities around your spectrum portfolio and the potential paths to monetization.
Sure. It's a core operating asset today. Most of it, 25 MHz, is being used to support our subscribers and the delivery of our service to those subscribers, 35 million subscribers across the U.S. and Canada. That's the 25 MHz that's S-band. It's your prime mid-band spectrum. We also have 5 MHz on either side, which is WCS or C and D blocks that we acquired in 2024. It's licensed for different uses, the WCS versus S-band. I think WCS is generally, we're using it today for some public safety initiatives and some emergency services, but it also serves as protective guard band to S-band. While it's licensed for terrestrial, the power levels are pretty low. There are other uses that we could look to do in those blocks.
S-band is, while it's fully utilized, there's still the lower band, which is the Sirius subscriber, and this is going back 25 years when we launched these satellites and the service. It's fully deployed for Sirius subscribers, but of course we've been migrating customers, or they've been migrating themselves as they buy new cars, which are the technology is the high band or XM. Same content, right, basically on both.
Over time, as they move off of Sirius, we could do something different with that band. Of course, it's licensed for a specific use. All of this has regulatory implications. For us, it's really about maximizing value here, right? The objective is to find the highest value use, and the way that might come to fruition could be any number of structures, and we're sort of agnostic, but we're focused on maximizing the value.
We want to enhance our flexibility through that process, and we have to make sure that from a technical and regulatory standpoint, whatever path we choose obviously is viable.
Could you talk a little bit more about ways to maximize the value of the spectrum and maybe as part of that, different use cases? To the extent you're having conversations with different parties, don't need to name parties, but-
Yeah
-if you think about where you're seeing the interest today, are those conversations more focused around leasing, maybe sharing the spectrum, or those maybe even potentially interested in acquiring the spectrum at some point down the line?
We've been pleased with the level of interest, and of course, there continues to be an expansion of use cases. The obvious one from the last few to several years is Direct-to-Device, right? We've had a number of conversations with different potential parties. I think, again, time is on our side here a bit. I think that we want to do the right deal. We're not focused on speed, we're focused on value, and that also, I don't want to presuppose what structure is best, right? There are any number of opportunities, whether that be a sale or a lease or a JV or just commercialization. It really has to do with the highest value opportunity, and again, I think with the emergence of new use cases, that being patient is probably a good thing.
Yeah. Is there any delineation? It sounds like the 2, 5 MHz WCS blocks, the guard bands, might have near-term opportunities to be monetized. I don't know if there's a way that you're thinking about that differently from the 12 .5 MHz that
It's possible. I think the question is it more valuable together, right? Smaller pieces are sometimes not as valuable as larger pieces, as you might imagine. Those are the things that we have to balance is near-term actionability versus the right value maximizing path.
And maybe with a minute left here, just to touch on free cash flow. You've brought it up a few times throughout some of the remarks, but just to give us a sense of the trajectory of free cash flow of Sirius XM becomes a materially free cash flow generative company post-satellite CapEx normalizing, how you're thinking about using that free cash flow, and then of course the leverage profile normalizing as well.
Absolutely. We hit our target leverage at the end of Q2, which was a little earlier than we expected, and we're on track to hit our target free cash flow of $1.5 billion next year, which we think we have a very healthy dividend that's probably well-placed. That opens up a lot of opportunities for us to deploy capital for share repurchases. Of course, our capital deployment priorities have stayed the same, right? Which is invest in the business first and foremost in the highest return opportunities, including potential M&A. I think the likelihood of anything big is small, but there could be some small things that make sense for ads, for instance. But outside of that, it's maintain our leverage ratio and then focus on capital deployment to shareholders.
Very good. Jennifer, we'll have to leave it there. Thank you so much for being a part of the conference this year.