Fox Corporation - Class A (FOXA) — Q3 2015 Earnings Call Transcript

Thank you, and good morning, everyone. Welcome to SiriusXM's earnings conference call. Today, Jim Meyer, our Chief Executive Officer, will be joined by David Frear, our Senior Executive Vice President and Chief Financial Officer. At the conclusion of our prepared remarks, management will be glad to take your questions. Scott Greenstein, our President and Chief Content Officer, will also be available for the Q&A portion of the call. First, 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 on 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. We advise listeners not to rely unduly on forward-looking statements and disclaim any intent or obligation to update them. As we begin, I would like to advise our listeners that today's results will include discussions about both actual results and adjusted results. All discussions of adjusted operating results exclude the effects of stock-based compensation. I will now hand the call over to Jim.

Good morning. We had an extremely strong third quarter. We are increasing our full-year subscriber guidance for the third time this year and also increasing our revenue and adjusted EBITDA guidance on the back of another great quarter. Here at SiriusXM, we remain incredibly focused on what we do best: We simply make great radio, a diverse offering of highly valuable news, talk and sports content, combined with curated commercial-free music. Radio that's worth paying for. And by the look of our subscriber growth, many Americans agree. We added 381,000 net self-pay subscribers, taking the self-pay base to a record high of 23.8 million. So far this year, we've grown self-pay subscribers by 1.3 million, almost as much as we did in 2014 during the entire year. And boosted by strong new car sales, we added 525,000 total net subscriber additions, pushing the paid subscriber base to a record high of approximately 29 million. While first half auto sales were quite good, the third quarter was exceptional. SAAR in the third quarter was 17.7 million, up 6% from last year's 16.7 million and up from 17.1 million in the second quarter. The September rate of 18.1 million was even higher. Time will tell how long this pace of sales can be maintained. Our penetration rate reached a record of about 75%, up nearly 4 points from the third quarter of 2014, resulting from gains at virtually all of our OEMs. This is a strong indicator that satellite radio is a must-have feature for most cars sold in the United States. As we mentioned on our last call, we see long-term penetration rates settling around the current level, which is up from our previous expectation of around 70%. The strong sales numbers this year, combined with our growing penetration rate in new cars, produced increased trial starts and conversion opportunities. And here, too, we've done a good job. Our new car conversion rate was 41% in the quarter, and I think maintaining this in the low 40s is exceptional because the rising penetration rate means our radios are being deployed in an increasing number of lower-priced models and trim packages. Our long history of steadily growing new car penetration has led to a sizable satellite radio-enabled fleet of about 79 million vehicles or about 33% of the total vehicles in operation in the United States. We continue to see this growing by a couple of percentage points a year for the next decade. And the SXM-enabled fleet should eventually approach a massive 180 million. This also means the fastest growth in our radio distribution will happen in the previously owned segment. This segment produced exceptional growth during the quarter. Approximately 18,000 dealers now offer 3-month trials of SiriusXM to all of their used car buyers who acquire an enabled vehicle. Also, improving our marketing efforts, over 8,000 of these dealerships run our Service Lane program. This program lets us selectively offer trials and obtain ownership information when car owners get their cars serviced at participating dealers. With the conversion rate steady in the low 30s and more conversion opportunities than ever before, we produced our highest ever quarter of used car additions. So far, most of our effort in the pre-owned market has been focused on offering trials via dealerships. But there are still many new areas for us to explore. For instance, nearly everyone insures their vehicle, and the majority of car purchases are financed. During the quarter, we signed an agreement with a major insurer to pursue cold marketing of SiriusXM subscriptions to previously owned cars. Stay tuned for more about this exciting program and other efforts we are making in this area. The previously owned segment is an incredibly significant long-term opportunity for us, which we will capitalize on. So with subscribers up 8%, strong growth in advertising and other revenue streams, we grew revenue double digits to a record $1.17 billion for the quarter. On the expense side, I feel we did a particularly fine job considering both the additional SAC to accommodate higher auto installations and the absorption of new pre-'72 music royalty expenses. Excluding these, our cash operating expenses were up just 3%. Fixed expenses actually declined 1% during the quarter. The combination of double-digit revenue growth and tight management of expenses produced expansive growth in adjusted EBITDA to $447 million, an increase of 17% year-over-year. But even more notable for me was the EBITDA margin of 38.2%, up almost 220 basis points from last year's third quarter and easily the highest single-quarter margin in our company's history. We've long said that business models matter, and we have one of the best models in media today. Just as we told you years ago, we are moving steadily towards 40%-plus adjusted EBITDA margins. SiriusXM's powerful and scalable model has become the envy of our competitors and other media companies. With negligible cash taxes and CapEx of only $30 million in the quarter, the bulk of this adjusted EBITDA flowed into our free cash flow, where we produced $369 million, up 38% year-over-year. One key reason we attract so many paying subscribers and the reason we're able to boast about these financial results rests heavily on our outstanding content. It's our mission to deliver to subscribers the best lineup of audio entertainment available anywhere. Our original, exclusive and easy-to-access programming are a hallmark that differentiate us from almost everyone else. Our focus on programming excellence was demonstrated again this quarter. We renewed our long-standing agreements with the NFL and NHL. We can bring live sports to subscribers in a car or wherever they have Internet access and surround it with exclusive, expert, and often news-making sports talk programming. SiriusXM provided wall-to-wall coverage when Pope Francis made his historic visit to the U.S., rebranding our Catholic Channel as Pope Radio. I really like that one. We've gotten an early start, doing much the same for the 2016 elections with half a dozen channels dissecting the news and broadcasting headline-making interviews and conversations with top candidates. We are making our bundle of great programming bigger and even better. This quarter, we successfully launched FOX News Headlines 24/7, an exclusive new channel that gives busy listeners an entire update on news, business, sports, weather, and even social media in less than 15 minutes, any time, day or night. This is the first time this format has ever been created for national radio. We also launched another full-time talk channel, Andy Cohen's Radio Andy, featuring Andy himself as well as an assortment of his talented friends. We also enhanced our already strong comedy offering with the launch of SiriusXM Comedy Greats, our eighth channel devoted entirely to comedy. Live and exclusive music performances are important for our fans, and SiriusXM took our subscribers to America's top music festivals all year long. Just this quarter, we broadcast from Austin City Limits, Lollapalooza, and we held exclusive town halls and interviews with music's biggest stars, including Don Henley, Keith Richards, and U2. We have also led the way in creating innovative, new radio formats by adding several new full-time music channels, such as Velvet and FLY, as well as special pop-up music channels like Yacht Rock and Road Trip Radio. These expertly curated channels address the evolving tastes of our subscriber base and satisfy the next generation of core subscribers. The one question many of you ask me about frequently is Howard Stern and whether he will be staying with the service in the coming years. We certainly hope so. Most of you would agree that his show has never been bigger or better. You should assume we speak quite often, and stay tuned for updates. And of course, the best way to hear any news regarding his renewal is to tune into Howard's show every morning. Heck, that's what I do. Since 2008, our programming costs have fallen by about 1/3 even as our revenue has nearly doubled. That reflects the power and efficiency of merging Sirius and XM. But those pre-merger contracts have all been renegotiated. And as we've said a couple of times, we do expect programming costs to begin rising next year. We still have a great position as the destination for premium nationwide audio content, and this is not going to change. We will continue to invest more in content to further our programming leadership. In addition to our focus on new programming, we are also growing our connected vehicle service business and investing in the next generation of SiriusXM design for the connected car. In CV services, I'm thrilled that we signed a new and expanded long-term agreement to be the telematics provider to Toyota. We look forward to delivering new and enhanced services and higher penetration rates for Toyota with our platform over the many coming years. You should expect to see more announcements with additional automakers this year as we solidify our position as the leading provider of connected vehicle services. We are also investing significant resources in our program called SXM17. I am very excited about this platform, which I've told you before will marry 2-way mobile connectivity with our satellite broadcast platform. Our team is pushing ahead rapidly, and we look forward to reaping major benefits of 2-way connectivity for our business and for our subscribers. As I've said, we plan on detailing more about this platform next year. We also have a vision to enhance the value of our spectrum, and this should be a very significant long-term value driver for our shareholders. Today, we are well into migrating all of our OEMs onto a single chipset technology, and we are developing flexible wideband chipsets for deployment in cars towards the end of this decade. This technology could allow us to add up to 400 new audio channels, deploy video services, or use that spectrum to make it easier for autonomous or self-driving vehicles to operate in harmony, or some combination of these and other applications. The bottom line is that we are taking significant steps now to ensure that our technology remains relevant and to maximize the long-term value of our network, technology, and spectrum. In August, our Board of Directors authorized an additional $2 billion of share repurchases, taking our total authorization to a massive $8 billion. We have used the growing free cash flow I talked about earlier to return in excess of $0.5 billion of capital to our shareholders for the sixth quarter in a row. Last week, we passed a cumulative total of $6 billion in buybacks since we began repurchasing stock in early 2013. To put it in other terms, we have removed 1.7 billion shares from circulation. The effect on our free cash flow per share, which we think drives the ultimate value of our company, is remarkable. During the first 9 months of 2012 before the capital return program began, we generated $0.064 per diluted share of free cash flow. During the first 9 months of 2015, just 3 years later, we have delivered free cash flow of $0.185 per diluted share, an incredible increase of 188% in just 3 years. The growth in underlying cash flow, massive share strength, and the resulting huge growth in free cash flow per share is an astounding accomplishment, especially given that we have done it while maintaining extremely reasonable leverage of just 3.3x. The players sometimes change, but the game for SiriusXM remains the same. Terrestrial radio remains our biggest competitor but is languishing today with no growth. While Internet radio continues to grow, I feel that growth is slowing and profitability remains a distant dream. We at SiriusXM will keep marching to the beat of our own drum. We have a plan to grow our subscribers and revenue, continue scaling our margins, and generate more free cash flow, which we will use in a very focused way to benefit our shareholders. We always look for opportunities to invest inside and outside of our business, and I remain committed to do that today.

Thanks, Jim. Good morning, everyone, and thank you for joining us. Our third quarter results have followed the strong trend we established in the first half of the year. Revenue increased by 11%, adjusted EBITDA rose by 17%, free cash flow improved by 38%, and free cash flow per share surged by 54%. We consider this an exceptional performance. We were also encouraged by our subscriber growth; in the third quarter, we added 525,000 net new subscribers, reflecting a 21% increase from the same quarter last year, bringing us very close to 29 million paid subscribers. Self-pay net subscriber additions for the quarter were 381,000, aligning with last year's numbers and pushing us near 24 million self-paying subscribers. Both new and used car trial starts hit record levels in the third quarter, with new car trial starts increasing nearly 15% due to higher auto industry sales and improved penetration, while previously owned trial starts rose by 24%. These results are very promising for our future subscriber growth. Churn remained steady at 1.9%, consistent with last year's figure and within our long-term trend range of 1.8% to 2%. We faced a regulatory challenge in the quarter when the FCC introduced new rules about outbound telemarketing calls to cell phones, effective the same day they were announced. This led us and others in the direct marketing sector to temporarily halt calling efforts to ensure compliance. We are raising our subscriber guidance for the third time this year. Our revised forecast for net additions is approximately 2 million, an increase of nearly two-thirds from our original guidance of 1.2 million. We anticipate over 1.6 million of these net additions will be self-pay subscribers, with between 300,000 and 400,000 coming from expansion and paid trial inventories supported by higher auto sales and production penetration. Auto sales reached 17.7 million in the quarter, and with a penetration rate around 75%, we now have a record 8.3 million OEM trials in the pipeline. We experienced steady self-pay churn and ended the third quarter in a strong position to meet our updated subscriber forecast. With positive momentum, we have the potential to achieve subscriber growth matching or exceeding any year since the Sirius and XM merger. Third quarter revenue grew approximately 1% to $1.17 billion, and we are raising our full year revenue guidance to around $4.53 billion. Advertising significantly outpaced overall revenue growth in the radio market, achieving a remarkable 31% increase in the quarter, and we are extremely pleased with our ad sales team's performance. Contribution margin decreased by 30 basis points to 70.8%, with higher royalty rates partially offset by reduced customer service and billing expenses. We continue to anticipate a contribution margin around 70% moving forward. SAC per install improved by 3% to $34, while total SAC costs rose 11% due to increased installation volumes. Overall fixed costs fell by nearly 1% thanks to savings in G&A, insurance recoveries, and disciplined expense management. This resulted in an adjusted EBITDA margin expansion of 220 basis points, reaching a record high of 38.2%. Seven out of nine cash expense line items improved as a percentage of revenue compared to last year, with SAC up just 4 basis points despite strong auto sales and record penetration. The only line item that increased as a percentage of revenue was revenue share and royalties. Summing it up, our adjusted EBITDA of $447 million for the quarter was our best ever, an increase of $66 million while absorbing $13 million in additional SAC, which will support future subscriber growth. Due to these favorable results, we are raising our full year EBITDA guidance by $30 million to approximately $1.65 billion. In the quarter, we converted 82% of our adjusted EBITDA into free cash flow, totaling $369 million, an increase of 38%. We remain confident in our current guidance of about $1.3 billion. Over the past 12 months, we have repurchased over 601 million shares, roughly 10% of our stock. This, combined with our 38% free cash flow growth, has led to a 54% increase in free cash flow per share. Since initiating our capital return program, we have repurchased more than 1.7 billion shares at an average price of $3.51. Our total debt now stands at $5.4 billion, with no maturities due until 2020. Leverage remains at 3.3 times trailing EBITDA. We have substantial liquidity, ending the quarter with $153 million in cash and nearly $1.5 billion in available balance on our revolver. We feel very positive about the momentum in our business. Let's open it up for questions.

I noticed a dollar rate increase for certain programming tiers on your website. Could you explain the implications of that for ARPU and what percentage of the customer base will be affected by it?

Yes. As we've mentioned before, we have many pricing plans available. Instead of applying broad price increases, we occasionally adjust specific prices. We have discounted plans that we utilize for retention and acquisition, and while we have been increasing prices on our standard service, we maintained those discounted plans for quite some time. This time, we've decided to raise those prices slightly. If you look at our rating engine, we have around 22,000 pricing combinations, so you can expect periodic adjustments to the pricing structure.

Could you provide an update on the status of the pre-'72 litigation related to New York?

It's currently moving through the court system. We recently received a favorable decision in Florida, but the opposing party is appealing. We also have initial unfavorable decisions in New York and California that we are appealing. Overall, the process will take a considerable amount of time.

It's a long road.

I have a couple of questions. The first, Jim, I know you talked about a lot of the new programming that you've introduced. It feels like you've really stepped up the programming initiatives. Can you talk a little bit about what's behind that?

I believe we have always aimed to be the leader in programming and to offer our subscribers a wide variety of content. Right now, our focus is on enhancing our programming, and our team is working on some innovative and impactful ideas. We are open to evaluating any programming suggestions we receive. I am serious about programming being the foundation of our offerings, and we intend to remain the leader in this area. There hasn't been a significant change; I just think a lot of hard work has culminated at the same time.

And also, it's like anything else. There's always an evolution process where a lot of these channels and ideas were in development for a long time. Andy Cohen, for instance, was very tied up at Bravo, and those discussions were going on for a bit of time. And then once he was a little more free on time, same thing with the all-news new channel. We always wanted one of that, but we needed the right sort of back-office to work with us to get there. So as Jim said, there are many ideas that are going on, including some that are coming to fruition down the road as well, and this just all sort of hit at once. So occasionally, you get that.

And Jessica, sometimes, the leader is the problem because I thought Yacht Rock was a dumb idea, then I ended up listening to it for almost every day for the 30 days it was on or certainly so. There's some clever stuff going on and I'm proud of what they're doing.

Yes, it's amazing. It just feels like it's accelerated. But moving on. And maybe this is for Scott, I'm not sure, but the advertising growth is extraordinary for any of us who follow the media sector. Can you talk about what's driving it and what some of the categories are?

Sure. We will approach this in two ways, starting with the category. If you look at Howard's content, including news, sports, and comedy, there is also a fantasy sports element that is gaining traction. Currently, we have reached a critical mass that the advertising community acknowledges is effective. Many advertisers have been experimenting with it and are now seeing excellent results, leading to increased investment from agencies. Additionally, we are taking a fresh approach to our programming on the non-music side. For example, we believe strongly in the potential of a dedicated all-news channel. Our advertising for news has already started strong, generating significant revenue from the outset. The previous model of focusing solely on content has evolved to prioritize both content and the accompanying advertising. We are quite enthusiastic about this development. Moreover, there are many opportunities we have yet to explore, such as powered sponsorships on these channels. We regularly host live events, and our Town Hall series generates nearly weekly requests for sponsorships and advertising. There's a lot of potential beyond the conventional advertising model.

I'm really excited. I have one last question. The used car or secondary car market opportunity is clearly enormous. I think I heard Jim mention 18,000 dealers. Can you discuss the other two-thirds of the market and what you're doing with independent dealers in the consumer-to-consumer market?

Sure. In my comments, I meant what I said. I believe this is the biggest subscriber growth opportunity we have for many years to come, and we won't let this pass us by. We will be very focused and use every resource at our disposal. I mentioned where we're headed next: almost every car on the road in this country is insured, and a large percentage is financed. All of these vehicles are linked to their VIN numbers and owners, which gives us valuable insights into car ownership. This is just one area we've been exploring for some time. We've made significant progress with one major insurer, which we'll discuss further later, and there will be more developments in that area. We're also learning more about partnerships with credit unions and similar organizations. Additionally, we're discovering a number of purchasing services and cooperatives that work within the independent dealer network, and I see opportunities there to access valuable data. We will continue to pursue every avenue to ensure we have a timely flow of that data, and it remains a top priority for us.

I wanted to ask you two things. First, could you discuss the expected increase in content costs for next year, considering the renewals and the move towards a normal stage where the benefits from legacy contract renewals may diminish? Secondly, I'm curious about your thoughts on what TuneIn is doing. They appear to have signed contracts akin to yours with the NFL and Major League Baseball. Do you believe they are a legitimate competitor? Additionally, how insulated do you feel from your content suppliers providing content to streaming platforms like TuneIn and others?

Okay, so on content costs, well, when we come around and give you guidance for next year, I think that will address that, and we are providing that at this point. So we're just going to defer that for a couple of months. On the TuneIn side...

Sure. First, I want to share my thoughts on TuneIn's plans to potentially launch an all-sports package priced at $8 or $10 a month. I believe this will be quite challenging for them. However, my focus is not specifically on TuneIn at the moment. It's interesting to note that major sports rights continue to become increasingly fragmented. I understand the business decisions being made around this, and I anticipate this trend will persist. Our approach is much broader than simply bundling live sports; our customers are looking for a diverse range of content. It's also important to remember that user-friendliness is crucial. There's a reason that over 200 million people listen to terrestrial radio. It's not just because it's free; it’s also because it's easy to use, and we are making significant efforts in this area. Scott, do you want to add anything?

Yes, I want to mention that over the years, we have established complementary 24/7 read channels that are well-defined and well-integrated within both the sports community and our subscriber base. We maintain that live games have always been accessible in various forms for many years. What truly enhances the experience is what accompanies those games and the ease of navigation when users want to explore beyond just the live events. This includes transitioning seamlessly to news channels, music, and other content. Therefore, we are still quite confident that our range of offerings is effective as it currently stands.

Yes. To be clear, I would prefer these guys didn't license these guys, but I understand why they did. Doesn't make me happy, but it's what they do.

Great. Just 2 quick questions here for David. First, I was hoping we could circle back and discuss that change in regulations from the FCC regarding marketing calls to cell phones. And maybe you could elaborate on what changed there and how you might expect to kind of replace that previous effort, and whether there might be any impact on costs or subscriber growth. And then just secondly, related to expenses, you mentioned fixed expenses down 1%. And just what could change that trend going forward? Or how sustainable might that be?

Well, I don't believe fixed expenses will continue to decline as we grow. However, we've been focused on cost-efficient growth, and you can expect that to continue in the future. We anticipate further expansion of the EBITDA margin. Frankly, we're somewhat surprised by the 38.2% margin this quarter, but we remain confident in our target of over 40%. Regarding the recent FCC rules, they pertain to what defines an automated telephone dialing system. We don't create the regulations; we just comply with them. The new rules came unexpectedly, so we and our vendors had to review numerous pages of material to ensure compliance. Essentially, our vendors now need to manually push buttons to dial cellular phones. This process takes longer compared to just pushing one button for a number. As a result, it will take more hours to go through the calling list. We'll decide whether we want to maintain the same level of list penetration as before or adjust it. We've been assessing the effectiveness of our marketing efforts for years, evaluating whether the cost of those last few attempts is justifiable. Given our experience operating under these new rules for about 2.5 months, we have a solid understanding of the implications for costs and subscriber figures moving forward, and we'll factor this into our future guidance and expectations for this year.

You were noting earlier how most of your success in the used car funnel is still coming out of the dealerships where you already operate. And so it's just an enormously cost-efficient way to win customers in that segment since you don't have to spend a lot more. You're already in the channel. So as you really start thinking about some of the initiatives where you're targeting the rest of the market where a lot of used car sales happen, how do we think about the spending that you're going to have to incur? Could that potentially put an upward pressure on SAC, for example?

It won't put any pressure on SAC, as SAC is primarily influenced by subsidies on new car installations. The question, then, is whether you'll see an increase in marketing costs, and the answer is likely yes. However, the good news is that by reaching out to these alternative channels, we are actually driving higher trial starts. Although sales and marketing costs may rise, they are effectively promoting trial starts. This is similar to the customer marketing costs we've been investing in for years, which focus on driving trials and conversions. We will manage those costs, but what we are really doing is increasing the size of the funnel, which I believe is a very positive aspect of the business.

And just as a follow-up, as you sell into the used car space, what's the ARPU profile of those customers? Are you finding that they're picking rate plans that are comparable to what new cars are? Or do you find that pricing is a bit more of an important tool?

Given that approximately 80% of car-owning households have two or more cars, we haven't observed much of a difference so far. Most households participating in the new car market also own a used car, suggesting that we're not encountering a significantly different market. Therefore, we still don't see much of a difference.

One other comment I'd like to make just in general is, and I touched on it in my comments, I want to reiterate it again, I think as you're trying to value our company, this news that we keep giving you of growing from today an embedded base of 79 million, and I really do believe it's growing very steadily towards 180 million. When you think about the power of that base, and there's no question that connectivity in vehicles is coming in a big way. We can debate the pros and merits and cons of that, but when you look at that 180 million, I want to remind you something else. The vast majority of those will not be connected in any way, okay? And so again, we are very, very focused on how do we capitalize on this installed base that we're building. And I think it's going to bode very, very well for growth for us for a long time.

Jim, just going back to those pros and cons of connectivity. And as you navigate thinking about 2-way services and evolving your product, what do you take from sort of the Apple Music experience so far? I mean, if you look at the numbers there, they came out with a lot of fanfare, and we're all trying to figure out sort of the demand in the U.S. market for interactive, on-demand listening versus broadcast radio. Do you take much from what you see in the market from competitors and form how you think about the strategic direction of your company?

Apple functions well without my input. I believe that achieving 6.5 million subscribers is noteworthy, especially after 12 years in the subscription business, although I'm unsure about the specifics, such as the number within the U.S. or their demographics, which hasn't been my focus. Streaming is clearly a technology rather than a competitor, and it will play a vital role in our offerings for subscribers in the coming decade. It benefits us significantly, especially at the outset. Enhancing the entertainment experience is important, but it’s crucial for us to simplify how customers access and renew our service, which I believe will greatly impact our business. It will also help us understand our customers better in terms of their listening habits. I’m optimistic about the interconnected world. For example, Pandora has seen remarkable growth in listeners over the past several years. However, when you consider everything, as we discussed recently, there are still 230 million people in this country listening to traditional radio, which remains a major focus for us in attracting new subscribers.

Makes sense. Just a separate follow-up. You mentioned a 75% penetration rate. That’s a very strong number, up year-on-year. Did the economics for you or David ever make sense to go standard with the OEMs? I know you’ve been standard with some partners historically, but I’m curious if the math supports that as an obvious choice from your perspective.

I think we've been expressing satisfaction with our current penetration level for some time, and I likely mentioned this when we were around 65% or 66%. Now that we’re at 75%, I'm even more pleased. From a production efficiency perspective, it seems beneficial for automakers to adopt a standard. However, that's just my opinion as a radio guy, and I trust that automakers can make their own decisions. We wouldn't invest in getting penetration to 100% by increasing hardware subsidies or revenue shares to encourage them to standardize. It's possible that this will happen naturally as technology evolves in cars. As indicated by our subscriber acquisition costs, we've made significant strides in reducing costs over the past year. Looking ahead, we should be able to continue lowering these costs while enhancing technology functionality in vehicles. So, in short, we'll just have to wait and see what unfolds.

And just if I could sneak one more in on churn. You guys were very clear not to extrapolate Q2 churn into Q3. You didn't comment on it in your prepared remarks. Any color on churn, either voluntary or involuntary? And any comment on credit card chipset trends, which have gotten an outsized amount of attention this quarter, as you know?

Yes, it's interesting. The representative from Visa who tracks our company was here yesterday, and we discussed it a bit. This year, we have processed around 50 million credit card transactions worth nearly $3 billion, and we haven't found any signs of a chip-related issue affecting customer retention. We simply don't see that happening. This isn't to say it couldn't be a factor for someone else, but it doesn't seem to be an issue for us.

Yes, Ben, if you look at voluntary and non-voluntary churn, David and I actually had my monthly churn review yesterday. After the meeting, we went into a quiet room. Over the last three years, there's virtually nothing new to report, which is great news, in my opinion. I'm really pleased with our current position. That said, I think our range remains consistent, as we've always indicated, between 1.8% and 2%.

I want to clarify something you mentioned briefly about the insurance impact related to G&A. Is there anything significant about this that we should consider?

We've had, as you know, sort of small things. I think we've had a whole bunch of lawsuits in different areas over the last couple of years. And we're like other companies. We buy coverage for various things we did, for things we started processing with the insurance companies last year or earlier this year that we finally got some recoveries through in the course of the third quarter. It was big enough to be worth noting, but not enough that I would incorporate it now into some fundamental change in our economics going forward.

Okay. All right. And then one other kind of bigger question on the topic of connected cars. Could you update us? I mean, how many of these things are actually being sold now, cars that have Internet bundled into them? And is there any change in kind of what you were seeing before that the connected car buyer is, if anything, a more loyal subscriber to Sirius?

I'll start with the easier part. Currently, we don't observe any significant impact on our conversion or churn rates when comparing connected vehicles to those that are not. This doesn’t mean that we won’t see a difference in the future, but we just don't see it at this time. Your first question is a bit more challenging, and I can’t recall the specific number at the moment. It’s something we monitor, and perhaps David or Hooper can follow up with you on that later.

It's probably approaching 40%, but we'll follow up on that.

Thank you for dialing in today.