Sirius XM Holdings Inc. (SIRI) Earnings Call Transcript & Summary

Greetings. Welcome to SiriusXM's Second Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Jennifer DiGrazia, Senior Vice President of Investor Relations.

Thank you, and good morning, everyone. Welcome to SiriusXM's Second Quarter 2026 Earnings Call. Today's discussion will include prepared remarks from Jennifer Witz, our Chief Executive Officer; and Zac Coughlin, our Chief Financial Officer. Following their comments, we will open the call for questions. Joining us for the Q&A portion are Scott Greenstein, our President and Chief Content Officer; and Scott Walker, our Chief Advertising Revenue Officer. I would like to remind everyone that certain statements made during the call may 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'd 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. Additionally, we have posted a supplementary earnings presentation and trending schedule on our Investor Relations website for your convenience and to provide an opportunity for as many analysts as possible to participate during the Q&A portion of the call, we ask that you please limit yourself to no more than 2 questions. With that, I'll turn the call over to Jennifer.

Good morning, everyone, and thank you for joining us today. As we reach the midpoint of 2026, our strategy is clear and our solid execution is delivering results. We remain focused on advancing the 3 strategic priorities we established in December 2024, strengthening our subscription business through exceptional in-car listening experiences, accelerating the growth of our advertising business and leveraging the scale of the SiriusXM portfolio to drive greater efficiency and long-term shareholder value. What gives us confidence today isn't simply the financial performance we delivered this quarter. It's that we're seeing tangible evidence our strategy is creating an even more durable business. We're building deeper subscriber relationships, expanding monetization opportunities, improving operating efficiency and reinforcing competitive advantages that we believe will support sustainable long-term growth. In the second quarter, we returned to positive net subscriber additions, increased ARPU and achieved the lowest churn in SiriusXM's history supporting 1% growth in revenue. Our continued focus on efficiency also drove further margin expansion. And as a result, adjusted EBITDA grew 3% and free cash flow increased 48% year-over-year, demonstrating our ability to convert disciplined execution into stronger financial performance. Reflecting the strength of our first half performance and our confidence in the business, we're raising our full year 2026 guidance for revenue, adjusted EBITDA and free cash flow by $25 million each. Before Zac reviews our financial results in more detail, I'd like to highlight a few areas where we are seeing solid execution. Starting with our subscription business. We delivered our strongest second quarter subscriber performance in 4 years, with self-pay net additions of 22,000. Companion plans, continuous service and extended duration automotive dealer programs all contributed meaningfully, helping offset slightly lower conversion rates. Our confidence in companion plans continues to grow, and we're thoughtfully expanding the program where we see the greatest strategic value. It's strengthening retention, customer satisfaction and revenue while incremental customer relationships continue to more than offset limited ARPU dilution and modest cannibalization. At the same time, we're becoming more disciplined in promotional acquisition, reducing discounting to improve subscriber quality and strengthen long-term economics. While these actions may temper near-term net additions, they position us to generate higher lifetime value and more durable growth. Looking to the second half of the year, subscriber trends will reflect a different seasonal pattern than investors have historically seen. Beginning in the fourth quarter, the year-over-year benefit from continuous service will begin to normalize as we anniversary its rollout resulting in more challenging retention comparisons. Combined with our disciplined acquisition strategy, we continue to expect modestly lower full year self-pay net additions. The benefits of this approach are already evident continuous service helped drive sulfate turn to approximately 1.4% during the quarter, while underlying churn also improved year-over-year independent of this initiative, driven by lower vehicle-related and nonpay churn. Combined with continued ARPU growth, these results demonstrate we're building a more resilient subscription business with pricing durability and higher long-term customer value. We remain focused on broadening how customers experience SiriusXM, connecting them with more of the music, sports, news, talk and entertainment that matters most to them across more devices, more listening moments and more members of their household to deliver a more personalized, engaging experience that strengthens retention and becomes increasingly essential over time. Exclusive content and unforgettable live experiences have always set SiriusXM apart. And in the second quarter, we continued to build on that advantage. Every new channel, artist performance, live event and creator collaboration advances our vision for the future of audio, making SiriusXM a home for fandom. In Q2, we expanded our artist-first programming with new full-time channels from Morgan Wallen and Green Day, alongside limited run offerings, including the Eagles, U2 and mild Davis radio. We also continued bringing fans closer to the artists they love through one-of-a-kind SiriusXM-only event, including performances by Kenny Chesney, Hillary Dust, the Black Pros and whiskey Myers, a live smart less taping and a special FIFA World Cup performance by Carlos Our front row series complemented these experiences by bringing audiences closer to the biggest moments in entertainment, with special conversations featuring the cast of the Delaware's product 2 and Toy Story 5, along with an intimate album preview with Olivia Rodrigo on HITS One. Across news, talk and podcast, we're strengthening our portfolio of trusted voices and compelling storytelling. We expanded our partnership with ABC News by launching the ABC News Live and 2020 True Crime channels, while bringing this week with George Stephanopoulos and start weekend to We also welcome the John Kasikshow and hosted Vice President, J.D. Vance on the Megan Kelly Show, underscoring our commitment to thoughtful conversations and diverse perspectives across the political spectrum. In podcast, we renewed partnerships with Comedy Bang! Bang! and the School of Greatness and announced a history of the United States in 100 objects, a landmark original series produced with BBC Studios and the award-winning team behind 99% invisible. Sports remains one of SiriusXM's most significant competitive advantages and an increasingly important driver of engagement. More subscribers are tuning into sports than ever before with sports streaming up 14% year-over-year and growing across every platform, including our expanding 360L audience. During the quarter, we delivered comprehensive coverage of the Masters PGA Championship U.S. open in every round of the NFL draft and NBA playoffs. We extended our long-standing NASCAR partnership, welcome Giants All-Star Logan Web to MLB Network Radio and Kenny Beecham to SiriusXM NBA radio and served as the audio home of the FIFA World Cup. We're also expanding our presence in one of the world's most passionate fan communities with the launch of WWE radio. Together, these investments strengthen SiriusXM's position as the premier audio destination for sports fans. Building on that success, yesterday, we announced Sports Pass, a new subscription designed specifically for today's always on sports fan. It offers a simpler or flexible way to access our industry-leading sports programming at a compelling price point, making our unmatched sports offering accessible to even more fans. We're complementing the launch with a new agreement with Odyssey, adding leading local sports stations from 22 major markets across the country and giving listeners seamless access to both national coverage and the hometown voices they care about most, further strengthening the value of our sports opening and broader subscription portfolio. Collectively, these initiatives represent far more than programming investments. They reflect our conviction that the future of media belongs to companies that create enduring relationships with audiences. Our approach is built around a powerful flywheel. Exclusive access drives participation, participation builds community, community deepens loyalty, loyalty fuel growth and growth creates new opportunities to deliver even more exclusive content experiences and access. SiriusXM is uniquely positioned to lead because we combine premium talent, passionate fan communities, immersive live events, first-party audience intelligence and SiriusXM Media's unmatched cross-platform reach in ways few others can replicate. Ultimately, we're transforming listening into belonging. We're already seeing the strategy deliver measurable impact. This year, we'll produce more than 400 live events, generating over 2,000 hours of original programming and more than 3 million feet take entries for free access to these events and other major artist stores. 95% of those who attend our exclusive events say the experiences, increase the value of their SiriusXM subscription and perhaps more importantly, these experiences deep engagement well beyond those who attend. That's the power of fandom. Bringing listeners closer to the people and moments they love while creating a stronger, more differentiated SiriusXM. Creating deeper fan connections isn't just about the content we offer. It's also about how we deliver it. As 360L expands across nearly every major OEM lineup, we're creating a more intelligent, personalized in-car experience that makes it easier for subscribers to discover and enjoy the content they love. We're seeing meaningful adoption of these capabilities. OEM subscribers now average approximately 24 hours of listening each month while those who also streamed through the SiriusXM app engage more than twice as much. Discovery is also accelerating with listening through our personalized artist stations increasing 50% year-over-year. When you combine exclusive content, immersive experiences and a more intelligent product, you create a subscription service that's more valuable to customers, easier to monetize and better position for long-term growth. The same strategy that's bringing fans closer to the content and creators they love is driving momentum across our advertising business, where revenue increased 5% year-over-year to $454 million. Our open ecosystem approach and strategic investments in advertising technology continue to cement our position as a leader in audio advertising. Partnerships with major players such as YouTube, Apple and Amazon significantly extend our addressable reach, increasing monetization opportunities and giving marketers access to premium inventory with the ease and targeting capabilities businesses need to invest with confidence. At the same time, our differentiated portfolio of podcasts, sports and live top programming continues to drive demand. Podcasting revenue grew 30% year-over-year, driven by rising CPMs, increased sell-through and an ongoing appetite for our culture-defining content. During the FIFA World Cup, for example, we leveraged our coverage across satellite streaming and podcast to create bespoke sponsorship packages for major brands, including Bank of America, Lowe's, Verizon, Xfinity and McDonald's, demonstrating how our premium audio lineup and cross-platform capabilities create value for both content partners and advertisers. Finally, the successful launch of SiriusXM-11 at the end of June advanced our next-generation satellite fleet and reinforce the long-term resilience of our network. Investments like these ensure we continue delivering the premium reliable in-car experience that remains a key competitive advantage for SiriusXM. Taken together, these investments are creating a stronger SiriusXM, one with healthier subscription economics, a faster-growing advertising platform and durable competitive advantages that position us for long-term growth. We're encouraged by our execution confident in our strategy and focused on creating sustainable long-term value for our listeners, partners and shareholders. Before I turn the call over to Zac for more detail on our financial results, I'd like to acknowledge that we announced this morning that Wayne Thorsen has decided to leave the company. We appreciate Wayne's many contributions to SiriusXM and thank him for his service. We wish him all the best in his future endeavors.

Thanks, Jennifer, and thank you, everyone, for joining us today. Our first half results reflect disciplined execution and reinforce three key themes. First, we delivered revenue growth, supported by the durability of our subscription business and momentum across advertising; second, we expanded margins through disciplined cost management while continuing to invest in our strategic priorities; and third, we translated that performance into higher earnings and strong free cash flow. Turning to the quarter. Consolidated revenue increased 1% year-over-year to nearly $2.2 billion. Subscription revenue grew 1% to $1.6 billion, reflecting the benefit of our February pricing actions and the resilience of our subscription business. And advertising revenue increased 5% to $454 million driven by the continued momentum in podcasting, programmatic advertising and technology fees, underscoring the strength and diversification of our advertising platform. That momentum also translated into higher profitability. Adjusted EBITDA increased 3% to $691 million, with margins expanding 1 percentage point to 32%. Higher subscription and advertising revenue, combined with disciplined expense management more than offset increased sales and marketing investment supporting the continued growth of our advertising business. Our cost transformation initiatives also continue to progress as planned. Year-to-date, we've captured $74 million toward our target of delivering an incremental $100 million in gross cost savings this year, including $48 million in operating expense savings and $26 million in CapEx savings. Higher revenue, expanding margins and disciplined expense management also produced strong earnings and cash flow. Net income increased 17% to $239 million while diluted earnings per share grew 23% to $0.70. And free cash flow increased 48% to $593 million, driven by higher adjusted EBITDA, lower cash taxes as well as favorable timing of vendor payments and capital expenditures. Turning to our segment results. SiriusXM revenue was $1.6 billion, slightly higher than the prior year period. SiriusXM subscriber revenue increased 1% to $1.5 billion, reflecting a 1% increase in ARPU to $15.32 following our February pricing actions. SiriusXM Advertising segment revenue grew 8% to $41 million, supported by robust demand across sports programming, particularly around the FIFA World Cup 2026. More than 6% of both self-pay and trial streaming listeners tuned in the World Cup coverage during the tournament, the championship match attracting 11% of all streaming listeners. Equipment revenue declined 22% year-over-year to $36 million, reflecting higher memory costs associated with our hardware modules. While this continues to pressure equipment revenue and margins, it reflects a broader semiconductor market dynamic rather than anything specific to SiriusXM. Despite that headwind, SiriusXM gross profit increased 2% to $981 million with gross margin expanding 1 percentage point to 61%. Turning to subscriber trends. We delivered our strongest second quarter subscriber performance in 4 years. Self-pay net additions totaled 22,000, an improvement of [ 90,000 ] from the prior year period. Companion plans contributed 123,000 incremental self-pay net additions while continuous service and expanded dealer programs helped to offset slightly lower conversion rates. Our confidence in companion plans continues to grow. More than 80% of users say the offering increases the value of their subscription and more than 3/4 say it makes them more likely to remain subscribers. Combined with the continued benefits of our continuous service initiative, these efforts help drive self-pay churn to approximately 1.4%, the lowest level in our history. As Jennifer discussed, our subscriber outlook remains unchanged. We continue to expect modestly lower full year self-pay net additions than last year as we anniversary the rollout of continuous service and continue to reduce promotional acquisition offers and discounting. While these actions will moderate reported net additions, they support our strategy of improving subscriber quality, increasing lifetime value and building a stronger, more durable subscription business. Turning to Pandora and Off-Platform, we delivered another quarter of strong profitable growth. Segment revenue increased 4% to $543 million, while advertising revenue grew 5% to $413 million, driven by approximately 30% growth in podcasting, 29% growth in programmatic advertising and 20% growth in technology fees, partially offset by softer streaming music advertising. That momentum reflects the continued strength of our advertising platform and the investments we're making to expand its reach and capabilities. Our Amazon demand-side platform integration is making our premium podcast inventory more accessible at advertisers, while more broadly, we're increasingly seeing advertisers buy across multiple platforms, underscoring the value of our integrated advertising offering and our ability to deliver scaled cross-platform campaigns. Looking ahead, we expect to begin the broader commercialization of YouTube audio later this year. Early advertiser demand and live campaigns are helping us enhance measurements, refine execution and validate the offering ahead of a broader rollout that we believe will expand our audience, deepen advertiser engagement and create new monetization opportunities. This continued operating momentum drove segment gross profit up 6% to $163 million with gross margin expanding 1 percentage point to approximately 30%. Capital expenditures were $130 million, down from $145 million a year ago, primarily reflecting lower satellite investment as we continue to wind down our current satellite investment cycle following the successful launch of SXM-11. We continue to expect non-satellite capital expenditures of approximately $400 million to $415 million this year. With the planned launch of SXM-12 next year expected to complete our current satellite investment cycle, we anticipate capital expenditures will normalize, providing an additional tailwind to free cash flow over time. Our strong cash generation continues to support a disciplined capital allocation strategy. During the quarter, we reduced total debt by $292 million, including the early repayment of our term loan, while returning nearly $97 million to shareholders through dividends and share repurchases. We ended the quarter with net leverage of 3.4x adjusted EBITDA, reaching our long-term target range of low to mid 3x. Our capital allocation priorities remain consistent. We'll continue investing in the business where we see the highest long-term returns, maintain a strong balance sheet within our leverage target and return capital to shareholders through dividends and share repurchases. We ended the quarter with approximately $996 million remaining under our existing repurchase authorization and continue to believe our shares represent an attractive long-term value. We'll also remain disciplined in evaluating opportunities to create additional shareholder value, moving through our spectrum assets and other strategic opportunities. Taken together, our first half performance gives the confidence to raise full year guidance by $25 million across revenue, adjusted EBITDA and free cash flow. We now expect approximately $8.525 billion of revenue, $2.625 billion of adjusted EBITDA and $1.375 billion of free cash flow for the year. This increase reflects the strength of our underlying business, while continuing to absorb higher memory costs, which have increased several times this year and are partially offsetting the flow-through of our strong operating performance. The durability of our subscription business, the momentum in advertising and the consistency of our cash generation continue to provide a strong financial foundation. We're confident in our outlook and remain focused on executing our strategy, allocating capital thoughtfully and delivering sustainable long-term shareholder value. With that, I'll turn it back to the operator for Q&A.

[Operator Instructions] And our first question will be coming from the line of Bryan Kraft with Deutsche Bank.

I was wondering if you could comment on any progress you've made towards finding a way to monetize a portion of your spectrum portfolio. And if you have any sense for the timing of reaching an agreement with a partner and what a partnership could look like, just given that you'll need to continue using that lower SARS band for much of the next 5 years? And then secondly, now that you're at the Leverage Targets Act, what kind of pacing could we expect for share repurchases going forward?

Thanks, Brian. We continue to see license spectrum as an added optionality and long-term value driver. As we've discussed in the past, we have 35 megahertz of contiguous spectrum. It serves as critical infrastructure in support of the business today, as you've noted, including supporting the delivery of our service to 35 million subscribers across the U.S. and Canada. So -- there's been a lot of activity in the market recently. So much more attention, obviously, on the value of spectrum. It's a scarce strategic asset, and we believe it provides us with meaningful long-term optionality. The technology and regulatory landscapes continue to evolve. So we are taking a methodical approach at looking at opportunities that support our current business. Also preserve our flexibility and position us to deliver the highest value for shareholders. So our strategy hasn't changed here. We believe the most attractive path to value creation is through partnerships, incremental opportunities that will allow us to monetize spectrum while preserving there's flexibility going forward. So we've previously shared that we continue to have discussions with potential partners around a range of different opportunities.

Great. Thanks for the question, Bryan. Yes, just to sort of ground everybody. We ended the second quarter with net leverage of 3.4x. So reaching our target leverage range of low to mid-3s, we communicated previously. So that's an important milestone for us as it gives us much greater flexibility in how we deploy our free cash flow. So now looking forward, our first priority remains the same as it has been investing in the business in order to deliver strategic and financial priorities. We continue to believe this has the highest ROI. Beyond that, though, with our balance sheet now in target range, our capital allocation priorities will shift toward returning capital to shareholders through dividend and share repurchases. So on the dividend side, remains an important component of our capital return framework and definitely reflects the durability of our subscription business, confidence in the outlook. But we believe our current dividend is at the right level. So we, therefore, expect share repurchases to become an increasingly important use of excess cash flow. So we'll be disciplined in our execution and opportunistic, of course, based on valuation and the market conditions and, of course, within our broader capital allocation priorities. So we ended the quarter, as we said on the call, with just about $1 billion in remaining authorization. And we think our shares are attractive long-term value. So I think you'll begin to see somewhat in the second half of the year an increase and then definitely the story for 2027 likely to move towards a much more significant share repurchases. So I think just to sort of land in the ordinary course of things, we do remain opportunistic, of course, in pursuing additional value creation, whether through strategic investment as potential spectrum opportunities, as Jennifer talked about, or other initiatives, but nothing is on our radar on the moment there. So I think what we're really happy about is our strong and consistent free cash flow gives us the flexibility to invest in growth while still meaningfully returning capital to shareholders now that we're inside the leverage range.

The next question is from the line of Stephen Laszczyk with Goldman Sachs.

Jennifer, back on the guidance raise. I was curious if you could maybe talk a little bit more about the puts and takes for the raise this year, where do you see play out better than expected, either through the subscription business or the ad business? And then it sounds like on the expense side, there's some added expenses around technology. Just curious if you'd help size the impact there and how we should be thinking about that into the second half?

Of course. Thank you, Stephen, for the question. We're really pleased with our second quarter performance, following what was also a very strong first quarter. So revenue growth versus last year. And importantly, growth in both SiriusXM and on the advertising side. EBITDA growth combining that revenue improvement with disciplined cost management and strong free cash flows, cash flow up 48% versus last year in the second quarter. So it's a really strong base. The underlying metrics are also very strong, positive self-pay net adds we saw for the quarter, ARPU higher than last year, record low churn in our SiriusXM subscription business. And on advertising strengthened both sell-through and CPMs. So as we look forward into the second half of the year, we see most of those strong trends continuing, which is what's allowing us to raise our guidance for revenue, EBITDA and cash flow. And that's despite a meaningful second half headwind from higher memory costs as the memory suppliers have raised prices multiple times over the last 9 months, driven by that broader semiconductor market dynamic. That was a small impact in the first half, and we expect it to be more meaningful in the second half and such incorporated into the guidance in our outlook. But otherwise, the underlying business performance remains strong.

And the only thing I'd add on related to subs, Stephen, is just -- we continue to be pleased with the performance and the strong take rate we've seen on companion subscriptions, our continuous service initiatives and contributions to our extended duration auto dealership programs. As we look at the rest of the year, the fourth quarter has a tough comp on when we launched continuous service. And so we're just being cautious as we set the context for subscriber performance this year.

That's great. And then maybe just secondly, if I could ask on the YouTube inventory, it sounds like commercialization is set for later this year. I was just curious if you could talk a little bit more about what you've learned so far after having your hands on the YouTube inventory or sort of seeing under the hood behind the YouTube inventory and then any plans or working approaches to monetize that into the back half of the year when we could expect that to really start to scale in the financials?

So we are -- as you -- we've talked about, this is a test and learn period for us. We are in the early stages, we've literally had thousands of conversations about the YouTube opportunity with customers. And I think the early stages are really about validating this takeaway that YouTube is truly a listing opportunity. This multimodal behavior where listeners are engaging in visual engagement but also listening as well, that is something that I think is a takeaway that everyone is recognizing. And we're really in the early stages of product validation, understanding the measurement capabilities and really building the commercial pipeline, we remain confident that this is a tremendous opportunity for advertisers and to bring unparalleled reach. I mean we're now at the stage where we can claim 255 million monthly active users, 90% of the adults 13 plus, and that is something that I think is really resonating with the market, and we're excited to bring this to commercial readiness later this year. I would just reiterate that we are in the Q4 buying cycle right now. So we are looking at this period as a test and learn phase. And really excited about the opportunity to bring this in the upfront discussions that we have with advertisers and agencies as they look ahead to 2027 planning.

Our next questions are from the line of Barton Crockett with Rosenblatt.

Okay. Great. I just wanted to drill a little bit more deeply into the commentary about still expecting lesser kind of subscriber additions despite the growth that we had here in the second quarter. In particular, it sounds like you're expecting kind of maybe more kind of a headwind in the back half than maybe we were seeing before. I'm just wondering if that's the case, if there's been any change in kind of the pacing versus what you were expecting before? And also, if you can kind of give us a sense of the size of the impacts of some of these things that we're comping from -- excuse me, some of the things that are impacting in terms of the continuous service and the companion if you could size the level of impact from that on the subs, that would be helpful.

Thanks, Barton. So on companion, we provided some numbers over the last few quarters, 80,000 net adds in Q4; 124,000, I believe, on Q1; and 123,000 in Q2. And so we've been very pleased with the continued sort of solid take rates we're seeing there among our most loyal subscribers. And I just would expect that, that might slow down as some of the marketing matures there. We've mentioned that we are looking -- given the sort of metrics we're seeing around this, it's been very positive, I think, for the overall business in terms of increasing household engagement that we are looking at opportunities to potentially expand that. But we have not solidified those yet. So I would expect, again, the contribution from companion to potentially decline over the course of the year. And then as we've talked about, with continuous service, we launched the initiative in the fourth quarter of last year, and we had a fairly meaningful contribution from that in terms of removing friction as customers move between vehicles. And that also will slow as we continue to progress through the year, and we're going to be seeing the anniversary of that, obviously, in the fourth quarter. So nothing's changed in our expectations for this year. As we reiterated, we still expect slightly lower self-pay net additions this year versus last year, and nothing's changed about our expectations, essentially for the quarters. But we are being cautious for some of those reasons about the timing of when the initiatives were launched. And also just generally about the auto market. So there is maybe some softness that the second quarter is actually pretty strong in terms of SAAR. But there is mixed messaging, I think, in the market in terms of consumer confidence. And so we just want to be cautious as we enter this third quarter where the trial starts will be a meaningful contribution to conversions in the fourth quarter.

Okay. And then if I could just also ask one other kind of drill deeper question on YouTube. Our understanding is that YouTube is going to dramatically increase your presence with younger audiences. And I was wondering if you could speak to that and speak to maybe some potential to elevate podcast in general and your position in podcast in the advertiser kind of mindset and budget allocation as we go into next year.

It's a really great point. We talked about the distribution of the audience in the last call. And one of the really amazing benefits here is just how much the younger generation under the age of 35 is using YouTube as a listening platform in addition to a visual platform, particularly with podcast, but also with music. And the increase in addressable reach against that younger demo, which is high demand and interest for a wide variety of advertisers is multiples higher than what we see today. And your second point about the podcasting component, we have a broad breadth of podcast content today. We have the largest podcast network in the U.S. with the most shows in the top 20, and we're really focused on building that part of our business. But this YouTube component also has increased reach against podcast listening nearly half of the overall consumption that is happening on YouTube is the podcast content, which gives us increased breadth and scale. So we see this as an opportunity to not only go deeper with advertisers across different categories who are targeting that younger demo, but also in other areas like multicultural, sports content, et cetera, which we're seeing increased demand for as well.

Our next question is from the line of Jessica Reif Ehrlich with Bank of America.

I wanted to dig a little bit deeper on advertising. And unfortunately, I'm going to go back, sorry, to YouTube, but you did say increasing opportunities. I just wanted to explore like first on YouTube, if you could give us some color on the economics, including possibly guarantees on your part. But also like the content that's included, they just announced to deal with Peacock beginning next year. So obviously, podcast from music, but does it encompass that content, which will include NFL, SML, et cetera? And then your press release talked about like news advertising declining. Is that -- do you think it's -- like is that a decline because it's too controversial. So really just more color, I guess, on advertising generally? And then second on content, you quickly Odyssey deal. Is that like for the stations that are just sports? Or is there other content included?

So Zac will start and then I'll go to Scott.

Yes, that sounds good. I think, Jessica, no apologies for asking us about YouTube. We're always happy to be talking about that particular one. Maybe I'll just cover the economics first and then hand over to Scott and Scott for the other pieces. I think as Scott has talked about, everything we've seen over the last 90 days with the YouTube deal supports our perspective that we believe the YouTube agreement is going to be an important source of future growth. Now I think it's important though to note while we don't expect meaningful financial contribution for the first half -- for the rest of '26 or the first half of '27, we do believe this becomes much more significant in revenue and earnings opportunity in the second half of '27 as an advertiser adoption scales. So we haven't yet quantified the size of that opportunity, as Scott and the team are continuing to learn about the composition of that inventory, and we're 90 days into that. But we view this as a structural opportunity to increase our roughly 10% of the approximately $18 billion U.S. audio advertising market. And we expect the revenue generated through this partnership to carry healthy contribution margins. Because we are leveraging the existing sales organization, add technology and campaign operations that Scott leads today already. So maybe, Scott, I'll turn it over to you to answer some other pieces around the composition of ads.

Thanks, Jessica. So on the content, remember, the inventory that we have, the exclusive opportunity to bring to market is really any time, YouTube and Google identify that the user is primarily listing versus watching, that means across any content where that may be happening. So your example of podcast content, music is intuitive. But beyond that, it could be a long-form interview. It could be sports programming. It could be entertainment category content, like you mentioned, NFL, et cetera, any channel or any content where the listener might take their phone with them put it in the pocket on a commute and start listening where they were watching prior is an opportunity to deliver an audio ad to that consumer, which delivers better value for the advertiser because it's more natively connected into that experience, and it brings that additional opportunity for us to expand our capabilities as well. So hopefully, that answers your question. And then on the news front, news has always been somewhat controversial in terms of how advertisers want to be adjacent to that content. But there are advances in targeting and semantic understanding of the content itself that help news publishers and podcast content within the news category bring the brand-safe content within the news to bear and avoid any content adjacencies that advertisers want to stay away from, whether it's geopolitics or other things. So we continue to invest. We have a lot of new partners on our platform, including NPR, New York Times, et cetera, and we continue to see that as an opportunity for advertisers if leverage in the right way.

Scott, to your just.

Sure. Quick. Jessica, one thing. As the video sports rights continue to get disaggregated, we have tried to curate and really consolidate as much sports rights as we can. And right now, we certainly have more than anybody else under one roof. The Odyssey deal was to add a piece we were missing, which was local sports talk, while we have very strong national voices and Stephen A. Smith, Chris Madorusso and many others, in addition to the league talk channels that are 24/7. We've now added 22 of the most passionate markets across the country for sports stock. So if someone misses their local team, that's just the play by play. Often, they miss the companion sports talk and local host, we'll have all of that now under it. So it really does complete our sports offering on that. But as part of the Odyssey deal, there are other channels that we can use and do and may, in the future, do that if there's passion for news channels or something like that. But really, the essence of that was to build sports fast into the definitive home for sports programming.