Good morning, and welcome to SiriusXM's Fourth Quarter 2018 Results Conference Call. This conference is being recorded. [Operator Instructions]. At this time, I would like to turn the call over to Hooper Stevens, Senior Vice President, Investor Relations and Finance. Mr. Stevens, please go ahead.

Thank you, and good morning, everyone. Welcome to SiriusXM's Fourth Quarter and 2018 Earnings Conference Call. Today, Jim Meyer, our Chief Executive Officer, will be joined by David Frear, our Chief Financial Officer. At the conclusion of our prepared remarks, management will be glad to take your questions. Scott Greenstein, our Chief Content Officer, will also be available for the Q&A portion of the call. First, I'd 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 are necessarily dependent 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 and Pandora's SEC filings. We advise listeners to not rely unduly upon forward-looking statements and disclaim any intent or obligation to update them. As we begin, I'd 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. With that, I hand the call over to Jim Meyer.

Thanks, Hooper. Good morning, and thank you for joining us. SiriusXM delivered strong fourth quarter results, and I'm pleased we were able to exceed all of our full year 2018 guidance metrics, even after increasing most of them multiple times throughout the year. And this year, we have set a goal of continuing to grow subscribers, revenue, adjusted EBITDA and free cash flow, all while managing our planned integration with Pandora. We expect the Pandora merger to close Friday. The combined company will reach over 100 million listeners in North America, with nearly 40 million self-paying subscribers and 75 million trailers -- trialers and ad-based listeners. The North American audio market is the most influential in the world. The suite SiriusXM and Pandora bring to content creators and advertisers is a powerful promotional platform. The Pandora team's continuing efforts to improve ad tech, add new content and features and to improve usability for both listeners and advertisers provides a solid foundation for Pandora's future. Before making further comments on Pandora, let me turn to SiriusXM. The overall auto market in 2018 was significantly stronger than many expected going into the year. Now while the car sedan segment of the market was somewhat soft, that was more than made up by a strong business in trucks and SUVs. In Las Vegas, at the Consumer Electronics Show earlier this month, we met with several senior leaders at many automakers. They remain upbeat about 2019 and as committed as ever to offering SiriusXM in their vehicles. And incidentally, they are quite excited about our acquisition of Pandora and the prospect of new, compelling packages for their car buyers. I am thrilled to announce this morning that SiriusXM will become standard on all Toyota vehicles in the United States. This is a big deal. Our penetration will start to climb this fall in model year 2020 vehicles. In addition to this fabulous news, our new agreement with Toyota now extends for a full decade, until 2028. Yes, that's right, a 10-year deal, which is really a remarkable, long-term endorsement of our service from one of the world's largest and most influential automakers. With growing penetration at Toyota, we expect our overall industry penetration to exceed 80% of new vehicle volume by next year. I'm also pleased to announce a significant expansion of 360L at General Motors, where we'll have several models rolling out by year-end with this enhanced functionality. We expect this next-generation platform to eventually be deployed throughout all of our new car distribution. And lastly, we continue to grow our connected vehicle business. Nissan and Infiniti just awarded us their next-generation connected vehicle business, extending our CV relationship with them out through model year 2022. While our OEM presence remains key, we have also made real progress during the quarter in improving our position outside the car. I can tell you that we remain very committed to continuing these efforts. Better apps with more features and content, including video, will play a key role as well as even more support for next-generation platforms, like smart speakers. We continue to see smart speakers as a great way to distribute our service in home. Stay tuned for more content and more functionality to come on Amazon's platform, and we are working with several other large players in this space, where we think we can add value to their platform and services and broaden our distribution. Put simply, we want more engagement everywhere. Needless to say, our combination with Pandora completely changes the game and gives us vastly more scale outside of the car in a way that we think is completely complementary to our existing efforts at SiriusXM. Together, the SiriusXM and Pandora brands are uniquely positioned to lead a new era of audio entertainment by delivering the most compelling subscription and ad-supported audio experience to millions of listeners in the car, at home and on the go. I am incredibly excited by the opportunity in front of us to build a media company that will be competitive for decades to come. As I mentioned, we plan to close the Pandora transaction on Friday, and we will hit the ground running. I've made a decision to immediately consolidate the G&A functions and have the business units report directly to me. My goal is to streamline decision-making, increase the speed of integration and manage the businesses holistically from day 1. These things are never easy. And just let me say, I have a ton of respect for Roger Lynch and the masterful job he has done at Pandora over the last 16 months. I want to personally thank him for his contributions. As we move closer to the combination, we are seeing increased opportunities for cost saving. By the end of next year, these cost synergies should exceed a run rate of $50 million per year. But this merger has never been about cost synergies. Let me reiterate my vision here. We see tremendous opportunities to create attractive and unique audio packages that combine our strengths, SiriusXM's in-vehicle position with Pandora's strong position out of the vehicle. There are strong prospects for cross-promotion across our combined North American audience. Quite simply, I'd like to monetize at some level every single one of the close to 23 million SiriusXM trials we are running annually. Over the next decade, the vast majority of Americans will have experienced one of these trials, and I am thrilled to now have a complete stack of compelling offerings to offer consumers, from paid to free. With our massive audience, particularly from the Pandora side, comes a tremendous amount of listener data that will be invaluable as we grow the combined company in the future. Let me give you just one example. Based upon our preliminary research, approximately half the owners of the SiriusXM-enabled vehicle fleet have used Pandora in the past 2 years. This is incredibly powerful. Data from Pandora can significantly improve our understanding of these users' preferences and behaviors when it comes to music listening. This kind of data should help us refine our marketing efforts for retention, conversions, win back as well as our streaming experience for SiriusXM subscribers over time. We also intend to capitalize on cross-promotion opportunities between SiriusXM's more than 36 million subscribers across North America and Pandora's approximately 70 million monthly active users. In early February, we will begin a targeted promotion to SiriusXM subscribers and Pandora listeners. Select Pandora listeners will receive an offer to obtain a unique $5 a month mostly news -- mostly music or news talk package in their satellite-equipped vehicle. SiriusXM subscribers will also receive an extended 14-day trial to Pandora Premium. By midyear, we expect to deliver a new Pandora-powered channel to our SiriusXM app users based upon their favorite artist and a new radio channel, driven by the latest trend from Pandora's billions of thumbs. This is just the beginning. We expect over time to create new, unique audio packages that will bring together the best of both services, creating a powerful platform for artists to reach their fans and to create new audiences. Without a doubt, the biggest challenge at Pandora is clearly related to active users and, even more importantly, listener hours. This is going to be a tremendous focus for my management team in 2019 and beyond. The biggest opportunity for change here is through improved content and marketing. The launch of Pandora's slate of podcasts is a great first step, and I'm confident Scott Greenstein and his team will add immediate value here. We will also be looking to improve Pandora's position in vehicle, and you can bet we will look to continually improve the Pandora user experience and onboarding experience. We have an excellent track record of performance at SiriusXM. We focus on having the right strategy and business plan and then executing that against that plan. Growing Pandora and, more importantly, generating sustained and growing cash flows there will not be easy. But with the combination of SiriusXM and Pandora, we will have tremendous opportunities. And let me remind you that SiriusXM's track record is second to none in audio entertainment. Trust me on one thing: We understand the many new challenges that arise at Pandora. We're excited to tackle them head-on, but we will in no way lose sight of our core business and the important opportunities for value creation that remain at SiriusXM. Great content is always the core of what we do at SiriusXM. We continue to be focused on updating and adding to our line of shows and hosts to give people a great reason to pay for radio. Live and subscriber-focused events continue, such as an upcoming KISS show live from LA's Sunset Strip, and it comes after a live performance by superstar Ricky Gervais for our subscribers in New York -- in New York City. On the red-hot political front, we have new voices, with CNN's Chris Cuomo's live call-in show starting up, and a new polling show with political analyst, Kristen Soltis. We've also added a daily afternoon show hosted by ABC News' chief legal analyst, Dan Abrams, focused on politics and legal issues in the news. These days, we certainly have plenty of those. We've also increased our already-large array of live sports channels with new full-time channels for major college sports conferences, the Big Ten and Big 12, and we've added new shows focused on golf and motorsports. This weekend, we will offer an unrivaled array of channels and shows from Radio Row at the Super Bowl. We are also significantly expanding our streaming offer by creating an additional 100 channels of streamed music content, which we expect to begin delivering to our subscribers next month. Our market research shows that consumers will really appreciate these new channels, which will go much deeper into specific genres. We will also be rolling out a much more robust video offering, in addition to Howard Stern's content, which is currently available. Later this year, we will be expanding our video offering beyond Howard and are hard at work right now building that offering. We will showcase the best of what we do at SiriusXM, from the amazing guests that come into our building every day, to performances and town halls and other great moments from the shows our subscribers love. Video will be yet another way to give our subscribers additional access and value. Our focus on excellent content, improved distribution via OEMs and now increasing out-of-car engagement isn't changing, nor is our commitment to executing our business plan to grow cash flow and use that cash flow to invest in our business and to return capital to shareholders. And even with stepped-up investment across our combined larger business, we expect to continue returning significant capital to shareholders via our growing dividend and ongoing share repurchases. Clearly, we've been out of the market for our stock in the past 5 weeks as the Pandora shareholder vote was pending. But you should take the $2 billion increase and repurchase reauthorization we announced yesterday as an indication of the solid value we see in our stock. I'm thrilled to welcome our new Pandora colleagues as we work together to grow our business and achieve our goals for 2019. With that, I'll turn it over to David.

Thanks, Jim. Good morning to everyone and thanks for joining the call. 2018 was another breakout year for SiriusXM that saw new records for subscribers, revenues and profitability. Auto sales were actually up a little for the year at a very strong 17.2 million vehicles. At the end of 2018, nearly 117 million vehicles on the road were equipped with SiriusXM-enabled radios, growing 12% over the prior year and now representing approximately 44% of all the cars in the country. New car penetration rates for the full year were 75%, down 130 basis points over 2017 as we reduced penetrated in some automakers with high fleet sales. Used car penetration rates came in at 40%, up 500 basis points over last year. As Jim mentioned, Toyota will make SiriusXM standard, beginning with model year '20 production, and we expect total penetration to exceed 80% in 2020. Together, we expect these channels to bring our enabled fleet to over 200 million vehicles in the coming years, growing more than 80% from where it is today. Total trial starts in the year rose approximately 5% to 22.4 million, including 10% growth in used car vehicle trial starts to 9.3 million. The total trial funnel stood at 9.1 million at year-end, up nearly 3% over 2017. New car conversion rates were approximately 39%, and used car rates were in the high 20s for the year, while self-pay churn was a very strong 1.73%, the lowest full year churn performance since 2007. Non-pay and voluntary churn rates dropped 10 basis points year-on-year, fully offsetting the rise in churn from vehicle turnover. 2018 was our ninth consecutive year of 1 million-plus net additions. We ended the year with 34 million total and almost 29 million self-pay subscribers, representing 1.3 million and 1.4 million net additions, respectively, over 2017. Reported ARPU of $13.34 for the full year grew nearly 1% or 2.5%, excluding the $0.24 headwind due to the new revenue recognition standard, which reclassified to expense approximately $95 million of revenue principally related to automaker agreements. With the strength of our subscriber growth, total annual revenue increased more than 6% to nearly $5.8 billion, or 8% excluding the new accounting standard. Contribution margin for the year was 70%, down 90 basis points versus 2017, with lower customer service and billing and cost of equipment as a percentage of revenue and the accounting change, partially offsetting higher revenue churn and royalty expenses resulting from the 40% increase in satellite radio performance royalties from the December 2017 CRB decision. As we discussed in our last call, we and SoundExchange have extended the current satellite radio royalty rate through 2027, giving us great visibility on royalty costs going forward. SAC dropped nearly 6% from the prior year due to reductions in OEM hardware subsidy rates, lower chipset costs and installations. And that brought SAC per install below $26 for 2018, approximately 13% below the prior year. Adjusted EBITDA for the year grew 6% to $2.24 billion, a new record. And our 2018 adjusted EBITDA margin totaled 38.8%, down only 10 basis points over the prior year despite the 40% increase in satellite radio performance royalties and expanded investments in content, distribution and streaming capabilities. For the full year, we converted 68% of our adjusted EBITDA into free cash flow, which totaled $1.52 billion, down 3% year-over-year due to the previously announced onetime lump-sum payment of $150 million to resolve all outstanding statutory license claims for sound recordings. 2018 net income grew 81% to $1.2 billion, benefiting from a $43 million unrealized gain associated with the change in fair value of the company's Pandora investment in addition to savings from the tax act and the savings from state and federal research and development credits. The company's effective tax rate for the full year 2018 totaled 17.2%, which is below the approximately 24% to 25% normalized rate we expect going forward. Taken together with the lower share count, diluted EPS for the year grew 88% to $0.26. For 2019, we've issued guidance for SiriusXM, excluding Pandora, which anticipates continued growth for the company. We are projecting self-pay net subscriber additions of approaching 1 million, revenue of approximately $6.1 billion, adjusted EBITDA of approximately $2.3 billion and free cash flow of approximately $1.6 billion. For the full year, SiriusXM returned approximately $1.5 billion to stockholders, repurchasing 209 million shares for $1.3 billion and paying $200 million in dividends. We continue to see substantial value in buying our own stock. And just yesterday, as Jim mentioned, our Board of Directors approved another $2 billion authorization to our repurchase program, bringing the total to $14 billion with $3.3 billion still outstanding. This week, we announced the successful completion of a consent solicitation with respect to Pandora's 1.75% convertible notes due in 2020 of which there are $152 million of notes outstanding. The solicitation sought consent to amend certain provisions of the note indenture to expressly permit the steps contemplated in the merger agreement, including the conversion of Pandora into a limited liability company. In conjunction with the consent solicitation, we will launch a tender offer for these notes a short time after the merger closes. Total debt at year-end was approximately $6.9 billion, with no bond maturities until August 2022. At the end of the quarter, our debt to adjusted EBITDA was just 3.1x. We had cash on hand of approximately $54 million and undrawn revolver capacity of $1.3 billion. Our strong capitalization and ample liquidity provide us flexibility to continue to invest in our business, make strategic investments and further return capital to stockholders. With that, operator, let's open it up for questions.

[Operator Instructions]. And we'll take our first question from Vijay Jayant in Evercore.

Just wanted to drill down on the guidance. Obviously, if you sort of look at how the year came out in 2018 and to 2019, it seems obviously you have pretty conservative guidance based on your past SAC record. But there seems to be no real operating leverage, at least on the guidance, in 2019. Can you talk about, is it sort of really the fact that Toyota is going to become standard and the mix shift between OEM and used car market is sort of shifting back and the SAC is higher? Is that sort of the difference you're sort of seeing there?

Yes. I think that is a big factor, Vijay. If you kind of look at the history, I think we've been picking up about 1 point of EBITDA margin pretty consistently for several years associated with just over absorbing the subscriber acquisition costs. Next year, we -- as we talked about, that we've had Toyota going standard, penetration is going to be rising, the expectation for auto sales is to be maybe down a little bit from this year, but not so much. So we are -- I don't think we're going to get that benefit in margin from SAC that we've seen in prior years, but that's the good news, right, that we're going to have a lot bigger pipeline in new vehicles coming out, which will benefit 2020.

And then just quickly on the -- since you just started talking about the Pandora synergies and the $50 million by the end of 2020, and you have all these initiatives starting pretty much right now on cross promotion between the 2 platforms, should we be also assuming that there will be revenue synergies prior to that, too? Obviously, you haven't quantified that.

Sure. We close Friday. We've gotten sort of the management's plan for the year just recently. And Jim and I and the rest of the team at the new combined company will have an opportunity over the next several weeks to really go through it and get our hands around it. And I think we'll have more to say about what we expect out of the combined company results when we get to the first quarter call.

Yes, Vijay, I would say that when it comes to the area of cost synergies, we've done quite a bit of work. And so we, obviously, wouldn't have guided to that number if we weren't comfortable with that as a number we can achieve. In the area -- and that number does not include revenue synergies. That's correct. It's cost synergy. In the area of revenue synergies, I happen to believe that there is a lot of opportunity. On the other hand, I think we have to test our way into it and try many things before we are going to be able to really actually know how big that opportunity is. And as David just said, we'll keep you abreast of that every quarter. I think the great news is we're coming out of the box swinging. I mean, we are going to begin testing next week. And you should assume we'll be doing that for many, many next months to come as we fine-tune this. So that's kind of where both David and I are on that.

Your next question is from Bryan Kraft in Deutsche Bank.

I had one for David and one for Jim. David, you just reloaded the share repurchase authorization by $2 billion, even though there is still $1.3 billion on the old authorization. Should we interpret that as a sign there's likely to be a step-up in share repurchases not just versus last year, which I think was a light year for you guys, but that could be much higher than the past few years and maybe even higher than the $2.5 billion you did in '14. And then Jim, separately, I wanted to ask you if you would comment at all so far the Amazon relationship. And also, which do you think is the bigger opportunity outside of the car for SiriusXM? Is it in-home listening through smart speakers? Or is it listening on smartphones at this point?

Well, I'm going to answer the last one of your 6 first. It's both. And I think for us, the exciting news is we have a lot of opportunity there to expand. And so I will be disappointed, Bryan, if we don't make significant progress in both of those areas in 2019, okay. And I think you know me pretty well. I am -- I don't focus on many things. When we do, we try to get them done, and we're certainly going to focus there. On the Amazon relationship, it launched, as you know, very late in 2018. We certainly saw a lot of enthusiasm from our subscriber base for wanting to use the product, and we saw early success in those customers increasing or wanting the smart speakers so that it enabled more listening at home. It's too early for us to know yet how much that data has moved. You can assume we're tracking that and watching that. On the flip side, I'll be very candid with you, I -- we didn't do as well as I would've liked to have done of attracting what I would call just stand-alone streaming customers through the Amazon channel. Both Amazon and us are already got our heads down, and we'll just going to stay at it. And I think we will figure it out. David?

So on the buyback question, for a long time, we've said that we intend to buy more of the stock when it's weak and in decline and less of it as it rises. And I think if you look at what we did in the fourth quarter, understanding that we had some restrictions on what we could buy, we bought quite a bit of stock in the fourth quarter. And we see value in the stock now. So the authorization -- the expanded authorization just gives us the flexibility to move and move quickly when we see opportunities to pick up the stock. Doesn't really change though, Bryan, the sort of long-term perspective we've talked about it, that we have a business model that generates about $2 billion of excess cash flow a year between the free cash flow and the expansion of EBITDA and the levers you can put on it. And that continues to be what we did. Last year, we returned $1.5 billion to shareholders through stock repurchases and dividends. And so I think we're staying right in that zip code.

Our next question is from Steven Cahall with Royal Bank of Canada.

Maybe first question just on ARPU. Calculating the ARPU, even excluding the accounting change, I get kind of baseline ARPU, excluding the MRF, to just be a little bit deflationary. So wondering if you could talk to us a little bit about what you're seeing on pricing and promotional activity. And how long you think the impact of the MRF can run? And then if you -- secondarily, I really liked that stat that you gave, that 50% of Pandora users are also Sirius users. And we see similar things in television with lots of Comcast subscribers being Netflix subscribers. I was wondering if you have any similar data on the overlay between SiriusXM users and Apple CarPlay and Android Auto users as penetration of those starts to come up as well.

Well, I'll take the last one first. I can't quote that data to you. I'd have to go back and ask our teams. But I don't know the answer to your last question, but we'll look into it. I happen to agree with you, I don't want to undersell this, but I can't tell you how excited I am, when I saw the first cut of the overlap between Pandora data and the SiriusXM vehicle-enabled database, which, as you know, is well over 100 million. For us, to now have this kind of data, is extraordinarily powerful. And we, obviously, have to figure out how to be able to use it seamlessly and creatively within our marketing campaigns and our marketing tactics. But this is a bright light in a tunnel for me.

On the ARPU question, we kind of look at the total sort of realized sort of value that we're getting out of subscribers. And if you look at the last sort of 8 years, we've averaged 2.5% realized increases in ARPU. And when you strip out the accounting change for last year, you end up at the same number. So our -- I think over -- we haven't really changed our discounting and go-to-market sort of practices. We've been using them for years that, at the margin, we -- we'll rotate offers and sequence what we do, and we'll come out with new plans. But the -- for the most part, we hammer away with very similar offers, and there's been no fundamental change in that for a long time.

Next question is from Jessica Reif Elrick, Bank of America Merrill Lynch.

Can you talk a little bit about the video product? What benefits you've seen so far? Is it just churn or anything else? And where can you take this product?

This is Jim, Jessica. I can tell you that we certainly have seen increased engagement from what's already a very engaged fan base in the Howard fan base. We can see it very early on, on the engagement with the app. And honestly, there's more to come on Howard's video as well as he is -- I don't want to speak for him, but I will today, he's very excited. I actually spoke with him a couple, 3 -- I don't know, 3 weeks ago on this. And he's very excited about now what he sees he can do with the video stuff and things he wants to do and work on. So I don't know yet that we can pin that back, any hard stat that says we've seen this improvement here or that improvement there. I do know, after 16 years here, I pretty easily learned one thing, and it's engagement, engagement, engagement is almost at the heart of every one of our metrics. The more our subscribers are engaged, certainly the better they behave for us in terms of our metrics. So I'm excited. I think you're going to see -- I think we can say it today. We've entered into a pretty extensive renewal and agreement with Whalerock and Lloyd Braun to help us with our video initiatives. Lloyd will report directly to Scott on that initiative. Both Scott and Lloyd, I can tell you, are excited about some of the stuff they're working on that will be -- I kind of don't want to reveal it yet, but stuff that we'll reveal over the next 6 months. But we're committed to this path. But that said, we're not getting outside our swim lane, okay. I mean, we're going to create video content that complements the audio experience, not -- we're not going to venture into things that would be too risky or outside our area.

And Jessica, the one thing where we have seen early numbers on Howard that does matter a great deal is in outside social media and digital places. So when the better-quality and well-edited clips hit YouTube or other places, the numbers have been extraordinary compared to where they were when it was in an organized plan or a thematic plan that's going out there. And when Howard runs the best of the interviews and other things on the audio side and some of these clips are out there through social media and other lines, we're seeing a much more dramatic increase in the number of views.

That's just great. And then -- but just one follow-up to something I think Jim said early on. Did you say you're adding 100 streaming channels on the app? So is that different from the other product that you have -- I mean, is -- how is it different from what you have now?

Well, those channels -- we're adding 100 channels. We expect to add them in the, I think, certainly in the next 4 to 6 weeks. Those 100 channels have been carefully thought out. They will only be on the app. But the great thing about that is you should expect the ones that perform very, very well will find their way into our satellite lineup.

And you should expect largely them to complement and go deeper existing popular channels or brands we've created at SiriusXM. So give more what people want, but still curate it and sort of hassle free.

The next question is from Matthew Harrigan with Buckingham Research Group.

Congratulations on the OEM side, particularly with Toyota and connectivity with Nissan and all that. But I was curious, you're going to have a lot of hype with the Uber IPO and with some [Technical Difficulty] Just a second. I'm sorry, can you hear me better now?

Yes.

Sure. We hear you fine.

Okay. I do apologize for that. With the Uber IPO in the queue, you're going to get a lot of talk about some real dislocations in with the automotive market between the cost of sharing versus the cost of ownership and all that. And I know you downplayed that in the past, and Uber and Lyft haven't got -- given you too much friction. But do you think you're going to get some perceptual bumps? And do you think it's something that necessarily affects your business over a period of time? And again, I apologize for the lapse on the start of the question.

Don't worry about it a bit. So I guess I could give you a kind of a smart-alecky answer, which is Uber has been around a long time and the auto industry has just had, I think, it's greatest 5-year run in its history. So I think Americans continue to value owning vehicles, and they certainly buy more vehicles when they feel good. And what I mean by feel good is when they're working. And so we're in a great place there. I am more worried about those macro factors and how they might affect the car market than I am Uber. That said, Uber is transforming many, many things. I happen to be a bit older and have 3 grown children who are all -- Uber is a key part of their -- of how they do things. I will also comment they own vehicles and don't want to give up their vehicles. So I just don't see it, me, and certainly in the near and the midterm. And I guess, I just -- I'm not smart enough right now to see how it might impact the road 5 or 10 years down.

Next question from Jason Bazinet in Citi.

I just had a question on Pandora. You said right now the main challenges you see is active users and listener hours, and the opportunity is marketing and content. And I was just interested in that, there were a couple of things you didn't mention there: One, the mix, as it exists today, between Premium and free; and then on the free side, the ad load and the ad CPMs. Can you just comment on those other three dimensions of Pandora? And whether you see opportunities there?

Well, to be correct, I think if -- I'll give you my opinion. And that is -- there is a lot I love about Pandora. I'm thrilled we're going to close this thing on Friday and hit the ground running, close, whatever time, hit the ground running 15 minutes later and get going. But the one flashing light that you got to worry about is the decline in listening hours. And we are very focused on that. We believe, we believe, deep into our gut that, that metric is fixable, okay. And we believe it's fixable, first and foremost, by making the entertainment experience more compelling and by adding more content and telling that story well to attract listeners, both into the funnel, and once listeners come into the funnel, will stay there longer and listen more. And we're going to drive that. I also mentioned, by the way, we believe there is significant room to improve Pandora's in-car listening statistics. That will take a little longer as we work together with our OEM partners to try to make that happen. And certainly, I believe there's still a lot more that can be done with the Pandora app and the Pandora experience to make it more compelling. And I think I -- that's where we're really going to be focused. I can tell you -- again, David will speak in a moment. I think the team there is doing a great job monetizing the ad load they have. They've invested in ad technology. They're doing a lot of smart things there. I don't think David or I see any, certainly, any increase in the ad load. We understand, by the way, that there's really compelling statistics about different varieties of where the ad loads can go, what it does to listening hours. So we have those tools available to make those decisions, and we're just going to get at it.

So let me just add a couple of things that -- we think, Jason, a little bit less about ad load and more about ad capacity in that if you want to drive ad revenues, you want to expand ad capacity, which -- and that will bring you right back around to the hours. And what we really like to do -- what we really like to do is expand the hours and drop the loads, right, and just get more ads. The -- and then I think, also -- and you and I have talked about this before. I think we talked about it at the conference, at CES. Yes, effectively, we've got a pretty compelling product stack between the 2 companies with the satellite radio offer. Certainly, let's call that the sort of the best product offering. And then we've got a -- we've got these middle-priced product offerings from $5 to $10 that sort of represent the better. And then you've got the ad-free product, which is the good in terms of that good, better, best lineup. And there is something for everyone here, that the vast majority of Americans want some sort of a free service, and Pandora certainly is -- has the ability to provide that. And -- but then there are appetites for mid-tier services and different product sets, and we've got a really powerful stack to offer to the market now.

And I just want to make one more editorial comment here that doesn't answer your question but something I feel strongly about. The Pandora team, for the last 3 or 4 years, has been constantly faced with the question of where are you going? What's going to happen to Pandora? Are you going to sell the company? All those questions. Those are all done now, okay. That's done. And so I can tell you at the heart of where we are is getting back the focusing on the fundamental metrics of the business, particularly listening hours and going to work on improving those. It won't be easy, but I'm confident we can do it.

We'll take our next and final question from Amy Yong in Macquarie.

Maybe just following up on the synergies, and I guess, thank you for the early color on the $50 million. I think a lot of us understand that in a merger process, there are dis-synergies before there are actual synergies. How do we think about that in the context of your 2019 EBITDA guidance? And then I guess, Jim, just following up on the previous question. Most of us look at SiriusXM as a subscription-based business, Pandora as an ad-based business. As you manage and prioritize the 2 different separate business models, how should we think about 2019 and beyond if we were to judge that this merger actually has some credibility?

Well, I think this merger does have credibility, but I'll start with...

Sorry.

I'll start with that, ultimately, how I'm going to measure it is back to what I said, and that is we're going to run -- you pick the number, 27 million, 28 million auto trials. We -- and by the way, we know these are real trials, okay. We get real owner information. They're not click through that are much harder to do. Today, as you well know, we're thrilled if we monetize 1/3 of those. And that's driven our model very, very successfully. In my mind, I want to start -- we will begin measuring immediately how many of those trials are we going to end up monetizing in some way. And by that, I mean, all the way from how many of them take our $20 offer, irregardless of how it's delivered, satellite or streaming, all the way down to how many are a free listener that we're monetizing through our ad channels. And I'm not worried about those cannibalizing each other. I'm more worried about how many of those trials every year can we end up in one of our revenue-producing funnels. And I'm confident if we can do that, we can very effectively manage finding the right pressure points between $20, $15, $10, $5 and free and solve for what I think could be a very generous EBITDA equation. David?

So on the guidance, Amy, we'll obviously come back to you in the first quarter when Jim and I have really had a chance to get our hands around the Pandora plan for '19. But for as smart as we are today, we wouldn't expect the effects of Pandora in '19 as it relates to -- revenue is different, right, because they got a lot of revenue. But the -- as it relates to EBITDA and free cash flow, it's probably not going to materially alter our guidance.

Thanks, Amy. Thank you, everyone, for joining us today. Take care.