Q1 2020 Earnings Call
[music].
Ladies and gentlemen, good morning, everyone else from two years to extend fourth quarter Twentytwenty Medical Conference call Today's conference is being recorded.
For the month of section will become Ducted formal because the presentation. If you have a question about time. Please press star one on the telephone keypad.
Anytime you, we'd like to move the stock from the Q. Please press star too.
At this time I'd like to turn the conference we weren't too Cooper season, Senior Vice President Investor Relations and probably Mr. Stephen. Please go ahead.
Thank you good morning, everyone welcome to Sirius XM <unk> first quarter 2020 conference call today, Jim buyer or Chief Executive Officer will be joins I gave his career for 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.
An officer will be available as well as Jennifer which our president of sales marketing and operations. Those two will also be available for the Q and a portion of the Paul first I'd like to remind everybody that certain statements made during the call may be forward looking statements as the term is defined in the private Securities Litigation Reform Act that makes you know what he thought.
These and all forward looking statements are based upon management's current beliefs and expectations and necessarily depend upon assumption beta 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 more information about those risks and uncertainties fleets usurious six cents FCC filings.
We advise listeners should not rely unduly unfair looking statements and disclaims any intention or obligation to update them.
We began I'd like to advise our listeners that today's results for flu discussions about both the actual results and pro forma adjusted results all discussion of pro forma adjusted operating results assumed depend or transaction closed on January onest 2018, and exclude the effects of stock based compensation and certain purchase price accounting adjustments with that.
I'll hand, the call it your Meyer.
Thank you burned good morning, we're going to keep it breed give you a friend or what the trends in recent weeks and reserve plenty of time for your questions. The roll this change very dramatically and very rapidly since the onset of preloaded 19 out and economic crisis, yet our first quarter was exactly.
Kind of strong performance you'd expect from US we grew subscribers CAD solid revenue growth and gorilla adjusted EBITDA by 13% a record first quarter elaborate.
We are fortunate to benefit from a powerful subscription business model and while we're not providing guidance at this time, we expect to generate substantial positive cash flows this year and in years to come.
Biggest priorities in the crisis will always be to ensure the wellbeing of our employees and to manage business continuity.
Global stay at home orders swiftly and materially alter the way we work.
All of our teams have responded with speed and creativity, we migrated 6500 employees and contractors to work from home neared games, just required a tremendous effort from our I T and HR teams.
We experienced substantial disruption of our call center staffing staffing levels fell 50% to 60% lengthening hold times, increasing abandon rates and reducing our ability to handle customer needs and support our sales campaigns in response are.
Hi, TV marketing and call Center operations teams took a variety of actions, including enabling more than 2500 of our call center agents to work at home.
Nitpicking, only increasing online chat capability.
And enhancing self care tools online and through our IDR systems.
We have made significant improvement here, but I don't expect us to get back to our normal levels until stay at home orders are lifted perhaps in June or July.
But we are playing offence as well as defects to drive awareness of our streaming offering and make it very easy for Americans to access vital news and information, we launched a free online listening period.
With most of US staying home, we see an opportunity to get more Americans stream Sirius XM as well as unique occasion to get our existing subscribers to stream more.
Programming group has been in overdrive, our content right now not only sounds great, but it's cheaper relevant and the response has been remarkable in times like these more than ever our service brings people together.
It's people company and helps us chair are changing national experience.
We were one of the first media companies to create virtual events to replace canceled ones as we did for the Ultra music Festival and more recently with stage couch.
Springsteen Taylor Smith.
Sales Rep, Garth Brooks and many more have participated in special DJ sets and home performances for listeners and Howard Stern has conducted some nominal interviews from his home with Tom Brady Governor, Andrew Cuomo and Paul Mccartney.
I'm happy to report get Andy Cohen made a healthy return so its exclusive talk show.
Kevin Heart is back doing new shows and Greg and Greg Norman and coach K did special shows for us.
We all could use a laugh and we created she self funded a full time comedy channel based on the works a female comics last week, we announced and launch or exclusive weekly show bike Yale King.
Where she hears from them and talks to Americans during this crisis.
Very early in March even before the gravity of the crisis was fully understood. We enlisted and why you Lengo unhealthy, which has powered our dr. radio channel for more than a decade to create a new full time channel about the Corona virus. We made this channel available free.
On both active and in active satellite radio us.
Dr Radio and our special Corona virus channel are providing daily reports from experts.
Donaldson stories for medical personnel on the front lines and fielding calls from listeners to answer questions on everyone's mind.
This program along with the daily podcast, we've created and are making available widely has become an essential source of the kind of fact based medical information that is both in demand and so vital to our country's future.
In short.
We quickly took steps to ensure that are audio entertainment service would be uninterrupted. We've provided the best possible customer service and we continue to operate the business with the level of excellence you have come to expect from Sirius XM.
I could not be more trout of the efforts and the performance of our teams during this difficult period.
But make no mistake.
Sirius XM is also still focused on building strong long term foundations for growth.
Pardon me Clark penetration rate rose to 76% in the first quarter on its way to the 80% that I've talked about Affinion later this year.
We continue to extend the OEM contracts further 360, L. rollouts and increase the quality of our screening offer.
Our investment in Soundcloud in February deepens, our relationship with the company and builds upon our successful AD sales agreement.
Soundcloud as one of the largest open audio platforms in the world and plays a critical role in the music ecosystem.
Asset that will benefit our shareholders over the long term.
[noise] excuse me, it's difficult to predict what the next three to six months will bring.
Our AD Avenue, our AD revenues will take a hit just like everyone else, but with a 80 20 subscription advertising mix serious X.M. is better position than most.
Companies to whether this storm with our talented employees.
Neat powerful business model and extremely strong financial position.
And I can assure you.
We will also be well position to capture upside.
When this crisis finely ends of course, we're taking a fresh look at everything in the business like many other companies we have pause nearly all hiring.
And we are putting a tight squeeze on spending where possible, while still investing where we see opportunities.
Our response to all more stakeholders will be guided by both empathy.
And smart economics.
I'll try married brands serious X.M.M. Pandora remain very attracted to consumers because we have fantastic content.
And we keep the service easy to use and we continue to present a good value proposition.
I remain as optimistic about our company future as ever before.
Once we have a better view of the slope of the restarting recovery big planned to resume providing guides now let me handed off today, but for more details on the core.
Thanks.
Serious like sounds first quarter was solid across the board is you have come to expect from us.
We added 69000 self thing of ads in group pro forma revenue, 5% to 2 billion adjusted either dog climb, 13% to new first quarter record of $639 million, Oh pool was $13 in 95% from the first quarter up 3.2% year on year.
<unk> was flat year over year at a very good 1.8% per month, the new car conversion rates improved deployed versus last year's first quarter to 39%.
Used car conversion rates were similarly solid.
<unk> enabled vehicles grew 10 per cent year over year to 128 million or approximately 46% of the cars on the road in the U.S.
The used car penetration rate climbed about 400 basis points year on year to about 48%.
At the end of the quarter. The total trial funnels stood at 9.1 million down from 9.3 million him at the end of 2019.
All of that contraction and trial funnel came into back half of March as stay at home orders reduced auto sales.
Oh, my healthy new car SAR of 16.8 million in February Sark came in at 11.4 million in March.
With all of the decline Feeing after March 9th.
So far in April new and used car trial starts a close proxy for sales are down the roughly 55% to 60% not quite as bad as we thought in many states are now reevaluating whether auto dealer showroom should remain closed.
However, lower sales auto sales today flows through to fewer conversion opportunities three months from now we will see the biggest effect of this lower top of the final activity in the third quarter.
Lower auto sales does provide the benefit of reduced vehicle related church, which will partially offset unexpected rise in nonpaid involuntary <unk>.
In March we saw 15 basis point increase in non pay and other voluntary churn, which was completely offset by a reduction in vehicle related sure.
Conversion rates fallen late March but have already partially recovered.
We did see a small number of advertising buys get cancelled and late March in a much bigger impact starting this much.
You have not yet seen much of a slowdown in payments related to add six bad debts associated with this or consumers should increase in a recession or environment, but once again, we have not seen much of this impact so far.
You're going to how much has changed in the economy, when Jim and I put all this together, we can't help but to see these recent trends as confirmation of a high quality of the business model.
We could we expect no more than 340 million of Catholics and 2020.
The launch of serious X.M. seven is currently expect to do occur later this year, but we expect the launch of serious X.M. eight to be pushed into early 2021.
The health of the satellite fleet is good and there is no customer impact this push.
We still I expect to pay no federal cash taxes and 2020 in a very small amount in late 21.
As we mentioned in the press release in late March we temporarily suspended our saw that even with that we put $377 million to work in the first quarter to returns of capital to shareholders N.B. investment Sound club.
Following the buybacks suspension, we use cash flow to quickly pay down the small balancing a revolver, which is now completely under on an available at $1.75 billion and we are building cash.
Our capital allocation strategy and leverage targets have not changed however, global assets have clearly Ben Reprised in the stock repurchase grid, we set at the beginning of February could simply become out of date by the time, we hit the end of March we expect to take a look at this in light of the out.
Look to the U.S. economy.
Resumed the buyback accordingly, we will update you further on Capitol returns on our next call it without operator, let's open it up for Q. and I.
Thank you ladies and gentlemen.
The question <unk>.
I think <unk>.
Coupons.
Okay, well, we'll just doesn't look you talked to.
<unk>.
Oh, one plop a question.
Well not take off [laughter] question.
<unk> giant from inner core baseball I hope well lines open.
<unk> too if I could put it all on the advertising conventions.
How to adapt to that in terms of the.
Bringing down price versus thing down quantities balancing the two.
Indoor died and secondly, along the.
Radio I wonder if patients there they they need changing the amount of time spent on it.
How that train the into subscribers.
That that live in grown.
Okay.
[laughter].
So I'll take the first half of your question David will take I'll take the second half of your question David.
We'll take the first so let let me comment I don't see.
<unk>, it's time Why's there'll be any material change in the demand for our product going forward.
Hmm, obviously the amount of listening in the car is significantly down.
The last 688 weeks once it's a country is open again, yeah, I see a big chunk, if not all of that listening returning.
I I think Americans are on a love story from their car for a long long time.
And I and I don't see why that's been changed with that Sad Ah I'm really.
Lab that we have signal significantly strength in our streaming offering once they're on the serious X.M. side. The way we have over the last three years I'm. All so glad now that works in all of our subscribers we see that.
Received streaming with no for no extra cost so I think we'll well position eaten away. So I'm not worried at all about the demand for all your listening hours for our product going forward. David can you take the question on advertising. Please.
Yeah, It's James if I heard it right I think you were talking about what can you do to bring down price to stimulate the demand side and you know why you know for what we see generally may advertising markets right now that I mean, you can drop your prices, but you're not really going to bring a lot a lot of dollars out that.
You know advertisers are cutting back for a whole whole host of reasons.
One of the <unk> well that hasn't to say this but you know we see some encouraging signs if we if we were literally to take the order book.
No <unk> you know for whether there for what it sounds or what it is that you know you you'd have the point of view that advertisers think we're gonna be back to normal and the third quarter now Jim and I look at that and recognizing that you know people can pull their ads at any time you know for the most part we we think that's probably.
<unk>, hopefully work and and you know people have time to make decisions about how quickly they restore advertising because you can't turn it up pretty fast.
And then we'll just have to wait and see but for the situation as we walk into this early part of the second quarter. When you <unk> you can drop your prices, but the factors is that you got to you're you're in a demand side problem here and you're not really going to stimulate it with by dropping prices.
Great.
Thanks.
Questions come from Ben Twin break from Morgan.
Please go ahead, well I need open.
[noise]. Thanks, I wanted to ask about your programming. During this you know pandemic and stay at home situation in a couple of ways.
Guys typically don't share engagement statistics, I know, it's tricky with satellite business, but I was just curious if you had a sense for.
How the programming was resonating which is less areas who are as you just for talking about not not drive and not can you name, but in the home and also if you expect to programming moves you've made 10 packs your program in cost structure, one way or the other I think even mentioned in their least city are continuing to pay for sports, even though there are no speech.
So it's really a question around the moves you made in content, which seemed to be really resonate at least anecdotally. Some other stuff that Howard stern do and it's been pretty incredible and how that is impacting or not engagement on the platform broadly and then also how much how much it may be impacting the cost structure, yeah, one way or the other.
Bigger question, because I wanted to get yourself [laughter].
So bandits. It's again, then I'll start and stop the same problem quick or yeah, and then David to wrap up on costs.
So first and foremost and I don't want this to sound like a pain.
But I couldn't be more proud of the content, we have on the air right now our team has transition.
So quickly to be able to provide the content that I'll listen to subset from us.
From an environment, where we work data virtually probably I think eight or nine national studios around the country dwell about content today.
Reduced outside of our.
<unk> without losing the Furthermore, we just had tremendous support from the town.
That you know, it's a big part of the same sex and I'm sorry.
I can tell you that you know on a serious X.M. side, we do have our own barometer Saunders fan.
Sponsor is to our programming and how it's being received examples being for instance on the top side, how many calls over c. from listeners on on various subjects of just give me a small on the Fred couples that a show on the ball channel a couple of weeks ago, the the call him too.
Longer I think than we've ever seen for for any probably don't have much going on so there's a good Greg Norman.
I I bet, nor gunfire people listening when so you know.
We know it's resonating.
And and within the more pleased with that on a pandora's side, we have.
Definitely seen a downturn.
In our listening.
It is come back <unk>.
Recently.
But still not quite where we would have expected it to be and so we're spending you know a lot on understanding that most of that we're sure it's related to they impacted the virus right now and and and obviously the flip between stay at home.
And commuting slash working outside in the car I also expect that will change and returned normal once a Americans begin to get back to what we all know we're going to do everyday witches get back there going going back to work. So I'm Scott anything quickly you want to add.
Yeah, just quick so it's just a couple of things that <unk> I think yes, we kicked off when how and people too.
Community raises the nuclear they'd be a minimum wage station media and everything teach emulated yeah.
It is really shows.
<unk>.
You know the date that.
People at least.
Go lie you could get colds, which I don't want to down play that compared to anybody in this out there just exactly yeah.
Skating multi billion. These every day.
The clock and then that led to obviously a lot of scanners and.
Really big and gaming using nutrients releasing is getting guess D.J.'s actions and then humanities that Beastie boys.
<unk> and then that led to people like Jimmy pounds during holidays.
Most states one and it gets continues.
Each day and there'll be more come true.
He wants to get engaged secrets to say this is functioning really unique way during the time, so as Jim said it couldn't be more ground like you're just getting started.
The long commute and some of its will continue and.
If you want to comment on card.
But sorry, Yep that I got yeah, one one more thing on the just mention the Pandora listening to them and we can.
Track the listening changes directly to commute times and you know we look at the markets were stronger stay at home orders and then you know we've looked at the markets that don't have them.
There's a lot of data.
And you can track the changing listening trend directly to commute we have picked up a quite a bit odd and C.E. devices with the whole girlfriend smart speakers.
Actually see people, you know sort of effectively transitioning to a different location, but the pick up and see he doesn't make up for you know the the loss of computer.
On on the cost side, we have some there there are a few contracts, where we have lower expenses and given what's happened and some of them are related to the reduce demand for the on the advertisement side, but for the most part programming costs remain the same.
God. Thank you off.
Thank you will not take on that question from the then cut off from West Fargo. Please go ahead.
Thanks.
A little bit about the churn dynamics in lower vehicles turn versus the involuntary turn could you mean, you talk a little bit about hot turn turned it in 2000 and denying and do you think did she can habits are going to be met neutral in terms of the way. The two forces are acting out in this cycle and then you'd have been trials aren't swore down about 55 to 60 per.
<unk>, a little better than thought you'd think that peak and the decline or is it cheating the towel and has the fun all shrinks should we start expansion, there's a pretty big offset to the fact expense and even just tell us think about how much sat down when it's on all starts to make that sort of shift banks.
So.
David will respond to some of those ended that just one point I want to know just before.
In 2000, 2009, we did not.
Use carafano that was near as powerful as we do today and we weren't penetrated initially.
Anywhere near where you are.
So I believe we can we can take a lot of lots and.
From how non voluntary.
During my point I plan, but I don't really believe there's anything from that period, that's going to help us forget whether one's going to offset.
<unk> said, they don't turn over to do.
Sure Yeah in 2000, they know and we were sort of late into the recession in the early out or the recession because her you know the demographic and the customer bases above average income you know, we're we're kind of more representative of the general jogging population now with what you know Jim said about the.
Most of the second older business.
And you know so we we would expect to be.
We don't know who are going to find out so I'm going to tell you right now I don't know what the answer is but I would expect that we will be quite as late in the in quite as early as last time, but we still have a customer base on average where the demo demographics say that we have better than average income. So they should be the customer pays should be more recession.
System I do expect because of the vehicle related churn that being a much bigger component to have less of a spike and ensure that we had the last time around how much less of a spike sorta anybody's guess, but you know we were hard pressed to believe that <unk>.
Rise a little from this 1.8% level that we've done that for quite a while but we don't we don't expect the same same kind of a spike.
The.
A sack you know trial starts and sat for combination between those you know it it is sort of a one for one as you take new car sales down that you're you're going to do ended up ultimately with less production unless you expect on the other end.
Over you know the spiked to recovered that in other words that it to go from 16 million car sales down do you know 11, and you know you think you're going to make all those up on the back end your sack would just come a little bit later, so a lot of what you <unk> you know what you have to forecast by the fact is what your expectations for the recovery is.
In the meantime, you know we know that automakers have shut the plant. So so they're not making the cars now and and that's that that we're gonna, whose result and volume reduction in Sac.
Great. Thank you.
Thank you want to take on next question from just a cat.
Oh <unk> from Bank of America. Please go ahead.
Hi, Thank you I'm on my first questions I said, Scott like Jim and then contain it.
So the first time just to go back to the content.
It really says and as you said you you still paying the sports League and I'm just wondering what.
Flexibility of what you're getting return.
<unk> like what what happens with these contracts.
And and then I guess there was an announcement how much I must have said something on the show. This morning that he's open to ideas on his contract.
If if any color.
Going on there.
And then for David.
You know it seems like an opportunity <unk>.
Probably too maybe change in the long term business operations, if there's something that you feel could be more efficient and aren't there any longer term impact from what's going on now and and then finally.
The confidence and was I mean by that that's interesting.
Amazingly confident when you it sounds like you're leaning towards that maybe I can get this color on that it does sound like it's sort of confidence from from the company. Thank you. Okay. So <unk> there.
It was a five or five five questions all products and outside of being affected willingly, but I'll take the question on holiday.
I I'll I'll comment quickly on the sports they'd stopped.
Nuance and David Yeah, we'll take the routes.
Yeah.
Well number one you know I've been really clear I want house.
Excellent or as long as solid wants to work I, you know I don't I think <unk> I know out or not.
Tremendous relationship then it's never been better as important <unk>, what my rather the quality of the show that he's bringing for listeners everyday couldn't be better and I couldn't be more proud of it.
Yeah, I'd I'd put in place of places to begin discussions I've had you know.
Higher and I chat quite often but.
Place takes the began more formalization of discussions is as follows contract thousands fire at the end of the year.
I'd actually.
Set some time aside to.
You know the begin working as through with Don bought walls is Howard's agent.
Obviously, the the Corona Violets, we haven't been able to have those.
Discussions option spoke with Don even you know a couple of days ago, and you know I I think those discussions are better at home.
One person I'm not concerned that we won't find a way.
Either to to to you know try to to find a path or and I'll have I hope you have more to say when we do a third quarter call, but but you know.
Ah.
<unk> I set it up there on the on the sports program inside I can tell you that you know there's it's a gigantic.
Argument or no argument.
Down the road first and foremost you know our number one concern is for the legs to get started and get the ponds that back on yeah. No I was just drivers.
Well the you know all kinds of discussions here.
But I didn't David summed it up pretty pretty well a couple of minutes ago, which is certainly in 2000 and.
Changed.
The costs of our of our sports times, David you want to take it for now.
I would just get it gets to think ahead.
[noise] so like say just the one thing on Howard you know obviously this.
<unk> unexpected.
Hired.
Neither.
Yeah.
Fish and couldn't compete in or that even this morning and that stuff.
<unk>, Yeah, and more importantly, how many of the school in the stands.
The show it really at a ball have now sat on the shows you. The three lives in New Jersey. In addition, misgivings hired an additional tool.
This means in town.
I have to be immediately I would've promoted movie or record it or whatever that they.
Major gas from their home his entire new tunes asked him about I expected.
So we do a good about that and then just on the on the sports.
No just said well yes.
But at this time and there's nothing else own we add the largest Liberia classic sports being broadcast news maybe many games.
So did filling that gap as best you can and and the news value.
Enter and we do that but you know data do you deal with different interests as they get better.
It just for your your question on the houses might change longer term business operations is it's a really good one that we've been talking a lot about this over the course of the last.
You know six weeks. So when you you know as you you know we'd been a high touch customer service organization or we have I think between inbound and outbound call Center staff here, we have like 10 to 12000 agents around the world and you know with a half of them you know not come into work and stuff about.
You know five six weeks ago.
It's.
It really drove us into figuring out what how do we change do things and now that we're five six weeks and do it you know <unk> questions were asking ourselves as well as we optimize in this new configuration, what is that what does it mean too long term performance and is there an opportunity in here. So we.
Yeah, you see it was you know moving into you know improved <unk> efficiency and digital experience for for customers that were you know <unk> figuring out how to turn up and make more effective chat agents are supposed to you know the the libations.
And you know as we can work our way through an awful lot of the business and wonder about that do we need as much office space do we actually need to put people in the air as a as often would do work I don't know what Oh, a viewer find it but we're finding that this world of working across assumed to be highly effective.
And and so there there is a a real consideration of do we need the same kind of G.N.A. infrastructure that that we used to have you know when even though we have incredibly strong quitter D.N. a lot of cash flow and we can clearly afford to pursue.
Do you know new initiatives and the same way that we had in the past where we that solve our guys to look hard at at the initiatives that they they had on the counter for this year and start prioritizing between them.
You know part of that gets a forced by you know the hiring pause that that Jim Jim mentioned that you know we're going to you know you know if they say nevertheless, good recession go go to waste and you know we're working hard at this out of current engagement is going to be a.
Is turning out to be really interesting thing force that with you know, it's hard to get people's attention for serious when they were busy driving in their car and we're finding a pretty streaming alternatives well. It's just her ganic efforts to get people stream need more have really picked up steam since the.
That's one of the size of so you know stay tuned to put all these changes you know play out with on the buyback well. We are confident clearly we don't have it liquidity or leverage problem to deal with.
And what we what we are looking at as a price dislocation that's not just at this location for for our assets.
Stock, but it's a it's dislocation for you know other people that were in the market. So there's a you know for a company with with an awful lot of financial resources, but we're in a good position as it relates to you know opportunities for external acquisition.
And.
You know with respect to the buyback itself will pick a hard looked at what we think the shape of the recovery could look like what we think that means for the value of our stock and and just like we have in the past when we when we believe what's on sale because won't hesitate to us stuff on the gas.
Right.
I'd like to just I'd like add David's as.
<unk>, we ban then as you would expect a week then.
We've had multiple conversations with our board.
On this subject and including obviously, just a few days ago and I didn't David summed it up as well as to both where the board is in the direction. The board, it's given day that and I, which obviously winds up exactly what they're what I reckon.
Mm.
Expressive ways.
Thank you all next question <unk> from the.
Yeah. Please go ahead.
Yeah.
I think like southern across in the first just keep talking about what sort of nowadays I live contemplating moving to <unk>.
That may beside the pause implant so the kids subscription there might be economic downturn maybe.
If there's any.
Kind of quickly.
We are pleased to jot them this year.
Which may or or not the bomb the stuff I want to just <unk>.
80 of experience do you have any something whether that's up on X.M. subscribers.
Spending less time on the road and see what's valuable service right now one of those cancellation work from households gets tightening up the discretionary.
<unk>.
Yeah.
Yeah. So you know Ah Argh nothing's really changed her offered strategy or the you know we've we've done some things too [noise].
Streamline the offers in some respects with you know we when you use to get an agent on the phone that they take it through a more complicated.
Offer cadence then you know now you can do it in the the I.B.R. you couldn't you can do it on line you can do it through a chat agent and then those less interactive channels. We've tried to streamline simplify the way that pitches. It was made.
Well I'd have a big effect on our pool, you know no. Although you have to feel like in a recession environment that whatever increase in our pool you saw it might be coming to me in the business. It it's got to be less.
More recession sensitive environment.
You know and the non pay you know side of things you know I don't I don't have any more data on that then that would I gave you end up prepared comments you know so <unk>, we tried to give it the data point of Okay. In March we saw a 15 basis point increase in the total of non pay and other voluntary churn.
You know it we've always felt that that you know.
Under $14 on average per subscriber that.
<unk>, Oh services ever really bad about.
You know you can't afford it it's more that you choose not to pay for it and so we do look at the two together you know you've heard is talking about those two together and sort of the you know sort of 120 basis point range you know over the last couple of years and you know so we saw a 15 basis point you know increase.
So in that in a in March but fully offset by the vehicle related <unk>.
You know how sustainable that be you know going forward. The it's sorta anybody's castle could could post.
Yeah.
Thank you will not take our next question some Jason back then it from sticky. Please go ahead.
I just had a a very simple two part question on gross additions as we wait for sort of auto plants. They come back on line do you mind just given this update on on the Sheriff gross ads on the on the new Coresite versus used and then on churn it David you mentioned.
You don't expect turned to be as bad as the financial crisis nine I seen that was a comment on sort of full year turn numbers not the sort of.
Off to peak that we saw quarterly 10 years ago or so thanks.
I think it's on the second question J. said I I think it's both right.
Again, I don't know, we're going to see I <unk> I hope I'm right, but you know I I don't think we'll see the kind of full your spike I don't think we'll see the quarter Spike you know <unk> you know quite as pagan yeah, I'm trying to remember now, but I I think we might as well like a 2.2% peak.
Yeah in 2000 2009 and.
You know could it go there sure you know I have to admit with the damn plane effect or vehicle relate to turn I'd I'd be a little surprised but <unk> broken let's see.
Oh gross ads, you know with new car sales drop it right. So if you come through the first quarter of the year that you know the share of of gross ads for new car versus and Jason I'm talking about new car conversion conversion from trials as opposed to winning back and original owner two years yesterday.
Alright, and you know that's.
System with what you've heard in the past it probably you know because of the way that sales fell off and at the end of the first quarter you know maybe you know it.
Drop down a couple of picks, but it's largely consistent with what you've been seen certainly is going forward that as we go through the second and third quarter. You know new curves you know, it's probably going to drop a little faster than than you know the subsequent owner.
Plus the original owners, who were winning back right. So but you know look at <unk>, we'll have to see but I I don't I don't really see anything in that materially changing from the trends you can see.
Okay. Thank you.
Operator can we take her next and last question. Please.
Okay. <unk> final question from Brian Craft from go a chip Bank. Please go ahead.
Yeah.
I get boring I wanted to ask about a little bit more on the Pandora AD revenue can you give us any sense for the actual case, yeah advertising revenue declines as you're seeing it Pandora a quarter to eight just alpha strained yeah sort of the worst case scenario and also how should we think about.
The margins on the AD revenue that is declining Andorra. Thanks.
But I do although liggett Jim.
Yeah, please but [noise].
Okay.
You're right. So we're we're has to provide you know any information about what what's really happening with the book on on the advertising side. It's you know, it's it's still it's still new business to us and it is only 20% of the revenue and you know so and they the part of the hasn't.
<unk>, it's the velocity of the change and orders right that I I don't think Jim and I have feel yet for how fast you know the people can change their minds and you know they advertise inside so that's that's really where the where the reluctance you know comes and yeah.
Reading a lot of things from you know published it to six from various sources on what's happening with you know advertising sales out there broadly you know it seems that digital properties are doing a little bit better than broadcast properties. You know digital audio is a much smaller.
Market, then you know search a search and display and and so you know, it's it's a scarcer commodity for people, who who want to reach that way.
So that you know the advertising so that's about as much like so it wasn't see other question.
Oh, yeah margin on it yeah. So I'm not you know so the on the Pandora's side. You you don't have a completely variable ah costs associated with that right that the formulation sort of these licenses or a greater of you know sort of.
Listening time or or per cent amount of this action and and so you know if youre listening doesn't declined proportionately with the demand you you can flip right into into the unit costs instead of the shared a revenue and you know generally.
We expect that to be occurring.
<unk>, there's going to be fewer royalties than they otherwise we're.
Certainly for the fact that listening is down a little bit through the crisis and there'll be sure royalties because of the drop on the demands side, but I do think that drop on demand from advertisers is going to be in excess of the drop and listening and so we're not going to get a one to one.
You know benefit there.
Yeah, maybe just [noise] excuse me one follow up on that you should decide to then the advertising listening hours. We're we're you know down I think a little bit less than we expected. So it seemed like the the underlying trying there was a little bit better but it was probably also a a pretty big fall off.
And the second half of March I was wearing yes, you know how much better that number might have looked if not for the kind of a 19 crisis snapping and like in the corridor.
Well, you know hard to know right, but.
You know, we we're we're feeling pretty good about you know the plan that we had until we got to March 9th on all aspects of the business that you know the satellite radio additions listening time, you know add orders, we're we're all very strong and.
When you hit the 10th March It was like you know business activity, you know around the world pull off a cliff.
So you know we are in a new normally do feel we had to call yesterday, Jim and I did with you know scholars on <unk> lots of other people in you know talking about listening trends that you know at Penn door and and they are.
So confident that they can track the changes listening to the reduction in commute time.
Yeah, Brian just one comment from.
Some G.M. is.
Your observation means exactly like we were David we were sitting on March 10th and you know first of all I want I want to realize that my comments I I think we had an outstanding.
Quarter.
We would have been even better would outgrow that there's there's no question.
The reason I say that is not to say Oh Gee you know, let's subscribers. So you know over over lost.
Oh still no. That's that's not the point at the point is to strengthen my business model.
Was was never a better evidence than than in the first quarter.
Demands on themselves at us both in revenue.
Subscriptions, there's no question about it and I believe both of those metrics will come Roaring back.
Once we get back to normal.
Thank you for thanks, Brian.
Thanks, Brian Thanks, everyone for participating in today's call stay healthy and we will speak Houston.
Thank you bye-bye.
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