Q1 2020 Earnings Call
[music].
Ladies and gentlemen, good morning, and welcome to.
Xtend fourth quarter Twentytwenty results Conference call Todays conference is being recorded a question amongst the section will become Ducted follow because it was in two should if you have a question about time. Please press star one on your telephone keypad.
Anytime that we'd like to move to talk from the Q. Please press star too.
At this time I'd like to turn the conference we weren't too Cooper, Susan Senior Vice President Investor Relations. Please.
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 or senior executive Vice President and Chief Financial Officer at the conclusion of our prepared remarks management will be glad to take your questions Scott Greenstein, our president and chief content.
The officer will be available as well as Jennifer which a 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 at Nike 95.
He isn't 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 fleets are you serious six cents FCC filings.
We advise listeners should not rely unduly unfair looking statements and disclaims any intention or obligation to update them as we began I'd like to advise our listeners that today's results will include discussions about both actual results and pro forma adjusted results all discussion of pro forma adjusted operating results assumed the Pandora 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 bring give you a friend or what the trends in recent weeks and reserve plenty of time for your questions.
Roll this change very dramatically and very rapidly since the onset of proud at 19, Elds and economic crisis, yet our first quarter was exactly the kind of strong performance you'd expect from US we grew subscribers CAD solid revenue growth and gorilla adjusted EBITDA by 13% to a record.
First quarter level, we're 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.
Our 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 5500 employees and contractors to work from home and near games. This 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 you 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 share 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 mid healthy returns to 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 like El King.
Where she hears from and talks to Americans during this crisis.
Very early in March even before the gravity of the crisis was fully understood. We inlets 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 chroma 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.
Astonishing stories for medical personnel on the front lines and fielding calls from listeners to answer questions on everyone's mind.
This programming along with the daily podcast, we've created and are making available widely has become a central 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 they continue to operate the business with the level of absolutely 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 focus 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 opinion later this year.
We continue to extend 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 would benefit our shareholders over the long term.
[laughter] excuse me, it's difficult to predict what the next three to six months will bring.
<unk> our AD revenues will take a hit just like everyone else, but where they 80 20 subscription advertising mix serious X.M. is better position than most.
Companies to whether this storm that are talented employees.
Unique 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 work get everything in the business like many other companies we'd have pause nearly all hiring.
And we are putting a tide squeeze on spending where possible, while still investing where we see opportunity.
Our response to all more stake holders will be guided by both empathy.
And smart economics, our primary brands of 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's 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 that for more details on the court.
Thanks, Jim.
So it sounds first quarter was solid across the board is you have come to expect from us.
We had 69000 self thing of ads in group pro forma revenue, 5% 2 billion.
Adjusted either climb 13% to new first quarter record of $639 million, Oh pool was $13.95 from the first quarter up 3.2% year on year.
Churn rate was flat year over year at a very good at 1.8% per month.
New car conversion rates improved a point versus last year's first quarter to 39%.
Used car conversion rates were similarly solid aren't so base of enabled vehicles grew 10% year over year to 128 million or approximately 46% of the cars on the road in the U.S.
<unk> penetration rate climbed about 400 basis points year on year to about 48%.
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 in the back half of March as stay at home orders reduced auto sales.
From a healthy new car SAR of 16.8 million in February Sark came in at 11.4 million in March.
With all of the decline seeing 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 we're evaluating whether auto dealers 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 church.
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.
I 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 unpack so far.
Given to how much has changed in the economy, when Jim and I put all this together we can't help but see these recent trends as confirmation of the high quality of the business model.
We currently expect no more than 340 million of Catholics and 2020.
Launching 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 soccer 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 buyback suspension, we use cash flow to quickly pay down a small balancing a revolver, which is now completely under on an available at $1.75 billion.
We are building cash.
Our capital allocation strategy and leverage targets have not changed however, global assets have clearly Ben Reprised in the stock purchase 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.
Outlook for the U.S. economy in resumed the buyback Accordingly, we will update you further on Capitol returns on our next call it with that operator, let's open it up for Q. and a.
Thank you, ladies and gentlemen, if you would like <unk> <unk> on the telephone keypad.
Okay, well, we'll just have some lucky I've too.
<unk>.
Plop a question.
[laughter] questioning.
She <unk> giant some core tasteful I hope well lines open.
<unk> too if I could but no on the average.
You mentioned.
How to adapt to that in terms of the.
Bringing down priced versus putting down quantities balancing there too.
Died and secondly.
It was a satellite radio I wonder patients there today.
Changing the amount of time spent on it.
How's that translates into subscribers.
That that would include.
[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 that for so let let me comment I don't see.
<unk>, it's time why 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 think Americans and had a love story because for a long long time.
And I and I don't see why.
Some change with that sad I'm really I'm glad that we have signal significantly strengthen our streaming offering on on the surface X.M. side. The way we have over the last three years I'm also glad now that virtually all of ours.
Subscribers, we see that.
Received streaming with no for no extra cost so I think we'll well positioned eaten away and 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.
Yeah, and 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 <unk> you know for what we see generally may advertising marketing right now that I mean, you can drop your prices, but you're not really going to bring a lot of a lot of dollars out that.
You know advertisers are cutting back for a whole host of reasons.
One of the.
Little bit hesitant to say this but <unk> you know we see some encouraging signs if we if we were literally to take the order book you know as you know for whether that 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.
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 hopeful working 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 fact is 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.
Question comes from then.
From Morgan titled Please go ahead.
Open.
[noise]. Thanks, I wanted to ask about your programming during this.
I can stay at home situation in a couple of ways.
You guys typically don't share engagement statistics, and I know, it's tricky with satellite. There's this but I was just curious if you had a sense for how the programming was resonating with his listeners who are as you just for talks about not not driving not kidding, but in the home.
And also if you expect to programming moves you've made 10 packs a program in cost structure, one way or the other I think even mentioned in the release that you're continuing to pay for sports she'll know there are no sports. So it's really a question around the moves you made in content, which seemed to be really resonated at least anecdotally.
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 about how much it may be impacting the cost structure, yeah, one way or the other.
A bigger question wanting to get your phone [laughter].
<unk>, it's jam and I'll start and stop the sick up real quick or.
David to wrap up on costs, So first and foremost yeah and I don't want this to sound like a page.
But I couldn't be more proud of the content, we have on the air right now our team has transition.
So quickly.
Able to provide the content, then I'll listen to subsets or not.
Yeah from an environment, where we worked out of virtually probably I think eight or nine national studios around the country well about content today.
Reduced outside of our.
Outside or studios without losing the Furthermore, we just had tremendous support from the town.
That that you know, it's a big party the same sex I'm, sorry, I I can tell you that you know on the serious X.M. side, we do have our own barometers to understand.
Sponsor is to our programming and how it's being received a examples being for instance on the top side, how many calls overseas from listeners.
On various subjects of gives gives you a small on the Fred couples they show on the ball channel a couple of weeks ago. The the call into waves longer I think than we've ever seen for for any probably don't we had on that you're going on so <unk>, there's a good Greg Norman.
I I read programs like people listening when so you know.
We know what's resonating.
And and we couldn't be more pleased with that.
Pandora's side, we have.
Definitely seen a downturn in our listening.
It is come back.
Recently, but still not quite where we would have expected it to be and so we're spending you know a lot I'm not understanding that most of that we're sure is related to big impact of the virus right now and and and obviously the flip between.
Stay at home and.
Slash working out slots 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 to go on going back to work. So I'm Scott anything quickly you want to add yeah, just a quick.
It's just the company's either woman I think he actually kicked off when Howard.
People too no.
Community raises the name of community I'd be a minimum wage station media and everything which emulated form really they need an eighties really shows.
You know the day that two people at least we could go like we could get colds, which I don't want to down play that compared to anybody else out there just the fact.
The idea you it shows Dayton.
The every day.
<unk> and then that led to obviously a lot of scanners and.
That's really dating game and using new <unk>, Yeah guess D.J. session and then it'd be.
Beastie Boys down.
And then got like two people like 20 pounds during holidays.
Swiftly sits one and it just seems P. news.
Each day, and maybe more coming shortly.
He didn't engage speaker. So this is from the beginning with a unique way during the time. So it's just said it couldn't be more crowd like you're just getting started.
And some of it's looking T.V.A.
If you want to comment on cars.
But still like that yeah, Yeah, I got yeah, one one more thing on the Jim mentioned, the pens or listening to them and we can you know track the listening changes directly to commute times and you know we look at the markets were stronger stay at home orders and you know we've looked at.
The markets that don't have them you know, there's a lot of data.
And you can track the change and listening trend directly to commute we have picked up a quite a bit odd and C.E. devices with the whole girlfriend smart speakers. So we didn't actually see people you know sort of effectively transitioning to a different location, but to pick up and see he doesn't make up for.
You know the the loss of computer.
On the cost side, we have some they're they're 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 they advertise inside but for the most part programming costs remain the same.
God. Thank you off.
Yeah.
Thank you will not take on that question from the then the house from West Fargo. Please go ahead.
Thanks.
Something a little bit about the churn dynamics in lower vehicle insurance versus the involuntary turn could you maybe you talk a little bit about hot turn turned it in 2008 to nine and do you think that you can habits are going to be neutral in terms of the way those two forces there acting out in this cycle and then you'd have been trials aren't swear down about 65 to 60 per.
The little better than thought you'd think that peak and the decline or is it she seemed a towel and as the fun offerings should we start don't expect anything that has a pretty big offset to the Celtics fan spending yourself I think about how much sat down when the phone all start to make that sort of shift banks.
So.
What we're going to respond to some of those ended that just one file animal just before.
2000, 2009, we did not.
A used car faunal that was near as powerful as we do today only work penetrating.
Anywhere near where they are today. So I believe we can we can take a lot of lots of.
From how non voluntary.
When I planned, but I don't really believe.
There's anything from that period, that's going to help us forget whether one's done also.
<unk> said, though.
<unk>.
Sure Yeah in 2008.
We were sort of late into the recession in the early out of the recession, because or you know the demographic and the customer bases above average income you know, we're we're kind of more representative of the general driving population now with what you know Jim said about the growth of the Huh second older business.
You know so we we would expect to be.
We don't know we're going to find out so I'm going to tell your 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 sort of 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.
<unk> 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 town that you're you're going to do and up ultimately with less production unless you expect on the other end.
You know the spike to recovered that in other words that if you go from 16 million car sales down do you know elevens and you know you think you're going to make all those up on the back and you're sack would just come a little bit later, so a lot about 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 sound, so they're not making the cars now and and that's that's absolutely. Good result in a volume reduction inside.
Great. Thank you.
Thank you want to take on next question from just a cat.
<unk> from Bank of America. Please go ahead.
Hi, thinking I'm on my first questions I said Scott.
Him and then contain it.
So the first time just to go back to the content.
<unk> and as you said you you still paying the sports leagues and I'm just wondering what.
Flexibility of what you're getting return.
Contracts didn't like what what happens with these contracts.
And and then I guess it 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 any color.
Hang on there.
And then for David.
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 are there any longer term intact from what's going on now and and then finally.
The confidence.
That's interesting.
Amazingly confident when you it sounds like you're leaning towards that maybe you can get this color, but it does sound like a big part of confidence from from the company. Thank you, okay. So but to just sit there like there.
It was a five four or five five questions all products.
You know effective willingly, but I'll take the question on holiday.
I I'll I'll comment quickly on the sports and stopped.
He wants in there.
We'll take the.
The.
Oh number one you know I've been really clear I, one house learned wants is excellent or as long as solid wants to work I you know I don't I think <unk> I know.
As a tremendous relationship then it's never been better as important when they when they were either on the quality of the show that he's bringing for listeners every day it couldn't be better and I couldn't be more proud of it.
Yeah I.
Place the pages to begin discussions I've had you know.
Higher and I chat quite often but put in place.
And more formalization of discussions is as high as contract as as fire at the end of the year I'd actually.
You know set some time aside to.
You know to begin working as through with Don balls as Howard's agent obviously.
We haven't been able to have those.
Ah discussions option spoke with Don even you know a couple of days ago, and you know I I think that's especially with a better how.
One person I'm not concerned that we won't find a way.
Other to to you know try to.
Find a path or and I'll have I hope to have more to say when we do our third quarter call, but but you know.
Uh-huh.
<unk> I set it up there on the on the sports program inside I can tell you that you know there's <unk> 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 head back on yeah.
<unk> love they'll be 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 2001 for me you know stuff won't change.
And the costs of our of our sport, sometimes David you want it huh.
I would just get it gets too.
[noise] so like say just the one thing on Howard you know obviously this whole situation unexpected has given hired.
Yeah.
Yeah.
Creation pretty grumpy and all that even this morning and that stuff.
<unk>, Yeah, and more importantly, how many of the school in the stands.
The show.
Have now sat on the shows you the free lives in New Jersey. In addition, misgivings hired an additional two besides the studio this means in town.
Have to be in the right way to promote a movie a record it or whatever that they.
Major gas from their home his entire new tunes.
So we get very good about that and then get on there on the sports. They you know just said it well, but yes.
At this time and there's nothing else on the at the largest library classic sports being broadcast and you made many many games.
So did filling that gap is best weekend and and the news value.
And we do that but you know data do you deal with your furniture.
Mmm.
It just for your your question on the houses like change longer term business operations is it's a really good one 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.
On the World and you know with half of them you know not coming to work so for about five six weeks ago.
It.
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 lie basis.
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 do work I don't know what Oh, a viewer find it but we're finding that this world of working across assume to be highly affected.
And and so there there is a a real consideration of doing need the same kind of G.N.A. infrastructure that that we used to have you know when even though we have incredibly strong liquidity and 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 or we that solve our guys to look hard at at the initiatives that they they had on the calendar 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 gonna you know you know what they say nevertheless, good recession go to go to waste and you know we're working hard at this out of current engagement is going to be a.
Turning out to be a really interesting thing for us that with you know it was 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 ganache efforts to get People's stream anymore have really picked up steam since the.
That sort of deciding so so you know stay tuned for all these changes you know play out.
I'm the by back well, we are confident clearly, we don't have of liquidity or leverage problem to deal with.
And what we what we are looking out as a price dislocation that's not just the dislocation for for our assets are serious stuff, but it's dislocation for you know other people that were in the market. So there's a you know floor 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.
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 up on the gas.
Right, there once where I'd like to just I'd like add David is that's what that we've been then as you would expect we've been.
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 well as to both where the board is in the direction. The board is given day.
Which obviously winds up exactly what they're what our recommendation was.
Next question please.
Thank you all next question <unk>, some rock still there from the.
Yeah people I hope.
Yeah.
I think right. So then the question the first just keep talking about with.
I live Compton quite amusing to when my <unk>.
That may beside the pause a pencil shape the kids subscription that might be economic downturn maybe.
If there's any kind of quickly.
We are teachers out there this year.
Or not.
I want to just on <unk>.
Rating of experience do you have any something rather.
Subscribing or campaign, because they're spending less time on the road and see what's valuable service right now one of those compilations work from households gets tightening up the discretionary spending thanks.
Yeah.
You take that one 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.
Streamlined the offers in some respects slip in a way when you used to get an agent on the phone that they'd take you through a more complicated you don't offer cadence. Then you know now you can do it and the the idea or you can 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 simple.
By the way that pitches is made you know whether I'd have a big effect on our pool you know no. Although you have to feel like in a recession environment that would ever increasing our pool you saw it might be coming in the in the business. It it's got to be less or.
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 15 basis point increase in the total of non pay and other voluntary churn.
As you know it we've always felt that had you know you know under $14 on average per subscriber.
Oh service has never really bad about.
You know you can't afford it it's more that you choose not to pay for it.
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 in that in a in March but fully offset by the vehicles.
<unk>.
You know how sustainable that'd be you know going forward, it's sorta anybody's castle could could post.
Yeah.
Thank you will not take time next question. Some days thing back then it from Picky. Please go ahead.
I just had a a very simple two part question on gross additions as we wait for sort of the auto plants. They come back on line do you mind, just giving this update on on the Sheriff grossed ads on the on the new car citations used and then on churn it David you mentioned.
Don't expect turn to be as bad as the financial crisis nine.
That was a comment on sort of full year turn numbers not the sort of.
<unk> peak that we saw quarterly 10 years ago or so thanks.
<unk> on the second question Gay said I I think it's both right.
And again I don't know, we're gonna 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.
I'm trying to remember now, but I I think we might there's only one or 2.2% peak <unk>.
Yeah in 2008, 2000 I didn't.
You know could go there sure you know I have to admit with the damp lean effect or vehicle related turn I'd I'd be a little surprised but.
<unk>.
<unk>, you know with new car sales dropping 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.
Correct 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 you know a 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 or last question. Please.
<unk> final question from Brian crossed from go a chip Bank. Please go ahead.
Yeah.
Oh, I get boring well one 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 office frame, yeah sort of the worst case scenario and also how shall we think about.
The margins on the AD revenue that is declining Andorra. Thanks.
<unk>.
Yeah. Please [noise].
Okay.
You know 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.
So and they the part of the hesitation is is that 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, <unk> reading a lot of things from you know publish statistics from various sources on what's happening with it you know advertising sales up it broadly you know it seems that digital properties are doing a little bit better than broadcast proper.
<unk> 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.
Out as much like so what would 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 costs associated with that right that the formulation sort of these licenses or a greater of you know sort of listening to.
Time or or per cent of Monetizations and and so you know if you were listening doesn't decline proportionately with the demand you you can flip right into into the unit costs instead of the shared a revenue and you know generally you know we <unk>.
That that to be occurring that you know, there's going to be fewer royalties them there otherwise we're.
Certainly for the fact that listening is down a little bit through the crisis and they'll be sure royalties because of the drop on the demands side, but I do think to drop the 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.
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 wondering if you know how much better that number might as well just not for the kind of a 19 crisis snapping and like in the corridor.
Well I, you know hard to know right, but [noise].
You know we we're we're feel pretty good about you know the plan, though 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 don't add orders, we're we're all very strong and.
When you hit the 10th March or it was like you know business activity you know around the world <unk>. So you know we are in a new normal we do feel they 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.
<unk> and they are you know confident that they can track the changes listening to the reduction in computer.
Yeah, Brian just one comment from from from Jim is.
Your observation means exactly right. We were David is exactly we're sitting on March 10th then you know first of all I want I want to realize that my comments I I think we had an outstanding.
Quarter.
You would've been even better would outgrow it now there's there's no question.
The reason I say that is not to say Oh Gee, you know, let's let's cry over so you know over over the loss.
Oh, well no. That's that's not the point at the point is the strength of our business model.
Was was never have better evidence then then in the first quarter.
Demands on themselves as both in revenue and I'd, rather subscriptions. There's no question about it and I believe both of those metrics will come Roaring back.
Once we get back to normal.
Yeah. Thank you for banks Brian.
Thanks, Brian Thanks, everyone from participating in today's call stay healthy and we will speak Houston.
Thank you bye-bye.