Q1 2020 Earnings Call
[music].
Ladies and gentlemen, good morning, and welcome to.
Xtend fourth quarter Twentytwenty results Conference call today's conference is being recorded.
For the month of section will become Dr. Following the presentation. If you have a question about time. Please press star one on your kind of going to Todd just like any time that we'd like to move just talk from the Q. Please press star to.
At this point I'd like to turn the conference we work to corporate even 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 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 College.
An officer will be available its lowest Jennifer what's up president of sales marketing and operations.
It's too 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 might be forward looking statements as the term as defined in the private Securities Litigation Reform Act that makes you 95 season. All forward looking statements are based upon management's current beliefs and expectations and necessarily to put.
And 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 to not rely unduly on forward looking statements and disclaims any intent or obligor.
Turning 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.
Any adjustments with that I'll hand, the call to Jamire.
Thanks, So far and 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.
Well this change very dramatically and very rapidly since the onset of problems at 19 out and economic crisis, yet part 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% direct.
Your first quarter 11, we're fortunate to benefit from a powerful subscription business model, a 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 order 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 gains. 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 toward 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 that 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 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 phenomenal interviews from his home with Tom Brady Governor, Andrew Cuomo and Paul Mccartney.
I'm happy to report get Andy Cohen made 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 an exclusive weekly show bike L. 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 Corona virus. We made this channel available free.
On both active and in active satellite radios.
Dr Radio and our special Corona virus channel are providing daily reports from experts.
Donnish in stores 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 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 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 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 if England later this year.
We continue to extend OEM contracts further threesixty l. rollouts and increase the quality of our screaming also.
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.
Jogging technology or a tremendous strategic asset that will benefit our shareholders over the long term.
[laughter] 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 where they 80 20 subscription advertising mix.
Area sex them is better position than most.
Companies to whether this storm with our 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 finally ends of course, we're taking a fresh look at everything in the business like many other companies we'd 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 stake holders will be guided by both empathy.
And smart economics, our primary brands of serious X.M.M. Pandora remain very attractive 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 guidance now let me handed off today, but for more details on the court.
Thanks.
Serious like sounds first quarter was followed across the board is you have come to expect from us.
We added 69000 self they never ads and group pro forma revenue, 5% to 2 billion adjusted either dog climb, 13% to new first quarter record of $639 million, our pool was $13 and 95% from the first quarter up 3.2% year on year.
<unk> was flat year over year at a very good at 1.8% per month, and 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% 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 0.2 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 effective 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 fell in late March that 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 so.
Bad debts associated with this or consumers should increase recessionary environment, but once again, we have not seen much of this and pack 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 a high quality at the business model.
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 to 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 athlete put $377 million to work in the first quarter to returns of capital to shareholders N.B. investment sound clock.
Following the by that suspension, we use cash flow to quickly pay down the small balance in our revolver, which is now completely under on and available at $1.75 billion and we are building cash.
Or 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 for the U.S. economy.
Zoom to buy back Accordingly, we will update you further on Capitol returns on our next call without operator.
Open ended up for Q. and day.
Thank you ladies and gentlemen.
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Coupons.
I would like to remove just less than Lucky I've kids.
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Profit question.
No not take out questioning.
<unk> giant from for baseball I hope the lines open.
<unk> <unk> too if I could put on the average price you mentioned.
How to adapt to that and bringing down priced versus a thing down quantity in balancing there too.
And then secondly.
It's been a satellite radio I wonder expectations.
They they change in the amount of time spent art.
How that translates into subscriber impact inability off that that <unk>.
[laughter].
So I'll take the first that'd be good question and 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.
I can't really at this 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 over the last six to eight eight weeks once to countries open again, yeah, I see a big chunk, if not all of that listening return.
I I think Americans that had a love story for their cause 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 once they're under serious X.M. side. The way we have over the last three years I'm also glad now that verbs and all of ours.
Subscribers, we see that.
Received streaming with note 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, and James if I heard it right I think you were talking about what can you do to bring down in price to stimulate the demand side and you know why you know for what we see generally amp 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 <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 as you know for whether there are 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 no third quarter.
Jim and I look at that in recognizing that you know people can pull their ads at any time you know for the most part we we think that's probably a quick look 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 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.
<unk> questions come from then.
From Oregon.
Please go ahead, well I need open.
Thanks, I wanted to ask about your programming. During this you know pandemic and stay at home situation and a couple of ways.
You guys typically don't share engagement statistics, they 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 kidding, 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 the release of your continuing to pay for sports even though 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. Some other stuff that Howard stern do and it's been pretty.
Credible 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 kind of a bigger question wanting to get your thoughts.
So then it's again, then I'll start and stop Passaic up real 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 paid.
But I couldn't be more proud of the content with that one yeah right now our team has transition.
So quickly.
Be able to provide the content that <unk>.
From an environment, where we worked out of virtually probably I think eight or nine national studios around the country well about content.
For based outside of our.
Outside of our state without losing the Furthermore, we just had tremendous support from the town.
That that you know, it's a big part of the same sex and I'm sorry, I can tell you that you know on the serious X.M. side, we do have our own barometer Saunders fan.
Sponsor is who are programming and how it's being received a 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 did a show on the ball Seattle, a couple of weeks ago, there the call him too.
It is longer I think than we've ever seen for for any kind of you 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 we've been be more pleased with that on the 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 of time or understanding that most of that we're sure is related to they impact of the virus right now and and and obviously the flip between.
Stay at home.
And.
Slash working outside in the car I also expect that will change in return normal.
On.
Americans begin to get back to what we all know we're going to do everyday witches get back to go going back to work. So I'm Scott anything quickly you want to add.
Gets quick so it's just a couple of things that <unk> I think yes, we kicked off with Howard and people too.
The oldest community raises the name of community I'd be in the home station media and everything which emulated form building in the eighties really shows pretty confusing to me you know the date that.
But at least.
Though like we could get colds, which I don't want to downplay that compared to anybody else out there just just acting.
State and goes making billions every day you know round the clock and then that led to obviously a lot of stories and.
That's really digging gaming using nutrients from B.C. news getting guess D.J. sessions, and then connect with these that it'd be great.
<unk> and then got like two people like Teeny tiny thing I was raised <unk>, yeah. We swiftly sits one and it just continues.
Each day and the the more coming true.
He wants to get engaged speaker would say this is from Cheney, maybe unique way during the time, so as Jim said it couldn't be more ground.
Just getting started.
<unk> and some of its will continue as as we can.
If you want to comment on cars.
Sorry that that I got yeah, one one more thing on the just mention the Pandora listening to them and we we can you know track the listening changes directly to commute times and you know we.
At the markets were stronger stay at home orders and then 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 girlfriends more speakers. So we could 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 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 they advertise inside 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 the house from West Fargo. Please go ahead.
Thanks.
A little bit about the insurance dynamics in lower vehicles turn versus the involuntary turn could you need talk a little bit about hot turned turned it in 2000 and denying and do you think that you 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 more down about 55 to 60.
<unk> better than thought you'd think that peak and the decline or is it she seemed a towel and has the final shrinks should we start to expect I assume there's a pretty big offset to the fact expense that means you tell us think about how much sat down when it's on all starts to make that sort of shift. Thanks.
So.
Well they didn't respond to some of those ended but just one file animal just before.
Member in 2000, 2009, we did not.
News Carafano that was near as powerful as we do today only one penetrating.
Anywhere near where you are today, so I believe we kidding <unk> a lot of lots of.
From how non voluntary.
And that's when 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 outside.
Without that day, but on the turn over to do.
Sure Yeah in 2008, no and 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 jogging population now with what you know Jim said about the.
Most of the second Oder business.
And you know so we we would expect to be.
We don't know who are going to find out so I'm gonna 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 out his last time, but we still have a customer base on average for the demo demographics say that we have better than average income so they should be the customer pays tribute motor 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>.
<unk> rise a little from this 1.8% level that we've done that for quite awhile.
But we don't we don't expect the same same kind of a spike.
On 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 are there 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. Okay. Con next question from just a cat <unk> from Bank of America. Please go ahead.
Hi, I'm on my first questions, if a scot like Jim and then to gain head.
So the first time just to go back to the content.
It really says and as you said, you're you're still paying the sports League and I'm just wondering what.
Flexibility of what you're getting return.
Contracts to like what what happens with these contracts.
And then.
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.
Because if any color.
Going on there.
And then for David.
You know it seems like an opportunity.
Possibly to 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.
But 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, but it does sound like it's sort of confidence from from the company. Thank you. Okay. So <unk> yeah, I think it was a five or five part questions all try to keep outside of being affected willingly, but also.
The question on holiday.
I I'll I'll comment quickly on the sports they'd stopped.
Yeah, we'll take the.
The.
So number one you know I've been really clear I want how it's going to be on serves up some for as long as solid wants to work I you know I don't I think <unk> I know our.
Have a tremendous relationship then it's never been better as important.
But my rather the quality of the show that he's bringing but as soon as everyday couldn't be better and I can do 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.
That does inspire 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 and salads 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 those discussions are better at home.
One person I'm not concerned that we won't find a way.
Are there to to to you know try to.
Assigned a path or and I'll have I hope to have more to say when we do a third quarter call, but but you know.
Uh-huh.
I think I I set him up there on the on the sports program inside I can tell you 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 that back on that.
I was 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 2121 spectral change.
And the costs of our of our sports times, David you want it huh.
I would just get it gets too.
[noise], So say just the one thing on Howard you know obviously this whole situation unexpected have you been hired.
Yeah.
Yeah.
Fish and couldn't compete you know that even this morning and that stuff.
<unk>, Yeah, and more importantly, how many of the school understands it even though the show.
Have now sound. The shows you the free lives in New Jersey. In addition, misgivings hired an additional two besides the studio this means in town.
It'd be immediately I made a movie a record it or whatever that they can get major gas from their home his entire new tunes.
Expecting ticketed, so we get very good about that and then get on there on the sports. They you know just said it well, but you also have to remember at this time and there's nothing else.
The the largest librarian claims that sports being broadcast news maybe 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 different interests as they get better.
It just screw your your question on the houses might change longer term business operations is it's a really good one we've been talking a lot about this over the course of last you know six weeks. So when you you know as you you know we've got a high touch customer service organization or we have I think between them.
And help out and call Center staff here, we have like 10 to 12000 agents around the world.
And you know with half of them you know not come into work their stuff about you know five six weeks ago that.
Really drove us into figure it out well how do we change do things and now that we're five six weeks and do it. 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 weak.
You know you see it was you know moving into you know improved <unk> efficiency and and digital experience for for customers that were you know <unk> figuring out how to turn up and make more effective chat agents as opposed 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 old viewer find it but we're finding that this world of working across assumed to be highly affected.
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.
Even though we have incredibly strong liquidity and a lot of cash flow and we can clearly afford to pursue 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.
Start prioritizing between them.
You know part of that gets a forced by you know the hiring pause that that Jim Jim mentioned, but 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 looking <unk> out of current engagement is going to be a a is turning out to be.
<unk> 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 commencement slice or so.
You know stay tuned to for how these changes you know play out with on the by back well. We are confident clearly we don't have it liquidity or leverage problem to deal with and what we what we are looking out as a priceless location. That's not just at this location.
For per hour asset the the serious stuff, but it's dislocation for you know other people that were in the market. So there's a you know for a 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, there once where I'd like to just I'd like add David is that's that 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 past about where the board is in the direction. The board has given David.
Which obviously winds up is that where what our recommendation was.
Expressive ways.
Thank you all next question <unk> from the nineties yeah. Please.
Okay.
Okay great.
The person just keep talking about what sort of nowadays I live contemplating you're going to <unk>.
That may decide deposit points old shit, they chose subscription there might be economic downturn maybe.
There's any kind of quickly.
<unk>.
Or not.
I want to just on <unk>.
Leave experience do you have any something rather.
Subscribing or campaign spending less time on the road and see what's valuable service like an hour those compilations work from households gets tightening up the discretionary spending like thing.
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.
Streamline the offers in some respects in a way when you use to get an agent on the phone that they'd take you through a more complicated you know offer cadence then you know now you can do it in 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.
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 this I say, it's got to be less.
More recession censor the 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 in the prepared comments you know so we tried to give it the data point those okay. In March we saw a 15 basis point increase in the total of non pay and other voluntary churn.
As you know it we've always felt that that you know.
Under $14 on average per subscriber that.
Armed services ever really bad about how.
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 income.
Reason that in a in March but fully offset by the vehicle related <unk>.
You know how sustainable that'd be you know going forward. The it's sorta anybody's castle could could post.
Right.
Thank you will not take our next question from <unk> from Picky. 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 getting the sound paid on on the share of gross ads on the on the new Coresite versus used.
Then on churn it David you mentioned.
You 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.
Trough the peak that we saw quarterly 10 years ago or so thanks.
But you always think it's on the second question J. said I I think it's both right.
And again I don't know, we're going to see <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 as well like a 2.2% peak <unk>.
Yeah in 2000 2009 and.
Could it go there sure you know <unk> I have to admit with the damp lean effect or vehicle related turn I'd I'd be a little surprised but grew up we're gonna broken see.
Yeah, I'll grow salads, 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 in original owner two years yesterday.
Locked in your car right and you know that's consistent 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 and we'll 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.
Okay. <unk> final question from Brian crossed from go a chip Bank. Please go ahead.
I get boring for one to ask about a little bit one hand or AD revenue can you give us any sense for the actual case of the advertising revenue declines as you're seeing it pant or.
Eight just out this frame 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] go ahead.
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 in the part of the hasn't.
<unk>, it's the velocity of the change in 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 statistics from various sources on what's happening with it 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.
Not as much like so what what's the 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 of Monetizations and and so you know if you were listening doesn't decline.
Fortunately with the demand you you can slip right into into the unit costs and says the shared a revenue and you know generally you know we expect that to be occurring to you know 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 they'll be sure royalties because of the drop on the demands side, but I do think that 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 underlying trying there was a little bit better, but there 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 [noise].
You know, we we're we're feeling pretty good about you know the plan that we had until we got to March nights on all aspects of the business.
You know the satellite radio additions listening time, you know add orders. We're we're all very strong and you know when you hit the 10th March or it was like you know business activity you know around the world fell off a cliff. So you know we are in a new normal we do feel they had to call you.
Yesterday, Jim and I did with Scott was on <unk> lots of other people.
You know talking about listening trends that you know Pandora and and they are you know I'm confident that you know that they can track the changes listening to the reduction in commute time.
Yeah, Brian just one comment from from from Jim is.
Your observation rooms exactly right. We were David Rockefeller was sitting on March 10th and you know first of all I want I want to realize that my comments I I think we want an outstanding.
Quarter.
You would've been even better would outgrow that there's there's no question.
The reason I say that it's not to say Oh Gee, you know, let's subscribers. So you know over over the last.
Oh still no. That's that's not the point the point is the strength of our business model.
Was was never a better evidence than than in the first quarter.
That demands on themselves at us both in rather than the N. 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.
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.
Yeah.
Yeah.
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