Q1 2020 Earnings Call
[music].
Ladies and gentlemen, good morning, and we'll show you extend fourth quarter Twentytwenty results Conference call Today's conference is being recorded.
My question amongst the section will be conducted follow because it was in two should if you have a question about time. Please press star one on your telephone keypad.
Okay tiny we'd like to move to talk from the Q. Please press star to.
At this point I'd like to turn the conference. He worked to corporate 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 Meier, Our 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 as well as Jennifer which our president of sales marketing and operations.
It's too will also be available for the Q and a portion of the call first I'd like to remind everybody that certain statements made during the call may be forward looking statements as the term as defined in the private Securities Litigation Reform Act that 90 95, using all forward looking statements are based upon management's current beliefs and expectations and necessarily to put.
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 on for looking statements and disclaims any intent or obligor.
Turning to update them.
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 adjustment 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, 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% a rep.
Your 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 near games is required a tremendous effort from our I T and HR teams.
We experienced a substantial disruption of our call center staffing staffing levels fell 50% to 60% lengthening hold times, increasing a band Emirates, 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 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.
Springstone Taylor Smith.
Taylor Swift Garth Brooks and many more have participated in special de headsets 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 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.
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 cone the 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 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 provided the best possible customer service and we continue to operate the business with a 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.
Our new card 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 the OEM contracts further 360, L. rollouts and increase the quality of our streaming offer.
Our investment in Soundcloud in February deepens, our relationship with the company and builds upon our successful AD sales agreement.
Sound cloud as one of the largest open audio platforms in the world and plays a critical role in the music ecosystem.
Asset.
Benefit our shareholders.
Over the long term.
Yeah.
[noise] excuse me, it's difficult to predict what the next three to six months will bring.
Our <unk> our AD revenues will take a hit just like everyone else, but were they 80 20 subscription advertising mix.
Serious X.M. is better position then 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 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 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 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 over a quarter.
Thanks.
Serious like sounds first quarter was solid across the board is you have come to expect from us.
We have at 69000 self thing of ads and grew pro forma revenue, 5% to 2 billion.
Adjusted either dog climbed 13% to new first quarter record of $639 million, Oh 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 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 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 hidden 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.
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 shirt, 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 fell in 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 slow down in payments related to add so.
Bad debts associated with this or consumers should increase in a recession or environment, but once again, we have not seen much of this and pack 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 see these recent trends as confirmation of a high quality of the business model.
We expect no more than 340 million of Catholics and 2020.
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 side airbags, even with up we put $377 million to work in the first quarter to returns of capital to shareholders and the investment Sound club.
Following the by that suspension, we use cash flow to quickly pay down the small balance in our revolver, which is now completely on drawn to it 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 said at the beginning of February had 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 in resumed or buyback Accordingly, we will update you further on Capitol returns on our next call without operator.
Open ended up for Q. and I.
Thank you ladies and gentlemen.
The question <unk>.
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Q I've kids.
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For baseball I hope well lines open.
<unk> too if I could go on the advertising you mentioned the impact how to adapt to that.
We bring down price versus a thing down quantity in balancing the two.
Endorsed died and secondly.
It's been a satellite radio I Wonder dictation.
The change in the mountains.
Aren't they.
How about trained the into subscriber in.
That that live in room.
[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 I'll be any material change in the demand for our product going forward.
Hmm, obviously, the amount of listening and the color is significantly down.
Over the last six to eight eight 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 for their car for a long long time.
And I and I don't see why that's going to change with that sad I I'm really.
Lab that we have signal significantly strength in our streaming offering once they're under serious X.M. side. The way we have over the last three years I'm. All so glad now that Berkeley, and all of our subscribers we see that.
Received streaming with no for no extra cost. So I think we're well positioned either way 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 ask me 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 <unk> 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 going to be back to normal and the third quarter.
Jim and I look at that one recognizing that you know people can pull their heads 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 turn it up pretty fast.
And they'll just have to wait and see but for the situation as we walked 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 crisis.
Great.
Yeah.
Sun comes from then.
From Morgan titles. 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 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.
And also if you expect to programming moves you've made 10 packs a program in cost structure.
The other I think even mentioned in their least you're 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.
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 kind of a bigger question wanting to get your thought [laughter].
So bandits, it's again I'll start and stop the sick up real quick were 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. We had one yeah right now our team has transition.
So quickly.
Able to provide the content that I was such that so now.
From an environment, where we worked out of virtually probably I think eight or nine national studios around the country well about content today.
Produced outside of our.
<unk> without losing the beam. Furthermore, we just had tremendous support from the town.
No. It's a big party. This is sex I'm, sorry, I I can tell you that you know on a serious X.M. side, we do have our own barometer. So I understand what the responses is who are programming and how it's being received a examples be for instance on the top side, how many calls over C. from list.
I was on on various subjects of just give you a small on the Fred couples they show on the ball channel a couple of weeks above the the call into waves longer I think than we've ever seen for for any time, you don't move out on that you're going on so there's a good.
<unk>.
I I <unk> people listening when so you know.
We know it's resonating.
And and within be more pleased with that on the Pandora 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 impacted 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 little change in return normal.
<unk>.
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 gets quick so.
Then one I think he actually kicked off it how.
And people too no.
Community raises the name of community that'd be a minimum wage station medium everything teaching related yeah for mood and then.
A new shows.
You know the gate <unk>.
Yeah, you could go like we could get colds, which I don't want to down play back compared to anybody in this out there just the fact that.
Maybe make a big ones every day, you know round the clock and then that led to obviously a lot of scanners and others that were midsized really big and gaming using neutering. Mr. B.C. News, you know guess D.J. sessions, and then you can activities that can be goes down.
And then got like two people like T.V. bouncing holidays.
Ship it sits one and it just continues.
Each day and they'd be more coming shortly.
He wants to get engaged secret services functioning maybe unique way Disney. These time, so as Jim said I couldn't be more grout.
Just getting started.
<unk> and send them bits will continue as as we can make.
And if you want to comment on cars.
Sorry that yeah, Yeah, I got yeah, one one more thing on the Jim mentioned, the parent or listening to them and we 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 then you know we've looked at the market.
Don't have them, yeah, there's a lot of data and kind of door and you can track the changing listening trend directly to commute we have picked up a quite a bit on 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 located.
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 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 Steven <unk>. So <unk>. Please go ahead.
Thanks.
Something a little bit about the churn dynamics in lower vehicle insurance versus the involuntary turn could you may you talk a little bit about concern translate in 2000, and denying and do you think that you can habits are going to be neutral <unk>. Two forces there acting out in this cycle and then you send the trial cents more down about 55 to 60 per.
And that was a little better than thought you'd think that peak and the decline or cheating the towel and as a fun or shrinks should we start to an expansion, there's a pretty big offset to the fact extend spending just help us think about how much sat down when it's on all starts to make that sort of shift. Thanks.
So.
<unk>, David will respond to some of those ended that just one point I want to know just before.
Member in 2000, 2000 mind, we did not huh.
Use carafano that was near as powerful as we do today and we weren't parents and then it would.
Anywhere near where they are today. So I believe we can we can take a lot of lots and.
From how non pay involuntary.
During that time frame, but I don't really believe lives anything from that period, but it's going to help us for example, whether one's done offset.
<unk> said, David on which are over there.
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 older business.
And you know so we we would expect to be.
We don't know we're going to find out so I'm gonna tell your right now I don't know what the answer but I would expect that we will be quite as late in the in quite as early how this last time, but we still have a customer base on average what are the demo demographics. So 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>.
<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.
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 down that you're you're going to do ended up ultimately with less production unless you expect on the other end.
Oh were you know the spike 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 other factors what your expectations for the recovery is.
In the meantime, you know we know that automakers shut the plant. So so they're not making the cars now and and that's that that we're going to result in volume reduction in Sac.
Great. Thank you.
Thank you <unk> question from just a cat.
<unk> Some bank of America is profit so long as open them time thinking I'm. They first questions are for Scott like Jim and then contain it.
So the first time just to go back to the content.
Particularly sends and as you said you you still paying the sports League and I'm just wondering what.
Flexibility.
And in return.
<unk> like <unk>.
But these contracts.
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 any color.
What's going on there.
And then for David Okay, you know it seems like an opportunity.
Possibly to maybe change the long term business operations that there's something that you feel could be more efficient.
My term impact from what's going on now.
And and then finally.
Confidence I mean, it by that 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 get sort of confidence from from the company. Thank you, okay. So, but just <unk> there.
It was a five four or five part questions all producteev outside of being affected willingly, but I'll take the question on holiday.
I I'll I'll comment quickly on the sports they stopped.
He wants and David Yeah, we'll take the routes.
The.
Oh number one you know I've been really clear I one house.
That's on for as long as solid wants to work I, you know I don't I think holiday I know.
As a tremendous relationship then it's never been better.
As important when <unk>.
Rather.
On the quality of the show that he's bringing.
Soon as every day, it couldn't be better and I couldn't be more proud of it.
Yeah I <unk>.
Place the pages to begin discussions I've had you know.
Higher and I chat quite often but.
Put in place to the began more formalization of discussions is as follows contract as expire at the end of the year.
I'd actually.
Set some time aside to.
You know then working as through with Don Block walls is how his agent obviously.
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.
To to you know try to.
Find a path or and I'll have I I hope to have more to say well, maybe a third quarter call, but but you know.
Uh-huh.
I think I I said enough there on the on the sports program inside I can tell Ya.
You know there's <unk> gigantic.
Argument or no argument.
Down the road first and foremost you know our number one concern.
The way to get started and get the ponds that back on <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.
Only in 2001 for me you know stuff won't change.
And the costs of more of our sports time times, David you want it huh.
Jim got it gets to think ahead.
So so just the one thing on Howard you know obviously this whole situation unexpected has given hired.
Yeah, there are going to be as in appreciation pretty competing though that even this morning and <unk>.
Yeah, and more importantly, how many of the school understands you need to know how to show.
Have now found the shows <unk>. In addition, misgivings hired an additional two besides the studio.
In town.
To be in the right way to promote a movie or.
Whatever that they can get major gas from your home his entire new tunes asked them and I expect him to consider so we do get about that and then get on the on the sports. They you know just said it well, but you also have to remember at this time and there's nothing else on we actually marriages library things that.
Sports being broadcast news, maybe many games.
So did filling that gap is best weekend and the news value.
And you'd be then like you know data do we'd be able to communicate.
Yeah.
It just to 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 the last.
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.
Tend to 12000 agents you know around the world and you know with half of them you know not come into work as of about 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 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 in 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 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 those G.N.A. infrastructure that that we used to have.
<unk>, 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 the past where we've asked solve our guys to look hard at at the initiatives that they they had on the calendar for this.
Sharon start prioritizing between them and 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 working hard at this out of car 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 ganache efforts to get people stream need more have really picked up steam since.
See I'm commencement try so so you know stay tuned for 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 dislocation poor per hour asset to the series I put a 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.
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 is <unk>. Then 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 borders given day that.
Which obviously winds up exactly what they're what our recommendation was.
Next question please.
Thank you on that question <unk> from the.
Yeah. Please.
Okay.
I think right. So then the question. The person just can you talk about what sort of nowadays I, you're contemplating use them to when my.
That may decide the positive points old so the kids subscription there might be economic downturn maybe.
If there's any.
Kind of quickly.
Yeah, I flew to drop the this year.
Which may or or not go bomb. The second one that was just on some of the bombs age.
Haiti's experience do you have any something weather.
Subscribing to her campaign spending less time on the road and see what's valuable service. They dollar those populations more from households gets tightening up the discretionary spending thanks.
Yeah.
Yeah. So you know Ah Argh nothing's really changed her off or strategy or the you know we've we've done some things too [noise].
Streamline the offers in some respects that in a way when you use to get an agent on the phone that they take it through a more complicated you know offer cadence then you know now you can do it in the the I.D.R. 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 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 your thought might be coming in the in the this I say, it's got to be less right during 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 we tried to give it the data point of Okay. In March we saw a 15 basis point increase in the total non pay and other voluntary churn.
Is you know it we've always felt that that you know.
Under $14 on average per subscriber.
<unk>.
Oh, the service is 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>.
How sustainable that'd be you know going forward, it's sorta anybody's guess, we'll keep you posted.
Right.
Thank you will not take time next question from Jason backing it from sticky. Please go ahead.
It's very simple two part question on gross additions as we wait for sort of auto plants. They come back online do you mind, just given the south Dade on on the Sheriff gross ads on the on the new Coresite versus used and then on churn. It David you mentioned you.
You don't expect turned 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.
<unk> on the second question J. said I I think it's both right.
And 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.
I'm trying to remember now, but I I think we might as one in one or 2.2% peak <unk>.
Yeah in 2000 2009 and.
You know could it go there sure you know <unk> I have to admit with the damn plane effect or vehicle related turn I'd I'd see a little surprised but.
[noise] broken let's see.
Oh Girl said, 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 wreck 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 car is you know is 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.
<unk> final question from Brian Croft from go a chip bank. It's go ahead.
Yeah.
I get boring for one to ask about a little bit more on the Pandora AD revenue can you give us any sense for the actual case the advertising revenue declines as you're seeing it Pandora.
Quarter to eight just out this frame yeah sort of the worst case scenario and also how shall we think about the margins on the AD revenue that is declining Pandora. Thanks.
But I do although liggett Jim.
Yeah, please but [noise].
<unk>.
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 sided.
It's it's still it's only business to us and it is only 20% of the revenue and.
So in the the part of the hesitation is is that it's the velocity of the change and orders right could 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.
And you know search a search and display and and so you know, it's it's a scares her 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'll, let you know so the other Pebereau 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 nation and and so you know if you were listening doesn't decline.
Fortunately with the demand you you can flip right into into the unit costs and so the shared a revenue and you know generally you know 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 demand side, but I do think the 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.
Where were 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 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 that 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, though that we had until we got to March 9th 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 normally do feel we had a call.
Yesterday, Jim and I did with Scott was on trying to present a lot of other people.
And you know talking about listening trends that you know 10 door and and they are you know I'm confident that they can track the changes listening to the reduction in commute time.
Yeah, Brian just one comments from <unk> from Jim is.
Your observation means exactly right. We were David we were 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 just no question.
I'd say that is not to say Oh Gee, you know, let's subscribers, though you know over over lost.
Oh, well no. That's that's not the point at the point is the strength of our business model.
Was was never better evidence than than in the first quarter.
That demand one themselves at us both in revenue and I'd, rather subscriptions. There's no question about it and I believe both of those matchup.
Will come Roaring back.
Once we get back to normal.
Yeah. Thank you for thanks, Brian.
Thanks, Brian Thanks, everyone from participating in today's call stay healthy and we will speak Houston.
Thank you bye-bye.
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