Sirius XM (SIRI) 30 Jul 202020 Q2 Earnings call transcript

Good morning and welcome to the SiriusXM's Second Quarter 2020 Results Conference Call. Today's conference is being recorded. A question-and-answer session will be conducted following the presentation. [Operator Instructions] At this time, I would like to turn the call over to Hooper Stevens, Senior Vice President, Investor Relations and Finance. Mr. ahead. go please Stevens,

Senior good remarks, conference Welcome Jennifer our call. be conclusion Frear, Officer and Financial and quarter At Officer. Chief SiriusXM's XXXX will the our Jennifer David and Officer will by Operations. be earnings management will your Today, our Scott joined Vice morning, take you Marketing President Content to to and President Chief questions. Scott Sales, prepared as available Chief Q&A everyone. well of second Witz, Executive Executive be be glad Thank Greenstein, our Jim of Meyer, our call. for President of portion will available, and the the

statements like First, necessarily all defined statements everyone methods materially. is imprecise. during based Litigation as in statements that to the expectations certain and Private forward-looking assumptions, are Act statements that risks and and differ actual the and remind These upon could or I incorrect upon of XXXX. Securities be uncertainties term cause or the would current results made management's Such Reform forward-looking subject may to to depend be call data are beliefs forward-looking might that

view about forward-looking not For and more update listeners any to them. and SiriusXM's those SEC intent advise uncertainties, disclaim rely information We please statements filings. on risks to unduly or obligation

to hand and adjustments. and stock-based Pandora Jim January XXXX, like forma the exclude results effects today's With that the certain closed pro listeners I results results Meyer. to price discussions compensation our discussions begin, forma pro on purchase the that and actual call advise adjusted about operating accounting include we transaction both would results. that, I'll assume As of adjusted of will All X,

the morning Good quarter extremely one everyone. in in company’s history. performance of challenging Hooper. times our SiriusXM’s represented most Thanks, resilient second

to boost we expectations performed in and aggressively term our invest a such podcast long deployments pace improving execute on a second month. during by And of quarter, business engagement, the are growing Our our month with ahead our goals significantly XXXL moving and quick as streaming market.

than the first we quarter, was economy, despite EBITDA quarter. to more the cash subscribers you second did lower revenue generate adjusted $X.X free On we last we was advertising And in XXX,XXX on our flows call, second positive X% our at the than while the versus net approximately home During generating bit in on quarter. of new we effects told added would the in free down substantial orders our about year year’s quarter revenue, did just I billion flat. last first and that cash quarter, a flow continue stay

finish COVID-XX rising a the We are country. cases uncertain to for the poised economic year, in strong despite outlook of parts the and

sales, expect subscriber We subscribers annual approximately about billion are now will of and business our guidance. additions, and outlook We billion. decline cash practise and providing we will compared revenue ad to perspective XXX,XXX the will the flow resuming cash slightly COVID net self-pay grow. hit adjusted of to flow expect our $X.X in XXXX, put total on billion. same. be EBITDA approximately $X.X approaching our driven Revenue free EBITDA To of free $X.X self-pay approximately Adjusted

models said business matter. very I many resilient. is As business have times, And our model

continue of sales XXXX further sits May sales expect for quarter SAR June better auto XX.X to million SAR XX%, X.X full auto finished started. auto to million second as than to sales XX improved the it but about was XX.X now million substantially, year at fell SAR million. analysts Although down improved improve. April to Consensus and

quarter. new mix points continued second XXX year-over-year nearly to in retail sales, basis auto of car improving XX% rate our an the up penetration to to addition In rise,

year. this to continue reach We expect the of to by end XX%

stay we starting a We expect GM’s, variety and vehicles GMC triple year automakers, even really gaining Buick, about in and significant this year Chevy Cadillac, is figure in in including roughly Chrysler, steam, at XXXL Volkswagen, X.X now This Fiat have XXXX. for and a Ford, which million brands XXXL this Audi, announced deployments tuned BMW, of should more. with deployment operation,

customers this year. half excited XX%, penetration experience. give this the provide shade business under now points Used We’re in to so The car up car XXX tailwind many basis used is time enhanced XXXX. to last a a versus second continues about of

trials trials. we home vehicle summer car vehicle fell helped orders new the month in and has doubled And customers. since the XX% quarter no first new last more when our at streaming majority we for of fell the subscribers. This only starts of starts subscribers accelerate had The additional ever, by pandemic more included SiriusXM second second car summer. amount every during streaming streaming charge our The began self-pay trend vast used While quarter, the time at than used X%. for stay engagement last

also rates large of advantage We the both scale Sirius awareness usage campaign, raised launch and large the of app. to took XM a advertising second the in quarter which attractive multimedia

down Of the the course, reducing biggest from ad XX% year, by fell performance the come the that April biggest revenue that and advertising to our May within quarter challenge down our prior note last our XX% financial has sharply, year. XX% in drag we on as compared from was the the market trend quarter faced, and XX%. June down with I positive will

the advertising the has for advertising the also supported revenue reduction down also rest add reduction period. less to prior remain Although advertised the We’ve uncertain pleased hours listening XX% quarter, than that X% compared abating. the of of as pleased we’ve been second for the year. – the been finished the early of as much recovering, in at outlook been down quarter After being Pandora that hours

to and declines listening seeing mitigating mobile, CE web. on We’re gains devices, and hours spent

ad listeners and As XX Pandora increasing important, are hours for older.

and compliment of acquisition tools Pandora as audio based products will advertising and reach combined sales with programmatic ad Pandoras XXX Digital the for execute sold and Simplecast, leading premier operate ad for and creators has through other capabilities We podcasts Stitcher a of ad provides product the leading efficiency. content ad and buys waves combination content, skill, per network platform our Audio podcasts, The downloads and leading world. produces sales of ad well advertisers strengthens a suite analytics, tech leading of the ease allow technology opportunity offerings. advertisers both Simplecast are visibility excited U.S. audience about content Stitcher a direct capabilities. the to audio When a about assembling and this podcast prospect extremely unprecedent technology month. for SoundCloud, with in scaled and of management number in publishers marketplaces sees capabilities and as platform audience high and of million

and grow, with XXX draws proposition listeners investments to the year, opportunity and efforts measurement improve expanded creators. space. us in for million Our and now this well in monetization I’m with for forward precision Sirius growing podcast to Stitcher podcast value at and more thrilled our advertising more existing this both to monthly led fit participate which unique a closing XM drive for provides the later targeting, than and growth to focus We for mark. this and position AdsWizz broader space, Pandora, to listeners look

job, As we and always, just number fantastic is continue and delivering that. to producing content our one do always

original premium of content been the owner are day audio since talk bundle. one. We And delivering we've the

and Rolling of channels and member the some wave in all the launched lost something remixes Stones. new with channels live biggest the YouTube catalogue, on stream the shows and artists’ our bands, from an world’s Zeppelin, with May. other David service we’ve people with channel. Our the By to from and programming participate May now of needed and opportunity are And part of deeply Strait, audio N' X time during in one playlists a this entertainment. both Marley, their top interviews, dedicated presentations on time expose George several bring Bowie, With month, we the and this Beastie platforms. course, listeners said artists and advantage and over first free many times, created on Roses, response with satellite of elevated full our saw our involved Metallica music our X, and their for to channels are were press when new anticipated new much YouTube, and well other a streaming relish and of creating X-Radio. platforms. Jim take Each relevant These news, We talents to their they platforms. to hard our and SiriusXM in information the comedian subscribers. the campaign working unprecedent channels Gaffigan. estates Bob rare is honed shows Guns another UX to Mac, recordings, as entertainments million of Earlier opening prince Queen and music with programming, game Boys, in on witnessed channel of We’ve to other launch of streaming Led in it. up full hosting free noted And and those cases, streaming as launched hardcore and launched and is its suite the We we willingness band people algorithmic we in exclusive Coldplay, both fans they as Fleetwood channel, Eagles,

and coverage SiriusXM fans back to the having experts national races returned week, and X, COVID-XX schedule. NBA plus daily the extensive quick season town to various and get to business the the variety, broadcast golf live the to from Radio EMSA NASCAR sports live return and the season panels lives of and and radio the comprehensives have in through leaders continue tonight, been an exclusive MLB our for the listeners to our effects assemble the want array sports May health, channels races, of economy. is of Doctor of halls inform As horse and back we’ve and soccer sports events action, live IndyCar restart start discuss Formula offering expect our on and and live And last delivering is to racing.

we've While not far, a surviving merely SiriusXM this I no say is proud XXXX one am predicted would like current so have to storm. had

Our is dedicated employees financial and and strong, envious in our talented are model position. business we a

growing areas making like the are and tremendous advertising of reach and our smart capabilities We expanding podcasting, and platform. investments

the in of in will business and that, focus investing positive we on enable continues. that past David. our We have with for grow heads With hope this years and already couple will a execution keep turn very to come. I’ll months, may we come, fits seen that and most the it Regardless of of over and a foundation across to trends that starts down to us our recovery clear

positive of seismic remarkably economy. quarter net SiriusXM’s XXth quarter was second the considering ads. added our Thanks, XXX,XXX good Jim. nets, We the self-pay challenges self-pay straight across

improved Our churn. lower quarter, by auto and offset to rate sales points rate churn in lower in resulted the a significantly more more and rise voluntary year-over-year Non-paid vehicle lowest churn quarterly churn actually decade. was in than modest a X.X% the six basis improvements These than churn. related improved and

New to year-on-year used in rate down XX%, the XX% point remained car range. conversion one steady about while mid conversion was car

X% nearly EBITDA particularly costs. ARPU with billion, because adjusted Our was Revenue board, that in margin at ARPU the of rose advertising flat from the X%. $X.X subscriber million coming rose ARPU, $XXX declined Pandora, across and lower year-over-year of on advertising from losing impact XX decline the all revenue. Despite million of expenses excluding lower roughly X% contribution acquisition to

parts but of of Fewer ended That million XXX.X first significantly the of At our in stood in the the market, advertising we audio -- guidance. Despite will in additions COVID in also of visibility our with with confident guidance the starting total quarter. from had X.X at to recovery. the vehicles With end self-pay the improving backdrop, justifiable in of better this or shape $X.X the start quarter, that, we concern approximately down the background up country, back grew million surging fleet the cars the risk the the revenue XX% reduce third of second associated half quarter. modeled April, second contraction the remains was on end subscriber in U.S. the at cases good the about pandemic. With of economic about feel at the year, we funnel there’s the quarter than billion. trial about many into X.X million being enabled of the hitting feel what there trials road Our sharpest but

revenues expand half, As in well revenue XXXX. Pandora's outpaced with advertising half, second at the clip. If boding for estimates it builds in expense a will gross will margin in SAC auto healthy the expand second analyst’s sales

which May of the occur guidance We of federal resumed us SiriusXM and brings and early this to The in amount billion is first $X.X COVID-XX, XXXX. expected adjusted expect and relatively launch million our of estimate should share our are to back XXXX. our bought and After $X.X EBITDA confident of uncertain suspending call approaching cash SiriusXM this our X guidance in taxes billion. the of CapEx XXX X of still cash XXX year, the we impact XXXX. later for million, in to June. earnings repurchases quarter response our no range of approximately small flow launch this in We shares in just free for March a after pay We about year year repurchases in

in the investment undrawn SoundCloud. we plus to At in five opportunistically already, in of we in maturities, ratio net And the and $X.X Simplecast our committed [ph]. our trailing acquisitions half year, million XXXX. our in dividends of the was available. three with of credit We a XX-year was four XXXX second million nearly of just our share have facility quarters and put five one a three In expense to June, first completely notes revolving interest year quarter, our proceeds billion new paper and this our fully Stitcher, this repurchases at rate XX-months issued amount and XXX and debt principal three similar EBITDA of XXX in and billion XXX billion of capital July, extend and adjusted redeem of to end eights times a in very due use lower notes the work the $X due to hundred then eights unsecured

of Our for our targets half that, up expect continue share year. Operator, with capital let’s back it unchanged, repurchases Q&A. allocation and we in leverage the to remain open and the

Your Thank Please go you, ahead. sir. [Operator Instructions] Wells comes Fargo. from Steven question first Cahall from

Your line open. is

one first in said think increase was you improved Thanks. churn Maybe it and just vehicle churn. modest on churn, only a I voluntary

on update your color subscribers? for give churn Maybe used churn up. trending used any involuntary than now us since certainly maybe you on more trials. new quick subscribers I bigger And So what follow could and trials is getting new have are a an versus

you… why don’t David,

Yes.

earning from some on heard other So churn, I involuntary mean, people in have this you may this season.

that have never bit is of It’s cars guessed low it on experience you seems sensitive get is used there’s It’s as just stunned fact have availability economically of churn. has the And around. me the significant generally types that And, cars going credit the going all the that of of used in room, shift. into level card. is. little of rate household. on and older thing difference always think, from the what's a but has little maybe card that, is but not have know, out what sort level that With tough past non-pay between we churn maybe it’s that more cars that overall higher, a to and there subscriber trials to different and to knows sort not, to churn as there’s some the there's on everybody in writing spending so a on We’re this And, consumer you what levels, with between then very with churn our the period. are an be of is, of something and more debit that we on suggests respect rate a base churn the the great there XX%, been down on And, bit cards lots it know it’s been with fallen. voluntary credit that it theories side you would are way rise is that performance here there

seen, rate And this in anything that mix so, performance that's the I’d say area. you've of sort us been in there take in X.X% the isn’t of out have roughly that churn to shift going

last strip resilient, Great. did if well? you sort with what were business Or presumably you might free it an is you a similar year, a allocation like as capital How M&A capital think lot about out RC, which looks I the little the flow a lot opportunity? we just as for year, does more at proving M&A buyback do so think on this spending think look of we about with a be back half, And on then more you. your said, appetite as allocation, but Thank buyback cash

David.

true, billion the remains time, $X For about today. about generating capital. a long thought that true excess we’ve in And business

excess acquiring or contrary capital [ph] that growth, cash the external growth, flow. go the free so to can And in get to, to external

We’re we can drive to that there? at and next billion the business up Simplecasts is market is something responsibly out little $XXX that’s have our down remains we buyback, good say, on And time investing we then time. the the which bit -- to dividends, business. add to that over growth and our value for and go and after everything acquire in we depending price as think available Stitcher is look critical then Like to think year step components we and X then goes what relationships allocation stock, in into from and million the there to a

So, really policy. our at no change in capital all allocation

Thank you.

the Operator, question? can you next move to

our removed participants Tony, it been from that appears [Operator queue. the of have some Instructions]

the question, next please. Let's on to go

from Stanley ahead. our Ben take Please next . go now Swinburne We’ll Morgan from question

Your mind is now open.

in XX% partners, OEM but Thank to of a one side, that in that's bit little us one years. might product I bit, vehicles said, from quickly two a so in about you if the David can’t you. last market the know you. because confirm an David you’d give or seeing you give over into at more heard later XX we you of Good install and ramp And how and like I and want XXXL now on can overall on be ramp bringing the you’re you more could just that interest couple this of Jim, be from that I year. think sort the programming. us a an specific seemed OEM it have I that rate sense of questions, talk morning. that’d the you next kind acceleration for time –

So that’s broader OEM sort question. of the

Jennifer, question, take why you please? so the don't XXXL Okay,

Sure.

think Jim product we’re without process with about up, see to the this model last of the product. AVW the with there’s any and ramping especially I the as our are, recommendations. buy consumers Ford. platform have real been we’ve voice, in and said, on the rollout couple other really, and months launch, BMW [Ph], number OEMs of over in as new of with years. It’s couple a demand We launches you’ll of OEM. engagement had And over and launched of had the kind of announcements start on great, two we in with And and of this new And vehicle new We’ve year excited in conjunction really; from infotainment launches. features OEMs past

next there. we will expect said, vehicles then it think triple from the end of operation I to the year, So and by ramping keep just yes, and we

– triple at year. from of that's X.X the That’s end triple million the

just So interrupted you I

triple expect in XXXX. the at of that and in it the to have operation roughly Ben’s vehicles million to just end year, sake, we for X.X Yes, then

Ben end - comfortable Ben on the guidance year XX% you finally by penetration. gave really then I’m we for and Okay,

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just correct. got is then good first memory, you’ve recollection say, I’ll, it I, talk briefly. I’ll a just Ben, let But and not, this rhetoric. and your and to Sure, me And is

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seven think Jim. I its years,

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Thank that. you. all appreciate I

comes Bazinet line from Our from is ahead, your next Citigroup. question Jason open. Please go

think pretty just how the look about of sort overall overtime. a And into on industry of industry strategy? The think, embryonic. when at podcast you sort you just And hear love sort fit still would podcasts. how have how of they properties, podcast, how, your podcast I I is question evolves various of you sort to

then start. And after Scott, up pick I

Okay.

Okay.

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think very we a of period And we long for -- time. we so understand

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Yes. Thanks.

of couple things. So a

it Howard Like content. to and Stern of moving company our look its our you at of over. for at heart, that, FM is sort lot others, look kind when audio obviously radio, when many track what But you know, record. podcasting itself. You And was content speaks at effectively back And was was had that a terrestrial as and in area that content. there expertise a audience AM a of you knew

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helpful. That's you. Thank

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Hey James for if think those I heard correctly. David, are I both you

Jennifer, actually, could you know, hear Okay. You James?

Yes.

retention side, the on of a think couple I things. there’s

up opened know. other there. We we COVID of on digital you pushed as sales have, improving really. and we But days capabilities programs so, We've number bit messaging, in we're our opening capabilities the increasingly And have digital. a chat and a active channels, have we're side by

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us was it that hour. we're our by impact They're original I'll because won't year just a Jen, a formula it to teams performing of those and they're on work I'm Oh -- and not really and -- executing ago. doing are operating I'm works proud then over sales it now teams acquisition just better performing better had David. into where really Jim are. comparison -- Meyer hour were, His We're be both proud I bashful when our early and significant they which when than and now And turn impacted what COVID they of a and than back retention good we damn we now here, first on. were settled point. just

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Thanks everyone.

you. Thank

we'll it in call. and speak days. everybody That Appreciate James, to the and coming Thank offline you for concludes care you. our Take participating