Ladies and gentlemen, good morning and welcome to the SiriusXM's First 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 conference over to Hooper Stevens, Senior Vice President, Investor Relations and Finance. Mr. Stevens, please go ahead.

Thank you and good morning, everyone. Welcome to SiriusXM's first quarter 2020 conference call. Today, Jim Meyer, our Chief Executive Officer will be joined by David Frear, our Senior Executive Vice President and Chief Financial Officer. At the conclusion of our prepared remarks, management will be glad to take your questions. Scott Greenstein, our President and Chief Content Officer will be available, as well Jennifer Witz, our President of Sales, Marketing and Operations. Those two will also be available for the Q&A portion of the call. First, I’d like to remind everybody that certain statements made during the call might be forward-looking statements as the term is defined in the Private Securities Litigation Reform Act of 1995. These and all forward-looking statements are based upon management's current beliefs and expectations and necessarily depend upon assumptions, data or methods that may be incorrect or imprecise. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. For more information about those risks and uncertainties, please view SiriusXM's SEC filings. We advise listeners to not rely unduly on forward-looking statements and disclaim any intent or obligation to update them. As we begin, I would like to advise our listeners that today's results will include discussions about both actual results and pro forma adjusted results. All discussions of pro forma adjusted operating results assume the Pandora transaction closed on January 1, 2018, and exclude the effects of stock-based compensation and certain purchase price accounting adjustments. With that, I'll hand the call to Jim Meyer.

Thanks, Hooper and good morning. We are going to keep it brief. Give you a further look at trends in recent weeks and reserve plenty of time for your questions. The world has changed very dramatically and very rapidly, since the onset of COVID-19 health and economic crisis. Yet our first quarter was exactly the kind of strong performance you would expect from us. We grew subscribers, had solid revenue growth and grew adjusted EBITDA by 13% to a record first quarter level. We are fortunate to benefit from a powerful subscription business model. And while we’re not providing guidance at this time, we expect to generate substantial positive cash flows this year and in years to come. Our biggest priorities in the crisis were always be to ensure the well-being 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 5,500 employees and contractors to work from home in mere days. This required a tremendous effort from our IT and HR teams. We experienced a substantial disruption of our call center staffing. Staffing levels fell 50% to 60%, lengthening hold times, increasing abandoned rates and reducing our ability to handle customer needs and support our sales campaigns. In response, our IT, marketing and call center operations teams took a variety of actions, including enabling more than 2,500 of our call center agents to work-at-home, significantly increasing online chat capability and enhancing self-care tools online and through our IVR systems. We have made significant improvement here, but I don't expect us to get back to our normal levels until stay-at-home orders are lifted, perhaps in June or July. But we are playing offense as well as defense to drive awareness of our streaming offerings 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 to stream SiriusXM, as well as unique occasion to get our existing subscribers to stream more. Our programming group has been in overdrive. Our content right now not only sounds great, but it's super relevant and the response has been remarkable. In times like these, more than ever, our service brings people together, gives people company and helps us share our 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 Stagecouch. Bruce Springsteen, Taylor Smith, Taylor Swift, Garth Brooks and many more have participated in special DJ sets and home performances for our 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 that Andy Cohen made a healthy return to his exclusive talk show. Kevin Hart 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's So Funny, a full time comedy channel based on the works of female comics. Last week, we announced and launched an exclusive weekly show by Gayle 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 enlisted NYU Langone Health, which has powered our Doctor Radio channel for more than a decade to create a new full time channel about the coronavirus. We made this channel available free on both active and inactive satellite radios. Doctor Radio and our special coronavirus channel are providing daily reports from experts, astonishing stories from medical personnel on the frontlines, and fielding calls from listeners to answer questions on everyone's minds. This programming, along with the daily podcast we created and are making available widely, has become a central source of the kind of fact based medical information that is both in demand and so vital to our country's future. In short, we quickly took steps to ensure that our 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’ve come to expect from SiriusXM. I could not be more proud of the efforts and the performance of our teams during this difficult period. But make no mistake, SiriusXM is also still focused on building strong long-term foundations for growth. Our new car penetration rate rose to 76% in the first quarter on its way to the 80% that I've talked about obtaining later this year. We continue to extend OEM contracts further 360L rollouts and increase the quality of our streaming offer. Our investing in SoundCloud in February deepens our relationship with the company and builds upon our successful ad sales agreement. SoundCloud is one of the largest open audio platforms in the world and plays a critical role in the music ecosystem. It helps rising artists get discovered and gives them the tools to understand how their content is being consumed. When combined with the reach of SiriusXM and Pandora, we can now offer advertisers the opportunity to reach 140 million listeners in North America. This enormous reach and our growing innovative capabilities in digital advertising technology are a tremendous strategic asset that will benefit our shareholders over the long-term. It's difficult to predict what the next 3 to 6 months will bring, our ad revenues will take a hit just like everyone else. But with a 80:20 subscription advertising mix, SiriusXM is better positioned than most companies to weather this storm with our talented employees, a unique, powerful business model and extremely strong financial position. And I can assure you we will also be well-positioned to capture upside when this crisis finally ends. Of course, we are taking a fresh look at everything in the business. Like many other companies, we have paused nearly all hiring, and we are putting a tight squeeze on spending where possible, while still investing where we see opportunity. Our response to all of our stakeholders will be guided by both empathy and smart economics. Our primary brands of SiriusXM and 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 restart and recovery, we plan to resume providing guidance. Now let me hand it off to David for more details on the quarter.

Thanks, Jim. SiriusXM's first quarter was solid across the board, as you have come to expect from us. We added 69,000 self-pay net ads and grew pro forma revenue 5% to $2 billion. Adjusted EBITDA climbed 13% to new first quarter record of $639 million. ARPU was $13.95 from the first quarter, up 3.2% year-on-year. Our churn rate was flat year-over-year at a very good 1.8% per month, and new car conversion rates improved a point versus last year's first quarter to 39%. Used car conversion rates were similarly solid. Our installed base of enabled vehicles grew 10% year-over-year to 128 million, or approximately 46% of the cars on the road in the U.S. The used car penetration rate climbed about 400 basis points year-on-year to about 48%. At the end of the quarter, the total trial funnels stood at 9.1 million, down from 9.3 million at the end of 2019. All of that contraction in the trial funnel came in the back half of March as stay-at-home orders reduced auto sales. From a healthy new car Saar of $16.8 million in February. Saar came in at a $11.4 million in March, with all of the declines seen after March 9. So far in April, new and used car trial starts. A close proxy for sales are down roughly 55% to 60%. Not quite as bad as we thought, and many states are now reevaluating whether auto dealer showrooms should remain closed. However, lower sales -- auto sales today flows through to fewer conversion opportunities 3 months from now. We will see the biggest effect of this lower top of the funnel activity in the third quarter. Lower auto sales does provide a benefit of reduced vehicle related churn, which will partially offset an expected rise in non-paid involuntary churn. In March, we saw a 15 basis point increase in non-pay and other voluntary churn, which was completely offset by a reduction in vehicle related churn. Conversion rates fall in late March, but have already partially recovered. We did see a small number of advertising buys get canceled in late March and a much bigger impact starting this March. We have not yet seen much of a slowdown in payments related to ad sales. Bad debts associated with this or consumers should increase in a recession or environment. But once again, we have not seen much of this impact so far. Given how much has changed in the economy, when Jim and I put all this together, we can't help to see these recent trends as confirmation of the high quality of the business model. We currently expect no more than $340 million of CapEx in 2020. The launch of SiriusXM 7 is currently expected to occur later this year, but we expect the launch of SiriusXM 8 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 expect to pay no federal cash taxes in 2020 and a very small amount in late $21. As we mentioned in the press release in late March, we temporarily suspended our stock buybacks. Even with that, we put $377 to work in the first quarter through returns of capital to shareholders and the investment in SoundCloud. Following the buyback suspension, we used cash flow to quickly pay down the small balance in our revolver, which is now completely undrawn and available at $1.75 billion. And we are building cash. Our capital allocation strategy and leverage targets have not changed. However, global assets have clearly been repriced 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 outlook for the U.S. economy and resume the buyback. Accordingly, we will update you further on capital returns on our next call. And with that, operator, let's open it up for Q&A.

Thank you, ladies and gentlemen. [Operator Instructions] We will now take our first question from Vijay Jayant from Evercore. Please go ahead. Your line is open.

Good morning. It's James Ratcliffe for Vijay. Two, if I could. First of all, on the advertising front you mentioned the impact. How do you adapt to that in terms of bringing down price versus going down quantity and balancing there to compete on the Pandora side? And secondly, on the satellite radio side, what are your expectations if there is a sustained change in the amount of consent and car increasing work from home. How that translates to -- into subscriber impact and your ability to offset that with in-home as part of the equation? Thanks.

So I'll take the first half of your question and David will take -- I'll take the second half of your question and David, will take the first. So let me comment. I don't see, quite candidly at this time, why there'll be any material change in the demand for our product going forward. Obviously, the amount of listening in the car is significantly down over the last 6 to 8 weeks. Once the country is open again, I see a big chunk, if not all, of that listening returning. I think Americans have had a love story for their car for a long, long time. And I don’t see why? That’s been changed. With that said, I’m really glad that we’ve significantly strengthened our streaming offering on the SiriusXM side the way we've had over the last three years. I'm also glad now that virtually all of our subscribers, we see what -- we see streaming with no -- for no extra cost. So I think we're well positioned either way. And so I'm not worried at all about the demand for all the listening hours for a product going forward. David, can you take the question on advertising, please?

Yes. And James, if I heard it right, I think you were talking about what can you do to bring down price to stimulate the demand side? And you know for what we see generally in the advertising markets right now that I mean, you can drop your prices, but you're not really going to bring a lot of dollars out to, advertisers or cutting back for a whole host of reasons. One of the -- well, that hasn't to say this, but we see some encouraging signs, if we were literally to take the order book for what it sounds or what it is that you'd have the point of view that advertisers think we're going to be back to normal in the third quarter. Now, Jim and I look at that and recognizing that, people can pull their ads at any time. You know, for the most part, we think that's probably hope to look and people have time to make decisions about how quickly they restore advertising because you can turn it up pretty fast. So we'll just have to wait and see. But for the situation, as we walk into this early part of the second quarter, you can drop your prices. But the fact is that you've got a -- you’re in a demand side problem here and you're not really going to stimulate it with by dropping prices.

Great. Thank you.

Thank you. Our next question comes from Ben Swinburne from Morgan Stanley. Please go ahead. Your line is open.

Thanks. I wanted to ask about your programming during this pandemic and stay-at-home situation. In a couple of ways you guys typically don't share engagement statistics. And I know it's tricky with the satellite business, but I was just curious if you had a sense for how the programming was resonating with listeners who are, as you just were talking about, not driving, not commuting, but in the home. And also, if you expect the programming moves, you've made to impact your programming cost structure one way or the other. I think even mentioned in the release that you're continuing to pay for sports. There are no sports. So it's really a question around the moves you’ve made in content, which seemed to be really resonating, at least anecdotally. And I think that some of the stuff that Howard's been doing has been pretty incredible. And how that is impacting or not engagement on the platform broadly. And then also how much it may be impacting the cost structure one way or the other. It's kind of a bigger question, but I wanted to get your thoughts.

So, Ben, it's Jim. and I'll start or I will ask Scott to say a couple of quick words. And then David to wrap up on costs. So first and foremost, and I don't want this to sound like a paid political ad, but I couldn't be more proud of the content we have on the air right now. Our team has transitioned so quickly to be able to provide the content that our listeners expect from us, from an environment where we worked out of virtually probably I think 8 or 9 national studios around the country to where all of our content today is being produced outside of our -- outside of our studios without reason to be. Furthermore, we just had tremendous support from the talent that, it's a big part of the SIRIUSXM. I can tell you that on the SiriusXM side, we do have our own barometers to understand what the response is to our programming and how it's being received. Examples being, for instance, on the top side. How many calls we will receive from listeners on various subjects? I'll just give you a small one. Fred Couples did a show on the Golf Channel a couple of weeks ago. The call in queue was longer, I think, then we've ever seen for any compound we had on that channel. And so there's a good …

Jim, It's Greg Norman.

Greg Norman, I’m sorry, people listening. And so, we know it's resonating and we couldn't be more pleased with that. On the Pandora side, we have definitely seen a downturn in our listening. It has come back recently, but still not quite where we would have expected it to be. And so we're spending a lot of time on understanding that. Most of that were shows related to the impact of the virus right now. And obviously, the flip between stay-at-home and community working outside in the car. I also expect that will change or return to normal once Americans begin to get back to what we all know we're going to do every day, which is get back going back to work. So, Scott, anything quickly you want to add?

Yes, just quick. So just a couple of things there. One, I think, yes, we kicked off with Howard and people could note both in the audience community and just the normal community of the amount of social media and everything generated far more than even any of those normal shows and it continues that way the day. That led to people at least realizing we could go live, we could take calls, which I don't want to downplay that compared to anybody else out there. Just the fact that we have live radio shows every day around the clock. And then that led to obviously a lot of stars and others that work with us really digging in and using their channels from Bruce and just guest DJ sessions to [indiscernible] to do stuff, to Beastie Boys to [indiscernible] and LL Cool J. And then that led to people like Jimmy Fallon saying I will host Hits [indiscernible], Taylor Swift hosts Hits [indiscernible] and it just continues each day and there'll be more coming shortly of talent that really wants to get engaged because the service is functioning in a unique way during the unique time. So as Jim said, I couldn't be more proud, like we're just getting started and we've learned a lot from it and some of this will continue as we come back to them.

Do you want to comment on -- Go ahead, sorry, Jim.

Yes, One more thing on the Jim mentioned of Pandora listening, Ben. And we can track the listening changes directly to commute times. And we -- if you look at the markets with stronger stay-at-home orders, and we've looked at the markets that don't have them. There's a lot of data and Pandora and you can track the change and listening trend directly to commute. We have picked up quite a bit on CE devices with the whole growth in smart speakers. So we did actually see people sort of effectively transitioning to a different location. But the pickup in CE doesn't make up for the loss of commute. On the cost side, we have some -- there are a few contracts where we have lower expenses given what's happened. And some of them are related to the reduced demand for the -- on the advertising side, but for the most part of programming costs remain the same.

Got it. Thank you all.

Thank you. We will now take our next question from Steven Cahall from Wells Fargo. Please go ahead. Your line is open.

Thanks. You talked a little bit about the churn dynamics and lower vehicle churn versus the involuntary churn. Could you maybe talk a little bit about how churn trended in 2008 to '09? And do you think that you can have it sort of be net neutral in terms of the way those two forces are acting out in this cycle? And then you said the trial starts were down about 55% to 60%, that was a little better than thought. You think that's the peak of the decline or is it too soon to tell? And as the funnel shrinks, should we start to expect? I assume there's a pretty big offset to the SAC expense. Maybe you can just help us think about how much SAC comes down when the funnel starts to make that sort of shift? Thanks.

So David will respond to some of those individually. Just one point I want to make just before. Remember, in 2008 and 2009, we did not have a used car funnel that was near as powerful as we do today and we weren't penetrated in the fleet anywhere near where we are today. So I believe we can take a lot of lessons from how non-pay involuntary behave during that time frame. But I don't really believe there's anything from that period that's going to help us predict where the one is going to offset the other. With that said, David, I’m going to turn it over to you.

Sure. Yes, in 2008, '09, we were sort of late into the recession and early out of the recession because -- the demographic and the customer base is above their average income. We're kind of more representative of the general driving population now with what Jim said about the growth of the second owner business. And so we would expect to be -- we don't know, we're going to find out. So I'm going to tell you right now, I don't know what the answer is, but I would expect that we will be quite as late in quite as early out as last time. But we still have a customer base on average where the demographics say that we have better than average income. So they should be -- the customer base should be more recession resistant. I do expect because of the vehicle related churn, that being a much bigger component to have less of a spike in churn than we had the last time around. How much less of a spike, sort of anybody's guess. But we are hard pressed to believe that churn wouldn't rise a little from this 1.8 % level that we've been at for quite a while. But we don't expect the same kind of a spike. On the SAC, trial starts in SAC, the combination between those, it is sort of a one-for-one. As you take new car sales down that you're going to end up ultimately with less production unless you expect on the other end the spike to recover that. In other words, that if you go from 16 million car sales down to 11 and you think you're going to make all those up on the back end your SAC would just come a little bit later. So a lot of what you have to forecast other factors, what your expectations for the recovery is. In the meantime, we know that automakers have shut the plants down so they're not making the cars now. And that's absolutely going to result in a volume reduction, in fact.

Great. Thank you.

Thank you. We'll take our next question from Jessica Reif Ehrlich from Bank of America. Please go ahead. Your line is open.

Hi. Thank you. My first question is for Scott or Jim and then for David. So the first side, just to go back to the content, the release says, and as you said, you're still paying the sports leagues and I'm just wondering what flexibility or what you get in return to send contracts? Do you -- like what happens with these contracts? And then I guess there was an announcement. Howard Stern must have said something on the show this morning that he's open to ideas on his contract. Can you give us any color on what's going on there? And then for David, just it seems like an opportunity possibly to maybe change the long-term business operations if there's something that you feel could be more efficient, or are there any longer term impact from what's going on now? And then finally, could you talk about the confidence in resuming the buyback? It seems amazingly confident when you -- it sounds like you're leaning towards that. Maybe you can give us color on, but it does sound like a good vote of confidence from the company. Thank you.

Okay. So Jessica, yes, I think it was a 5 -- 4 or 5 part question. So I'll try to be an effective ring leader. I'll take the question on Howard. I'll comment quickly on the sports savings. Scott can add anything if you want. And then David …

Yes.

… will take the rest. So number one, I've been really clear. I want Howard Stern to be on SiriusXM for as long as Howard wants to work. I don't -- I think Howard -- I know Howard and I have a tremendous relationship and it's never been better as importantly, maybe most importantly, rather, on the quality of the show that he's bringing for our listeners every day, couldn't be better. And I couldn't be more proud of that. I put the place of cadence to begin discussions I've had. Howard and I chat quite often, but we've put in place takes to begin more formalization or discussions as Howard's contract does expire at the end of the year and actually set some time aside to begin taking -- to begin working this through with Don Buchwald, who's Howard's agent. Obviously, with the coronavirus we haven't been able to have those discussions. I actually spoke with Don even a couple of days ago. And I think those discussions are better held in person. I'm not concerned that we won't find a way together to try to find a path forward. And I'll have -- I hope to have more to say when we do our third quarter call. But, again, I think I’ve said enough there. On the sports programming side, I can tell you that there's been a gigantic argument or no argument, down the road. First and foremost, our number one concern is for the league to get started and get the content back on the air that we know our subscribers love. There will be all kinds of discussions here. But I think David summed it up pretty, pretty well couple minutes ago, which is certainly in 2020, we don't expect any change in the cost of our sports contents. David, you want to take it from here?

Jim, can I add just two things.

Go ahead.

So just the one thing on Howard. Obviously, this whole situation unexpected has given Howard another level of enthusiasm and appreciation for the company, that even this morning I met, in fact he was talking about how proud of it he is. And more importantly, how many of his former fans, who didn't even know how the show really had evolved have now found the show through the free listening period. In addition, this gives Howard an additional tool besides the studio, this Zoom thing, when talent doesn’t have be in New York or LA to promote a movie or a record or whatever. That they -- he can get major guests from their home is an entire new tool and its awesome. And then I expect him to continue. So we feel very good about that. And then, Jessica, on the sports league, Jim said it well, but you also have to remember at this time and there's nothing else on, we’ve the largest library of classic sports being broadcast. I mean there was many, many games going over time. So we are filling that gap as best we can and the leads value us as a partner, and we do them. But, David, will deal with the financials as we get better further.

Jessica, your question on how this might change longer term business operations, 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 -- as you know, we've been a high-touch customer service organization. We have, I think, between inbound and outbound call center staff here. We have 10,000 to 12000 agents around the world. And with half of them not coming to work as of about, five or six weeks, that really drove us into figuring out, well, how do we change, do things. And now that we're five, six weeks into it, one of the questions we're asking ourselves as well as we optimize in this new configuration, what is it -- what does it mean to long-term performance and is there an opportunity in here. So you see us moving into improved efficiency and digital experience for customers that we're figuring out how to turn up and make more effective chat agents as opposed to the live agents. And 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 often than we do? I don’t know what all of you are finding, but we're finding that this world of working across Zoom to be highly effective. And so there is a real consideration of do we need the same kind of G&A infrastructure that we used to have? You know, when even though we have incredibly strong liquidity and a lot of cash flow, we can clearly afford to pursue new initiatives in the same way that we had in the past where we've asked all of our guys to look hard at the initiatives that they have on the calendar and start prioritizing between them. And part of that gets forced by the hiring pause that Jim mentioned. But we're going to -- you know what they say, never let a good recession go to waste. And we're looking hard at this out of car engagement is going to be a -- is turning out to be a really interesting thing for us. That with -- what’s hard to get people's attention for Sirius when they were busy driving in their car and we're finding the free streaming alternatives as well as just our organic efforts to get people streaming more have really picked up steam since the commencement of this crisis. So, stay tuned for how these changes play out. With -- on the buyback, well, we are confident. Clearly, we don't have a liquidity or a leverage problem to deal with. And what we are looking at is a price dislocation. It's not just a dislocation for our asset, the Sirius stock. But it's a dislocation for other people that we're in the market. So there's for a company with an awful lot of financial resources that we're in a good position as it relates to opportunities for external acquisition. And with respect to the buyback itself, we'll take a hard look at what we think the shape of the recovery could look like, what we think that means for the value of our stock. And just like we have in the past, when we believe it's on failed, we won't hesitate to step on the gas.

Right.

One point I'd like to just -- I'd like to add David is, Jessica, we've been and 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 think David summed it up well as to both where the Board is and the direction the Board has given David and I, which obviously winds up exactly with where -- with what our recommendation was. Next question, please.

Thank you. Our next question comes from Zack Silver from B. Riley, FBR. Please go ahead. Your line is open.

Okay, great. Thanks for taking the question. But first just can you talk about what sort of levers are you contemplating using to win back any customers that may decide to pause or cancel their tier subscription in light of the economic downturn? Maybe if there's any kind of puts and takes on how that should impact the ARPU trajectory this year, whether it's material or not. And then the second one just on some of the voluntary churn, ex the non-pay. Do you experience -- do you have any sense of whether -- so far there's been subscribers who are cancelling because you’re spending less time on the road and see less value of the service right now or those cancellations more from households just tightening up their discretionary expenses? Thanks.

David, why don’t you take that one?

Yes. So, nothing's really changed with our offer strategy, right? We've done some things to streamline the offers in some respects. When you used to get an agent on the phone, they'd take you through a more complicated offer cadence than now you can do it in the IVR, you can you can do it online, you can do it through the chat agent, and then those less interactive channels we've tried to streamline, simplify the way that pitches is made. Will it have a big effect on our ARPU? No, although you have to feel like in a recession environment that whatever increase in ARPU you thought might be coming in the business, it's got to be less, right? You're in a more recession sensitive environment. On the non-pay side of things, I don't have any more data on that than what I gave you in the prepared comments. So we tried to give you the data point of, okay 1IN March, we saw a 15 basis point increase in the total of non-pay and other voluntary churn. We've always felt that at -- under $14 on average per subscriber that our service has never really been about 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've heard us talking about those two together and sort of the 120 basis point range, over the last couple of years. And so we saw a 15 basis point increase in that in March, but fully offset by the vehicle related churn. How sustained will that be, going forward? It's sort of anybody's guess, we'll keep you posted.

Got it. Thank you.

Thank you. We'll now take our next question from Jason Bazinet from Citi. Please go ahead.

I just had a very simple two part question. On gross additions as we wait for sort of auto plants to come back online, do you mind just giving us an update on the share of gross adds on the new car side versus used? And then on churn, David, you mentioned you don't expect churn to be as bad as the financial crisis of '09. I assume that was a comment on sort of full-year churn numbers, not the sort of trough to peak that we saw quarterly 10 years ago or so. Thanks.

I think it's -- on the second question, Jason, I think it's both, right? And again, I don't know, we're going to see, I hope I'm right. But I don't think we'll see the kind of full-year spike, I don't think we'll see the quarter spike, quite as big and I'm trying to remember now. But I think we might have seen 2.2% peak …

[Indiscernible].

… yes, in 2008, 2009 and could it go there? Sure., I have to admit, with the dampening effect of vehicle related churn, I'd be a little surprised, but we're all going to see. Yes, gross adds, with new car sales dropping, right, so if you come through the first quarter of the year that the share of gross adds for new car versus -- and Jason, I'm talking about new car conversion from trials as opposed to winning back in original owner two years after they bought a new car, right? And that's consistent with what you've heard in the past. It probably -- because of the way that sales fell off and at the end of the first quarter, maybe it dropped down a couple of ticks, but it's largely consistent with what you've been seeing, certainly going forward that as we go through the second and third quarter, new cars, it's probably going to drop a little faster than the subsequent owner, plus the original owners who were winning back, right? So -- but again we'll have to see that. I don't really see anything in that materially changing from the trends you've been seeing.

Okay, thank you.

Operator, can we take our next and last question, please?

We will take our next and final question from Bryan Kraft from Deutsche Bank. Please go ahead. Your line is open.

Hi. Good morning. I wanted to ask about a little bit more on the Pandora ad revenue. Can you give us any sense for the actual piece of the advertising revenue declines that you're seeing Pandora quarter-to-date? Just to help us frame sort of the worst-case scenario. And also, how should we think about the margins on the ad revenue that is declining at Pandora? Thanks.

Do you want me to take it, Jim?

Yes, please, David. Go ahead.

So we're hesitant to provide any information about what's really happening with the book on the advertising side. It's still a new business to us and it is only 20% of the revenue. And so in the -- the part of the hesitation is that it's the velocity of the change in orders, right? I don't think Jim and I have a feel yet for how fast the people can change their minds on the advertising side. So that's really where the reluctance comes in. Yes, I’m reading a lot of things from published statistics from various sources on what's happening with advertising sales out there broadly. It seems that digital properties are doing a little bit better than broadcast properties. Digital audio is a much smaller market than search and display. And so, it's a scarcer commodity for people who want to reach that way. So that -- on the advertising side, that’s about as much like. So what was the other question? Oh, the margin on it.

Yes.

Yes, so on the Pandora side, you don't have a completely variable costs associated with that, right? The formulations of these licenses are greater of, sort of listening time or percent of monetization. And so, if you're listening doesn't decline proportionately with the demand, you can flip right into the unit costs instead of the share revenue. And generally, we expect that to be occurring, that -- there's going to be fewer royalties than there otherwise were, certainly for the fact that listening is down a little bit to the crisis and there'll be fewer 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 in listening and so we're not going to get a one-to-one benefit there.

Maybe just -- excuse me, one follow-up on the usage side, too, then. The advertising listening hours were down, I think a little bit less than we expected. So it seemed like the underlying trend there was a little bit better, but there was probably also a pretty big fall off in the second half of March. I was wondering if, how much better that number might have looked if not for the COVID-19 crisis stepping in late in the quarter?

Well, hard to know, right? But we were -- we're feeling pretty good about the plan that we had until we got to March 9 on all aspects of the business that the satellite radio additions, listening time, ad orders were all very strong. And then, when you hit the 10 of March, it was like business activity around the world fell off a cliff. So, we are in a new normal. We do feel we had a call yesterday, Jim and I did with -- Scott was on, Jennifer was on, a lot of other people and talking about listening trends at Pandora. And they are confident that they can track the change in listening to the reduction in commute time.

Yes, Bryan, just one comment from us, from Jim is your observation is exactly right. We were -- David is, [indiscernible]. We were sitting on March 10 and first of all, I want to reiterate what I said in my comments. I think we had an outstanding first quarter. It would have been even better without COVID-19. There is just no question. And the only reason I say that is not to say, oh, gee, let's cry over spilled -- over lost -- over spilled milk. That’s not the point. The point is the strength of our business model was never better evidenced than in the first quarter. That demand when it sells, hits us both in revenue and ad revenue and in subscriptions. There's no question about it. And I believe both of those metrics will come roaring back once we get back to normal.

Okay. Thank you for the color.

Thanks, Bryan. Thanks, Bryan. Thanks everyone, for participating in today's call. Stay healthy and we will speak to you soon. Good luck. A - David Frear: Thank you. Bye, bye.