Sirius XM Holdings Inc. (NASDAQ:SIRI) Q2 2020 Earnings Conference Call - Final Transcript

Jul 30, 2020 • 08:00 am ET

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Sirius XM Holdings Inc. (NASDAQ:SIRI) Q2 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

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

Analyst
Steven Cahall

Thanks. Maybe just first one on churn. I think you said vehicle churn improved, and it was only a modest increase in voluntary churn. So maybe any color on involuntary churn. And since used trials are now more -- sort of getting bigger than new trials, maybe you could give us an update on what churn is trending for your used subscribers versus new subscribers? Then I have a quick follow-up.

Executive
James E. Meyer

David, why don't you take it?

Executive
David J. Frear

Yes. So on involuntary churn, I mean, you may have heard this from some other people in this earnings season. We're sort of stunned at the very low level of non-pay churn. It's something that we never would have guessed going into an economically sensitive period. And the fact is, the rate on it is falling. And there are lots of theories out there on it that there's some writing that suggests that with the overall level of consumer spending down from past levels. There's more room, more availability on credit cards. I think, as everybody knows, that our subscriber base is 80% debit card and credit card. And so maybe it's that. Maybe it's just that with the rise in voluntary churn that you have a little bit of a shift.

It's tough to know, but it sort of is what it is, and performance on the churn side has been great all the way around. With respect to used trials and churn rate on used cars. To me, there's not a significant difference between what we experience between the different types of cars that generally, as cars get older, churn seems to be a little bit higher, but then you always have this thing with what's going on in the household. And so, I'd say that there isn't anything in the mix shift that's going to take us out of the performance rate that you've seen in churn of sort of being roughly in this 1.7% area.

Analyst
Steven Cahall

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

Executive
James E. Meyer

David?

Executive
David J. Frear

Well, for a long time, we've talked about the business generating about $2 billion in excess capital and that remains true today. And so, that excess capital can go to external growth, acquiring external growth. Or in the -- because we -- to get to the free cash flow, we're investing everything we think we responsibly can to drive growth in the