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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Presentation
Executive
James E. Meyer

practice of providing annual guidance. We now expect approximately 500,000 self-pay net subscriber additions, total revenue of approximately $7.7 billion, adjusted EBITDA of approximately $2.4 billion, and free cash flow approaching $1.6 billion.

To put our business outlook in perspective compared to 2019, we expect self-pay subscribers will grow. Revenue will decline slightly on the COVID-driven hit to our ad sales and adjusted EBITDA and free cash flow will be about the same. As I have said many times, business models matter, and our business model is very resilient. Although auto sales fell substantially, the second quarter finished better than it started. April SAAR of 8.6 million was down 48%, but May SAAR improved to 12.2 million, and June SAAR further improved to 13 million.

Consensus for full-year 2020 auto sales now sits at about 13.2 million, as analysts expect auto sales to continue to improve. In addition to an improving retail mix of auto sales, our new car penetration rate continued to rise, up nearly 500 basis points year-over-year to 77% in the second quarter. We continue to expect to reach 80% by the end of this year.

We have announced significant 360L deployments starting this year with a variety of automakers, including Audi, BMW, Fiat Chrysler, Ford, GM's Buick, Cadillac, Chevy and GMC brands and Volkswagen. Stay tuned for even more. This deployment is now really gaining steam, and we expect to end this year at about 1.4 million 360L vehicles in operation, a figure which should roughly triple in 2021. We're excited to give so many customers this enhanced experience. The used car business continues to provide a tailwind in the second half of 2020. Used car penetration is now a shade under 50%, up about 500 basis points versus this time last year. While new vehicle starts fell 26% in the second quarter, used vehicle starts fell only 5%. And for the first time ever, we had more used car trials than new car trials.

The pandemic and stay-at-home orders during the second quarter helped accelerate more streaming engagement by our customers. This trend began last summer when we included streaming at no additional charge for the vast majority of our subscribers. The amount of Sirius XM self-pay subscribers streaming every month has doubled since last summer. We also took advantage of attractive advertising rates in the second quarter to launch a large-scale multimedia campaign, which raised both the awareness and usage of the Sirius XM app. Of course, the biggest challenge we faced and the biggest drag on our financial performance has come from our advertising market that fell sharply, reducing our ad revenue by 34% in the quarter as compared to last year.

I will note that the trend within the quarter was positive, with April down 44% from the prior year, May down 38% and June down 22%. Although recovering the outlook for advertising revenue remains uncertain for the rest of the year. We've also been pleased that the reduction of advertising supported