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

Jul 30, 2020 • 08:00 am ET


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


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David J. Frear


Our enabled fleet grew to 129.6 million vehicles or about 47% of the cars on the road in the U.S. At the end of the second quarter, the total trial funnel stood at 8.1 million, down from 9.1 million at the end of the first quarter. That contraction was sharpest in April, but ended up being significantly better than what we had modeled at the start of the pandemic.

Fewer trials starting in the second quarter will reduce self-pay additions in the third quarter. With COVID cases surging in many parts of the country, there remains justifiable concern about the shape of the economic recovery. Despite that, with improving visibility into the back half of the year, we feel confident in our subscriber guidance.

With this backdrop, there's also risk associated with the audio advertising market, but we feel good about hitting our revenue guidance of approximately $7.7 billion. As advertising revenue builds in the second half, Pandora's gross margin will expand at a healthy clip. If auto sales outpaced analysts' estimates in the second half, SAC expense will expand with it, boding well for revenues in 2021. We are confident of our guidance for adjusted EBITDA of approximately $2.4 billion for 2020. The launch of SiriusXM 7 is expected later this year and the Sirius XM 8 launch should occur in early '21. We still expect to pay no federal cash taxes this year and a relatively small amount in '21.

We estimate capex this year in the range of $330 million which brings us to our free cash flow guidance of approaching $1.6 billion. After suspending our share repurchases in March in response to the uncertain impact of COVID-19, we resumed repurchases just after our first quarter earnings call and bought back about $165 million of our shares in May and June.

We have put to work nearly $1 billion this year already, with $525 million in share repurchases and dividends in the first half of this year, plus $428 million of capital committed to our acquisitions of Stitcher, Simplecast and our investment in SoundCloud. In June, to lower our interest expense and extend maturities, we very opportunistically issued $1.5 billion of new 10-year unsecured paper at a rate of just 4.125%. And in July, we used the proceeds to redeem a similar principal amount of our 4.625% notes due in '23 and the 5.375% notes due in '25.

At the end of the second quarter, our net debt to trailing 12-month adjusted EBITDA ratio was 3 times and our $1.75 billion revolving credit facility was completely undrawn and fully available. Our capital allocation and leverage targets remain unchanged, and we expect to continue our share repurchases in the back half of the year.

Now operator, with that, let's open it up for Q&A.