Sirius XM Holdings Inc at JPMorgan Technology, Media and Communications Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : David, just given these unprecedented times, can you talk about what SiriusXM is doing to address this for customers and employees, and perhaps some of the longer-term structural changes you expect to happen across the business? And how does this change how you invest in the business and priorities from here?

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : Great. On the 1Q call 2 weeks ago, you gave a lot of great color on some of the trends that you were seeing in the business through April. I want to see if you can maybe touch on a few of those topics, and let us know perhaps what you're seeing thus far through May -- through mid-May? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 12, 2020 / 6:10PM, SIRI - Sirius XM Holdings Inc at JPMorgan Technology, Media and Communications Conference (Virtual)

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : That's great. And I just wanted to follow up quickly on a couple of those. I think on the call you talked about, through April I think, trial starts were down about 55% to 60%. As sales have kind of come back a little bit, has the trial starts improved commensurately with auto sales as you kind of talked about?

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : And you talked about, yes, auto sales at 8.6 million in April. To your point, not as bad as some had feared. But just maybe perhaps in your conversations with either OEMs, maybe J.D. Powers, maybe what are they saying perhaps about the shape of the recovery in auto sales? Any additional kind of color you can provide?

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : And similarly, while -- so conversion in the first quarter of 39% was pretty strong. And then you kind of talked about, okay, maybe -- I think you mentioned the second quarter may come in below that. Is it similarly too kind of too early to tell in terms of the trend of the conversion rate through the remainder of the year? Because to your point, there's still a lot of unknowns kind of out there and too early to call.

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : Yes, I'm sorry.

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : So I'm not sure -- if I did ask about the advertising and if you had been seeing any payments -- late payments related to ad sales. Did you hear the question?

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : Okay. That's good. So in the first quarter, you did pause the share repurchase program. Have you resumed share repurchases thus far in the second quarter?

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : So yes. Just on that, in the past, you had talked about 2 billion of excess capital generated through the business between free cash flow and then EBITDA growth and putting some leverage on the EBITDA growth on a per annum basis. And how are you thinking about balancing capital returns with also maintaining flexibility in this environment?

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : So you did the SoundCloud deal in the first quarter. Not specifically touching on that yet, but what other types of maybe assets out there would be appealing? Is it more on the audio and streaming side? Obviously, connected vehicle and telematics has been an area of investment through the years as well. Just anything that kind of strikes you as most interesting?

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : Okay. That's helpful. And then in terms of finishing up on the updates from the first quarter call, so in terms of CapEx, $340 million kind of like a ceiling, I think, is kind of maybe how to think about it to an extent. Are you still comfortable with that level for the year? And maybe what are some of the key investments projects for 2020 that perhaps you could defer if need be? I mean you did mention SiriusXM 8 was probably one of those.

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : Great. So back to the business for a minute, in terms of just churn, there's a discretionary product there's been a lot of focus on, perhaps a potential increase through the rest of the year given the economic slowdown. I think you saw churn increase by about maybe 30 bps in the '08, '09 recession, I think to about 2 2. I mean do you think we could see that? Or could vehicle churn continue to do what it's doing and offset some of that nonpay and voluntary increase?

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : That's great. So then -- so I think what is -- self-pay churn has just been incredibly resilient in [each of] the last couple of years. To your point, it's now trending towards 1.7. Is it just better blocking and tackling on your end? Is it just from a CRM perspective, is it the content? Is it a little bit of both? Anything you can put your finger on in terms of just why it's been so incredibly resilient of late?

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : Now Toyota going standard recently is helping push the penetration rate towards 80%. But I think you've kind of intimated to it a little bit on previous calls, or Jim has. Have you had convos with other OEMs as well about going standard?

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : And has COVID changed any of those conversations at all? Or is it too early?

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : So in the quarter if we can just -- kind of wrapping up with the funnel, given the decline in March in new auto sales and perhaps some of the dynamics you talked about with used being a little bit more resilient, should we expect the contribution from the used car channel to kind of probably increase pretty nicely on a relative basis in the quarter? And at this point, has anything changed about your views on whether -- when used will pass new in terms of gross adds share?

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : Okay. And has there been any changes thus far in the second quarter in terms of your offer strategy? Just perhaps any color on recent trends and whether you're seeing perhaps gross adds come in at a lower-priced packages or levels? And any demonstrable change in retention or save credits policy?

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : Okay. And then yes, with -- just shifting gears to -- for a second here. With SoundCloud, you touched on it previously. You previously had the ad sales agreement with them. What does the investment make? Does the investment change anything with that? Could it accelerate anything you're currently doing with SoundCloud? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 12, 2020 / 6:10PM, SIRI - Sirius XM Holdings Inc at JPMorgan Technology, Media and Communications Conference (Virtual)

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : Yes. It's a huge platform there when you add it all up. I think -- so recently, some headlines regarding Liberty's interest in iHeart have been popping up different articles in the press. In bankruptcy, you did make a joint bid with Liberty for a portion of iHeart. I mean any color perhaps on potential revenue or cost synergies? And do you see iHeart as being complementary to what you're trying to do perhaps in ad-supported audio?

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : I think shifting back to CapEx for a minute, I think prior to shifting the satellite launch into 2021, I think The Street was looking for a sharp reduction in CapEx. And so how are you thinking about the trend from '20? I know -- I mean you kind of touched on it a little bit in terms of planning is still kind of in process. But does 2021 CapEx levels, is that kind of determined about how 2020 kind of shakes out?

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : And then you mentioned that, I think, just engagement or listening hours at Pandora begin to narrow versus the prior -- the declines have begun to narrow a little bit versus the prior year. I think even on the call, you talked about first quarter was trending pretty well until March and then when things kind of changed. I mean how should we think about just overall, the decline in advertising, obviously while demand is weak in the second quarter, but just overall the decline perhaps that we could expect at Pandora in terms of advertising dollars in the second quarter? Obviously, you've seen some broadcast radio assets or local broadcast assets in general, pretty sharp declines. Obviously, digital is a different end of the spectrum, I think. How should we think about Pandora kind of fitting in that paradigm, I guess? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 12, 2020 / 6:10PM, SIRI - Sirius XM Holdings Inc at JPMorgan Technology, Media and Communications Conference (Virtual)

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : Okay. Great. I think any color perhaps, because we talked about some different verticals obviously a bit more challenged than others. I think there were reports out last week that audio advertising was down about 70% -- auto advertising was down about 70% in April. Any color on verticals perhaps, maybe at Pandora?

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : Great. And I think only a couple of minutes here quickly left. And just in closing, I think one of the attributes of SIRI that I think kind of is underappreciated is your variable cost structure, particularly on the legacy SIRI side. In this environment, rev share come down, SAC will come down with auto sales, installs, et cetera. I mean what are folks missing? And how should we be thinking about how SIRI is positioned for a recovery coming out of this?

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : That's a great place to end it, David. Thank you so much, and thanks for joining us here today, and stay safe.

Question: Sebastiano Carmine Petti - JP Morgan Chase & Co, Research Division - Analyst : Thanks, everyone.