Sirius Xm Holdings Inc. Q1 FY2020 Earnings Call

Ladies and gentlemen, good morning and welcome to SiriusXM's First Quarter 2020 Results Conference Call. Today's conference is being recorded. A question-and-answer session will follow the presentation. At this time, I would like to turn the conference over to Hooper Stevens, Senior Vice President of 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 will 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 the 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 to ensure the well-being of our employees and to manage business continuity. Global stay-at-home orders swiftly and materially altered 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 improvements 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 a 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 Swift, Garth Brooks, and many more have participated in special DJ sets and home performances for our listeners. 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 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 an 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 an 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, 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 a 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 SAR of 16.8 million in February, SAR came in at $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 auto sales today flow through to fewer conversion opportunities three months from now. We will see the biggest effect of this lower top-funnel activity in the third quarter. Lower auto sales do 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 fell 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 recessionary 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 2021. As we mentioned in the press release in late March, we temporarily suspended our stock buybacks. Even with that, we put $377 million 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, everyone. 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 content and car increasing work from home. How that translates to subscriber impact and your ability to offset that with home as part of the equation? Thanks.

I will address the first part of your question, and David will handle the second part. I honestly do not anticipate any significant change in the demand for our product moving forward. While we've seen a noticeable decline in in-car listening over the past 6 to 8 weeks, I believe that much, if not all, of that listening will return once the country reopens. Americans have always had a strong connection to their cars, and I don't believe that has changed. Additionally, I’m pleased that we've enhanced our streaming offerings on the SiriusXM side significantly over the last three years. I'm also glad that nearly all of our subscribers can stream without incurring extra costs. Therefore, I think we are well-positioned regardless of the circumstances, and I am not concerned about future demand for our listening hours. David, could you address the question regarding advertising?

Yes, James, if I understood you correctly, you were asking about how to reduce prices to boost demand. In the current advertising markets, lowering prices doesn't necessarily translate into increased spending from advertisers who are scaling back for various reasons. While we haven't officially stated this, we do notice some positive trends. If we look at the order book, there seems to be an expectation among advertisers that things will return to normal by the third quarter. Jim and I acknowledge that advertisers can withdraw their ads at any moment. Generally, we believe this is more of a hopeful outlook, and advertisers will take time to decide when to ramp up their spending again, as it can be done quickly. We will need to see how it unfolds. However, as we enter the early part of the second quarter, lowering prices won't address the underlying demand problem we currently face.

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 can 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 8 or 9 national studios around the country to where all of our content today is being produced outside of our studios without reason to be. Furthermore, we just had tremendous support from the talent that’s a big part of 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, than we've ever seen for any compound we had on that channel. And so there's a good vibe out there.

Jim, it's 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 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 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 various acts to do stuff, to Beastie Boys to others. And then that led to people like Jimmy Fallon saying he will host hits, Taylor Swift hosts hits, 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 this 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 that? Go ahead, sorry, Jim.

Yes. One more point regarding Pandora listening that Jim mentioned. We can directly link changes in listening to commute times. When comparing markets with stricter stay-at-home orders to those without, we found substantial data on Pandora that shows a correlation between changes in listening trends and commuting. We've noticed a significant increase in connected entertainment devices, especially with the rise of smart speakers, indicating that people are transitioning to different locations. However, the increase in connected entertainment does not compensate for the decline in commuting. On the cost side, we have a few contracts with reduced expenses due to changes in demand, especially on the advertising front. Nevertheless, programming costs remain stable for the most part.

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. Do 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 nearly 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.

In 2008 and 2009, we entered the recession later and exited earlier because our demographic and customer base had above-average incomes. Now, we are more representative of the general driving population, and with the growth of the second owner business, we would expect our situation to differ this time around. I don't have a definitive answer, but I think we will not be as late in the recession or as early out of it as before. Our customer base still maintains a better-than-average income, which should make it more resilient during a recession. I anticipate that the vehicle-related churn will be more significant this time, leading to a smaller spike in churn compared to last time. It’s hard to say exactly how much less of a spike there will be, but I find it difficult to believe churn won't rise from our current level of 1.8%. However, we don't expect the same magnitude of increase. Regarding the sales and customer acquisition costs, there is a direct relationship; as new car sales decline, we will ultimately see less production unless we anticipate a recovery. If car sales drop significantly, like from 16 million to 11 million, and there’s an expectation for a recovery later on, the impacts on customer acquisition costs will be delayed. Additionally, automakers have halted production, which will inevitably lead to a reduction in volume.

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. First, I want to revisit the content regarding the payments to sports leagues mentioned in the release. I'm curious about the flexibility or benefits you receive in return for these contracts. What happens with these contracts? Additionally, Howard Stern mentioned on his show this morning that he's open to ideas regarding his contract. Can you provide any insights into that? Now, for David, it seems like there might be an opportunity to alter long-term business operations if you see potential for greater efficiency. Are there any long-term implications from the current situation? Lastly, could you share your confidence in resuming the buyback? It sounds like you are leaning towards that, which appears to be a strong vote of confidence from the company. Thank you.

Okay. Jessica, I believe your question had multiple parts. I’ll address the part about Howard first. I've been quite clear that I want Howard Stern to remain with SiriusXM for as long as he chooses to work. Our relationship is strong and better than ever, and importantly, the quality of the show he delivers to our listeners is outstanding. We've initiated discussions for a more formal dialogue as Howard's contract comes to an end this year, and I've allocated time to work through this with his agent, Don Buchwald. Unfortunately, due to the coronavirus, we haven’t been able to meet in person, but I recently spoke with Don, and I believe these discussions will be more effective face-to-face. I am confident we will find a path forward together, and I hope to share more during our third quarter call. Now, regarding sports programming, our primary focus is ensuring the league gets underway and that our subscribers receive the content they love. There will be many discussions, but as David mentioned earlier, we do not anticipate any changes in the cost of our sports content for 2020. David, would you like to continue?

Jessica, your question about how this might affect long-term business operations is an excellent one. We've been discussing this a lot over the past six weeks. As you know, we have traditionally been a high-touch customer service organization with around 10,000 to 12,000 agents globally between inbound and outbound call centers. With about half of them unable to work in person for the last five or six weeks, we had to figure out how to adapt. Now that we're five or six weeks in, we're asking ourselves how this new setup will impact long-term performance and if there are opportunities here. We're improving efficiency and enhancing the digital experience for customers by developing more effective chat agents instead of relying solely on live agents. We're evaluating whether we need as much office space and if we should be flying staff as frequently. Many of us have found remote work via Zoom to be very effective. Thus, we are reconsidering our G&A infrastructure. Although we have strong liquidity and cash flow, we are mindful of how we pursue new initiatives, and we've asked our teams to prioritize their projects more carefully. This is partly driven by the hiring pause Jim mentioned. We're also looking closely at out-of-car engagement, which is becoming an intriguing focus for us. It used to be challenging to capture people's attention for Sirius while they were driving, but we've seen a significant increase in streaming from free alternatives and our own efforts since this crisis began. So, stay tuned for how these changes unfold. Regarding the buyback, we are confident. We do not have liquidity or leverage issues to worry about. We're looking at the price dislocation, not just for Sirius stock but for assets on the market. With our ample financial resources, we're well-positioned to explore external acquisition opportunities. For the buyback itself, we will carefully assess the potential recovery shape and what it means for our stock value. As we have done in the past, if we believe the stock is undervalued, we will not hesitate to take action.

Right.

One point I'd like to add is that we've had multiple conversations with our Board on this subject, including just a few days ago. I think David summed it up well regarding the Board's position and the direction they have given David and me, which aligns perfectly with our recommendation. Next question, please.

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

Thank you for taking my question. Can you discuss the strategies you are considering to recapture customers who might pause or cancel their tier subscriptions due to the economic downturn? Additionally, could you share your thoughts on how this might affect the ARPU trajectory this year, whether significantly or not? Also, regarding the voluntary churn, excluding non-payment, do you have any insight on whether the cancellations are due to subscribers feeling there’s less value in your service because you’re spending less time on the road, or are they primarily from households reducing discretionary spending? Thank you.

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 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 has 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, in 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. Your line is open.

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 believe your second question pertains to both aspects. I am unsure of the future predictions, but I hope I am correct. I don't anticipate a significant full-year spike or a substantial quarter spike either. If I recall correctly, we observed a 2.2% peak in 2008 and 2009; it could reach that level again, but given the dampening effect of vehicle-related churn, I would be somewhat surprised. We will all find out together. Yes, there will be gross additions despite a decline in new car sales. If we analyze the first quarter, the share of gross additions for new cars compared to other categories—specifically new car conversions from trials versus original owners two years after purchasing new cars—remains consistent with previous observations. Sales did decline at the end of the first quarter, which might have resulted in a slight decrease, but it aligns with the trends you've been noting. Moving forward into the second and third quarters, the rate of new car additions is likely to decline faster than that of subsequent owners or original owners we are trying to win back. However, we will need to monitor that closely. I don't expect any significant changes from the trends you have been observing.

Okay, thank you.

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 decline 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.

We are cautious about sharing specific details regarding the advertising aspect of the business. It is still relatively new to us and constitutes only 20% of our revenue. Our hesitation stems from the rapid changes in order patterns, and we are still gauging how quickly clients can alter their advertising strategies. While I have reviewed various statistics regarding overall advertising sales, it appears that digital platforms are outperforming broadcast ones. Digital audio is a much smaller segment compared to search and display, making it a more limited option for advertisers. That covers what I can share about the advertising side. What was your other question? Oh, the margins related to that.

Yes.

Yes, so on the Pandora side, you don't have a completely variable cost associated with that, right? The formulations of these licenses are greater of, sort of listening time or percent of monetization. And so, if your 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.

I have a follow-up regarding the usage side as well. The advertising listening hours were down, perhaps a bit more than we anticipated. It appears that the underlying trend was somewhat better, but there was likely a significant decline in the latter half of March. I am curious about how much more favorable that number might have been if the COVID-19 crisis had not emerged late in the quarter.

It's hard to say for sure, but we were feeling optimistic about our plan until March 9. We saw strong performance across the board with satellite radio additions, listening time, and ad orders. However, after March 10, it seemed like global business activity drastically declined. We are now adjusting to a new normal. Jim and I had a call yesterday with Scott, Jennifer, and several others discussing listening trends at Pandora, and they are confident that they can monitor the changes in listening patterns related to the decrease in commute time. Yes, Bryan, just one comment from us, from Jim is your observation is exactly right. 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 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, everyone, for participating in today's call. Stay healthy and we will speak to you soon. Good luck.

Thank you. Bye-bye.