Sirius Xm Holdings Inc. Q2 FY2020 Earnings Call

Good morning and welcome to the SiriusXM's Second Quarter 2020 Results Conference Call. Today's conference is being recorded. A question-and-answer session will take place after the presentation. At this time, I would like to turn the call over to Hooper Stevens, Senior Vice President of Investor Relations and Finance. Mr. Stevens, please proceed.

Thank you and good morning, everyone. Welcome to SiriusXM's second quarter 2020 earnings 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. Jennifer and Scott will be available for the Q&A portion of the call. First, I would like to remind everyone 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 not to 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 that 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. Good morning, everyone. SiriusXM’s second quarter represented extremely resilient performance in one of the most challenging times in our company’s history. Our business performed significantly ahead of our expectations during the second quarter, with a quick and improving pace month by month. And we are moving aggressively to boost our streaming engagement, execute on our long-term goals such as 360L deployments and invest in a growing podcast market. During the second quarter, despite the effects of stay-at-home orders on the economy, we added about 200,000 more net new subscribers than we did in the first quarter. And while our revenue was down 5% versus last year on lower advertising revenue, our adjusted EBITDA was flat. On our first quarter call, I told you we would continue to generate substantial positive free cash flows and we did just that in the quarter, generating approximately $0.5 billion in free cash flow, a bit more than last year’s second quarter. We are poised for a strong finish to the year, despite the uncertain economic outlook and rising COVID-19 cases in parts of the country. We are resuming our 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 SAR of 8.6 million was down 48%, but May SAR improved to 12.2 million and June SAR 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, so stay tuned for even more. This deployment is now really gaining steam, and we expect by the end of this year 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 number of SiriusXM 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 SiriusXM 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 listening hours at Pandora has been abating. After being down as much as 18% early in the second quarter, ad hours finished the quarter down less than 6% compared to the prior period. We’re seeing gains in hours spent listening to connected devices, mitigating declines on mobile and web. As important, Pandora ad hours are increasing for listeners 35 and older. We are extremely excited about the prospect of assembling the premier suite of audio advertising products in the world. The acquisition of Stitcher and Simplecast complement ad waves leading ad tech platform and Pandora's digital audio sales capabilities. Simplecast, a leading platform for podcast creators, strengthens our capabilities in content management and analytics, as well as provides leading ad technology tools for publishers and advertisers to operate scaled ad marketplaces for podcasts and other audio content through both programmatic and direct sold product offerings. Stitcher produces a number of high-visibility podcasts, has a leading ad network and sees about 150 million downloads per month. When combined with the U.S. audience reach of Pandora and SoundCloud, this combination of content, technology, and sales capabilities will allow advertisers the opportunity to execute audience-based buys with unprecedented scale, ease, and efficiency. Our expanded podcast efforts fit well with our existing advertising-led focus at Pandora and AdsWizz, and position us to improve precision targeting, measurement, and monetization for the broader podcast market. I’m thrilled for SiriusXM to participate more in this growing space, which now draws more than 100 million monthly listeners and provides a unique value proposition for both listeners and creators. We look forward to closing Stitcher later this year and for the opportunity to drive growth with investments in this space. As always, producing and delivering fantastic content is always our number one job, and we continue to do just that. We are the owner of the original audio bundle, and we've been delivering premium talk content since day one. Our shows are live and relevant to the times, and we’ve witnessed an unprecedented response from both music and other entertainment's top talents with their willingness to participate in new programming and presentations on our platforms. With one of the world’s biggest bands, U2, we launched its much-anticipated full-time channel, U2 X-Radio. Each member of the band is deeply involved in creating and hosting exclusive shows on this channel. And U2 said in press interviews they relish the opportunity to expose both new and hardcore fans to their full catalog, as well as remixes and rare recordings, something they noted is lost in algorithmic playlists from other audio platforms. We’ve honed and elevated our game in music programming, with the launch of several new artists’ channels on our satellite and streaming platforms. We launched the first wave on May 1, with a Prince channel and other channels dedicated to Led Zeppelin, George Strait, David Bowie, the Eagles, Fleetwood Mac, Guns N' Roses, Metallica, and the Rolling Stones. These channels, created with the artists and in some cases, their estates, were part of our stream-free campaign in May. By opening up our SiriusXM streaming service for free during a time when people needed news, information, and entertainment, we saw over 4 million people take advantage of it. And of course, we are now working hard to bring in many of those listeners as subscribers. Earlier this month, we launched another suite of streaming channels with Beastie Boys, Bob Marley, Coldplay, Queen, and comedian Jim Gaffigan. As various sports have returned to live action, we’ve been quick to get back to delivering the live broadcasts and comprehensive coverage our listeners want and expect from the return of live golf events and NASCAR races in May through the start of the MLB season last week, and the restart of the NBA season tonight, plus IndyCar, Formula 1, EMSA races, soccer, and horse racing. SiriusXM is back to offering sports fans an extensive live sports schedule. And our business radio and Doctor Radio channels continue to assemble experts and leaders for exclusive panels and town halls to inform and discuss the variety of effects COVID-19 is having on our health, daily lives, and the national economy. While no one would have predicted a 2020 like we've had so far, I am proud to say SiriusXM is not merely surviving this current storm. Our business model is strong, our employees are talented and dedicated, and we are in an enviable financial position. We are making smart investments and growing areas like podcasting, while expanding the tremendous reach and capabilities of our advertising platform. We have already seen very clear and positive trends across most of our business in the past couple of months, and we hope that this recovery continues. Regardless of the fits and starts that may come, we will keep our heads down with a focus on execution and investing in a foundation that will enable us to grow for years to come. With that, I’ll turn it over to David.

Thanks, Jim. SiriusXM’s second quarter was remarkably good considering the seismic challenges across the economy. We added 264,000 self-pay nets, our 44th straight quarter of positive self-pay net additions. Our churn rate improved by six basis points year-over-year to 1.6% and was the lowest quarterly churn rate in more than a decade. Non-paid churn actually improved in the quarter, and lower auto sales resulted in significantly lower vehicle-related churn. These improvements more than offset a modest rise in voluntary churn. The new car conversion rate was down about one point year-on-year to 37%, while used car conversion remained steady in the mid-20% range. Our ARPU rose 1% and excluding the advertising impact on ARPU, ARPU rose 3%. Revenue declined 5% to $1.9 billion, with nearly all of that decline coming from lower advertising revenue. Despite losing $87 million of margin contribution from Pandora, adjusted EBITDA was roughly flat year-over-year at $615 million because of lower expenses across the board, particularly in subscriber acquisition costs. 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 outpace analysts’ estimates in the second half, SAC expense will expand with it, boding well for revenues in 2021. We are confident in our guidance for adjusted EBITDA of approximately $2.4 billion for 2020. The launch of SiriusXM 7 is expected later this year, and the SiriusXM 8 launch should occur in early 2021. We still expect to pay no federal cash taxes this year and a relatively small amount in 2021. 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 4.08%. In July, we used the proceeds to redeem a similar principal amount of our 4.05% notes due in 2023 and the 5.38% notes due in 2025. At the end of the second quarter, our net debt trailing 12-months adjusted EBITDA ratio was three times, and our $1.25 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.

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

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 certainly getting bigger than new trials. Maybe you could give us an update on what churn is trending for your used subscribers versus new subscribers? And I have a quick follow up.

David, why don’t you…

Yes. So on involuntary churn, I mean, you may have heard this from some other people in this earning season. We’re sort of stunned that 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 that is falling. And there are lots of theories out there on it that suggest that with the overall level of consumer spending down from past levels, there’s more room, more availability on credit cards. As everybody knows, our subscriber base is 80% debit card and credit card holders. And so maybe it’s not, maybe it's just that there's a 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 the household dynamics. 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. Churn has sort of been roughly in this 1.7% area.

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 at the back half, free cash flow looks a lot like it did last year, does a buyback presumably look similar as well? Or if you were an RC, which is sort of strip out what you might be spending on M&A as we think about your appetite for buyback opportunity? Thank you.

For a long time, we’ve thought 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 contrary, to get to the free cash flow. We’re investing everything we think we responsibly can to drive growth in the business and then the next step is to go into that $2 billion and say, is there something good to acquire out there? Like Stitcher and Simplecast, which we think add critical components to our business. And then after that we look at... we have our dividends, and that’s a little bit over $200 million year allocation, and then what remains is available for buyback, depending on price-value relationships in the stock, as the market goes up and down from time to time. So, really no change at all in our capital allocation policy.

Operator, can you move to the next question?

Tony, it seems that some of our participants have been taken out of the queue.

Let's go on to the next question, please.

We’ll now take our next question from Ben Swinburne from Morgan Stanley. Please go ahead. Your line is now open.

Thank you. Good morning. I have two questions, one on the OEM side, and one on programming. Jim, could you give us, I know you can’t talk about specific OEM partners, but can you give us a sense for the ramp in 360L and now that that's in the market a little bit, if you’re seeing more interest in bringing that product into more vehicles and sort of how quickly that might ramp over the next couple of years. And I think David said, you’d be at an 80% install rate overall later this year. I just want to confirm that because it seemed like a bit of an acceleration from the last time we heard from you. So that’s sort of the broader OEM question.

Okay, so Jennifer, why don't you take the 360L question, please?

Sure. We are, I think as Jim said, we’re in the process of ramping up. We launched with two of our OEMs over the past couple of years. And we’ve had a number of announcements over the last couple of months with Audi, BMW, and Ford. And really, with any other new product launch, you’ll start to see this rollout in conjunction with new model year launches and new in-vehicle infotainment platform launches. It’s really; the OEMs have been excited about this product. We’ve had great engagement with consumers, especially on the features of voice, on demand, and recommendations. There’s real buy-in from the OEMs. So yes, we expect the vehicles in operation to triple by the end of next year, and then it will just keep ramping from there.

That’s triple – that's triple from 1.4 million at the end of the year.

So I just interrupted you.

Yes, just for Ben’s sake, we expect to have 1.4 million vehicles in operation at the end of the year, and then that to roughly triple in 2021.

Okay, and then finally, Ben - Ben I’m really comfortable with the 80% guidance we gave you by year end for penetration.

Terrific. And then just a quick content question, I’m sure you’re not going to be surprised by it. Obviously, a lot of focus as there is every five years on the Howard Stern relationship, which I know there’s only so much you can say, Jim. But is there any way to help us think about how much of Howard’s library or how much of his content SiriusXM essentially retains the rights to long-term? And then I think when you guys last negotiated with him, you created maybe a deeper, broader partnership that could last for a longer period of time. And just maybe you can help us to understand kind of how that product might evolve over the long term, even without Howard or anything you could say at all since there’s obviously a lot of focus on it?

Absolutely, Ben. Your memory serves you well, and you're spot on. I'll touch on that briefly. First and foremost, I want to emphasize that Howard is currently at the pinnacle of his performance and has been consistently punctual. I couldn’t be more satisfied with how Howard's show is progressing, especially considering his transition from broadcasting live at our New York studio to now doing it flawlessly from a remote setup. It’s a testament to both Howard and the supportive team around him, and I'm truly pleased with the last week’s guests and the overall quality of the shows. Secondly, from what I observe, Howard seems genuinely happy with his work. His content is noticeably better when he's in a good place, and he appears more relaxed. I believe this applies to all of us. I've made it clear that I want Howard Stern to continue working at SiriusXM for as long as he wishes to do so. We’ve been in discussions since late last year, though the pandemic impacted our timeline. Those conversations are active again, and I understand what Howard wants; we’re exploring how to align all our interests. While I don’t want to sound overly optimistic, I'm committed to keeping Howard with us and we’ll navigate this process just like we have in the past. To address your question directly, in our last agreement with Howard, we secured a five-year contract for his live shows. Should he decide to stop his live broadcasts or choose to retire by the year's end, we retain rights to his library for an additional period. I can’t recall the exact timeline, but it’s documented in our filings. Naturally, that’s not my preference; I want Howard on the air. He’s a remarkable talent and vital to our brand. There is indeed a run-off period in place.

I think it's seven years, Jim.

Okay. And that run-off period was something that both of us thought was important and included in our previous agreement. So, we're going to keep working at this and I'm pretty sure at the next earnings call, we'll have something to say here. But I'm focused; I guess is the only word I can say here.

I appreciate all that. Thank you.

Our next question comes from Jason Bazinet from Citigroup. Please go ahead, your line is open.

I just have a question on podcasts. The industry is still pretty embryonic. And I would just love to hear sort of how you think the podcast industry evolves over time and how, when you sort of look at various podcast properties, how you sort of think about how they fit into your overall strategy?

And then Scott, pick up after I start. Okay.

Thank you for your question, Jason. I agree that we need to be cautious about making too many assumptions regarding the potential size of the podcast business. While we have a long history in the audio bundle sector, and we understand the mix between music and spoken word has remained steady, changes in content delivery could speed up those trends. Podcasting is a key component of our audio bundle, but I personally don't believe it can stand alone as a viable business without substantial investment and marketing. There are many players in this space, and we plan to support them through our platform. I think we're still in the early stages of the podcasting industry. Our focus is not on simply acquiring content to prevent others from doing so, but on what we can add to our platform that enhances our value and boosts customer engagement. It's about a broad range of content rather than just a few specific titles. Scott, would you like to add anything? Yes. Thanks. So a couple of things. You know, at its heart, podcasting is audio content. And when you look at that, obviously our expertise as a company in that area speaks for itself. But when you look back at terrestrial radio, there was a lot of AM and FM content that was effectively to our content, and it had a track record. Like Howard Stern and many others, you sort of knew what kind of audience was moving over. So podcasting, as Jim said, we're in the first inning. It's evolving; business models matter. When things emerge and become significant, we're certainly able to look at what would work in our platform. So that's number one. Number two, the marketing aspect. The podcasting is very nascent, and our SiriusXM and Pandora windows on any podcast automatically change the marketing game with that, and so I'm particularly excited about content not isolated as co-podcasts, but as audio content that can flow all the way up and down. And as I mentioned, our ability now to have our financing and our business model complemented by our podcasting acquisitions with Simplecast and Stitcher is going to allow us maximum flexibility on it. And the last piece is, in that first inning concept, big talent in this area, and brands and others are first getting involved. And a lot of them have a lot to lose if their brands aren't as strong or positioned as well in this new podcasting world. Because as you can tell by the numbers, not many podcasts do very significant numbers. So I think our expertise in producing marketing and doing what we do and our marketing window on our platforms puts us in a really good position to at least start going from here on in.

That's helpful. Thank you.

We'll take our next question from Brian Russell from Credit Suisse. Please go ahead. Your line is now open.

Hi, thanks for taking the question. I have two. The first one, I was hoping you could talk about what your thinking is for M&A at this point. What types of assets might still interest you? Is it technologies, content, ad salesforce? Or is your portfolio pretty complete at this point? The second question is, again relating to this, just call it non-music. I think David said in the past that music is somewhere between 80% and 85% of what your customers listen to. Do you think maybe spoken word content is more valuable to your product than its share of listening time would suggest? Thanks.

So I'll start and then I want David to comment on both of your questions. But then I’m going to start with the latter first. We’ve always believed in non-music content. It’s why, by the way, and it’s more than spoken word. We believe live sports is also a key part of the audio bundle. And I think we’ve proved it. I mean, we’ve been at this for close to almost 20 years, right? And so, we and again when I speak, I speak to what our customers in North America want. And so, we’ve always believed in the value of the live bundle. I’ve also always believed that particularly in the subscription business, really my comment applies to the subscription business. Customers pay for what they think they listen to, not necessarily entirely what they do listen to, okay? They pay for what their perceived value is of the service. And so I can tell you customers when you solve, for instance, a one-time for them and a month period, an NFL game that they can't get normally. And then you go back and ask them how interested they are in the NFL? They'll tell you all the time. I also think that the numbers you quoted from David are relatively close to what I believe the ultimate listening spread can be. But at any given time, that can change and it's mixed during a particular period. So in my opinion, the bundle is very, very important. This is not new news for us. We’ve been at it from day one with a bundle, and we can, and I can tell you, we continue to believe in that and on the Pandora side, we will continue to expand bundle from more than jazz music going forward. David, can you take the M&A question, any comments you want on that?

Sure. Just to finish up on the music talk side. I think Brian, we've talked about the past that for a long time, there are a lot of studies out there that say AM and FM radio, which is the largest population we have for looking at long-term trends and listening in North America, which is what we're most interested in. That over the long term, that's been an 85:15 split between music and talk, but you’ve got to remember that even within the music, a lot of what they're listening to is their favorite DJ in the morning and not necessarily the music. They’re in it for the engagement. So, we do skew below that long-term average because of the preponderance and the breadth of content that we have. In terms of level of importance, brand affiliation has always really mattered to us, whether it's the NFL, or the NHL, or Howard Stern, and the different news brands that it creates awareness and carries that brand through and builds awareness for us. It gives just another reason for people to subscribe. How much they actually listen to the content that moves them is less important than it actually moving them. And so someone might subscribe so that they can listen to play-by-play for out of market gains that they can't get elsewhere, even though that's only once a week. But it might be that trigger that causes them to go. Far and away, the most important part of the whole puzzle is the curation because if you were just playing music with no hosts, there’s nothing differentiated about it. And so how they're packaged in the channels, and what the hosts do with it, and how you curate the non-music content, the pop-up channels, that’s more brand affiliation. That whole package is what Scott’s team is focused on to really drive interest in the service. On the M&A side, I think we're in pretty good shape at this point, and I don't think there's anything we're missing. And so, for instance, on monetizing digital audio, regardless of whether that's music, or something called a podcast, or something called an on-demand episode from radio, that we have a stack of products for the marketplace to buy if they're interested in buying them. So with Simplecast, we have a content hosting and data analytics platform that is flat-out the best in the world. Any podcaster, regardless of where their podcasts are being listened to, should want to be on that system. AdsWizz has the best technology out there for ad insertion and the order and buying process associated with digital audio advertising, regardless of whether it's music or talk. John Trimble's team from the Pandora side is the largest scaled sales representation team in digital audio. So if you're anybody out there playing in the digital audio space, that you're going to want to be talking to us about how to improve your monetization. One of the big challenges in digital audio today is no one has scale. All the podcasters have fairly limited reach, and it’s an awful lot of direct response advertising, not a lot of branded advertising. And one of the reasons there is, is that the brands can’t put enough money to work efficiently. Quite honestly, we have an array of products and an audience size across those products that solves that problem for brands. So I think we've got all the pieces. That being said, there's always somebody else out there who can add a little bit more to what you got, and we'll keep an eye out for the things that have good value.

That's very helpful and very interesting. Thank you, both.

One last point. Jim, I want to highlight that we've been actively involved for a while now, and we are pleased with our investment in SoundCloud. We appreciate the management team at SoundCloud, and David serves on the board alongside another team member. We are optimistic about our position and will observe how things develop. I believe this also supports our advertising off-platform business.

We'll take our next and final question from James Ratcliffe from Evercore ISI. Please go ahead. Your line is now open.

Hey, thanks for taking the question. Two if I could. First of all, regarding the very strong churn number in the quarter, can you talk about what you're doing in retention? You mentioned voluntary churn; do you have any metrics around attempts to churn or anything like that? You guys don't make it particularly easy to disconnect. Just trying to get an assessment there of what's driving the lower churn activity. And second, has the world changed a lot since you put out your January guidance? But looking at the July guidance versus January, the revenue died down about $40 million; it was only down about $100 million. Can you talk about what’s driving that people can find out better margins? Thanks.

Hey David, I think those are both for you if I heard James correctly.

You know, actually, Jennifer, could you hear James? Okay.

Yes. I think on the retention side, there are a couple of things. We have active days programs as you know. We've opened up a number of other channels, pushed a bit by COVID really. But on the digital side, so we have chat and messaging, and we're increasingly opening capabilities in digital. And we're improving our sales capabilities there. So, it's a combination of reinforcing the value and of course, promotional offers. But I would say one of the biggest things we've done and launched in the middle of last year is, is providing streaming to the majority of the base. And while it's still new, we have, as Jim said, doubled usage among ourselves say base over that time period. And our retention among customers, not surprisingly who engage with us outside of the car through streaming is much higher. So, that is something you’ll continue to see us pushing. And we did a big campaign with stream free, which was not only about getting new prospects into our streaming experience, but also driving awareness across our satellite trailers and our self-pay base about our streaming product.

Oh Jen, that's a great point. Jim Meyer will now pass it back to David. I'm really proud of where we are. Our customer acquisition and sales retention teams are not only performing better now compared to when COVID first impacted us, which was our initial benchmark, but they are also doing better than they were a year ago. I'm very proud of their efforts. We have established a successful formula that we are executing consistently. Churn management heavily relies on strong execution every hour, and our team is delivering on that.

In comparing January to July regarding revenue and EBITDA, the net self-pay additions appear to be healthy compared to a couple of months ago, although they remain below our original guidance. Subscription revenues are expected to grow, but not as significantly. Conversely, advertising revenues are anticipated to decline this year. Overall revenue will be impacted negatively. Additionally, with lower auto production for the year, sales and marketing costs will decrease due to fewer auto sales and fewer trial starts. Our sales and marketing campaigns will also see a year-on-year decline. Following the onset of COVID, management made a careful assessment of advertisement spending, hiring pace, and ongoing projects, leading to a reduction in these areas in response to the economic slowdown. As a result, we are experiencing lower growth than initially anticipated. The decline in advertising, paired with effective cost management, has helped bridge some of the gaps we face.

Thanks, everyone.

Thank you.

That concludes our call. Appreciate it, James, and everybody for participating and we'll speak to you offline in the coming days. Take care.