Ladies and gentlemen, good morning and welcome to the SiriusXM's first quarter 2020 results conference call. Today's conference is being recorded. A question and answer session will be conducted following the presentation. If you have a question at that time, please press star one on your telephone keypad. If at any time you would like to remove yourself from the queue, please press star two. At this time, I'd like to turn the conference over to Hooper Stevens, Senior Vice President, 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 well as Jennifer Witz, our President of Sales, Marketing, and Operations. Those two will also be available for the Q&A portion of the call. 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'd like to advise our listeners that today's results will include discussions about both actual results and pro forma adjusted results. All discussion of pro forma adjusted operating results assume the Pandora transaction closed on January 1st, 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're 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 COVID-19 health and economic crisis. Our first quarter was exactly the kind of strong performance you'd 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. While we are 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 a crisis will always be 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 abandon 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 improvement here, I don't expect us to get back to our normal levels until stay-at-home orders are lifted, perhaps in June or July. We are playing offense as well as defense.
To drive awareness of our streaming offering 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 the 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 Smith, 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 front lines, and fielding calls from listeners to answer questions on everyone's minds. This programming, along with a daily podcast we've created and are making available widely, has become an essential 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, we continue to operate the business with a level of excellence you have come to expect from SiriusXM. I could not be more proud of the efforts and the performance of our teams during this difficult period. 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 attaining later this year. We continue to extend OEM contracts, further 360L rollouts, and increase the quality of our streaming offer. Our investment 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. Excuse me. It's difficult to predict what the next three to six months will bring. Our ad revenues will take a hit just like everyone else. 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 extremely strong financial position. 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, and 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 adds 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 in 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 funnel 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 SAAR of $16.8 million in February, SAAR came in at $11.4 million in March, with all of the declines seen after March 9th. Far in April, new and used car trial starts, a close proxy for sales, are down roughly 55%-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 flows through to fewer conversion opportunities three months from now. We will see the biggest effect of this lower top-of-the-funnel activity in the third quarter.
Lower auto sales does provide a benefit of reduced vehicle-related churn, which will partially offset an expected rise in non-pay and voluntary 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 but 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 SXM-7 is currently expected to occur later this year, but we expect the launch of SXM-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 a 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, and the stock repurchase grid we set 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. With that, operator, let's open it up for Q&A.
Thank you. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you would like to remove yourself from the queue, press star two. Again, it's star one to ask a question. We will now take our first question from Vijay Jayant from Evercore. Please go ahead. Your line is open.
Good morning. It's Vijay Jayant with EJ. Two, if I could. First of all, on the advertising front, you mentioned things making an impact. How do you adapt to that in terms of bringing down price versus bringing down quantity and balancing those two, particularly on the Pandora side? Secondly, on the satellite radio side, what are your expectations if there is a sustained change in just the amount of time spent in cars and increasing work from home, how that translates through into subscriber impact and your ability to offset that with in-home? Thanks.
I'll take the first half of your question, I'll take the second half of your question, and David will take the first. Let me comment. I don't see, quite candidly at this time, why there'll be any material change in the demand for our product going forward. Obviously, the amount of listening in the car is significantly down over the last six to eight weeks. Once the country is open again, I see a big chunk, if not all, of that listening returning. I think Americans have had a love story for the car for a long time, and I don't see why that's going to change. With that said, I'm really glad that we have significantly strengthened our streaming offering on the SiriusXM side the way we have over the last three years.
I'm also glad now that virtually all of our subscribers receive streaming for no extra cost. I think we're well-positioned either way, and so I'm not worried at all about the demand for or the listening hours for our product going forward. David, can you take the question on advertising, please?
Yeah. James, if I heard it right, I think you were talking about what can you do to bring down price to stimulate the demand side. For what we see generally in the advertising markets right now, you can drop your prices, but you're not really going to bring a lot of dollars out that advertisers are cutting back for a whole host of reasons. I'm a little bit hesitant to say this, but we see some encouraging signs. If we were literally to take the order book, for what it says or what it is, that you'd have the point of view that advertisers think we're going to be back to normal in the third quarter. Now, Jim and I look at that and recognizing that people can pull their ads at any time.
For the most part, we think that's probably a hopeful look, and people have time to make decisions about how quickly they restore advertising, because you can turn it up pretty fast. We'll just have to wait and see. For the situation as we walk into this early part of the second quarter, you can drop your prices, but the fact is that you're in a demand side problem here, and you're not really going to stimulate it by dropping prices.
Great, thank you.
Okay, John.
Operator.
Next question comes from Benjamin 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 that's tricky with the satellite business. 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. Also, if you expect the programming moves you've made to impact your programming cost structure one way or the other. I think you even mentioned in the release that you're continuing to pay for sports even though there are no sports. It's really a question around the moves you've made in content which seem to be really resonating, at least anecdotally.
I mean, 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 wanted to get your thoughts.
Ben, it's Jim, and I'll start. I'll ask Scott to say a couple of quick words.
Yeah.
David to wrap up on cost. First and foremost, I don't want this to sound like a paid political ad, 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, I think, eight or nine national studios around the country, to where all of our content today is being produced outside of our studios without losing a beat. Furthermore, we've just had tremendous support from the talent that is a big part of the SiriusXM story. 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 talk side, how many calls we'll receive from listeners on various subjects. I'll just give you a small one. The 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 content we've had on that channel.
Greg Norman.
Greg Norman, I'm sorry, of people listening. 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've expected it to be. We're spending a lot of time on understanding that. Most of that we're sure is related to the impact of the virus right now and obviously the flip between stay at home and commuting/working out/in the car. I also expect that will change and return normal once Americans begin to get back to what we all know we're going to do every day, which is get back there, going back to work. Scott, anything quickly you want to add?
Yeah, just quick. Just a couple of things then. One, I think you actually kicked off with Howard and people took note, both in the artist community and just the normal community of the amount of social media and everything it generated far more than even any of his normal shows, and it continues that way to date. That led to people at least realizing we could go live, we could take calls, which I don't want to downplay that compared to anybody else out there. Just the fact that we have live radio shows taking calls multiple times every day around the clock. That led to obviously a lot of stars and others that work with us really digging in and using their channels from boots, Get DJ sessions, Pandora should have to do stuff. The Beastie Boys Town Hall with LL Cool J.
That led to people like Jimmy Fallon saying, oh, Host gets one, Taylor Swift gets one. 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 a unique time. As Jim said, I couldn't be more proud, but we're just getting started, we've learned a lot from this, some of this will continue as we come back to them.
Dave, do you want to comment?
Go ahead. Sorry, Ben. Yeah. Yeah.
Yeah, go. One more thing on the. Jim mentioned the Pandora listening done. We can track the listening changes directly to commute times. Right. We look at the markets with stronger stay-at-home orders, and we've looked at the markets that don't have them. There's a lot of data at Pandora, and you can track the change in listening trend directly to commute. We have picked up quite a bit on CE devices with the whole growth in smart speakers. We can actually see people effectively transitioning to a different location. The pickup in CE doesn't make up for the loss of commute. On the cost side, there are a few contracts where we have lower expenses given what's happened, and some of them are related to the reduced demand on the advertising side.
For the most part, our programming costs remain the same.
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 2009, do you think that you can have it sort of be net neutral in terms of the way those two forces are acting in this cycle? You said the trial starts were down about 55%-60%, and that was a little better than thought. Do you think that's a peak of the decline, or is it too soon to tell? 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.
David will respond to some of those in a bit. Just one point I want to mention before. Remember, in 2008 and 2009, we did not have a used car funnel that was near as powerful as we do today, and we weren't penetrated in the fleet anywhere near where we are today. I believe we can take a lot of lessons from how non-pay and voluntary behaved during that timeframe, but I don't really believe there's anything from that period that's going to help us predict whether one's going to offset the other. With that said, David, let me turn it over to you.
Sure. Yeah, in 2008 and 2009, we were sort of late into the recession and early out of the recession because the demographic and the customer base was above their average income. We're kind of more representative of the general driving population now with what Jim said about the growth of the second owner business. We don't know. We're going to find out. I'm going to tell you right now, I don't know what the answer is. I would expect that we won't be quite as late in and quite as early out as last time, but we still have a customer base, on average, where the demographics say that we have better than average income. The customer base should be more recession resistant.
I do expect because of the vehicle-related churn, that being a much bigger component to have less of a spike in churn than we had the last time around. How much less of a spike? Sort of anybody's guess. We're hard-pressed to believe that churn wouldn't rise a little from this 1.8% level that we've been at for quite a while, but we don't expect the same kind of a spike. On the trial starts and SAC, the combination between those, it is sort of a one-to-one. As you take new car sales down, that you're going to end up ultimately with less production unless you expect on the other end the spike to recover.
In other words, if you go from 16 million car sales down to 11, and you think you're going to make all those up on the back end, your SAC would just come a little bit later. A lot of what you have to forecast out of SAC is what your expectations for the recovery is. In the meantime, we know that automakers have shut the plants down. They're not making the cars now, and that's absolutely going to result in a volume reduction in SAC.
Great. Thank you.
Thank you. We'll take our next question from Jessica 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. The first side, just to go back to the content. The release says, and as you said, you're still paying the sports leagues, and I'm just wondering what flexibility or what you get in return. Do you extend contracts? What happens with these contracts? I guess there was an announcement. Howard Stern must have said something on his show this morning that he's open to ideas on his contract. Can you give us any color on what's going on there? For David, it seems like an opportunity, possibly, to maybe change the long-term business operations, if there's something that you feel could be more efficient. Are there any longer-term impacts from what's going on now? Finally, could you talk about the confidence in resuming the buyback?
It just seems amazingly confident. It sounds like you're leaning towards that. Maybe you can give us color. It does sound like a big vote of confidence from the company. Thank you.
To Jessica, I think it was a four or five-part question, so I'll try to be an effective wingman, but I'll take the question on Howard. I'll comment quickly on the sports leagues. Scott can add in if he wants, and then David.
Yes
will take the rest. Number one, I've been really clear, I want Howard Stern to be on SiriusXM for as long as Howard wants to work. I know Howard and I have a tremendous relationship, and it's never been better. As importantly, maybe most importantly, rather, the quality of the show that he's bringing to our listeners every day couldn't be better, and I couldn't be more proud of it. I've put in place a cadence to begin discussions. Howard and I chat quite often, but we've put in place cadence to begin more formalization of those discussions as Howard's contract does expire at the end of the year. I'd actually set some time aside to begin working this through with Don Buchwald, who's Howard's agent. Obviously, with the coronavirus, we haven't been able to have those discussions.
I actually spoke with Don even a couple days ago. I think those discussions are better held in person. I'm not concerned that we won't find a way together to try to find a path forward. I hope to have more to say when we do our third quarter call. Again, I think I said enough there. On the sports programming side, I can tell you, there's going to be a gigantic argument or no argument down the road. First and foremost, our number one concern is for the leagues to get started and get the content back on the air that we know our subscribers love. There'll be all kinds of discussions here, but I think David summed it up pretty well a couple of minutes ago, which is certainly in 2020, we're not expecting a change in the cost of our sports content.
David, you want to take it from here?
Jim, can I add just two things?
Go ahead. Sure.
Just the one thing on Howard. Obviously, this whole situation, unexpected, has given Howard an entire other level of enthusiasm and appreciation for the company and all that. Even this morning on that stuff, he was talking about how proud of it he is, and more importantly, how many of his former fans, who didn't even know how the show really had evolved, have now found the show through the free listening period. In addition, this gives Howard an additional tool besides the studio. This Zoom thing, when talent doesn't have to be in New York or L.A. to promote a movie or a record or whatever, that he can get major guests from their home is an entirely new tool, and it's awesome, and one I expect him to continue. We feel really good about that.
Just on the sports leagues, Jim said it well, but you also have to remember at this time when there's nothing else on, we have the largest library of classic sports being broadcast. There's many games going all the time. We're filling that gap as best we can, and the leagues value us as a partner, and we do them. David will deal with the financials as we get further on that.
Jessica, your question on how this might change longer-term business operations, it's a really good one. We've been talking a lot about this over the course of the last six weeks. As you know, we've been a high-touch customer service organization. We have, I think between inbound and outbound call center staffing, we have 10,000 - 2,000 agents around the world. With half of them not coming to work as of about five, six weeks ago, that really drove us into figuring out, well, how do we change to do things? Now that we're five, six weeks into it, one of the questions we're asking ourselves is, well, as we optimize in this new configuration, what does it mean to long-term performance, and is there an opportunity in here?
You'll see us moving into improved efficiency and digital experience for customers, that we're figuring out how to turn up and make more effective chat agents as opposed to the live agents.
The business and wonder about that. Do we need as much office space? Do we actually need to put people in the air as often as we do? I don't know what all of you are finding, but we're finding that this world of working across Zoom to be highly effective. There is a real consideration of do we need the same kind of G&A infrastructure that we used to have. Even though we have incredibly strong liquidity and a lot of cash flow, and we can clearly afford to pursue new initiatives in the same way that we have in the past, we've asked all of our guys to look hard at the initiatives that they had on the calendar for this year and start prioritizing between them. Part of that gets forced by the hiring pause that Jim mentioned.
We're going to, you know what they say, never let a good recession go to waste. We're looking hard at this. Out-of-car engagement is turning out to be a really interesting thing for us. It was hard to get people's attention for Sirius when they were busy driving in their car. We're finding the free streaming alternatives as well as just our organic efforts to get people streaming more have really picked up steam since the commencement of the crisis. Stay tuned for how these changes play out. On the buyback, well, we are confident. Clearly, we don't have a liquidity or a leverage problem to deal with. What we are looking at is a price dislocation. That's not just a dislocation for our asset, the Sirius stock. It's a dislocation for other people that were in the market.
For a company with an awful lot of financial resources, that we're in a good position as it relates to opportunities for external acquisition. With respect to the buyback itself, we'll take a hard look at what we think the shape of the recovery could look like, what we think that means for the value of our stock. Just like we have in the past when we believe it's on sale, we won't hesitate to step on the gas.
Right.
One point I'd like to add, David, is, Jessica, as you would expect, we've had multiple conversations with our board on this subject, including, obviously, just a few days ago. I think David summed it up well as to both where the board is and the direction the board has given David and I, which obviously lines up exactly with what our recommendation was. Next question, please.
Thank you. Our next question comes from Zack S ilver from B. Riley FBR. Please go ahead. Your line is open.
Okay, great. Thanks for letting me question. The first, just can you talk about what sort of levers are you contemplating using to win back any customers that may decide to pause or cancel their Sirius subscriptions in light of the economic downturn? Maybe if there's any kind of takeaways on how that should impact the ARPU trajectory this year, whether it's material or not. Then the second one is just on some of the voluntary churn, ex the non-pay that you've experienced, do you have any sense of whether so far that's been subscribers who are canceling because they're spending less time on the road and seeing less value of the service right now? Are those cancellations working households just tightening up their discretionary expenses? Thanks.
David, why don't you take that one?
Yeah. 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 a chat agent. In those less interactive channels, we've tried to streamline, simplify the way that pitch is made. Will it have a big effect on 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, it's 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.
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. We do look at the two together. You've heard us talking about those two together in sort of the 120-basis-point range over the last couple of years. 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.
I just had a very simple two-part question. On gross additions, as we wait for sort of the 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? On churn, David, you mentioned you don't expect churn to be as bad as the financial crisis of 2009. 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.
On the second question, Jason, I think it's both, right? Again, I don't know. We're going to see. I hope I'm right. I don't think we'll see the kind of full-year spike. I don't think we'll see the quarter spike quite as big. I'm trying to remember now, I think we might have seen like a 2.2% peak.
Correct.
Yeah. In 2008, 2009, could it go there? Sure. I have to admit, with the dampening effect of vehicle-related churn, I'd be a little surprised, but we're all going to see. Yeah, on gross adds, with new car sales dropping, right? If you come through the first quarter of the year, the share of gross adds for new car, Jason, I'm talking about new car conversion from trials as opposed to winning back an original owner two years after they bought the new car, right?
Sure.
That's consistent with what you've heard in the past. It probably, because of the way that sales fell off at the end of the first quarter, maybe it dropped down a couple of ticks. It's largely consistent with what you've been seeing. Certainly going forward, that as we go through the second and third quarter, new car is probably going to drop a little faster than the subsequent owner plus the original owners who we're winning back. Right? Again, we'll have to see. I don't really see anything in that materially changing from the trends you've been seeing.
Okay. Thank you.
Operator, can we take our next and last question, please?
We'll 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 pace of the advertising revenue declines that you're seeing at Pandora quarter to date, just to help us frame sort of the worst case scenario? Also, how should we think about the margins on the ad revenue that is declining at Pandora? Thanks.
Do you want to take it, Jim?
Yeah, please, Dave. Go ahead.
We're hesitant to provide any information about what's really happening with the book on the advertising side. It's still new business to us, and it is only 20% of the revenue. The hesitation is that it's the velocity of the change in orders, right? That I don't think Jim and I have a feel yet for how fast the people can change their minds on the advertising side. That's really where the reluctance comes in. Yeah, I'm reading a lot of things from published statistics from various sources on what's happening with advertising sales out there broadly. It seems that digital properties are doing a little bit better than broadcast properties. Digital audio is a much smaller market than search and display. It's a scarcer commodity for people who want to reach that way.
On the advertising side, that's about as much as I can say. What was the other question? Oh, the margin on it.
Yeah.
Yeah. On the Pandora side, you don't have a completely variable cost associated with that. Right? The formulations of these licenses are a greater of sort of listening time or a percent of monetization. If your listening doesn't decline proportionately with the demand, you can flip into the unit cost instead of the share of revenue. Generally, we expect that to be occurring. There's going to be fewer royalties than there otherwise were, certainly for the fact that listening is down a little bit due to the crisis, and there'll be fewer royalties because of the drop on the demand side. 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.
Maybe just excuse me, one follow-up on the usage side, too, then. The advertising listening hours were down, I think a little bit less than we expected. It seemed like the underlying trend there was a little bit better, but there was probably also a pretty big fall-off in the second half of March. I was wondering how much better that number might have looked, if not for the COVID-19 crisis stepping in late in the quarter?
Hard to know, right? We were feeling pretty good about the plan that we had until we got to March 9th on all aspects of the business. That the satellite radio additions, listening time, ad orders were all very strong. When you hit the 10th of March, it was like business activity around the world fell off a cliff. We are in a new normal. We had a call yesterday, Jim and I did. Scott was on, Jennifer was on, a lot of other people, and talking about listening trends at Pandora, and they are confident that they can track the change in listening to the reduction in commute time.
Yeah. Bryan, just one comment from Jim is, your observation is exactly right. David's exactly. We were sitting on March 10th and first of all, I want to reiterate what I said in my comments. I think we had an outstanding first quarter. It would've been even better without COVID-19. There's just no question. 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 fell hit us both in 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.
Thank you for the call.
Thanks, Bryan. Thanks everyone for participating in today's call. Stay healthy, and we will speak to you soon. Goodbye.
Thank you. Bye-bye.