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SIRIUSXM WEATHERS THE PANDEMIC

SiriusXM added approximately 264,000 net new self-pay subscribers in the second quarter of 2020, resulting in nearly 34.3m total  subscribers at the end of the period that felt the effect of the COVID-19 pandemic. Q2 revenue was unchanged at $1.58b with growth in subscriber revenue offsetting declines in advertising and equipment revenue.

The company posted $949m of gross profit, a 1% increase over the second quarter of 2019.  Gross profit margin was 62%, up 20 basis points compared to the prior year quarter. SiriusXM continued to increase the number of automakers that will be factory installing their new 360L system, among them Audi, BMW, Ford, Cadillac and Volkswagen.

“Despite the incredible economic stresses brought about by the COVID-19 pandemic, our self-pay net subscriber additions grew by nearly 200,000 over the first quarter of the year, and we reported improved churn of just 1.6% per month with rising ARPU,” said SiriusXM CEO Jim Meyer.

“Although advertising revenue fell 34% in the quarter, substantial expense savings in SAC and other areas provided a complete offset, and we generated over half a billion dollars of free cash flow.  We are investing in our business, our people, and external opportunities to position ourselves for future growth."

The company spelled out issues related to the COVID-19 pandemic in a special note to investors.

The pandemic has not affected SiriusXM’s capital and financial resources, they resumed repurchasing of common stock in Q2, and do not expect it will affect the company’s ability to meet debt obligations.

It will not significantly affect programming and content expenses and will decrease sales and marketing expenses. The company has not received any financial assistance in the form of loans under the CARES Act.

On the flipside, the company expects the pandemic will continue to adversely affect subscriber revenue due to the decline in sales of vehicles and reduced drive time; cause a decline in advertising revenues at Pandora and SiriusXM; and reduce revenue share and royalties expenses.

From a customer-care and support perspective, they've created chat platforms, activated interactive-voice-response systems and worked with call-center vendors to increase the capability for customer-service agents to work remotely. 

For the first time in its history, used car trial starts exceeded new car trial starts in the second quarter as sales of new cars in the U.S. were down approximately 48% in April. During the quarter, the penetration rate of satellite radios in new vehicle sales was approximately 77%, an increase of nearly 500 basis points over 2019.

Pandora, meanwhile, has declined markedly since mid-March 2020. The company has seen recent increases in advertising orders, but the outlook for future advertising revenue is uncertain. Pandora advertising revenue was down approximately 41% in April, 36% in May and 18% in June from the same periods last year.

Pandora added 40,000 net new self-pay subscribers to its Pandora Plus and Pandora Premium services in the second quarter to end the period, with more than 6.3m self-pay subscribers. The number of Monthly Active Users at Pandora took a small dip to 59.6m as advertising revenue declined 31% to $211m in the quarter.

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