By Dave Sebastian 



  Sirius XM Holdings Inc. said it expects the Covid-19 pandemic along with the decline in sales of new and used vehicles to continue weighing on its subscriber and advertising revenues. 


  The digital-music company said a substantial portion of the subscription growth it had anticipated for the year for its satellite radio service was to be derived from purchasers and lessees of new and used cars in the U.S. Sales of new cars in the U.S. were down about 47% in April and 29% in May from the same time last year, it said. 


  The company said it saw a decline in the rate at which purchasers and lessees of new cars convert into self-pay subscribers of its satellite radio service from trial versions, but the decline is lower than expected so far in the second quarter. The pandemic also had a small effect on its used-car conversion rates, it said. It expects new car conversion rates recovering in the next several months to within 5% of first-quarter levels. 


  Sirius XM said it expects to report positive net new self-pay subscribers for the quarter ending June 30. 


  The company said its penetration rate of satellite radios in new vehicle production was about 79.5% in April, reflecting an increase partly due to the shift in auto production to a mix that includes more consumer than fleet vehicles. But the decline in new car sales starting mid-March -- the early days of the outbreak escalation in the U.S. -- will hurt the company's trial starts in the second quarter and result in fewer opportunities to convert customers to self-pay from trial subscriptions as used-car sales decline, it said. 


  As third parties have pulled back, the company said it expects advertising revenues in its Pandora and Sirius XM business to fall this year despite increases in advertising orders. 


  The pandemic will also hurt the company's equipment revenue and sale of satellite radios, components and accessories, it said. The company also expects declines in customer service and billing costs due to its vendors' inability to fully staff their operations, subscriber acquisition costs due to supply-chain disruptions, sales and marketing expenses as well as general and administrative expenses. 


  Sirius XM doesn't expect the pandemic to significantly affect programming and content expenses as well as transmission expenses and costs of equipment expenses. 


  Write to Dave Sebastian at dave.sebastian@wsj.com