WASHINGTON, May 12 /PRNewswire-FirstCall/ -- XM Satellite Radio Holdings Inc. (NASDAQ:XMSR) today announced earnings for the three-month period ended March 31, 2008. Revenue for the first quarter 2008 rose to $308 million, a nearly 17 percent increase over first quarter 2007 revenue of $264 million.
XM ended first quarter 2008 with 9.33 million subscribers, an 18 percent increase, compared to 7.91 million subscribers at the end of first quarter 2007. This growth was driven by a 49 percent year-over-year increase in the number of gross additions through the automotive (OEM) channel. First quarter 2008 OEM gross additions were 802 thousand, compared to 537 thousand in first quarter 2007.
"In first quarter 2008 we delivered the largest number of new customers from the automotive channel in XM's history, marking the fourth consecutive quarter of record OEM gross additions," said Nate Davis, president and chief executive officer of XM Satellite Radio. "XM's ongoing investment in the OEM channel is paying dividends in the form of record customer additions and continued revenue growth as our OEM partners further expand XM's reach to millions of consumers."
In first quarter 2008, XM reported total gross additions of 1.034 million, and 303 thousand net subscriber additions, compared to 868 thousand gross additions and 285 thousand net subscriber additions in first quarter 2007.
First quarter 2008 adjusted operating loss was $30.7 million, compared to a loss of $27 million in first quarter 2007. The first quarter 2008 adjusted operating loss includes $3.5 million of merger related expenses, compared to $9.2 million in first quarter 2007.
XM's first quarter 2008 net loss was $129 million, compared to a first quarter 2007 net loss of $122 million. For a reconciliation of XM's net loss to adjusted operating loss, see the attached financial schedules.
In first quarter 2008, XM's subscriber acquisition costs (SAC), a component of cost per gross addition (CPGA), were $73, compared to $65 in first quarter 2007. CPGA in first quarter 2008 fell below $100 to $99 for the first time since third quarter 2006 and compares to $103 in first quarter 2007.
XM continued to maintain stability in key operating metrics of conversion and churn, both of which improved year over year. First quarter 2008 conversion was 53.3 percent, compared to first quarter 2007 conversion of 51.5 percent. First quarter 2008 churn was 1.77 percent, compared to first quarter 2007 churn of 1.78 percent.
As of March 31, 2008, the company had total available liquidity of nearly $425 million comprised of approximately $212 million in cash and cash equivalents, $62.5 million remaining on its $250 million secured credit facility and a $150 million credit facility with General Motors.
During first quarter 2008 XM continued to grow its automotive customer base and, in addition to record volumes, achieved the following:
-- XM's OEM partners produced approximately 1 million new XM-equipped vehicles in the first quarter 2008 alone, compared to 690 thousand in first quarter 2007. XM unveiled its groundbreaking NavWeather Service and announced that the real-time, weather tracking system for in-dash GPS navigation will debut on the 2009 Acura RL and Acura TSX; -- The first Toyota brands with factory-equipped XM arrived at dealerships nationwide. The all-new 2009 Toyota Corolla and Matrix are now available with factory-installed XM Radio; -- In the first quarter, award-winning XM NavTraffic expanded its availability to include 2009 model year vehicles from Toyota, Infiniti and Hyundai. More recently, GM announced NavTraffic availability in 22 of its 2009 model year vehicles. Altogether XM NavTraffic will be available in more than 40 Honda, GM, Toyota, Nissan and Hyundai 2009 model year vehicles.
During first quarter 2008 the company continued to enhance its industry- leading programming:
-- XM launched its fourth season as the exclusive satellite radio provider of Major League Baseball, airing every game for every team to fans nationwide; -- XM recently completed its first season of carrying every NHL game for every team and is now airing every game of the Stanley Cup playoffs; -- XM wrapped its first season as the official satellite radio network of the six BCS conferences with the exclusive satellite radio broadcast of the BCS National Championship Game; -- XM announced it would be the exclusive satellite provider of The Masters golf tournament for the third consecutive year, providing more live radio coverage of the event than any other media outlet; -- The XM Sports Nation channel added two of the biggest names in sports talk - Dan Patrick and Tony Kornheiser; -- XM and ESPN launched the ESPN Xtra channel, featuring premier ESPN Radio shows from major cities, as well as new content produced by ESPN exclusively for XM listeners; -- XM's presidential election channel POTUS '08 won critical acclaim for its round-the-clock coverage of the presidential primaries; -- XM announced a partnership with EWTN, the world's largest religious media network, to create a micro channel devoted to Pope Benedict's first visit to the United States; -- XM introduced two new micro channels, one dedicated to the 25th anniversary of Michael Jackson's landmark album "Thriller," the other dedicated to country music legend George Strait and timed for his chart-topping album release; -- XM's exclusive Oprah & Friends channel was honored with three national Gracie Awards by the American Women in Radio and Television (AWRT), which recognize exemplary programming created for women, by women and about women in all facets of electronic media.
On March 24, 2008, the U.S. Department of Justice informed XM and Sirius that it had ended its investigation into their pending merger without taking action to block the transaction. That decision means the DOJ concluded the merger is not anti-competitive and that it will allow the transaction to proceed. The companies each obtained stockholder approval in November 2007. The pending merger is still subject to approval by the Federal Communications Commission.
Webcast and Conference Call Information
XM will host an earnings conference call to discuss its first quarter 2008 financial results today, May 12, at 10:00 AM Eastern Time. Prior to the call, you can access XM Radio's first quarter 2008 results on the Company's website at http://www.xmradio.com/. To listen to the conference call via telephone, please call one of the following numbers approximately 10 minutes prior to the planned start of the call:
Call-in number: (877) 265-5808 Local call-in number: (706) 679-7931 Conference ID#: 46660772
The conference call can also be accessed through a live webcast on the Company's website at http://www.xmradio.com/(click on "Investor Info" link at the bottom of the page). The webcast of the call will also be archived on the Company's Web site. A replay of the conference call will be available after 11:30 a.m. ET on May 12 until August 12 via the following numbers:
Playback Numbers: (800) 642-1687 Local playback number: (706) 645-9291 Conference ID#: 46660772
XM (NASDAQ:XMSR) is America's number one satellite radio company with more than 9.3 million subscribers. Broadcasting live daily from studios in Washington, DC, New York City, Chicago, Nashville, Toronto and Montreal, XM's 2008 lineup includes more than 170 digital channels of choice from coast to coast: commercial-free music, premier sports, news, talk radio, comedy, children's and entertainment programming; and the most advanced traffic and weather information.
XM, the leader in satellite-delivered entertainment and data services for the automobile market through partnerships with General Motors, Honda, Hyundai, Nissan, Porsche, Subaru, Suzuki and Toyota is available in 140 different vehicle models for 2008. XM's industry-leading products are available at consumer electronics retailers nationwide. XM programming is also available through XM Radio Online, as downloads of original XM shows via podcasts from XM's Web site or the Apple's iTunes Store, and as streams of commercial-free XM music channels to AT&T and Alltel wireless customers through XM Radio Mobile. For more information about XM hardware, programming and partnerships, please visit http://www.xmradio.com/.
Factors that could cause actual results to differ materially from those in the forward-looking statements in this press release include demand for XM Satellite Radio's service, our significant expenditures and losses, our dependence on technology and third party vendors, our potential need for additional financing, the health of our satellites, the impact of our proposed merger with Sirius, our substantial indebtedness as well as other risks described in XM Satellite Radio Holdings Inc.'s Form 10-K filed with the Securities and Exchange Commission on 2-28-08. Copies of the filing are available upon request from XM Radio's Investor Relations Department.
XM SATELLITE RADIO HOLDINGS INC. UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except share and per Three months ended March 31, share data) 2008 2007 Revenue: Subscription $275,725 $236,486 Activation 5,144 4,654 Merchandise 4,321 5,297 Net ad sales 9,118 7,478 Other 14,146 10,197 Total revenue 308,454 264,112 Operating expenses: Cost of revenue (excludes depreciation & amortization, shown below): Revenue share & royalties 68,822 47,426 Customer care & billing operations (1) 34,310 27,928 Cost of merchandise 8,551 18,277 Ad sales (1) 4,703 3,385 Satellite & terrestrial (1) 13,181 13,882 Broadcast & operations: Broadcast (1) 6,960 6,544 Operations (1) 10,491 9,716 Total broadcast & operations 17,451 16,260 Programming & content (1) 51,562 43,952 Total cost of revenue 198,580 171,110 Research & development (excludes depreciation & amortization, shown below) (1) 11,020 7,310 General & administrative (excludes depreciation & amortization, shown below) (1) 30,729 34,185 Marketing (excludes depreciation & amortization, shown below): Retention & support (1) 11,797 9,756 Subsidies & distribution 71,524 43,602 Advertising & marketing 26,501 32,809 Marketing 109,822 86,167 Amortization of GM liability 6,504 6,504 Total marketing 116,326 92,671 Depreciation & amortization 45,483 46,882 Total operating expenses (1) 402,138 352,158 Operating loss (93,684) (88,046) Other income (expense): Interest income 1,675 3,544 Interest expense (29,327) (27,609) Loss from de-leveraging transactions - (2,965) Equity in net loss of affiliate (4,177) (5,425) Minority interest (3,238) (1,697) Other income (expense) (187) 444 Net loss before income taxes (128,938) (121,754) Provision for deferred income taxes (331) (684) Net loss $(129,269) $(122,438) Net loss per common share - basic and diluted $(0.42) $(0.40) Weighted average shares used in computing net loss per common share - basic and diluted 309,674,526 305,877,670 Reconciliation of Net loss to Adjusted operating loss: Net loss as reported $(129,269) $(122,438) Add back Net loss items excluded from Adjusted operating loss: Interest income (1,675) (3,544) Interest expense 29,327 27,609 Provision for deferred income taxes 331 684 Loss from de-leveraging transactions - 2,965 Equity in net loss of affiliate 4,177 5,425 Minority interest 3,238 1,697 Other (income) expense 187 (444) Operating loss (93,684) (88,046) Depreciation & amortization 45,483 46,882 Total share-based payment expense 17,504 14,131 Adjusted operating loss (2) $(30,697) $(27,033) Footnotes: (1) These captions include non-cash Three months ended March 31, share-based payment expense as follows: 2008 2007 (in thousands) Customer care & billing operations $889 $440 Ad sales 607 356 Satellite & terrestrial 642 520 Broadcast 793 600 Operations 470 378 Programming & content 2,543 2,166 Research & development 2,463 1,726 General & administrative 6,052 6,048 Retention & support 3,045 1,897 Total share-based payment expense $17,504 $14,131 (2) Adjusted operating loss is net loss before interest income, interest expense, income taxes, depreciation and amortization, loss from de-leveraging transactions, loss from impairment of investments, equity in net loss of affiliate, minority interest, other income (expense) and share-based payment expense. This non-GAAP measure should be used in addition to, but not as a substitute for, the analysis provided in the statement of operations. We believe Adjusted operating loss is a useful measure of our operating performance and improves comparability between periods. Adjusted operating loss is a significant basis used by management to measure our success in acquiring, retaining and servicing subscribers because we believe this measure provides insight into our ability to grow revenues in a cost- effective manner. We believe Adjusted operating loss is a calculation used as a basis for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performances and value of our company and similar companies in our industry. Because we have funded the build-out of our system through the raising and expenditure of large amounts of capital, our results of operations reflect significant charges for depreciation, amortization and interest expense. We believe Adjusted operating loss provides helpful information about the operating performance of our business apart from the expenses associated with our physical plant or capital structure. We believe it is appropriate to exclude depreciation, amortization and interest expense due to the variability of the timing of capital expenditures, estimated useful lives and fluctuation in interest rates. We exclude income taxes due to our tax losses and timing differences, so that certain periods will reflect a tax benefit, while others an expense, neither of which is reflective of our operating results. Because of the variety of equity awards used by companies, the varying methodologies for determining share-based payment expense and the subjective assumptions involved in those determinations, we believe excluding share-based payment expense enhances the ability of management and investors to compare our core operating results with those of similar companies in our industry. Equity in net loss of affiliate represents our share of losses in a non-US affiliate in a similar business and over which we exercise significant influence, but do not control. Management believes it is appropriate to exclude this loss when evaluating the performance of our own operations. Additionally, we exclude loss from de-leveraging transactions, loss from impairment of investments, minority interest and other income (expense) because these items represent activity outside of our core business operations and can distort period to period comparisons of operating performance. There are limitations associated with the use of Adjusted operating loss in evaluating our company compared with net loss, which reflects overall financial performance. Adjusted operating loss does not reflect the impact on our financial results of (i) interest income, (ii) interest expense, (iii) income taxes, (iv) depreciation and amortization, (v) loss from de-leveraging transactions, (vi) loss from impairment of investments, (vii) equity in net loss of affiliate, (viii) minority interest, (ix) other income (expense) and (x) share- based payment expense, which are included in the computation of net loss. Users that wish to compare and evaluate our company based on our net loss should refer to our Unaudited Consolidated Statements of Operations. Adjusted operating loss does not purport to represent operating loss or cash flow from operating activities, as those terms are defined under United States generally accepted accounting principles, and should not be considered as an alternative to those measurements as an indicator of our performance. In addition, our measure of Adjusted operating loss may not be comparable to similarly titled measures of other companies. XM SATELLITE RADIO HOLDINGS INC. SELECTED FINANCIAL AND OPERATING METRICS As of (in thousands) March 31, 2008 December 31, 2007 SELECTED BALANCE SHEET DATA Cash and cash equivalents $211,542 $156,686 System under construction 161,772 151,142 Property and equipment, net 677,509 710,370 DARS license 141,412 141,412 Investments 33,259 36,981 Total assets 1,662,174 1,609,230 Total subscriber deferred revenue 526,239 514,926 Total deferred income 133,802 134,803 Long-term debt, net of current portion 1,666,819 1,480,639 Total liabilities 2,699,944 2,533,787 Stockholders' deficit (1,097,978) (984,303) Three months ended March 31, SELECTED OPERATING METRICS 2008 2007 (15) Subscriber Data (in thousands, except percentages): OEM Gross Subscriber Additions (1) 802 537 Retail Gross Subscriber Additions (2) (12) 233 331 Total Gross Subscriber Additions (12) 1,034 868 OEM Net Subscriber Additions (3) 355 225 Retail Net Subscriber Additions (4) (51) 60 Total Net Subscriber Additions 303 285 Conversion Rate (5) 53.3% 51.5% Monthly Churn Rate (6) (12) 1.77% 1.78% OEM Subscribers 3,869 2,853 Retail Subscribers (13) 4,480 4,422 Subscribers in OEM Promotional Periods 836 565 XM Activated Vehicles with Rental Car Companies 78 23 Data Services Subscribers 49 35 Outsourced Commercial Subscribers (13) 18 16 Total Ending Subscribers (7) 9,330 7,914 Percentage of Ending Subscribers on Annual and Multi-Year Plans (12) 45.1% 44.0% Percentage of Ending Subscribers on Family Plans (12) 23.5% 23.2% Revenue Data (monthly average): Subscription Revenue per Retail, OEM & Other Subscriber (8) (14) $10.36 $10.34 Subscription Revenue per Subscriber in OEM Promotional Periods $5.60 $6.39 Subscription Revenue per XM Activated Vehicle with Rental Car Companies $6.27 $7.51 Subscription Revenue per Subscriber of Data Services $35.34 $33.72 Average Monthly Subscription Revenue per Subscriber ("ARPU") (9) (14) $10.04 $10.15 Net Ad Sales Revenue per Subscriber $0.33 $0.32 Activation, Merchandise and Other Revenue per Subscriber (14) $0.86 $0.87 Total Revenue per Subscriber $11.23 $11.34 Expense Data: Subscriber Acquisition Costs ("SAC") (10) (12) $73 $65 Cost Per Gross Addition ("CPGA") (11) (12) $99 $103 (Certain totals may not add due to the effects of rounding) Footnotes: (1) OEM gross subscriber additions are paying subscribers newly activated in the reporting period and include Subscribers in OEM promotional periods as well as XM activated vehicles with rental car companies. (2) Retail gross subscriber additions are paying subscribers newly activated in the reporting period and include Data services subscribers and commercial subscribers for 2007 only. (3) OEM net subscriber additions (OEM gross subscriber additions less disconnects) represent the total net incremental paying subscribers added during the period. (4) Retail net subscriber additions (Retail gross subscriber additions less disconnects) represent the total net incremental paying subscribers added during the period, including net Outsourced commercial subscribers for 2008. (5) We measure the success of these promotional programs included in our OEM promotional subscriber count based on the percentage of new promotional subscribers that elect to receive the XM service and convert to self-paying subscribers after the initial promotion period. We refer to this as the "conversion rate." (6) Monthly churn rate for the quarter represents the weighted average Churn rate for each month in the quarter. Churn rate represents the average percentage of self-paying Retail, OEM & other subscribers that discontinued service during the month divided by the average of these beginning and ending subscribers for the month. Churn rate does not include OEM promotional period deactivations and deactivations resulting from the change-out of XM activated vehicles with rental car companies. (7) Subscribers -- Subscribers are those who are receiving and have agreed to pay for our service, including those who are currently in promotional periods paid in part by vehicle manufacturers, XM activated radios in vehicles for which we have a contractual right to receive payment for the use of our service and commercial establishments that receive our service through our relationship with a third party vendor. We count radios individually as subscribers. Retail subscribers consist primarily of subscribers who purchased their radio at retail outlets, distributors, or through XM's direct sales efforts. OEM subscribers are self-paying subscribers whose XM radio was installed by an OEM and are not currently in OEM promotional programs. OEM promotional subscribers are subscribers who receive a fixed period of XM service where XM receives revenue from the OEM for the trial period following the initial purchase or lease of the vehicle. In situations where XM receives no revenue from the OEM during the trial period, the subscriber is not included in XM's subscriber count. At the time of sale, some vehicle owners receive a three month prepaid trial subscription. Promotional periods generally include the period of trial service plus 30 days to handle the receipt and processing of payments. The automated activation program provides activated XM radios on dealer lots for test drives but XM does not include these vehicles in its subscriber count. XM's OEM partners generally indicate the inclusion of three months of XM service on the window sticker of XM-enabled vehicles. XM, historically and including the 2006 model year, receives a negotiated rate for providing audio service to rental car companies. Beginning with the 2007 model year, XM entered into marketing arrangements which govern the rate which XM receives for providing audio service on certain rental fleet vehicles. Data services subscribers are those subscribers that are receiving services that include stand-alone XM WX Satellite Weather service, stand-alone XM Radio Online service and stand-alone NavTraffic service. Stand-alone XM WX Satellite Weather service packages range in price from $29.99 to $99.99 per month. Stand-alone XM Radio Online service is $7.99 per month. Stand-alone NavTraffic service is $9.95 per month. XM generally charges a range of $9.99 - $11.87 per month for its audio service for annual and multi-year plans and $6.99 per month for a family plan. (8) Other subscribers include weather and other stand-alone service subscribers. (9) Subscription revenue includes monthly subscription revenues for our satellite audio service and data services, net of any promotions or discounts. (10) SAC - Subscriber acquisition costs include Subsidies & distribution and the negative gross profit on merchandise revenue. Subscriber acquisition costs are divided by gross additions to calculate what we refer to as "SAC." (11) CPGA - CPGA costs include the amounts in SAC, as well as Advertising & marketing. These costs are divided by the gross additions for the period to calculate CPGA. CPGA costs do not include marketing staff (included in Retention & support) or the amortization of the GM guaranteed payments (included in Amortization of GM liability). (12) Outsourced commercial subscribers are excluded for 2008. (13) Approximately 16 thousand subscribers, previously reported as Retail subscribers, are presented as Outsourced commercial subscribers for 2007 for comparability. (14) Beginning in 2008, revenue from Outsourced commercial subscribers, previously reported as Subscription revenue, is reported as Other revenue. (15) Except for as stated in footnote 13, no previously reported metrics have been adjusted to reflect the exclusion of Outsourced commercial subscribers.
Source: XM Satellite Radio Holdings Inc.