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May 12, 2008 at 08:34 AM EDT
XM Satellite Radio Holdings Inc. Announces First Quarter 2008 Results
Record Automotive Additions Fuel Year-Over-Year Gains in Revenue and Subscribers; First Quarter Ending Subscribers Exceed 9.3 Million

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.

(Logo: http://www.newscom.com/cgi-bin/prnh/20070313/XMLOGO )

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.

Merger Update

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

About XM

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.

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