Revenue for XM Satellite Radio Holdings Inc. rose nearly 15 percent year over year to $318 million in the second quarter, the company said today.As announced yesterday, XM's subscribers grew 17 percent to 9.65 million for Q2, compared to 8.25 million subscribers at the end of second quarter 2007. Net OEM subscriber additions of 360,000 more than offset the loss of 38,000 net retail subscribers.
Second quarter 2008 adjusted operating loss narrowed to $37 million, compared to a loss of $47 million in second quarter 2007. XM's second quarter 2008 net loss improved to $120 million, compared to a second quarter 2007 net loss of $176 million.
In 2Q08, XM's subscriber acquisition costs (SAC) improved year-over-year to $65, compared to $75 in the period last year. Cost per gross addition (CPGA) came in at $100 and down from $121 in the second quarter 2007.
XM reported that Q208 conversion held at 53.4 percent, compared to second quarter 2007 conversion of 52.7 percent. Second quarter 2008 churn improved to 1.67 percent, compared to second quarter 2007 churn of 1.84 percent.
Full financials after the jump...
XM SATELLITE RADIO HOLDINGS INC.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except Three months ended Six months ended
share and per share June 30, June 30,
data) 2008 2007 2008 2007
Revenue:
Subscription $284,136 $245,778 $559,862 $482,264
Activation 5,044 4,766 10,188 9,419
Merchandise 7,491 5,658 11,812 10,955
Net ad sales 10,432 10,153 19,550 17,631
Other 10,932 10,921 25,078 21,118
Total revenue 318,035 277,276 626,490 541,387
Operating expenses:
Cost of revenue
(excludes
depreciation &
amortization, shown
below):
Revenue share &
royalties 73,586 49,723 142,408 97,149
Customer care &
billing operations (1) 36,388 30,749 70,698 58,677
Cost of merchandise 9,055 12,694 17,606 30,970
Ad sales (1) 4,879 5,480 9,583 8,866
Satellite &
terrestrial (1) 13,472 13,472 26,653 27,354
Broadcast & operations:
Broadcast (1) 6,308 6,885 13,269 13,429
Operations (1) 11,026 9,683 21,516 19,399
Total broadcast &
operations 17,334 16,568 34,785 32,828
Programming &
content (1) 49,604 41,827 101,166 85,779
Total cost of revenue 204,318 170,513 402,899 341,623
Research & development
(excludes depreciation
& amortization,
shown below) (1) 9,414 8,159 20,435 15,469
General & administrative
(excludes depreciation
& amortization, shown
below) (1) 30,989 35,869 61,719 70,053
Marketing (excludes
depreciation &
amortization, shown
below):
Retention &
support (1) 11,032 10,618 22,829 20,374
Subsidies &
distribution 69,193 63,855 140,717 107,457
Advertising &
marketing 36,865 43,244 63,367 76,053
Marketing 117,090 117,717 226,913 203,884
Amortization of GM
liability 6,504 6,504 13,007 13,008
Total marketing 123,594 124,221 239,920 216,892
Depreciation &
amortization 32,438 46,506 77,921 93,387
Total operating
expenses (1) 400,753 385,268 802,894 737,424
Operating loss (82,718) (107,992) (176,404) (196,037)
Other income
(expense):
Interest income 743 4,238 2,419 7,781
Interest expense (30,480) (32,423) (59,807) (60,032)
Loss from de-leveraging
transactions - - - (2,965)
Loss from impairment
of investments - (35,824) - (35,824)
Equity in net loss
of affiliate (4,373) (2,752) (8,550) (8,177)
Minority interest (3,153) (3,266) (6,390) (4,962)
Other income 1,082 413 895 856
Net loss before income
taxes (118,899) (177,606) (247,837) (299,360)
(Provision for)
benefit from
deferred income
taxes (673) 1,859 (1,004) 1,175
Net loss $(119,572) $(175,747) $(248,841) $(298,185)
Net loss per common
share - basic and
diluted (0.38) (0.57) (0.80) (0.97)
Weighted average
shares used in
computing net loss
per common share -
basic and diluted 310,886,180 306,425,375 310,283,700 306,154,565
Reconciliation of Net
loss to Adjusted
operating loss:
Net loss as reported $(119,572) $(175,747) $(248,841) $(298,185)
Add back Net loss
items excluded from
Adjusted operating
loss:
Interest income (743) (4,238) (2,419) (7,781)
Interest expense 30,480 32,423 59,807 60,032
Provision for (benefit
from) deferred
income taxes 673 (1,859) 1,004 (1,175)
Loss from
de-leveraging
transactions - - - 2,965
Equity in net loss
of affiliate 4,373 2,752 8,550 8,177
Minority interest 3,153 3,266 6,390 4,962
Other income (1,082) (413) (895) (856)
Operating loss (82,718) (107,992) (176,404) (196,037)
Depreciation &
amortization 32,438 46,506 77,921 93,387
Share-based payment
expense 12,947 14,080 30,451 28,211
Adjusted operating
loss (3) $(37,333) $(47,406) $(68,032) $(74,439)
Footnotes:
(1) These captions
include non-cash
share-based payment Three months ended Six months ended
expense as follows: June 30, June 30,
(in thousands) 2008 2007 2008 2007
Customer care &
billing operations $752 $497 $1,641 $937
Ad sales 436 460 1,044 816
Satellite &
terrestrial 447 491 1,089 1,010
Broadcast 558 606 1,351 1,206
Operations 359 351 829 729
Programming &
content 1,820 2,061 4,363 4,227
Research &
development 1,702 1,716 4,164 3,442
General &
administrative 4,686 5,829 10,737 11,878
Retention & support 2,187 2,069 5,233 3,966
Total share-based
payment expense $12,947 $14,080 $30,451 $28,211
(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 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) June 30, 2008 December 31, 2007
SELECTED BALANCE SHEET DATA (Unaudited)
Cash and cash equivalents $183,853 $156,686
System under construction 166,786 151,142
Property and equipment, net 660,274 710,370
DARS license 141,412 141,412
Investments 37,192 36,981
Total assets 1,723,886 1,609,230
Total subscriber deferred revenue 547,377 514,926
Total deferred income 132,992 134,803
Long-term debt, net of current portion 1,480,226 1,480,639
Total liabilities 2,868,158 2,533,787
Stockholders' deficit (1,204,472) (984,303)
Three months ended June 30,
SELECTED OPERATING METRICS 2008 2007(15)
Subscriber Data (in thousands,
except percentages):
OEM Gross Subscriber Additions (1) 857 618
Retail Gross Subscriber Additions (2) (12) 224 323
Total Gross Subscriber Additions (12) 1,081 942
OEM Net Subscriber Additions (3) 360 295
Retail Net Subscriber Additions (4) (38) 43
Total Net Subscriber Additions 322 338
Conversion Rate (5) 53.4% 52.7%
Monthly Churn Rate (6) (12) 1.67% 1.84%
OEM Subscribers 4,178 3,047
Retail Subscribers (13) 4,433 4,459
Subscribers in OEM Promotional Periods 876 649
XM Activated Vehicles with Rental Car
Companies 90 40
Data Services Subscribers 58 40
Outsourced Commercial Subscribers (13) 18 17
Total Ending Subscribers (7) 9,653 8,252
Percentage of Ending Subscribers on Annual
and Multi-Year Plans (12) 44.7% 43.6%
Percentage of Ending Subscribers on Family
Plans (12) 22.7% 23.5%
Revenue Data (monthly average):
Subscription Revenue per Retail, OEM &
Other Subscriber (8) (14) $10.31 $10.37
Subscription Revenue per Subscriber in
OEM Promotional Periods $5.68 $6.18
Subscription Revenue per XM Activated
Vehicle with Rental Car Companies $6.02 $7.07
Subscription Revenue per Subscriber of
Data Services $33.40 $33.96
Average Monthly Subscription Revenue
per Subscriber ("ARPU") (9) (14) $9.98 $10.15
Net Ad Sales Revenue per Subscriber $0.37 $0.42
Activation, Merchandise and Other Revenue
per Subscriber (14) $0.81 $0.88
Total Revenue per Subscriber $11.16 $11.45
Expense Data:
Subscriber Acquisition Costs ("SAC")
(10) (12) $65 $75
Cost Per Gross Addition ("CPGA") (11) (12) $100 $121
(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 receive the XM service and convert to
self-paying subscribers after the initial promotion period. We refer
to this as the "conversion rate." At the time of sale, vehicle owners
generally 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. In
situations where audio service of 12 months or longer is bundled with
the sale of the vehicle, XM counts those subscribers for the first 3
months of service as OEM promotional subscribers and for the remainder
of the bundled service period as OEM subscribers. We measure
conversion rate three months after the period in which the trial
service ends. Based on our experience it may take up to 90 days after
the trial service ends for subscribers to respond to our marketing
communications and become self-paying subscribers. Vehicles that have
bundled service for 12 months or greater are counted in our conversion
rate calculation as being converted six months after the start of the
bundled service. These same vehicles are included as part of our
overall churn calculation after the date conversion is measured.
During Q2 2008 if we calculated conversion rate by excluding 12 months
or greater bundled service subscribers from the calculation, our
conversion rate would have been 52.7% for the three months ended
June 30, 2008.
(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. XM charges up to $7.99 per
month for stand-alone XM Radio Online service. 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) Subscriber Acquisition Costs -- 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) Cost Per Gross Addition ("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 17 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) No previously reported metrics have been adjusted to reflect the
exclusion of Outsourced commercial subscribers except for as stated
in footnote 13.
I am still sifting through this... but preliminary sais... WOW... Not great numbers but EVRYTHING seems to have improved YoY and QoQ. I mean EVERYTHING.
With numbers like this, why do they need Sirius's massive debt and ridiculous burden for "exclusive content" again?
Hey look it's NAB poster again.
Talking YOY gains about XM (or Sirius) is like talking about selling vitamins to a 95 year old, with pneumonia that recently had a good day. Sure it's nice, but is it going to matter?
OK.. read through most of the report...
what stands out is that XM clearly states how they have replaced their Satelite infrastructure and how much longer they expet it to run as well as the total cost to replace all the stuff... almost like they said in the filing...
"Hey... look at us.. Sirius has to go through this soon and when this merger is denied otr stipulations are too high.. we are much better of as a stand along company than sirius"
Look at this another way.... now they only losing 911,000 per day instead of 1.18 million that they did in 2007....and the best part, they only burned 500,000 million to lose 350K in owner equity....or this way, they lost 1/2 billion to add the last 1,4 million subs that adds only 150K to cash flow.
Laughable.
Look at this another way.... now they only losing 911,000 per day instead of 1.18 million that they did in 2007....and the best part, they only burned 500,000 million to lose 350K in owner equity....or this way, they lost 1/2 billion to add the last 1,4 million subs that adds only 150K to cash flow.
Laughable.
"Hey look it's NAB poster again.
Posted by: Anonymous Coward | July 22, 2008 8:55 AM"
Hey look it's a blind, ignorant satradio fanboy, desperate for Melvin Alan "Mel" Karmazin's "merge" MONOPOLY scheme, desperate for any change to try and justify a idiotic and risky investment in a industry which has never, and will never make a dime without serious business and management changes.
Comparing YoY and QoQ gives us some light on much more than Plow Boy implys.
XM has done many things to reduce their foward expenses.. While Sirius has not.
XM's cost cutting is starting to take effect and the other part of my theory about the "MERGER" has also come to pass... XM has taken the write downs on many things while the perverbial "WOOL" is pulled over everyone's eyes.. or atleast everyone was watching the Merger Clock. ..
Hey look it's a blind, ignorant NAB fanboy, desperate for David Rher Terrestrial "merge" MONOPOLY scheme, desperate for any change to try and justify a idiotic and risky investment in a industry which is losing money, and will never make a dime ever again without serious business and management changes.
This growth rate, subscriber gains, and loss reduction extrapolated suggests that in 1.3-1.5 billion dollars of loss from now, sometime in 2011-2012, XMSR would make it's first dime.
These companies will only exist with the merger that the FCC seems impotent to produce.
Is the FCC relevant anymore?
I'm sitting at my city office giggling. It's the first time in three years I've seen My man Mel triangulated (at least I suspect so).
So where are your numbers Mel? ... You usually go before XMSR. Are you going to hold them back hoping you get an FCC verdict before you have to announce that XMSR beat you by 20-35K subs? ... God, talk about cutting it close. You may have to show everyone why you can't walk away from this merger, at the last minute before it (the merger)becomes a reality.
IF I were @ the FCC, I'd hold back just to make you report.... just to be a pisser.
no--mel has always gone after
Sirius normally reports after XM Plowboy, that's been the history.
Interesting that XM announced early and has no CC scheduled. It seems to me that the FCC wants to see their #'s before making final decision and has asked them to report a little early. Sirius tomorrow ?
Plowboy,
The FCC is relevant and always will be. It's your ignorant and failed risky investment in satradio which is not at all relevant
You're right guys...I stand corrected ... I was going back long ago.
I agree that XM came out early and wondered also if that wasn't an FCC request.
------
AC,... not that risky I'd say... I'm up 23.3K as of yesterday :) . Isn't that what you make in a year? Re: FCC .... somewhere as useful as tits on a boar hog and ice in Alaska.
OMG.. the ammount of mis guided numb nuts here is incredible...
Sirius always went after XM... until Sirius thought it was reporting better numbers.
Then the PR would come out regarding the Net subs. or OEM subs or record earnings or greatst % revenue increase.
Hey .. I know they have to be positive in the PR's ... but its so funny watching the Tit for Tat between XM and Sirius.
Not bad, when compared... or how bad it could have been.
What jumped out at me though, was XM's Free Cash Flow for the quarter... vastly improved... and COMPLETELY overlooked, everywhere. This is key. They have to turn their FCF around, if they ever want to stop burning through the cash. A couple more quarters like this, then even without the merger -- their liquidity may be strong enough to last for quite some time. Their FCF in Q2 spits in the face of all those claiming XM was close to filing bankruptcy.
Nonethless, looking at their FCF in the quarter -- and where most of what was spent, went -- I was somewhat impressed.
Still have a long way to go. I'm curious to see how Sirius' FCF will be -- knowing they are now paying (rougly) $50~60 million per quarter on satellite capex for the next few years.
---
Per-subscriber carrying costs come in at $40.02 per subscriber-quarter, a new low for XM, just beating the $40.26 posted in Q306 ($41.51 in Q1, $44.59 in Q207).
Non-equipment, non-other revenue (i.e. continuing revenue from direct listeners) per subscriber-quarter declined on both a QoQ and YoY basis to $31.57, from $31.68 and $32.30 respectively.
Fully-loaded churn still looks ugly. 759k deactivations => 253k per month. Avg daily subscriber count was 9.490 million (give or take about 5-6k), for a churn rate of 2.67%.
The CHURN is going to really look ugly IF "merge" MONOPOLY scheme happens.
"Hey look it's NAB poster again.
Posted by: Anonymous Coward | July 22, 2008 8:55 AM"
Hey look it's NAB poster again.
Looking back at my sub model for the quarter -- I had XM adding...
227,456 Gross Retail
861,000 Gross OEM
1,088,456 Total Gross
With a monthly "all-in-churn" of 2.70%
Spread out over Q2, left me with 324,722 Net sub additions... not bad, have to keep this model for a bit longer... I'll take it ;~)
For Q3, I have them coming close to -- but likely not breaking 10 million.. but it's still early. I have to wait and see how auto sales go for the quarter -- so that I can make the final tweaks to those estimates.
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