XM Satellite Radio (XMSR) announced their 2Q06 earnings results, showing that net loss was down $176 million from $229 million a year earlier. Revenue for this year's second quarter increased 22% year over year to $277 million compared to $228 million in the 2006 second quarter.
XM ended 2Q07 with more than 8.25 million subscribers.
In Q2 2007, XM had 942,000 gross subscriber additions and 338,000 net subscriber additions - compared to 926,000 gross and 398,000 net subscriber additions in the same period last year.
2Q07 SAC came in at $75 compared to $67 in 2Q06. Second quarter 2007 SAC includes $10 for inventory-related charges as well as a $10 increase as a result of continued OEM growth from increased production by our newer automotive partners.
CPGA in the 2007 second quarter rose to $121 compared to $112 in the second quarter of 2006.
Adjusted operating loss (formerly adjusted EBITDA) was $47 million compared to a loss of $46 million in the same period of 2006. This adjusted operating loss includes $4 million in expenses related to XM's pending merger with Sirius Satellite Radio.
Full financial report after the jump. Earnings call is scheduled for 10am ET, and as usual, Orbitcast will be live-blogging the call...
XM SATELLITE RADIO HOLDINGS INC.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
Three Months ended Six Months ended
June 30, June 30,
(in thousands, except 2007 2006 2007 2006
share and per share
data)
Revenue:
Subscription $245,778 $202,165 $482,264 $390,267
Activation 4,766 3,942 9,419 7,521
Merchandise 5,658 4,928 10,955 8,479
Net ad sales 10,153 8,982 17,631 15,500
Other 10,921 7,869 21,118 14,085
Total revenue 277,276 227,886 541,387 435,852
Operating expenses:
Cost of revenue
(excludes
depreciation &
amortization, shown
below):
Revenue share &
royalties 49,723 37,923 97,149 72,200
Customer care &
billing operations(1) 30,749 26,395 58,677 48,850
Cost of merchandise 12,694 10,254 30,970 18,247
Ad sales(1) 5,480 4,460 8,866 7,815
Satellite &
terrestrial(1) 13,472 11,571 27,354 24,620
Broadcast &
operations:
Broadcast(1) 6,885 5,169 13,429 11,022
Operations(1) 9,683 8,805 19,399 17,692
Total broadcast &
operations 16,568 13,974 32,828 28,714
Programming &
content(1) 41,827 42,253 85,779 79,896
Total cost of
revenue 170,513 146,830 341,623 280,342
Research &
development
(excludes
depreciation &
amortization, shown
below)(1) 8,159 8,518 15,469 19,499
General &
administrative
(excludes
depreciation &
amortization, shown
below)(1) 35,869 18,672 70,053 36,301
Marketing (excludes
depreciation &
amortization, shown
below):
Retention &
support(1) 10,618 7,443 20,374 15,490
Subsidies &
distribution 63,855 56,696 107,457 112,169
Advertising &
marketing 43,244 42,096 76,053 76,022
Marketing 117,717 106,235 203,884 203,681
Amortization of GM
liability 6,504 7,440 13,008 16,753
Total marketing 124,221 113,675 216,892 220,434
Depreciation &
amortization 46,506 41,847 93,387 81,729
Total operating
expenses(1) 385,268 329,542 737,424 638,305
Operating loss (107,992) (101,656) (196,037) (202,453)
Other income
(expense):
Interest income 4,238 6,376 7,781 12,949
Interest expense (32,423) (29,317) (60,032) (62,553)
Loss from de-
leveraging
transactions - (82,345) (2,965) (100,724)
Loss from impairment
of investments (35,824) (18,926) (35,824) (18,926)
Equity in net loss
of affiliate (2,752) (4,206) (8,177) (13,090)
Minority interest (3,266) - (4,962) -
Other income (expense) 413 (212) 856 4,422
Net loss before
income taxes (177,606) (230,286) (299,360) (380,375)
Benefit from
deferred income
taxes 1,859 1,177 1,175 2,045
Net loss (175,747) (229,109) (298,185) (378,330)
8.25% Series B and C
preferred stock
dividend
requirement - (1,814) - (3,963)
8.25% Series B
preferred stock
retirement loss - (755) - (755)
Net loss attributable
to common stockholders $(175,747) $(231,678) $(298,185) $(383,048)
Net loss per common
share - basic and
diluted $(0.57) $(0.87) $(0.97) $(1.47)
Weighted average
shares used in
computing net loss
per common share -
basic and diluted 306,425,375 266,098,554 306,154,565 259,866,408
Reconciliation of Net
loss to Adjusted
operating loss:
Net loss as reported $(175,747) $(229,109) $(298,185) $(378,330)
Add back Net loss
items excluded from
Adjusted operating
loss:
Interest income (4,238) (6,376) (7,781) (12,949)
Interest expense 32,423 29,317 60,032 62,553
Benefit from
deferred income
taxes (1,859) (1,177) (1,175) (2,045)
Loss from
de-leveraging
transactions - 82,345 2,965 100,724
Loss from impairment
of investments 35,824 18,926 35,824 18,926
Equity in net loss
of affiliate 2,752 4,206 8,177 13,090
Minority interest 3,266 - 4,962 -
Other (income)
expense (413) 212 (856) (4,422)
Operating loss (107,992) (101,656) (196,037) (202,453)
Depreciation &
amortization 46,506 41,847 93,387 81,729
Stock-based
compensation(1) 14,080 13,914 28,211 25,975
Adjusted operating
loss(2) $(47,406) $(45,895) $(74,439) $(94,749)
Three Months ended Six Months ended
Footnotes: June 30, June 30,
(1) These captions include non-cash
stock-based compensation expense
as follows: 2007 2006 2007 2006
(in thousands)
Customer care & billing operations $497 $268 $937 $354
Ad sales 460 520 816 948
Satellite & terrestrial 491 511 1,010 972
Broadcast 606 577 1,206 1,058
Operations 351 419 729 1,002
Programming & content 2,061 2,126 4,227 4,018
Research & development 1,716 1,780 3,442 3,237
General & administrative 5,829 6,017 11,878 11,078
Retention & support 2,069 1,696 3,966 3,308
Total stock-based compensation $14,080 $13,914 $28,211 $25,975
(2) Adjusted operating loss (formerly Adjusted EBITDA) 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 stock-based compensation. 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 stock-based compensation expense and the subjective
assumptions involved in those determinations, we believe excluding
stock-based compensation 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 (1) interest
income, (2) interest expense, (3) income taxes, (4) depreciation and
amortization, (5) loss from de-leveraging transactions, (6) loss
from impairment of investments, (7) equity in net loss of affiliate,
(8) minority interest, (9) other income (expense) and (10) stock-
based compensation, 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 Condensed 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, 2007 December 31, 2006
SELECTED BALANCE SHEET DATA (unaudited)
Cash and cash equivalents(1) $275,392 $218,216
Restricted investments 196 2,098
System under construction 142,935 126,049
Property and equipment, net 774,185 849,662
DARS license 141,387 141,387
Investments 44,650 80,592
Total assets(2) 1,812,958 1,840,618
Total subscriber deferred revenue 479,147 427,193
Total deferred income 137,591 140,695
Long-term debt, net of current portion 1,476,720 1,286,179
Total liabilities(2) 2,410,157 2,238,498
Stockholders' deficit(2) (3) (659,861) (397,880)
Three Months ended June 30,
SELECTED OPERATING METRICS 2007 2006
Subscriber Data (in thousands,
except percentages):
OEM and Rental Car Company Gross
Subscriber Additions 618 518
Aftermarket and Data Gross
Subscriber Additions 323 409
Total Gross Subscriber Additions(4) 942 926
OEM and Rental Car Company Net
Subscriber Additions 295 230
Aftermarket and Data Net
Subscriber Additions 43 168
Total Net Subscriber Additions(5) 338 398
Conversion Rate (6) 52.7% 54.5%
Churn Rate (7) 1.84% 1.83%
Aftermarket Subscribers 4,476 4,046
OEM Subscribers 3,047 2,212
Subscribers in OEM Promotional
Periods 649 573
XM Activated Vehicles with Rental
Car Companies 40 42
Data Services Subscribers 40 27
Total Ending Subscribers(8) 8,252 6,900
Percentage of Ending Subscribers
on Annual and Multi-Year Plans(9) 43.6% 42.3%
Percentage of Ending Subscribers
on Family Plans(9) 23.5% 20.7%
Revenue Data (monthly average):
Subscription Revenue per
Aftermarket, OEM & Other
Subscriber $10.37 $10.38
Subscription Revenue per
Subscriber in OEM Promotional
Periods $6.18 $6.29
Subscription Revenue per XM
Activated Vehicle with Rental
Car Companies $7.07 $5.55
Subscription Revenue per
Subscriber of Data Services $33.96 $29.93
Average Monthly Subscription
Revenue per Subscriber ("ARPU")(10) $10.15 $10.08
Net Ad Sales Revenue per
Subscriber(11) $0.42 $0.45
Activation, Equipment and Other
Revenue per Subscriber $0.88 $0.83
Total Revenue per Subscriber $11.45 $11.36
Expense Data:
Subscriber Acquisition Costs
("SAC") (12) $75 $67
Cost Per Gross Addition ("CPGA")(13) $121 $112
(Certain totals may not add due to the effects of rounding)
Footnotes:
(1) In addition to the Cash and cash equivalents available to the
Company, the Company has a $250 million credit facility with a
group of banks and a $150 million credit facility with GM.
(2) Total assets does not equal Total liabilities plus Stockholders'
deficit because of minority interest, which is not included in
this table.
(3) We have not declared or paid any dividends on our Class A common
stock since our date of inception.
(4) Gross Subscriber Additions are paying subscribers newly activated
in the reporting period. OEM subscribers include both newly
activated promotional and non-promotional subscribers.
(5) Net Subscriber Additions represent the total net incremental paying
subscribers added during the period (Gross Subscriber Additions
less Disconnects).
(6) We measure the success of our OEM promotional programs 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."
(7) Churn Rate represents the percentage of self-paying Aftermarket,
OEM & Other Subscribers who discontinued service during the period
divided by the monthly weighted average ending subscribers. Churn
Rate does not include OEM promotional period deactivations or
deactivations resulting from the change-out of XM-enabled rental
car activity.
(8) 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, as well as XM
activated radios in vehicles for which we have a contractual right
to receive payment for the use of our service. Radios that are
revenue generating are counted individually as subscribers.
Aftermarket 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 their subscriber count. XM's OEM partners generally
indicate the inclusion of three months free 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 has 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.
(9) XM receives 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.
(10) Subscription Revenue includes monthly subscription revenues for our
satellite audio service and data services, net of any promotions or
discounts.
(11) Net Ad Sales Revenue includes sales of advertisements and program
sponsorships on the XM system, including barter recorded at fair
value, net of agency commissions.
(12) SAC - As noted in our Form 10-K for the year ended December 31,
2006, we have revised our calculation of SAC to allow for the
direct calculation of this metric using certain line items from our
Results of Operations and Key Metrics tables. 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." The previously reported amount under the prior
definition for the three months ended June 30, 2006 was $64.
(13) CPGA - As noted in our Form 10-K for the year ended December 31,
2006, we have revised our calculation of CPGA to allow for the
direct calculation of this metric using certain line items from our
Results of Operations and Key Metrics tables. 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). The
previously reported amount under the prior definition for the three
months ended June 30, 2006 was $112.
Hoo Hoo. I want a big cut of all this extra cash after the merger.
I wonder how much money they're wasting on behalf of the Sirius takeover? Another 1/4 or two and XM may reach a flat income. Another 1/4 or two beyond (when Sirius fails), they can absorb the old Sirius subscribers and the income from a million or two new subscribers.
So what can we tell from the fact that they met expectations for both gross and net subs, in spite of massive O&A-related cancellations?
Hoo Hoo. You tell ' em RoadRunner. They only re-subcribed to XM after O & A were reinstated so that they could listen to me after the merger.
I brought 'em all back to XM. Hoo Hoo. I deserve a raise.
O and A's failure is complete. Now the numbers show 5,000 pests cancelled moving churn only .06% over the last quarter. They made no impact, again. Not quite 0.0 but 0.06 is close.
Whatever the real numbers were, they were high enough to make XM bring O & A back without additional censorship. They speak freely about their suspension, which is something that would have gotten them gagged or fired by the money-grubbing, play-it-safe jackasses that run Sirius.
So much for Freedom-of-Speech, First Amendment Hoo Hoo. So much for the White-Haired Shyster. So much for the merger.
Hoo Hoo, Mudhead. Does this mean that I can't take credit for your subscription? I thought I brought all of the subscriptions to XM and Sirius.
I invented subscriptions. Hoo Hoo.
Can you really be additionally censored if nobody is listening? Could Sirius ever gag them if they would never hire them?
P.S. it was never a First Amendment issue with Imus or Opie. The government didn't censor them. Their bosses told them to shut up. Constitutional law is too intellectual for any mind that would be entertained by that crap so it's obvious why you would misunderstand.
Hoo Hoo Mel kept those two little bastards because they'll line his pockets with plenty of extra cash.
XM never hired me because they knew that I would cost them plenty of cash.
I guess I showed them. Hoo Hoo
By the way, what's wrong with letting the FCC tell me the difference between good censorship and bad censorship? Hoo Hoo
Boys, Boys!
Can't we just get along?
I enjoy a good schoolyard scrap now and then like anyone else, but comparing Howard and O & A is like comparing the Beatles to the Rolling Stones - they're nothing alike, but they're both great in their own way.
Ryan and JB have finally convinced me that neither XM nor Sirius are likely to survive without the merger. That means we'll probably lose the opportunity to listen to Howard and O & A "on the loop." We'll be back to listening to a few minutes of them in one time slot on commercial radio. Anything's better than that.
I'm going to hold my nose when I say this, but I now support the merger. Long live Howard and long live O & A.
You're really dating yourself with that "Beatles/Rolling Stones" analogy, Captain Sludge, but I have to agree with your line of thinking.
I'm not ready to suppor the merger just yet, but I'm getting there. I just wish I didn't need to buy a new receiver to get the "A La Carte I" offering. Fifty hand-picked channels and O & A for $9.99 is a pretty good deal considering the fact that I don't listen to more than 15-20 channels to begin with.
True enough, Zooboy, but two of my other favorites are AC/DC and Alice in Chains.
Whatever. I'll probably join Zooboy if Howard doesn't use his influence with Mel to get O & A gagged or fired again. That's really the only beef that we O & A listeners have with Hoo Hoo.