XM Satellite Radio Holdings Inc. Announces Fourth Quarter And Full Year 2003 Results
XM Adds Over 1 Million Subscribers in 2003, Ending Year with 1,360,228 Subscribers
2003 Revenues Hit $92 Million
XM Raises Capital and Strengthens Balance Sheet
WASHINGTON, Feb. 12 -- XM Satellite Radio Holdings Inc. today reported financial and operating results for the fourth quarter and full year ended December 31, 2003. As of December 31, 2003, XM Radio reported 1,360,228 subscribers, with the number of subscribers now exceeding 1.5 million. Record net subscriber additions of 430,580 for the fourth quarter represent a 46% increase from the end of the third quarter 2003 and more than the total subscriber net additions in 2002. Contributing to XM's rapid subscriber growth was a very successful 2003 Holiday shopping season, with more than 100,000 subscribers added during the last seven days of December, including over 23,000 on Christmas day.
XM President and CEO Hugh Panero noted that, "With over 1.5 million subscribers today, the foundation is in place to grow XM's business to 20 million subscribers by 2010. XM's impressive performance through 2003 has only scratched the surface of the potential market for satellite radio. In fact, XM to date has captured less than one percent of the 200 million U.S. vehicle market."
Fourth Quarter and Full Year Financial and Operating Results
For the fourth quarter 2003, XM reported record quarterly revenue of $33.5 million, increasing from $9 million in the fourth quarter 2002. XM's full year 2003 revenue increased to $91.8 million, from $20.2 million in 2002. These quarterly and annual increases in revenue were due to significant subscriber growth.
XM recorded an EBITDA loss of ($95.5) million for the fourth quarter of 2003, compared to ($97.3) million for the fourth quarter 2002. For the full year 2003, XM reported an EBITDA loss of ($318.9), compared to ($318.0) million for the full year of 2002. Excluding the impact of de-leveraging activities, EBITDA in 2003 improved to ($294) million -- the first time XM has improved EBITDA on a year-to-year basis.
XM's net loss for the fourth quarter was ($162.9) million as compared to a ($155.9) million net loss in the fourth quarter 2002. For the full year, XM's net loss was ($584.5) million, compared to ($495.0) million in 2002, reflecting increased depreciation, interest and de-leveraging expenses.
Dramatic Reduction in Cost to Acquire Each New Subscriber
Fourth quarter 2003 Cost Per Gross Addition (CPGA) was $125, a significant improvement from $238 in the fourth quarter of 2002. Full year 2003 CPGA was $137, representing a 68 percent reduction from the full year 2002 CPGA of $425. XM's CPGA is the fully-loaded cost to acquire each new subscriber, including Subscriber Acquisition Costs (SAC), advertising and marketing expenses.
OEM and Retail Distribution Leadership
XM is currently available in more than 80 automobile models for the 2004 model year. GM recently announced it will increase the availability of XM Radio to more than 50 cars and trucks in the 2005 model year, including 12 new 2005 vehicles featuring XM for the first time, such as the Chevrolet Corvette and Hummer H2. GM also announced earlier this month the production of its one-millionth XM-equipped vehicle.
In fourth quarter 2003, Honda introduced XM Radio as a standard feature on the Honda Accord EX, Acura RL and Acura TL. Honda is expected to produce approximately 200,000 XM-equipped 2004 model year vehicles.
In 2003, XM introduced several new retail products including the XM Roady, XMCommander and XM Direct. XM SKYFi continued to lead the plug-n-play category. In early 2004, Delphi introduced the industry's first full featured boom box featuring XM, AM, FM, CD and MP3.
100% Commercial-Free Music Lineup and Instant Traffic & Weather
On February 1, 2004, XM introduced its 100 percent commercial-free music lineup. XM now offers music lovers more music, commercial-free, than any terrestrial or satellite alternative. In March 2004, XM will broaden its channel offerings with the addition of XM Instant Traffic & Weather -- providing 24 hour, seven day a week, traffic and weather information for over 20 major markets by yearend, including New York, Los Angeles, San Francisco, Chicago and Washington DC. Each market will have its own dedicated channel broadcast nationally.
Significant Capital Raised and Balance Sheet Strengthened
During 2003, XM raised over $800 million in new equity, debt and financing facilities. This fundraising and prudent use of cash resulted in cash and cash equivalents of $418 million at December 31, 2003. XM's total liquidity position at the end of 2003 was approximately $500 million including cash, cash equivalents and available payment and debt facilities from GM.
Also during the year, XM opportunistically de-levered its balance sheet through the removal of over $280 million in future value of debt, convertible notes and preferred stock (eliminating a total cost of over $430 million in future interest, dividends and principal payments through the maturity of the various instruments). This de-leveraging was achieved through $17 million in cash payments and the issuance of a net eight million shares of common stock.
In January 2004, XM sold seven million primary shares in the public market for net proceeds of approximately $177 million. XM will use the proceeds to retire an $89 million convertible note to General Motors, which was convertible into approximately five million shares of common stock. In addition, XM provided notice to the holders of its 7.75 percent Convertible Notes that it intends to call these notes on the first call date of March 3, 2004. Conversion or retirement of these notes will eliminate approximately $46 million of debt and $7 million of future cash interest payments through their 2006 maturity.
About XM Satellite Radio
XM is America's #1 satellite radio service with more than 1.5 million subscribers today. XM's 2004 programming lineup includes more than 120 digital channels of choice from coast to coast: 68 music channels that are 100% commercial-free, featuring hip hop to opera, classical to country, bluegrass to blues; 32 channels of premier sports, talk, comedy, children's and entertainment programming; and more than 20 channels of the most advanced traffic and weather information for major metropolitan areas nationwide. Affordable, compact and stylish XM satellite radio receivers for the home, the car, the computer and boom boxes for "on the go" are available from retailers nationwide. In addition, XM is available in more than 80 different 2004 vehicle models. XM is a popular factory-installed option on more than 40 new General Motors models, as well as a standard feature on several top-selling Honda and Acura models. JetBlue Airways and AirTran Airways passengers will be able to listen to XM's programming in-flight later in 2004. For more information about XM, visit www.xmradio.com.
Net loss before interest income, interest expense, depreciation and amortization is commonly referred to in our business as "EBITDA." EBITDA is not a measure of financial performance under generally accepted accounting principles. A reconciliation of EBITDA loss is presented on the attachment. We believe EBITDA is often a useful measure of a company's operating performance and is a significant basis used by our management to measure the operating performance of our business. Because we have funded and completed 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. EBITDA, which excludes this information, provides helpful information about the operating performance of our business, apart from the expense associated with our physical plant or capital structure. EBITDA is frequently used as one of the bases for comparing businesses in our industry, although our measure of EBITDA may not be comparable to similarly titled measures of other companies. EBITDA does not purport to represent operating loss or cash flow from operating activities, as those terms are defined under generally accepted accounting principles, and should not be considered as an alternative to those measurements as an indicator of our performance.
Factors that could cause actual results to differ materially from those in the forward-looking statements in this press release include demand for the Company's service, the Company's dependence on technology and third party vendors, its potential need for additional financing, as well as other risks described in XM Satellite Radio Holdings Inc.'s Form 8-K filed with the Securities and Exchange Commission on 1-14-04. Copies of the filing are available upon request from XM Radio' s Investor Relations Department.
XM SATELLITE RADIO HOLDINGS INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share amounts)
Twelve Months ended Three Months ended
December 31, December 31,
(Unaudited) 2003 2002 2003 2002
Revenue:
Subscription $78,275 $16,344 $28,910 $7,357
Activation 1,868 484 659 213
Equipment 6,692 757 1,518 757
Net ad sales 4,065 2,333 2,055 642
Other 881 263 353 36
Total revenue 91,781 20,181 33,495 9,005
Operating expenses:
Cost of revenue:
(excludes depreciation
and amortization,
shown below)
Revenue share &
royalties 26,440 12,790 9,930 10,200
Customer care &
billing 25,945 16,069 8,566 5,400
Cost of equipment 9,797 1,679 2,603 1,679
Ad sales 3,257 1,870 1,500 566
Satellite &
terrestrial 39,692 44,818 6,339 11,148
Broadcast & operations:
Broadcast 7,689 7,745 1,330 1,822
Operations 12,023 12,106 3,390 3,523
Total broadcast &
operations 19,712 19,851 4,720 5,345
Programming & content 23,109 25,379 7,537 5,801
Total cost of revenue 147,952 122,456 41,195 40,139
Research & development
(excludes depreciation
and amortization,
shown below) 12,285 10,843 2,883 1,925
General & administrative
(excludes depreciation
and amortization,
shown below) 27,418 26,448 7,224 10,543
Marketing (excludes
depreciation and
amortization,
shown below):
Retention & support 7,873 9,857 2,214 2,238
Subsidies &
distribution 92,521 54,086 39,477 18,486
Advertising &
marketing 64,309 91,624 22,729 17,860
Marketing 164,703 155,567 64,420 38,584
Amortization of GM
liability 35,564 13,598 9,313 4,253
Total marketing 200,267 169,165 73,733 42,837
Impairment of goodwill --- 11,461 --- 11,461
Depreciation &
amortization 158,317 118,588 39,243 42,977
Total operating
expenses 546,239 458,961 164,278 149,882
Operating loss (454,458) (438,780) (130,783) (140,877)
Interest income 3,066 5,111 1,113 556
Interest expense (110,349) (63,573) (29,277) (16,145)
Other income (expense) (22,794) 2,230 (4,002) 555
Net loss (584,535) (495,012) (162,949) (155,911)
8.25% Series B and C
preferred stock
dividend requirement (17,569) (20,859) (3,403) (5,087)
Series B preferred
stock retirement gain 8,761 --- --- ---
Series C preferred
stock retirement loss (11,537) --- (3,843) ---
Net Loss attributable
to common
stockholders $(604,880) $(515,871) $(170,195) $(160,998)
Basic and diluted net
loss per share: $(4.83) $(5.95) $(1.12) $(1.76)
Weighted average shares
used in computing net
loss per share -
basic and diluted 125,176,320 86,735,257 152,251,413 91,544,410
Reconciliation of Net
Loss to EBITDA:
Net loss as reported $(584,535) $(495,012) $(162,949) $(155,911)
Add back non-EBITDA
items included
in net loss:
Interest income (3,066) (5,111) (1,113) (556)
Interest expense 110,349 63,573 29,277 16,145
Depreciation &
amortization 158,317 118,588 39,243 42,977
EBITDA $(318,935) $(317,962) $(95,542) $(97,345)
As of As of
SELECTED BALANCE SHEET DATA 12/31/2003 12/31/2002
Cash and cash equivalents $418,307 $32,818
Short-term investments --- 9,997
Restricted investments 4,151 29,742
System under construction 92,577 55,016
Property and equipment in service, net 709,501 847,936
Intangibles, net 149,629 153,732
Total assets 1,526,782 1,160,280
Deferred revenue 53,884 12,297
Total long-term debt 781,940 416,385
Total liabilities 993,894 567,969
Stockholders' equity 532,888 592,311