XM Satellite Radio Holdings Inc. Announces Third Quarter 2007 Results
Largest Quarter for New OEM Additions Fuels Year-Over-Year Third Quarter Gains in Gross and Net Subscribers; Third Quarter Ending Subscribers Exceed 8.5 Million; Year-Over-Year Revenue Increases 20 Percent
WASHINGTON, Oct. 25 -- XM Satellite Radio Holdings Inc. today announced earnings for the three-month period ended September 30, 2007. Revenue for the 2007 third quarter increased approximately 20 percent year over year to $287 million compared to $240 million in the 2006 third quarter.
XM ended the 2007 third quarter with approximately 8.57 million subscribers compared to approximately 7.19 million subscribers in the prior year period.
"During the third quarter, XM achieved year-over-year gains in both gross and net subscriber additions, despite weakness at retail, driven primarily by a record number of new automotive subscribers," said Nate Davis, president and chief executive officer, XM Satellite Radio. "We're already seeing the early results of the ramp in production of XM-equipped vehicles, which will provide XM with sustained subscriber growth for 2008 and beyond."
Davis continued, "We remain optimistic that our deal to merge with Sirius will close by the end of this year. In the meantime, we continue to work with the Federal Communications Commission and the Department of Justice to further demonstrate that this merger is in the public interest and should be approved."
For the third quarter of 2007, adjusted operating loss (formerly adjusted EBITDA) was $47 million compared to a loss of $2 million in the same period of 2006. The 2007 third quarter adjusted operating loss includes $9 million in expenses related to the company's pending merger with Sirius Satellite Radio. XM's 2007 third quarter net loss was $145 million compared to the 2006 third quarter net loss of $84 million. For a reconciliation of XM's net loss to adjusted operating loss, see the attached financial schedules.
In the 2007 third quarter, XM recorded gross subscriber additions of 952 thousand and net subscriber additions of 315 thousand compared to 868 thousand gross additions and 286 thousand net subscriber additions in the 2006 third quarter.
In the 2007 third quarter, XM's subscriber acquisition costs (SAC), a component of cost per gross addition (CPGA), were $70, including approximately $10 related to increased factory installations by new automotive partners. This compared to $59 in the third quarter of 2006. CPGA in the 2007 third quarter was $116 compared to $94 in the third quarter of 2006.
As of September 30, 2007, the company had $231 million in cash compared to $275 million at the end of June 30, 2007. As of September 30, 2007, the company also had $400 million in credit facilities, resulting in total available liquidity of $631 million.
Automotive and Retail
The company recently achieved the following in its automotive and retail channels:
-- With automotive partnerships representing more than 60 percent of the
U.S. automotive market, XM had its largest quarter ever in automotive
gross additions with 700 thousand;
-- The total number of vehicles produced with factory-installed XM reached
approximately 9 million;
-- General Motors launched the 2008 model year with XM included as
standard equipment for the first time in all Saab, HUMMER and Buick
models and expects to manufacture more than 2.5 million XM-equipped
vehicles in model year 2008;
-- XM announced the first Ferrari model equipped with XM. The new Ferrari
612 Scaglietti will feature standard, factory-equipped XM Radio and XM
NavTraffic with three years of service;
-- XM recently announced an innovative multi-platform marketing campaign
for the 2008 Cadillac Escalade that integrates Bob Dylan's critically
acclaimed XM Radio show "Theme Time Radio Hour" through TV, online and
print; and
-- At retail, XM recently launched the XpressRC, the first satellite radio
to offer a color split screen display, 60-minute replay and song
storage. The XpressRC (MSRP $169.99), which was recently named WIRED
magazine's "Editor's Pick," joins the XpressR (MSRP $129.99), the mid-
tier Xpress (MSRP $89.99) and the entry-level XpressEZ (MSRP $69.99) to
create a full suite of Xpress plug-and-play XM radios for the fourth
quarter holiday selling season.
Programming
During the 2007 third quarter, the company made the following announcements:
-- XM launched "P.O.T.U.S. '08," the nation's first radio channel
dedicated to a presidential election with 24-hour coverage of the 2008
campaign. As a public service, XM provides the channel for free on all
XM radios;
-- XM began its first college football season as the official satellite
radio network for all six power conferences: ACC, Big East, Big Ten,
Big 12, Pac-10, and SEC;
-- XM launched its first season as the exclusive satellite radio network
of the National Hockey League (NHL) in the U.S. and Canada featuring
the full schedule of NHL regular season and playoff games;
-- XM launched "Unmasked" - the new, original comedy series featuring one-
on-one interviews with some of the most talked about names in comedy,
including George Carlin, Bob Newhart, Jim Norton, Bob Saget, Brian
Regan and Carlos Mencia;
-- XM's original live music and interview series "Artist Confidential"
kicked off a new season with the band Smashing Pumpkins. Future
episodes of "Artist Confidential" will include Gloria Estefan, Marty
Stuart, Mandy Moore, Lyle Lovett and Daddy Yankee, among many others;
-- XM debuted the second season of Bob Dylan's award-winning XM music
show, "Theme Time Radio Hour" featuring contributions from Luke Wilson,
Amy Sedaris, Jack White, John Cusack, Richard Lewis and Ellen Barkin;
-- XM announced the second season of Oprah Winfrey's XM radio show "Soul
Series" which airs exclusively on the "Oprah & Friends" channel;
-- In response to the California wildfires, XM's 24-hour Emergency Alert
channel is broadcasting news and public safety information in
partnership with local radio stations and the Red Cross. As a public
service, XM provides the channel for free on all XM radios; and
-- XM launched the innovative new channel called XMX (XM Channel 2), which
showcases XM's critically-acclaimed original music series "Artist
Confidential" plus exclusive shows hosted by legendary artists Bob
Dylan, Tom Petty, Ludacris, Wynton Marsalis, Quincy Jones and more.
Pending Merger with Sirius Satellite Radio
XM announced it will hold a special meeting of shareholders on November 13, 2007, to consider and vote upon a proposal to adopt the Agreement and Plan of Merger between XM and Sirius Satellite Radio. The proposed transaction, which has been approved by the Board of Directors of both companies, is also subject to regulatory review and approvals, including the Department of Justice (DOJ) and the Federal Communications Commission (FCC), and the satisfaction of customary closing conditions. The companies remain optimistic that the merger will close in late 2007.
The regulatory review process continues to move forward. On September 4, 2007, XM and Sirius each certified to the DOJ that we were in substantial compliance with its Request for Additional Information. The FCC completed its 45-day public comment and reply period. On July 24, 2007, XM and SIRIUS filed their joint reply comments with the FCC. The filing included detailed programming and pricing plans, including "best of," "family friendly," and "a la carte" packages that will give consumers more choice and better pricing options.
More than 4,500 comments have been filed in favor of the merger from individuals as well as from many prestigious organizations and businesses. The volume, diversity and strength of the public comments filed with the FCC demonstrate persuasively that the merger is in the public interest and should be approved.
XM and Sirius announced their agreement to combine in a tax-free, all- stock merger on February 19, 2007. The companies filed their Merger Agreement with the Securities and Exchange Commission on February 21, 2007. Under the terms of the agreement, XM shareholders will receive a fixed exchange ratio of 4.6 shares of Sirius common stock for each share of XM. XM and Sirius shareholders will each own approximately 50 percent of the combined company. Additional details about the merger are available at www.xmmerger.com.
Webcast and Conference Call Information
Gary Parsons, chairman, and Nate Davis, president and chief executive officer, will host an earnings conference call to discuss XM Satellite Radio's 2007 third quarter results today, Thursday, October 25, at 10:00 AM Eastern Time. Prior to the call, you can access XM Radio's third quarter 2007 results on the Company's website at 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#: 20811705
The conference call can also be accessed through a live webcast on the Company's website at 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 Thursday, October 25, 2007 until January 25, 2008 via the following numbers:
Playback Numbers: (800) 642-1687 Local playback number: (706) 645-9291 Conference ID#: 20811705 About XM
XM is America's number one satellite radio company with more than 8.5 million subscribers. Broadcasting live daily from studios in Washington, DC, New York City, Chicago, the Country Music Hall of Fame in Nashville, Toronto and Montreal, XM's 2007 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, Ferrari, Subaru, Suzuki and Toyota is available in 140 different vehicle models for 2007. XM's industry-leading products are available at consumer electronics retailers nationwide. For more information about XM hardware, programming and partnerships, please visit http://www.xmradio.com/.
Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, future events or performance with respect to XM Satellite Radio Holdings Inc. ("XM") are not historical facts and may be forward-looking and, accordingly, such statements involve estimates, assumptions and uncertainties which could cause actual results to differ materially from those expressed in any forward-looking statements. Accordingly, any such statements are qualified in their entirety by reference to the factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2006 filed with the Securities and Exchange Commission. Among the significant factors that could cause our actual results to differ materially from those expressed are: our pending merger with SIRIUS Satellite Radio Inc. ("SIRIUS"), including related uncertainties and risks and the impact on our business if the merger is not completed; any events which affect the useful life of our satellites; our dependence upon third parties, including manufacturers of XM radios, retailers, automakers and programming providers; and our competitive position versus other audio entertainment providers.
Important Additional Information and Where to Find It
This communication is being made in respect of the proposed business combination involving XM and SIRIUS. In connection with the proposed transaction, SIRIUS filed with the SEC a Registration Statement on Form S-4 (Registration No. 333-144845) containing a Joint Proxy Statement/Prospectus and XM and SIRIUS may file with the SEC other documents regarding the proposed transaction. The Joint Proxy Statement/Prospectus is publicly available through the web site maintained by the SEC at http://www.sec.gov/ and was first mailed to stockholders of XM and SIRIUS on October 9, 2007. INVESTORS AND SECURITY HOLDERS OF XM AND SIRIUS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS TO IT) AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders may obtain free copies of the Registration Statement and the Joint Proxy Statement/Prospectus and other documents filed with the SEC by XM and SIRIUS through the web site maintained by the SEC at http://www.sec.gov/. Free copies of the Registration Statement and the Joint Proxy Statement/Prospectus and other documents filed with the SEC can also be obtained by directing a request to XM Satellite Radio Holdings Inc., 1500 Eckington Place, NE, Washington, DC 20002, Attention: Investor Relations. XM, SIRIUS and their respective directors and executive officers and other persons may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding XM's directors and executive officers is available in XM's Annual Report on Form 10-K for the year ended December 31, 2006, which was filed with the SEC on March 1, 2007 and its proxy statement for its 2007 annual meeting of shareholders, which was filed with the SEC on April 17, 2007, and information regarding SIRIUS' directors and executive officers is available in its Annual Report on Form 10- K for the year ended December 31, 2006, which was filed with the SEC on March 1, 2007, and its proxy statement for its 2007 annual meeting of stockholders, which was filed with the SEC on April 23, 2007. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the Joint Proxy Statement/Prospectus and other relevant materials filed with the SEC.
XM SATELLITE RADIO HOLDINGS INC.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
Three Months ended Nine Months ended
September 30, September 30,
(in thousands, except 2007 2006 2007 2006
share and per share
data)
Revenue:
Subscription $256,770 $214,817 $739,034 $605,084
Activation 4,929 4,213 14,348 11,733
Merchandise 4,310 3,164 15,265 11,644
Net ad sales 10,716 8,786 28,347 24,285
Other 10,731 9,464 31,849 23,549
Total revenue 287,456 240,444 828,843 676,295
Operating expenses:
Cost of revenue
(excludes
depreciation &
amortization, shown
below):
Revenue share &
royalties 52,416 33,406 149,565 105,605
Customer care &
billing
operations (1) 31,396 27,171 90,073 76,021
Cost of merchandise 9,585 10,177 40,555 28,424
Ad sales (1) 6,878 3,378 15,744 11,193
Satellite &
terrestrial (1) 13,808 11,670 41,163 36,290
Broadcast &
operations:
Broadcast (1) 6,139 6,158 19,569 17,180
Operations (1) 9,715 7,827 29,114 25,519
Total broadcast &
operations 15,854 13,985 48,683 42,699
Programming &
content (1) 46,825 38,873 132,603 118,769
Total cost of
revenue 176,762 138,660 518,386 419,001
Research &
development
(excludes
depreciation &
amortization, shown
below) (1) 8,343 8,849 23,812 28,348
General &
administrative
(excludes
depreciation &
amortization, shown
below) (1) 46,301 21,997 116,354 58,299
Marketing (excludes
depreciation &
amortization, shown
below):
Retention &
support (1) 11,504 7,288 31,878 22,778
Subsidies &
distribution 61,658 43,872 169,115 156,040
Advertising &
marketing 43,051 30,925 119,104 106,948
Marketing 116,213 82,085 320,097 285,766
Amortization of GM
liability 6,504 6,504 19,511 23,256
Total marketing 122,717 88,589 339,608 309,022
Depreciation &
amortization 46,402 43,109 139,789 124,837
Total operating
expenses (1) 400,525 301,204 1,137,949 939,507
Operating loss (113,069) (60,760) (309,106) (263,212)
Other income
(expense):
Interest income 3,495 5,216 11,277 18,165
Interest expense (27,757) (23,794) (87,789) (86,346)
Loss from de-
leveraging
transactions - (21) (2,965) (100,746)
Loss from impairment
of investments (481) - (36,305) (18,926)
Equity in net loss
of affiliate (4,546) (4,853) (12,723) (17,943)
Minority interest (3,302) - (8,265) -
Other income
(expense) 387 1,187 1,243 5,609
Net loss before
income taxes (145,273) (83,025) (444,633) (463,399)
(Provision for)
benefit from
deferred income
taxes (105) (794) 1,070 1,251
Net loss (145,378) (83,819) (443,563) (462,148)
8.25% Series B and C
preferred stock
dividend
requirement - (1,634) - (5,597)
8.25% Series B
preferred stock
retirement loss - - - (755)
Net loss attributable
to common
stockholders $(145,378) $(85,453) $(443,563) $(468,500)
Net loss per common
share - basic and
diluted $(0.47) $(0.32) $(1.45) $(1.78)
Weighted average
shares used in
computing net loss
per common share -
basic and diluted 306,931,732 268,363,377 306,418,280 262,740,383
Reconciliation of Net
loss to Adjusted
operating loss:
Net loss as reported $(145,378) $(83,819) $(443,563) $(462,148)
Add back Net loss
items excluded from
Adjusted operating
loss:
Interest income (3,495) (5,216) (11,277) (18,165)
Interest expense 27,757 23,794 87,789 86,346
Provision for
(benefit from)
deferred income
taxes 105 794 (1,070) (1,251)
Loss from de-
leveraging
transactions - 21 2,965 100,746
Loss from impairment
of investments 481 - 36,305 18,926
Equity in net loss
of affiliate 4,546 4,853 12,723 17,943
Minority interest 3,302 - 8,265 -
Other (income)
expense (387) (1,187) (1,243) (5,609)
Operating loss (113,069) (60,760) (309,106) (263,212)
Depreciation &
amortization 46,402 43,109 139,789 124,837
Stock-based
compensation (1) 19,987 16,047 48,198 42,022
Adjusted operating
loss (2) $(46,680) $(1,604) $(121,119) $(96,353)
Footnotes: Three Months ended Nine Months ended
September 30, September 30,
(1) These captions 2007 2006 2007 2006
include non-cash
stock-based
compensation
expense as follows:
(in thousands)
Customer care &
billing operations $726 $369 $1,663 $723
Ad sales 580 579 1,396 1,527
Satellite &
terrestrial 609 667 1,619 1,639
Broadcast 781 691 1,987 1,749
Operations 437 570 1,166 1,572
Programming &
content 2,458 2,644 6,685 6,662
Research &
development 2,204 2,161 5,646 5,398
General &
administrative 9,412 6,337 21,289 17,414
Retention & support 2,780 2,029 6,747 5,338
Total stock-based
compensation $19,987 $16,047 $48,198 $42,022
(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
September 30, December 31,
(in thousands) 2007 2006
SELECTED BALANCE SHEET DATA (unaudited)
Cash and cash equivalents (1) $231,187 $218,216
Restricted investments 196 2,098
System under construction 145,849 126,049
Property and equipment, net 739,321 849,662
DARS license 141,412 141,387
Investments 42,682 80,592
Total assets (2) 1,708,957 1,840,618
Total subscriber deferred revenue 474,929 427,193
Total deferred income 135,920 140,695
Long-term debt, net of current
portion 1,474,200 1,286,179
Total liabilities (2) 2,432,592 2,238,498
Stockholders' deficit (2) (3) (789,599) (397,880)
Three Months ended September 30,
SELECTED OPERATING METRICS 2007 2006
Subscriber Data (in thousands,
except percentages):
OEM and Rental Car Company Gross
Subscriber Additions 700 553
Aftermarket and Data Gross
Subscriber Additions 251 316
Total Gross Subscriber Additions (4) 952 868
OEM and Rental Car Company Net
Subscriber Additions 332 217
Aftermarket and Data Net
Subscriber Additions (17) 69
Total Net Subscriber Additions (5) 315 286
Conversion Rate (6) 52.5% 52.2%
Churn Rate (7) 1.69% 1.82%
Aftermarket Subscribers 4,454 4,111
OEM Subscribers 3,291 2,410
Subscribers in OEM Promotional
Periods 726 614
XM Activated Vehicles with Rental
Car Companies 51 21
Data Services Subscribers 44 31
Total Ending Subscribers (8) 8,567 7,186
Percentage of Ending Subscribers
on Annual and Multi-Year Plans (9) 44.1% 43.0%
Percentage of Ending Subscribers
on Family Plans (9) 23.4% 21.2%
Revenue Data (monthly average):
Subscription Revenue per
Aftermarket, OEM & Other
Subscriber $10.41 $10.45
Subscription Revenue per
Subscriber in OEM Promotional
Periods $6.12 $6.15
Subscription Revenue per XM
Activated Vehicle with Rental Car
Companies $7.16 $4.67
Subscription Revenue per
Subscriber of Data Services $35.08 $31.89
Average Monthly Subscription
Revenue per Subscriber ("ARPU") (10) $10.17 $10.15
Net Ad Sales Revenue per
Subscriber (11) $0.42 $0.41
Activation, Equipment and Other
Revenue per Subscriber $0.80 $0.80
Total Revenue per Subscriber $11.39 $11.36
Expense Data:
Subscriber Acquisition Costs
("SAC") (12) $70 $59
Cost Per Gross Addition ("CPGA") (13) $116 $94
(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 the OEM 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."
(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. We count radios
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 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 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 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.
(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 September 30, 2006 was $60.
(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 September 30, 2006 was $93.
Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20070313/XMLOGO
AP Archive: http://photoarchive.ap.org/
PRN Photo Desk, photodesk@prnewswire.com