XM Satellite Radio Holdings
Inc. today reported financial and operating results for the
first quarter ended March 31, 2003. XM reports 483,075 subscribers as of
March 31, 2003. This represented a net subscriber addition of 135,916 for the
first quarter; a 39 percent increase from the fourth quarter 2002 and six
times the subscribers from the first quarter of 2002. In April 2003, XM
surpassed the half-million subscriber mark, commencing the Company’s March To
A Million subscribers campaign.
First Quarter Financial and Operating Results
For the first quarter of 2003, XM recognized revenue of $13.1 million, an
increase of $11.3 million when compared to $1.8 million of revenue in the
first quarter of 2002. EBITDA loss for the quarter was $(63.3) million, an
improvement of $12.1 million as compared with $(75.4) million in the first
quarter of 2002.
For the first quarter 2003, the consolidated net loss available to common
shareholders was $(124) million, or $(1.26) per share (on weighted average
shares of 98.7 million), as compared to $(117.7) million, or $(1.56) per share
(on weighted average shares of 75.2 million), for the first quarter of 2002.
XM continues to make progress towards cash flow breakeven while ramping
subscribers, reducing costs and achieving operational milestones. Cost Per
Gross Addition (CPGA) for the first quarter 2003 was $156 per subscriber,
driven in part by seasonally lower marketing expenses. CPGA for the first and
fourth quarters of 2002 was $875 and $240, respectively. During the first
quarter 2003, XM incurred an average subscriber acquisition cost (SAC) of $74.
This compares to an average SAC of $127 for first quarter 2002 and $96 in the
fourth quarter 2002.
At the end of the first quarter 2003, the Company had cash on hand of
approximately $194 million, excluding restricted cash, and approximately $122
million of undrawn credit and equity funding facilities from General Motors,
resulting in an aggregate liquidity position of $316 million.
XM Eliminates $137 Million of Debt and Preferred Stock and Raises
Additional $50 Million in Equity Proceeds
Since the first of the year, the Company completed several privately
negotiated de-leveraging transactions reducing XM’s debt and preferred stock
by approximately $137 million in principal amount at maturity (the accreted
value of the liabilities eliminated is approximately $108 million). These
debt and preferred stock transactions eliminate approximately $212 million in
total future principal, interest, dividends and liquidation preference amounts
due over the life of the securities. In addition, warrants to purchase 3.7
million shares of XM stock at $3.18 per share were eliminated in similar
transactions.
During the first quarter and in April 2003, XM also raised approximately
$50 million in cash proceeds under its Direct Stock Purchase Plan (DSPP), and
used approximately $17 million in connection with these de-leveraging
transactions.
As a result of the various transactions described above, the Company
increased its net cash on hand by an additional $33 million in cash,
eliminated $137 million face amount at maturity of its debt, preferred stock,
and warrants, some portion of which were convertible into approximately 5.9
million shares, and increased the Company’s total outstanding common stock to
approximately 120 million shares.
XM Expands OEM Distribution Channel
The Company achieved another significant subscriber milestone in the
quarter when, working collaboratively with GM, XM surpassed the 100,000 GM
subscriber mark where XM radios are factory installed in the new car. The XM
OEM distribution channel continues to grow beyond GM to include manufacturers
such as Honda, Acura, Audi, Toyota and Infiniti. Across the 2003 and 2004
model years, XM will be available in 15 automobile brands spanning over 70
vehicle models.
Acura, a division of American Honda Motor Co. — a strategic investor in
XM, announced that both the 2004 Acura TL and RL would include XM Radio as a
factory-installed standard feature. The 2004 Acura RL debuted recently as the
first luxury sedan to feature XM as standard equipment.
Toyota announced that XM Radio would be offered as a dealer-installed
option on Toyota’s all-new 2004 Camry Solara coupe, which will begin arriving
in U.S. showrooms during the summer. Toyota has previously announced it will
offer XM in its new youth oriented Scion brand. The Camry Solara coupe
represents the first mainstream Toyota-branded model to move forward with XM.
Finally, Audi also announced that, beginning in the summer, it would offer
XM as an option on a wide range of 2004 models, including the A4, S4, A6, the
A8L and the allroad quattro. This XM product offering by Audi is particularly
significant in that these award winning cars will arrive at the dealer with a
factory-installed satellite-ready “head unit” and satellite radio antenna; the
dealer will then “snap-in” the XM receiver on-site.
Wal-Mart Roll-out End of May
XM continues to expand its aftermarket distribution network to include
2,100 Wal-Mart stores across the country that will sell the complete line of
Delphi XM SKYFi radios. This roll-out is expected to be completed by the end
of May, as Wal-Mart outfits its automotive sales and home electronics
departments with XM displays and stocks XM products across the nation. XM
product availability at the world’s largest retailer significantly expands the
Company’s existing national retail network of Best Buy, Circuit City and other
regional and independent electronics outlets.
XM Family Plan
XM’s Family Plan has already generated positive results from both current
and new subscribers. To date, approximately 5,000 new radios have been
activated under the XM Family Plan at a monthly rate of $6.99. A recent
survey conducted on XM’s behalf by Greystone Communications reported that 58
percent of XM subscribers are likely to purchase an additional XM subscription
under the Family Plan.
XM Introduces New Product for the PC Market
In pursuit of the Company’s “XM Everywhere” goal, XM has just introduced
XM PCR, the first satellite radio product allowing any personal computer or
laptop to be transformed into an XM radio receiver. XM PCR, with a suggested
retail price of $69.95, is the perfect “music and news companion” for the PC
user in the home or at the office. With its unique features and advanced
functionality, XM PCR listeners can experience our rich programming content in
digital quality sound without the buffering delays, reduced PC processing
speed and heavy bandwidth requirements which characterize the Internet-
delivered radio and music marketplace.
XM PCR is available for direct purchase from the online retailer PC
Connection through XM’s website at xmpcr.xmradio.com.
About XM Satellite Radio
XM is transforming radio with a programming lineup featuring 101 coast-to-
coast digital channels: 70 music channels, more than 35 of them commercial-
free, from hip hop to opera, classical to country, bluegrass to blues; and 31
channels of sports, talk, children’s and other entertainment programming. XM’s
strategic investors include America’s leading car, radio and satellite TV
companies — General Motors, American Honda Motor Co. Inc., Clear Channel
Communications and DIRECTV. For more information, please visit XM’s web site:
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 third party vendors, its
potential need for additional financing, as well as other risks described in
XM Satellite Radio Holdings Inc.’s Form 10-K filed with the Securities and
Exchange Commission on 3-31-03. Copies of the filing are available upon
request from XM Radio’s Investor Relations Department.
XM Satellite Radio Holdings, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Three Months ended
March 31,
(Unaudited) 2003 2002
Revenue:
Subscriber:
Subscription $ 11,590 $ 1,365
Activation & equipment 887 24
Total subscriber revenue 12,477 1,389
Net ad sales 448 391
Royalties & other 127 5
Total revenue 13,052 1,785
Operating expenses:
Cost of revenue: (excludes
depreciation and amortization,
shown below)
Revenue share & royalties and
cost of equipment:
Revenue share & royalties 3,883 612
Cost of equipment 1,113 -
Total revenue share & royalties
and cost of equipment 4,996 612
Ad sales 437 167
Customer care & billing 4,842 2,487
Satellite & terrestrial 12,571 10,478
Broadcast & operations:
Broadcast 2,566 1,741
Operations 2,766 2,482
Total broadcast & operations 5,332 4,223
Programming & content 4,787 6,024
Total cost of revenue 32,965 23,991
Research & development
(excludes depreciation and
amortization, shown below) 2,467 2,324
General & administrative 9,019 5,015
Marketing:
Retention & support 4,914 2,897
Subsidies & distribution 11,722 9,561
Advertising & marketing 11,349 33,127
Marketing 27,985 45,585
Amortization of GM liability 7,626 745
Total marketing 35,611 46,330
Depreciation & amortization 39,760 22,486
Total operating expenses 119,822 100,146
Operating loss (106,770) (98,361)
Interest income 552 1,658
Interest expense (23,799) (15,999)
Other income (expense) 3,735 452
Net loss (126,282) (112,250)
8.25% Series B and C preferred
stock dividend requirement (5,002) (5,496)
Series B preferred stock
conversion gain 7,273 -
Net Loss attributable to
common stockholders $ (124,011) $ (117,746)
Basic and diluted net loss
per share: $ (1.26) $ (1.56)
Weighted average shares used in
computing net loss per share -
basic and diluted 98,654,290 75,241,684
Reconciliation of Net Loss to EBITDA:
Net loss as reported $ (126,282) $ (112,250)
Add back non-EBITDA items
included in net loss:
Interest income (552) (1,658)
Interest expense 23,799 15,999
Depreciation & amortization 39,760 22,486
EBITDA $ (63,275) $ (75,423)
SELECTED OPERATING METRICS (actual
dollars, except EBITDA is in the
thousands)
EBITDA $ (63,275) $ (75,423)
Ending Subscribers 483,075 76,242
Net Subscriber Additions 135,916 48,509
Subscription Revenue per Average
Subscriber $ 9.34 $ 9.27
Net Ad Sales per Average
Subscriber $ 0.36 $ 2.65
Total Revenue per Average
Subscriber $ 10.52 $ 12.12
Cost Per Gross Addition (CPGA) $ 156 $ 875
Subscriber Acquisition Costs (SAC) $ 74 $ 127
As of As of
SELECTED BALANCE SHEET DATA 03/31/2003 12/31/2002
(in thousands)
Cash and cash equivalents $ 193,492 $ 32,818
Short-term investments - 9,997
Restricted investments 11,999 29,742
System under construction 55,016 55,016
Property and equipment in
service, net 810,030 847,936
Intangibles, net 150,579 153,732
Total assets 1,371,830 1,160,280
Total long-term debt, net of
current portion 631,513 412,540
Total liabilities 763,859 567,969
Stockholders equity 607,971 592,311
