XM Adds Nearly 1.7 Million Net Subscribers in 2006
2006 Revenue Increases 67% to $933 Million
XM Achieves Positive Cash Flow from Operations in the Fourth Quarter of 2006
XM and Sirius to Combine in $13 Billion Merger of Equals
WASHINGTON, Feb. 26 XM Satellite Radio Holdings Inc. (NASDAQ: XMSR) today reported financial and operating results for the fourth quarter and full year ended December 31, 2006. XM announced that 2006 revenue increased year over year by 67 percent to $933 million. XM added 1.696 million new net subscribers in 2006 for a total of 7.629 million subscribers, and XM achieved positive cash flow from operations in the fourth quarter.
“2006 was a pivotal year for XM,” said Hugh Panero, XM CEO. “The automobile market is emerging as a key catalyst for satellite radio’s future growth, and XM is well-positioned through its relationships with the nation’s largest and fastest-growing automakers. Our financial metrics are heading in the right direction as marketing costs have declined and our revenues have increased.”
Fourth Quarter and Full-Year Financial Results
For the fourth quarter of 2006, XM reported quarterly total revenue of $257.1 million, an increase of 45 percent over the $177.1 million total revenue reported in fourth quarter of 2005. XM’s full year 2006 total revenue was $933.4 million, an increase of 67 percent over the $558.3 million total revenue recorded in 2005. Subscription revenue grew 64 percent to $825.6 million from $502.6 million in 2005. Advertising revenue grew 76 percent to $35.3 million from $20.1 million. These quarterly and annual increases in revenue were driven by our subscriber growth and increases in average revenue per subscriber in connection with our price increase implemented in the second quarter of 2005.
For the fourth quarter, subscriber acquisition cost (SAC), a component of cost per gross addition (CPGA) was $70 compared to $89 in the same period last year. CPGA in the fourth quarter was $128 compared to $141 in the same period last year. For full year 2006, SAC was $64, consistent with $64 in 2005, and CPGA was $108, compared to $109 in 2005.
XM reported an adjusted EBITDA loss of ($69.8) million for the fourth quarter of 2006, a substantial improvement from the adjusted EBITDA loss of ($172.9) million reported in the fourth quarter of 2005. For the full year 2006, XM reported an adjusted EBITDA loss of ($166.2) million down from the full year 2005 adjusted EBITDA loss of ($403.7) million. The decline in adjusted EBITDA loss primarily resulted from our increase in subscribers, growth in subscription margin and lower marketing costs.
Net loss for the fourth quarter of 2006 was ($256.7) million, which included the following non-cash items totaling ($79.0) million of the net loss: a charge of $(57.6) million to reflect an impairment in our 23% ownership in Canadian Satellite Radio and charges of ($21.4) million from our balance sheet restructuring. XM’s net loss for the fourth quarter of 2005 was ($268.3) million which included charges of ($25.3) million from our balance sheet restructuring.
Full year net loss was ($718.9) million, which included the following non- cash items totaling ($198.8) million of the net loss: impairment charges of ($76.6) million in our investments in WorldSpace and Canadian Satellite Radio and charges of ($122.2) million from our balance sheet restructuring. XM’s net loss for the full year 2005 was ($666.7) million which included charges of ($27.6) million from our balance sheet restructuring.
Successful Balance Sheet Restructuring Concludes
In 2006, the company successfully completed a major recapitalization by leveraging its improving credit profile to transition to a largely unsecured capital structure, reducing interest expense by refinancing the debt issued earlier in the company’s development, extending debt maturities and enhancing its liquidity position. In conjunction with the refinancing, the company established a secured $250 million revolving credit facility maturing in 2009 with a syndicate of blue chip banks and increased the size of the credit facility with GM by $50 million to $150 million.
Also in 2006, to further simplify the balance sheet, XM redeemed all outstanding shares of Series B Convertible Preferred Stock, converted all of its Series C Convertible Preferred Stock into 14.5 million Class A common shares, and incentivized the conversion of $146.6 million aggregate fully accreted face amount of 10% Senior Secured Discount Convertible notes by issuing 48.8 million shares of common stock.
In February 2007, the company entered into a sale-leaseback of the transponders on the XM-4 satellite whereby the company received $288.5 million of net proceeds of which $44 million was used to retire outstanding mortgages.
XM Extends Long-Term Agreements with Honda, Toyota; General Motors Expands XM Vehicle Production for 2007
2006 marked the first year that XM added more net new customers through auto dealerships than at retail. XM’s recent ten-year contract extensions with Toyota and Honda add to the momentum that XM has in the new car market.
General Motors, the leading automotive provider of XM radios, announced its plan to build more than 1.8 million vehicles with factory-installed XM in 2007. American Honda plans to equip more than 650,000 vehicles with factory XM radios for 2007 and Toyota is expected to produce more than one million vehicles with factory XM radios annually by 2010.
XM Completes New State-of-the-Art Satellite System with “Rhythm” and “Blues”
In December 2006, XM began broadcasting through its XM-4 satellite (known as “Blues”) manufactured by Boeing Satellite Systems International, Inc. The combination of “Rhythm,” the XM-3 satellite launched in February 2005, and “Blues” provides a solid foundation to deliver a full complement of digital broadcasts for at least the next 15 years. “Rhythm” and “Blues” replace XM’s original satellites “Rock” and “Roll,” which were launched in 2001 and will serve as in-orbit spares for the near-term.
XM and Sirius to Combine in $13 Billion Merger of Equals
XM Satellite Radio and Sirius Satellite Radio last week announced that they have entered into a definitive agreement, under which the companies will be combined in a tax-free, all-stock merger of equals with a combined enterprise value of approximately $13 billion, which includes net debt of approximately $1.6 billion. 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 they own. XM and Sirius shareholders will each own approximately 50 percent of the combined company. The combination creates a nationwide audio entertainment provider with combined 2006 revenues of approximately $1.5 billion based on analysts’ consensus estimates. The transaction is subject to approval by both companies’ shareholders, the satisfaction of customary closing conditions and regulatory review and approvals, including antitrust agencies and the FCC. Pending regulatory approval, the companies expect the transaction to be completed by the end of 2007.
About XM
XM (NASDAQ: XMSR) is America’s number one satellite radio company with more than 7.6 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, 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/.
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the benefits of the business combination transaction involving Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc., including potential synergies and cost savings and the timing thereof, future financial and operating results, the combined company’s plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “will,” “should,” “may,” or words of similar meaning. Such forward-looking statements are based upon the current beliefs and expectations of Sirius’s and XM’s management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond the control of Sirius and XM. Actual results may differ materially from the results anticipated in these forward-looking statements.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statement: general business and economic conditions; the performance of financial markets and interest rates; the ability to obtain governmental approvals of the transaction on a timely basis; the failure of Sirius and XM shareholders to approve the transaction; the failure to realize synergies and cost-savings from the transaction or delay in realization thereof; the businesses of Sirius and XM may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected; and operating costs and business disruption following the merger, including adverse effects on employee retention and on our business relationships with third parties, including manufacturers of radios, retailers, automakers and programming providers. Additional factors that could cause Sirius’s and XM’s results to differ materially from those described in the forward-looking statements can be found in Sirius’s and XM’s Annual Reports on Form 10-K for the year ended December 31, 2005, and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2006, June 30, 2006 and September 30, 2006 which are filed with the Securities and Exchange Commission (the “SEC”) and available at the SEC’s Internet site (http://www.sec.gov/). The information set forth herein speaks only as of the date hereof, and Sirius and XM disclaim any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this press release.
Important Additional Information Will be Filed with the SEC
This communication is being made in respect of the proposed business combination involving Sirius and XM. In connection with the proposed transaction, Sirius plans to file with the SEC a Registration Statement on Form S-4 containing a Joint Proxy Statement/Prospectus and each of Sirius and XM plan to file with the SEC other documents regarding the proposed transaction. The definitive Joint Proxy Statement/Prospectus will be mailed to stockholders of Sirius and XM. INVESTORS AND SECURITY HOLDERS OF SIRIUS AND XM ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders will be able to obtain free copies of the Registration Statement and the Joint Proxy Statement/Prospectus (when available) and other documents filed with the SEC by Sirius and XM 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 (when available) and other documents filed with the SEC can also be obtained by directing a request to Sirius Satellite Radio Inc., 1221 Avenue of the Americas, New York, NY 10020, Attention: Investor Relations or by directing a request to XM Satellite Radio Holdings Inc., 1500 Eckington Place, NE Washington, DC 20002, Attention: Investor Relations.
Sirius, XM 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 Sirius’s directors and executive officers is available in its Annual Report on Form 10-K for the year ended December 31, 2005, which was filed with the SEC on March 13, 2006, and its proxy statement for its 2006 annual meeting of stockholders, which was filed with the SEC on April 21, 2006, and 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, 2005, which was filed with the SEC on March 3, 2006 and its proxy statement for its 2006 annual meeting of shareholders, which was filed with the SEC on April 25, 2006. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the Joint Proxy Statement/Prospectus and other relevant materials to be filed with the SEC when they become available.
XM SATELLITE RADIO HOLDINGS INC.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended Twelve months ended
December 31, December 31,
(in thousands, except
share and per share
data) 2006 2005 2006 2005
(Unaudited) (Unaudited)
Revenue:
Subscription $220,542 $156,251 $825,626 $502,612
Activation 4,459 3,079 16,192 10,066
Merchandise 10,076 8,627 21,720 18,182
Net ad sales 11,045 7,283 35,330 20,103
Other 11,000 1,895 34,549 7,303
Total revenue 257,122 177,135 933,417 558,266
Operating expenses:
Cost of revenue
(excludes
depreciation &
amortization, shown
below):
Revenue share &
royalties 43,405 27,889 149,010 93,874
Customer care &
billing operations(1) 28,850 24,560 104,871 76,222
Cost of merchandise 20,525 22,267 48,949 40,707
Ad sales (1) 4,768 3,644 15,961 10,058
Satellite &
terrestrial (1) 12,729 11,353 49,019 42,355
Broadcast &
operations:
Broadcast (1) 5,869 4,707 23,049 16,609
Operations (1) 9,164 6,851 34,683 24,460
Total broadcast &
operations 15,033 11,558 57,732 41,069
Programming &
content (1) 46,427 30,551 165,196 101,008
Total cost of revenue 171,737 131,822 590,738 405,293
Research & development
(excludes depreciation
and amortization,
shown below)(1) 9,080 10,248 37,428 31,218
General &
administrative
(excludes
depreciation and
amortization, shown
below) (1) 30,327 13,213 88,626 43,864
Marketing (excludes
depreciation and
amortization, shown
below):
Retention & support (1) 9,064 6,584 31,842 22,275
Subsidies &
distribution 73,464 113,852 241,601 264,719
Advertising &
marketing 52,789 66,703 147,640 163,312
Marketing 135,317 187,139 421,083 450,306
Amortization of GM
liability 6,504 9,313 29,760 37,250
Total marketing 141,821 196,452 450,843 487,556
Depreciation &
amortization 44,043 39,028 168,880 145,870
Total operating
expenses (1) 397,008 390,763 1,336,515 1,113,801
Operating loss (139,886) (213,628) (403,098) (555,535)
Other income (expense):
Interest income 3,499 7,218 21,664 23,586
Interest expense (34,958) (36,557) (121,304) (107,791)
Loss from
de-leveraging
transactions (21,443) (25,345) (122,189) (27,552)
Loss from impairment
of investments (57,646) - (76,572) -
Equity in net loss
of affiliate (5,286) (482) (23,229) (482)
Other income (expense) 233 1,061 5,842 3,389
Net loss before
income taxes (255,487) (267,733) (718,886) (664,385)
Benefit from
(provision for)
deferred income
taxes (1,237) (593) 14 (2,330)
Net loss (256,724) (268,326) (718,872) (666,715)
8.25% Series B and C
preferred stock
dividend
requirement (530) (2,149) (6,127) (8,597)
8.25% Series B
preferred stock
retirement loss - - (755) -
8.25% Series C
preferred stock
retirement loss (5,938) - (5,938) -
Net loss attributable
to common
stockholders $(263,192) $(270,475) $(731,692) $(675,312)
Net loss per common
share - basic and
diluted $(0.90) $(1.22) $2.70 $(3.07)
Weighted average
shares used in
computing net loss
per common share -
basic and diluted 293,797,483 221,929,446 270,586,682 219,620,468
Reconciliation of Net
loss to Adjusted
EBITDA:
Net loss as
reported $(256,724) $(268,326) $(718,872) $(666,715)
Add back Net loss
items not included
in EBITDA:
Interest income (3,499) (7,218) (21,664) (23,586)
Interest expense 34,958 36,557 121,304 107,791
Depreciation &
amortization 44,043 39,028 168,880 145,870
(Benefit from)
provision for
deferred income
taxes 1,237 593 (14) 2,330
EBITDA (2) (179,985) (199,366) (450,366) (434,310)
Add back EBITDA
items not included
in Adjusted EBITDA:
Loss from
de-leveraging
transactions 21,443 25,345 122,189 27,552
Loss from
impairment of
investments 57,646 - 76,572 -
Equity in net loss
of affiliate 5,286 482 23,229 482
Other (income)
expense (233) (1,061) (5,842) (3,389)
Stock-based
compensation (1) 26,024 1,741 68,046 5,966
Adjusted EBITDA (2) $(69,819) $(172,859) $(166,172) $(403,699)
Three months Twelve months
ended Dec. 31, ended Dec. 31,
Footnotes:
(1) These captions include non-cash
stock-based compensation expense
as follows: 2006 2005 2006 2005
(In thousands)
Customer care & billing operations $615 $15 $1,338 $45
Ad sales 870 76 2,397 234
Satellite & terrestrial 1,010 98 2,649 287
Broadcast 1,131 78 2,880 240
Operations 853 31 2,425 96
Programming & content 4,216 185 10,878 840
Research & development 3,257 319 8,655 1,029
General & administrative 10,710 446 28,124 1,741
Retention & support 3,362 493 8,700 1,454
Total stock-based
compensation $26,024 $1,741 $68,046 $5,966
(2) Net loss before interest income, interest expense, income taxes,
depreciation and amortization is commonly referred to in our business
as "EBITDA." Adjusted EBITDA is defined as EBITDA excluding loss from
de-leveraging transactions, loss from impairment of investments,
equity in net loss of affiliates, other income (expense) and stock-
based compensation. We believe that Adjusted EBITDA provides a better
measure of our core business operating results and improves
comparability. 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 EBITDA is a useful measure of our
operating performance. Adjusted EBITDA 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. Adjusted
EBITDA 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 similar companies in our industry.
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. We believe Adjusted EBITDA
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, certain periods will reflect a tax
benefit, while others an expense, in which neither are 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 similar companies in our industry.
Equity in net loss of affiliates represents our share of losses in an
affiliate in which we exercise significant influence, but do not
control. Management believes it is appropriate to exclude this loss
when evaluating the performance of our core business operations.
Additionally, we exclude loss from de-leveraging transactions, loss
from impairment of investments and other income (expense) because
these items represent activity outside of our core business
operations.
There are limitations associated with the use of Adjusted EBITDA in
evaluating our company compared with net loss, which reflects overall
financial performance. These limitations include the inclusion 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 affiliates, (8) other income (expense) and (9) stock-based
compensation 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 principles, and should not be considered as an
alternative to those measurements as an indicator of our performance.
In addition, our measure of Adjusted EBITDA may not be comparable to
similarly titled measures of other companies.
Effective for the three months ended March 31, 2007, we will
consolidate our disclosures to present Adjusted operating loss and
eliminate the use of EBITDA and Adjusted EBITDA. The calculation will
be shown as follows:
Three months ended Twelve months ended
December 31, December 31,
Reconciliation of Operating
loss to Adjusted operating
loss: 2006 2005 2006 2005
Net loss as reported $(256,724) $(268,326) $(718,872) $(666,715)
Add back Net loss items
excluded from adjusted
operating loss:
Interest income (3,499) (7,218) (21,664) (23,586)
Interest expense 34,958 36,557 121,304 107,791
(Benefit from) provision
for deferred income taxes 1,237 593 (14) 2,330
Loss from de-leveraging
transactions 21,443 25,345 122,189 27,552
Loss from impairment of
investments 57,646 - 76,572 -
Equity in net loss of
affiliate 5,286 482 23,229 482
Other (income) expense (233) (1,061) (5,842) (3,389)
Operating Loss (139,886) (213,628) (403,098) (555,535)
Depreciation & amortization 44,043 39,028 168,880 145,870
Stock-based compensation(1) 26,024 1,741 68,046 5,966
Adjusted operating loss $(69,819) $(172,859) $(166,172) $(403,699)
XM SATELLITE RADIO HOLDINGS INC.
SELECTED FINANCIAL AND OPERATING METRICS
As of
(In thousands) December 31, 2006 December 31, 2005
SELECTED BALANCE SHEET DATA (Unaudited)
Cash and cash equivalents (1) $218,216 $710,991
Restricted investments 2,098 5,438
System under construction 126,049 216,527
Property and equipment, net 849,662 673,672
DARS license 141,387 141,276
Investments 80,592 187,403
Total assets 1,840,618 2,223,661
Total subscriber deferred revenue 427,193 360,638
Total deferred income 140,695 151,210
Long-term debt, net of current
portion 1,286,179 1,035,584
Total liabilities 2,238,498 2,142,713
Stockholders' equity (deficit) (2) (397,880) 80,948
Three months ended Twelve months ended
December 31, December 31,
SELECTED OPERATING METRICS
(Unaudited) 2006 2005 2006 2005
Subscriber Data:
OEM and Rental Car Company
Gross Subscriber Additions 524,413 438,169 2,085,396 1,916,374
Aftermarket and Data Gross
Subscriber Additions 540,474 935,707 1,781,085 2,214,063
Total Gross Subscriber
Additions (3) 1,064,887 1,373,876 3,866,481 4,130,437
OEM and Rental Car Company
Net Subscriber Additions 171,838 115,895 883,934 980,827
Aftermarket and Data Net
Subscriber Additions 270,841 782,420 811,661 1,723,006
Total Net Subscriber
Additions (4) 442,679 898,315 1,695,595 2,703,833
Conversion Rate (5) 52.4% 54.3% 53.3% 56.9%
Churn Rate (6) 1.79% 1.57% 1.77% 1.46%
Aftermarket Subscribers 4,379,762 3,581,639 4,379,762 3,581,639
OEM Subscribers 2,655,404 1,827,427 2,655,404 1,827,427
Subscribers in OEM
Promotional Periods 555,094 460,615 555,094 460,615
XM Activated Vehicles with
Rental Car Companies 5,434 43,928 5,434 43,928
Data Services Subscribers 32,858 19,348 32,858 19,348
Total Ending
Subscribers(7) 7,628,552 5,932,957 7,628,552 5,932,957
Percentage of Ending
Subscribers on Annual and
Multi-Year Plans (8) 44.2% 42.1% 44.2% 42.1%
Percentage of Ending
Subscribers on
Family Plans (8) 22.5% 19.0% 22.5% 19.0%
Revenue Data (monthly
average):
Subscription Revenue per
Aftermarket, OEM & Other
Subscriber $10.28 $10.21 $10.37 $9.97
Subscription Revenue per
Subscriber in OEM
Promotional Periods $6.35 $5.84 $6.23 $5.79
Subscription Revenue per XM
Activated Vehicle with
Rental Car Companies $3.10 $9.64 $5.96 $9.88
Subscription Revenue per
Subscriber of Data Services $34.33 $34.23 $31.74 $34.23
Average Monthly Subscription
Revenue per Subscriber
("ARPU") (9) $10.07 $9.85 $10.09 $9.51
Net Ad Sales Revenue per
Subscriber (10) $0.50 $0.46 $0.43 $0.38
Activation, Equipment and
Other Revenue per
Subscriber $1.17 $0.86 $0.89 $0.68
Total Revenue per
Subscriber $11.74 $11.17 $11.41 $10.57
Expense Data:
Subscriber Acquisition Costs
("SAC") (11) $70 $89 $64 $64
Cost Per Gross Addition
("CPGA") (12) $128 $141 $108 $109
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) We have not declared or paid any dividends on our Class A common
stock since our date of inception.
(3) Gross Subscriber Additions are paying subscribers newly activated in
the reporting period. OEM subscribers include both newly activated
promotional and non-promotional subscribers.
(4) Net Subscriber Additions represent the total net incremental paying
subscribers added during the period (Gross Subscribers Additions less
Disconnects).
(5) We measure the success of our OEM promotional programs based on the
percentage of 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." We
measure conversion rate three months after the period in which the
trial service ends.
(6) 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.
(7) Subscribers are those who are receiving and have agreed to pay for
our service, either by credit card or by invoice, 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. Currently, 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. 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 with
rental car companies which govern the rate which XM receives for
providing audio service. 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.
(8) XM receives a range of $9.99 - $11.87 per month for annual and multi-
year plans and $6.99 per month for a family plan.
(9) Subscription Revenue includes monthly subscription revenues for our
satellite audio service and data services, net of any promotions or
discounts.
(10) Net Ad Sales Revenue includes sales of advertisements and program
sponsorships on the XM system, net of agency commissions.
(11) Subscriber acquisition costs include Subsidies & distribution
(excluding on-going loyalty payments to distribution partners) and
the negative gross profit on merchandise revenue. Subscriber
acquisition costs are divided by the appropriate gross additions or
units manufactured to calculate what we refer to as "SAC."
(12) CPGA costs include the amounts in SAC, as well as Advertising &
marketing and on-going loyalty payments to distribution partners.
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). These costs are divided by the
gross additions for the period to calculate what refer to as "CPGA."
SOURCE: XM Satellite Radio Holdings Inc.
CONTACT: Investors, Joe Wilkinson, +1-202-380-4008,
joe.wilkinson@xmradio.com, or Richard Sloane, +1-202-380-1439,
richard.sloane@xmradio.com, or Media, Nathaniel Brown, +1-212-708-6170,
nathaniel.brown@xmradio.com, or Chance Patterson, +1-202-380-4318,
chance.patterson@xmradio.com, all of XM Satellite Radio
Web site: http://www.xmradio.com/
