From: XM Satellite Radio
Posted: Thursday, May 8, 2003
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
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