XM Doubles Q2 Revenue, Ups Sub Estimate
By Jeff Malester -- TWICE, 8/8/2005
Washington — XM Satellite Radio more than doubled its revenue and its subscription revenue for the second quarter and said it projects it will have 6 million subscribers by the end of the year.
Second quarter revenue was $125.5 million, up 136 percent from $53 million in the second three months of 2004. Subscription revenue also more than doubled, reaching $113.4 million in the second quarter, compared with $48.6 million year-on-year.
XM reported a smaller net loss for the second three months, ended June 30, coming in at $146.6 million, compared with a net loss of $166.1 million in the same quarter a year earlier. The company reported negative earnings before interest, taxes, depreciation and amortization (EBITDA) of $89.9 million, compared to a negative $107.8 million in the second quarter of last year. The company's net loss and EBITDA for the second quarter of 2004 each included a $35 million charge for de-leveraging activities.
Revenue growth at XM was driven by record second-quarter net subscriber additions of 647,226, a 55 percent increase over the 418,449 subscribers added in the second quarter a year ago. XM ended the three months with 4.4 million subs, compared with 2.1 million reported in the second quarter of 2004. XM said it will increase its projected number of subscribers by year's end to 6 million, up from 5.5 million, based on faster than expected growth in the first half.
Cost per gross subscriber addition in the second quarter reached $98, down 3 percent from the $101 posted year-on-year.
Second-quarter subscriber growth was strong across both the retail aftermarket and automotive distribution channels. Sub revenue in the aftermarket rose to $9.84 per subscriber in the second quarter, up from $9.26 in the same three months a year earlier. Sub revenue in XM-activated vehicles with rental car companies climbed to $9.74 in the three months, up from $9.23 the previous year. Total second-quarter revenue per sub reached $10.34, compared with $9.40 year-over-year.
Subscriber aftermarket numbers in the second quarter hit 3.8 million, up from 1.7 million quarter-over-quarter. For XM activated vehicles with rental car companies, subscribers rose to 44,337 in the second quarter, up from 20,231 in the same three months in 2004.
For the six months, XM revenue hit $228.1 million, up from $95.9 million the previous year. Subscribers accounted for $206.4 million in the first half, compared with $88.4 million year-on-year. Net loss for the six months narrowed to $266.5 million, from $336.2 million in the first half of last year.
XM's president/CEO Hugh Panero noted that XM subscribers remain loyal to the service, as the company's 30 percent rate increase in April did not impact XM's churn, which remained at 1.4 percent.
At a recent earnings conference, Panero stated that Howard Stern's plans to begin airing on Sirius Satellite Radio in January will not have a big impact on XM's sales. “Clearly, we wouldn't be upping our guidance if we thought there was an issue … The Stern announcement has been out there for a while and it's had no impact,” Panero said.
Consumer awareness for the XM brand is gaining with unaided awareness at approximately 65 percent and aided awareness “in the mid-30s,” according to a spokesman.
Part of that awareness is due to the company's advertising its Major League Baseball (MLB) broadcasts. XM said that 23 percent of its new after-market subscribers for the second quarter cited MLB as the reason for buying the service. — Additional reporting by Amy Gilroy
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