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XM Posts Q2 Sales Gain, But Increased Loss

7/27/2006 09:10:00 AM Eastern

Washington — XM Satellite Radio posted an 82 percent increase in revenue, but an increased loss for its fiscal second quarter.

XM's net loss for the second quarter, ended June 30, was $229 million, compared with a net loss of $147 million during the second quarter of 2005. The net loss includes $105 million in de-leveraging and other non-operating charges that were not incurred during the second quarter of 2005. For the second quarter of 2006, the adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) loss (non-GAAP) improved to $46 million vs. an adjusted EBITDA loss of $88 million in the second quarter of 2005. The primary differences between net loss and adjusted EBITDA are non-operating amounts and certain operating non-cash charges.

XM said for its second quarter it recorded gross subscriber additions of 926,281 and net subscriber additions of 398,012. XM finished the second quarter of 2006 with a total of 6,899,871 subscribers, a 56 percent increase over the 4,417,490 subscribers at the end of the second quarter 2005.

But based on current marketplace dynamics and regulatory uncertainties concerning plug-and-play radios, XM today also reported a change to its subscriber guidance for 2006, projecting that it will end the year with total subscribers of between 8.2 million and 7.7 million.

The company will refine its projected subscriber numbers in the range provided at the end of the third quarter when it expects to have a firmer sense of regulatory progress and availability of product for the fourth quarter, as well as retail sales trends. With this revised subscriber guidance, XM still expects to achieve positive cash flow from operations for the fourth quarter 2006 and the full year 2007, although its ability to do so becomes challenging toward the lower end of the subscriber range.

For the second quarter XM reported revenue of about $228 million, an increase of 82 percent from the $125 million reported in the second quarter of 2005. The quarterly increase in revenue was driven by 56 percent subscriber growth year over year, and increases in average revenue per subscriber. For the second quarter of 2006, XM’s subscriber acquisition cost, a component of cost per gross addition (CPGA) was $64, compared with $50 in the second quarter of 2005. CPGA was $112, compared with $98 in the second quarter of 2005.

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