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XM Reports More Revenue, More Subs, Reduced Loss

Washington — XM Satellite Radio reported higher revenue, a reduced net loss and 43 percent more subscribers for the quarter ended Sept. 30 vs. the same time last year.

Revenue increased by 57 percent year-over-year to about $240 million, while XM’s net loss for the quarter reduced 36 percent to $84 million. XM ended the third quarter with 7.185 million subscribers, an increase of 43 percent over the prior year’s third quarter.

XM said it will begin shifting its marketing away from offering subsidies on its products toward offering subsidies on the XM service plan.New subscribers will receive discounts for signing up for one or more years.

“We’ve been discounting radios and asking consumers to sign up for three months.We’ll try to give more discounts on service and ask consumers to sign up for one to three years,” said a spokesman on an earnings call this morning.

In addition, XM said it expects its growth over the next two to three years to be driven mainly by OEM automotive sales.At present there are 5.5 million cars with factory installed XM radios on the road said CEO Hugh Panero.

Recently appointed president and COO Nate Davis said he expects retail sales to also grow, but perhaps not at the peak levels seen in 2005.

On the issue of parity at retail with Sirius, XM said that if Radio Shack is subtracted from the picture and we look at sales in Wal-Mart, Best Buy, Circuit City and smaller retailers, XM’s market share is about 49 to 50 percent.It said Sirius’s advantage lies in its sales through Radio Shack where it is the exclusive satellite radio vendor.

XM said it is improving s execution at retail by acting to ensure that in-store demo units are working properly, that reps are well trained and shelves are stocked, it said.

Sales of the XM wearable MP3 combos—the Pioneer Inno and Samsung Helix—are running flat and the company is now offering a rebate on the Samsung Nexus, it said.

The increase in revenue was driven by subscriber growth year-over-year, and increases in average revenue per subscriber, XM said. The satellite radio provider’s net loss for the quarter was $84 million compared to a net loss of $132 million during the third quarter of 2005, a 36 percent improvement.

For the third quarter of 2006, the adjusted EBITDA loss (non- GAAP) substantially improved to a loss of just $2 million versus an adjusted EBITDA loss of $70 million in the third quarter of 2005. The primary differences between net loss and adjusted EBITDA are non-operating amounts and certain operating non-cash charges.

For the third quarter 2006, XM recorded gross subscriber additions of 868,007 and net subscriber additions of 286,002. XM finished the third quarter 2006 with a total of 7,185,873 subscribers, representing a 43 percent increase over the 5,034,642 subscribers at the end of the third quarter 2005.

For the third quarter of 2006, XM’s subscriber acquisition cost (SAC), a component of cost per gross addition (CPGA) was $60 compared to $53 in the third quarter of 2005. CPGA was $93 compared to $89 in the third quarter of 2005.

XM projects that it will end the year with a total of subscribers between 7.7 million and 7.9 million, which is within the previously announced guidance range. XM expects to achieve positive cash flow from operations for the fourth quarter 2006. Consistent with the above range of subscribers, 2006 subscription revenue is expected to be in the $810 million to $815 million range and adjusted EBITDA Loss is expected to be in the $205 million to $215 million range. XM will provide 2007 guidance, including subscribers, subscription revenues, EBITDA and cash flows, when it provides full year 2006 results.

XM said it continues to believe it will reach or near 20 million subscribers in the year 2010.

XM also launched its fourth satellite which is expected to deliver XM broadcasts for the next 15 years.