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XM Announces Fourth Quarter and Full Year 2005 Results


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#1 of 1 ONLINE   Ronald Epstein

Ronald Epstein

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Posted February 16 2006 - 12:38 AM

XM Announces Fourth Quarter and Full Year 2005 Results
Press Release Source: XM Satellite Radio Holdings Inc.

XM Satellite Radio Holdings Inc. Announces Fourth Quarter and Full Year 2005 Results; XM to Exceed Nine Million Subscribers and Reach Cash Flow Break-Even By Year-End 2006

Thursday February 16, 7:00 am ET
XM Adds Over 2.7 Million Net Subscribers in 2005; 2005 Subscription Revenue More than Doubles to $503 Million

WASHINGTON, Feb. 16 /PRNewswire-FirstCall/ -- XM Satellite Radio Holdings Inc. (Nasdaq: XMSR - News) today reported financial and operating results for the fourth quarter and full year ended December 31, 2005. XM reported sharply higher 2005 revenue, and the Company said it expected to report positive cash flow from operations in the fourth quarter of 2006.

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"2005 was a significant growth year for XM in which we added more than 2.7 million net subscribers," said Hugh Panero, President and CEO of XM Satellite Radio. "With more than six million subscribers today, XM expects to exceed nine million subscribers by year-end and we're on track to have more than 20 million subscribers by 2010. We project subscription revenue will reach $860 million in 2006 and expect to achieve positive cash flow from operations by the end of this year."

Panero continued, "Last week, we reinforced XM's position as the premium content leader across all of radio with our announcement of the "Oprah & Friends" channel that will complement our music, talk and sports programming starting in September."

XM ended 2005 with 5,932,957 subscribers, an increase of 84 percent over 2004. Despite an intensely competitive marketplace in the fourth quarter, XM achieved net subscriber additions of 898,315. Later than expected activations from strong holiday sales brought the total to more than six million during the first week of January.

"XM achieved significant growth, added quality content and signed up important new automotive distribution partners in 2005," Panero said. "At the start of 2005, XM had 3.2 million subscribers and led the satellite radio competition by 2.1 million subscribers. Over the course of the year, XM increased that lead to 2.6 million subscribers."

Fourth Quarter and Full-Year Financial Results

For the fourth quarter of 2005, XM reported quarterly total revenue of $177 million, an increase of 113 percent over the $83.1 million total revenue reported in fourth quarter of 2004. XM's full year 2005 total revenue was $558.3 million, an increase of 128 percent over the $244.4 million total revenue recorded in 2004. These quarterly and annual increases in revenue were driven by our significant 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 $89 compared to $64 in the same period last year. CPGA in the fourth quarter was $141 compared to $104 in the same period last year. These increases were primarily due to higher marketing expenses to meet a one-time competitive event in the fourth quarter. For full year 2005, SAC was $64, a slight increase from $62 in 2004, and CPGA was $109, compared to $100 in 2004. In the first quarter of 2006, XM expects a more normalized market environment and projects that SAC and CPGA will decrease in 2006.

XM reported an EBITDA loss of ($199.4) million for the fourth quarter of 2005, including $25.3 million in de-leveraging charges, compared to an EBITDA loss of ($139.7) million for the fourth quarter of 2004, which included $41.6 million in de-leveraging charges. The full year EBITDA loss was ($434.3) million, including $27.6 million in de-leveraging charges, compared to a 2004 EBITDA loss of ($388.4) million which included $76.6 million of de-leveraging charges. The increased EBITDA loss primarily resulted from our increase in subscribers as well as the higher fourth quarter marketing expenses.

XM's net loss for the fourth quarter of 2005 was ($268.3) million as compared to a net loss of ($188.2) million in the fourth quarter of 2004. For the full year 2005, XM's net loss was ($666.7) million, compared to a net loss of ($642.4) million in 2004.

In 2005, we continued to strengthen XM's balance sheet by selected de-leveraging activities. Specifically, XM entered into agreements to exchange debt with carrying value of $80 million ($94 million accreted face value at maturity) for $41 million cash and 18.3 million common shares. This activity related to the retirement of 100 percent or $23 million face value of our 14% Senior Secured Notes due 2010, $15 million of our 12% Senior Secured Notes due 2010 and $56 million of our 10% Senior Secured Convertible Discount Notes due 2009. From these activities, we recognized de-leveraging charges of approximately $28 million while eliminating $45 million of future interest payments. In January 2006, XM exchanged $52 million aggregate of the 10% Senior Secured Convertible Discount Notes due 2009 for 17.1 million shares. The Company estimated that this transaction would release it from $21 million of interest payments over the next four years. XM will recognize approximately $18 million of de-leveraging charges in connection with this transaction in the first quarter of 2006.

XM ended the year with $711 million in cash and cash equivalents with additional capacity provided by our undrawn $135 million GM Facilities. XM will opportunistically continue to improve and reshape the balance sheet in 2006.

XM is the Premium Content Leader with an Unmatched Programming Lineup

The "Oprah & Friends" channel completes XM's programming plan to deliver the best in music, sports and talk to our customer base.

* Oprah & Friends: XM will launch the exclusive "Oprah & Friends" channel this September. The channel will feature a broad range of original programming including a weekly radio show hosted by Oprah Winfrey and Gayle King. Other regular segments will be hosted by popular "Oprah"
personalities including Bob Greene, Dr. Mehmet Oz, Dr. Robin Smith, Marianne Williamson, and Nate Berkus. The channel will be broadcast from a new state-of-the-art XM studio at Harpo Studios in Chicago.

* Major League Baseball: XM's acclaimed coverage of Major League Baseball gears up this month as pitchers and catchers report to spring training in preparation for the 2006 season. XM's baseball coverage includes live broadcasts of all 39 games of the inaugural World Baseball
Classic, plus live coverage of spring training games in Florida and Arizona.

* Bob Dylan and more: Music legend Bob Dylan and hip-hop superstar Ludacris are each hosting their own exclusive XM music show starting this year. They join Tom Petty, Snoop Dogg, and Quincy Jones amongst others to make XM's commercial-free music line-up even more appealing.

* Sports Talk: NASCAR champions Dale Earnhardt, Jr. and Jimmie Johnson and Duke Basketball Coach Mike Krzyzewski, among others, have all joined XM's sports radio talk line-up.

* Take Five: In 2005, XM debuted Take Five, a talk and lifestyle channel focused on women. Take Five offers daily satellite radio broadcasts of the "Ellen DeGeneres Show," the "Tyra Banks Show," the "Good Morning America Radio Show," and also features content from the Food Network,
Home and Garden Television and the "Satellite Sisters."

* FOX News and Other Leading Talk Programming: XM offers the FOX News Channel, the top-rated cable news network, as well as the recently launched FOX News Talk radio channel, which features well known TV and radio commentators from the FOX line-up. XM is also the exclusive satellite radio home for Air America Radio, featuring Al Franken.

* NHL Hockey, World Cup Germany 2006 and College Sports: XM began broadcasting NHL games this season and will become the NHL's exclusive satellite radio broadcast partner for the 2007-8 season through a ten-year agreement. This May, XM will broadcast the play-by-play of all 64 soccer matches of the 2006 FIFA® World Cup Germany in both English and Spanish in cooperation with legendary sportscaster Andres Cantor. We also recently expanded our college sports offering with BIG EAST basketball and football broadcasts, adding to our existing ACC, PAC-10
and Big Ten broadcasts.

XM Introduces the First Integrated Portable XM Satellite Radio/MP3 Player

In January, at the Consumer Electronic Show in Las Vegas, XM unveiled the Pioneer Inno™ and Samsung Helix™. These products, smaller than a deck of cards, combine live XM and MP3, two of the most popular forms of audio entertainment over the past 20 years. Subscribers will be able to record XM favorites for enjoyment at their convenience -- similar to television recording capabilities -- plus purchase and download their own MP3 songs, and listen to their music anywhere and everywhere. These new products will begin shipping in March and be available in significant quantities during the second quarter.

Other key products for XM in 2006 will be the recently-introduced Audiovox XM Xpress, Delphi XM RoadyXT and the AGT Sportscaster plug-and-play radios as well as the XM Passport. The Passport is the first satellite radio "mini" tuner; a tiny, portable cartridge that delivers XM content to consumer electronic devices for the home, vehicle, and portable use via one subscription.

Nissan and Hyundai Join XM's Exclusive Factory-Installed OEM Partners, GM,

Honda and Toyota

In 2005, XM entered into exclusive arrangements for the distribution of factory-installed satellite radios in Nissan and Hyundai automobiles while our key OEM partners GM, Honda and Toyota expanded their distribution of vehicles with XM radios.

In 2006, XM expects to see solid growth in its OEM channel. General Motors expects to produce 1.55 million XM equipped vehicles during calendar 2006, up from 1.4 million in 2005. In September 2005, GM produced its 3 millionth XM- equipped vehicle. Honda announced in the fourth quarter of 2005 that it plans to factory install 550,000 XM radios in model year 2006, up from 400,000 in model year 2005. Toyota will expand XM availability and will launch its first factory-installed program later in 2006.

Most importantly, however, 2006 will be the staging year for more dramatic OEM growth in 2007, 2008 and beyond as Hyundai, Nissan and Toyota production expands. Hyundai plans to offer XM as a standard feature in its vehicles, with installations starting at the end of 2006. Nissan plans to produce more than 500,000 vehicles with XM factory installed during model year 2008 and more than one million vehicles during model year 2010. XM's OEM leadership position has been secured for the long term with the biggest and fastest growing car companies.

2005 XM Strategic Initiatives

* Canadian Satellite Radio (CSR) (Toronto: XSR.SV - News): XM owns 23% of CSR, which launched service in November 2005 as XM Canada and completed its initial public offering in December 2005. XM Canada's channels include
XM commercial-free music and extensive NHL hockey play-by-play coverage (exclusive to XM beginning with the 2007-2008 season).

* WorldSpace (Nasdaq: WRSP - News): In July 2005, XM invested $25 million in WorldSpace. WorldSpace provides satellite radio services in Asia, Europe, the Middle East and Africa.

* WCS Wireless: In July 2005, XM entered into an agreement to acquire WCS Wireless, a private entity with wireless spectrum licenses in geographic areas covering 163 million people throughout the US, including 15 of the top 20 metropolitan markets, for 5.5 million shares. XM and WCS Wireless are awaiting necessary regulatory approvals
for license and ownership transfer.

 

Ronald J Epstein
Home Theater Forum co-owner

 

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