XM Satellite Radio Holdings Inc. Announces Fourth Quarter and Full Year 2007 Results

XM Satellite Radio Holdings Inc. Announces Fourth Quarter and Full Year 2007 Results

Fourth Quarter and Full Year Net Loss Narrows;

2007 Revenue Increases 22% to $ 1.1 Billion;

XM Surpasses 9 Million Subscribers in 2007;

XM-Equipped New Car Production Increases 64% in 2007

WASHINGTON, Feb. 28 /PRNewswire-FirstCall/ -- XM Satellite Radio Holdings Inc. (NASDAQ:XMSR) today reported financial and operating results for the fourth quarter and full year ended December 31, 2007. XM announced that 2007 revenue increased year over year by 22 percent to $1.1 billion. XM added 1.4 million net new subscribers ending 2007 with more than 9 million subscribers, an 18 percent increase over the prior year. In 2007, XM's automotive partners increased production of XM-equipped vehicles by 64 percent over 2006, with 3.5 million installs and more than a million in the fourth quarter alone.

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"XM substantially improved its business operations in 2007 as we grew our subscriber base and revenues and narrowed our loss, positioning us as a stronger and more focused company better positioned to meet the competitive challenges of the future," said Nate Davis, president and chief executive officer, XM Satellite Radio. "XM has doubled its revenues in the last two years and our investment and robust performance in the new car market establishes a clear path for sustained future growth."

"Our pending merger will benefit shareholders and offer consumers more programming choices and lower prices," Davis continued. "We are pleased with the strong support our merger has received from a broad range of organizations, and we look forward to regulatory approval in the near future."

Fourth Quarter and Full-Year Financial Results

For the fourth quarter of 2007, XM reported total revenue of $308 million, an increase of 20 percent over the $257 million total revenue reported in fourth quarter of 2006. XM's full year 2007 total revenue was $1.1 billion, an increase of 22 percent over the $933 million total revenue recorded in 2006.

Net loss for the fourth quarter of 2007 narrowed by $18 million over the prior year to ($239) million compared to a net loss for the fourth quarter 2006 of ($257) million. Full year net loss improved by $37 million over the prior year to ($682) million compared to a full year 2006 net loss of ($719) million.

Net loss per share for the fourth quarter was 78 cents, which included a total of 25 cents for certain merger and settlement related charges.

Full year 2007 adjusted operating loss of $238 million included merger and settlement charges of $86 million which were excluded from our guidance range of $170 million to $180 million loss. Fourth Quarter adjusted operating loss of $117 million included $58 million of the aforementioned $86 million of merger and settlement charges.

Industry-leading Programming

2007 was another exceptional year for XM programming. XM kicked off its third season of Major League Baseball and its first season of college sports from all six major conferences: the ACC, BIG EAST, Big Ten, Big 12, Pac-10, and SEC. The company introduced new channels, including XMX, an innovative new channel featuring XM's most popular and critically-acclaimed original music shows all in one place. In 2007, Bob Dylan launched the second season of his award-winning show, "Theme Time Radio Hour," and XM recently marked the expansion of exclusive programming on the popular Oprah & Friends channel. In anticipation of the presidential primary season, XM debuted the nation's first radio channel dedicated to a presidential campaign, POTUS '08, which was named "one of the ten most important voices to listen to" this election year by Best Life magazine.

XM's Automotive Partners Continue to Expand Availability of XM-Equipped Vehicles - First Toyota Brands with Factory-Equipped XM Now At Dealerships

In 2007, XM's automotive partners produced 3.5 million XM-equipped vehicles. The fourth quarter of 2007 saw XM's automotive partners continue to announce and introduce more vehicle models with factory-equipped XM and the real-time traffic service XM NavTraffic. The all-new 2009 Toyota Corolla and Matrix are now available with factory-installed XM Radio. In addition, XM NavTraffic will be available on Corolla and Matrix this spring. General Motors expanded XM as standard equipment on all 2008 Buick, HUMMER, and Saab models. Hyundai announced that the 2008 Tiburon, Accent, and Tuscon models with standard XM will be available in the spring of 2008. Factory-equipped XM and XM NavTraffic options for the 2009 Nissan Murano are available now, and Kawasaki unveiled its first motorcycles with satellite radio in partnership with XM.

XM Podcasts Debut on XMRadio.com and Apple's iTunes Store

In December 2007, XM introduced free podcasts of select XM programs made available on XMRadio.com and Apple's iTunes Store. Two of XM's podcasts ranked among iTunes Top 10 Podcasts. For the first time, consumers can download a variety of XM talk, music, comedy, and sports podcasts for portable media players and personal computers. These podcasts let consumers experience a small, but compelling, sample of XM's programming diversity.

XM Radios Take Top Honors in 2007 Year-End Reviews

XM's newest radio, the XpressRC plug-and-play receiver, took top honors in 2007 year-end product reviews by WIRED, Popular Science, and Men's Health magazines. In addition, XM received four Innovations Awards for outstanding products at the 2008 Consumer Electronics Show.

Webcast and Conference Call Information

XM will host an earnings conference call to discuss its full year and fourth quarter 2007 results today, February 28, at 10:00 AM Eastern Time. Prior to the call, you can access XM Radio's full year and fourth quarter 2007 results on the Company's website at http://www.xmradio.com/. To listen to the conference call via telephone, please call one of the following numbers approximately 10 minutes prior to the planned start of the call:

   Call-in number: (877) 265-5808   Local call-in number: (706) 679-7931   Conference ID#: 35479749   

The conference call can also be accessed through a live webcast on the Company's website at http://www.xmradio.com/(click on "Investor Info" link at the bottom of the page). The webcast of the call will also be archived on the Company's Web site. A replay of the conference call will be available after 11:30 a.m. ET on February 28 until May 28 via the following numbers:

   Playback Numbers: (800) 642-1687   Local playback number: (706) 645-9291   Conference ID#: 35479749    About XM  

XM (NASDAQ:XMSR) is America's number one satellite radio company with more than 9 million subscribers. Broadcasting live daily from studios in Washington, DC, New York City, Chicago, Nashville, Toronto and Montreal, XM's 2008 lineup includes more than 170 digital channels of choice from coast to coast: commercial-free music, premier sports, news, talk radio, comedy, children's and entertainment programming; and the most advanced traffic and weather information.

XM, the leader in satellite-delivered entertainment and data services for the automobile market through partnerships with General Motors, Honda, Hyundai, Nissan, Porsche, Subaru, Suzuki and Toyota is available in 140 different vehicle models for 2008. XM's industry-leading products are available at consumer electronics retailers nationwide. XM programming is also available through XM Radio Online, as downloads of original XM shows via podcasts from XM's Web site or the Apple's iTunes Store, and as streams of commercial-free XM music channels to AT&T and Alltel wireless customers through XM Radio Mobile. For more information about XM hardware, programming and partnerships, please visit http://www.xmradio.com/.

Factors that could cause actual results to differ materially from those in the forward-looking statements in this press release include demand for XM Satellite Radio's service, our significant expenditures and losses, our dependence on technology and third party vendors, our potential need for additional financing, the health of our satellites, the impact of our proposed merger with Sirius, our substantial indebtedness as well as other risks described in XM Satellite Radio Holdings Inc.'s Form 10-K filed with the Securities and Exchange Commission on 3-1-07. Copies of the filing are available upon request from XM Radio's Investor Relations Department.

                      XM SATELLITE RADIO HOLDINGS INC.                AUDITED CONSOLIDATED STATEMENT OF OPERATIONS                                  Three months ended      Twelve months ended                                     December 31,            December 31,   (in thousands, except    share and per share    data)                          2007        2006        2007        2006                             (unaudited)  (unaudited)   Revenue:     Subscription               $266,445    $220,542  $1,005,479    $825,626     Activation                    5,006       4,459      19,354      16,192     Merchandise                  13,068      10,076      28,333      21,720     Net ad sales                 10,801      11,045      39,148      35,330     Other                        12,379      11,000      44,228      34,549   Total revenue                 307,699     257,122   1,136,542     933,417   Operating expenses:     Cost of revenue (excludes      depreciation &      amortization,      shown below):       Revenue share & royalties 106,779      43,405     256,344     149,010       Customer care &        billing operations (1)    36,703      28,850     126,776     104,871       Cost of merchandise        21,448      20,525      62,003      48,949       Ad sales (1)                4,848       4,768      20,592      15,961       Satellite &        terrestrial (1)           13,271      12,729      54,434      49,019       Broadcast & operations:         Broadcast (1)             7,033       5,869      26,602      23,049         Operations (1)            9,351       9,164      38,465      34,683       Total broadcast &        operations                16,384      15,033      65,067      57,732       Programming & content (1)  51,297      46,427     183,900     165,196     Total cost of revenue       250,730     171,737     769,116     590,738     Research & development      (excludes depreciation      & amortization, shown      below) (1)                   9,265       9,080      33,077      37,428     General & administrative      (excludes depreciation      & amortization, shown      below) (1)                  33,755      30,327     150,109      88,626     Marketing (excludes      depreciation &      amortization,      shown below):       Retention & support (1)    12,702       9,064      44,580      31,842       Subsidies &        distribution (1)          90,028      68,822     259,143     224,862       Advertising &        marketing (1)             59,639      57,431     178,743     164,379     Marketing                   162,369     135,317     482,466     421,083     Amortization of GM      liability                    6,504       6,504      26,015      29,760     Total marketing             168,873     141,821     508,481     450,843     Depreciation & amortization  47,407      44,043     187,196     168,880   Total operating expenses (1)  510,030     397,008   1,647,979   1,336,515   Operating loss               (202,331)   (139,886)   (511,437)   (403,098)   Other income (expense):     Interest income               2,807       3,499      14,084      21,664     Interest expense            (28,816)    (34,958)   (116,605)   (121,304)     Loss from de-leveraging      transactions                  (728)    (21,443)     (3,693)   (122,189)     Loss from impairment of      investments                 (3,360)    (57,646)    (39,665)    (76,572)     Equity in net loss of      affiliate                   (3,768)     (5,286)    (16,491)    (23,229)     Minority interest            (3,267)          -     (11,532)          -     Other income (expense)          776         233       2,019       5,842   Net loss before income    taxes                       (238,687)   (255,487)   (683,320)   (718,886)     (Provision for) benefit      from deferred income      taxes                         (131)     (1,237)        939          14   Net loss                     (238,818)   (256,724)   (682,381)   (718,872)     8.25% Series B and C      preferred stock      dividend requirement             -        (530)          -      (6,127)     8.25% Series B preferred      stock retirement loss            -           -           -        (755)     8.25% Series C preferred      stock retirement loss            -      (5,938)          -      (5,938)   Net loss attributable to    common stockholders        $(238,818)  $(263,192)  $(682,381)  $(731,692)   Net loss per common share    - basic and diluted           $(0.78)     $(0.90)     $(2.22)     $(2.70)   Weighted average shares    used in computing net    loss per common share    - basic and diluted      307,474,429 293,797,483 306,700,022 270,586,682    Reconciliation of Net    loss to Adjusted    operating loss:     Net loss as reported      $(238,818)  $(256,724)  $(682,381)  $(718,872)   Add back Net loss items    excluded from Adjusted    operating loss:     Interest income              (2,807)     (3,499)    (14,084)    (21,664)     Interest expense             28,816      34,958     116,605     121,304     Provision for (benefit      from) deferred income taxes    131       1,237        (939)        (14)     Loss from de-leveraging      transactions                   728      21,443       3,693     122,189     Loss from impairment of      investments                  3,360      57,646      39,665      76,572     Equity in net loss of      affiliate                    3,768       5,286      16,491      23,229     Minority interest             3,267           -      11,532           -     Other (income) expense         (776)       (233)     (2,019)     (5,842)       Operating loss           (202,331)   (139,886)   (511,437)   (403,098)     Depreciation & amortization  47,407      44,043     187,196     168,880     Total share-based payment      expense                     38,001      26,024      86,199      68,046   Adjusted operating loss (2) $(116,923)   $(69,819)  $(238,042)  $(166,172)      Footnotes:                                Three months      Twelve months   (1) These captions include non-cash           ended             ended       share-based payment expense as         December 31,      December 31,       follows:                              2007     2006     2007     2006       (in thousands)                   (unaudited)(unaudited)        Customer care & billing operations     $820     $615   $2,483   $1,338       Ad sales                                514      870    1,910    2,397       Satellite & terrestrial                 689    1,010    2,308    2,649       Broadcast                               729    1,131    2,716    2,880       Operations                              434      853    1,600    2,425       Programming & content                 2,170    4,216    8,855   10,878       Research & development                2,283    3,257    7,929    8,655       General & administrative              5,400   10,710   26,689   28,124       Retention & support                   2,962    3,362    9,709    8,700       Subsidies & distribution              9,167        -    9,167        -       Advertising & marketing              12,833        -   12,833        -         Total share-based payment expense $38,001  $26,024  $86,199  $68,046    (2) Adjusted operating loss is net loss before interest income, interest       expense, income taxes, depreciation and amortization, loss from de-       leveraging transactions, loss from impairment of investments, equity       in net loss of affiliate, minority interest, other income (expense)       and share-based payment expense. This non-GAAP measure should be used       in addition to, but not as a substitute for, the analysis provided in       the statement of operations. We believe Adjusted operating loss is a       useful measure of our operating performance and improves comparability       between periods. Adjusted operating loss is a significant basis used       by management to measure our success in acquiring, retaining and       servicing subscribers because we believe this measure provides insight       into our ability to grow revenues in a cost-effective manner. We       believe Adjusted operating loss is a calculation used as a basis for       investors, analysts and credit rating agencies to evaluate and compare       the periodic and future operating performances and value of our       company and similar companies in our industry.        Because we have funded 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. We believe Adjusted operating loss provides helpful       information about the operating performance of our business apart from       the expenses associated with our physical plant or capital structure.       We believe it is appropriate to exclude depreciation, amortization and       interest expense due to the variability of the timing of capital       expenditures, estimated useful lives and fluctuation in interest       rates. We exclude income taxes due to our tax losses and timing       differences, so that certain periods will reflect a tax benefit, while       others an expense, neither of which is reflective of our operating       results. Because of the variety of equity awards used by companies,       the varying methodologies for determining share-based payment       expense and the subjective assumptions involved in those       determinations, we believe excluding share-based payment expense       enhances the ability of management and investors to compare our core       operating results with those of similar companies in our industry.        Equity in net loss of affiliate represents our share of losses in a       non-US affiliate in a similar business and over which we exercise       significant influence, but do not control. Management believes it is       appropriate to exclude this loss when evaluating the performance of       our own operations. Additionally, we exclude loss from de-leveraging       transactions, loss from impairment of investments, minority interest       and other income (expense) because these items represent activity       outside of our core business operations and can distort period to       period comparisons of operating performance.        There are limitations associated with the use of Adjusted operating       loss in evaluating our company compared with net loss, which reflects       overall financial performance. Adjusted operating loss does not       reflect the impact on our financial results of (i) interest income,       (ii) interest expense, (iii) income taxes, (iv) depreciation and       amortization, (v) loss from de-leveraging transactions, (vi) loss from       impairment of investments, (vii) equity in net loss of affiliate,       (viii) minority interest, (ix) other income (expense) and (x) share-       based payment expense, which are included in the computation of net       loss. Users that wish to compare and evaluate our company based on our       net loss should refer to our Consolidated Statements of Operations.       Adjusted operating loss does not purport to represent operating loss       or cash flow from operating activities, as those terms are defined       under United States generally accepted accounting principles, and       should not be considered as an alternative to those measurements as an       indicator of our performance. In addition, our measure of Adjusted       operating loss may not be comparable to similarly titled measures of       other companies.                         XM SATELLITE RADIO HOLDINGS INC.                  SELECTED FINANCIAL AND OPERATING METRICS                                                        As of   (in thousands)                    December 31, 2007   December 31, 2006   SELECTED BALANCE SHEET DATA      Cash and cash equivalents                $156,686            $218,216     System under construction                 151,142             126,049     Property and equipment, net               710,370             849,662     DARS license                              141,412             141,387     Investments                                36,981              80,591     Total assets                            1,609,230           1,840,618     Total subscriber deferred revenue         514,926             427,193     Total deferred income                     134,803             140,695     Long-term debt, net of current portion  1,480,639           1,286,179     Total liabilities                       2,533,787           2,238,499     Stockholders' deficit                    (984,303)           (397,880)                                                Three months      Twelve months                                                 ended             ended                                              December 31,      December 31,   SELECTED OPERATING METRICS                2007     2006     2007     2006      Subscriber Data (in thousands,      except percentages):       OEM Gross Subscriber Additions (1)     766      524    2,622    2,085       Retail Gross Subscriber        Additions (2)                         364      540    1,269    1,781         Total Gross Subscriber          Additions (3)                     1,130    1,065    3,891    3,866        OEM Net Subscriber Additions (1)       361      172    1,213      884       Retail Net Subscriber Additions (2)     99      271      185      812         Total Net Subscriber Additions (4)   460      443    1,398    1,696        Conversion Rate (5)                   53.9%    52.4%    52.7%    53.3%       Monthly Churn Rate (6)                1.72%    1.79%    1.75%    1.77%        OEM Subscribers                      3,590    2,655    3,590    2,655       Retail Subscribers                   4,552    4,380    4,552    4,380       Subscribers in OEM Promotional        Periods                               777      555      777      555       XM Activated Vehicles with Rental        Car Companies                          61        5       61        5       Data Services Subscribers               46       33       46       33         Total Ending Subscribers (7)       9,027    7,629    9,027    7,629        Percentage of Ending Subscribers        on Annual and Multi-Year Plans       44.8%    44.2%    44.8%    44.2%       Percentage of Ending Subscribers        on Family Plans                      23.6%    22.5%    23.6%    22.5%      Revenue Data (monthly average):       Subscription Revenue per Retail,        OEM & Other Subscriber             $10.42   $10.26   $10.39   $10.37       Subscription Revenue per Subscriber        in OEM Promotional Periods          $5.97    $6.35    $6.15    $6.23       Subscription Revenue per XM        Activated Vehicle with Rental        Car Companies                       $6.75    $3.10    $7.03    $5.96       Subscription Revenue per Subscriber        of Data Services                   $35.95   $34.33   $34.77   $31.74        Average Monthly Subscription Revenue        per Subscriber ("ARPU") (8)        $10.14   $10.05   $10.15   $10.09       Net Ad Sales Revenue per Subscriber  $0.41    $0.50    $0.40    $0.43       Activation, Merchandise and Other        Revenue per Subscriber              $1.16    $1.16    $0.93    $0.89         Total Revenue per Subscriber      $11.71   $11.72   $11.48   $11.41        Expense Data:         Subscriber Acquisition Costs          ("SAC") (9)                         $87      $74      $75      $65         Cost Per Gross Addition          ("CPGA") (10)                      $140     $128     $121     $108    (Certain totals may not add due to the effects of rounding)    Footnotes:   (1) OEM subscribers include subscribers in OEM promotional periods as well       as XM activated vehicles with rental car companies.    (2) Retail subscribers include data services subscribers.    (3) Gross Subscriber Additions are paying subscribers newly activated in       the reporting period.    (4) Net Subscriber Additions represent the total net incremental paying       subscribers added during the period (Gross Subscriber Additions less       disconnects).    (5) We measure the success of these promotional programs included in our       OEM promotional subscriber count based on the percentage of new       promotional subscribers that elect to receive the XM service and       convert to self-paying subscribers after the initial promotion period.       We refer to this as the "conversion rate."    (6) Monthly Churn Rate represents the average percentage of self-paying       Retail, OEM & Other Subscribers that discontinued service during the       month divided by the monthly weighted average ending subscribers.       Monthly Churn Rate does not include OEM promotional period       deactivations or deactivations resulting from the change-out of XM-       enabled rental car activity.    (7) Subscribers-Subscribers are those who are receiving and have agreed to       pay for our service, including those who are currently in promotional       periods paid in part by vehicle manufacturers, as well as XM activated       radios in vehicles for which we have a contractual right to receive       payment for the use of our service. We count radios individually as       subscribers. Retail subscribers consist primarily of subscribers who       purchased their radio at retail outlets, distributors, or through XM's       direct sales efforts. OEM subscribers are self-paying subscribers       whose XM radio was installed by an OEM and are not currently in OEM       promotional programs. OEM promotional subscribers are subscribers who       receive a fixed period of XM service where XM receives revenue from       the OEM for the trial period following the initial purchase or lease       of the vehicle. In situations where XM receives no revenue from the       OEM during the trial period, the subscriber is not included in XM's       subscriber count. At the time of sale, some vehicle owners receive a       three month prepaid trial subscription. Promotional periods generally       include the period of trial service plus 30 days to handle the receipt       and processing of payments. The automated activation program provides       activated XM radios on dealer lots for test drives but XM does not       include these vehicles in its subscriber count. XM's OEM partners       generally indicate the inclusion of three months of XM service on the       window sticker of XM-enabled vehicles. XM, historically and including       the 2006 model year, receives a negotiated rate for providing audio       service to rental car companies. Beginning with the 2007 model year,       XM entered into marketing arrangements which govern the rate which XM       receives for providing audio service on certain rental fleet vehicles.       Data services subscribers are those subscribers that are receiving       services that include stand-alone XM WX Satellite Weather service,       stand-alone XM Radio Online service and stand-alone NavTraffic       service. Stand-alone XM WX Satellite Weather service packages range in       price from $29.99 to $99.99 per month. Stand-alone XM Radio Online       service is $7.99 per month. Stand-alone NavTraffic service is $9.95       per month. XM generally charges a range of $9.99-$11.87 per month for       its audio service for annual and multi-year plans and $6.99 per month       for a family plan.    (8) Subscription Revenue includes monthly subscription revenues for our       satellite audio service and data services, net of any promotions or       discounts.    (9) SAC - Subscriber acquisition costs include Subsidies & distribution       and the negative gross profit on merchandise revenue. Subscriber       acquisition costs are divided by gross additions to calculate what we       refer to as "SAC."  The previously reported amounts under the prior       definition for the three and twelve months ended December 31, 2006       were $74 and $64, respectively.    (10) CPGA - CPGA costs include the amounts in SAC, as well as Advertising       & marketing. These costs are divided by the gross additions for the       period to calculate CPGA. CPGA costs do not include marketing staff       (included in Retention & support) or the amortization of the GM       guaranteed payments (included in Amortization of GM liability). The       previously reported amounts under the prior definition for the three       and twelve months ended December 31, 2006 were $128 and $108,       respectively.  

First Call Analyst:
FCMN Contact: david.butler@xmradio.com

Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20070313/XMLOGO
AP Archive: http://photoarchive.ap.org/
PRN Photo Desk, photodesk@prnewswire.com

Source: XM Satellite Radio Holdings Inc.

CONTACT: Investors, Joe Wilkinson, +1-202-380-4008,
joe.wilkinson@xmradio.com or Richard Sloane, +1-202-380-1439,
richard.sloane@xmradio.com; Media, Nathaniel Brown, +1-212-708-6170,
nathaniel.brown@xmradio.com or Chance Patterson, +1-202-380-4318,
chance.patterson@xmradio.com, all of XM Satellite Radio Holdings Inc.

Web site: http://www.xmradio.com/

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Profile: International Entertainment