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Monday, May 12, 2008

XM Satellite Radio Holdings Inc. Announces First Quarter 2008 Results

XM Satellite Radio Holdings Inc. Announces First Quarter 2008 Results

Record Automotive Additions Fuel Year-Over-Year Gains in Revenue and Subscribers; First Quarter Ending Subscribers Exceed 9.3 Million

XM-Sirius Merger Passes Department of Justice Antitrust Scrutiny

WASHINGTON, May 12 /PRNewswire-FirstCall/ -- XM Satellite Radio Holdings Inc. (NASDAQ:XMSR) today announced earnings for the three-month period ended March 31, 2008. Revenue for the first quarter 2008 rose to $308 million, a nearly 17 percent increase over first quarter 2007 revenue of $264 million.

(Logo: http://www.newscom.com/cgi-bin/prnh/20070313/XMLOGO )

XM ended first quarter 2008 with 9.33 million subscribers, an 18 percent increase, compared to 7.91 million subscribers at the end of first quarter 2007. This growth was driven by a 49 percent year-over-year increase in the number of gross additions through the automotive (OEM) channel. First quarter 2008 OEM gross additions were 802 thousand, compared to 537 thousand in first quarter 2007.

"In first quarter 2008 we delivered the largest number of new customers from the automotive channel in XM's history, marking the fourth consecutive quarter of record OEM gross additions," said Nate Davis, president and chief executive officer of XM Satellite Radio. "XM's ongoing investment in the OEM channel is paying dividends in the form of record customer additions and continued revenue growth as our OEM partners further expand XM's reach to millions of consumers."

In first quarter 2008, XM reported total gross additions of 1.034 million, and 303 thousand net subscriber additions, compared to 868 thousand gross additions and 285 thousand net subscriber additions in first quarter 2007.

First quarter 2008 adjusted operating loss was $30.7 million, compared to a loss of $27 million in first quarter 2007. The first quarter 2008 adjusted operating loss includes $3.5 million of merger related expenses, compared to $9.2 million in first quarter 2007.

XM's first quarter 2008 net loss was $129 million, compared to a first quarter 2007 net loss of $122 million. For a reconciliation of XM's net loss to adjusted operating loss, see the attached financial schedules.

In first quarter 2008, XM's subscriber acquisition costs (SAC), a component of cost per gross addition (CPGA), were $73, compared to $65 in first quarter 2007. CPGA in first quarter 2008 fell below $100 to $99 for the first time since third quarter 2006 and compares to $103 in first quarter 2007.

XM continued to maintain stability in key operating metrics of conversion and churn, both of which improved year over year. First quarter 2008 conversion was 53.3 percent, compared to first quarter 2007 conversion of 51.5 percent. First quarter 2008 churn was 1.77 percent, compared to first quarter 2007 churn of 1.78 percent.

As of March 31, 2008, the company had total available liquidity of nearly $425 million comprised of approximately $212 million in cash and cash equivalents, $62.5 million remaining on its $250 million secured credit facility and a $150 million credit facility with General Motors.

During first quarter 2008 XM continued to grow its automotive customer base and, in addition to record volumes, achieved the following:

   --  XM's OEM partners produced approximately 1 million new XM-equipped       vehicles in the first quarter 2008 alone, compared to 690 thousand in       first quarter 2007. XM unveiled its groundbreaking NavWeather Service       and announced that the real-time, weather tracking system for in-dash       GPS navigation will debut on the 2009 Acura RL and Acura TSX;    --  The first Toyota brands with factory-equipped XM arrived at       dealerships nationwide.  The all-new 2009 Toyota Corolla and Matrix       are now available with factory-installed XM Radio;    --  In the first quarter, award-winning XM NavTraffic expanded its       availability to include 2009 model year vehicles from Toyota, Infiniti       and Hyundai. More recently, GM announced NavTraffic availability in 22       of its 2009 model year vehicles. Altogether XM NavTraffic will be       available in more than 40 Honda, GM, Toyota, Nissan and Hyundai 2009       model year vehicles.    

During first quarter 2008 the company continued to enhance its industry- leading programming:

   --  XM launched its fourth season as the exclusive satellite radio       provider of Major League Baseball, airing every game for every team to       fans nationwide;    --  XM recently completed its first season of carrying every NHL game for       every team and is now airing every game of the Stanley Cup playoffs;    --  XM wrapped its first season as the official satellite radio network of       the six BCS conferences with the exclusive satellite radio broadcast       of the BCS National Championship Game;    --  XM announced it would be the exclusive satellite provider of The       Masters golf tournament for the third consecutive year, providing more       live radio coverage of the event than any other media outlet;    --  The XM Sports Nation channel added two of the biggest names in sports       talk - Dan Patrick and Tony Kornheiser;    --  XM and ESPN launched the ESPN Xtra channel, featuring premier ESPN       Radio shows from major cities, as well as new content produced by ESPN       exclusively for XM listeners;    --  XM's presidential election channel POTUS '08 won critical acclaim for       its round-the-clock coverage of the presidential primaries;    --  XM announced a partnership with EWTN, the world's largest religious       media network, to create a micro channel devoted to Pope Benedict's       first visit to the United States;    --  XM introduced two new micro channels, one dedicated to the 25th       anniversary of Michael Jackson's landmark album "Thriller," the other       dedicated to country music legend George Strait and timed for his       chart-topping album release;    --  XM's exclusive Oprah & Friends channel was honored with three national       Gracie Awards by the American Women in Radio and Television (AWRT),       which recognize exemplary programming created for women, by women and       about women in all facets of electronic media.     Merger Update  

On March 24, 2008, the U.S. Department of Justice informed XM and Sirius that it had ended its investigation into their pending merger without taking action to block the transaction. That decision means the DOJ concluded the merger is not anti-competitive and that it will allow the transaction to proceed. The companies each obtained stockholder approval in November 2007. The pending merger is still subject to approval by the Federal Communications Commission.

Webcast and Conference Call Information

XM will host an earnings conference call to discuss its first quarter 2008 financial results today, May 12, at 10:00 AM Eastern Time. Prior to the call, you can access XM Radio's first quarter 2008 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#:               46660772    

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 May 12 until August 12 via the following numbers:

     Playback Numbers:               (800) 642-1687     Local playback number:          (706) 645-9291     Conference ID#:                 46660772     About XM  

XM (NASDAQ:XMSR) is America's number one satellite radio company with more than 9.3 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 2-28-08. Copies of the filing are available upon request from XM Radio's Investor Relations Department.

                      XM SATELLITE RADIO HOLDINGS INC.               UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS    (in thousands, except share and per           Three months ended March 31,    share data)                                      2008              2007    Revenue:     Subscription                                 $275,725          $236,486     Activation                                      5,144             4,654     Merchandise                                     4,321             5,297     Net ad sales                                    9,118             7,478     Other                                          14,146            10,197   Total revenue                                   308,454           264,112   Operating expenses:     Cost of revenue (excludes depreciation      & amortization, shown below):       Revenue share & royalties                    68,822            47,426       Customer care & billing operations (1)       34,310            27,928       Cost of merchandise                           8,551            18,277       Ad sales (1)                                  4,703             3,385       Satellite & terrestrial (1)                  13,181            13,882       Broadcast & operations:         Broadcast (1)                               6,960             6,544         Operations (1)                             10,491             9,716       Total broadcast & operations                 17,451            16,260       Programming & content (1)                    51,562            43,952     Total cost of revenue                         198,580           171,110     Research & development (excludes      depreciation & amortization, shown      below) (1)                                    11,020             7,310     General & administrative (excludes      depreciation & amortization, shown      below) (1)                                    30,729            34,185     Marketing (excludes depreciation &      amortization, shown below):         Retention & support (1)                    11,797             9,756         Subsidies & distribution                   71,524            43,602         Advertising & marketing                    26,501            32,809       Marketing                                   109,822            86,167       Amortization of GM liability                  6,504             6,504     Total marketing                               116,326            92,671     Depreciation & amortization                    45,483            46,882   Total operating expenses (1)                    402,138           352,158   Operating loss                                  (93,684)          (88,046)   Other income (expense):     Interest income                                 1,675             3,544     Interest expense                              (29,327)          (27,609)     Loss from de-leveraging transactions                -            (2,965)     Equity in net loss of affiliate                (4,177)           (5,425)     Minority interest                              (3,238)           (1,697)     Other income (expense)                           (187)              444   Net loss before income taxes                   (128,938)         (121,754)     Provision for deferred income taxes              (331)             (684)   Net loss                                      $(129,269)        $(122,438)   Net loss per common share - basic and    diluted                                         $(0.42)           $(0.40)   Weighted average shares used in    computing net loss per common share    - basic and diluted                        309,674,526       305,877,670   Reconciliation of Net loss to Adjusted    operating loss:     Net loss as reported                        $(129,269)        $(122,438)   Add back Net loss items excluded from    Adjusted operating loss:     Interest income                                (1,675)           (3,544)     Interest expense                               29,327            27,609     Provision for deferred income taxes               331               684     Loss from de-leveraging transactions                -             2,965     Equity in net loss of affiliate                 4,177             5,425     Minority interest                               3,238             1,697     Other (income) expense                            187              (444)       Operating loss                              (93,684)          (88,046)     Depreciation & amortization                    45,483            46,882     Total share-based payment expense              17,504            14,131   Adjusted operating loss (2)                    $(30,697)         $(27,033)      Footnotes:   (1) These captions include non-cash           Three months ended March 31,       share-based payment expense as follows:       2008              2007       (in thousands)        Customer care & billing operations             $889              $440       Ad sales                                        607               356       Satellite & terrestrial                         642               520       Broadcast                                       793               600       Operations                                      470               378       Programming & content                         2,543             2,166       Research & development                        2,463             1,726       General & administrative                      6,052             6,048       Retention & support                           3,045             1,897         Total share-based payment expense         $17,504           $14,131    (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 Unaudited 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)                          March 31, 2008   December 31, 2007   SELECTED BALANCE SHEET DATA      Cash and cash equivalents                  $211,542          $156,686     System under construction                   161,772           151,142     Property and equipment, net                 677,509           710,370     DARS license                                141,412           141,412     Investments                                  33,259            36,981     Total assets                              1,662,174         1,609,230     Total subscriber deferred revenue           526,239           514,926     Total deferred income                       133,802           134,803     Long-term debt, net of current portion    1,666,819         1,480,639     Total liabilities                         2,699,944         2,533,787     Stockholders' deficit                    (1,097,978)         (984,303)                                                    Three months ended March 31,   SELECTED OPERATING METRICS                         2008          2007 (15)      Subscriber Data (in thousands,      except percentages):       OEM Gross Subscriber Additions (1)              802               537       Retail Gross Subscriber Additions (2) (12)      233               331         Total Gross Subscriber Additions (12)       1,034               868        OEM Net Subscriber Additions (3)                355               225       Retail Net Subscriber Additions (4)             (51)               60         Total Net Subscriber Additions                303               285        Conversion Rate (5)                            53.3%             51.5%       Monthly Churn Rate (6) (12)                    1.77%             1.78%        OEM Subscribers                               3,869             2,853       Retail Subscribers (13)                       4,480             4,422       Subscribers in OEM Promotional Periods          836               565       XM Activated Vehicles with Rental        Car Companies                                   78                23       Data Services Subscribers                        49                35       Outsourced Commercial Subscribers (13)           18                16         Total Ending Subscribers (7)                9,330             7,914         Percentage of Ending Subscribers        on Annual and Multi-Year Plans (12)           45.1%             44.0%       Percentage of Ending Subscribers        on Family Plans (12)                          23.5%             23.2%      Revenue Data (monthly average):       Subscription Revenue per Retail,        OEM & Other Subscriber (8) (14)             $10.36            $10.34       Subscription Revenue per Subscriber        in OEM Promotional Periods                   $5.60             $6.39       Subscription Revenue per XM Activated        Vehicle with Rental Car Companies            $6.27             $7.51       Subscription Revenue per       Subscriber of Data Services                  $35.34            $33.72        Average Monthly Subscription Revenue        per Subscriber ("ARPU") (9) (14)            $10.04            $10.15       Net Ad Sales Revenue per Subscriber           $0.33             $0.32       Activation, Merchandise and Other        Revenue per Subscriber (14)                  $0.86             $0.87         Total Revenue per Subscriber               $11.23            $11.34      Expense Data:       Subscriber Acquisition Costs        ("SAC") (10) (12)                              $73               $65       Cost Per Gross Addition ("CPGA") (11) (12)      $99              $103            (Certain totals may not add due to the effects of rounding)    Footnotes:   (1)  OEM gross subscriber additions are paying subscribers newly activated        in the reporting period and include Subscribers in OEM promotional        periods as well as XM activated vehicles with rental car companies.    (2)  Retail gross subscriber additions are paying subscribers newly        activated in the reporting period and include Data services        subscribers and commercial subscribers for 2007 only.    (3)  OEM net subscriber additions (OEM gross subscriber additions less        disconnects) represent the total net incremental paying subscribers        added during the period.    (4)  Retail net subscriber additions (Retail gross subscriber additions        less disconnects) represent the total net incremental paying        subscribers added during the period, including net Outsourced        commercial subscribers for 2008.    (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 for the quarter represents the weighted average        Churn rate for each month in the quarter. Churn rate represents the        average percentage of self-paying Retail, OEM & other subscribers        that discontinued service during the month divided by the average of        these beginning and ending subscribers for the month. Churn rate does        not include OEM promotional period deactivations and deactivations        resulting from the change-out of XM activated vehicles with rental        car companies.    (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, XM        activated radios in vehicles for which we have a contractual right to        receive payment for the use of our service and commercial        establishments that receive our service through our relationship with        a third party vendor. 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)  Other subscribers include weather and other stand-alone service        subscribers.    (9)  Subscription revenue includes monthly subscription revenues for our        satellite audio service and data services, net of any promotions or        discounts.    (10) 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."    (11) 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).    (12) Outsourced commercial subscribers are excluded for 2008.    (13) Approximately 16 thousand subscribers, previously reported as Retail        subscribers, are presented as Outsourced commercial subscribers for        2007 for comparability.    (14) Beginning in 2008, revenue from Outsourced commercial subscribers,        previously reported as Subscription revenue, is reported as Other        revenue.    (15) Except for as stated in footnote 13, no previously reported metrics        have been adjusted to reflect the exclusion of Outsourced commercial        subscribers.  

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

Photo: http://www.newscom.com/cgi-bin/prnh/20070313/XMLOGO

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/


Profile: International Entertainment

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