WorldSpace Announces Third Quarter 2005 Results

SILVER SPRING, Md., Nov. 7 /PRNewswire-FirstCall/ -- WorldSpace, Inc. , one of the world leaders in satellite-based digital radio services, today reported its financial and operating results for the third quarter ended September 30, 2005.

WorldSpace finished the quarter with 75,071 subscribers. The Company added 11,141 subscribers in the third quarter this year, an increase of 78 percent over the 6,253 subscribers added in third quarter of 2004. In India, the Company has 35,670 subscribers at the end of the third quarter, of which 7,737 were added between July and September, an increase of 114% over the 3,616 added in the third quarter of 2004. In addition, WorldSpace added over 12,000 subscribers in India in October 2005 as part of its holiday marketing campaign.

At the end of the third quarter, WorldSpace distributed its satellite radio services to six cities in India, consisting of Mumbai, Delhi, Bangalore, Chennai, Hyderabad and Kochi. In addition services in Pune and Ahmedabad were launched in October. WorldSpace's market distribution is now available to a population of more than 50 million, including nearly 29 million households in the segment of the population that WorldSpace is targeting.

"During the third quarter we have made operational progress that puts us well on the path of delivering strong subscriber growth. This growth is clearly visible in our successful October holiday marketing campaign," said Noah Samara, WorldSpace's Chairman and CEO. "We have significantly increased our marketing and retail presence in key cities in India, expanded our content offering to further enhance an attractive value proposition to the consumer and improved our distribution. We continued to make progress in our business development activities in Europe and in addition in October, we obtained terrestrial repeater licenses in Dubai and Bahrain, the first terrestrial repeater licenses for mobile satellite radio outside of North America, and rolled out new marketing initiatives to the US military and government personnel stationed in our coverage area."

Quarterly Revenue Accelerates

For the third quarter of 2005, WorldSpace reported quarterly revenues of approximately $2.4 million, representing a 51 percent increase compared with revenues of approximately $1.6 million for the third quarter of 2004. Subscriber revenue increased 232 percent to approximately $1.0 million for the third quarter of 2005 compared with subscriber revenue of approximately $0.3 million for the third quarter of 2004.

Net Loss Narrows

WorldSpace recorded a net loss for the third quarter 2005 of $15.4 million or $0.48 per share, compared with a net loss of $57.3 million or $9.90 per share for the third quarter of 2004, a period that included $30.6 million in interest charges. WorldSpace had an EBITDA (earnings before interest income, interest expense, income taxes, depreciation and amortization) loss of $29.1 million for the third quarter of 2005, compared with an EBITDA loss of $12.1 million for the third quarter of 2004.

Accelerated Marketing Campaign

WorldSpace continued to ramp up its marketing campaign during the third quarter of 2005. During the third quarter of 2005, blended Cost Per Gross Addition (CPGA) was $407, compared with $128 CPGA during the third quarter of 2004. Blended CPGA includes fully-loaded cost to acquire each new subscriber in India and in its other markets and includes Subscriber Acquisition Costs and other marketing expenses such as advertising and point of sale materials. India CPGA during the three-month period ended September 30, 2005 was $508, compared with $97 for the third quarter of 2004, representing a significant ramp-up in marketing activities this year. WorldSpace's blended SAC for the third quarter of 2005 was $27 per subscriber, while the India SAC for the three-month period was $38 per subscriber. In the third quarter 2005, WorldSpace spent $4.9 million on advertising and marketing expenses, of which $4.1 million was spent in India.

Improved Liquidity from IPO

WorldSpace had total cash, cash equivalents and marketable securities of $296.5 million as of September 30, 2005. This improved liquidity position resulted primarily from additional financing of approximately $244 million raised during the third quarter of 2005.

On August 9, 2005, WorldSpace completed its initial public offering (IPO) of its Class A common stock of 11.5 million shares, raising a total of approximately $221 million in net proceeds for WorldSpace.

On July 18, 2005, WorldSpace issued to XM Satellite Radio Holdings Inc. 1,562,500 shares of Class A Common Stock for an aggregate purchase price of $25 million. In connection with this transaction, WorldSpace entered into a global satellite radio cooperation agreement with XM pursuant to which both entities each agreed to cooperate with one another on receiver technology, terrestrial repeater technology, OEM and third party distribution relationships, content opportunities and new applications and services. In addition, Gary Parsons, Chairman of the Board of Directors of XM, was elected to the WorldSpace board of directors. In connection with the transaction, WorldSpace also granted to XM a performance-based warrant to purchase 1,785,714 shares of Class A Common Stock.

Conference Call

WorldSpace plans to hold a conference call to discuss these results on Monday, November 7, 2005, at 4:30 pm. The call will also be available as a webcast, which can be accessed via the company's website, http://www.worldspace.com/, by following the links to investor relations and webcasts. To participate in the call, please dial 1-866-700-7441, using passcode 94605436; internationally, the call may be accessed by dialing 1-617-213-8839 using the same passcode. The call will be available as an archived webcast beginning approximately one hour after completion in the investor relations section of the company's website.

Non GAAP Reconciliation

Earnings before interest income, interest expense, income taxes, depreciation and amortization is commonly referred to in our business as "EBITDA." EBITDA is not a measure of financial performance under generally accepted accounting principles. The Company believes EBITDA is often a useful measure of a company's operating performance and is a significant basis used by the Company's management to measure the operating performance of the Company's business because EBITDA excludes charges for depreciation, amortization and interest expense that have resulted from our debt financings, as well as our provision for income tax expense. Accordingly, the Company believes that EBITDA provides helpful information about the operating performance of its business, apart from the expenses associated with its physical assets or capital structure. EBITDA is frequently used as one of the bases for comparing businesses in the Company's industry, although the Company's measure of EBITDA may not be identical to similarly titled measures of other companies. EBITDA does not purport to represent operating income or cash flow from operating activities, as those terms are defined under generally accepted accounting principles, and should not be considered as alternatives to those measurements as an indicator of our performance. A reconciliation of net loss to EBITDA has been provided in this release.

About WorldSpace, Inc.

WorldSpace is the world's only global media and entertainment company positioned to offer a satellite radio experience to consumers in more than 130 countries with five billion people, driving 300 million cars. WorldSpace delivers the latest tunes, trends and information from around the world and around the corner. WorldSpace subscribers benefit from a unique combination of local programming, original WorldSpace content and content from leading brands around the globe including the BBC, CNN, Virgin Radio, NDTV and RFI. WorldSpace's satellites cover two-thirds of the globe with six beams. Each beam is capable of delivering up to 80 channels of high quality digital audio and multimedia programming directly to WorldSpace Satellite Radios anytime and virtually anywhere in its coverage area. WorldSpace is a pioneer of satellite-based digital radio services (DARS) and was instrumental in the development of the technology infrastructure used today by XM Satellite Radio.

Forward-looking Statements

This press release may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations or beliefs about future events and financial, political and social trends and assumptions it has made based on information currently available to it. The Company cannot assure that any expectations, forecasts or assumptions made by management in preparing these forward-looking statements will prove accurate, or that any projections will be realized. Such forward-looking statements may be affected by inaccurate assumptions or by known or unknown risks or uncertainties. Actual results may vary materially from those expressed or implied by the statements herein. Forward-looking statements contained herein speak only as of the date of this release. The Company does not undertake any obligation to update or revise publicly any forward-looking statements, whether to reflect new information, future events or otherwise.

  RESULTS OF OPERATIONS

                              Three Months Ended      Nine Months Ended
                                 September 30,           September 30,
                               2005        2004        2005        2004
                                  (unaudited,             (unaudited,
                                 in thousands)           in thousands)
  STATEMENT OF OPERATIONS DATA:
     REVENUE:
     Subscription revenue     $    959    $    289   $   2,554   $     599

     Equipment revenue             670         288       1,646       1,510
     Other revenue                 724         979       3,035       4,200
       Total revenue             2,353       1,556       7,235       6,309

     OPERATING EXPENSES:
     Satellite and
      transmission,
      programming and other      5,028       2,846      11,898       9,366
     Cost of equipment             998         410       2,022       1,425
     Selling, general and
      administrative            17,571       8,474      39,172      21,739
     Stock-based compensation    9,258         810      10,246       2,499
     Depreciation and
      amortization              14,732      14,681      44,136      45,022
     Total operating expenses   47,587      27,221     107,474      80,051

       Loss from Operations    (45,234)    (25,665)   (100,239)    (73,742)

     OTHER INCOME (EXPENSE)
     Gain on extinguishment
      of debt                       --          --      14,130          --

     Interest income             2,044         109       3,647         323

     Interest expense           (2,336)    (30,611)     (7,498)    (85,389)

     Other                       1,389      (1,107)      2,312        (414)

       Loss before income
        taxes                  (44,137)    (57,274)    (87,648)   (159,222)

     INCOME TAX BENEFIT         28,719          --      40,961          --

       Net loss               $(15,418)   $(57,274)  $ (46,687)  $(159,222)



                                               September 30,    December 31,
                                                   2005            2004
                                                (unaudited)
  SELECTED BALANCE SHEET DATA:                         (in thousands)

    Cash and cash equivalents                   $    63,047     $   154,362
    Restricted cash and marketable securities       242,108           1,775
    Satellites and related systems, property
     and equipment, net                             428,060         470,857
    Total assets                                    764,709         649,087
    Total debt                                      155,000         155,000
    Contingent royalty obligation                 1,814,175       1,814,175
    Total liabilities                             2,240,117       2,338,493
    Total stockholders' equity                   (1,475,408)     (1,689,406)




                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                   2005       2004      2005        2004
                                     (unaudited)           (unaudited)
                                       (in thousands, except per share
                                            and subscriber data)
  PER SHARE DATA - basic and
   diluted:
     Net loss per share           $ (0.48)   $ (9.90)  $ (1.78)    $(27.52)

  Weighted average shares
   outstanding                     32,024      5,785    26,160       5,785

  SELECTED OPERATING DATA

  NET SUBSCRIBER ADDITIONS         11,141      6,253    40,801      13,742

     India                          7,737      3,616    27,335       5,376

     Rest of World (ROW)            3,404      2,637    13,466       8,366

  TOTAL EOP SUBSCRIBERS            75,071     18,725    75,071      18,725

     India                         35,670      5,376    35,670       5,376

     ROW                           39,401     13,349    39,401      13,349

  ARPU (1)                        $  4.43    $  6.00   $  4.83     $  6.46
     India                           2.73       2.12      2.56        1.89
     Rest of World (ROW)             5.86       6.61      6.49        6.84


  SAC (2)                         $    27    $     1   $    11     $     2
     India                             38          9        23          19
     Rest of World (ROW)                5          0         0           0

  CPGA (3)                        $   407    $   128   $   200     $   122
     India                            508         97       310         154
     Rest of World (ROW)              202        181        78         111


  Notes:

  (1) Average Revenue per Subscriber (ARPU) is derived from the total of
  monthly earned subscription revenue (net of promotion and rebates) divided
  by the monthly average number of subscribers for the period reported.
  ARPU is a measure of operational performance and not a measure of
  financial performance under generally accepted accounting principles.

  (2) Subscriber Acquisition Cost (SAC) includes the negative margins from
  equipment sales to end customers, but do not include ongoing loyalty
  payments to retailers and distribution partners, and payments under
  revenue sharing arrangements to content providers.

  (3) Cost Per Gross Addition (CPGA) includes amounts in SAC described
  above, as well as advertising, media and other discretionary marketing
  expenses, but does not include headcount related to sales and marketing
  staff.



                               Three Months Ended       Nine Months Ended
                                  September 30,           September 30,
                                2005       2004         2005        2004
                                  (unaudited)             (unaudited)
                        (in thousands, except per share and subscriber data)

  EBITDA reconciliation:

  Net loss                   $(15,418)  $(57,274)    $(46,687)  $(159,222)

  Less: Interest income        (2,044)      (109)      (3,647)       (323)

  Plus: Interest expense        2,336     30,611        7,498      85,389

  Less: Income tax benefit    (28,719)        --      (40,961)         --

  Plus: Depreciation and
   amortization                14,732     14,681       44,136      45,022

     EBITDA                  $(29,113)  $(12,091)    $(39,661)  $ (29,134)