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

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.

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

"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.