XM Satellite Radio Holdings Inc. (NASDAQ: XMSR) has announced quarterly earnings this morning with revenue increasing 22% year over year to $277 million. XM's 2007 second quarter net loss narrowed to $176 million, or 57 cents a share, a 23% improvement compared to the 2006 second quarter net loss of $229 million, or 87 cents, in the year-ago period. Excluding charges, the company's earnings per share was 45 cents per share.Analysts polled by Thomson Financial expected the company to lose 44 cents a share on revenues of $275 million.
XM also ended the quarter with more than 8.25 million subscribers compared to 6.90 million subscribers in the prior year period. In the recent quarter XM added 338,000 net subscribers. While new retail subscribers actually fell 74% to 43,000, customers added through the installation of radios by carmakers rose 28% to 295,000. Churn rate remained roughly the same, but conversion rate increased.
The stock is trading down 3.3% in early trading.
Okay it's about to begin, please remember to refresh and let's hear what they have to say.
10:01 am: The call is officially late. There's classical music in the background.
10:04 am: Finally we started, the general counsel is giving the normal disclaimers about forward looking statements.
10:08 am: Sorry guys, my computer crashed just as Hugh Panero was about to update about the Sirius merger. I just can't believe it!!!
10:09 am: He explains that Mel Karmazin will be the CEO of the combined company.
10:10 am: Nate Davis the COO and interim CEO started to speak. Confident merger will be completed by late 2007 early 2008. Despite the upcoming merger, he says, XM needs to concentrate on growth.
10:11 am: Explains that retail becomes a smaller portion of growth and subscriber addition. Now programming.
10:12 am: Leading in factory installed cars. There were more than 8 million cars in the quarter installed with XM radios, 7 million of them sold. Ford and Toyota have a growing list of models with XM. XM is the exclusive for Nissan and Infinity. Honda too.
10:15 am: Conversion rates improved. He keeps talking about OEM improvements and growth. Working more and more with OEM partners.
10:16 am: Now he explains the certified pre-owned vehicle plan of XM's remarketing plan. This has the potential to boost growth.
10:18 am: Despite being weak, Nate says retail will continue to be an important part of growth.
10:20 am: Programming: he pitches that programming is the best of all radios. Signed with NHL, Fox and added NFL channels. Music: again, claims XM provides a wide breadth of music channels.
10:21 am: New and added value channels. XM X - XM Exclusive where original and exclusive content will be heard. Also added a politics news channel that will air 24 hours a day during the election campaign.
10:23 am: Now devices: split screen display of the mxrp. EV, another device should add to retail demand that is down. Believes the radios will choose XM for the devices
10:25 am: Customer satisfaction as measured by an independent OEM entity improved. Customer satisfaction should help drive family subscription plans.
10:26 am: Now Joe Euteneuer will go over financials. He's happy with the results, including churn and conversion rate and OEM growth, as well as generated cash.
10:29 am: More numbers. The thing that caught my attention was improving margin per subscriber.
10:31 am: SAC (subscriber acquisition cost) was $75 in Q2, up from $65 in first quarter and $67 in second quarter last year. Joe is somehow trying to explain it. A lot of financial song and dance to explain this.
10:32 am: Insists key metrics are going the right way.
Hugh again. Merger going forward, solid results. Now questions.
10:34 am: Morgan Stanley: Inventory charge of $10 is a one time charge? Yes.
Q: Not much new products, marketing plan flat. With Sirius - how will that work?
Nate: We see competition from other sources: iPods etc.
Q: Conversion ratio that ticked up, because of Honda subs?
Nate: No. The certified preowned not counted.
10:36 am: Q: Timing of the announcement for Hugh leaving.
I think it's Hugh: We felt that me leaving would be in the best interest of the shareholders. Helped Gary (chairman of the board) with the merger with the understanding that there will be one CEO in the combined company. ("I won't say I want to spend more time with the family or explore other options" - laughter).
I think this is Nate (or Gary): We feel positive about the merger. We debunked most of the "myths" that were circulated. We're almost completed the document. Then we'll get an idea from the DoJ. Confidence level? "I am confident", was pleased with comment round - 4:1 comments in favor of the merger. The pricing plan (a-la-carte) that put up Monday could also help. Feels pretty good about the prospects of the merger.
10:41 am: 2010 numbers guidance.
Nate: We'll probably won't achieve the high numbers you're thinking of for 2010.
10:43 am: Okay, this was a long question about penetration levels.
Yeah, high penetration levels, but can't give more specific details as manufacturers want to keep that.
Conversion rates also high.
Lots of talk about ARPU (average monthly subscription revenue per subscriber) and the combined programming.
10:46 am: Copyright and litigation with helix.
There isn't an update that can be given on either. There is arbitration right now and expect resolution by end of year.
10:48 am: Financial math: the analysts are trying to get their models right. And another question regarding penetration, have we reached a stage where it is stable?
OEM churn has always been lower than retail churn. Churn would always be better with manufacturers.
As for penetration rate, haven't reached the stable stage.
10:51 am: My kind of question: Contingency plan if merger doesn't go through!!!
We won't get into speculation about rate increases. We'll have to look at the cost structure of the businesses. Lower legal costs. Lower programming expenses and a number of items like that we would do.
Someone (Nate) intervened and says: "we don't entertain the thought the merger wouldn't go through."
10:53 am: Longer initial promo such as the one in Infinity - why?
First, churn is better. Customers like long term plans. Reduces internal cost. Overall it's a better arrangement.
Some makes sure we understand it's not a longer trial plan, but once customers decided to subscribe they are offered longer-term promo plans.
10:56 am: Year end target?
No change in guidance.
10:57 am: Success rate of the Toyota plan.
Too early to give precise info, but pretty pleased with results so far.
Question about CapEx, not much this quarter. From liquidity stand point we're in great position.
10:59 am: A-La-Carte radios - incorporating it in GM cars?
As we become more OEM centric we'll take of OEM partners, we'll make sure they're competitive.
Q: Will the plan confuse the consumer?
Some will understand immediately, some will just want the standard $12.95 package. Some will want the flexibility, so want the package to reduce confusion.
Q: You and Sirius report subscribers differently. The analyst wants some indication so as to compare better.
11:02 am: Closing remarks.
First time that gross additions have been up y-o-y.
That's it, about to thank Hugh Panero, his voice is quavering.
So that's it, last check XMSR share price: down 2.2% to $11.81.
10:09 am: He explains that Mel Karmazin will be the CEO of the combined company.
10:10 am: Nate Davis the COO and interim CEO started to speak. Confident merger will be completed by late 2007 early 2008. Despite the upcoming merger, he says, XM needs to concentrate on growth.
10:11 am: Explains that retail becomes a smaller portion of growth and subscriber addition. Now programming.
10:12 am: Leading in factory installed cars. There were more than 8 million cars in the quarter installed with XM radios, 7 million of them sold. Ford and Toyota have a growing list of models with XM. XM is the exclusive for Nissan and Infinity. Honda too.
10:15 am: Conversion rates improved. He keeps talking about OEM improvements and growth. Working more and more with OEM partners.
10:16 am: Now he explains the certified pre-owned vehicle plan of XM's remarketing plan. This has the potential to boost growth.
10:18 am: Despite being weak, Nate says retail will continue to be an important part of growth.
10:20 am: Programming: he pitches that programming is the best of all radios. Signed with NHL, Fox and added NFL channels. Music: again, claims XM provides a wide breadth of music channels.
10:21 am: New and added value channels. XM X - XM Exclusive where original and exclusive content will be heard. Also added a politics news channel that will air 24 hours a day during the election campaign.
10:23 am: Now devices: split screen display of the mxrp. EV, another device should add to retail demand that is down. Believes the radios will choose XM for the devices
10:25 am: Customer satisfaction as measured by an independent OEM entity improved. Customer satisfaction should help drive family subscription plans.
10:26 am: Now Joe Euteneuer will go over financials. He's happy with the results, including churn and conversion rate and OEM growth, as well as generated cash.
10:29 am: More numbers. The thing that caught my attention was improving margin per subscriber.
10:31 am: SAC (subscriber acquisition cost) was $75 in Q2, up from $65 in first quarter and $67 in second quarter last year. Joe is somehow trying to explain it. A lot of financial song and dance to explain this.
10:32 am: Insists key metrics are going the right way.
Hugh again. Merger going forward, solid results. Now questions.
10:34 am: Morgan Stanley: Inventory charge of $10 is a one time charge? Yes.
Q: Not much new products, marketing plan flat. With Sirius - how will that work?
Nate: We see competition from other sources: iPods etc.
Q: Conversion ratio that ticked up, because of Honda subs?
Nate: No. The certified preowned not counted.
10:36 am: Q: Timing of the announcement for Hugh leaving.
I think it's Hugh: We felt that me leaving would be in the best interest of the shareholders. Helped Gary (chairman of the board) with the merger with the understanding that there will be one CEO in the combined company. ("I won't say I want to spend more time with the family or explore other options" - laughter).
I think this is Nate (or Gary): We feel positive about the merger. We debunked most of the "myths" that were circulated. We're almost completed the document. Then we'll get an idea from the DoJ. Confidence level? "I am confident", was pleased with comment round - 4:1 comments in favor of the merger. The pricing plan (a-la-carte) that put up Monday could also help. Feels pretty good about the prospects of the merger.
10:41 am: 2010 numbers guidance.
Nate: We'll probably won't achieve the high numbers you're thinking of for 2010.
10:43 am: Okay, this was a long question about penetration levels.
Yeah, high penetration levels, but can't give more specific details as manufacturers want to keep that.
Conversion rates also high.
Lots of talk about ARPU (average monthly subscription revenue per subscriber) and the combined programming.
10:46 am: Copyright and litigation with helix.
There isn't an update that can be given on either. There is arbitration right now and expect resolution by end of year.
10:48 am: Financial math: the analysts are trying to get their models right. And another question regarding penetration, have we reached a stage where it is stable?
OEM churn has always been lower than retail churn. Churn would always be better with manufacturers.
As for penetration rate, haven't reached the stable stage.
10:51 am: My kind of question: Contingency plan if merger doesn't go through!!!
We won't get into speculation about rate increases. We'll have to look at the cost structure of the businesses. Lower legal costs. Lower programming expenses and a number of items like that we would do.
Someone (Nate) intervened and says: "we don't entertain the thought the merger wouldn't go through."
10:53 am: Longer initial promo such as the one in Infinity - why?
First, churn is better. Customers like long term plans. Reduces internal cost. Overall it's a better arrangement.
Some makes sure we understand it's not a longer trial plan, but once customers decided to subscribe they are offered longer-term promo plans.
10:56 am: Year end target?
No change in guidance.
10:57 am: Success rate of the Toyota plan.
Too early to give precise info, but pretty pleased with results so far.
Question about CapEx, not much this quarter. From liquidity stand point we're in great position.
10:59 am: A-La-Carte radios - incorporating it in GM cars?
As we become more OEM centric we'll take of OEM partners, we'll make sure they're competitive.
Q: Will the plan confuse the consumer?
Some will understand immediately, some will just want the standard $12.95 package. Some will want the flexibility, so want the package to reduce confusion.
Q: You and Sirius report subscribers differently. The analyst wants some indication so as to compare better.
11:02 am: Closing remarks.
First time that gross additions have been up y-o-y.
That's it, about to thank Hugh Panero, his voice is quavering.
So that's it, last check XMSR share price: down 2.2% to $11.81.
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