XM Satellite Radio Holdings Inc. Announces Third Quarter 2005 Results and Reaffirms 6 Million Subscriber Guidance

XM Satellite Radio Holdings Inc. Announces Third Quarter 2005 Results and Reaffirms 6 Million Subscriber Guidance

Revenues up 134% to $153 million in third quarter, compared to prior year period; Subscribers double to 5,034,642 from prior year; Expands lead with 617,152 net additions; GM and Honda to produce more than 2 million 2006 XM-equipped vehicles

WASHINGTON, Oct. 27 /PRNewswire-FirstCall/ -- XM Satellite Radio Holdings Inc. (NASDAQ:XMSR) today reported financial and operating results for the third quarter ended September 30, 2005. XM ended the quarter with 5,034,642 subscribers, doubling the 2,516,023 subscribers reported last year for the third quarter. The growth was driven by third quarter net subscriber additions of 617,152, a 48 percent increase over the 415,671 net subscribers added in the third quarter 2004. Given its strong performance in the first three quarters, XM reaffirms its guidance of exceeding 6 million subscribers by the end of 2005.

(Logo: http://www.newscom.com/cgi-bin/prnh/20000724/XMSATLOGO )

XM's net loss for the third quarter 2005 was ($131.9) million, as compared to ($118.0) million in the third quarter 2004. XM reported an EBITDA loss of ($73.8) million for the third quarter 2005 compared to a third quarter 2004 loss of ($62.9) million.

Record Revenue from Cost-Effective Subscriber Growth

For the quarter, XM reported revenue of $153 million, an increase of 134 percent over the $65 million reported in the third quarter 2004. XM's third quarter subscriber growth was driven by strong automotive and retail distribution performance with a range of full-featured products. Subscriber Acquisition Costs (SAC) in the third quarter 2005 were $53, a decrease from the $57 in the third quarter 2004. Cost Per Gross Addition (CPGA) in the third quarters of both 2005 and 2004 was $89. XM products are well stocked for the holiday season and XM expects to accelerate its subscriber and revenue growth through the fourth quarter.

GM and Honda to produce more than 2 million 2006 XM-equipped vehicles

In September, General Motors announced the production of its 3 millionth vehicle with a factory-installed XM radio. General Motors also announced it plans to manufacture 1.55 million vehicles factory-installed with XM in the 2006 calendar year. In addition, Honda announced its plans to produce 550,000 XM equipped vehicles in the 2006 model year, compared to a 2005 target of 400,000. XM's OEM partners represent 61 percent of the U.S. auto market, with automotive partners Toyota and Hyundai gearing up for XM factory installation beginning in the 2007 model year.

XM Expands Sports, Talk and Women's Programming

XM is the satellite radio leader in live sports content and will broadcast over 5,000 live sporting events each year. XM is capping off its inaugural season of exclusive Major League Baseball coverage with the biggest promotion in World Series history, offering every ticket holder to Game One a voucher to receive a free Delphi XM RoadyXT radio with a subscription commitment. In addition to MLB, XM is now broadcasting National Hockey League games as a part of a 10-year agreement. XM will become the exclusive satellite radio network of the NHL beginning with the 2007-2008 season. XM also carried the USTA US Open Tournament and PGA TOUR Golf, and it introduced a new Spanish-language sports channel XM Deportivo, which will offer 2006 World Cup Soccer. Earlier this month, XM also launched Take Five, a channel dedicated to women, featuring Ellen DeGeneres, Tyra Banks, the Satellite Sisters and content from the Food Network and HGTV. XM recently announced that the FOX News Talk channel will be available in January, featuring FOX News personalities Bill O'Reilly, Tony Snow, and others.

XM Broadens Exposure with Strategic Partnerships

XM continues to broaden its exposure by offering its content on AOL and soon DIRECTV (available in mid-November) and announcing XM+Napster, an online music download service, which will allow customers to purchase music heard on XM. All these strategic relationships complement XM's marketing partnerships with Starbucks Coffee, JetBlue, AirTran Airways, Hyatt Hotels, Avis, National and Alamo, which together help build XM brand awareness and trial.

XM Canada Receives Final Regulatory Approval

In September, the Canadian Federal Cabinet gave final regulatory approval to XM's Canadian partner. XM Canada plans to offer a broad range of music, sports, news, and talk radio channels in time for the holiday season.

About XM Satellite Radio

XM (NASDAQ:XMSR) is America's number one satellite radio service with more than 5 million subscribers. Broadcasting live daily from studios in Washington, DC, New York City and Nashville at the Country Music Hall of Fame, XM's 2005 lineup includes more than 150 digital channels of choice from coast to coast: the most commercial-free music channels, plus premier sports, talk, comedy, children's and entertainment programming; and 21 channels of the most advanced traffic and weather information. XM was named Best Radio Service at the 2004 Billboard Digital Entertainment Awards.

XM, the leader in satellite-delivered entertainment and data services for the automobile market through partnerships with General Motors, Honda, Toyota, Hyundai, Nissan, Porsche, and Volkswagen/Audi, is available in more than 120 different vehicle models for 2005. XM's industry-leading products are available at consumer electronics retailers nationwide. 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, the Company's dependence on technology and third party vendors, its potential need for additional financing, as well as other risks described in XM Satellite Radio Holdings Inc.'s Form 8-K filed with the Securities and Exchange Commission on 8-5-05. 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 Share Amounts)

Three Months ended Nine Months ended
September 30, September 30,
2005 2004 2005 2004
Revenue:
Subscription $140,001 $59,616 $346,361 $147,867
Activation 2,650 1,305 6,987 3,230
Merchandise 2,640 1,414 9,555 3,147
Net ad sales 5,332 2,062 12,820 4,459
Other 2,489 961 5,408 2,601
Total revenue 153,112 65,358 381,131 161,304

Operating expenses:

Cost of revenue:
(excludes depreciation
& amortization, shown
below)
Revenue share
& royalties 25,788 10,823 65,985 36,780
Customer care
& billing 17,794 10,021 51,662 26,081
Cost of
merchandise 7,857 2,293 18,440 5,659
Ad sales 2,547 1,504 6,414 4,148
Satellite &
terrestrial 11,813 8,622 31,003 27,855
Broadcast &
operations:
Broadcast 4,274 2,782 11,903 7,882
Operations 6,498 3,350 17,608 9,383
Total broadcast
& operations 10,772 6,132 29,511 17,265
Programming
& content 28,388 8,629 70,457 22,969

Total cost of
revenue 104,959 48,024 273,472 140,757

Research & development
(excludes depreciation
and amortization,
shown below) 7,885 6,684 20,970 19,584
General & administrative
(excludes depreciation
and amortization,
shown below) 12,534 7,435 30,651 19,826
Marketing (excludes
depreciation and
amortization, shown
below):
Retention & support 6,092 3,552 15,691 9,490
Subsidies &
distribution 54,241 37,305 150,867 107,387
Advertising &
marketing 29,581 16,627 96,609 51,632
Marketing 89,914 57,484 263,167 168,509
Amortization of
GM liability 9,313 9,313 27,938 27,938
Total marketing 99,227 66,797 291,105 196,447

Depreciation &
amortization 38,040 36,998 106,841 116,036

Total operating
expenses 262,645 165,938 723,039 492,650

Operating loss (109,533) (100,580) (341,908) (331,346)

Interest income 7,266 1,463 16,368 3,628
Interest expense (26,733) (19,007) (71,234) (66,353)
Other income (expense) (2,290) 709 121 (33,365)

Net loss before
income taxes (131,290) (117,415) (396,653) (427,436)

Provision for deferred
income taxes (579) (579) (1,737) (26,731)

Net Loss (131,869) (117,994) (398,390) (454,167)

8.25% Series B and C
preferred stock
dividend requirement (2,149) (2,149) (6,448) (6,654)

Net Loss attributable
to common
stockholders $(134,018) $(120,143) $(404,838) $(460,821)

Basic and diluted
net loss per share: $(0.60) $(0.59) $(1.88) $(2.37)
Weighted average shares
used in computing
net loss per share
- basic and
diluted 221,949,069 204,553,656 215,484,949 194,714,000

Reconciliation of
Net Loss to EBITDA:
Net loss as
reported $(131,869) $(117,994) $(398,390) $(454,167)
Add back
non-EBITDA items
included in
net loss:
Interest income (7,266) (1,463) (16,368) (3,628)
Interest expense 26,733 19,007 71,234 66,353
Depreciation &
amortization 38,040 36,998 106,841 116,036
Provision for
deferred income
taxes 579 579 1,737 26,731

EBITDA $(73,783) $(62,873) $(234,946) $(248,675)

SELECTED BALANCE As of As of
SHEET DATA 9/30/2005 12/31/2004
(Unaudited)

Cash and cash
equivalents $754,131 $717,867
Restricted
investments 5,446 4,492
System under
construction 194,048 329,355
Property and
equipment
in service, net 685,440 461,333
DARS licenses 147,496 148,391
Total assets 2,073,147 1,821,635
Deferred revenue 303,445 152,347
Total long-term
debt, net of
current portion 1,086,054 948,741
Total liabilities 1,809,122 1,485,472
Stockholders'
equity 264,025 336,163

XM SATELLITE RADIO HOLDINGS INC.

Three Months ended
September 30,
SELECTED OPERATING METRICS 2005 2004

EBITDA (in thousands) (1) $(73,783) $(62,873)

Subscriber Data:
Net Subscriber Additions (2) 617,152 415,671

Aftermarket, OEM & Other
Subscribers (3) 4,367,945 2,092,600
Subscribers in OEM Promotional
Periods (4) 624,580 398,993
XM Activated Vehicles with Rental
Car Companies (5) 42,117 24,430
Total Ending Subscribers
(3) (4) (5) (6) 5,034,642 2,516,023

Revenue Data:
Subscription Revenue per Aftermarket, OEM
& Other Subscriber $10.36 $9.24
Subscription Revenue per Subscriber in OEM
Promotional Periods $5.99 $5.63
Subscription Revenue per XM Activated
Vehicle with Rental Car Companies $10.25 $9.47

Subscription Revenue per Subscriber (7) $9.78 $8.64
Net Ad Sales Revenue per Subscriber (8) $0.37 $0.30
Activation, Equipment and Other Revenue per
Subscriber $0.54 $0.51
Total Revenue per Subscriber $10.69 $9.45

Expense Data:
Subscriber Acquisition Costs (SAC) (9) $53 $57
Cost Per Gross Addition (CPGA) (10) $89 $89

(1) EBITDA is commonly referred to in our business as net loss before
interest income, interest expense, income taxes, depreciation and
amortization. Consistent with regulatory requirements, EBITDA
includes Other Income (Expense). EBITDA is not a measure of
financial performance under generally accepted accounting principles.
We believe EBITDA is often a useful measure of a company's operating
performance and is a significant basis used by our management to
measure the operating performance of our business. Because we have
funded and completed 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. EBITDA, which excludes this information,
provides helpful information about the operating performance of our
business, apart from the expenses associated with our physical plant
or capital structure. EBITDA is frequently used as one of the bases
for comparing businesses in our industry, although our measure of
EBITDA may not be comparable to similarly titled measures of other
companies. EBITDA does not purport to represent operating loss or
cash flow from operating activities, as those terms are defined under
generally accepted accounting principles, and should not be
considered as an alternative to those measurements as an indicator of
our performance.
(2) Total net subscriber additions for the three months ended September
30, 2005, include 305,284 retail, 314,088 OEM, and (2,220) rental
cars.
(3) Ending subscribers include 831,425 family plan subscriptions at a
multi-unit rate of $6.99 per radio per month.
(4) OEM Promotional Subscribers are subscribers who have either a portion
or all of their subscription fee paid for by an OEM for a fixed
period following the initial purchase or lease of the vehicle.
Currently, at the time of sale, vehicle owners generally receive a 3-
month trial subscription. XM generally receives two months of the 3-
month trial subscription from the vehicle manufacturer. The automated
activation program provides activated XM radios on dealer lots for
test drives. GM and Honda generally indicate the inclusion of 3
months free of XM service on the window sticker of XM-enabled
vehicles. We measure the success of these programs based on the
percentage that elect to continue to receive the XM service and
convert to self-paying subscribers after the initial promotion
period -- we refer to this as the "conversion rate". The conversion
rate for the quarter ended September 30, 2005 is 56% and reflects the
auto activation program, with all XM-enabled vehicles activated for
the promotional period.
(5) Rental car activity commenced in late June 2003. At September 30,
2005, there were 42,117 XM subscriptions in rental vehicles. For the
initial Model Year 2003 XM-enabled rental vehicles, XM receives
payments based on the use of the service. Customers are charged $2.99
per day per vehicle for use of the XM service, on which XM receives a
revenue share. For subsequent Model Year 2004 and later vehicles, XM
receives $10 per subscription per month.
(6) Subscribers are those who are receiving and have agreed to pay for
our satellite audio service, either by credit card or by invoice,
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 satellite audio service. Radios that are revenue generating
are counted individually as subscribers. Promotional periods
generally include the period of trial service plus 30 days for the
receipt and processing of payments.
(7) Subscription Revenue includes monthly subscription revenues for our
satellite audio service, net of any promotions or discounts.
(8) Net Ad Sales Revenue includes sales of advertisements and program
sponsorships on the XM network net of agency commissions.
(9) SAC is a subset of total CPGA and includes radio manufacturer
subsidies, certain sales, activation and installation commissions,
and hardware-related promotions. These costs are reported in
subsidies & distribution. SAC also includes the negative margin on
equipment sales. These expenses are divided by the appropriate per
unit gross additions, or units manufactured.
(10) CPGA includes all costs in SAC, as well as advertising and marketing
expenses, divided by gross additions for the period.

Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20000724/XMSATLOGO
AP Archive: http://photoarchive.ap.org/
PRN Photo Desk photodesk@prnewswire.com
Source: XM Satellite Radio

CONTACT: Chance Patterson of XM Satellite Radio, +1-202-380-4318,
chance.patterson@xmradio.com

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

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