XM Radio 2008 Annual Report Download - page 12

with results for prior periods less meaningful. Accordingly, the discussion below addresses trends we believe are
significant.
2008 2007 2006
Unaudited Actual
For the Years Ended December 31,
Beginning subscribers ............................ 8,321,785 6,024,555 3,316,560
Gross subscriber additions ......................... 14,954,112 4,183,901 3,758,159
Deactivated subscribers ........................... (4,272,041) (1,886,671) (1,050,164)
Net additions .................................. 10,682,071 2,297,230 2,707,995
Ending subscribers .............................. 19,003,856 8,321,785 6,024,555
Retail ...................................... 8,905,087 4,640,710 4,041,826
OEM....................................... 9,995,953 3,665,631 1,959,009
Rental ...................................... 102,816 15,444 23,720
Ending subscribers .............................. 19,003,856 8,321,785 6,024,555
Retail ...................................... 4,264,378 598,884 1,576,463
OEM....................................... 6,330,321 1,706,622 1,135,316
Rental ...................................... 87,372 (8,276) (3,784)
Net additions .................................. 10,682,071 2,297,230 2,707,995
2008 2007 2006
Unaudited Actual
For the Years Ended December 31,
Average self-pay monthly churn(1)(7) ............... 1.8% 1.6% 1.6%
Conversion rate(2)(7) ........................... 47.5% 47.5% 44.1%
ARPU(7)(16) ................................. $ 9.91 $ 10.46 $ 11.01
SAC, as adjusted, per gross subscriber addition(7)(17) . . . $ 69 $ 98 $ 114
Customer service and billing expenses, as adjusted, per
average subscriber(7)(18) ....................... $ 1.02 $ 1.10 $ 1.37
Total revenue ................................. $1,663,992 $ 922,066 $ 637,235
Free cash flow(7)(19) ........................... $ (244,467) $(218,624) $ (500,715)
Net cash used in operating activities ................ $ (152,797) $(148,766) $ (421,702)
Adjusted income (loss) from operations(20) . . ......... $ 31,032 $(327,410) $ (513,140)
Net loss ..................................... $(5,313,288) $(565,252) $(1,104,867)
Note: For the footnotes, see pages 27 to 45.
Subscribers. We ended 2008 with 19,003,856 subscribers, an increase of 128% from the 8,321,785
subscribers as of December 31, 2007. The increase was a result of the 9,716,070 subscribers acquired in the
Merger, and a 25% increase in gross subscriber additions due to the inclusion of XM in our operating results as a
result of the Merger. Gross additions in our OEM channel continued to grow as automakers continued to increase
the portion of their production which incorporates satellite radio. The growth in OEM gross additions was offset by
declines in retail gross additions. Deactivations include the results of XM from the date of the Merger. The
deactivation rate for self-pay subscriptions increased slightly while the conversion rate for subscribers in paid
promotional trial periods stayed constant.
ARPU. Total ARPU for the year ended December 31, 2008 was $9.91, compared to $10.46 for the year ended
December 31, 2007. The decrease was driven by an increase in the mix of discounted OEM promotional trials,
subscriber winback programs, second subscribers, the effect of purchase price accounting adjustments and a decline
in net advertising revenue per average subscriber as subscriber growth exceeded the growth in ad revenues.
We expect ARPU to fluctuate based on the growth of our subscriber base, promotions, rebates offered to
subscribers and corresponding take-rates, plan mix, subscription prices, advertising sales and the identification of
additional revenue from subscribers.
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