XM Radio 2008 Annual Report Download - page 15

offset by the $192,992 increase in expenses included in adjusted income (loss) from operations, both of which were
favorably impacted by the inclusion of the operating results of XM in the amount of $60,371.
2008 2007 2006
Unaudited Actual
For the Three Months Ended December 31,
Total revenue .................................... $622,183 $ 249,816 $ 193,380
Operating expenses:
Satellite and transmission ......................... 24,481 5,175 7,518
Programming and content ......................... 89,214 62,735 80,414
Revenue share and royalties ....................... 103,217 56,762 21,062
Customer service and billing ....................... 67,818 29,288 25,912
Cost of equipment............................... 18,084 15,886 22,105
Sales and marketing ............................. 80,699 56,866 77,780
Subscriber acquisition costs ........................ 113,512 100,062 122,196
General and administrative ........................ 64,586 37,212 32,379
Engineering, design and development ................ 12,404 7,946 13,448
Impairment of goodwill........................... 15,331 — —
Depreciation and amortization ...................... 82,958 27,638 27,495
Restructuring and related costs ..................... 2,977 — —
Total operating expenses ............................ 675,281 399,570 430,309
Loss from operations .............................. (53,098) (149,754) (236,929)
Other expense .................................. (192,571) (15,699) (8,512)
Loss before income taxes ........................... (245,669) (165,453) (245,441)
Income tax expense.............................. (175) (770) (156)
Net loss . ....................................... $(245,844) $(166,223) $(245,597)
Highlights for the Three Months Ended December 31, 2008. Our revenue grew 149%, or by $372,367, in the
three months ended December 31, 2008 compared to the three months ended December 31, 2007. $316,623 of the
increase was attributable to the inclusion of XM’s results for the fourth quarter of 2008. Adjusted income (loss) from
operations was $72,155 in the fourth quarter of 2008 quarter compared to ($107,220) in the fourth quarter of 2007.
Total operating expenses, excluding goodwill impairment, restructuring, depreciation and share-based payment
expense, increased by 54%, or $192,992, in the quarter. $262,908 of the increase was attributable to the Merger.
Programming and content costs increased by 42%, or $26,479, over the prior year’s quarter, as a result of the
inclusion of XM’s programming costs for the fourth quarter of 2008.
Revenue share and royalties increased by 82%, or $46,455, over the prior year’s quarter. $52,564 of the
increase was attributable to the Merger. Customer service and billing costs increased 132%, or $38,530, from the
prior year’s quarter. $36,002 of the increase was attributable to the Merger.
Sales and marketing cost increased 42%, or $23,833, over the prior year’s quarter due to reduced advertising
and cooperative marketing spend, offset in part by higher customer retention spending. $32,012 of the increase was
attributable to the Merger.
Subscriber acquisition costs increased 13%, or $13,450, over the prior year’s quarter. $37,343 of the increase
was attributable to the Merger. The offsetting decrease in subscriber acquisition costs of $23,893 was driven by
improved product economics and lower retail and OEM subsidies.
General and administrative costs increased 74%, or $27,374, over the prior year’s quarter. $24,006 of the
increase was attributable to the Merger. Engineering, design and development costs increased 56%, or $4,458.
$6,467 of the increase was attributable to the Merger. The offsetting decrease was due lower product development
costs and savings at SIRIUS as result of the Merger.
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