XM Radio 2009 Annual Report Download - page 115

payment expense), resulted in improved adjusted income (loss) from operations of $115,339 in the three months
ended December 31, 2009 compared to $31,797 in 2008.
Satellite and transmission costs increased 10%, or $2,243, in the three months ended December 31, 2009
compared to 2008 due to non-cash repeater lease charges and an increase in in-orbit insurance expense, partially
offset by reductions in repeater maintenance costs and personnel costs. Programming and content costs decreased
12%, or $12,358, in the three months ended December 31, 2009 compared to 2008, due mainly to reductions in
personnel and on-air talent costs as well as savings on certain content agreements. Revenue share and royalties
increased 1%, or $1,816, in the three months ended December 31, 2009 compared to 2008 primarily due to an
increase in our revenues and an increase in the statutory royalty rate for the performance of sound recordings.
Customer service and billing costs decreased 12%, or $8,149, in the three months ended December 31, 2009
compared to 2008 primarily due to decreases in personnel costs and customer call center expenses. Cost of
equipment decreased 33%, or $5,884, in the three months ended December 31, 2009 compared to 2008 as a result of
a decrease in our direct to customer sales and lower inventory write-downs.
Sales and marketing costs decreased 2%, or $1,551, in the three months ended December 31, 2009 compared to
2008 due to reduced personnel costs and third party distribution support expenses. Subscriber acquisition costs
decreased 4%, or $5,143, in the three months ended December 31, 2009 compared to 2008. This improvement was
driven by lower OEM subsidies, improved chip set costs and lower aftermarket acquisition costs, partially offset by
higher aftermarket inventory related charges.
General and administrative costs decreased 24%, or $12,483, in the three months ended December 31, 2009
compared to 2008 mainly due to the absence of certain legal and regulatory charges incurred in 2008 and lower
personnel costs. Engineering, design and development costs decreased 23%, or $2,362, in the three months ended
December 31, 2009 compared to 2008, due to lower costs associated with development, tooling and testing of radios
as well as lower personnel costs.
Restructuring, impairments and related costs decreased 11%, or $337, in the three months ended December 31,
2009 compared to 2008 mainly due to fewer restructuring charges associated with the Merger.
Other expenses decreased 65%, or $132,373, in the three months ended December 31, 2009 compared to 2008
driven mainly by a decrease in loss on extinguishment of debt and credit facilities of $94,324 and a decrease of
$28,892 in loss on investments.
Highlights for the Three Months Ended December 31, 2008. Our revenue grew 16%, or by $86,593, in the
three months ended December 31, 2008 compared to 2007. The increase in subscriber revenue was driven primarily
by a 14% growth in average subscribers. Advertising revenue decreased 23%, or $4,795, in the three months ended
December 31, 2008 compared to 2007. The decrease in advertising revenue was driven by reduced spending by
advertisers. Equipment revenue increased 22%, or $5,579, in the three months ended December 31, 2008 compared
to 2007. The increase in equipment revenue was driven by increased sales through our direct to consumer
distribution channel at higher average prices. Other revenue decreased 12%, or $1,218, in the three months ended
December 31, 2008 compared to 2007. The decrease in other revenue was driven mainly by decreased content
license fees. The overall increase in revenue was accompanied by lower operating costs, as described below,
resulting in a significantly improved adjusted income (loss) from operations of $31,797 compared to ($224,143) in
the fourth quarter of 2007. Total operating expenses, excluding goodwill impairment, restructuring, depreciation
and share-based payment expense, decreased by 22%, or $169,347, in the quarter.
Satellite and transmission costs decreased 4%, or $846, in the three months ended December 31, 2008
compared to 2007 primarily due to reductions in repeater maintenance costs and personnel costs. Programming and
content costs decreased 4%, or $3,861, in the three months ended December 31, 2008 compared to 2007 as a result
of Merger related savings. Revenue share and royalties, representing approximately 19% and 29% of revenue
during 2008 and 2007 respectively, decreased by 25%, or $40,830, over the prior year’s quarter. The prior period
included a charge of $52,440 resulting from the decision in January 2008 of the Copyright Royalty Board to
increase royalties to the music industry commencing January 1, 2007. Adjusting for the royalty accrual in the fourth
quarter of 2007, revenue share and royalties increased 10%, or $11,610, from the fourth quarter of 2007. Customer
service and billing costs increased 3%, or $2,030, from the prior year’s quarter, reflecting higher subscriber totals
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