XM Radio 2009 Annual Report Download - page 125

2009 2008 2007
For the Three Months Ended December 31,
Unaudited
(In thousands)
(1) Amounts related to share-based payment expense included in operating expenses were as
follows:
Satellite and transmission ........................ $ (276) $ 1,349 $ 364
Programming and content ........................ 1,646 4,672 2,786
Customer service and billing ...................... — 783 165
Sales and marketing ............................ (474) 2,165 539
Subscriber acquisition costs ...................... — — 156
General and administrative ....................... 5,493 12,995 10,261
Engineering, design and development ............... 38 2,023 625
Total share-based payment expense ................. $ 6,427 $ 23,987 $ 14,896
Highlights for the Three Months Ended December 31, 2009. Our revenue grew 9%, or $53,990, in the three
months ended December 31, 2009 compared to 2008. Subscriber revenue increased 3%, or $19,525, in the three
months ended December 31, 2009 compared to 2008. The increase in subscriber revenue was driven by the sale of
“Best of” programming and the rate increases to our multi-subscription and internet packages. Advertising revenue
decreased 8%, or $1,309, in the three months ended December 31, 2009 compared to 2008. The decrease in
advertising revenue was driven by the current economic environment. Equipment revenue decreased 38%, or
$11,704, in the three months ended December 31, 2009 compared to 2008. The decrease in equipment revenue was
driven by declines in sales through our direct to consumer distribution channel and lower product royalties. Other
revenue increased 662%, or $47,478, in the three months ended December 31, 2009 compared to 2008. The increase
in other revenue was driven by the U.S. Music Royalty Fee introduced in the third quarter of 2009. The overall
increase in revenue, combined with a decrease of 8%, or $44,421, in adjusted operating costs (total operating
expense excluding restructuring, impairments and related costs, depreciation and amortization and share-based
payment expense), resulted in improved adjusted income (loss) from operations of $170,566 in the three months
ended December 31, 2009 compared to $72,155 in 2008.
Satellite and transmission costs increased slightly 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 13%, or
$11,917, 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 decreased 3%,
or $2,862, in the three months ended December 31, 2009 compared to 2008 primarily due to the impact of purchase
accounting adjustments partially offset by increases to revenues and an increase in the statutory royalty rate for the
performance of sound recordings. Customer service and billing costs decreased 13%, or $8,931, 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 $4,391, or 5%, in the three months ended December 31, 2009 compared to
2008 due to reduced advertising and cooperative marketing spend as well as reductions to personnel costs and third
party distribution support expenses. Subscriber acquisition costs decreased 3%, or $3,779, in the three months
ended December 31, 2009 compared to 2008. The decrease was primarily due to 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 31%, or $19,985, 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 35%, or $4,348, in the three months ended
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