Thursday, April 20, 2006

XM Q1 Conference Call Outlook

April 20, 2006 – 10:29AM EST

XM Satellite Radio has announced their 1st Quarter Conference Call date and time. The call will take place on April 27, 2006, and you can read more about that via a previous SSG article here.

This piece outlines Street expectations as well as some opinions by SSG.

Street Expectations

On average it appears as though the street is expecting XM to announce a loss of 53 cents per share on revenue of about $201,500,000.

What To Watch For

1. After missing the numbers in the fourth quarter, XM commented that they are committed to bringing spending into line. It is important that XM show progress here by coming in near expectations.

2. Subscriber Acquisition Costs (SAC). XM’s SAC went up substantially in the fourth quarter, and played a major role in them missing targets. XM needs to demonstrate that they have the SAC under control. The street is looking for signs that they can be confident in, and a good SAC could go a long way in quelling concerns about costs.

3. WCS Spectrum. XM has made a deal to acquire the WCS spectrum of bandwidth. The bandwidth serves several major markets, but the issue is still before the FCC. The street has been speculating as to what the bandwidth will be used for, but also seems to have questions about the expenses involved in being able to deploy the use of this spectrum. Watch to see if XM offers any “color” on the WCS subject.

4. Subscribers. The Q1 subscriber tall of about 568,000 subscribers has already been announced. Some analysts have already lowered their end of year guidance on subscribers for XM and are at this point calling for XM to miss the 9,000,000 year end subscribers that XM has stated previously. Many analysts cite that XM needs a very good performance from the OEM channel to hit the goals. Watch for XM to address the subscriber guidance and to likely reiterate that they will get to 9,000,000.

5. Cash Flow Break Even (CFBE). XM has stated that they anticipate reaching CFBE in Q4 (not including capital expenditures). Like with the subscriber guidance, there are analysts who do not feel XM will hit this target. IMO if XM feels they can hit it, they need to make a strong statement about the subject, and offer a path by which they will get there.

6. Refinancing. XM recently announced a refinancing plan that they anticipated to be complete on May 1. This means that the transaction may not be complete in time for the call. Questions are surely going to be asked however, and XM should be very clear in their answers. Aspects of this refinancing could well impact the CFBE subject, and may help XM achieve their stated goal.

7. OEM channel ramp up. Watch for XM to discuss in greater detail the level of OEM participation in 2006. This segment of subscribers is important to XM reaching their end of year targets.

8. Hardware. XM will likely dedicate a small portion of the call to their new hardware. The hardware is in the process of launching, and XM will likely offer some “color” on the subject.

The bottom line is that XM needs to have a convincing call and illustrate that they have corrected spending issues. They also need to offer solid guidance that the street can embrace. SSG suggests that anyone invested into either SDARS equity listen to the call. A lot of good information comes out of these calls.

Satellite Standard group is not a financial advisor. SSG strongly encourages that investors do their own research and seek the advice of a Certified Financial Planner prior to making any investment decisions.

The link to this write up is http://tinyurl.com/qa5ur

4/20/2006 11:04:00 AM

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