Strong results reflect continued improvement in subscriber growth, retail
market share, automotive customer growth, revenue, cost management and
other key performance metrics
TORONTO, July 10 /CNW/ - Canadian Satellite Radio Holdings Inc. (TSX: XSR) today announced its financial results for the third quarter ended May 31, 2008.
XM Canada also announced today that it achieved positive cash flow(1) for the first time during the third quarter ended May 31, 2008. This milestone was attained in only two and a half years.
Third Quarter 2008 Highlights
Three months ended May 31, 2008 versus three months ended May 31, 2007
- Generated positive cash flow of $0.3 million during Q3 2008
- Total revenue increased 81 per cent to $10.3 million
- Adjusted Operating Loss(2) improved $2.7 million to $7.1 million
- Pre-Marketing Adjusted Operating Loss(2) improved $3.4 million to
$1.3 million
- Subscriber base reached 439,900, an increase of 58 per cent
- Self-paying subscribers increased 84 per cent to 280,400 as ARPU grew
to $11.99
"Our achievement of positive cash flow for the quarter, an important milestone that measures the financial health of the company, demonstrates our ability to effectively manage costs and working capital while growing our subscribers and revenue," said Michael Moskowitz, President and Chief Executive Officer of XM Canada. "We have spent a great deal of time striking a fine balance between investing in our business to attract new subscribers and achieving profitability. Our strong financial results reflect our direction to achieve profitable and sustainable growth, a key factor in determining the long-term success in the satellite radio industry. Getting our business to cash flow breakeven has been a key focus of management and we believe that there will be no further requirement for third party funding going forward."
------------------------ (1) Calculated from the Interim Consolidated Statement of Cash Flows (Unaudited), positive cash flow is defined as change in cash during the period less sale (purchase) of short-term investments, net. (2) See section 2.0 entitled "Operating Definitions" found in Management's Discussion & Analysis for the quarter ended May 31, 2008 found at www.cdnsatrad.com and www.sedar.com.
Financial Performance
Three months ended May 31, 2008 versus three months ended May 31, 2007
For the three months ended May 31, 2007 and May 31, 2008, revenue was $5.7 million and $10.3 million, respectively. This 81 per cent increase, or $4.6 million, is primarily attributable to XM Canada's increasing subscriber base.
Adjusted Operating Loss for the third quarter of 2007 was $9.8 million compared to $7.1 million for the third quarter of 2008, an improvement of $2.7 million. Pre-Marketing Adjusted Operating Loss, which adds back total marketing expenses, improved by $3.4 million from $4.7 million in the third quarter of 2007 to $1.3 million for the third quarter of 2008. Both Adjusted Operating Loss and Pre-Marketing Adjusted Operating Loss are expected to improve as XM Canada's subscriber base continues to grow and fixed and marketing costs are managed efficiently.
Average Monthly Subscription Revenue per Subscriber (ARPU) increased from $11.70 in the third quarter of 2007 to $11.99 for the third quarter of 2008. Much of this growth is attributable to an increasing proportion of our subscribers transitioning from our previous basic monthly subscription price of $12.99 to the current price of $14.99.
Cost per Gross Addition (CPGA) continues to decline year-over-year. CPGA was $178 for the quarter ended May 31, 2007 compared to $141 for the comparable period in 2008. XM Canada expects CPGA to decrease on an annualized basis as it increases gross additions through cost-efficient distribution channels.
Subscriber Acquisition Cost (SAC) was $40 for the third quarter of 2007 and $87 for the third quarter of 2008. This increase in SAC is primarily attributable to a shift in focus from general marketing activities towards targeted marketing strategies, including hardware promotions that were combined with prepayment of subsidies in connection with Father's Day gift giving.
Three months ended May 31, 2008 versus three months ended
February 29, 2008
For the three months ended February 29, 2008 and May 31, 2008, revenue was $9.2 million and $10.3 million, respectively. This 12 per cent increase is directly attributable to our growing subscriber base.
Adjusted Operating Loss for the three months ended February 29, 2008 and May 31, 2008 was $9.0 million and $7.1 million, respectively, an improvement of $1.9 million. Pre-Marketing Adjusted Operating Loss, which adds back total marketing expenses, improved by $0.3 million from $1.6 million in the second quarter of 2008 to $1.3 million in the third quarter of 2008.
ARPU was $11.61 and $11.99 for the three months ended February 29, 2008 and May 31, 2008, respectively. The quarter-over-quarter growth in ARPU is due to an increasing proportion of our subscribers transitioning from our previous basic monthly subscription price of $12.99 to the price of $14.99.
CPGA increased from $136 for the three months ended February 29, 2008 to $141 for the quarter ending May 31, 2008. SAC was $63 and $87 for the three months ended February 29, 2008 and May 31, 2008, respectively. This increase in SAC is due to the prepayment of subsidies in connection with gift giving in advance of Father's Day.
The non-GAAP measures above should be used in addition to, but not as a substitute for, the analysis provided in the interim consolidated statement of operations and deficit.
Quarterly Conference Call and Audio Webcast
CSR's management team will discuss its financial results for the third quarter ended May 31, 2008 on Thursday, July 10, 2008 at 2:30 p.m. EDT. To participate in the conference call, please dial 416-644-3414 or 1-800-733-7571 (toll-free). A live audio webcast will be available at http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)2113760.
A slide presentation intended for simultaneous viewing will be available the afternoon of Thursday, July 10, 2008 at www.cdnsatrad.com.
An archive of the audio webcast will be available for 90 days following the original broadcast on CSR's website at: www.cdnsatrad.com.
About Canadian Satellite Radio Holdings Inc.
Canadian Satellite Radio Holdings Inc. (TSX: XSR) operates as XM Canada(TM) and is Canada's premium digital audio entertainment and information company with the best signal coverage across the country.
With 130 channels, XM Canada offers listeners the most unique Canadian and international programming including exclusive satellite radio coverage of EVERY NHL(TM) GAME, as well as PGA TOUR(TM) and Major League Baseball(TM), the deepest playlist, plus news, talk, sports, entertainment and children's content. Acura, Buick, Cadillac, Chevrolet, GMC, Harley Davidson, Honda, Hummer, Hyundai, Infiniti, Lexus, Nissan, Pontiac, Toyota, Saab, Saturn, Suzuki and Subaru offer XM radios in more than 150 different vehicles for model year 2008.
XM Satellite Radio Inc. is the number one satellite radio company in North America with more than 9 million subscribers. In Canada, XM is offered on TELUS Mobile Radio(TM) and Rogers(TM) Communications wireless and is also the exclusive music channel provider on Air Canada's flights and is available in select Avis Budget Group rental vehicles.
A free three-day trial of XM Radio Online is available at http://listen.xmradio.ca. Visit www.xmradio.ca for programming and subscription information.
To find out more about Canadian Satellite Radio Holdings Inc. (TSX: XSR), visit our website at www.cdnsatrad.com.
Forward-Looking Statements
Certain statements included above may be forward-looking in nature. Such statements can be identified by the use of forward-looking terminology such as "expects," "may," "will," "should," "intend," "plan," or "anticipates" or the negative thereof or comparable terminology, or by discussions of strategy. Forward-looking statements include estimates, plans, expectations, opinions, forecasts, projections, targets, guidance or other statements that are not statements of fact. Although CSR believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. CSR's forward-looking statements are expressly qualified in their entirety by this cautionary statement. CSR makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made, except as required by applicable law. Additional information identifying risks and uncertainties is contained in CSR's filings with the Canadian securities regulators, available at www.sedar.com.
CANADIAN SATELLITE RADIO HOLDINGS INC.
INTERIM CONSOLIDATED BALANCE SHEET (UNAUDITED)
May 31, August 31,
2008 2007
-----------------------------
ASSETS
Current assets
Cash $ 4,365,105 $ 9,524,931
Short term investments 16,733,319 5,281,000
Accounts receivable 6,158,506 4,904,803
Inventory 588,392 2,462,975
Prepaid expenses and other assets 3,415,863 2,401,315
Restricted investments 12,401,609 13,043,109
-----------------------------
43,662,794 37,618,133
Restricted investments - 6,301,677
Deferred financing costs - 4,456,280
Property and equipment 18,604,547 20,878,489
Contract rights, distribution rights
and computer software 205,508,253 219,897,424
-----------------------------
Total assets 267,775,594 289,152,003
-----------------------------
-----------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities 21,059,969 19,822,541
Interest payable 4,375,606 590,315
Deferred revenue 16,468,603 10,445,788
-----------------------------
41,904,178 30,858,644
Long-term debt 115,881,970 107,434,473
Deferred revenue 3,991,077 3,626,134
Long-term obligations 2,220,811 376,316
-----------------------------
Total liabilities 163,998,036 142,295,567
-----------------------------
Shareholders' equity
Share capital 314,200,952 312,948,883
Contributed surplus 38,513,275 30,129,704
Deficit (248,936,669) (196,222,151)
-----------------------------
Total shareholders' equity 103,777,558 146,856,436
-----------------------------
Total liabilities and shareholders' equity 267,775,594 289,152,003
-----------------------------
-----------------------------
CANADIAN SATELLITE RADIO HOLDINGS INC.
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT (UNAUDITED)
Three Months Ended Nine Months Ended
May 31, 2008 May 31, 2007 May 31, 2008 May 31, 2007
--------------------------------------------------------
Revenue 10,335,948 5,710,886 27,677,502 14,411,140
--------------------------------------------------------
Operating expenses
Cost of revenue 7,951,244 6,288,948 22,463,250 19,208,952
General and
administrative 3,720,545 3,632,199 11,722,325 12,571,509
Special charges - 573,400 - 573,400
Stock-based
compensation 763,397 720,032 2,605,844 2,407,573
Marketing 5,826,585 5,047,684 20,291,487 20,574,356
Amortization of
intangible assets
and property &
equipment 5,569,361 5,606,096 16,713,036 16,810,627
--------------------------------------------------------
23,831,132 21,868,359 73,795,942 72,146,417
--------------------------------------------------------
Loss before the
undernoted (13,495,184) (16,157,473) (46,118,440) (57,735,277)
Interest revenue 285,738 434,731 1,181,142 1,936,112
Interest expense 4,273,146 3,819,342 12,340,982 11,641,210
Revaluation of
derivative 503,600 - 503,600 -
Foreign exchange
gain (loss) (803,122) 6,273,883 5,067,362 3,186,357
--------------------------------------------------------
Net loss and
comprehensive
loss for the
period (18,789,314) (13,268,201) (52,714,518) (64,254,018)
Deficit -
Beginning of
period (230,147,355) (162,568,125) (196,222,151) (111,582,308)
--------------------------------------------------------
Deficit - End
of period (248,936,669) (175,836,326) (248,936,669) (175,836,326)
--------------------------------------------------------
--------------------------------------------------------
Basic and fully
diluted loss per
common share (0.39) (0.28) (1.10) (1.35)
--------------------------------------------------------
--------------------------------------------------------
CANADIAN SATELLITE RADIO HOLDINGS INC.
RECONCILIATION OF LOSS BEFORE THE UNDERNOTED
TO ADJUSTED OPERATING LOSS (UNAUDITED)
Adjusted Operating Loss is defined as Operating loss before the undernoted excluding amortization, stock-based compensation to employees, directors, officers and service providers, and non-cash costs paid by our parent company. We believe that Adjusted Operating Loss, as opposed to Operating loss or Net loss, provides a better measure of our core business operating results and improves comparability.
This non-GAAP measure should be used in addition to, but not as a substitute for, the analysis provided in statement of operations. We believe Adjusted Operating Loss is a useful measure of our operating performance and is a significant basis used by our management to measure the operating performance of our business. While amortization and stock-based compensation are considered operating costs under generally accepted accounting principles, these expenses primarily represent non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods and non-cash employee and service provider compensation. Costs paid by parent company are non-cash costs related to the licence application process and are not related to ongoing operations of the business. Adjusted Operating Loss is a calculation used as a basis for investors and analysts to evaluate and compare the periodic and future operating performances and value of similar companies in our industry, although our measure of Adjusted Operating Loss may not be comparable to similarly titled measures of other companies.
Adjusted Operating Loss does not purport to represent operating loss or cash flow from operating activities, as those terms are defined under generally accepted accounting principles, and should not be considered as an alternative to those measurements as an indicator of our performance.
Pre-Marketing Adjusted Operating Loss is defined as Adjusted Operating Loss adding back total marketing expenses. We believe that Pre-Marketing Adjusted Operating Loss is a good measure of operating performance before investing to acquire new subscribers. This non-GAAP measure should be used in addition to, but not as a substitute for, the analysis provided in statement of operations. We believe Pre-Marketing Adjusted Operating Loss is a useful measure of our operating performance and is a significant basis used by our management to measure the operating performance of our business.
($000's) Three Months Ended
May 31, May 31,
2008 2007
-----------------------------
Reconciliation of loss before the
undernoted to Adjusted Operating Loss
Loss before the undernoted (13,495) (16,157)
Add back non-Adjusted Operating Loss
items included in loss
Amortization 5,569 5,606
Stock-based compensation 763 720
Costs paid by parent company 57 52
-----------------------------
Adjusted Operating Loss (7,106) (9,779)
Add back total marketing 5,827 5,048
-----------------------------
Pre-Marketing Adjusted Operating Loss (1,279) (4,731)
-----------------------------
-----------------------------
CANADIAN SATELLITE RADIO HOLDINGS INC.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Three Months Ended Nine Months Ended
May 31, 2008 May 31, 2007 May 31, 2008 May 31, 2007
--------------------------------------------------------
Cash provided by
(used in)
Operating
activities
Net loss and
comprehensive loss
for the period $(18,789,314) $(13,268,201) $(52,714,518) $(64,254,018)
Add (deduct):
Non-cash items
Costs paid by
parent company 57,004 51,822 167,017 151,833
Stock-based
compensation
expense 763,397 720,032 2,605,844 2,407,573
Amortization of
intangible
assets 4,799,680 4,820,642 14,398,513 14,464,695
Amortization of
property and
equipment 769,682 785,454 2,295,669 2,345,932
Accrued interest
- debt 3,586,224 3,625,781 3,785,291 3,637,928
Accrued interest
receivable (198,807) (275,032) (407,240) (1,000,624)
Interest
accretion
expense 298,864 172,500 762,763 517,500
Increase in long
term obligations 1,829,145 8,814 1,847,352 26,142
Revaluation of
derivative 503,600 - 503,600 -
Loss on disposal
of property and
equipment 33,003 - 239,671 -
Unrealized
foreign exchange
losses (gains) 798,086 (6,379,858) (5,916,820) (2,461,028)
Net change in
non-cash working
capital related to
operations 5,158,818 2,472,975 10,388,715 9,479,580
--------------------------------------------------------
Net cash used in
operating
activities (390,618) (7,265,701) (22,044,143) (34,684,487)
--------------------------------------------------------
Investing activities
Payment of interest
from restricted
investments - - 6,385,200 7,458,750
Sale (purchase) of
short-term
investments, net (93,498) - (10,880,477) (5,850,000)
Proceeds on sale
of property and
equipment - - 31,022 -
Purchase of
property and
equipment (128,780) (123,248) (322,557) (1,464,960)
Purchase of
computer software - (176) (4,513) (78,191)
--------------------------------------------------------
Net cash provided
by (used in)
investing
activities (222,278) (123,424) (4,791,325) 65,599
--------------------------------------------------------
Financing activities
Proceeds from XM
credit facility 771,019 - 2,289,002 -
Proceeds from
convertible notes - - 19,396,445 -
--------------------------------------------------------
Net cash provided
by financing
activities 771,019 - 21,685,447 -
--------------------------------------------------------
Foreign exchange
gains (losses)
on cash held in
foreign currency 1,334 (742,834) (9,805) (272,348)
--------------------------------------------------------
Change in cash
during the period 159,457 (8,131,329) (5,159,826) (34,891,236)
Cash - Beginning
of period 4,205,648 18,428,307 9,524,931 45,188,214
--------------------------------------------------------
Cash - End of
period 4,365,105 10,296,978 4,365,105 10,296,978
--------------------------------------------------------
--------------------------------------------------------
Supplemental cash
flow disclosures
Utilization of XM
credit facility 2,361,133 - 6,127,149 -
%SEDAR: 00022901E
