XM Satellite Radio's Subscriber Base, Net Losses Grow (XMSR 3Q05 Conf Call Quotes)

XM Satellite Radio (ticker: XMSR) -- the leading national satellite radio company -- reported that high 3Q05 marketing, retention and programming costs undermined its subscriber and revenue growth, leading to a stiff net loss and a 9% drop in its stock by week's end. Key data and quotes from the XMSR conference call:

Earnings: Net loss of $134 million, or 60 cents/share (3Q04: Loss of $120.1 million)

Revenue: $153.1 million (3Q04: $65.3 million)

Cost of revenue: $105 million

Total subscribers: 5.03 million (3Q04: 2.51 million)

New subscriber acquisition cost: $53 ($89 including marketing and advertising)

In the conference call, XM commented on its key business with GM and a falling 'conversion rate' (percentage of customers who go to XM's paid plan after a free trial period):

about the conversion rates, and we were at about 58% for the second quarter. That ticked down to 56% for this quarter. Remember, this is the first quarter where we are seeing the full impact of the [editor: 2Q05] rate increase, because we measure conversion rates 90 days after the trial period. So, we lost a couple of points.

On XM's strategy to draw car radio customers into buying a home-based unit:

as long as you have a very strong OEM [editor: automotive] channel where that particular radio is not portable, that does not move into the home like a plug-and-play does, then you're always going to have somebody that loves it in their new car and is looking to get something then that they can maybe get it in other venues too.

And on what some analysts termed a disappointment -- no XM MP3 player (produced with Samsung) ready for this holiday season:

On the Samsung devices, we had always planned to have significant volume of the device in the first quarter. We were trying to get some of the devices in the fourth quarter, but our numbers and our projections for the year did not encompass having that be any significant portion of our subscriber growth.

(Quotes are from the CCBN StreetEvents transcript.)

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