XM Narrows Loss, but Sales Fall Short

XM Satellite Radio (XMSR Quote - Cramer on XMSR - Stock Picks) recorded a better-than-expected second-quarter profit, just one day after the company posted preliminary subscriber data, although weakness in the retail business persisted.

The Washington, D.C.-based satellite-radio operator reported a loss of $120 million, or 38 cents a share, in the quarter, narrowing from a year-ago loss of $176 million, or 57 cents a share. Total revenue rose to $318 million, up nearly 15% from the same quarter a year earlier.

Analysts were expecting a loss of 41 cents a share on revenue of $323 million, according to Thomson Reuters. Shares of XM were down 1.8% at $8.91 in early trading.

As both XM and its potential merger mate Sirius Satellite Radio (SIRI Quote - Cramer on SIRI - Stock Picks) have done in the past, XM did not provide 2008 guidance in its earnings report.

XM ended the second quarter with 9.65 million subscribers, a 17% increase from a year ago. On Monday, XM said it added 322,000 new net subscribers in the quarter, with 857,000 gross additions coming from the OEM, or automotive, side of the business.

Despite the strength in OEM additions, XM's retail side continued to face pressure. The company said retail gross subscriber additions fell to 224,000 from 323,000 in the year-ago period. XM saw a retail net subscriber loss of 38,000, compared with a net gain of 43,000 in the second quarter of 2007.

Among key metrics watched closely by analysts, subscriber acquisition costs shrank to $65 from $75 last year. Monthly churn, which measures the number of subscribers who quit the service, dipped to 1.67% from 1.84% in the second quarter of 2007. Additionally, XM said its conversion rate increased to 53.4% from 52.7% in the year-ago period.

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