Kit Spring, an analyst for Stifel issued a note today on XM's Q4 and 2007 operating results.


XMSR: First Look: Churn & Conversion Better; But Lack of Expense Control

Financials – were a miss overall: 4Q revenues of $308MM, up 20% YOY, were slightly above our estimate of$305MM and the Street at $303MM.

Adjusted EBITDA loss was $116MM worse than our estimate of $82MM.

EPS loss was $0.78, worse than our estimate of $0.61.

Cash position was $157MM exactly in line with our estimate.

Metrics mixed – great churn and OEM conversion but higher SAC:

4Q gross additions were 1.13MM, up 6% YOY slightly below our estimateof 1.15MM.

OEM gross adds of 766k (up 46%), were below our 800k estimate, while retail gross adds of 364k (down 33%), were slightly above our estimate of 351k.

Monthly churn was 1.72%, down from 1.79% in 4Q06 and below ourestimate of 1.8%, though up from 1.69% in 3Q07.

OEM conversion rate was 53.9% versus our expectation of 52.5% and was the highest rate since 2Q06 despite a deeper penetration into middle and lower-end new cars.

Net subscribers adds were 460k, up 6% YOY but below our estimate of 493k.

Ending subscribers were 9.027MM, within guidance of 9.0-9.2MM, and slightly below our estimate of 9.060MM.

4Q ARPU (average revenue per user per month) were $10.14, above our $10.09 estimate and up 1% YOY.

4Q SAC (subscriber acquisition cost per gross addition) was $87, far above our estimate of $75 and 24% above $70 last year.

4Q CPGA (SAC plus other marketing costs) was $140, far above ourestimate of $127, and $128 in 4Q06.

We plan to update all financials after the conference call which was at 8am ET

Position - Long Sirius, XM