Worldspace (MM) (NASDAQ:WRSP)
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1worldspace™
(NASDAQ:WRSP) the only global satellite communications company
positioned to offer crystal-clear radio to listeners in more than 130
countries, today announced results for the second quarter ended June 30,
2008. The Company ended the quarter with 171,657 subscribers worldwide,
a slight increase of 187 from the close of the prior quarter, continuing
to reflect the cessation of marketing efforts in India and other parts
of the world ahead of the Company’s efforts to
launch its mobile service in Europe in 2009, as well as the need to
raise additional funding. In India, the Company gained 2,283 net
subscribers during the second quarter of 2008, even with substantially
reduced marketing spend in that region. 1worldspace ended the
period with 164,309 subscribers in India, compared with 162,026 at the
end of the first quarter of 2008. Highlights of the second quarter
include:
As previously announced WorldSpace Europe, a majority-owned
subsidiary, received approval from Germany’s
Federal Network Agency, the Bundesnetzagentur, for the operation of a
terrestrial repeater network in Germany. The repeaters will work in
conjunction with the 1worldspace existing satellite network to
provide German consumers with a subscription-based satellite radio
service to automobiles, starting sometime in 2009.
An agreement with STMicroelectronics for the development, manufacture
and distribution of chips for the 1worldspace mobile receiver
for the European aftermarket. The agreement between 1worldspace
and STMicroelectronics is expected to lead to the first
fully-integrated device for channel decoding in ESDR receivers.
On June 13, 2008 the Company reached an agreement with its existing
note holders to defer its June 1, 2008 debt repayment of $17.7 million
and accrued interest of $2.16 million to June 30, 2008. The Company
also agreed to accelerate the repayment of the remaining unpaid
principal amount of the Bridge Loan Notes of $17.5 million to July 31,
2008.
Three additional transactions of interest occurred after the close of
the second quarter:
On July 3, 2008, the Company reached a revised agreement with its
existing note holders to defer the June 30 payment until July 9, 2008,
on which date the payment was further deferred to July 31, 2008, when
the second payment of $17.5 million was also due, as the Company
entered into a second forbearance agreement and amendment.
Upon receipt of funding to make one of the July 31, 2008, obligations,
on July 24, 2008, the Company entered into a third forbearance
agreement and amendment under which the Company agreed to pay on or
before July 25, 2008, an aggregate of $18.5 million to the investors
in principal and interest and further extended the forbearance period
through September 15, 2008 for the remaining unpaid principal amount
of the Bridge Loan Notes of about $20 million. In addition, the
Investors agreed to change the September 30, 2008 maturity date of the
Convertible Notes to December 31, 2008 if the Company has paid in full
on or before September 15, 2008, all amounts due on the Bridge Loan
Notes.
On July 24, 2008 1worldspace secured $20 million of
subordinated financing from Yenura Pte. Ltd., a company controlled by
Noah Samara, chairman and CEO of 1worldspace. Approximately
$18.5 million was used to meet the terms of the July 25, 2008
financing terms reached with its investors, leaving approximately $1.5
million to make certain payments owed to vendors and other persons.
The Company also introduced its new brand, 1worldspace and a new
website was launched on July 14, 2008.
“Our goals moving forward in 2008 continue to
be the resolution of our financial situation and a focus on our plans to
bring mobile satellite radio services to Europe, starting with Italy
sometime next year,” said Noah A. Samara,
Chairman and CEO, 1worldspace. “We have
also drastically reigned in spending in India, pending the attainment of
the license for repeaters and a local equity partner relationship there,
as we continue to work very hard to solve our liquidity issues.”
Subscriber Growth
Gross subscriber adds of 15,865 in India were slightly up from 15,637 in
the second quarter of 2008. Net subscriber adds in India in the second
quarter were slightly higher at 2,283 compared to net subscriber losses
of 1,049 in the first quarter of 2008. The Company continues to work
towards stabilizing its subscriber base, while awaiting approval of its
terrestrial offering in the country along with finalization of potential
partnership agreements.
Revenue
For the second quarter of 2008, 1worldspace reported revenues of
approximately $3.3 million, a slight increase over revenues of
approximately $3.0 million for the first quarter of 2008. Subscription
revenue was approximately $1.8 million for the second quarter of 2008,
compared with approximately $1.9 million in the second quarter of 2007.
On a sequential basis, subscription revenues in the first quarter of
2008 were approximately $1.7 million.
Operating Expenses
Total operating expenses for the second quarter of 2008 were $33.1
million, a 26.5% decline from operating expenses of $45.0 million in the
second quarter of 2007, primarily reflecting reduced marketing activity
in India, as well as decreased compensation and lower professional and
legal fees in the 2008 period.
Net Loss and EBITDA Loss
1worldspace recorded a net loss for the second quarter of 2008 of
$36.0 million, or $0.85 per share, compared with a net loss of $51.2
million, or $1.30 per share for the second quarter of 2007. 1worldspace
had an EBITDA (earnings before interest income, interest expense, income
taxes, depreciation and amortization) loss of $15.2 million for the
second quarter of 2008, compared with an EBITDA loss of $27.0 million
for the second quarter of 2007.
As of June 30, 2008, the Company had cash and cash equivalents of $1.2
million, along with restricted cash and investments of approximately
$4.8 million, compared with $2.0 million and $5.6 million, respectively,
as of March 31, 2008.
SAC and CPGA
Subscriber Acquisition Costs (SAC) were $13 in the second quarter of
2008 on a blended basis (India and the rest of the world) and $19 in
India, compared with $28 on a blended basis and $30 in India for the
first quarter of 2008. Cost Per Gross Addition (CPGA) decreased in the
quarter to $22 on a blended basis, down from the $70 CPGA in the prior
quarter, reflecting the lower marketing activity in India, and CPGA in
India, decreased to $27 for the second quarter of 2008 from $72 in the
first quarter of 2008. WorldSpace's CPGA is the fully-loaded cost to
acquire each new subscriber, including SAC, as well as advertising and
marketing expenses. SAC also represents a subsidy on equipment sales.
Non GAAP Reconciliation
Earnings before interest income, interest expense, income taxes,
depreciation and amortization is commonly referred to in our business as
"EBITDA." EBITDA is not a measure of financial performance under
generally accepted accounting principles. The Company believes EBITDA is
often a useful measure of a Company's operating performance and is a
significant basis used by the Company's management to measure the
operating performance of the Company's business because EBITDA excludes
charges for depreciation, amortization and interest expense that have
resulted from our debt financings, as well as our provision for income
tax expense. Accordingly, the Company believes that EBITDA provides
helpful information about the operating performance of its business,
apart from the expenses associated with its physical assets or capital
structure. EBITDA is frequently used as one of the bases for comparing
businesses in the Company's industry, although the Company's measure of
EBITDA may not be identical to similarly titled measures of other
companies. EBITDA does not purport to represent operating income or cash
flow from operating activities, as those terms are defined under
generally accepted accounting principles, and should not be considered
as alternatives to those measurements as an indicator of our
performance. A reconciliation of net loss to EBITDA has been provided in
this release.
About 1worldspace™
Based in the Washington, DC metropolitan area, 1worldspace™
is the world’s only global media and
entertainment company positioned to offer a satellite radio experience
to consumers in more than 130 countries with five billion people,
driving 300 million cars. 1worldspace™
award-winning programming provides subscribers with a combination of
news, sports, music, talk and entertainment, as well as brand-name
content and educational programming. Leading brands from around the
globe found on 1worldspace™ include
the BBC, CNN International, Virgin Radio UK, and RFI.
1worldspace™ satellites cover
two-thirds of the earth and enable the Company to offer a wide range of
innovative services for enterprises and governments globally, including
distance learning, alert delivery, data delivery, and disaster readiness
and response systems. 1worldspace™ is
a pioneer of satellite-based digital radio services and was instrumental
in the early development of the technology infrastructure used today by
XM Satellite Radio. For more information, visit www.1worldspace.com.
Forward-looking Statements
This press release may contain certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of
1995. These statements are based on management's current expectations or
beliefs about future events and financial, political and social trends
and assumptions it has made based on information currently available to
it. The Company cannot assure that any expectations, forecasts or
assumptions made by management in preparing these forward-looking
statements will prove accurate, or that any projections will be
realized. Such forward-looking statements may be affected by inaccurate
assumptions or by known or unknown risks or uncertainties. Actual
results may vary materially from those expressed or implied by the
statements herein. For factors that could cause actual results to vary,
perhaps materially, from these forward-looking statements, please refer
to the Company's Form 10-K, filed with the Securities and Exchange
Commission, and other subsequent filings. Forward-looking statements
contained herein speak only as of the date of this release. The Company
does not undertake any obligation to update or revise publicly any
forward-looking statements, whether to reflect new information, future
events or otherwise.
FINANCIAL TABLES FOLLOW
RESULTS OF OPERATIONS:
Three months ended June 30,
Six months ended June 30,
2008
2007
2008
2007
STATEMENT OF OPERATIONS DATA:
(unaudited, in thousands)
REVENUE:
Subscription revenue
$
1,747
$
1,884
$
3,482
$
3,704
Equipment revenue
393
535
731
1,015
Other revenue
1,127
1,189
2,098
1,935
Total Revenue
3,267
3,608
6,311
6,654
OPERATING EXPENSES:
Satellite transmission, programming and other
5,295
8,266
11,947
15,635
Cost of equipment
341
952
907
2,706
Research and development
530
1,430
2,976
1,525
Selling and marketing
1,123
3,491
2,774
5,985
General and administrative
11,058
16,060
21,354
30,339
Depreciation and amortization
14,712
14,805
29,498
29,402
Total Operating Expenses
33,059
45,004
69,456
85,592
Loss from Operations
(29,792
)
(41,396
)
(63,145
)
(78,938
)
OTHER INCOME (EXPENSE):
Interest income
217
1,779
407
4,073
Interest expense
(5,866
)
(3,023
)
(9,353
)
(5,690
)
Write-off of deferred debt issuance costs
—
(11,516
)
—
(11,516
)
Other
(158
)
(324
)
(68
)
(401
)
Total Other Income (Expense)
(5,807
)
(13,084
)
(9,014
)
(13,534
)
Loss Before Income Taxes
(35,599
)
(54,480
)
(72,159
)
(92,472
)
Income Tax Benefit (Expense)
(363
)
3,234
(625
)
5,694
Net Loss
$
(35,962
)
$
(51,246
)
$
(72,784
)
$
(86,778
)
Three months ended June 30,
Six months ended June 30,
2008
2007
2008
2007
PER SHARE DATA – Basic and Diluted:
Loss per share—basic and diluted
($0.85
)
($1.30
)
($1.72
)
($2.21
)
Weighted Average Number of Shares Outstanding
42,327,845
39,391,365
42,327,748
39,202,912
SUMMARY OPERATING METRICS
Three months ended
Six months ended
June 30,
June 30,
2008
2007
2008
2007
Net Subscriber Additions
187
(1,313
)
(2,509
)
(8,772
)
India
2,283
3,261
1,234
11,605
Rest of World ('ROW')
(2,096
)
(4,574
)
(3,743
)
(20,377
)
Total EOP Subs
171,657
190,333
171,657
190,333
India
164,309
173,615
164,309
173,615
ROW
7,348
16,718
7,348
16,718
ARPU (1)
$3.44
$3.28
$3.40
$3.23
ARPU (India)
3.22
2.98
3.14
2.96
ARPU (ROW)
7.53
6.06
7.83
5.57
SAC (2)
$13
$21
$11
$28
SAC (India)
19
22
15
29
SAC (ROW)
0
0
0
0
CPGA (3)
$22
$110
$55
$91
CPGA (India)
27
108
40
87
CPGA (ROW)
13
144
35
124
EBITDA (4)
($15,238
)
($26,915
)
($33,715
)
($49,937
)
SELECTED BALANCE SHEET DATA:
As of
June 30, 2008
December 31, 2007
Unaudited
(in thousands)
Cash and cash equivalents
$
1,224
$
3,597
Restricted Cash and Marketable Securities
4,839
6,312
Satellites and Related Systems, net
272,002
298,503
Total Assets
307,382
340,014
Total Debt ( including current portion)
111,016
94,013
Contingent Royalty Obligation
1,814,175
1,814,175
Total Liabilities
2,122,904
2,091,745
Minority Interest
438
689
Total Shareholders’ Deficit
(1,815,960
)
(1,752,420
)
EBITDA Reconciliation:
Three months ended
June 30,
2008
2007
(in thousands)
Reconciliation of Net Loss to EBITDA
Net Loss as reported
($35,962
)
($51,246
)
Addback non-EBITDA items included in net loss:
Interest income
(217
)
(1,779
)
Interest expense
5,866
14,539
Depreciation & amortization
14,712
14,805
Deferred income tax expenses (benefit)
363
(3,234
)
EBITDA
($15,238
)
($26,915
)
Six months ended
June 30,
2008
2007
(in thousands)
Reconciliation of Net Loss to EBITDA
Net Loss as reported
($72,784
)
($86,778
)
Addback non-EBITDA items included in net loss:
Interest income
(407
)
(4,073
)
Interest expense
9,353
17,206
Depreciation & amortization
29,498
29,402
Deferred income tax expenses (benefit)
625
(5,694
)
EBITDA
($33,715
)
($49,937
)
Notes:
1
Average Revenue per User (ARPU) is derived from the total of monthly
earned subscription revenue (net of promotion and rebates) divided
by the monthly average number of subscribers for the period
reported. ARPU is a measure of operational performance and not a
measure of financial performance under generally accepted accounting
principles.
2
Subscriber Acquisition Cost (SAC) includes the negative margins from
equipment sales to end customers, but does not include ongoing
loyalty payments to retailers and distribution partners, and
payments under revenue sharing arrangements to content providers.
3
Cost per Gross Addition (CPGA) includes amounts in SAC described
above, as well as advertising, media and other discretionary
marketing expenses, but does not include headcount related to sales
and marketing staff.
4
"EBITDA" refers to net loss before interest income, interest
expense, income taxes, depreciation and amortization. EBITDA is
not a measure of financial performance under generally accepted
accounting principles. EBITDA is often a useful measure of a
company's operating performance and is a significant basis used by
WorldSpace's management to measure the operating performance of
the business. Because we have funded and completed the build-out
of our system through the raising and expenditure of large amounts
of capital, our results of operations reflect significant charges
for depreciation, amortization and interest expense. EBITDA, which
excludes this information, provides helpful information about the
operating performance of our business, apart from the expenses
associated with our physical plant or capital structure. EBITDA is
frequently used as one of the bases for comparing businesses in
our industry, although our measure of EBITDA may not be comparable
to similarly titled measures of other companies. EBITDA 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.