1worldspace Reports Second Quarter 2008 Results
Aug. 14, 2008
SILVER SPRING, Md.,1worldspace 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.
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