siri-20200930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☑

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM __________ TO ________

COMMISSION FILE NUMBER 001-34295

SIRIUS XM HOLDINGS INC.

(Exact name of registrant as specified in its charter)

Delaware

38-3916511

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

1221 Avenue of the Americas, 35th Floor, New York, NY

(Address of Principal Executive Offices)

10020

(Zip Code)

Registrant’s telephone number, including area code: (212) 584-5100

Former name, former address and former fiscal year, if changed since last report: Not Applicable

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of exchange on which registered

Common stock, $0.001 par value

SIRI

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

(Class)

(Outstanding as of October 20, 2020)

Common stock, $0.001 par value

4,249,501,448

Table of Contents

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q


Item No.	Description

	PART I - Financial Information

Item 1.	Financial Statements (unaudited)
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2020 and 2019	2
	Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019	3
	Consolidated Statements of Stockholders' Equity (Deficit) for the three and nine months ended September 30, 2020 and 2019	4
	Consolidated Statements of Cash Flows for the nine months ended Sept ember 30, 2020 and 2019	8
	Notes to the Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	63
Item 4.	Controls and Procedures	64

	PART II - Other Information

Item 1.	Legal Proceedings	65
Item 1A.	Risk Factors	65
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65
Item 3.	Defaults Upon Senior Securities	65
Item 4.	Mine Safety Disclosures	65
Item 5.	Other Information	65
Item 6.	Exhibits	65
	Signatures	67

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in millions, except per share data)	2020		2019		2020		2019
Revenue:
Subscriber revenue	$	1,594	$	1,556	$	4,757	$	4,551
Advertising revenue	345		366		866		933
Equipment revenue	47		45		113		127
Other revenue	39		44		115		121
Total revenue	2,025		2,011		5,851		5,732
Operating expenses:
Cost of services:
Revenue share and royalties	602		592		1,759		1,684
Programming and content	123		116		351		338
Customer service and billing	119		119		359		352
Transmission	46		46		129		117
Cost of equipment	5		8		13		20
Subscriber acquisition costs	110		101		257		313
Sales and marketing	222		233		664		648
Engineering, design and development	64		78		196		206
General and administrative	131		124		357		379
Depreciation and amortization	125		118		381		344
Acquisition and restructuring costs	—		—		24		83
Total operating expenses	1,547		1,535		4,490		4,484
Income from operations	478		476		1,361		1,248
Other (expense) income:
Interest expense	(96)		(104)		(297)		(291)
Loss on extinguishment of debt	(40)		(56)		(40)		(57)
Other income (expense)	2		—		10		(2)
Total other (expense) income	(134)		(160)		(327)		(350)
Income before income taxes	344		316		1,034		898
Income tax expense	(72)		(70)		(226)		(227)
Net income	$	272	$	246	$	808	$	671
Foreign currency translation adjustment, net of tax	7		(5)		(8)		9
Total comprehensive income	$	279	$	241	$	800	$	680
Net income per common share:
Basic	$	0.06	$	0.06	$	0.19	$	0.15
Diluted	$	0.06	$	0.05	$	0.18	$	0.15
Weighted average common shares outstanding:
Basic	4,326		4,450		4,367		4,529
Diluted	4,415		4,564		4,465		4,641

See accompanying notes to the unaudited consolidated financial statements.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



(in millions, except per share data)	September 30, 2020		December 31, 2019
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	33	$	106
Receivables, net	582		670
Inventory, net	10		11
Related party current assets	10		22
Prepaid expenses and other current assets	194		194
Total current assets	829		1,003
Property and equipment, net	1,587		1,626
Intangible assets, net	3,360		3,467
Goodwill	3,860		3,843
Related party long-term assets	514		452
Deferred tax assets	—		153
Operating lease right-of-use assets	423		466
Other long-term assets	129		139
Total assets	$	10,702	$	11,149
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses	$	1,088	$	1,151
Accrued interest	84		160
Current portion of deferred revenue	1,792		1,930
Current maturities of debt	2		2
Operating lease current liabilities	47		46
Related party current liabilities	1		4
Total current liabilities	3,014		3,293
Long-term deferred revenue	121		130
Long-term debt	7,845		7,842

Deferred tax liabilities	91		70
Operating lease liabilities	416		456
Other long-term liabilities	126		94
Total liabilities	11,613		11,885
Commitments and contingencies (Note 16)
Stockholders’ equity (deficit):
Common stock, par value $0.001 per share; 9,000 shares authorized; 4,283 and 4,412 shares issued; 4,278 and 4,412 shares outstanding at September 30, 2020 and December 31, 2019, respectively	4		4
Accumulated other comprehensive income, net of tax	—		8
Additional paid-in capital	—		395
Treasury stock, at cost; 5 and 0 shares of common stock at September 30, 2020 and December 31, 2019, respectively	(24)		—
Accumulated deficit	(891)		(1,143)
Total stockholders’ equity (deficit)	(911)		(736)
Total liabilities and stockholders’ equity (deficit)	$	10,702	$	11,149

See accompanying notes to the unaudited consolidated financial statements.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)


For the Nine Months Ended September 30, 2020
	Common Stock					Accumulated Other Comprehensive Income (Loss)		Additional Paid-in Capital	Treasury Stock						Accumulated Deficit	Total Stockholders’ Equity (Deficit)
(in millions)	Shares	Amount							Shares		Amount
Balance at December 31, 2019	4,412	$	4	$	8	$	395	—	$	—	$	(1,143)	$	(736)
Comprehensive income (loss), net of tax	—	—		(8)		—		—	—		808		800
Share-based payment expense	—	—		—		178		—	—		—		178
Exercise of stock options and vesting of restricted stock units	22	—		—		—		—	—		—		—
Withholding taxes on net share settlement of stock-based compensation	—	—		—		(84)		—	—		—		(84)
Cash dividends paid on common stock, $0.03993 per share	—	—		—		(139)		—	—		(36)		(175)
Common stock repurchased	—	—		—		—		156	(894)		—		(894)
Common stock retired	(151)	—		—		(350)		(151)	870		(520)		—
Balance at September 30, 2020	4,283	$	4	$	—	$	—	5	$	(24)	$	(891)	$	(911)

See accompanying notes to the unaudited consolidated financial statements.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)


For the Three Months Ended September 30, 2020
	Common Stock					Accumulated Other Comprehensive Income (Loss)		Additional Paid-in Capital	Treasury Stock						Accumulated Deficit	Total Stockholders’ Equity (Deficit)
(in millions)	Shares	Amount							Shares		Amount
Balance at June 30, 2020	4,355	$	4	$	(7)	$	(49)	2	$	(9)	$	(607)	$	(668)
Comprehensive income, net of tax	—	—		7		—		—	—		272		279
Share-based payment expense	—	—		—		63		—	—		—		63
Exercise of stock options and vesting of restricted stock units	11	—		—		—		—	—		—		—
Withholding taxes on net share settlement of stock-based compensation	—	—		—		(41)		—	—		—		(41)
Cash dividends paid on common stock, $0.01331 per share	—	—		—		(22)		—	—		(36)		(58)
Common stock repurchased	—	—		—		—		86	(486)		—		(486)
Common stock retired	(83)	—		—		49		(83)	471		(520)		—
Balance at September 30, 2020	4,283	$	4	$	—	$	—	5	$	(24)	$	(891)	$	(911)

See accompanying notes to the unaudited consolidated financial statements.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)


For the Nine Months Ended September 30, 2019
	Common Stock					Accumulated Other Comprehensive Income (Loss)		Additional Paid-in Capital	Treasury Stock						Accumulated Deficit	Total Stockholders’ Equity (Deficit)
(in millions)	Shares	Amount							Shares		Amount
Balance at December 31, 2018	4,346	$	4	$	(6)	$	242	—	$	—	$	(2,057)	$	(1,817)
Comprehensive income, net of tax	—	—		9		—		—	—		671		680
Share-based payment expense	—	—		—		201		—	—		—		201
Exercise of stock options and vesting of restricted stock units	30	—		—		8		—	—		—		8
Withholding taxes on net share settlement of stock-based compensation	—	—		—		(104)		—	—		—		(104)
Cash dividends paid on common stock, $0.0363 per share	—	—		—		(167)		—	—		—		(167)
Issuance of common stock as part of Pandora Acquisition	392	1		—		2,354		—	—		—		2,355
Equity component of convertible note	—	—		—		62		—	—		—		62
Common stock repurchased	—	—		—		—		335	(1,966)		—		(1,966)
Common stock retired	(334)	(1)		—		(1,958)		(334)	1,959		—		—
Balance at September 30, 2019	4,434	$	4	$	3	$	638	1	$	(7)	$	(1,386)	$	(748)

See accompanying notes to the unaudited consolidated financial statements.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)


For the Three Months Ended September 30, 2019
	Common Stock					Accumulated Other Comprehensive Income (Loss)		Additional Paid-in Capital	Treasury Stock						Accumulated Deficit	Total Stockholders’ Equity (Deficit)
(in millions)	Shares	Amount							Shares		Amount
Balance at June 30, 2019	4,497	$	4	$	8	$	1,159	5	$	(28)	$	(1,632)	$	(489)
Comprehensive income (loss), net of tax	—	—		(5)		—		—	—		246		241
Share-based payment expense	—	—		—		67		—	—		—		67
Exercise of stock options and vesting of restricted stock units	17	—		—		8		—	—		—		8
Withholding taxes on net share settlement of stock-based compensation	—	—		—		(57)		—	—		—		(57)
Cash dividends paid on common stock, $0.0121 per share	—	—		—		(54)		—	—		—		(54)

Common stock repurchased	—	—		—		—		76	(464)		—		(464)
Common stock retired	(80)	—		—		(485)		(80)	485		—		—
Balance at September 30, 2019	4,434	$	4	$	3	$	638	1	$	(7)	$	(1,386)	$	(748)

See accompanying notes to the unaudited consolidated financial statements.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the Nine Months Ended September 30,
(in millions)	2020		2019
Cash flows from operating activities:
Net income	$	808	$	671
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	381		344
Non-cash interest expense, net of amortization of premium	15		12
Provision for doubtful accounts	48		40
Amortization of deferred income related to equity method investment	(2)		(2)
Loss on extinguishment of debt	40		57
Loss on unconsolidated entity investments, net	8		16

Dividend received from unconsolidated entity investment	1		1
Loss on restructuring	24		—
Gain on other investments	(1)		(3)
Share-based payment expense	165		192
Deferred income taxes	175		210
Amortization of right-of-use assets	42		16
Changes in operating assets and liabilities:
Receivables	39		(85)
Inventory	(2)		8
Related party, net	10		—
Prepaid expenses and other current assets	(2)		(9)
Other long-term assets	14		8
Accounts payable and accrued expenses	(83)		79
Accrued interest	(76)		(24)
Deferred revenue	(147)		(46)
Operating lease liabilities	(39)		(4)
Other long-term liabilities	32		4
Net cash provided by operating activities	1,450		1,485
Cash flows from investing activities:
Additions to property and equipment	(230)		(239)
Purchases of other investments	(8)		(7)
Acquisition of business, net of cash acquired	(28)		313
Sale of short-term investments	—		73
Investments in related parties and other equity investees	(89)		(14)
Repayment from related party	11		—
Net cash (used in) provided by investing activities	(344)		126
Cash flows from financing activities:
Proceeds from exercise of stock options	—		8
Taxes paid from net share settlements for stock-based compensation	(81)		(104)
Revolving credit facility, net of deferred financing costs	—		(374)
Proceeds from long-term borrowings, net of costs	1,481		2,715
Proceeds from sale of capped call security	—		3
Principal payments of long-term borrowings	(1,506)		(1,663)
Payment of premiums on redemption of debt	(31)		(45)
Common stock repurchased and retired	(870)		(1,959)
Dividends paid	(175)		(167)
Net cash used in financing activities	(1,182)		(1,586)
Net (decrease) increase in cash, cash equivalents and restricted cash	(76)		25
Cash, cash equivalents and restricted cash at beginning of period ⁽¹⁾	120		65
Cash, cash equivalents and restricted cash at end of period ⁽¹⁾	$	44	$	90

See accompanying notes to the unaudited consolidated financial statements.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

(UNAUDITED)


	For the Nine Months Ended September 30,
(in millions)	2020		2019
Supplemental Disclosure of Cash and Non-Cash Flow Information
Cash paid during the period for:
Interest, net of amounts capitalized	$	357	$	300
Income taxes paid	$	26	$	6
Non-cash investing and financing activities:

Treasury stock not yet settled	$	(24)	$	(7)
Fair value of shares issued related to acquisition of a business	$	—	$	2,355
Accumulated other comprehensive (loss) income, net of tax	$	(8)	$	9

(1)The following table reconciles cash, cash equivalents and restricted cash per the statement of cash flows to the balance sheet. The restricted cash balances are primarily due to letters of credit which have been issued to the landlords of leased office space. The terms of the letters of credit primarily extend beyond one year.

(in millions)

September 30, 2020

December 31, 2019

September 30, 2019

December 31, 2018

Cash and cash equivalents