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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
OR
| | | | | | | | |
☐ | | 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 | shares |
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
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.
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.
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.
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.
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.
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.
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.
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 | $ | 33 | | |