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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 MARCH 31, 2023
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 | | The Nasdaq Stock Market LLC |
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 Exchange 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 April 25, 2023) |
Common stock, $0.001 par value | | 3,868,399,027 | 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 March 31, |
(in millions, except per share data) | | | | | 2023 | | 2022 | | |
Revenue: | | | | | | | | | |
Subscriber revenue | | | | | $ | 1,691 | | | $ | 1,713 | | | |
Advertising revenue | | | | | 375 | | | 383 | | | |
Equipment revenue | | | | | 46 | | | 53 | | | |
Other revenue | | | | | 32 | | | 37 | | | |
Total revenue | | | | | 2,144 | | | 2,186 | | | |
Operating expenses: | | | | | | | | | |
Cost of services: | | | | | | | | | |
Revenue share and royalties | | | | | 700 | | | 670 | | | |
Programming and content | | | | | 150 | | | 140 | | | |
Customer service and billing | | | | | 122 | | | 125 | | | |
Transmission | | | | | 49 | | | 51 | | | |
Cost of equipment | | | | | 3 | | | 3 | | | |
Subscriber acquisition costs | | | | | 90 | | | 90 | | | |
Sales and marketing | | | | | 224 | | | 272 | | | |
Engineering, design and development | | | | | 79 | | | 67 | | | |
General and administrative | | | | | 147 | | | 123 | | | |
Depreciation and amortization | | | | | 136 | | | 135 | | | |
Impairment, restructuring and acquisition costs | | | | | 32 | | | — | | | |
Total operating expenses | | | | | 1,732 | | | 1,676 | | | |
Income from operations | | | | | 412 | | | 510 | | | |
Other (expense) income: | | | | | | | | | |
Interest expense | | | | | (107) | | | (103) | | | |
| | | | | | | | | |
Other income | | | | | 3 | | | 2 | | | |
Total other expense | | | | | (104) | | | (101) | | | |
Income before income taxes | | | | | 308 | | | 409 | | | |
Income tax expense | | | | | (75) | | | (100) | | | |
Net income | | | | | $ | 233 | | | $ | 309 | | | |
Foreign currency translation adjustment, net of tax | | | | | — | | | 8 | | | |
Total comprehensive income | | | | | $ | 233 | | | $ | 317 | | | |
Net income per common share: | | | | | | | | | |
Basic | | | | | $ | 0.06 | | | $ | 0.08 | | | |
Diluted | | | | | $ | 0.06 | | | $ | 0.08 | | | |
Weighted average common shares outstanding: | | | | | | | | | |
Basic | | | | | 3,889 | | | 3,948 | | | |
Diluted | | | | | 3,939 | | | 4,024 | | | |
See accompanying notes to the unaudited consolidated financial statements.
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| |
(in millions, except per share data) | March 31, 2023 | | December 31, 2022 |
ASSETS | (unaudited) | | |
Current assets: | | | |
Cash and cash equivalents | $ | 53 | | | $ | 57 | |
Receivables, net | 587 | | | 655 | |
| | | |
Related party current assets | 18 | | | 42 | |
Prepaid expenses and other current assets | 322 | | | 284 | |
Total current assets | 980 | | | 1,038 | |
Property and equipment, net | 1,586 | | | 1,499 | |
Intangible assets, net | 3,013 | | | 3,050 | |
Goodwill | 3,249 | | | 3,249 | |
Related party long-term assets | 491 | | | 488 | |
Deferred tax assets | 147 | | | 147 | |
Operating lease right-of-use assets | 297 | | | 315 | |
Other long-term assets | 260 | | | 236 | |
Total assets | $ | 10,023 | | | $ | 10,022 | |
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | | | |
Current liabilities: | | | |
Accounts payable and accrued expenses | $ | 1,170 | | | $ | 1,248 | |
Accrued interest | 72 | | | 165 | |
Current portion of deferred revenue | 1,307 | | | 1,322 | |
Current maturities of debt | 122 | | | 196 | |
Operating lease current liabilities | 48 | | | 50 | |
Related party current liabilities | 77 | | | — | |
Total current liabilities | 2,796 | | | 2,981 | |
Long-term deferred revenue | 79 | | | 81 | |
Long-term debt | 9,391 | | | 9,256 | |
| | | |
Deferred tax liabilities | 511 | | | 565 | |
Operating lease liabilities | 310 | | | 320 | |
Other long-term liabilities | 195 | | | 170 | |
Total liabilities | 13,282 | | | 13,373 | |
Commitments and contingencies (Note 15) | | | |
Stockholders’ equity (deficit): | | | |
Common stock, par value $0.001 per share; 9,000 shares authorized; 3,879 and 3,891 shares issued; 3,878 and 3,891 shares outstanding at March 31, 2023 and December 31, 2022, respectively | 4 | | | 4 | |
Accumulated other comprehensive (loss) income, net of tax | (4) | | | (4) | |
| | | |
Treasury stock, at cost; 1 and 0 shares of common stock at March 31, 2023 and December 31, 2022, respectively | (5) | | | — | |
Accumulated deficit | (3,254) | | | (3,351) | |
Total stockholders’ equity (deficit) | (3,259) | | | (3,351) | |
Total liabilities and stockholders’ equity (deficit) | $ | 10,023 | | | $ | 10,022 | |
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 March 31, 2023 |
| | Common Stock | | Accumulated Other Comprehensive Loss | | Additional Paid-in Capital | | Treasury Stock | | Accumulated Deficit | | Total Stockholders’ Equity (Deficit) |
(in millions) | | Shares | | Amount | | | | Shares | | Amount | | |
Balance at December 31, 2022 | | 3,891 | | | $ | 4 | | | $ | (4) | | | $ | — | | | — | | | $ | — | | | $ | (3,351) | | | $ | (3,351) | |
Comprehensive income, net of tax | | — | | | — | | | — | | | — | | | — | | | — | | | 233 | | | 233 | |
Share-based payment expense | | — | | | — | | | — | | | 48 | | | — | | | — | | | — | | | 48 | |
Exercise of stock options and vesting of restricted stock units | | 4 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Withholding taxes on net share settlement of stock-based compensation | | — | | | — | | | — | | | (14) | | | — | | | — | | | — | | | (14) | |
Capital contribution related to Tax Sharing Agreement with Liberty Media | | — | | | — | | | — | | | — | | | — | | | — | | | (14) | | | (14) | |
Cash dividends paid on common stock, $0.0242 per share | | — | | | — | | | — | | | (34) | | | — | | | — | | | (60) | | | (94) | |
Common stock repurchased | | — | | | — | | | — | | | — | | | 17 | | | (67) | | | — | | | (67) | |
Common stock retired | | (16) | | | — | | | — | | | — | | | (16) | | | 62 | | | (62) | | | — | |
Balance at March 31, 2023 | | 3,879 | | | $ | 4 | | | $ | (4) | | | $ | — | | | 1 | | | $ | (5) | | | $ | (3,254) | | | $ | (3,259) | |
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 March 31, 2022 |
| | Common Stock | | Accumulated Other Comprehensive Income | | Additional Paid-in Capital | | Treasury Stock | | Accumulated Deficit | | Total Stockholders’ Equity (Deficit) |
(in millions) | | Shares | | Amount | | | | Shares | | Amount | | |
Balance at December 31, 2021 | | 3,968 | | | $ | 4 | | | $ | 15 | | | $ | — | | | 1 | | | $ | (8) | | | $ | (2,636) | | | $ | (2,625) | |
Cumulative effect of change in accounting principles | | — | | | — | | | — | | | — | | | — | | | — | | | (14) | | | (14) | |
Comprehensive income, net of tax | | — | | | — | | | 8 | | | — | | | — | | | — | | | 309 | | | 317 | |
Share-based payment expense | | — | | | — | | | — | | | 50 | | | — | | | — | | | — | | | 50 | |
Exercise of stock options and vesting of restricted stock units | | 5 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Withholding taxes on net share settlement of stock-based compensation | | — | | | — | | | — | | | (29) | | | — | | | — | | | — | | | (29) | |
Tax sharing agreement with Liberty Media | | — | | | — | | | — | | | — | | | — | | | — | | | (13) | | | (13) | |
Cash dividends paid on common stock, $0.2719615 per share | | — | | | — | | | — | | | (21) | | | — | | | — | | | (1,052) | | | (1,073) | |
| | | | | | | | | | | | | | | | |
Common stock repurchased | | — | | | — | | | — | | | — | | | 32 | | | (200) | | | — | | | (200) | |
Common stock retired | | (33) | | | — | | | — | | | — | | | (33) | | | 206 | | | (206) | | | — | |
Balance at March 31, 2022 | | 3,940 | | | $ | 4 | | | $ | 23 | | | $ | — | | | — | | | $ | (2) | | | $ | (3,612) | | | $ | (3,587) | |
See accompanying notes to the unaudited consolidated financial statements.
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | | | | | | | | | |
| For the Three Months Ended March 31, |
(in millions) | 2023 | | 2022 | | |
Cash flows from operating activities: | | | | | |
Net income | $ | 233 | | | $ | 309 | | | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation and amortization | 136 | | | 135 | | | |
Non-cash impairment and restructuring costs | 8 | | | — | | | |
Non-cash interest expense, net of amortization of premium | 3 | | | 5 | | | |
| | | | | |
Provision for doubtful accounts | 14 | | | 15 | | | |
| | | | | |
| | | | | |
Gain on unconsolidated entity investments, net | — | | | (3) | | | |
| | | | | |
| | | | | |
| | | | | |
(Gain) loss on other investments | (2) | | | 3 | | | |
Share-based payment expense | 45 | | | 45 | | | |
Deferred income tax (benefit) expense | (52) | | | 29 | | | |
Amortization of right-of-use assets | 10 | | | 12 | | | |
Changes in operating assets and liabilities: | | | | | |
Receivables | 53 | | | 57 | | | |
| | | | | |
Related party, net | 88 | | | 60 | | | |
Prepaid expenses and other current assets | (38) | | | (71) | | | |
Other long-term assets | 6 | | | 1 | | | |
Accounts payable and accrued expenses | (57) | | | (116) | | | |
Accrued interest | (93) | | | (102) | | | |
Deferred revenue | (17) | | | (9) | | | |
Operating lease liabilities | (10) | | | (15) | | | |
Other long-term liabilities | 23 | | | — | | | |
Net cash provided by operating activities | 350 | | | 355 | | | |
Cash flows from investing activities: | | | | | |
Additions to property and equipment | (205) | | | (97) | | | |
| | | | | |
Purchases of other investments | (1) | | | — | | | |
Acquisition of business, net of cash acquired | — | | | (44) | | | |
| | | | | |
Investments in related parties and other equity investees | (29) | | | (1) | | | |
| | | | | |
Net cash used in investing activities | (235) | | | (142) | | | |
Cash flows from financing activities: | | | | | |
| | | | | |
Taxes paid from net share settlements for stock-based compensation | (14) | | | (29) | | | |
Revolving credit facility, net | 130 | | | 981 | | | |
| | | | | |
Principal payments of long-term borrowings | (77) | | | (1) | | | |
| | | | | |
Payment of contingent consideration for business acquisition | (2) | | | — | | | |
| | | | | |
Common stock repurchased and retired | (62) | | | (206) | | | |
Dividends paid | (94) | | | (1,073) | | | |
Net cash used in financing activities | (119) | | | (328) | | | |
Net decrease in cash, cash equivalents and restricted cash | (4) | | | (115) | | | |
Cash, cash equivalents and restricted cash at beginning of period (1) | 65 | | | 199 | | | |
Cash, cash equivalents and restricted cash at end of period (1) | $ | 61 | | | $ | 84 | | | |
See accompanying notes to the unaudited consolidated financial statements.
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(UNAUDITED)
| | | | | | | | | | | | | |
| For the Three Months Ended March 31, |
(in millions) | 2023 | | 2022 | | |
Supplemental Disclosure of Cash and Non-Cash Flow Information | | | | | |
Cash paid during the period for: | | | | | |
Interest, net of amounts capitalized | $ | 195 | | | $ | 199 | | | |
Income taxes paid | $ | — | | | $ | 5 | | | |
Non-cash investing and financing activities: | | | | | |
Capital lease obligations incurred to acquire assets | $ | 4 | | | $ | — | | | |
| | | | | |
| | | | | |
Accumulated other comprehensive income, net of tax | $ | — | | | $ | 8 | | | |
Capital contribution pursuant to Tax Sharing Agreement | $ | 14 | | | $ | 13 | | | |
(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) | March 31, 2023 | | December 31, 2022 | | March 31, 2022 | | December 31, 2021 |
Cash and cash equivalents | $ | 53 | | | $ | 57 | | | $ | 76 | | | $ | 191 | |
Restricted cash included in Other long-term assets | 8 | | | 8 | | | 8 | | | 8 | |
Total cash, cash equivalents and restricted cash at end of period | $ | 61 | | | $ | 65 | | | $ | 84 | | | $ | 199 | |
See accompanying notes to the unaudited consolidated financial statements.
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)
(1)Business & Basis of Presentation
This Quarterly Report on Form 10-Q presents information for Sirius XM Holdings Inc. and its subsidiaries (collectively “Holdings”). The terms “Holdings,” “we,” “us,” “our,” and “our company” as used herein, and unless otherwise stated or indicated by context, refer to Sirius XM Holdings Inc. and its subsidiaries. “Sirius XM” refers to our wholly owned subsidiary Sirius XM Radio Inc. and its subsidiaries. “Pandora” refers to Sirius XM's wholly owned subsidiary Pandora Media, LLC and its subsidiaries. Holdings has no operations independent of Sirius XM and Pandora.
Business
We operate two complementary audio entertainment businesses - one of which we refer to as “SiriusXM” and the second of which we refer to as “Pandora and Off-platform”.
Sirius XM
Our Sirius XM business features music, sports, entertainment, comedy, talk, news, traffic and weather channels and other content, as well as podcasts and infotainment services, in the United States on a subscription fee basis. Sirius XM packages include live, curated and certain exclusive and on demand programming. The Sirius XM service is distributed through our two proprietary satellite radio systems and streamed via applications for mobile devices, home devices and other consumer electronic equipment. Satellite radios are primarily distributed through automakers, retailers and our website. Our Sirius XM service is also available through our in-car user interface, which we call “360L,” that combines our satellite and streaming services into a single, cohesive in-vehicle entertainment experience.
The primary source of revenue from our Sirius XM business is subscription fees, with most of our customers subscribing to monthly, quarterly, semi-annual or annual plans. We also derive revenue from advertising on select non-music channels, which is sold under the SXM Media brand, direct sales of our satellite radios and accessories, and other ancillary services. As of March 31, 2023, our Sirius XM business had approximately 34.0 million subscribers.
In addition to our audio entertainment businesses, we provide connected vehicle services to several automakers. These services are designed to enhance the safety, security and driving experience of consumers. We also offer a suite of data services that includes graphical weather and fuel prices, a traffic information service, and real-time weather services in boats and airplanes.
Sirius XM also holds a 70% equity interest and 33% voting interest in Sirius XM Canada Holdings Inc. (“Sirius XM Canada”). Sirius XM Canada's subscribers are not included in our subscriber count or subscriber-based operating metrics.
Pandora and Off-platform
Our Pandora and Off-platform business operates a music and podcast streaming discovery platform, offering a personalized experience for each listener wherever and whenever they want to listen, whether through computers, tablets, mobile devices, vehicle speakers or connected devices. Pandora enables listeners to create personalized stations and playlists, discover new content, hear artist- and expert-curated playlists, podcasts and select Sirius XM content as well as search and play songs and albums on-demand. Pandora is available as (1) an ad-supported radio service, (2) a radio subscription service (Pandora Plus) and (3) an on-demand subscription service (Pandora Premium). As of March 31, 2023, Pandora had approximately 6.2 million subscribers.
The majority of revenue from Pandora is generated from advertising on our Pandora ad-supported radio service which is sold under the SXM Media brand. We also derive subscription revenue from our Pandora Plus and Pandora Premium subscribers.
We also sell advertising on other audio platforms and in widely distributed podcasts, which we consider to be off-platform services. We have an arrangement with SoundCloud Holdings, LLC (“SoundCloud”) to be its exclusive ad sales representative in the US and certain European countries and offer advertisers the ability to execute campaigns across the Pandora and SoundCloud platforms. We also have arrangements to serve as the ad sales representative for certain podcasts. In
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)
addition, through AdsWizz Inc., we provide a comprehensive digital audio and programmatic advertising technology platform, which connects audio publishers and advertisers with a variety of ad insertion, campaign trafficking, yield optimization, programmatic buying, marketplace and podcast monetization solutions.
Liberty Media
As of March 31, 2023, Liberty Media Corporation (“Liberty Media”) beneficially owned, directly and indirectly, approximately 83% of the outstanding shares of our common stock. As a result, we are a “controlled company” for the purposes of the NASDAQ corporate governance requirements. Refer to Note 11 for more information regarding related parties.
Basis of Presentation
The accompanying unaudited consolidated financial statements of Holdings have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All significant intercompany transactions have been eliminated in consolidation. Certain numbers in our prior period consolidated financial statements and footnotes have been reclassified or consolidated to conform to our current period presentation.
In the opinion of our management, all normal recurring adjustments necessary for a fair presentation of our unaudited consolidated financial statements as of March 31, 2023 and for the three months ended March 31, 2023 and 2022 have been made.
Interim results are not necessarily indicative of the results that may be expected for a full year. This Quarterly Report on Form 10-Q should be read together with our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 2, 2023.
Public companies are required to disclose certain information about their reportable operating segments. Operating segments are defined as significant components of an enterprise for which separate financial information is available and is evaluated on a regular basis by the chief operating decision maker in deciding how to allocate resources to an individual segment and in assessing performance of the segment. We have determined that we have two reportable segments as our chief operating decision maker, our Chief Executive Officer, assesses performance and allocates resources based on the financial results of these segments. Refer to Note 17 for information related to our segments.
We have evaluated events subsequent to the balance sheet date and prior to the filing of this Quarterly Report on Form 10-Q for the three months ended March 31, 2023 and have determined that no events have occurred that would require adjustment to our unaudited consolidated financial statements. For a discussion of subsequent events that do not require adjustment to our unaudited consolidated financial statements refer to Note 18.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes. Estimates, by their nature, are based on judgment and available information. Actual results could differ materially from those estimates. Significant estimates inherent in the preparation of the accompanying unaudited consolidated financial statements include asset impairment, depreciable lives of our satellites, share-based payment expense and income taxes.
(2)Summary of Significant Accounting Policies
Fair Value Measurements
For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are based on unadjusted quoted prices in active markets for identical instruments. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. As of March 31, 2023 and December 31, 2022, the carrying amounts of cash and cash equivalents, receivables and accounts payable approximated fair value due to the short-term nature of these instruments.
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)
Our liabilities measured at fair value were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
| Level 1 | | Level 2 | | Level 3 | | Total Fair Value | | Level 1 | | Level 2 | | Level 3 | | Total Fair Value |
Liabilities: | | | | | | | | | | | | | | | |
Debt (a) | — | | | $ | 8,204 | | | — | | | $ | 8,204 | | | — | | | $ | 8,362 | | | — | | | $ | 8,362 | |
(a)The fair value for non-publicly traded debt is based upon estimates from a market maker and brokerage firm. Refer to Note 12 for information related to the carrying value of our debt as of March 31, 2023 and December 31, 2022.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive loss of $4 was primarily comprised of the cumulative foreign currency translation adjustments related to our investment in Sirius XM Canada (refer to Note 11 for additional information). During the three months ended March 31, 2023 and 2022, we recorded foreign currency translation adjustment income of less than $1 and $8, net of tax expense of less than $1 and $3, respectively.
(3)Acquisitions
On January 12, 2022, we completed an acquisition for total cash consideration of $44. We recognized goodwill of $29, other definite-lived intangible assets of $19 and liabilities of $4.
There were no acquisition related costs recognized for the three months ended March 31, 2023 and March 31, 2022.
(4)Restructuring Costs
During the three months ended March 31, 2023, we initiated measures to pursue greater efficiency and to realign our business and focus on strategic priorities. As part of these measures, we reduced the size of our workforce by approximately 475 roles, or 8%. We recorded a charge of $23 primarily related to severance and other employee costs. In addition, we vacated one of our leased locations. We assessed the recoverability of the carrying value of the operating lease right of use asset related to this location and determined that the carrying value of the asset was not recoverable. As a result, we recorded an impairment of $5 to reduce its carrying value to its estimated fair value. Additionally, we accrued expenses of $2 for which we will not recognize any future economic benefits, and we wrote off fixed assets of less than $1 in connection with furniture and equipment located at the impaired office space. The total restructuring and related impairment charge of $30 was recorded to Impairment, restructuring and acquisition costs in our unaudited consolidated statements of comprehensive income for the three months ended March 31, 2023.
No restructuring costs were recognized during the three months ended March 31, 2022.
(5)Earnings per Share
Basic net income per common share is calculated by dividing the income available to common stockholders by the weighted average common shares outstanding during each reporting period. Diluted net income per common share adjusts the weighted average number of common shares outstanding for the potential dilution that could occur if common stock equivalents (stock options, restricted stock units and convertible debt) were exercised or converted into common stock, calculated using the treasury stock method. We had no participating securities during the three months ended March 31, 2023 and 2022.
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)
Common stock equivalents of 162 and 84 for the three months ended March 31, 2023 and 2022, respectively, were excluded from the calculation of diluted net income per common share as the effect would have been anti-dilutive.
| | | | | | | | | | | | | | | | | |
| | | For the Three Months Ended March 31, |
| | | | | 2023 | | 2022 | | |
Numerator: | | | | | | | | | |
Net Income available to common stockholders for basic net income per common share | | | | | $ | 233 | | | $ | 309 | | | |
Effect of interest on assumed conversions of convertible notes, net of tax | | | | | 1 | | | 2 | | | |
Net Income available to common stockholders for dilutive net income per common share | | | | | $ | 234 | | | $ | 311 | | | |
Denominator: | | | | | | | | | |
Weighted average common shares outstanding for basic net income per common share | | | | | 3,889 | | | 3,948 | | | |
Weighted average impact of assumed convertible notes | | | | | 32 | | | 31 | | | |
Weighted average impact of dilutive equity instruments | | | | | 18 | | | 45 | | | |
Weighted average shares for diluted net income per common share | | | | | 3,939 | | | 4,024 | | | |
Net income per common share: | | | | | | | | | |
Basic | | | | | $ | 0.06 | | | $ | 0.08 | | | |
Diluted | | | | | $ | 0.06 | | | $ | 0.08 | | | |
(6)Receivables, net
Receivables, net, includes customer accounts receivable, receivables from distributors and other receivables. We do not have any customer receivables that individually represent more than ten percent of our receivables.
Customer accounts receivable, net, includes receivables from our subscribers and advertising customers, including advertising agencies and other customers, and is stated at amounts due, net of an allowance for doubtful accounts. Our allowance for doubtful accounts is based upon our assessment of various factors. We consider historical experience, the age of the receivable balances, current economic conditions, industry experience and other factors that may affect the counterparty’s ability to pay. Bad debt expense is included in Customer service and billing expense in our unaudited consolidated statements of comprehensive income.
Receivables from distributors primarily include billed and unbilled amounts due from automakers for services included in the sale or lease price of vehicles, as well as billed amounts due from wholesale distributors of our satellite radios. Other receivables primarily include amounts due from manufacturers of our radios, modules and chipsets where we are entitled to subsidies and royalties based on the number of units produced. We have not established an allowance for doubtful accounts for our receivables from distributors or other receivables as we have historically not experienced any significant collection issues with automakers or other third parties and do not expect issues in the foreseeable future.
Receivables, net, consists of the following:
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Gross customer accounts receivable | $ | 512 | | | $ | 585 | |
Allowance for doubtful accounts | (10) | | | (11) | |
Customer accounts receivable, net | $ | 502 | | | $ | 574 | |
Receivables from distributors | 59 | | | 53 | |
Other receivables | 26 | | | 28 | |
Total receivables, net | $ | 587 | | | $ | 655 | |
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)
(7)Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired in business combinations. Our annual impairment assessment of our two reporting units is performed as of the fourth quarter of each year, and an assessment is performed at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. ASC 350, Intangibles - Goodwill and Other, states that an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Our Sirius XM reporting unit, which has an allocated goodwill balance of $2,290, had a negative carrying amount as of March 31, 2023.
As of March 31, 2023, there were no indicators of impairment, and no impairment losses were recorded for goodwill during the three months ended March 31, 2023 and 2022. As of March 31, 2023, the cumulative balance of goodwill impairments recorded was $5,722, of which $4,766 was recognized during the year ended December 31, 2008 and is included in the carrying amount of the goodwill allocated to our Sirius XM reporting unit and $956 was recognized during the year ended December 31, 2020 and is included in the carrying amount of the goodwill allocated to our Pandora and Off-platform reporting unit.
As of each of March 31, 2023 and December 31, 2022, the carrying amount of goodwill for our Sirius XM and Pandora and Off-platform reporting units was $2,290 and $959, respectively.
(8)Intangible Assets
Our intangible assets include the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | March 31, 2023 | | December 31, 2022 |
| Weighted Average Useful Lives | | Gross Carrying Value | | Accumulated Amortization | | Net Carrying Value | | Gross Carrying Value | | Accumulated Amortization | | Net Carrying Value |
Indefinite life intangible assets: | | | | | | | | | | | | | |
FCC licenses | Indefinite | | $ | 2,084 | | | $ | — | | | $ | 2,084 | | | $ | 2,084 | | | $ | — | | | $ | 2,084 | |
Trademarks | Indefinite | | 250 | | | — | | | 250 | | | 250 | | | — | | | 250 | |
Definite life intangible assets: | | | | | | | | | | | | | |
OEM relationships | 15 years | | 220 | | | (138) | | | 82 | | | 220 | | | (135) | | | 85 | |
Licensing agreements | 12 years | | 45 | | | (45) | | | — | | | 45 | | | (45) | | | — | |
Software and technology | 7 years | | 31 | | | (22) | | | 9 | | | 31 | | | (21) | | | 10 | |
Due to Acquisitions recorded to Pandora and Off-platform Reporting Unit: | | | | | | | | | | | | |
Indefinite life intangible assets: | | | | | | | | | | | | | |
Trademarks | Indefinite | | 312 | | | — | | | 312 | | | 312 | | | — | | | 312 | |
Definite life intangible assets: | | | | | | | | | | | | | |
Customer relationships | 8 years | | 442 | | | (239) | | | 203 | | | 442 | | | (225) | | | 217 | |
Software and technology | 5 years | | 391 | | | (318) | | | 73 | | | 391 | | | (299) | | | 92 | |
Total intangible assets | | | $ | 3,775 | | | $ | (762) | | | $ | 3,013 | | | $ | 3,775 | | | $ | (725) | | | $ | 3,050 | |
Indefinite Life Intangible Assets
We have identified our FCC licenses and XM and Pandora trademarks as indefinite life intangible assets after considering the expected use of the assets, the regulatory and economic environment within which they are used and the effects of obsolescence on their use.
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)
We hold FCC licenses to operate our satellite digital audio radio service and provide ancillary services. Each of the FCC licenses authorizes us to use radio spectrum, a reusable resource that does not deplete or exhaust over time.
Our annual impairment assessment of our identifiable indefinite lived intangible assets is performed as of the fourth quarter of each year. An assessment is performed at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of the asset below its carrying value. If the carrying value of the intangible assets exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. As of March 31, 2023, there were no indicators of impairment, and no impairment loss was recognized for intangible assets with indefinite lives during the three months ended March 31, 2023 and 2022.
Definite Life Intangible Assets
Amortization expense for all definite life intangible assets was $37 and $39 for the three months ended March 31, 2023 and 2022, respectively. There were no retirements of definite lived intangible assets during the three months ended March 31, 2023 and 2022.
The expected amortization expense for each of the fiscal years 2023 through 2027 and for periods thereafter is as follows:
| | | | | | | | |
Years ending December 31, | | Amount |
2023 (remaining) | | $ | 107 | |
2024 | | 77 | |
2025 | | 72 | |
2026 | | 71 | |
2027 | | 25 | |
Thereafter | | 15 | |
Total definite life intangible assets, net | | $ | 367 | |
(9)Property and Equipment
Property and equipment, net, consists of the following:
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Satellite system | $ | 1,598 | | | $ | 1,841 | |
Terrestrial repeater network | 118 | | | 118 | |
Leasehold improvements | 102 | | | 100 | |
Broadcast studio equipment | 135 | | | 133 | |
Capitalized software and hardware | 1,831 | | | 1,821 | |
Satellite telemetry, tracking and control facilities | 79 | | | 76 | |
Furniture, fixtures, equipment and other | 87 | | | 89 | |
Land | 32 | | | 32 | |
Building | 71 | | | 70 | |
Construction in progress | 477 | | | 313 | |
Total property and equipment | 4,530 | | | 4,593 | |
Accumulated depreciation | (2,944) | | | (3,094) | |
Property and equipment, net | $ | 1,586 | | | $ | 1,499 | |
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)
Construction in progress consists of the following:
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Satellite system | $ | 314 | | | $ | 212 | |
Terrestrial repeater network | 11 | | | 10 | |
Capitalized software and hardware | 114 | | | 56 | |
Other | 38 | | | 35 | |
Construction in progress | $ | 477 | | | $ | 313 | |
Depreciation and amortization expense on property and equipment was $99 and $96 for the three months ended March 31, 2023 and 2022, respectively. During the three months ended March 31, 2023, we recorded impairment charges of less than $1 related to furniture and equipment in connection with impaired office space leases and $2 related to terminated software projects. Additionally, we retired fully depreciated property and equipment of $249 primarily related to the retirement of our XM-4 satellite and $22 with a net book value of $1 during the three months ended March 31, 2023 and 2022, respectively.
We capitalize a portion of the interest on funds borrowed to finance the construction and launch of our satellites. Capitalized interest is recorded as part of the asset’s cost and depreciated over the satellite’s useful life. Capitalized interest costs were $3 and $1 for the three months ended March 31, 2023 and 2022, respectively, which related to the construction of our SXM-9, SXM-10, SXM-11 and SXM-12 satellites. We also capitalize a portion of share-based compensation related to employee time for capitalized software projects. Capitalized share-based compensation costs were $5 for each of the three months ended March 31, 2023 and 2022.
Satellites
As of March 31, 2023, we operated a fleet of five satellites. Each satellite requires an FCC license, and prior to the expiration of each license, we are required to apply for a renewal of the FCC satellite license. The renewal and extension of our licenses is reasonably certain at minimal cost, which is expensed as incurred. The chart below provides certain information on our satellites as of March 31, 2023:
| | | | | | | | | | | | | | | | | | | | |
Satellite Description | | Year Delivered | | Estimated End of Depreciable Life | | FCC License Expiration Year |
| | | | | | |
SIRIUS FM-5 | | 2009 | | 2024 | | 2025 |
SIRIUS FM-6 | | 2013 | | 2028 | | 2030 |
XM-3 | | 2005 | | 2020 | | 2026 |
| | | | | | |
XM-5 | | 2010 | | 2025 | | 2026 |
SXM-8 | | 2021 | | 2036 | | 2029 |
During the three months ended March 31, 2023, we removed our XM-4 satellite from service and began the process of de-orbiting the satellite which we expect to be completed by the end of 2023. Our XM-3 satellite remains available as an in-orbit spare.
(10)Leases
We have operating and finance leases for offices, terrestrial repeaters, data centers and certain equipment. Our leases have remaining lease terms of less than 1 year to 15 years, some of which may include options to extend the leases for up to 5 years, and some of which may include options to terminate the leases within 1 year. We elected the practical expedient to account for the lease and non-lease components as a single component. Additionally, we elected the practical expedient to not recognize right-of-use assets or lease liabilities for short-term leases, which are those leases with a term of twelve months or less at the lease commencement date.
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)
The components of lease expense were as follows:
| | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
Operating lease cost | $ | 21 | | | $ | 13 | | | | | |
| | | | | | | |
Sublease income | (1) | | | (1) | | | | | |
Total lease cost | $ | 20 | | | $ | 12 | | | | | |
During the three months ended March 31, 2023, we ceased using one of our leased locations and recorded an impairment charge of $5 to write down the carrying value of the right-of-use asset for this location to its estimated fair value. Refer to Note 4 for additional information.
(11)Related Party Transactions
In the normal course of business, we enter into transactions with related parties such as Sirius XM Canada and SoundCloud.
Liberty Media
As of March 31, 2023, Liberty Media beneficially owned, directly and indirectly, approximately 83% of the outstanding shares of our common stock. Liberty Media has three of its executives and one of its directors on our board of directors. Gregory B. Maffei, the President and Chief Executive Officer of Liberty Media, is the Chairman of our board of directors.
On February 1, 2021, Holdings entered into a tax sharing agreement with Liberty Media governing the allocation of consolidated U.S. income tax liabilities and setting forth agreements with respect to other tax matters. The tax sharing agreement was negotiated and approved by a special committee of Holdings’ board of directors, all of whom are independent of Liberty Media. Refer to Note 16 for more information regarding the tax sharing agreement.
Sirius XM Canada
Sirius XM holds a 70% equity interest and 33% voting interest in Sirius XM Canada, a privately held corporation. We own 591 shares of preferred stock of Sirius XM Canada, which has a liquidation preference of one Canadian dollar per share.
Sirius XM Canada is accounted for as an equity method investment, and its results are not consolidated in our unaudited consolidated financial statements. Sirius XM Canada does not meet the requirements for consolidation as we do not have the ability to direct the most significant activities that impact Sirius XM Canada's economic performance.
On March 15, 2022, Sirius XM and Sirius XM Canada entered into an amended and restated services and distribution agreement. The amended and restated services and distribution agreement modified the existing Services Agreement and terminated the existing Advisory Agreement, each dated as of May 25, 2017, between Sirius XM and Sirius XM Canada. Pursuant to the amended and restated services and distribution agreement, the fee payable by Sirius XM Canada to Sirius XM was modified from a fixed percentage of revenue to a variable fee, based on a target operating profit for Sirius XM Canada. Such variable fee is expected to be evaluated annually based on comparable companies. In accordance with the amended and restated services and distribution agreement, the fee is payable on a monthly basis, in arrears, beginning January 1, 2022.
In May 2017, Sirius XM extended a loan to Sirius XM Canada in the principal amount of $131. Prior to the March 2022 amendment, cumulative note repayments by Sirius XM Canada were $10. In connection with the execution of the amended and restated services and distribution agreement, Sirius XM forgave $113 in principal amount of such loan to Sirius XM Canada, leaving an outstanding principal amount of $8 on such loan. The principal amount that was forgiven by Sirius XM was considered satisfied and as contributed capital from Sirius XM.
Our related party long-term assets as of March 31, 2023 and December 31, 2022 included the carrying value of our investment balance in Sirius XM Canada of $416 and $412, respectively, and, as of each of March 31, 2023 and December 31, 2022, also included $8, for the long-term value of the outstanding loan to Sirius XM Canada.
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)
Sirius XM Canada paid gross dividends to us of less than $1 for each of the three months ended March 31, 2023 and 2022. Dividends are first recorded as a reduction to our investment balance in Sirius XM Canada to the extent a balance exists and then as Other (expense) income for any remaining portion.
We recorded revenue from Sirius XM Canada as Other revenue in our unaudited consolidated statements of comprehensive income of $26 and $27 during the three months ended March 31, 2023 and 2022, respectively.
SoundCloud
We have an investment in SoundCloud which is accounted for as an equity method investment and recorded in Related party long-term assets in our unaudited consolidated balance sheets. Sirius XM has appointed two individuals to serve on SoundCloud's ten-member board of managers. Sirius XM's share of SoundCloud's net loss was $1 for each of the three months ended March 31, 2023 and 2022, which was recorded in Other (expense) income in our unaudited consolidated statements of comprehensive income.
In addition to our investment in SoundCloud, Pandora has an agreement with SoundCloud to be its exclusive ad sales representative in the US and certain European countries. Through this arrangement, Pandora offers advertisers the ability to execute campaigns across the Pandora and SoundCloud platforms. We recorded revenue share expense related to this agreement of $12 and $13 for the three months ended March 31, 2023 and 2022, respectively. We also had related party liabilities of $17 and $19 as of March 31, 2023 and December 31, 2022, respectively, related to this agreement.
(12)Debt
Our debt as of March 31, 2023 and December 31, 2022 consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Principal Amount at | | Carrying value(a) at |
Issuer / Borrower | | Issued | | Debt | | Maturity Date | | Interest Payable | | March 31, 2023 | | March 31, 2023 | | December 31, 2022 |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Pandora (c) (d) | | June 2018
| | 1.75% Convertible Senior Notes | | December 1, 2023 | | semi-annually on June 1 and December 1 | | $ | 118 | | | $ | 118 | | | $ | 193 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Sirius XM (b) (f) | | April 2022 | | Incremental Term Loan | | April 11, 2024 | | variable fee paid monthly | | 500 | | | 500 | | | 500 | |
Sirius XM (b) | | August 2021 | | 3.125% Senior Notes | | September 1, 2026 | | semi-annually on March 1 and September 1 | | 1,000 | | | 992 | | | 992 | |
Sirius XM (b) | | July 2017 | | 5.00% Senior Notes | | August 1, 2027 | | semi-annually on February 1 and August 1 | | 1,500 | | | 1,493 | | | 1,492 | |
Sirius XM (b) | | June 2021 | | 4.00% Senior Notes | | July 15, 2028 | | semi-annually on January 15 and July 15 | | 2,000 | | | 1,983 | | | 1,982 | |
Sirius XM (b) | | June 2019 | | 5.500% Senior Notes | | July 1, 2029 | | semi-annually on January 1 and July 1 | | 1,250 | | | 1,240 | | | 1,240 | |
Sirius XM (b) | | June 2020 | | 4.125% Senior Notes | | July 1, 2030 | | semi-annually on January 1 and July 1 | | 1,500 | | | 1,487 | | | 1,487 | |
Sirius XM (b) | | August 2021 | | 3.875% Senior Notes | | September 1, 2031 | | semi-annually on March 1 and September 1 | | 1,500 | | | 1,485 | | | 1,485 | |
Sirius XM (e) | | December 2012 | | Senior Secured Revolving Credit Facility (the "Credit Facility") | | August 31, 2026 | | variable fee paid quarterly | | 210 | | | 210 | | | 80 | |
Sirius XM | | Various | | Finance leases | | Various | | n/a | | n/a | | 15 | | | 12 | |
Total Debt | | 9,523 | | | 9,463 | |
Less: total current maturities | | 122 | | | 196 | |
Less: total deferred financing costs | | 10 | | | 11 | |
Total long-term debt | | $ | 9,391 | | | $ | 9,256 | |
(a)The carrying value of the obligations is net of any remaining unamortized original issue discount.
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)
(b)All material domestic subsidiaries, including Pandora and its subsidiaries, that guarantee the Credit Facility have guaranteed the Incremental Term Loan and these notes.
(c)Holdings has unconditionally guaranteed all of the payment obligations of Pandora under these notes.
(d)We acquired $193 in principal amount of the 1.75% Convertible Senior Notes due 2023 as part of the acquisition of Pandora Media, Inc. in 2019. During the three months ended March 31, 2023, certain investors exercised their right to require a Special Repurchase, as defined in the indenture governing such notes, and Pandora repurchased $75 in outstanding principal amount of its 1.75% Convertible Senior Notes due 2023 with cash for an aggregate purchase price equal to 100% of the principal amount of the notes repurchased plus accrued and unpaid interest to the date of repurchase. The 1.75% Convertible Senior Notes due 2023 were not convertible into common stock and were not redeemable as of March 31, 2023.
(e)In August 2021, Sirius XM entered into an amendment to extend the maturity of the $1,750 Credit Facility to August 31, 2026. In March 2023, Sirius XM entered into an amendment to the Credit Facility to provide for the LIBOR transition on borrowings on or after July 1, 2023. Sirius XM's obligations under the Credit Facility are guaranteed by certain of its material domestic subsidiaries, including Pandora and its subsidiaries, and are secured by a lien on substantially all of Sirius XM's assets and the assets of its material domestic subsidiaries. Until June 30, 2023, interest on borrowings is payable on a monthly basis and accrues at a rate based on either the Secured Overnight Financing Rate (“SOFR”) or LIBOR plus an applicable rate. On or after July 1, 2023, borrowings based on LIBOR as the benchmark rate will no longer be available. Sirius XM is also required to pay a variable fee on the average daily unused portion of the Credit Facility which is payable on a quarterly basis. The variable rate for the unused portion of the Credit Facility was 0.25% per annum as of March 31, 2023. All of Sirius XM's outstanding borrowings under the Credit Facility are classified as Long-term debt within our unaudited consolidated balance sheets due to the long-term maturity of this debt.
(f)In April 2022, Sirius XM entered into an amendment to the Credit Facility to incorporate an Incremental Term Loan borrowing of $500 which matures on April 11, 2024. Interest on the Incremental Term Loan borrowing is based on SOFR plus an applicable rate.
Covenants and Restrictions
Under the Credit Facility, Sirius XM, our wholly owned subsidiary, must comply with a debt maintenance covenant that it cannot exceed a total leverage ratio, calculated as consolidated total debt to consolidated operating cash flow, of 5.0 to 1.0. The Credit Facility generally requires compliance with certain covenants that restrict Sirius XM's ability to, among other things, (i) incur additional indebtedness, (ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions with affiliates, (v) merge or consolidate with another person, (vi) sell, assign, lease or otherwise dispose of all or substantially all of Sirius XM's assets, and (vii) make voluntary prepayments of certain debt, in each case subject to exceptions.
The indentures governing Sirius XM's notes restrict Sirius XM's non-guarantor subsidiaries' ability to create, assume, incur or guarantee additional indebtedness without such non-guarantor subsidiary guaranteeing each such series of notes on a pari passu basis. The indentures governing the notes also contain covenants that, among other things, limit Sirius XM's ability and the ability of its subsidiaries to create certain liens; enter into sale/leaseback transactions; and merge or consolidate.
Under Sirius XM's debt agreements, the following generally constitute an event of default: (i) a default in the payment of interest; (ii) a default in the payment of principal; (iii) failure to comply with covenants; (iv) failure to pay other indebtedness after final maturity or acceleration of other indebtedness exceeding a specified amount; (v) certain events of bankruptcy; (vi) a judgment for payment of money exceeding a specified aggregate amount; and (vii) voidance of subsidiary guarantees, subject to grace periods where applicable. If an event of default occurs and is continuing, our debt could become immediately due and payable.
The indenture governing the Pandora 2023 Notes (as defined below) contains covenants that limit Pandora’s ability to merge or consolidate and provides for customary events of default, which include nonpayment of principal or interest, breach of covenants, payment defaults or acceleration of other indebtedness and certain events of bankruptcy.
At March 31, 2023 and December 31, 2022, we were in compliance with our debt covenants.
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)
Pandora Convertible Notes
Pandora's 1.75% Convertible Senior Notes due 2023 (the “Pandora 2023 Notes”) are unsecured, senior obligations of Pandora. Holdings has guaranteed the payment and performance obligations of Pandora under the Pandora 2023 Notes and the indenture governing the Pandora 2023 Notes.
The Pandora 2023 Notes will mature on December 1, 2023, unless earlier repurchased or redeemed by Pandora or converted in accordance with their terms. As of March 31, 2023, the conversion rate applicable to the Pandora 2023 Notes was 162.7373 shares of Holdings' common stock per one thousand principal amount of the Pandora 2023 Notes.
(13)Stockholders’ Equity
Common Stock, par value $0.001 per share
We are authorized to issue up to 9,000 shares of common stock. There were 3,879 and 3,891 shares of common stock issued and 3,878 and 3,891 shares of common stock outstanding on March 31, 2023 and December 31, 2022, respectively.
As of March 31, 2023, there were 222 shares of common stock reserved for issuance in connection with outstanding stock-based awards to members of our board of directors, employees and third parties.
Quarterly Dividends
During the three months ended March 31, 2023, our board of directors declared and paid the following dividend:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Declaration Date | | Dividend Per Share | | Record Date | | Total Amount | | Payment Date |
January 25, 2023 | | $ | 0.0242 | | | February 9, 2023 | | $ | 94 | | | February 24, 2023 |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Stock Repurchase Program
As of March 31, 2023, our board of directors had approved for repurchase an aggregate of $