Sirius XM Holdings Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Benefit Plans

Benefit Plans

6 Months Ended

Jun. 30, 2019

We recognized share-based payment expense of $57 and $36 for the three months ended June 30, 2019 and 2018, respectively, and $127 and $70 for the six months ended June 30, 2019 and 2018, respectively. This amount includes $21 of share-based compensation expense recorded in Acquisition and other related costs in our unaudited consolidated statements of comprehensive income during the six months ended June 30, 2019.

2015 Long-Term Stock Incentive Plan

In May 2015, our stockholders approved the Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan (the “2015 Plan”). Employees, consultants and members of our board of directors are eligible to receive awards under the 2015 Plan. The 2015 Plan provides for the grant of stock options, restricted stock awards, restricted stock units and other stock-based awards that the compensation committee of our board of directors deems appropriate. Stock-based awards granted under the 2015 Plan are generally subject to a graded vesting requirement, which is generally three to four years from the grant date. Stock options generally expire ten years from the date of grant. Restricted stock units include performance-based restricted stock units (“PRSUs”), the vesting of which are subject to the achievement of performance goals and the employee's continued employment and generally cliff vest on the third anniversary of the grant date. Each restricted stock unit entitles the holder to receive one share of common stock upon vesting. As of June 30, 2019, 156 shares of common stock were available for future grants under the 2015 Plan.

In connection with the Pandora Acquisition, we assumed all shares available for issuance (including any shares that later become available for issuance in accordance with the terms of the applicable plans) under each of the 2014 Stock Incentive Plan of AdsWizz Inc., the Pandora Media, Inc. 2011 Equity Incentive Plan, the Pandora Media, Inc. 2004 Stock Plan and the TheSavageBeast.com, Inc. 2000 Stock Incentive Plan, which were previously approved by stockholders of Pandora or the applicable adopting entity. All shares available under these stock plans became additional shares available for grant pursuant to the terms of the 2015 Plan (as adjusted, to the extent appropriate, to reflect the application of the exchange ratio). Subject to certain limitations set forth in the 2015 Plan, such shares may be used for awards under the 2015 Plan.

Other Plans

We maintain six additional share-based benefit plans — the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan, the Amended and Restated Sirius Satellite Radio 2003 Long-Term Stock Incentive Plan, the 2014 Stock Incentive Plan of AdsWizz Inc., the Pandora Media, Inc. 2011 Equity Incentive Plan, the Pandora Media, Inc. 2004 Stock Plan and the TheSavageBeast.com, Inc. 2000 Stock Incentive Plan. Excluding dividend equivalent units granted as a result of a declared dividend, no further awards may be made under these plans.

The following table summarizes the weighted-average assumptions used to compute the fair value of options granted to employees:



	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2019	2018	2019	2018
Risk-free interest rate	2.1%	2.6%	2.5%	2.5%
Expected life of options — years	3.99	3.48	3.36	3.54
Expected stock price volatility	34%	22%	26%	22%
Expected dividend yield	0.9%	0.6%	0.8%	0.7%

The following table summarizes stock option activity under our share-based plans for the six months ended June 30, 2019:



	Options		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2018	243		$	4.22
Options granted in connection with Pandora Acquisition	7		$	3.85
Granted	13		$	6.00
Exercised	(8	)	$	3.16
Forfeited, cancelled or expired	(3	)	$	5.45
Outstanding as of June 30, 2019	252		$	4.32	5.89	$	354
Exercisable as of June 30, 2019	151		$	3.72	4.88	$	284

The weighted average grant date fair value per share of stock options granted during the six months ended June 30, 2019 was $1.26. The total intrinsic value of stock options exercised during the six months ended June 30, 2019 and 2018 was $22 and $140, respectively. During the six months ended June 30, 2019, the number of net settled shares which were issued as a result of stock option exercises was 2.

In connection with the Pandora Acquisition, each option granted by Pandora under its stock incentive plans to purchase shares of Pandora common stock, whether vested or unvested, was assumed and converted into an option to purchase shares of our common stock, with appropriate adjustments (based on the 1.44 exchange ratio) to the exercise price and number of shares of our common stock subject to such option, and has the same vesting schedule and exercise conditions as in effect as of immediately prior to the closing of the Pandora Acquisition; provided, that any Pandora stock option that had an exercise price per share that was equal to or greater than the value, at the closing of the Pandora Acquisition, of our common stock issued as merger consideration in exchange for each share of Pandora common stock, was canceled without payment. We recorded $8 to Goodwill related to pre-acquisition replacement equity awards attributable to pre-combination service.

We recognized share-based payment expense associated with stock options of $15 and $21 for the three months ended June 30, 2019 and 2018, respectively, and $35 and $40 for the six months ended June 30, 2019 and 2018, respectively.

The following table summarizes the restricted stock unit, including PRSU, activity under our share-based plans for the six months ended June 30, 2019:



	Shares		Grant Date Fair Value Per Share
Nonvested as of December 31, 2018	35		$	5.50
Units granted in connection with Pandora Acquisition	48		$	5.83
Granted	12		$	5.84
Vested	(18	)	$	5.78
Forfeited	(4	)	$	5.78
Nonvested as of June 30, 2019	73		$	5.68

The total intrinsic value of restricted stock units, including PRSUs, vesting during the six months ended June 30, 2019 and 2018 was $102 and $23, respectively. During the six months ended June 30, 2019, the number of net settled shares which were issued as a result of restricted stock units vesting totaled 11. During the six months ended June 30, 2019, we granted 9 PRSUs to certain employees. We believe it is probable that the performance target applicable to these PRSUs will be achieved.

In connection with the Pandora Acquisition, each unvested restricted stock unit granted by Pandora under its stock incentive plans was assumed and converted into an unvested restricted stock unit of Holdings, with appropriate adjustments (based on the 1.44 exchange ratio) to the number of shares of our common stock to be received, and has the same vesting schedule and settlement date as in effect as of immediately prior to the closing of the Pandora Acquisition. We recorded $62 to Goodwill related to pre-acquisition replacement equity awards attributable to pre-combination service.

In connection with the cash dividend paid during the six months ended June 30, 2019, we granted less than 1 restricted stock units, including PRSUs, in accordance with the terms of existing award agreements. These grants did not result in any additional incremental share-based payment expense being recognized during the six months ended June 30, 2019.

We recognized share-based payment expense associated with restricted stock units, including PRSUs, of $42 and $15 for the three months ended June 30, 2019 and 2018, respectively, and $92 and $30 for the six months ended June 30, 2019 and 2018, respectively.

Total unrecognized compensation costs related to unvested share-based payment awards for stock options and restricted stock units, including PRSUs, granted to employees, members of our board of directors and third parties at June 30, 2019 and December 31, 2018 was $406 and $254, respectively. The total unrecognized compensation costs at June 30, 2019 are expected to be recognized over a weighted-average period of 1.9 years.

401(k) Savings Plans

Sirius XM Radio Inc. 401(k) Savings Plan

Sirius XM sponsors the Sirius XM Radio Inc. 401(k) Savings Plan (the “Sirius XM Plan”) for eligible employees. The Sirius XM Plan allows eligible employees to voluntarily contribute from 1% to 50% of their pre-tax eligible earnings, subject to certain defined limits. We match 50% of an employee’s voluntary contributions per pay period on the first 6% of an employee’s pre-tax salary up to a maximum of 3% of eligible compensation. We may also make additional discretionary matching, true-up matching and non-elective contributions to the Sirius XM Plan. Employer matching contributions under the Sirius XM Plan vest at a rate of 33.33% for each year of employment and are fully vested after three years of employment for all current and future contributions. Our cash employer matching contributions are not used to purchase shares of our common stock on the open market, unless the employee elects our common stock as their investment option for this contribution. We recognized expenses of $2 for both the three months ended June 30, 2019 and 2018, and $4 for both the six months ended June 30, 2019 and 2018, in connection with the Sirius XM Plan.

Pandora Media, LLC 401(k) Profit Sharing Plan and Trust

Pandora sponsors the Pandora Media, LLC 401(k) Profit Sharing Plan and Trust (the “Pandora Plan”) for eligible employees. The Pandora Plan allows eligible employees to voluntarily contribute from 1% to 75% of their pre-tax eligible earnings, subject to certain defined limits. There is no employer matching of employee contributions under the Pandora Plan.

Sirius XM Holdings Inc. Deferred Compensation Plan

The Sirius XM Holdings Inc. Deferred Compensation Plan (the “DCP”) allows members of our board of directors and certain eligible employees to defer all or a portion of their base salary, cash incentive compensation and/or board of directors’ cash compensation, as applicable. Pursuant to the terms of the DCP, we may elect to make additional contributions beyond amounts deferred by participants, but we are under no obligation to do so. We have established a grantor (or “rabbi”) trust to facilitate the payment of our obligations under the DCP.

Contributions to the DCP, net of withdrawals, for both the three months ended June 30, 2019 and 2018 were less than $1, and were $7 and $7 for six months ended June 30, 2019 and 2018, respectively. As of June 30, 2019 and December 31, 2018, the fair value of the investments held in the trust were $31 and $22, respectively, which is included in Other long-term assets in our unaudited consolidated balance sheets and classified as trading securities. Trading gains and losses associated with these investments are recorded in Other (expense) income within our unaudited consolidated statements of comprehensive income. The associated liability is recorded within Other long-term liabilities in our unaudited consolidated balance sheets, and any increase or decrease in the liability is recorded in General and administration expense within our unaudited consolidated statements of comprehensive income. For the three and six months ended June 30, 2019 and 2018, we recorded an immaterial amount of unrealized gains on investments held in the trust.