Sirius XM Holdings Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Composition of Certain Financial Statement Captions

Composition of Certain Financial Statement Captions

12 Months Ended

Dec. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Composition of Certain Financial Statement Captions

Cash, Cash Equivalents and Investments

Cash, cash equivalents and investments consisted of the following:



	As of December 31,
	2016		2017
	(in thousands)
Cash and cash equivalents
Cash	$	144,192	$	146,294
Money market funds	55,752		353,303
Total cash and cash equivalents	$	199,944	$	499,597
Short-term investments
Corporate debt securities	37,109		1,250
Total short-term investments	$	37,109	$	1,250
Long-term investments
Corporate debt securities	$	6,252	$	—
Total long-term investments	$	6,252	$	—
Cash, cash equivalents and investments	$	243,305	$	500,847

Our short-term investments have maturities of twelve months or less and are classified as available-for-sale. Our long-term investments have maturities of greater than twelve months and are classified as available-for-sale.

The following table summarizes our available-for-sale securities’ adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category as of December 31, 2016. As of December 31, 2017, the adjusted cost and fair value by significant investment category are the same.



	As of December 31, 2016
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)
Cash equivalents and marketable securities
Money market funds	$	55,752	$	—	$	—		$	55,752
Corporate debt securities	43,413		3		(55		)	43,361
Total cash equivalents and marketable securities	$	99,165	$	3	$	(55	)	$	99,113

The following tables present available-for-sale securities by contractual maturity date as of December 31, 2016 and 2017:



	As of December 31, 2016
	Adjusted Cost		Fair Value
	(in thousands)
Due in one year or less	$	92,914	$	92,861
Due after one year through three years	6,251		6,252
Total	$	99,165	$	99,113



	As of December 31, 2017
	Adjusted Cost		Fair Value
	(in thousands)
Due in one year or less	$	354,553	$	354,553
Total	$	354,553	$	354,553

The following table summarizes our available-for-sale securities’ fair value and gross unrealized losses aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position as of December 31, 2016. We had no securities that had been in a continuous unrealized loss position for greater than 12 months as of December 31, 2017.



	As of December 31, 2016
	Twelve Months or Less					More than Twelve Months					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(in thousands)
Corporate debt securities	$	34,257	$	(52	)	$	4,099	$	(3	)	$	38,356	$	(55	)
Total	$	34,257	$	(52	)	$	4,099	$	(3	)	$	38,356	$	(55	)

Our investment policy requires investments to be investment grade, primarily rated "A1" by Standard & Poor’s or "P1" by Moody’s or better for short-term investments and rated "A" by Standard & Poor’s or "A2" by Moody’s or better for long-term investments, with the objective of minimizing the potential risk of principal loss. In addition, the investment policy limits the amount of credit exposure to any one issuer.

As of December 31, 2017, we owned no securities that were in an unrealized loss position. When evaluating investments for other-than-temporary impairment, we review factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and our intent to sell, or whether it is more likely than not we will be required to sell, the investment before recovery of the investment’s amortized cost basis. During the year ended December 31, 2017, we did not recognize any impairment charges. There were no sales of available-for-sale securities during the year ended December 31, 2017.

Accounts Receivable, net

Accounts receivable, net consisted of the following as of December 31, 2016 and 2017:



	As of December 31,
	2016			2017
	(in thousands)
Accounts receivable, net
Accounts receivable	$	312,900		$	341,781
Allowance for doubtful accounts	(3,633		)	(5,352		)
Total accounts receivable, net	$	309,267		$	336,429

The following table summarizes our beginning allowance for doubtful accounts balance for each period, additions, write-offs net of recoveries and the balance at the end of each period for the years December 31, 2015, 2016 and 2017:



Allowance for Doubtful Accounts	Balance at Beginning of Period		Additions	Write-offs, Net of Recoveries		Balance at End of Period
	(in thousands)
For the year ended December 31, 2015	$	1,218	2,085	(1,138	)	$	2,165
For the year ended December 31, 2016	$	2,165	3,508	(2,040	)	$	3,633
For the year ended December 31, 2017	$	3,633	5,274	(3,555	)	$	5,352

Prepaid and Other Current Assets

Prepaid and other current assets consisted of the following as of December 31, 2016 and 2017:



	As of December 31,
	2016		2017
	(in thousands)
Prepaid expenses and other current assets
Other current assets	$	13,858	$	6,636
Prepaid expenses	13,533		12,584
Ticketing contract advances—short term, net	5,800		—
Total prepaid expenses and other current assets	$	33,191	$	19,220

As of December 31, 2016 and 2017, other current assets consisted primarily of $9.1 million and $3.8 million in receivables for the reimbursement of costs of leasehold improvements in connection with our operating leases.

Other Long-Term Assets

Other long-term assets consisted of the following as of December 31, 2016 and 2017:



	As of December 31,
	2016		2017
	(in thousands)
Other long-term assets
Long-term security deposits	$	9,090	$	8,810
Other	7,048		2,483
Ticketing contract advances—long-term	15,395		—
Total other long-term assets	$	31,533	$	11,293

Property and Equipment, net

Property and equipment, net consisted of the following as of December 31, 2016 and 2017:



	As of December 31,
	2016			2017
	(in thousands)
Property and equipment, net
Servers, computers and other related equipment	$	85,541		$	91,803
Software developed for internal use	34,983			74,260
Leasehold improvements	63,519			64,968
Construction in progress	20,393			8,460
Office furniture and equipment	9,037			8,040
Total property and equipment	$	213,473		$	247,531
Less accumulated depreciation and amortization	(89,385		)	(130,789		)
Total property and equipment, net	$	124,088		$	116,742

Depreciation expenses totaled $20.4 million, $34.2 million and $46.2 million for the years ended December 31, 2015, 2016 and 2017, respectively. There were no material write-offs during the years ended December 31, 2015, 2016 and 2017.

Software developed for internal use generally has an expected useful life of three to five years from the date placed in service. As of December 31, 2016 and 2017 the net carrying amount was $25.7 million and $50.9 million, including accumulated amortization of $9.3 million and $23.4 million. Amortization expense for the years ended December 31, 2015, 2016 and 2017 was $2.2 million, $5.3 million and $14.1 million, respectively.

Other Current Liabilities

Other current liabilities consisted of the following as of December 31, 2016 and 2017:



	As of December 31,
	2016		2017
	(in thousands)
Other current liabilities
Ticketing amounts due to clients	$	20,666	$	—
Other	327		—
Total other current liabilities	$	20,993	$	—

Ticketing amounts due to clients consists of the face value of tickets sold and the revenue share costs related to tickets sold on the Ticketfly ticketing platform that are owed to clients. The face value of tickets sold on the Ticketfly ticketing platform is collected by Ticketfly and remitted to clients. Revenue share costs owed to clients related to tickets sold on the Ticketfly ticketing platform consist of fees paid to clients for their share of convenience and order processing fees. We completed the sale of Ticketfly on September 1, 2017, which resulted in the disposition of these liabilities. Refer to Note 5 "Dispositions" in the Notes to Consolidated Financial Statements for further details on the Ticketfly disposition.

Other Long-Term Liabilities

Other long-term liabilities consisted of the following as of December 31, 2016 and 2017:



	As of December 31,
	2016		2017
	(in thousands)
Other long-term liabilities
Long-term deferred rent	$	24,245	$	19,822
Other	9,942		3,678
Total other long-term liabilities	$	34,187	$	23,500

For operating leases that include escalation clauses over the term of the lease, tenant improvement reimbursements and rent abatement periods, we recognize rent expense on a straight-line basis over the lease term including expected renewal periods. The difference between rent expense and rent payments is recorded as deferred rent.