|12 Months Ended|
Dec. 31, 2022
|Retirement Benefits [Abstract]|
We recognized share-based payment expense of $197, $202 and $223 for the years ended December 31, 2022, 2021 and 2020, respectively.
We account for equity instruments granted in accordance with ASC 718, Compensation - Stock Compensation. ASC 718 requires all share-based compensation payments to be recognized in the financial statements based on fair value. We use the Black-Scholes-Merton option-pricing model to value stock option awards and have elected to treat awards with graded vesting as a single award. Share-based compensation expense is recognized ratably over the requisite service period, which is generally the vesting period. We measure restricted stock unit awards using the fair market value of the restricted shares of common stock on the day the award is granted. We measure the value of restricted units that will vest depending a relative total stockholder return metric – that is, the performance of our common stock as compared other companies included in the S&P 500 Index – using a special option-based valuation method, known as a Monte Carlo simulation. Since the results of such awards depend on future results, which are not known on the grant date, the Monte Carlo simulation attempts to take into consideration the terms of the awards, potential future returns, payout rates, and other factors to estimate a fair value of the award. The Monte Carlo simulation method uses factual data for the company and employs various assumptions. Stock-based awards granted to employees, non-employees and members of our board of directors include stock options and restricted stock units.
Fair value as determined using the Black-Scholes-Merton model varies based on assumptions used for the expected life, expected stock price volatility, expected dividend yield and risk-free interest rates. For the years ended December 31, 2022, 2021 and 2020, we estimated the fair value of awards granted using the hybrid approach for volatility, which weights observable historical volatility and implied volatility of qualifying actively traded options on our common stock. The expected life assumption represents the weighted-average period stock-based awards are expected to remain outstanding. These expected life assumptions are established through a review of historical exercise behavior of stock-based award grants with similar vesting periods. Where historical patterns do not exist for non-employees, contractual terms are used. Dividend yield is based on the current expected annual dividend per share and our stock price. The risk-free interest rate represents the daily treasury yield curve rate at the grant date based on the closing market bid yields on actively traded U.S. treasury securities in the over-the-counter market for the expected term. Our assumptions may change in future periods.
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 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 December 31, 2022, 122 shares of common stock were available for future grants under the 2015 Plan.
The Compensation Committee intends to award equity-based compensation to our senior management in the form of: 25% stock options, which awards will vest in equal installments on the first three anniversaries of the date of grant; 25% restricted stock units, which awards will vest in equal installments on the first three anniversaries of the date of grant; 25% PRSUs, which will cliff vest on the third anniversary of the date of grant after a two-year performance period if the free cash flow target established by the Compensation Committee is achieved; and 25% PRSUs, which will cliff vest after a three-year performance period based on the performance of our common stock relative to the companies included in the S&P 500 Index. We refer to this performance measure as a relative “TSR” or “total stockholder return” metric. PRSUs based on the relative total stockholder return metric will only vest if our performance achieves at least the 25th percentile, with a target payout requiring performance at the 50th percentile. The settlement of PRSUs earned in respect of the applicable three-year performance period will be generally subject to the executive’s continued employment with us through the date the total stockholder return performance is certified by the Compensation Committee.
We maintain six share-based benefit plans in addition to the 2015 Plan — 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, members of our board of directors and non-employees:
The following table summarizes stock option activity under our share-based plans for the years ended December 31, 2022, 2021 and 2020:
(1) On February 25, 2022, we paid a special dividend which resulted in a $0.25 reduction to the exercise price of all options outstanding as of February 11, 2022. The table above reflects the exercise price reduction for all stock option activity during the year ended December 31, 2022 and for the outstanding and exercisable balances as of December 31, 2022. Stock option activity and balances prior to January 1, 2022 were not adjusted in the table above.
The weighted average grant date fair value per stock option granted during the years ended December 31, 2022, 2021 and 2020 was $1.48, $1.77 and $1.46, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2022, 2021 and 2020 was $77, $170 and $94, respectively. During the years ended December 31, 2022, 2021 and 2020, the number of net settled shares issued as a result of stock option exercises was 8, 22 and 8, respectively.
We recognized share-based payment expense associated with stock options of $35, $42 and $45 for the years ended December 31, 2022, 2021 and 2020, respectively.
The following table summarizes the restricted stock unit, including PRSU, activity under our share-based plans for the years ended December 31, 2022, 2021 and 2020:
The total intrinsic value of restricted stock units, including PRSUs, vesting during the years ended December 31, 2022, 2021 and 2020 was $207, $166 and $196, respectively. During the years ended December 31, 2022, 2021 and 2020, the number of net settled shares issued as a result of restricted stock units vesting totaled 19, 16 and 20, respectively. During the years ended December 31, 2022, 2021 and 2020, we granted 6, 7 and 4 PRSUs, respectively, to certain employees. We believe it is probable that the performance target applicable to these PRSUs will be achieved.
In connection with the cash dividends paid during each of the years ended December 31, 2022, 2021 and 2020, we granted 4, 1 and 1 restricted stock units, including PRSUs, in accordance with the terms of existing award agreements, respectively. These grants did not result in any additional incremental share-based payment expense being recognized during the years ended December 31, 2022, 2021 and 2020.
We recognized share-based payment expense associated with restricted stock units, including PRSUs, of $162, $160 and $178 for the years ended December 31, 2022, 2021 and 2020, 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 December 31, 2022 and December 31, 2021 was $472 and $455, respectively. The total unrecognized compensation costs at December 31, 2022 are expected to be recognized over a weighted-average period of 2.5 years.
401(k) Savings Plans
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 $19, $21 and $16 for the years ended December 31, 2022, 2021 and 2020, respectively, in connection with the Sirius XM 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 the years ended December 31, 2022, 2021 and 2020 were $(1), $4 and $8, respectively. As of December 31, 2022 and December 31, 2021, the fair value of the investments held in the trust were $47 and $56, respectively, which is included in Other long-term assets in our consolidated balance sheets and classified as trading securities. Trading gains and losses associated with these investments are recorded in Other (expense) income within our consolidated statements of comprehensive income. The associated liability is recorded within Other long-term liabilities in our consolidated balance sheets, and any increase or decrease in the liability is recorded in General and administrative expense within our consolidated statements of comprehensive income. We recorded (losses) gains on investments held in the trust of $(10), $5 and $3 for the years ended December 31, 2022, 2021 and 2020, respectively.
The entire disclosure for an entity's employee compensation and benefit plans, including, but not limited to, postemployment and postretirement benefit plans, defined benefit pension plans, defined contribution plans, non-qualified and supplemental benefit plans, deferred compensation, share-based compensation, life insurance, severance, health care, unemployment and other benefit plans.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
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