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, 2015

Composition of Certain Financial Statement Captions

Composition of Certain Financial Statement Captions

Cash, Cash Equivalents and Investments

Cash, cash equivalents and investments consisted of the following:



	As of December 31,
	2014		2015
	(in thousands)
Cash and cash equivalents
Cash	$	72,487	$	104,361
Money market funds	89,113		180,021
Commercial paper	9,349		31,089
Corporate debt securities	5,008		2,000
U.S. government and government agency debt securities	—		17,196
Total cash and cash equivalents	$	175,957	$	334,667
Short-term investments
Commercial paper	$	45,443	$	4,792
Corporate debt securities	128,691		31,052
U.S. government and government agency debt securities	4,497		—
Total short-term investments	$	178,631	$	35,844
Long-term investments
Corporate debt securities	$	100,998	$	46,369
U.S. government and government agency debt securities	3,245		—
Total long-term investments	$	104,243	$	46,369
Total cash, cash equivalents and investments	$	458,831	$	416,880

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 tables 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, 2014 and 2015.



	As of December 31, 2014
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)
Cash equivalents and marketable securities
Money market funds	$	89,113	$	—	$	—		$	89,113
Commercial paper	54,792		—		—			54,792
Corporate debt securities	235,135		6		(444		)	234,697
U.S. government and government agency debt securities	7,751		—		(9		)	7,742
Total cash equivalents and marketable securities	$	386,791	$	6	$	(453	)	$	386,344



	As of December 31, 2015
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)
Cash equivalents and marketable securities
Money market funds	$	180,021	$	—	$	—		$	180,021
Commercial paper	35,881		—		—			35,881
Corporate debt securities	79,760		8		(347		)	79,421
U.S. government and government agency debt securities	17,198		—		(2		)	17,196
Total cash equivalents and marketable securities	$	312,860	$	8	$	(349	)	$	312,519

The following tables present available-for-sale investments by contractual maturity date as of December 31, 2014 and 2015:



	As of December 31, 2014
	Adjusted Cost		Fair Value
	(in thousands)
Due in one year or less	$	282,206	$	282,101
Due after one year through three years	104,585		104,243
Total	$	386,791	$	386,344



	As of December 31, 2015
	Adjusted Cost		Fair Value
	(in thousands)
Due in one year or less	$	266,205	$	266,150
Due after one year through three years	46,655		46,369
Total	$	312,860	$	312,519

The following tables summarize 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, 2014 and 2015:



	As of December 31, 2014
	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)
Money market funds	$	—	$	—		$	—	$	—		$	—	$	—
Commercial paper	—		—			—		—			—		—
Corporate debt securities	192,699		(422		)	12,148		(22		)	204,847		(444		)
U.S. government and government agency debt securities	5,240		(9		)	—		—			5,240		(9		)
Total	$	197,939	$	(431	)	$	12,148	$	(22	)	$	210,087	$	(453	)



	As of December 31, 2015
	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)
Money market funds	$	—	$	—		$	—	$	—		$	—	$	—
Commercial paper	—		—			—		—			—		—
Corporate debt securities	64,804		(293		)	8,531		(54		)	73,335		(347		)
U.S. government and government agency debt securities	16,241		(2		)	—		—			16,241		(2		)
Total	$	81,045	$	(295	)	$	8,531	$	(54	)	$	89,576	$	(349	)

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.

The unrealized losses on our available-for-sale securities as of December 31, 2015 were primarily a result of unfavorable changes in interest rates subsequent to the initial purchase of these securities. As of December 31, 2015, we owned 71 securities that were in an unrealized loss position. Based on our cash flow needs, we may be required to sell a portion of these securities prior to maturity. However, we expect to recover the full carrying value of these securities. As a result, no portion of the unrealized losses at December 31, 2015 is deemed to be other-than-temporary and the unrealized losses are not deemed to be credit losses. When evaluating the 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 twelve months ended months ended December 31, 2015, we did not recognize any impairment charges. During the twelve months ended December 31, 2015, proceeds from the sale of available-for-sale securities were $111.4 million. We did not recognize a realized gain or loss in connection with these sales.

Accounts Receivable, net

Accounts receivable, net consisted of the following as of December 31, 2014 and 2015:



	As of December 31,
	2014			2015
	(in thousands)
Accounts receivable, net
Accounts receivable	$	219,655		$	279,240
Allowance for doubtful accounts	(1,218		)	(2,165		)
Total accounts receivable, net	$	218,437		$	277,075

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 eleven months ended December 31, 2013, the twelve months ended December 31, 2014 and the twelve months ended December 31, 2015:



Allowance for Doubtful Accounts	Balance at Beginning of Period		Additions	Write-offs, Net of Recoveries		Balance at End of Period
	(in thousands)
For the eleven months ended December 31, 2013	$	761	948	(437	)	$	1,272
For the twelve months ended December 31, 2014	$	1,272	1,064	(1,118	)	$	1,218
For the twelve months ended December 31, 2015	$	1,218	2,085	(1,138	)	$	2,165

Prepaid and Other Current Assets

Prepaid and other current assets consisted of the following as of December 31, 2014 and 2015:



	As of December 31,
	2014		2015
	(in thousands)
Prepaid and other current assets
Other current assets	$	8,520	$	15,821
Prepaid expenses	6,169		13,908
Ticketing contract advance - short term, net	—		4,092
Prepaid royalties	700		2,099
Total prepaid and other current assets	$	15,389	$	35,920

Other current assets consists primarily of $12.9 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, 2014 and 2015:



	As of December 31,
	2014		2015
	(in thousands)
Other long-term assets
Other	$	1,826	$	10,929
Ticketing contract advance - long-term	—		9,824
Long-term security deposits	4,947		9,039
Total other long-term assets	$	6,773	$	29,792

Property and Equipment, net

Property and equipment, net consisted of the following as of December 31, 2014 and 2015:



	As of December 31,
	2014			2015
	(in thousands)
Property and equipment, net
Servers, computers and other related equipment	$	39,890		$	57,309
Leasehold improvements	25,893			35,947
Office furniture and equipment	2,721			5,470
Construction in progress	5,075			12,550
Software developed for internal use	4,519			10,239
Total property and equipment	$	78,098		$	121,515
Less accumulated depreciation and amortization	(35,177		)	(55,145		)
Total property and equipment, net	$	42,921		$	66,370

Depreciation expenses totaled $9.7 million, $14.7 million and $20.4 million for the eleven months ended December 31, 2013 and the twelve months ended December 31, 2014 and 2015, respectively. There were no material write-offs during the eleven months ended December 31, 2013 or the twelve months ended December 31, 2014 or 2015.

Software developed for internal use generally has an expected useful life of three years from the date placed in service. As of December 31, 2014 and 2015 the net carrying amount was $2.8 million and $6.3 million, including accumulated amortization of $1.7 million and $4.0 million. Amortization expense for the eleven months ended December 31, 2013, the twelve months ended December 31, 2014 and the twelve months ended December 31, 2015 was $0.6 million, $1.1 million and $2.2 million, respectively.

Other Current Liabilities

Other current liabilities consisted of the following as of December 31, 2014 and 2015:



	As of December 31,
	2014		2015
	(in thousands)
Other current liabilities
Ticketing amounts due to clients	$	—	$	13,104
Other	—		2,528
Total other current liabilities	$	—	$	15,632

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.

Other Long-Term Liabilities

Other long-term liabilities consisted of the following as of December 31, 2014 and 2015:



	As of December 31,
	2014		2015
	(in thousands)
Other long-term liabilities
Long-term deferred rent	$	15,068	$	23,662
Other	1,705		7,200
Total other long-term liabilities	$	16,773	$	30,862

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.