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☑
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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38-3916511
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.)
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Title of each class
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Trading Symbol(s)
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Name of exchange on which registered
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Common stock, $0.001 par value
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SIRI
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NASDAQ Global Select Market
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Large accelerated filer
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☑
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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Item No.
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Description
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ITEM 1.
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BUSINESS
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•
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an extensive selection of music genres, ranging from rock, pop and hip-hop to country, dance, jazz, Latin and classical;
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•
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live play-by-play sports from major leagues and colleges;
|
•
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a multitude of talk and entertainment channels for a variety of audiences;
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•
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a wide range of national, international and financial news; and
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•
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exclusive limited run channels.
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•
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satellites, terrestrial repeaters and other satellite facilities;
|
•
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studios; and
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•
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radios.
|
•
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the licensing of our satellite systems;
|
•
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preventing interference with or to other users of radio frequencies; and
|
•
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compliance with FCC rules established specifically for U.S. satellites and satellite radio services.
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Name
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Age
|
Position
|
James E. Meyer
|
65
|
Chief Executive Officer
|
Scott A. Greenstein
|
60
|
President, Chief Content Officer
|
Jennifer C. Witz
|
51
|
President Sales, Marketing and Operations
|
David J. Frear
|
63
|
Senior Executive Vice President and Chief Financial Officer
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Dara F. Altman
|
61
|
Executive Vice President and Chief Administrative Officer
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Patrick L. Donnelly
|
58
|
Executive Vice President, General Counsel and Secretary
|
ITEM 1A.
|
RISK FACTORS
|
•
|
the price of our service;
|
•
|
the ease of use of our service;
|
•
|
the effectiveness of our marketing programs;
|
•
|
with respect to our Sirius XM service, the sale or lease rate of new vehicles in the United States;
|
•
|
the rate at which our self-pay subscribers to our Sirius XM service buy and sell new and used vehicles in the United States;
|
•
|
our ability to convince owners and lessees of new and used vehicles that include satellite radios to purchase subscriptions to our Sirius XM service;
|
•
|
the perceived value of our programming and the packages and services we offer;
|
•
|
our ability to introduce features in a manner that is favorably received by our listeners and subscribers;
|
•
|
our ability to keep up with rapidly evolving technology and features in audio entertainment;
|
•
|
our ability to respond to evolving consumer tastes; and
|
•
|
actions by our competitors, such as Apple, Google, Amazon, Facebook and other audio entertainment and information providers.
|
•
|
the number of listener hours on the Pandora ad-supported service, particularly the number of listener hours attributable to high-value demographics;
|
•
|
keeping pace with changes in technology and our competitors, some of which have significant influence over the distribution of our Pandora app;
|
•
|
competing effectively for advertising with other dominant online services, such as Google and Facebook, as well as other marketing and media outlets, some of which provide services to us that we depend upon to fulfill the advertising we sell;
|
•
|
successfully competing for local radio advertising;
|
•
|
demonstrating the ability of advertisements to reach targeted audiences, including the value of mobile digital advertising;
|
•
|
ensuring that new ad formats and ad product offerings are attractive to advertisers and that inventory management decisions (such as changes to ad load, frequency, prominence and quality of ads that we serve listeners) do not have a negative impact on listener hours;
|
•
|
continuing to develop and diversify our advertising platform, which currently includes delivery of display, audio and video advertising products through multiple delivery channels; and
|
•
|
adapting to technologies designed to block the display of our ads.
|
•
|
manufacturers that build and distribute satellite radios;
|
•
|
companies that manufacture and sell integrated circuits for satellite radios;
|
•
|
third-party software that we incorporate in and include with our apps and service;
|
•
|
programming providers, including agreements with owners of various copyrights in music, and on-air talent;
|
•
|
vendors that operate our call centers;
|
•
|
vendors that have designed or built, and vendors that support or operate, other important elements of our systems, including our satellites and cloud-based systems we use;
|
•
|
Apple, who distributes our apps through its App Store and who, in the case of our Pandora service, we rely on to collect fees and approve the terms of our consumer offers; and
|
•
|
Google, who distributes our apps through its App Store and who, in the case of our Pandora service, we rely on to collect fees and approve the terms of our consumer offers, and who plays an important role in the fulfillment of the ads we sell on our Pandora platform.
|
•
|
degradation and durability of solar panels;
|
•
|
quality of construction;
|
•
|
random failure of satellite components, which could result in significant damage to or loss of a satellite;
|
•
|
amount of fuel the satellite consumes; and
|
•
|
damage or destruction as a result of electrostatic storms, terrorist attacks, collisions with other objects in space or other events, such as nuclear detonations, occurring in space.
|
ITEM 1B.
|
UNRESOLVED STAFF COMMENTS
|
ITEM 2.
|
PROPERTIES
|
Location
|
|
Purpose
|
|
Own/Lease
|
New York, NY
|
|
Corporate headquarters, office facilities and studio/production facilities
|
|
Lease
|
Washington, DC
|
|
Office, studio/production facilities and data center
|
|
Own
|
Lawrenceville, NJ
|
|
Office and technical/engineering facilities
|
|
Lease
|
Deerfield Beach, FL
|
|
Office and technical/engineering facilities
|
|
Lease
|
Farmington Hills, MI
|
|
Office and technical/engineering facilities
|
|
Lease
|
Nashville, TN
|
|
Studio/production facilities
|
|
Lease
|
Vernon, NJ
|
|
Technical/engineering facilities
|
|
Own
|
Ellenwood, GA
|
|
Technical/engineering facilities
|
|
Lease
|
Fredericksburg, VA
|
|
Warehouse and technical/engineering facilities
|
|
Lease
|
Los Angeles, CA
|
|
Office and studio/production facilities
|
|
Lease
|
Irving, TX
|
|
Office and engineering facilities/call center
|
|
Lease
|
San Francisco, CA
|
|
Office and engineering facilities
|
|
Lease
|
Location
|
|
Purpose
|
|
Own/Lease
|
Oakland, CA
|
|
Office and technical/engineering facilities
|
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Lease
|
New York, NY
|
|
Office, sales and studio/production facilities
|
|
Lease
|
Atlanta, GA
|
|
Office, sales and technical/engineering facilities
|
|
Lease
|
Santa Monica, CA
|
|
Office and sales facilities
|
|
Lease
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Period
|
|
Total Number of Shares Purchased
|
|
Average Price Paid Per Share (a)
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (a)
|
||||||
October 1, 2019 - October 31, 2019
|
|
8,831,735
|
|
|
$
|
6.34
|
|
|
8,831,735
|
|
|
$
|
1,303,879,917
|
|
November 1, 2019 - November 30, 2019
|
|
20,279,670
|
|
|
$
|
6.78
|
|
|
20,279,670
|
|
|
$
|
1,166,420,573
|
|
December 1, 2019 - December 31, 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
1,166,420,573
|
|
Total
|
|
29,111,405
|
|
|
$
|
6.65
|
|
|
29,111,405
|
|
|
|
(a)
|
These amounts include fees and commissions associated with the shares repurchased. All of these repurchases were made pursuant to our share repurchase program.
|
|
NASDAQ
Telecommunications Index |
|
S&P 500 Index
|
|
Sirius XM Holdings Inc.
|
||||||
December 31, 2014
|
$
|
100.00
|
|
|
$
|
100.00
|
|
|
$
|
100.00
|
|
December 31, 2015
|
$
|
92.50
|
|
|
$
|
99.27
|
|
|
$
|
116.29
|
|
December 31, 2016
|
$
|
106.25
|
|
|
$
|
108.74
|
|
|
$
|
127.14
|
|
December 31, 2017
|
$
|
124.78
|
|
|
$
|
129.86
|
|
|
$
|
153.14
|
|
December 31, 2018
|
$
|
128.57
|
|
|
$
|
121.76
|
|
|
$
|
163.14
|
|
December 31, 2019
|
$
|
143.20
|
|
|
$
|
156.92
|
|
|
$
|
204.29
|
|
Plan Category (shares in millions)
|
|
Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights(1)
|
|
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights(2)
|
|
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans
|
||||
Equity compensation plans approved by security holders
|
|
283
|
|
|
$
|
4.46
|
|
|
165
|
|
Equity compensation plans not approved by security holders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
283
|
|
|
$
|
4.46
|
|
|
165
|
|
(1)
|
In addition to shares issuable upon exercise of stock options, amount also includes approximately 75 shares underlying restricted stock units, including performance-based restricted stock units (“PRSUs”) and dividend equivalents thereon. The number of shares to be issued in respect of PRSUs and dividend equivalents thereon have been calculated based on the assumption that the maximum levels of performance applicable to the PRSUs will be achieved.
|
(2)
|
The weighted-average exercise price of outstanding options, warrants and rights relates solely to stock options, which are the only currently outstanding exercisable security.
|
|
As of and for the Years Ended December 31,
|
||||||||||||||||||
(in millions, except per share data)
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
Statements of Comprehensive Income Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total revenue
|
$
|
7,794
|
|
|
$
|
5,771
|
|
|
$
|
5,425
|
|
|
$
|
5,017
|
|
|
$
|
4,570
|
|
Net income
|
$
|
914
|
|
|
$
|
1,176
|
|
|
$
|
648
|
|
|
$
|
746
|
|
|
$
|
510
|
|
Net income per share - basic (1)
|
$
|
0.20
|
|
|
$
|
0.26
|
|
|
$
|
0.14
|
|
|
$
|
0.15
|
|
|
$
|
0.09
|
|
Net income per share - diluted (1)
|
$
|
0.20
|
|
|
$
|
0.26
|
|
|
$
|
0.14
|
|
|
$
|
0.15
|
|
|
$
|
0.09
|
|
Weighted average common shares outstanding - basic
|
4,501
|
|
|
4,462
|
|
|
4,638
|
|
|
4,917
|
|
|
5,376
|
|
|||||
Weighted average common shares outstanding - diluted
|
4,616
|
|
|
4,561
|
|
|
4,724
|
|
|
4,965
|
|
|
5,435
|
|
|||||
Cash dividends declared per share
|
$
|
0.04961
|
|
|
$
|
0.0451
|
|
|
$
|
0.0410
|
|
|
$
|
0.0100
|
|
|
$
|
—
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
106
|
|
|
$
|
54
|
|
|
$
|
69
|
|
|
$
|
214
|
|
|
$
|
112
|
|
Restricted investments
|
$
|
14
|
|
|
$
|
11
|
|
|
$
|
10
|
|
|
$
|
10
|
|
|
$
|
10
|
|
Total assets (2) (3)
|
$
|
11,149
|
|
|
$
|
8,173
|
|
|
$
|
8,329
|
|
|
$
|
8,004
|
|
|
$
|
8,047
|
|
Long-term debt, net of current portion (3)
|
$
|
7,842
|
|
|
$
|
6,885
|
|
|
$
|
6,741
|
|
|
$
|
5,843
|
|
|
$
|
5,444
|
|
Stockholders' (deficit) equity (2)
|
$
|
(736
|
)
|
|
$
|
(1,817
|
)
|
|
$
|
(1,524
|
)
|
|
$
|
(792
|
)
|
|
$
|
(166
|
)
|
(1)
|
The 2017 net income per basic and diluted share includes the impact of $185 in income tax expense, or a decrease of approximately $0.04 per share, due to the reduction in our net Deferred tax asset balance as a result of the Tax Cut and Jobs Act signed into law on December 22, 2017. For additional information refer to Note 17 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K.
|
(2)
|
For the year ended December 31, 2016, we recorded $294 as an increase to our Deferred tax assets and decrease to our Accumulated deficit as a result of the adoption of Accounting Standards Update 2016-09, Compensation-Stock Compensation (Topic 718).
|
(3)
|
The 2015 balance reflects the adoption of Accounting Standards Update 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, and Accounting Standards Update 2015-15,
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
For the Years Ended December 31,
|
|
2019 vs 2018 Change
|
|
2018 vs 2017 Change
|
||||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||||||||||
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Sirius XM:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Subscriber revenue
|
$
|
5,644
|
|
|
$
|
5,264
|
|
|
$
|
4,990
|
|
|
$
|
380
|
|
|
7
|
%
|
|
$
|
274
|
|
|
5
|
%
|
Advertising revenue
|
205
|
|
|
188
|
|
|
160
|
|
|
17
|
|
|
9
|
%
|
|
28
|
|
|
18
|
%
|
|||||
Equipment revenue
|
173
|
|
|
155
|
|
|
132
|
|
|
18
|
|
|
12
|
%
|
|
23
|
|
|
17
|
%
|
|||||
Other revenue
|
165
|
|
|
164
|
|
|
143
|
|
|
1
|
|
|
1
|
%
|
|
21
|
|
|
15
|
%
|
|||||
Total Sirius XM revenue
|
6,187
|
|
|
5,771
|
|
|
5,425
|
|
|
416
|
|
|
7
|
%
|
|
346
|
|
|
6
|
%
|
|||||
Pandora:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Subscriber revenue
|
476
|
|
|
—
|
|
|
—
|
|
|
476
|
|
|
nm
|
|
|
—
|
|
|
nm
|
|
|||||
Advertising revenue
|
1,131
|
|
|
—
|
|
|
—
|
|
|
1,131
|
|
|
nm
|
|
|
—
|
|
|
nm
|
|
|||||
Total Pandora revenue
|
1,607
|
|
|
—
|
|
|
—
|
|
|
1,607
|
|
|
nm
|
|
|
—
|
|
|
nm
|
|
|||||
Total consolidated revenue
|
7,794
|
|
|
5,771
|
|
|
5,425
|
|
|
2,023
|
|
|
35
|
%
|
|
346
|
|
|
6
|
%
|
|||||
Cost of services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Sirius XM:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Revenue share and royalties
|
1,431
|
|
|
1,394
|
|
|
1,210
|
|
|
37
|
|
|
3
|
%
|
|
184
|
|
|
15
|
%
|
|||||
Programming and content
|
444
|
|
|
406
|
|
|
388
|
|
|
38
|
|
|
9
|
%
|
|
18
|
|
|
5
|
%
|
|||||
Customer service and billing
|
398
|
|
|
382
|
|
|
385
|
|
|
16
|
|
|
4
|
%
|
|
(3
|
)
|
|
(1
|
)%
|
|||||
Transmission
|
112
|
|
|
96
|
|
|
83
|
|
|
16
|
|
|
17
|
%
|
|
13
|
|
|
16
|
%
|
|||||
Cost of equipment
|
29
|
|
|
31
|
|
|
35
|
|
|
(2
|
)
|
|
(6
|
)%
|
|
(4
|
)
|
|
(11
|
)%
|
|||||
Total Sirius XM cost of services
|
2,414
|
|
|
2,309
|
|
|
2,101
|
|
|
105
|
|
|
5
|
%
|
|
208
|
|
|
10
|
%
|
|||||
Pandora:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Revenue share and royalties
|
860
|
|
|
—
|
|
|
—
|
|
|
860
|
|
|
nm
|
|
|
—
|
|
|
nm
|
|
|||||
Programming and content
|
18
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
nm
|
|
|
—
|
|
|
nm
|
|
|||||
Customer service and billing
|
77
|
|
|
—
|
|
|
—
|
|
|
77
|
|
|
nm
|
|
|
—
|
|
|
nm
|
|
|||||
Transmission
|
58
|
|
|
—
|
|
|
—
|
|
|
58
|
|
|
nm
|
|
|
—
|
|
|
nm
|
|
|||||
Total Pandora cost of services
|
1,013
|
|
|
—
|
|
|
—
|
|
|
1,013
|
|
|
nm
|
|
|
—
|
|
|
nm
|
|
|||||
Total consolidated cost of services
|
3,427
|
|
|
2,309
|
|
|
2,101
|
|
|
1,118
|
|
|
48
|
%
|
|
208
|
|
|
10
|
%
|
|||||
Subscriber acquisition costs
|
427
|
|
|
470
|
|
|
499
|
|
|
(43
|
)
|
|
(9
|
)%
|
|
(29
|
)
|
|
(6
|
)%
|
|||||
Sales and marketing
|
937
|
|
|
484
|
|
|
438
|
|
|
453
|
|
|
94
|
%
|
|
46
|
|
|
11
|
%
|
|||||
Engineering, design and development
|
280
|
|
|
123
|
|
|
112
|
|
|
157
|
|
|
128
|
%
|
|
11
|
|
|
10
|
%
|
|||||
General and administrative
|
524
|
|
|
354
|
|
|
335
|
|
|
170
|
|
|
48
|
%
|
|
19
|
|
|
6
|
%
|
|||||
Depreciation and amortization
|
468
|
|
|
301
|
|
|
299
|
|
|
167
|
|
|
55
|
%
|
|
2
|
|
|
1
|
%
|
|||||
Acquisition and other related costs
|
84
|
|
|
3
|
|
|
—
|
|
|
81
|
|
|
nm
|
|
|
3
|
|
|
nm
|
|
|||||
Total operating expenses
|
6,147
|
|
|
4,044
|
|
|
3,784
|
|
|
2,103
|
|
|
52
|
%
|
|
260
|
|
|
7
|
%
|
|||||
Income from operations
|
1,647
|
|
|
1,727
|
|
|
1,641
|
|
|
(80
|
)
|
|
(5
|
)%
|
|
86
|
|
|
5
|
%
|
|||||
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense
|
(390
|
)
|
|
(350
|
)
|
|
(346
|
)
|
|
(40
|
)
|
|
(11
|
)%
|
|
(4
|
)
|
|
(1
|
)%
|
|||||
Loss on extinguishment of debt
|
(57
|
)
|
|
—
|
|
|
(44
|
)
|
|
(57
|
)
|
|
nm
|
|
|
44
|
|
|
100
|
%
|
|||||
Other (expense) income
|
(3
|
)
|
|
44
|
|
|
13
|
|
|
(47
|
)
|
|
(107
|
)%
|
|
31
|
|
|
238
|
%
|
|||||
Total other (expense) income
|
(450
|
)
|
|
(306
|
)
|
|
(377
|
)
|
|
(144
|
)
|
|
(47
|
)%
|
|
71
|
|
|
19
|
%
|
|||||
Income before income taxes
|
1,197
|
|
|
1,421
|
|
|
1,264
|
|
|
(224
|
)
|
|
(16
|
)%
|
|
157
|
|
|
12
|
%
|
|||||
Income tax expense
|
(283
|
)
|
|
(245
|
)
|
|
(616
|
)
|
|
(38
|
)
|
|
(16
|
)%
|
|
371
|
|
|
60
|
%
|
|||||
Net income
|
$
|
914
|
|
|
$
|
1,176
|
|
|
$
|
648
|
|
|
$
|
(262
|
)
|
|
(22
|
)%
|
|
$
|
528
|
|
|
81
|
%
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, subscriber acquisition costs were $427 and $470, respectively, a decrease of 9%, or $43, and decreased as a percentage of total revenue. The decrease was driven by reductions to OEM hardware subsidy rates, lower subsidized costs related to the transition of chipsets, and a decrease in the volume of satellite radio installations.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, subscriber acquisition costs were $470 and $499, respectively, a decrease of 6%, or $29, and decreased as a percentage of total revenue. The decrease was driven by reductions to OEM hardware subsidy rates, lower subsidized costs related to the transition of chipsets, and a decrease in the volume of satellite radio installations.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, sales and marketing expenses were $937 and $484, respectively, an increase of 94%, or $453, and increased as a percentage of total revenue. The increase was primarily due to the inclusion of Pandora, and additional subscriber communications and acquisition campaigns.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, sales and marketing expenses were $484 and $438, respectively, an increase of 11%, or $46, and increased as a percentage of total revenue. The increase was primarily due to additional subscriber communications, retention programs and acquisition campaigns as well as higher personnel-related costs.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, engineering, design and development expenses were $280 and $123, respectively, an increase of 128%, or $157, and increased as a percentage of total revenue. The increase was driven primarily by the inclusion of Pandora.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, engineering, design and development expenses were $123 and $112, respectively, an increase of 10%, or $11, and increased as a percentage of total revenue. The increase was driven by the continued development of our Sirius XM streaming product and connected vehicle services.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, general and administrative expenses were $524 and $354, respectively, an increase of 48%, or $170, and increased as a percentage of total revenue. The increase was driven by the inclusion of Pandora and by a $25 legal settlement associated with Do-Not-Call litigation.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, general and administrative expenses were $354 and $335, respectively, an increase of 6%, or $19, and decreased as a percentage of total revenue. The increase was primarily driven by higher personnel-related costs, information technology costs, and a one-time charge for sales and use taxes. These increases were partially offset by lower legal costs.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, depreciation and amortization expense was $468 and $301, respectively, an increase of 55%, or $167, and increased as a percentage of total revenue. The increase was driven by the amortization of definite life intangibles resulting from the Pandora Acquisition and higher depreciation costs related to additional assets placed in-service.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, depreciation and amortization expense was $301 and $299, respectively, an increase of 1%, or $2, and decreased as a percentage of total revenue. The increase was driven by additional assets placed in-service, partially offset by acceleration of amortization related to a shorter useful life of certain software during 2017.
|
•
|
2019 vs. 2018: For the year ended December 31, 2019 and 2018, acquisition and other related costs were $84 and $3, respectively.
|
•
|
2018 vs. 2017: For the year ended December 31, 2018 acquisition and related costs was $3. There were no acquisition and other related costs in 2017.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, interest expense was $390 and $350, respectively, an increase of 11%, or $40. The increase was primarily driven by higher average debt due to the issuances of Sirius XM's 5.500% Senior Notes due 2029 and 4.625% Senior Notes due 2024 as well as the inclusion of Pandora debt, partially offset by the redemption of Sirius XM's 6.00% Senior Notes due 2024, lower interest rates and an increase in capitalized interest associated with construction of new satellites.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, interest expense was $350 and $346, respectively, an increase of 1%, or $4. The increase was primarily due to higher average debt outstanding, partially offset by an increase in capitalized interest associated with the construction of new satellites.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, loss on extinguishment of debt was $57 and $0, respectively. During the year ended December 31, 2019, we recorded losses due to the redemption of $1,500 in principal amount of Sirius XM's 6.00% Senior Notes due 2024 and the repurchase of $151 principal amount of Pandora's 1.75% Convertible Senior Notes due 2020. There was no loss on extinguishment of debt in 2018.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, loss on extinguishment of debt was $0 and $44, respectively. During the year ended December 31, 2017, we recorded losses due to the redemption of Sirius XM's 4.25% Senior Notes due 2020, 5.75% Senior Notes due 2021, and 5.25% Senior Secured Notes due 2022.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, other (expense) income was $(3) and $44, respectively. Other expense for the year ended December 31, 2019 was driven by losses on other investments of $21; partially offset by interest earned on our loan to Sirius XM Canada of $10, trading gains associated with the investments held for our Deferred Compensation Plan of $4 and interest income of $3. Other income for the year ended December 31, 2018 was driven by unrealized gains of $43 from a fair value adjustment of our investment in Pandora, and interest earned on our loan to Sirius XM Canada of $10, partially offset by losses on other investments of $10.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, other income was $44 and $13, respectively. Other income for the year ended December 31, 2018 was driven by unrealized gains of $43 from a fair value adjustment of our investment in Pandora, and interest earned on our loan to Sirius XM Canada of $10, partially offset by losses on other investments of $10. Other income for the year ended December 31, 2017, included interest earned on our loan to Sirius XM Canada, and our share of Sirius XM Canada's net income, partially offset by transaction costs associated with our investment in Pandora.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, income tax expense was $283 and $245, respectively, and our effective tax rate was 23.6% and 17.2%, respectively.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, income tax expense was $245 and $616, respectively, and our effective tax rate was 17.2% and 48.7%, respectively. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act
|
|
For the Years Ended December 31,
|
|
2019 vs 2018 Change
|
|
2018 vs 2017 Change
|
||||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||||||||||
Revenue
|
(Pro Forma)
|
|
(Pro Forma)
|
|
(Pro Forma)
|
|
|
|
|
|
|
|
|
||||||||||||
Sirius XM:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Subscriber revenue
|
$
|
5,644
|
|
|
$
|
5,264
|
|
|
$
|
4,990
|
|
|
$
|
380
|
|
|
7
|
%
|
|
$
|
274
|
|
|
5
|
%
|
Advertising revenue
|
205
|
|
|
188
|
|
|
160
|
|
|
17
|
|
|
9
|
%
|
|
28
|
|
|
18
|
%
|
|||||
Equipment revenue
|
173
|
|
|
155
|
|
|
132
|
|
|
18
|
|
|
12
|
%
|
|
23
|
|
|
17
|
%
|
|||||
Other revenue
|
172
|
|
|
171
|
|
|
150
|
|
|
1
|
|
|
1
|
%
|
|
21
|
|
|
14
|
%
|
|||||
Total Sirius XM revenue
|
6,194
|
|
|
5,778
|
|
|
5,432
|
|
|
416
|
|
|
7
|
%
|
|
346
|
|
|
6
|
%
|
|||||
Pandora:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Subscriber revenue
|
527
|
|
|
478
|
|
|
315
|
|
|
49
|
|
|
10
|
%
|
|
163
|
|
|
52
|
%
|
|||||
Advertising revenue
|
1,200
|
|
|
1,092
|
|
|
1,071
|
|
|
108
|
|
|
10
|
%
|
|
21
|
|
|
2
|
%
|
|||||
Total Pandora revenue
|
1,727
|
|
|
1,570
|
|
|
1,386
|
|
|
157
|
|
|
10
|
%
|
|
184
|
|
|
13
|
%
|
|||||
Total consolidated revenue
|
7,921
|
|
|
7,348
|
|
|
6,818
|
|
|
573
|
|
|
8
|
%
|
|
530
|
|
|
8
|
%
|
|||||
Cost of services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Sirius XM:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Revenue share and royalties
|
1,431
|
|
|
1,394
|
|
|
1,210
|
|
|
37
|
|
|
3
|
%
|
|
184
|
|
|
15
|
%
|
|||||
Programming and content
|
444
|
|
|
406
|
|
|
388
|
|
|
38
|
|
|
9
|
%
|
|
18
|
|
|
5
|
%
|
|||||
Customer service and billing
|
398
|
|
|
382
|
|
|
385
|
|
|
16
|
|
|
4
|
%
|
|
(3
|
)
|
|
(1
|
)%
|
|||||
Transmission
|
112
|
|
|
96
|
|
|
83
|
|
|
16
|
|
|
17
|
%
|
|
13
|
|
|
16
|
%
|
|||||
Cost of equipment
|
29
|
|
|
31
|
|
|
35
|
|
|
(2
|
)
|
|
(6
|
)%
|
|
(4
|
)
|
|
(11
|
)%
|
|||||
Total Sirius XM cost of services
|
2,414
|
|
|
2,309
|
|
|
2,101
|
|
|
105
|
|
|
5
|
%
|
|
208
|
|
|
10
|
%
|
|||||
Pandora:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Revenue share and royalties
|
945
|
|
|
929
|
|
|
826
|
|
|
16
|
|
|
2
|
%
|
|
103
|
|
|
12
|
%
|
|||||
Programming and content
|
18
|
|
|
11
|
|
|
14
|
|
|
7
|
|
|
64
|
%
|
|
(3
|
)
|
|
(21
|
)%
|
|||||
Customer service and billing
|
85
|
|
|
95
|
|
|
66
|
|
|
(10
|
)
|
|
(11
|
)%
|
|
29
|
|
|
44
|
%
|
|||||
Transmission
|
63
|
|
|
50
|
|
|
48
|
|
|
13
|
|
|
26
|
%
|
|
2
|
|
|
4
|
%
|
|||||
Total Pandora cost of services
|
1,111
|
|
|
1,085
|
|
|
954
|
|
|
26
|
|
|
2
|
%
|
|
131
|
|
|
14
|
%
|
|||||
Total consolidated cost of services
|
3,525
|
|
|
3,394
|
|
|
3,055
|
|
|
131
|
|
|
4
|
%
|
|
339
|
|
|
11
|
%
|
|||||
Subscriber acquisition costs
|
427
|
|
|
470
|
|
|
499
|
|
|
(43
|
)
|
|
(9
|
)%
|
|
(29
|
)
|
|
(6
|
)%
|
|||||
Sales and marketing
|
973
|
|
|
883
|
|
|
799
|
|
|
90
|
|
|
10
|
%
|
|
84
|
|
|
11
|
%
|
|||||
Engineering, design and development
|
294
|
|
|
266
|
|
|
228
|
|
|
28
|
|
|
11
|
%
|
|
38
|
|
|
17
|
%
|
|||||
General and administrative
|
540
|
|
|
517
|
|
|
528
|
|
|
23
|
|
|
4
|
%
|
|
(11
|
)
|
|
(2
|
)%
|
|||||
Depreciation and amortization
|
483
|
|
|
465
|
|
|
452
|
|
|
18
|
|
|
4
|
%
|
|
13
|
|
|
3
|
%
|
|||||
Total operating expenses
|
6,242
|
|
|
5,995
|
|
|
5,561
|
|
|
247
|
|
|
4
|
%
|
|
434
|
|
|
8
|
%
|
|||||
Income from operations
|
1,679
|
|
|
1,353
|
|
|
1,257
|
|
|
326
|
|
|
24
|
%
|
|
96
|
|
|
8
|
%
|
|||||
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense
|
(392
|
)
|
|
(377
|
)
|
|
(375
|
)
|
|
(15
|
)
|
|
(4
|
)%
|
|
(2
|
)
|
|
(1
|
)%
|
|||||
Loss on extinguishment of debt
|
(57
|
)
|
|
(17
|
)
|
|
(53
|
)
|
|
(40
|
)
|
|
(235
|
)%
|
|
36
|
|
|
68
|
%
|
|||||
Other (expense) income
|
(2
|
)
|
|
8
|
|
|
16
|
|
|
(10
|
)
|
|
(125
|
)%
|
|
(8
|
)
|
|
(50
|
)%
|
|||||
Total other (expense) income
|
(451
|
)
|
|
(386
|
)
|
|
(412
|
)
|
|
(65
|
)
|
|
(17
|
)%
|
|
26
|
|
|
6
|
%
|
|||||
Income before income taxes
|
1,228
|
|
|
967
|
|
|
845
|
|
|
261
|
|
|
27
|
%
|
|
122
|
|
|
14
|
%
|
|||||
Income tax expense
|
(290
|
)
|
|
(123
|
)
|
|
(510
|
)
|
|
(167
|
)
|
|
(136
|
)%
|
|
387
|
|
|
76
|
%
|
|||||
Net income
|
$
|
938
|
|
|
$
|
844
|
|
|
$
|
335
|
|
|
$
|
94
|
|
|
11
|
%
|
|
$
|
509
|
|
|
152
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Adjusted EBITDA
|
$
|
2,427
|
|
|
$
|
2,131
|
|
|
$
|
2,006
|
|
|
$
|
296
|
|
|
14
|
%
|
|
$
|
125
|
|
|
6
|
%
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, subscriber revenue was $5,644 and $5,264, respectively, an increase of 7%, or $380. The increase was primarily driven by higher U.S. Music Royalty Fees due to a higher music royalty rate, higher self-pay subscription revenue as a result of a 3% increase in the daily weighted average number of subscribers and higher revenue from our connected vehicle services.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, subscriber revenue was $5,264 and $4,990, respectively, an increase of 5%, or $274. The increase was primarily driven by higher U.S. Music Royalty Fees due to a higher music royalty rate and higher self-pay subscription revenue as a result of a 5% increase in the daily weighted average number of subscribers. Subscriber revenue was negatively impacted by $95 for the year ended December 31, 2018 due to the adoption of Accounting Standards Update (“ASU”) 2014-09, effective January 1, 2018.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, advertising revenue was $205 and $188, respectively, an increase of 9%, or $17. The increase was primarily due to a greater number of advertising spots sold and transmitted as well as increases in rates charged per spot.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, advertising revenue was $188 and $160, respectively, an increase of 18%, or $28. The increase was primarily due to a greater number of advertising spots sold and transmitted as well as increases in rates charged per spot.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, equipment revenue was $173 and $155, respectively, an increase of 12%, or $18. The increase was driven by an increase in royalty revenue due to our transition to a new generation of chipsets.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, equipment revenue was $155 and $132, respectively, an increase of 17%, or $23. The increase was driven by an increase in royalty revenue due to our transition to a new generation of chipsets.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, other revenue was $172 and $171, respectively, an increase of 1%, or $1. The increase was primarily driven by higher royalty revenue generated from Sirius XM Canada, partially offset by a decrease in data usage revenue generated from our connected vehicle services.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, other revenue was $171 and $150, respectively, an increase of 14%, or $21. The increase was primarily driven by higher revenue generated from our connected vehicle services and from Sirius XM Canada.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, Pandora subscriber revenue was $527 and $478, respectively, an increase of 10%, or $49. The increase was primarily due to a greater weighted average number of subscribers and an increase in the average price per paid subscriber due to the growth of Pandora Premium.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, Pandora subscriber revenue was $478 and $315, respectively, an increase of 52%, or $163. The increase was primarily due to an increase in the weighted average number of subscribers and an increase in the average price per paid subscriber due to the growth of Pandora Premium.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, Pandora advertising revenue was $1,200 and $1,092, respectively, an increase of 10%, or $108. The increase was primarily due to growth in our off-platform advertising revenue, increased sell-through percentage, increases in the average price per ad and revenue growth in the AdsWizz business.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, Pandora advertising revenue was $1,092 and $1,071, respectively, an increase of 2%, or $21. The increase was primarily due to increases in the average price per ad and increases in our off-platform revenue.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, revenue share and royalties were $1,431 and $1,394, respectively, an increase of 3%, or $37, but decreased as a percentage of total Sirius XM revenue. The increase was driven by overall greater revenues subject to royalties and revenue share. The increase was partially offset by a $69 charge during the second quarter of 2018 related to the legal settlement that resolved all outstanding claims, including ongoing audits, under Sirius XM's statutory license for sound recordings for the period January 1, 2007 through December 31, 2017.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, revenue share and royalties were $1,394 and $1,210, respectively, an increase of 15%, or $184, and increased as a percentage of total Sirius XM revenue. The increase was driven by an increase in the statutory royalty rate applicable to our use of post-1972 recordings, which increased from 11% in 2017 to 15.5% in 2018, and overall greater revenues subject to revenue share with the automakers. Included in the increase was a $69 charge related to the legal settlement that resolved outstanding claims, including ongoing audits, under our statutory license for sound recordings for the period January 1, 2007 through December 31, 2017. In 2017, we recorded $45 of expense related to music royalty legal settlements and related reserves. The increase was partially offset by approximately $88 for the year ended December 31, 2018, related to the adoption of ASU 2014‑09, which established Accounting Standard Codification (ASC) Topic 606, Revenue ‑ Revenue from Contracts with Customers, effective as of January 1, 2018.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, programming and content expenses were $444 and $406, respectively, an increase of 9%, or $38, and increased as a percentage of total Sirius XM revenue. The increase was primarily driven by higher content licensing costs as well as greater personnel-related costs.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, programming and content expenses were $406 and $388, respectively, an increase of 5%, or $18, but decreased as a percentage of total Sirius XM revenue. The increase was driven primarily by personnel-related costs, and higher music licensing costs.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, customer service and billing expenses were $398 and $382, respectively, an increase of 4%, or $16, but decreased as a percentage of total Sirius XM revenue. The increase was driven by increased transaction fees from a larger subscriber base and higher bad debt expense.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, customer service and billing expenses were $382 and $385, respectively, a decrease of 1%, or $3, and decreased as a percentage of total Sirius XM revenue. The decrease was primarily driven by lower call center costs due to lower agent rates, increased customer self-service and improved non-pay processes driving lower bad debt expense, partially offset by increased transaction fees from a larger subscriber base and personnel-related costs.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, transmission expenses were $112 and $96, respectively, an increase of 17%, or $16, and increased as a percentage of total Sirius XM revenue. The increase was primarily driven by higher cloud hosting and costs associated with our streaming services and higher repeater network costs.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, transmission expenses were $96 and $83, respectively, an increase of 16%, or $13, and increased as a percentage of total Sirius XM revenue. The increase was primarily driven by higher wireless costs associated with our connected vehicle services and higher streaming costs.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, cost of equipment was $29 and $31, respectively, a decrease of 6%, or $2, and decreased as a percentage of equipment revenue. The decrease was primarily due to lower direct sales to satellite radio and connected vehicle consumers, partially offset by an increase in our inventory reserve.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, cost of equipment was $31 and $35, respectively, a decrease of 11%, or $4, and decreased as a percentage of equipment revenue. The decrease was primarily due to lower direct satellite radio sales to consumers.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, revenue share and royalties were $945 and $929, respectively, an increase of 2%, or $16, but decreased as a percentage of total Pandora revenue. The increase was primarily attributable to higher revenue share driven by growth of our off platform revenue, partially offset by lower royalty costs resulting from renegotiated agreements with record labels, music and sound recording copyright holders and distributors.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, revenue share and royalties were $929 and $826, respectively, an increase of 12%, or $103, but decreased as a percentage of total Pandora revenue. The increase was due to minimum guarantee accruals related to our direct license agreements with major and independent labels, distributors, performing rights organizations and publishers.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, programming and content expenses were $18 and $11, respectively, an increase of 64%, or $7, and increased as a percentage of total Pandora revenue. The increase was primarily attributable to higher personnel-related and content costs.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, programming and content expenses were $11 and $14, respectively, a decrease of 21%, or $3, and decreased as a percentage of total Pandora revenue. The decrease was primarily attributable to lower content costs.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, customer service and billing expenses were $85 and $95, respectively, a decrease of 11%, or $10, and decreased as a percentage of total Pandora revenue. The decrease was primarily driven by lower bad debt expense due to recoveries and lower transaction fees.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, customer service and billing expenses were $95 and $66, respectively, an increase of 44%, or $29, and increased as a percentage of total Pandora revenue. The increase was primarily driven by higher transaction fees and bad debt expense from higher average subscriber balances.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, transmission expenses were $63 and $50, respectively, an increase of 26%, or $13, and increased as a percentage of total Pandora revenue. The increase was primarily driven by web hosting and personnel-related costs.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, transmission expenses were $50 and $48, respectively, an increase of 4%, or $2, and decreased as a percentage of total Pandora revenue. The increase was primarily driven by web hosting costs.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, subscriber acquisition costs were $427 and $470, respectively, a decrease of 9%, or $43, and decreased as a percentage of total revenue. The decrease was driven by reductions to OEM hardware subsidy rates, lower subsidized costs related to the transition of chipsets, and a decrease in the volume of satellite radio installations.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, subscriber acquisition costs were $470 and $499, respectively, a decrease of 6%, or $29, and decreased as a percentage of total revenue. The decrease was driven by reductions to OEM hardware subsidy rates, lower subsidized costs related to the transition of chipsets, and a decrease in the volume of satellite radio installations.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, sales and marketing expenses were $973 and $883, respectively, an increase of 10%, or $90, and increased as a percentage of total revenue. The increase was primarily due to additional acquisition campaigns and subscriber communications as well as higher personnel-related costs.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, sales and marketing expenses were $883 and $799, respectively, an increase of 11%, or $84, and increased as a percentage of total revenue. The increase was primarily due to additional subscriber communications, retention programs and acquisition campaigns, as well as higher personnel-related costs.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, engineering, design and development expenses were $294 and $266, respectively, an increase of 11%, or $28, and increased as a percentage of total revenue. The increase was driven by higher personnel-related costs.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, engineering, design and development expenses were $266 and $228, respectively, an increase of 17%, or $38, and increased as a percentage of total revenue. The increase was driven by the continued development of our streaming products and connected vehicle services as well as higher personnel-related costs.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, general and administrative expenses were $540 and $517, respectively, an increase of 4%, or $23, but decreased as a percentage of total revenue. The increase was primarily driven by a $25 legal settlement associated with Do-Not-Call litigation and higher rent, partially offset by lower personnel-related costs.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, general and administrative expenses were $517 and $528, respectively, a decrease of 2%, or $11, and decreased as a percentage of total revenue. The decrease was primarily driven by lower personnel-related costs offset by higher legal and consulting costs.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, depreciation and amortization expense was $483 and $465, respectively, an increase of 4%, or $18, but decreased as a percentage of total revenue. The increase was driven by higher depreciation costs related to additional assets placed in-service.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, depreciation and amortization expense was $465 and $452, respectively, an increase of 3%, or $13, and decreased as a percentage of total revenue. The depreciation increase was driven by additional assets placed in-service, partially offset by acceleration of amortization related to a shorter useful life of certain software during 2017.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, interest expense was $392 and $377, respectively, an increase of 4%, or $15. The increase was primarily driven by higher average debt due to the issuances of Sirius XM's 5.500% Senior Notes due 2029 and 4.625% Senior Notes due 2024, partially offset by the redemption of Sirius XM's 6.00% Senior Notes due 2024, the repurchase of the Pandora 1.75% Convertible Senior Notes due 2020, and lower interest rates.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, interest expense was $377 and $375, respectively, an increase of 1%, or $2. The increase was primarily due to higher average debt outstanding, partially offset by an increase in capitalized interest associated with the construction of new satellites.
|
•
|
2019 vs. 2018: For the year ended December 31, 2019, we recorded a $57 loss due to the redemption of $1,500 in principal amount of Sirius XM's 6.00% Senior Notes due 2024 and the repurchase of $151 principal amount of Pandora's 1.75% Convertible Senior Notes due 2020. During the year ended December 31, 2018, we recorded a $17 loss on extinguishment of debt primarily due to the exchange of Pandora's 1.75% Convertible Senior Notes due 2020 for new 1.75% Convertible Senior Notes due 2023.
|
•
|
2018 vs. 2017: For the year ended December 31, 2018, Pandora recorded a $17 loss on extinguishment of debt primarily due to the exchange of Pandora's 1.75% Convertible Senior Notes due 2020 for new 1.75% Convertible Senior Notes due 2023. During the year ended December 31, 2017, we recorded a $53 loss on extinguishment of debt due to the redemption of Sirius XM's 4.25% Senior Notes due 2020, 5.75% Senior Notes due 2021, and 5.25% Senior Secured Notes due 2022.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, other (expense) income was $(2) and $8, respectively. Other expense for the year ended December 31, 2019 was driven by losses on other investments of $21; partially offset by interest earned on our loan to Sirius XM Canada of $10, trading gains associated with the investments held for our Deferred Compensation Plan of $4 and interest income of $3. Other income for the year ended December 31, 2018 was driven by interest earned on our loan to Sirius XM Canada of $10 and interest income of $8, partially offset by losses on other investments of $10.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, other (expense) income was $8 and $16, respectively. During the year ended December 31, 2018, other income was driven by interest earned on our loan to Sirius XM Canada of $10 and interest income of $8, partially offset by losses on other investments of $10. During the year ended December 31, 2017, other income was driven by interest earned on our loan to Sirius XM Canada and gains associated with short-term investments.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, income tax expense was $290 and $123, respectively, and our effective tax rate was 23.6% and 12.7%, respectively. The effective tax rate of 23.6% was primarily impacted by the recognition of excess tax benefits related to share-based compensation and benefits related to state and federal research and development and certain other credits, partially offset by the impact of nondeductible officers' compensation. The effective tax rate of 12.7% was primarily impacted by the recognition of excess tax benefits related to share based compensation and a benefit related to state and federal research and development credits under the Protecting Americans from Tax Hikes Act of 2015.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, income tax expense was $123 and $510, respectively, and our effective tax rate was 12.7% and 60.4%, respectively. The effective tax rate of 12.7% for the year ended December 31, 2018 was primarily impacted by the reduced federal tax rate to 21%, the recognition of excess tax benefits related to share based compensation and a benefit related to state and federal research and development credits. The effective tax rate of 60.4% for the year ended December 31, 2017 was negatively impacted by the revaluation of our net deferred tax assets, excluding after tax credits, as of December 31, 2017, as a result of the reduction of the federal corporate income tax rate. This was offset by the recognition of excess tax benefits related to share based compensation and a benefit related to federal research and development credits under the Protecting Americans from Tax Hikes Act of 2015. Based on this revaluation, we recorded an additional tax expense of $185 to reduce our net deferred tax asset balance for the year ended December 31, 2017.
|
|
Unaudited for the Year Ended December 31, 2019
|
||||||||||||||||
|
As Reported
|
|
Predecessor Financial Information (a)
|
|
Purchase Price
Accounting and Pro Forma Adjustments |
|
Ref
|
|
Pro Forma
|
||||||||
Revenue
|
|
|
|
|
|
|
|
|
|
||||||||
Sirius XM:
|
|
|
|
|
|
|
|
|
|
||||||||
Subscriber revenue
|
$
|
5,644
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
5,644
|
|
Advertising revenue
|
205
|
|
|
—
|
|
|
—
|
|
|
|
|
205
|
|
||||
Equipment revenue
|
173
|
|
|
—
|
|
|
—
|
|
|
|
|
173
|
|
||||
Other revenue
|
165
|
|
|
—
|
|
|
7
|
|
|
(b)
|
|
172
|
|
||||
Total Sirius XM revenue
|
6,187
|
|
|
—
|
|
|
7
|
|
|
|
|
6,194
|
|
||||
Pandora:
|
|
|
|
|
|
|
|
|
|
||||||||
Subscriber revenue
|
476
|
|
|
46
|
|
|
5
|
|
|
(c)
|
|
527
|
|
||||
Advertising revenue
|
1,131
|
|
|
68
|
|
|
1
|
|
|
(c)
|
|
1,200
|
|
||||
Total Pandora revenue
|
1,607
|
|
|
114
|
|
|
6
|
|
|
|
|
1,727
|
|
||||
Total consolidated revenue
|
7,794
|
|
|
114
|
|
|
13
|
|
|
|
|
7,921
|
|
||||
Cost of services
|
|
|
|
|
|
|
|
|
|
||||||||
Sirius XM:
|
|
|
|
|
|
|
|
|
|
||||||||
Revenue share and royalties
|
1,431
|
|
|
—
|
|
|
—
|
|
|
|
|
1,431
|
|
||||
Programming and content
|
444
|
|
|
—
|
|
|
—
|
|
|
|
|
444
|
|
||||
Customer service and billing
|
398
|
|
|
—
|
|
|
—
|
|
|
|
|
398
|
|
||||
Transmission
|
112
|
|
|
—
|
|
|
—
|
|
|
|
|
112
|
|
||||
Cost of equipment
|
29
|
|
|
—
|
|
|
—
|
|
|
|
|
29
|
|
||||
Total Sirius XM cost of services
|
2,414
|
|
|
—
|
|
|
—
|
|
|
|
|
2,414
|
|
||||
Pandora:
|
|
|
|
|
|
|
|
|
|
||||||||
Revenue share and royalties
|
860
|
|
|
71
|
|
|
14
|
|
|
(d)
|
|
945
|
|
||||
Programming and content
|
18
|
|
|
—
|
|
|
—
|
|
|
|
|
18
|
|
||||
Customer service and billing
|
77
|
|
|
8
|
|
|
—
|
|
|
|
|
85
|
|
||||
Transmission
|
58
|
|
|
5
|
|
|
—
|
|
|
|
|
63
|
|
||||
Total Pandora cost of services
|
1,013
|
|
|
84
|
|
|
14
|
|
|
|
|
1,111
|
|
||||
Total consolidated cost of services
|
3,427
|
|
|
84
|
|
|
14
|
|
|
|
|
3,525
|
|
||||
Subscriber acquisition costs
|
427
|
|
|
—
|
|
|
—
|
|
|
|
|
427
|
|
||||
Sales and marketing
|
937
|
|
|
36
|
|
|
—
|
|
|
|
|
973
|
|
||||
Engineering, design and development
|
280
|
|
|
14
|
|
|
—
|
|
|
|
|
294
|
|
||||
General and administrative
|
524
|
|
|
16
|
|
|
—
|
|
|
|
|
540
|
|
||||
Depreciation and amortization
|
468
|
|
|
6
|
|
|
9
|
|
|
(e)
|
|
483
|
|
||||
Acquisition and other related costs
|
84
|
|
|
1
|
|
|
(85
|
)
|
|
(f)
|
|
—
|
|
||||
Total operating expenses
|
6,147
|
|
|
157
|
|
|
(62
|
)
|
|
|
|
6,242
|
|
||||
Income (loss) from operations
|
1,647
|
|
|
(43
|
)
|
|
75
|
|
|
|
|
1,679
|
|
||||
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(390
|
)
|
|
(2
|
)
|
|
—
|
|
|
|
|
(392
|
)
|
||||
Loss on extinguishment of debt
|
(57
|
)
|
|
—
|
|
|
—
|
|
|
|
|
(57
|
)
|
||||
Other (expense) income
|
(3
|
)
|
|
1
|
|
|
—
|
|
|
|
|
(2
|
)
|
||||
Total other (expense) income
|
(450
|
)
|
|
(1
|
)
|
|
—
|
|
|
|
|
(451
|
)
|
||||
Income (loss) before income taxes
|
1,197
|
|
|
(44
|
)
|
|
75
|
|
|
|
|
1,228
|
|
||||
Income tax expense
|
(283
|
)
|
|
—
|
|
|
(7
|
)
|
|
(g)
|
|
(290
|
)
|
||||
Net income
|
$
|
914
|
|
|
$
|
(44
|
)
|
|
$
|
68
|
|
|
|
|
$
|
938
|
|
(a)
|
Represents Pandora’s results for the period January 1, 2019 through January 31, 2019.
|
(b)
|
This adjustment eliminates the impact of additional revenue associated with certain programming agreements recorded as part of the merger of Sirius and XM (the "XM Merger").
|
(c)
|
This adjustment relates to the amortization of deferred subscription and deferred advertising revenue that was fair valued in purchase accounting.
|
(d)
|
This adjustment includes the impact of additional expense associated with minimum guarantee royalty contracts recorded as part of the Pandora Acquisition.
|
(e)
|
This adjustment includes the impact of the additional amortization associated with the acquired intangible assets recorded as part of the Pandora Acquisition that are subject to amortization, partially offset by normal depreciation associated with assets revalued in purchase accounting.
|
(f)
|
This adjustment eliminates the impact of acquisition and other related costs.
|
(g)
|
This adjustment to income taxes was calculated by applying Sirius XM's statutory tax rate at December 31, 2019 to the pro forma adjustments of $75 and Pandora's pre-acquisition loss before income tax of $(44).
|
|
Unaudited for the Year Ended December 31, 2018
|
||||||||||||||||
|
As Reported
|
|
Predecessor Financial Information (h)
|
|
Purchase Price
Accounting and Pro Forma Adjustments |
|
Ref
|
|
Pro Forma
|
||||||||
Revenue
|
|
|
|
|
|
|
|
|
|
||||||||
Sirius XM:
|
|
|
|
|
|
|
|
|
|
||||||||
Subscriber revenue
|
$
|
5,264
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
5,264
|
|
Advertising revenue
|
188
|
|
|
—
|
|
|
—
|
|
|
|
|
188
|
|
||||
Equipment revenue
|
155
|
|
|
—
|
|
|
—
|
|
|
|
|
155
|
|
||||
Other revenue
|
164
|
|
|
—
|
|
|
7
|
|
|
(i)
|
|
171
|
|
||||
Total Sirius XM revenue
|
5,771
|
|
|
—
|
|
|
7
|
|
|
|
|
5,778
|
|
||||
Pandora:
|
|
|
|
|
|
|
|
|
|
||||||||
Subscriber revenue
|
—
|
|
|
478
|
|
|
—
|
|
|
|
|
478
|
|
||||
Advertising revenue
|
—
|
|
|
1,092
|
|
|
—
|
|
|
|
|
1,092
|
|
||||
Total Pandora revenue
|
—
|
|
|
1,570
|
|
|
—
|
|
|
|
|
1,570
|
|
||||
Total consolidated revenue
|
5,771
|
|
|
1,570
|
|
|
7
|
|
|
|
|
7,348
|
|
||||
Cost of services
|
|
|
|
|
|
|
|
|
|
||||||||
Sirius XM:
|
|
|
|
|
|
|
|
|
|
||||||||
Revenue share and royalties
|
1,394
|
|
|
—
|
|
|
—
|
|
|
|
|
1,394
|
|
||||
Programming and content
|
406
|
|
|
—
|
|
|
—
|
|
|
|
|
406
|
|
||||
Customer service and billing
|
382
|
|
|
—
|
|
|
—
|
|
|
|
|
382
|
|
||||
Transmission
|
96
|
|
|
—
|
|
|
—
|
|
|
|
|
96
|
|
||||
Cost of equipment
|
31
|
|
|
—
|
|
|
—
|
|
|
|
|
31
|
|
||||
Total Sirius XM cost of services
|
2,309
|
|
|
—
|
|
|
—
|
|
|
|
|
2,309
|
|
||||
Pandora:
|
|
|
|
|
|
|
|
|
|
||||||||
Revenue share and royalties
|
—
|
|
|
929
|
|
|
—
|
|
|
|
|
929
|
|
||||
Programming and content
|
—
|
|
|
11
|
|
|
—
|
|
|
|
|
11
|
|
||||
Customer service and billing
|
—
|
|
|
95
|
|
|
—
|
|
|
|
|
95
|
|
||||
Transmission
|
—
|
|
|
50
|
|
|
—
|
|
|
|
|
50
|
|
||||
Total Pandora cost of services
|
—
|
|
|
1,085
|
|
|
—
|
|
|
|
|
1,085
|
|
||||
Total consolidated cost of services
|
2,309
|
|
|
1,085
|
|
|
—
|
|
|
|
|
3,394
|
|
||||
Subscriber acquisition costs
|
470
|
|
|
—
|
|
|
—
|
|
|
|
|
470
|
|
||||
Sales and marketing
|
484
|
|
|
399
|
|
|
—
|
|
|
|
|
883
|
|
||||
Engineering, design and development
|
123
|
|
|
143
|
|
|
—
|
|
|
|
|
266
|
|
||||
General and administrative
|
354
|
|
|
169
|
|
|
(6
|
)
|
|
(j)
|
|
517
|
|
||||
Depreciation and amortization
|
301
|
|
|
61
|
|
|
103
|
|
|
(k)
|
|
465
|
|
||||
Acquisition and other related costs
|
3
|
|
|
12
|
|
|
(15
|
)
|
|
(l)
|
|
—
|
|
||||
Total operating expenses
|
4,044
|
|
|
1,869
|
|
|
82
|
|
|
|
|
5,995
|
|
||||
Income (loss) from operations
|
1,727
|
|
|
(299
|
)
|
|
(75
|
)
|
|
|
|
1,353
|
|
||||
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(350
|
)
|
|
(27
|
)
|
|
—
|
|
|
|
|
(377
|
)
|
||||
Loss on extinguishment of debt
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
|
|
(17
|
)
|
||||
Other (expense) income
|
44
|
|
|
7
|
|
|
(43
|
)
|
|
(m)
|
|
8
|
|
||||
Total other (expense) income
|
(306
|
)
|
|
(37
|
)
|
|
(43
|
)
|
|
|
|
(386
|
)
|
||||
Income (loss) before income taxes
|
1,421
|
|
|
(336
|
)
|
|
(118
|
)
|
|
|
|
967
|
|
||||
Income tax expense
|
(245
|
)
|
|
8
|
|
|
114
|
|
|
(n)
|
|
(123
|
)
|
||||
Net income
|
$
|
1,176
|
|
|
$
|
(328
|
)
|
|
$
|
(4
|
)
|
|
|
|
$
|
844
|
|
(h)
|
Represents Pandora’s results for the period January 1, 2018 through December 31, 2018.
|
(i)
|
This adjustment eliminates the impact of additional revenue associated with certain programming agreements recorded as part of the XM Merger.
|
(j)
|
This adjustment eliminates the impact of contract termination fees.
|
(k)
|
This adjustment includes the impact of the additional amortization associated with the acquired intangible assets recorded as part of the Pandora Acquisition that are subject to amortization, partially offset by normal depreciation associated with assets revalued in purchase accounting.
|
(l)
|
This adjustment eliminates the impact of transaction related costs, recorded by Pandora, to advisers for the planned acquisition by Sirius XM.
|
(m)
|
This adjustment eliminates the unrealized gain for the fair value adjustment of our preferred stock investment in Pandora.
|
(n)
|
This adjustment to income taxes was calculated by applying Sirius XM's statutory tax rate at December 31, 2018 to the pro forma adjustments of $(118) and Pandora's loss before income tax of $(336).
|
|
Unaudited for the Year Ended December 31, 2017
|
||||||||||||||||
|
As Reported
|
|
Predecessor Financial Information (o)
|
|
Purchase Price
Accounting and Pro Forma Adjustments |
|
Ref
|
|
Pro Forma
|
||||||||
Revenue
|
|
|
|
|
|
|
|
|
|
||||||||
Sirius XM:
|
|
|
|
|
|
|
|
|
|
||||||||
Subscriber revenue
|
$
|
4,990
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
4,990
|
|
Advertising revenue
|
160
|
|
|
—
|
|
|
—
|
|
|
|
|
160
|
|
||||
Equipment revenue
|
132
|
|
|
—
|
|
|
—
|
|
|
|
|
132
|
|
||||
Other revenue
|
143
|
|
|
—
|
|
|
7
|
|
|
(p)
|
|
150
|
|
||||
Total Sirius XM revenue
|
5,425
|
|
|
—
|
|
|
7
|
|
|
|
|
5,432
|
|
||||
Pandora:
|
|
|
|
|
|
|
|
|
|
||||||||
Subscriber revenue
|
—
|
|
|
315
|
|
|
—
|
|
|
|
|
315
|
|
||||
Advertising revenue
|
—
|
|
|
1,075
|
|
|
(4
|
)
|
|
(q)
|
|
1,071
|
|
||||
Other revenue
|
—
|
|
|
77
|
|
|
(77
|
)
|
|
(q)
|
|
—
|
|
||||
Total Pandora revenue
|
—
|
|
|
1,467
|
|
|
(81
|
)
|
|
|
|
1,386
|
|
||||
Total consolidated revenue
|
5,425
|
|
|
1,467
|
|
|
(74
|
)
|
|
|
|
6,818
|
|
||||
Cost of services
|
|
|
|
|
|
|
|
|
|
||||||||
Sirius XM:
|
|
|
|
|
|
|
|
|
|
||||||||
Revenue share and royalties
|
1,210
|
|
|
—
|
|
|
—
|
|
|
|
|
1,210
|
|
||||
Programming and content
|
388
|
|
|
—
|
|
|
—
|
|
|
|
|
388
|
|
||||
Customer service and billing
|
385
|
|
|
—
|
|
|
—
|
|
|
|
|
385
|
|
||||
Transmission
|
83
|
|
|
—
|
|
|
—
|
|
|
|
|
83
|
|
||||
Cost of equipment
|
35
|
|
|
—
|
|
|
—
|
|
|
|
|
35
|
|
||||
Total Sirius XM cost of services
|
2,101
|
|
|
—
|
|
|
—
|
|
|
|
|
2,101
|
|
||||
Pandora:
|
|
|
|
|
|
|
|
|
|
||||||||
Revenue share and royalties
|
—
|
|
|
862
|
|
|
(36
|
)
|
|
(q)
|
|
826
|
|
||||
Programming and content
|
—
|
|
|
14
|
|
|
—
|
|
|
|
|
14
|
|
||||
Customer service and billing
|
—
|
|
|
73
|
|
|
(7
|
)
|
|
(q)
|
|
66
|
|
||||
Transmission
|
—
|
|
|
59
|
|
|
(11
|
)
|
|
(q)
|
|
48
|
|
||||
Total Pandora cost of services
|
—
|
|
|
1,008
|
|
|
(54
|
)
|
|
|
|
954
|
|
||||
Total consolidated cost of services
|
2,101
|
|
|
1,008
|
|
|
(54
|
)
|
|
|
|
3,055
|
|
||||
Subscriber acquisition costs
|
499
|
|
|
—
|
|
|
—
|
|
|
|
|
499
|
|
||||
Sales and marketing
|
438
|
|
|
379
|
|
|
(18
|
)
|
|
(q)
|
|
799
|
|
||||
Engineering, design and development
|
112
|
|
|
127
|
|
|
(11
|
)
|
|
(q)
|
|
228
|
|
||||
General and administrative
|
335
|
|
|
374
|
|
|
(181
|
)
|
|
(q)
|
|
528
|
|
||||
Depreciation and amortization
|
299
|
|
|
63
|
|
|
90
|
|
|
(r)
|
|
452
|
|
||||
Total operating expenses
|
3,784
|
|
|
1,951
|
|
|
(174
|
)
|
|
|
|
5,561
|
|
||||
Income (loss) from operations
|
1,641
|
|
|
(484
|
)
|
|
100
|
|
|
|
|
1,257
|
|
||||
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(346
|
)
|
|
(29
|
)
|
|
—
|
|
|
|
|
(375
|
)
|
||||
Loss on extinguishment of debt
|
(44
|
)
|
|
(9
|
)
|
|
—
|
|
|
|
|
(53
|
)
|
||||
Other (expense) income
|
13
|
|
|
3
|
|
|
—
|
|
|
|
|
16
|
|
||||
Total other (expense) income
|
(377
|
)
|
|
(35
|
)
|
|
—
|
|
|
|
|
(412
|
)
|
||||
Income (loss) before income taxes
|
1,264
|
|
|
(519
|
)
|
|
100
|
|
|
|
|
845
|
|
||||
Income tax expense
|
(616
|
)
|
|
1
|
|
|
105
|
|
|
(s)
|
|
(510
|
)
|
||||
Net income
|
$
|
648
|
|
|
$
|
(518
|
)
|
|
$
|
205
|
|
|
|
|
$
|
335
|
|
(o)
|
Represents Pandora’s results for the period January 1, 2017 through December 31, 2017.
|
(p)
|
This adjustment eliminates the impact of additional revenue associated with certain programming agreements recorded as part of the XM Merger.
|
(q)
|
This adjustment eliminates the impact of revenues and expenses attributable to Pandora's Ticketfly business which was disposed of on September 1, 2017 and Pandora's Australia and New Zealand business activities which were discontinued in the year ended December 31, 2017.
|
(r)
|
This adjustment includes the impact of the additional amortization associated with the acquired intangible assets recorded as part of the Pandora Acquisition that are subject to amortization, partially offset by normal depreciation associated with assets revalued in purchase accounting.
|
(s)
|
This adjustment to income taxes was calculated by applying Sirius XM's statutory tax rate at December 31, 2017 to the pro forma adjustments of $100 and Pandora's loss before income tax of $(519).
|
•
|
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue - Revenue from Contracts with Customers.
|
•
|
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).
|
•
|
In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.
|
•
|
In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.
|
•
|
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.
|
|
As of December 31,
|
|
2019 vs 2018 Change
|
|
2018 vs 2017 Change
|
|||||||||||||||
(subscribers in thousands)
|
2019
|
|
2018 (1)
|
|
2017 (2)
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|||||||
Sirius XM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Self-pay subscribers
|
29,978
|
|
|
28,915
|
|
|
27,513
|
|
|
1,063
|
|
|
4
|
%
|
|
1,402
|
|
|
5
|
%
|
Paid promotional subscribers
|
4,931
|
|
|
5,124
|
|
|
5,223
|
|
|
(193
|
)
|
|
(4
|
)%
|
|
(99
|
)
|
|
(2
|
)%
|
Ending subscribers
|
34,909
|
|
|
34,039
|
|
|
32,736
|
|
|
870
|
|
|
3
|
%
|
|
1,303
|
|
|
4
|
%
|
Traffic users
|
9,334
|
|
|
8,606
|
|
|
7,489
|
|
|
728
|
|
|
8
|
%
|
|
1,117
|
|
|
15
|
%
|
Sirius XM Canada subscribers
|
2,707
|
|
|
2,644
|
|
|
2,565
|
|
|
63
|
|
|
2
|
%
|
|
79
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Pandora
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Monthly active users - all services
|
63,508
|
|
|
69,399
|
|
|
74,693
|
|
|
(5,891
|
)
|
|
(8
|
)%
|
|
(5,294
|
)
|
|
(7
|
)%
|
Self-pay subscribers
|
6,165
|
|
|
5,914
|
|
|
5,478
|
|
|
251
|
|
|
4
|
%
|
|
436
|
|
|
8
|
%
|
Paid promotional subscribers
|
49
|
|
|
756
|
|
|
—
|
|
|
(707
|
)
|
|
(94
|
)%
|
|
756
|
|
|
nm
|
|
Ending subscribers
|
6,214
|
|
|
6,670
|
|
|
5,478
|
|
|
(456
|
)
|
|
(7
|
)%
|
|
1,192
|
|
|
22
|
%
|
(1)
|
Includes Pandora's results as of December 31, 2018.
|
(2)
|
Includes Pandora's results as of December 31, 2017.
|
|
For the Years Ended December 31,
|
|
2019 vs 2018 Change
|
|
2018 vs 2017 Change
|
||||||||||||||||||||
(subscribers in thousands)
|
2019
|
|
2018
|
|
2017
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||||||||||
Sirius XM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Self-pay subscribers
|
1,063
|
|
|
1,402
|
|
|
1,562
|
|
|
(339
|
)
|
|
(24
|
)%
|
|
(160
|
)
|
|
(10
|
)%
|
|||||
Paid promotional subscribers
|
(193
|
)
|
|
(99
|
)
|
|
(172
|
)
|
|
(94
|
)
|
|
95
|
%
|
|
73
|
|
|
(42
|
)%
|
|||||
Net additions
|
870
|
|
|
1,303
|
|
|
1,390
|
|
|
(433
|
)
|
|
(33
|
)%
|
|
(87
|
)
|
|
(6
|
)%
|
|||||
Weighted average number of subscribers
|
34,314
|
|
|
33,345
|
|
|
31,866
|
|
|
969
|
|
|
3
|
%
|
|
1,479
|
|
|
5
|
%
|
|||||
Average self-pay monthly churn
|
1.7
|
%
|
|
1.7
|
%
|
|
1.8
|
%
|
|
—
|
%
|
|
—
|
%
|
|
(0.1
|
)%
|
|
(6
|
)%
|
|||||
ARPU (1)
|
$
|
13.82
|
|
|
$
|
13.34
|
|
|
$
|
13.25
|
|
|
$
|
0.48
|
|
|
4
|
%
|
|
$
|
0.09
|
|
|
1
|
%
|
SAC, per installation
|
$
|
22.91
|
|
|
$
|
25.66
|
|
|
$
|
29.53
|
|
|
$
|
(2.75
|
)
|
|
(11
|
)%
|
|
$
|
(3.87
|
)
|
|
(13
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pandora
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Self-pay subscribers
|
251
|
|
|
436
|
|
|
1,139
|
|
|
(185
|
)
|
|
(42
|
)%
|
|
(703
|
)
|
|
(62
|
)%
|
|||||
Paid promotional subscribers
|
(707
|
)
|
|
756
|
|
|
—
|
|
|
(1,463
|
)
|
|
(194
|
)%
|
|
756
|
|
|
nm
|
|
|||||
Net additions
|
(456
|
)
|
|
1,192
|
|
|
1,139
|
|
|
(1,648
|
)
|
|
(138
|
)%
|
|
53
|
|
|
5
|
%
|
|||||
Weighted average number of subscribers
|
6,654
|
|
|
6,080
|
|
|
4,885
|
|
|
574
|
|
|
9
|
%
|
|
1,195
|
|
|
24
|
%
|
|||||
ARPU
|
$
|
6.61
|
|
|
$
|
6.53
|
|
|
$
|
5.34
|
|
|
$
|
0.08
|
|
|
1
|
%
|
|
$
|
1.19
|
|
|
22
|
%
|
Ad supported listener hours (in billions)
|
13.44
|
|
|
14.79
|
|
|
16.28
|
|
|
(1.35
|
)
|
|
(9
|
)%
|
|
(1.49
|
)
|
|
(9
|
)%
|
|||||
Advertising revenue per thousand listener hours (RPM)
|
$
|
80.41
|
|
|
$
|
71.60
|
|
|
$
|
65.54
|
|
|
$
|
8.81
|
|
|
12
|
%
|
|
$
|
6.06
|
|
|
9
|
%
|
Licensing costs per thousand listener hours (LPM)
|
$
|
38.94
|
|
|
$
|
37.80
|
|
|
$
|
35.68
|
|
|
$
|
1.14
|
|
|
3
|
%
|
|
$
|
2.12
|
|
|
6
|
%
|
Licensing costs per paid subscriber (LPU)
|
$
|
4.06
|
|
|
$
|
4.47
|
|
|
$
|
3.63
|
|
|
$
|
(0.41
|
)
|
|
(9
|
)%
|
|
$
|
0.84
|
|
|
23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Adjusted EBITDA
|
$
|
2,427
|
|
|
$
|
2,131
|
|
|
$
|
2,006
|
|
|
$
|
296
|
|
|
14
|
%
|
|
$
|
125
|
|
|
6
|
%
|
Free cash flow (2)
|
$
|
1,647
|
|
|
$
|
1,517
|
|
|
$
|
1,560
|
|
|
$
|
130
|
|
|
9
|
%
|
|
$
|
(43
|
)
|
|
(3
|
)%
|
(1)
|
ARPU for Sirius XM excludes subscriber revenue from our connected vehicle services of $159, $111, and $84 for the years ended December 31, 2019, 2018 and 2017, respectively.
|
(2)
|
Free cash flow has not been adjusted to include Pandora's pre-acquisition results.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, net additions were 0.9 million and 1.3 million, respectively, a decrease of 33%, or 0.4 million. Self-pay net additions decreased primarily due to a flat churn rate on a growing subscriber base and lower gross add win-backs, offset by increases in trial conversions. The reduction of paid promotional subscribers increased due to lower shipments and trial starts from automakers offering paid promotional subscriptions.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, net additions were 1.3 million and 1.4 million, respectively, a decrease of 6%, or 0.1 million. Self-pay net additions decreased primarily due to a growing subscriber base and lower gross add win-backs, offset by improvements in churn rate and increases in trial conversions. The reduction of paid promotional subscribers decreased due to higher shipments from automakers offering paid promotional subscriptions.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, our average self-pay monthly churn rate was 1.7%.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, our average self-pay monthly churn rate was 1.7% and 1.8%, respectively. The decrease was due to improvements in non-pay and voluntary churn.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, ARPU was $13.82 and $13.34, respectively. The increase was driven by increases in the U. S. Music Royalty Fee, increases in self-pay revenue and higher advertising revenue.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, ARPU was $13.34 and $13.25, respectively. The increase in certain of our subscription rates, including the U. S. Music Royalty Fee, and higher advertising revenue was negatively impacted by the adoption of the new revenue standard, effective as of January 1, 2018 of $0.24, and the growth in subscription discounts offered through customer acquisition and retention programs.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, SAC, per installation, was $22.91 and $25.66, respectively. The decrease was driven by our transition to a new generation of chipsets and reductions to OEM hardware subsidy rates.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, SAC, per installation, was $25.66 and $29.53, respectively. The decrease was driven by reductions to OEM hardware subsidy rates, our transition to a new
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, net additions were (0.5) million and 1.2 million, respectively, a decrease of 138%, or 1.6 million. Net additions decreased due to a loss of paid promotional subscribers from the expiration of an agreement with T-Mobile.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, net additions were 1.2 million and 1.1 million, respectively, an increase of 5%, or 0.1 million. Net additions increased as a result of an influx in paid promotional subscribers from an agreement with T-Mobile in 2018, partially offset by a decline in the number of new self-pay subscribers.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, ARPU was $6.61 and $6.53, respectively. The increase was primarily driven by an increase in the number of Pandora Premium subscribers while the number of lower price Pandora Plus subscribers decreased.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, ARPU was $6.53 and $5.34, respectively. The increase was primarily driven by an increase in the number of Pandora Premium subscribers while the number of lower price Pandora Plus subscribers decreased.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, ad supported listener hours was 13.44 billion and 14.79 billion, respectively. The decline in ad supported listener hours was primarily driven by a decrease in ad-supported listeners.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, ad supported listener hours was 14.79 billion and 16.28 billion, respectively. The decline in ad supported listener hours was primarily driven by a decrease in ad-supported listeners.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, RPM was $80.41 and $71.60, respectively. The increase was a result of an increase in the average price per ad and increased sell-through percentage.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, RPM was $71.60 and $65.54, respectively. The increase was a result of an increase in the average price per ad and increased sell-through percentage.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, LPM was $38.94 and $37.80, respectively. The increase was primarily driven by higher eligible advertising revenue and increases to track rates.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, LPM was $37.80 and $35.68, respectively. The increase was primarily driven by increases to track rates and higher eligible advertising revenue.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, LPU was $4.06 and $4.47, respectively. The decrease was due to lower minimum guarantees associated with our direct license agreements with major and independent labels, distributors, performing rights organizations and publishers.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, LPU was $4.47 and $3.63, respectively. The increase was primarily driven by increases in content acquisition costs associated with Pandora Premium and minimum guarantee accruals related to our direct license agreements with major and independent labels, distributors, performing rights organizations and publishers.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, adjusted EBITDA was $2,427 and $2,131, respectively, an increase of 14%, or $296. The increase was due to: growth of 8% in total revenue which was primarily a result of the increase in our subscriber base; additional revenues from the U.S. Music Royalty Fee; an increase in advertising revenue; and lower subscriber acquisition costs. The increases were partially offset by higher revenue share and royalty, sales and marketing, programming and content, transmission, engineering, design and development costs, and general and administrative costs.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, adjusted EBITDA was $2,131 and $2,006, respectively, an increase of 6%, or $125. The increase was due to: growth of 8% in total revenue which was primarily a result of the increase in our subscriber base; additional revenues from the U.S. Music Royalty Fee; an increase in advertising revenue; and lower subscriber acquisition costs. The increases were partially offset by higher revenue share and royalty, sales and marketing, programming and content, transmission, and general and administrative costs.
|
•
|
2019 vs. 2018: For the years ended December 31, 2019 and 2018, free cash flow was $1,647 and $1,517, respectively, an increase of $130, or 9%. The increase was impacted by the one-time lump sum payment of $150 to resolve all outstanding claims under our statutory license for sound recordings for the period January 1, 2007 through December 31, 2017, paid during 2018; partially offset by a payment of $25 for a legal settlement paid during 2019.
|
•
|
2018 vs. 2017: For the years ended December 31, 2018 and 2017, free cash flow was $1,517 and $1,560, respectively, a decrease of $43, or 3%. The decrease was driven primarily by the one-time lump sum payment of $150 to resolve all outstanding claims under our statutory license for sound recordings for the period January 1, 2007 through December 31, 2017, an increase in additions to property and equipment due to the timing of payments for new satellite construction, and the timing of payments to vendors; partially offset by higher net cash provided by operating activities resulting from improved operating performance.
|
|
For the Years Ended December 31,
|
|
|
|
|
||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2019 vs 2018
|
|
2018 vs 2017
|
||||||||||
Net cash provided by operating activities
|
$
|
2,017
|
|
|
$
|
1,880
|
|
|
$
|
1,856
|
|
|
$
|
137
|
|
|
$
|
24
|
|
Net cash used in investing activities
|
(3
|
)
|
|
(379
|
)
|
|
(1,147
|
)
|
|
376
|
|
|
768
|
|
|||||
Net cash used in financing activities
|
(1,959
|
)
|
|
(1,515
|
)
|
|
(854
|
)
|
|
(444
|
)
|
|
(661
|
)
|
|||||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
55
|
|
|
(14
|
)
|
|
(145
|
)
|
|
69
|
|
|
131
|
|
|||||
Cash, cash equivalents and restricted cash at beginning of period
|
65
|
|
|
79
|
|
|
224
|
|
|
(14
|
)
|
|
(145
|
)
|
|||||
Cash, cash equivalents and restricted cash at end of period
|
$
|
120
|
|
|
$
|
65
|
|
|
$
|
79
|
|
|
$
|
55
|
|
|
$
|
(14
|
)
|
|
For the Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Net income:
|
$
|
914
|
|
|
$
|
1,176
|
|
|
$
|
648
|
|
Add back items excluded from Adjusted EBITDA:
|
|
|
|
|
|
|
|
||||
Legal settlements and reserves
|
25
|
|
|
69
|
|
|
45
|
|
|||
Acquisition and other related costs (1)
|
84
|
|
|
3
|
|
|
—
|
|
|||
Share-based payment expense
|
229
|
|
|
133
|
|
|
124
|
|
|||
Depreciation and amortization
|
468
|
|
|
301
|
|
|
299
|
|
|||
Interest expense
|
390
|
|
|
350
|
|
|
346
|
|
|||
Loss on extinguishment of debt
|
57
|
|
|
—
|
|
|
44
|
|
|||
Other expense (income)
|
3
|
|
|
(44
|
)
|
|
(13
|
)
|
|||
Income tax expense
|
283
|
|
|
245
|
|
|
616
|
|
|||
Purchase price accounting adjustments:
|
|
|
|
|
|
||||||
Revenues
|
13
|
|
|
7
|
|
|
7
|
|
|||
Operating expenses
|
(14
|
)
|
|
—
|
|
|
—
|
|
|||
Pro forma adjustments (2)
|
(25
|
)
|
|
(109
|
)
|
|
(110
|
)
|
|||
Adjusted EBITDA
|
$
|
2,427
|
|
|
$
|
2,131
|
|
|
$
|
2,006
|
|
(1)
|
Acquisition and other related costs include $21 of share-based compensation expense for the year ended December 31, 2019.
|
(2)
|
Pro forma adjustment for the year ended December 31, 2019 includes Pandora's January 2019 Net income of $(44) plus Depreciation and amortization of $6, Share-based payment expense of $11, Acquisition and other related costs of $1, and Interest expense of $2 offset by Other expense (income) of $1. Pro forma adjustment for year ended December 31, 2018 includes Pandora's Net income for the year ended December 31, 2018 of $(328) plus Depreciation and amortization of $61, Share-based payment expense of $111, Loss on extinguishment of debt of $17, Interest expense of $27, transaction related costs recorded by Pandora related to its acquisition by Sirius XM of $12, and contract termination fees of $6, offset by Other expense (income) of $7 and Income tax benefit of $8. Pro forma adjustment for year ended December 31, 2017 includes Pandora's Net income for the year ended December 31, 2017 of $(518) plus Depreciation and amortization of $63, Share-based payment expense of $128, Interest expense of $29, contract termination fees of $23, loss on extinguishment of debt of $9 and activity related to discontinued operations of $160, offset by Other expense (income) of $3 and Income tax benefit of $1.
|
|
For the Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Cash Flow information
|
|
|
|
|
|
|
|||||
Net cash provided by operating activities
|
$
|
2,017
|
|
|
$
|
1,880
|
|
|
$
|
1,856
|
|
Net cash used in investing activities
|
$
|
(3
|
)
|
|
$
|
(379
|
)
|
|
$
|
(1,147
|
)
|
Net cash used in financing activities
|
$
|
(1,959
|
)
|
|
$
|
(1,515
|
)
|
|
$
|
(854
|
)
|
Free Cash Flow
|
|
|
|
|
|
|
|||||
Net cash provided by operating activities
|
$
|
2,017
|
|
|
$
|
1,880
|
|
|
$
|
1,856
|
|
Additions to property and equipment
|
(363
|
)
|
|
(355
|
)
|
|
(288
|
)
|
|||
Purchases of other investments
|
(7
|
)
|
|
(8
|
)
|
|
(8
|
)
|
|||
Free cash flow
|
$
|
1,647
|
|
|
$
|
1,517
|
|
|
$
|
1,560
|
|
|
For the Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Subscriber acquisition costs, excluding connected vehicle services
|
$
|
427
|
|
|
$
|
470
|
|
|
$
|
499
|
|
Less: margin from sales of radios and accessories, excluding connected vehicle services
|
(144
|
)
|
|
(122
|
)
|
|
(96
|
)
|
|||
|
$
|
283
|
|
|
$
|
348
|
|
|
$
|
403
|
|
Installations
|
12,355
|
|
|
13,563
|
|
|
13,662
|
|
|||
SAC, per installation (a)
|
$
|
22.91
|
|
|
$
|
25.66
|
|
|
$
|
29.53
|
|
(a)
|
Amounts may not recalculate as a result of rounding.
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
ITEM 9B.
|
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
ITEM 15.
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
ITEM 16.
|
FORM 10-K SUMMARY
|
Exhibit
|
|
Description
|
|
|
|
|
|
2.1
|
|
|
|
|
|
|
|
2.2
|
|
|
|
|
|
|
|
2.3
|
|
|
|
|
|
|
|
3.1
|
|
|
|
|
|
|
|
3.2
|
|
|
|
|
|
|
|
4.1
|
|
|
|
|
|
|
|
4.2
|
|
|
|
|
|
|
|
4.3
|
|
|
|
|
|
|
|
4.4
|
|
|
|
|
|
|
|
4.5
|
|
|
|
|
|
|
|
4.6
|
|
|
|
|
|
|
|
4.7
|
|
|
|
|
|
|
|
4.8
|
|
|
|
|
|
|
|
4.9
|
|
|
|
|
|
|
|
4.10
|
|
|
|
|
|
|
|
4.11
|
|
|
|
|
|
|
|
4.12
|
|
|
Exhibit
|
|
Description
|
|
|
|
|
|
|
|
|
|
4.13
|
|
|
|
|
|
|
|
4.14
|
|
|
|
|
|
|
|
4.15
|
|
|
|
|
|
|
|
10.1
|
|
|
|
|
|
|
|
10.2
|
|
|
|
|
|
|
|
10.3
|
|
|
|
|
|
|
|
10.4
|
|
|
|
|
|
|
|
**10.5
|
|
|
|
|
|
|
|
*10.6
|
|
|
|
|
|
|
|
*10.7
|
|
|
|
|
|
|
|
*10.8
|
|
|
|
|
|
|
|
*10.9
|
|
|
|
|
|
|
|
*10.10
|
|
|
|
|
|
|
|
*10.11
|
|
|
|
|
|
|
|
*10.12
|
|
|
|
|
|
|
|
*10.13
|
|
|
|
|
|
|
|
*10.14
|
|
|
|
|
|
|
Exhibit
|
|
Description
|
|
|
|
|
|
*10.15
|
|
|
|
|
|
|
|
*10.16
|
|
|
|
|
|
|
|
*10.17
|
|
|
|
|
|
|
|
*10.18
|
|
|
|
|
|
|
|
*10.19
|
|
|
|
|
|
|
|
*10.20
|
|
|
|
|
|
|
|
*10.21
|
|
|
|
|
|
|
|
*10.22
|
|
|
|
|
|
|
|
*10.23
|
|
|
|
|
|
|
|
*10.24
|
|
|
|
|
|
|
|
*10.25
|
|
|
|
|
|
|
|
*10.26
|
|
|
|
|
|
|
|
*10.27
|
|
|
|
|
|
|
|
*10.28
|
|
|
|
|
|
|
|
*10.29
|
|
|
|
|
|
|
|
*10.30
|
|
|
|
|
|
|
|
*10.31
|
|
|
|
|
|
|
Exhibit
|
|
Description
|
|
|
|
|
|
*10.32
|
|
|
|
|
|
|
|
*10.33
|
|
|
|
|
|
|
|
*10.34
|
|
|
|
|
|
|
|
*10.35
|
|
|
|
|
|
|
|
*10.36
|
|
|
|
|
|
|
|
*10.37
|
|
|
|
|
|
|
|
21.1
|
|
|
|
|
|
|
|
23.1
|
|
|
|
|
|
|
|
31.1
|
|
|
|
|
|
|
|
31.2
|
|
|
|
|
|
|
|
32.1
|
|
|
|
|
|
|
|
32.2
|
|
|
|
|
|
|
|
99.1
|
|
|
|
|
|
|
|
99.2
|
|
|
|
|
|
|
|
101.1
|
|
|
The following financial information from our Annual Report on Form 10-K for the year ended December 31, 2019 formatted in Inline eXtensible Business Reporting Language (Inline XBRL): (i) Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017; (ii) Consolidated Balance Sheets as of December 31, 2019 and 2018; (iii) Consolidated Statements of Stockholders’ (Deficit) Equity for the years ended December 31, 2019, 2018 and 2017; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017; and (v) Combined Notes to Consolidated Financial Statements.
|
|
|
|
|
104.1
|
|
|
Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101.1)
|
*
|
This document has been identified as a management contract or compensatory plan or arrangement.
|
**
|
Pursuant to the Commission’s Orders Granting Confidential Treatment under Rule 406 of the Securities Act of 1933 or Rule 24(b)-2 under the Securities Exchange Act of 1934, certain confidential portions of this Exhibit were omitted by means of redacting a portion of the text.
|
SIRIUS XM HOLDINGS INC.
|
||
|
|
|
By:
|
|
/s/ DAVID J. FREAR
|
|
|
David J. Frear
|
|
|
Senior Executive Vice President and
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial Officer and Authorized Officer)
|
Signature
|
|
Title
|
Date
|
|
|
|
|
/s/ GREGORY B. MAFFEI
|
|
Chairman of the Board of Directors and Director
|
February 4, 2020
|
(Gregory B. Maffei)
|
|
||
/s/ JAMES E. MEYER
|
|
Chief Executive Officer and Director (Principal Executive Officer)
|
February 4, 2020
|
(James E. Meyer)
|
|
||
/s/ DAVID J. FREAR
|
|
Senior Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
February 4, 2020
|
(David J. Frear)
|
|
||
/s/ THOMAS D. BARRY
|
|
Senior Vice President and Controller
(Principal Accounting Officer)
|
February 4, 2020
|
(Thomas D. Barry)
|
|
||
/s/ JOAN L. AMBLE
|
|
Director
|
February 4, 2020
|
(Joan L. Amble)
|
|
||
/s/ GEORGE W. BODENHEIMER
|
|
Director
|
February 4, 2020
|
(George W. Bodenheimer)
|
|
||
/s/ MARK D. CARLETON
|
|
Director
|
February 4, 2020
|
(Mark D. Carleton)
|
|
||
/s/ EDDY W. HARTENSTEIN
|
|
Director
|
February 4, 2020
|
(Eddy W. Hartenstein)
|
|
||
/s/ JAMES P. HOLDEN
|
|
Director
|
February 4, 2020
|
(James P. Holden)
|
|
||
/s/ EVAN D. MALONE
|
|
Director
|
February 4, 2020
|
(Evan D. Malone)
|
|
||
/s/ JAMES F. MOONEY
|
|
Director
|
February 4, 2020
|
(James F. Mooney)
|
|
||
/s/ MICHAEL RAPINO
|
|
Director
|
February 4, 2020
|
(Michael Rapino)
|
|
||
/s/ KRISTINA M. SALEN
|
|
Director
|
February 4, 2020
|
(Kristina M. Salen)
|
|
||
/s/ CARL E. VOGEL
|
|
Director
|
February 4, 2020
|
(Carl E. Vogel)
|
|
||
/s/ DAVID M. ZASLAV
|
|
Director
|
February 4, 2020
|
(David M. Zaslav)
|
|
•
|
Evaluating the discount rates by comparing them to an independently developed range using publicly available market data for comparable entities;
|
•
|
Evaluating the royalty rates for trademark, software and technology acquired by comparing them to royalty rates for similar companies;
|
•
|
Developing an estimated range of fair values of the advertising customer relationships acquired using the Company’s cash flow forecasts and an independently developed range of discount rates, and comparing it to the Company’s fair value estimate; and
|
•
|
Developing an estimated range of fair values of the trademark, software and technology acquired using the Company’s forecasted revenues and an independently developed range of discount rates and royalty rates, and comparing them to the Company’s fair value estimates.
|
|
For the Years Ended December 31,
|
||||||||||
(in millions, except per share data)
|
2019
|
|
2018
|
|
2017
|
||||||
Revenue:
|
|
|
|
|
|
||||||
Subscriber revenue
|
$
|
6,120
|
|
|
$
|
5,264
|
|
|
$
|
4,990
|
|
Advertising revenue
|
1,336
|
|
|
188
|
|
|
160
|
|
|||
Equipment revenue
|
173
|
|
|
155
|
|
|
132
|
|
|||
Other revenue
|
165
|
|
|
164
|
|
|
143
|
|
|||
Total revenue
|
7,794
|
|
|
5,771
|
|
|
5,425
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Cost of services:
|
|
|
|
|
|
||||||
Revenue share and royalties
|
2,291
|
|
|
1,394
|
|
|
1,210
|
|
|||
Programming and content
|
462
|
|
|
406
|
|
|
388
|
|
|||
Customer service and billing
|
475
|
|
|
382
|
|
|
385
|
|
|||
Transmission
|
170
|
|
|
96
|
|
|
83
|
|
|||
Cost of equipment
|
29
|
|
|
31
|
|
|
35
|
|
|||
Subscriber acquisition costs
|
427
|
|
|
470
|
|
|
499
|
|
|||
Sales and marketing
|
937
|
|
|
484
|
|
|
438
|
|
|||
Engineering, design and development
|
280
|
|
|
123
|
|
|
112
|
|
|||
General and administrative
|
524
|
|
|
354
|
|
|
335
|
|
|||
Depreciation and amortization
|
468
|
|
|
301
|
|
|
299
|
|
|||
Acquisition and other related costs
|
84
|
|
|
3
|
|
|
—
|
|
|||
Total operating expenses
|
6,147
|
|
|
4,044
|
|
|
3,784
|
|
|||
Income from operations
|
1,647
|
|
|
1,727
|
|
|
1,641
|
|
|||
Other (expense) income:
|
|
|
|
|
|
||||||
Interest expense
|
(390
|
)
|
|
(350
|
)
|
|
(346
|
)
|
|||
Loss on extinguishment of debt
|
(57
|
)
|
|
—
|
|
|
(44
|
)
|
|||
Other (expense) income
|
(3
|
)
|
|
44
|
|
|
13
|
|
|||
Total other (expense) income
|
(450
|
)
|
|
(306
|
)
|
|
(377
|
)
|
|||
Income before income taxes
|
1,197
|
|
|
1,421
|
|
|
1,264
|
|
|||
Income tax expense
|
(283
|
)
|
|
(245
|
)
|
|
(616
|
)
|
|||
Net income
|
$
|
914
|
|
|
$
|
1,176
|
|
|
$
|
648
|
|
Foreign currency translation adjustment, net of tax
|
14
|
|
|
(29
|
)
|
|
19
|
|
|||
Total comprehensive income
|
$
|
928
|
|
|
$
|
1,147
|
|
|
$
|
667
|
|
Net income per common share:
|
|
|
|
|
|
||||||
Basic
|
$
|
0.20
|
|
|
$
|
0.26
|
|
|
$
|
0.14
|
|
Diluted
|
$
|
0.20
|
|
|
$
|
0.26
|
|
|
$
|
0.14
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
||||||
Basic
|
4,501
|
|
|
4,462
|
|
|
4,638
|
|
|||
Diluted
|
4,616
|
|
|
4,561
|
|
|
4,724
|
|
(in millions, except per share data)
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
ASSETS
|
|
|
|
|
|||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
106
|
|
|
$
|
54
|
|
Receivables, net
|
670
|
|
|
233
|
|
||
Inventory, net
|
11
|
|
|
22
|
|
||
Related party current assets
|
22
|
|
|
11
|
|
||
Prepaid expenses and other current assets
|
194
|
|
|
158
|
|
||
Total current assets
|
1,003
|
|
|
478
|
|
||
Property and equipment, net
|
1,626
|
|
|
1,513
|
|
||
Intangible assets, net
|
3,467
|
|
|
2,501
|
|
||
Goodwill
|
3,843
|
|
|
2,290
|
|
||
Related party long-term assets
|
452
|
|
|
960
|
|
||
Deferred tax assets
|
153
|
|
|
293
|
|
||
Operating lease right-of-use assets
|
466
|
|
|
—
|
|
||
Other long-term assets
|
139
|
|
|
138
|
|
||
Total assets
|
$
|
11,149
|
|
|
$
|
8,173
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable and accrued expenses
|
$
|
1,151
|
|
|
$
|
736
|
|
Accrued interest
|
160
|
|
|
128
|
|
||
Current portion of deferred revenue
|
1,930
|
|
|
1,932
|
|
||
Current maturities of debt
|
2
|
|
|
3
|
|
||
Operating lease current liabilities
|
46
|
|
|
—
|
|
||
Related party current liabilities
|
4
|
|
|
4
|
|
||
Total current liabilities
|
3,293
|
|
|
2,803
|
|
||
Long-term deferred revenue
|
130
|
|
|
149
|
|
||
Long-term debt
|
7,842
|
|
|
6,885
|
|
||
Related party long-term liabilities
|
—
|
|
|
4
|
|
||
Deferred tax liabilities
|
70
|
|
|
47
|
|
||
Operating lease liabilities
|
456
|
|
|
—
|
|
||
Other long-term liabilities
|
94
|
|
|
102
|
|
||
Total liabilities
|
11,885
|
|
|
9,990
|
|
||
Commitments and contingencies (Note 16)
|
|
|
|
|
|
||
Stockholders’ equity (deficit):
|
|
|
|
|
|
||
Common stock, par value $0.001 per share; 9,000 shares authorized; 4,412 and 4,346 shares issued; 4,412 and 4,346 outstanding at December 31, 2019 and December 31, 2018, respectively
|
4
|
|
|
4
|
|
||
Accumulated other comprehensive income (loss), net of tax
|
8
|
|
|
(6
|
)
|
||
Additional paid-in capital
|
395
|
|
|
242
|
|
||
Treasury stock, at cost; 0 and 0 shares of common stock at December 31, 2019 and December 31, 2018, respectively
|
—
|
|
|
—
|
|
||
Accumulated deficit
|
(1,143
|
)
|
|
(2,057
|
)
|
||
Total stockholders’ equity (deficit)
|
(736
|
)
|
|
(1,817
|
)
|
||
Total liabilities and stockholders’ equity (deficit)
|
$
|
11,149
|
|
|
$
|
8,173
|
|
|
|
Common Stock
|
|
Accumulated
Other Comprehensive Income (Loss) |
|
Additional
Paid-in Capital |
|
Treasury Stock
|
|
Accumulated
Deficit |
|
Total
Stockholders’ Equity (Deficit) |
||||||||||||||||||
(in millions)
|
|
Shares
|
|
Amount
|
|
|
|
Shares
|
|
Amount
|
|
|
||||||||||||||||||
Balance at Balance at January 1, 2017
|
|
4,746
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
3,118
|
|
|
5
|
|
|
$
|
(23
|
)
|
|
$
|
(3,891
|
)
|
|
$
|
(792
|
)
|
Comprehensive income, net of tax
|
|
—
|
|
|
—
|
|
|
19
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
648
|
|
|
667
|
|
||||||
Issuance of common stock as part of recapitalization of Sirius XM Canada
|
|
35
|
|
|
—
|
|
|
—
|
|
|
179
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
179
|
|
||||||
Share-based payment expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
109
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
109
|
|
||||||
Exercise of stock options and vesting of restricted stock units
|
|
22
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||
Withholding taxes on net share settlement of stock-based compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(93
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(93
|
)
|
||||||
Cash dividends paid on common stock, $0.04100 per share
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(190
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(190
|
)
|
||||||
Common stock repurchased
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
271
|
|
|
(1,403
|
)
|
|
—
|
|
|
(1,403
|
)
|
||||||
Common stock retired
|
|
(272
|
)
|
|
—
|
|
|
—
|
|
|
(1,409
|
)
|
|
(273
|
)
|
|
1,409
|
|
|
—
|
|
|
—
|
|
||||||
Balance at December 31, 2017
|
|
4,531
|
|
|
$
|
4
|
|
|
$
|
19
|
|
|
$
|
1,715
|
|
|
3
|
|
|
$
|
(17
|
)
|
|
$
|
(3,243
|
)
|
|
$
|
(1,522
|
)
|
Cumulative effect of change in accounting principles
|
|
—
|
|
|
—
|
|
|
4
|
|
|
30
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
44
|
|
||||||
Comprehensive income, net of tax
|
|
—
|
|
|
—
|
|
|
(29
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,176
|
|
|
1,147
|
|
||||||
Share-based payment expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
133
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
133
|
|
||||||
Exercise of stock options and vesting of restricted stock units
|
|
27
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Withholding taxes on net share settlement of stock-based compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(121
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(121
|
)
|
||||||
Cash dividends paid on common stock, $0.04510 per share
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(201
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(201
|
)
|
||||||
Common stock repurchased
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
209
|
|
|
(1,297
|
)
|
|
—
|
|
|
(1,297
|
)
|
||||||
Common stock retired
|
|
(212
|
)
|
|
—
|
|
|
—
|
|
|
(1,314
|
)
|
|
(212
|
)
|
|
1,314
|
|
|
—
|
|
|
—
|
|
||||||
Balance at December 31, 2018
|
|
4,346
|
|
|
$
|
4
|
|
|
$
|
(6
|
)
|
|
$
|
242
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
(2,057
|
)
|
|
$
|
(1,817
|
)
|
Comprehensive income, net of tax
|
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
914
|
|
|
928
|
|
||||||
Share-based payment expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
263
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
263
|
|
||||||
Exercise of stock options and vesting of restricted stock units
|
|
38
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
||||||
Withholding taxes on net share settlement of stock-based compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(150
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(150
|
)
|
||||||
Cash dividends paid on common stock, $0.04961 per share
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(226
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(226
|
)
|
||||||
Issuance of common stock as part of Pandora Acquisition
|
|
392
|
|
|
1
|
|
|
—
|
|
|
2,354
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,355
|
|
||||||
Equity component of convertible note
|
|
—
|
|
|
—
|
|
|
—
|
|
|
62
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
62
|
|
||||||
Common stock repurchased
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
364
|
|
|
(2,159
|
)
|
|
—
|
|
|
(2,159
|
)
|
||||||
Common stock retired
|
|
(364
|
)
|
|
(1
|
)
|
|
—
|
|
|
(2,158
|
)
|
|
(364
|
)
|
|
2,159
|
|
|
—
|
|
|
—
|
|
||||||
Balance at December 31, 2019
|
|
4,412
|
|
|
$
|
4
|
|
|
$
|
8
|
|
|
$
|
395
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,143
|
)
|
|
$
|
(736
|
)
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
914
|
|
|
$
|
1,176
|
|
|
$
|
648
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization
|
468
|
|
|
301
|
|
|
299
|
|
|||
Non-cash interest expense, net of amortization of premium
|
17
|
|
|
9
|
|
|
9
|
|
|||
Provision for doubtful accounts
|
53
|
|
|
51
|
|
|
56
|
|
|||
Amortization of deferred income related to equity method investment
|
(3
|
)
|
|
(3
|
)
|
|
(3
|
)
|
|||
Loss on extinguishment of debt
|
57
|
|
|
—
|
|
|
44
|
|
|||
Loss (gain) on unconsolidated entity investments, net
|
21
|
|
|
10
|
|
|
(5
|
)
|
|||
Gain on fair value instrument
|
—
|
|
|
(43
|
)
|
|
—
|
|
|||
Dividend received from unconsolidated entity investment
|
2
|
|
|
2
|
|
|
4
|
|
|||
Share-based payment expense
|
250
|
|
|
133
|
|
|
124
|
|
|||
Deferred income taxes
|
259
|
|
|
257
|
|
|
584
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
||||
Receivables
|
(137
|
)
|
|
(42
|
)
|
|
(74
|
)
|
|||
Inventory
|
11
|
|
|
(2
|
)
|
|
2
|
|
|||
Related party, net
|
(10
|
)
|
|
1
|
|
|
(2
|
)
|
|||
Prepaid expenses and other current assets
|
(3
|
)
|
|
(20
|
)
|
|
50
|
|
|||
Other long-term assets
|
4
|
|
|
10
|
|
|
7
|
|
|||
Operating lease right-of-use assets
|
(14
|
)
|
|
—
|
|
|
—
|
|
|||
Accounts payable and accrued expenses
|
109
|
|
|
(20
|
)
|
|
41
|
|
|||
Accrued interest
|
32
|
|
|
(9
|
)
|
|
23
|
|
|||
Deferred revenue
|
(58
|
)
|
|
70
|
|
|
42
|
|
|||
Operating lease liabilities
|
36
|
|
|
—
|
|
|
—
|
|
|||
Other long-term liabilities
|
9
|
|
|
(1
|
)
|
|
7
|
|
|||
Net cash provided by operating activities
|
2,017
|
|
|
1,880
|
|
|
1,856
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
||||
Additions to property and equipment
|
(363
|
)
|
|
(355
|
)
|
|
(288
|
)
|
|||
Purchases of other investments
|
(7
|
)
|
|
(8
|
)
|
|
(8
|
)
|
|||
Acquisition of business, net of cash acquired
|
313
|
|
|
(2
|
)
|
|
(108
|
)
|
|||
Sale of short-term investments
|
73
|
|
|
—
|
|
|
—
|
|
|||
Investments in related parties and other equity investees
|
(19
|
)
|
|
(17
|
)
|
|
(612
|
)
|
|||
Repayment from (loan to) related party
|
—
|
|
|
3
|
|
|
(131
|
)
|
|||
Net cash used in investing activities
|
(3
|
)
|
|
(379
|
)
|
|
(1,147
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
||||
Proceeds from exercise of stock options
|
8
|
|
|
—
|
|
|
1
|
|
|||
Taxes paid from net share settlements for stock-based compensation
|
(150
|
)
|
|
(120
|
)
|
|
(93
|
)
|
|||
Revolving credit facility, net of deferred financing costs
|
(439
|
)
|
|
136
|
|
|
(90
|
)
|
|||
Proceeds from long-term borrowings, net of costs
|
2,715
|
|
|
—
|
|
|
2,473
|
|
|||
Proceeds from sale of capped call security
|
3
|
|
|
—
|
|
|
—
|
|
|||
Principal payments of long-term borrowings
|
(1,666
|
)
|
|
(16
|
)
|
|
(1,513
|
)
|
|||
Payment of premiums on redemption of debt
|
(45
|
)
|
|
—
|
|
|
(33
|
)
|
|||
Common stock repurchased and retired
|
(2,159
|
)
|
|
(1,314
|
)
|
|
(1,409
|
)
|
|||
Dividends paid
|
(226
|
)
|
|
(201
|
)
|
|
(190
|
)
|
|||
Net cash used in financing activities
|
(1,959
|
)
|
|
(1,515
|
)
|
|
(854
|
)
|
|||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
55
|
|
|
(14
|
)
|
|
(145
|
)
|
|||
Cash, cash equivalents and restricted cash at beginning of period
|
65
|
|
|
79
|
|
|
224
|
|
|||
Cash, cash equivalents and restricted cash at end of period(1)
|
$
|
120
|
|
|
$
|
65
|
|
|
$
|
79
|
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Supplemental Disclosure of Cash and Non-Cash Flow Information
|
|
|
|
|
|
||||||
Cash paid during the period for:
|
|
|
|
|
|
||||||
Interest, net of amounts capitalized
|
$
|
337
|
|
|
$
|
345
|
|
|
$
|
310
|
|
Income taxes paid
|
$
|
10
|
|
|
$
|
6
|
|
|
$
|
28
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
||||||
Capital lease obligations incurred to acquire assets
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
Treasury stock not yet settled
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
6
|
|
Fair value of shares issued related to acquisition of a business
|
$
|
2,355
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accumulated other comprehensive income (loss), net of tax
|
$
|
14
|
|
|
$
|
(29
|
)
|
|
$
|
19
|
|
Issuance of common stock as part of recapitalization of Sirius XM Canada
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
179
|
|
(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)
|
December 31, 2019
|
|
December 31, 2018
|
|
December 31, 2017
|
|
December 31, 2016
|
||||||||
Cash and cash equivalents
|
$
|
106
|
|
|
$
|
54
|
|
|
$
|
69
|
|
|
$
|
214
|
|
Restricted cash included in Other long-term assets
|
14
|
|
|
11
|
|
|
10
|
|
|
10
|
|
||||
Total cash, cash equivalents and restricted cash at end of period
|
$
|
120
|
|
|
$
|
65
|
|
|
$
|
79
|
|
|
$
|
224
|
|
(1)
|
Business & Basis of Presentation
|
|
For the Year Ended December 31, 2018
|
|
For the Year Ended December 31, 2017
|
||||||||||||||||||||
|
As Reported
|
|
Reclassification
|
|
Current Report
|
|
As Reported
|
|
Reclassification
|
|
Current Report
|
||||||||||||
Subscriber revenue
|
$
|
4,594
|
|
|
$
|
670
|
|
|
$
|
5,264
|
|
|
$
|
4,472
|
|
|
$
|
518
|
|
|
$
|
4,990
|
|
Advertising revenue
|
188
|
|
|
—
|
|
|
188
|
|
|
160
|
|
|
—
|
|
|
160
|
|
||||||
Equipment revenue
|
155
|
|
|
—
|
|
|
155
|
|
|
132
|
|
|
—
|
|
|
132
|
|
||||||
Other revenue
|
834
|
|
|
(670
|
)
|
|
164
|
|
|
661
|
|
|
(518
|
)
|
|
143
|
|
||||||
Total revenue
|
$
|
5,771
|
|
|
$
|
—
|
|
|
$
|
5,771
|
|
|
$
|
5,425
|
|
|
$
|
—
|
|
|
$
|
5,425
|
|
(2)
|
Summary of Significant Accounting Policies
|
Significant Accounting Policy
|
|
Note #
|
|
Page #
|
|
Acquisition
|
|
3
|
|
|
|
Fair Value Measurements
|
|
4
|
|
|
|
Goodwill
|
|
8
|
|
|
|
Intangible Assets
|
|
9
|
|
|
|
Property and Equipment
|
|
10
|
|
|
|
Equity Method Investments
|
|
12
|
|
|
|
Share-Based Compensation
|
|
15
|
|
|
|
Legal Reserves
|
|
16
|
|
|
|
Income Taxes
|
|
17
|
|
|
|
Balance at December 31, 2018
|
|
Adjustments Due to ASU 2016-02
|
|
Balance at January 1, 2019
|
||||||
Balance Sheet
|
|
|
|
|
|
||||||
Assets:
|
|
|
|
|
|
||||||
Operating lease right-of-use assets
|
$
|
—
|
|
|
$
|
347
|
|
|
$
|
347
|
|
|
|
|
|
|
|
||||||
Liabilities:
|
|
|
|
|
|
||||||
Accounts payable and accrued expenses
|
$
|
736
|
|
|
$
|
(1
|
)
|
|
$
|
735
|
|
Operating lease current liabilities
|
—
|
|
|
30
|
|
|
30
|
|
|||
Operating lease liabilities
|
—
|
|
|
339
|
|
|
339
|
|
|||
Other long-term liabilities
|
102
|
|
|
(21
|
)
|
|
81
|
|
•
|
Activation fees were previously recognized over the expected subscriber life using the straight-line method. Under the new revenue standard, activation fees have been recognized over a one month period from activation as the activation fees are non-refundable and they do not convey a material right. As of January 1, 2018, we reduced deferred revenue related to activation fees of $8, net of tax, to Accumulated deficit.
|
•
|
Loyalty payments to OEMs were previously expensed when incurred as Subscriber acquisition costs. Under the new revenue standard, these costs have been capitalized in Prepaid expenses and other current assets as costs to obtain a contract and these costs will be amortized to Subscriber acquisition costs over an average self-pay subscriber life of that OEM. As of January 1, 2018, we capitalized previously expensed loyalty payments of $10, net of tax, to Prepaid expenses and other current assets by reducing Accumulated deficit.
|
|
For the Year Ended December 31, 2018
|
||||||||||
|
Current Report
|
|
Impact of Adopting ASU 2014-09
|
|
Balances Without Adoption of ASU 2014-09
|
||||||
Income Statement
|
|
|
|
|
|
||||||
Revenues
|
|
|
|
|
|
||||||
Subscriber revenue (1)
|
$
|
5,264
|
|
|
$
|
95
|
|
|
$
|
5,359
|
|
|
|
|
|
|
|
||||||
Expenses
|
|
|
|
|
|
||||||
Revenue share and royalties
|
1,394
|
|
|
88
|
|
|
1,482
|
|
|||
Subscriber acquisition costs
|
470
|
|
|
4
|
|
|
474
|
|
|||
Income tax expense
|
(245
|
)
|
|
—
|
|
|
(245
|
)
|
|||
|
|
|
|
|
|
||||||
Net Income
|
$
|
1,176
|
|
|
$
|
3
|
|
|
$
|
1,179
|
|
(1)
|
Music Royalty Fee revenue was reported as Other revenue in our December 31, 2018 and 2017 Annual Reports on Form 10-K. This revenue was reclassified to Subscriber revenue to conform with the current period presentation. Refer to Note 1 for more information.
|
(3)
|
Acquisition
|
|
Total
|
||
Pandora common stock outstanding
|
272
|
|
|
Exchange ratio
|
1.44
|
|
|
Common stock issued
|
392
|
|
|
Price per share of Holdings common stock
|
$
|
5.83
|
|
Value of common stock issued to Pandora stockholders
|
$
|
2,285
|
|
Value of replacement equity awards attributable to pre-combination service
|
$
|
70
|
|
Consideration of common stock and replacement equity awards for pre-combination service
|
$
|
2,355
|
|
Sirius XM’s Pandora preferred stock investment (related party fair value instrument) canceled
|
$
|
524
|
|
Total consideration for Pandora Acquisition
|
$
|
2,879
|
|
Value attributed to par at $0.001 par value
|
$
|
1
|
|
Balance to capital in excess of par value
|
$
|
2,354
|
|
Acquired Assets:
|
|
||
Cash and cash equivalents
|
$
|
313
|
|
Receivables, net
|
353
|
|
|
Prepaid expenses and other current assets
|
109
|
|
|
Property and equipment
|
65
|
|
|
Intangible assets
|
1,107
|
|
|
Goodwill
|
1,553
|
|
|
Deferred tax assets
|
102
|
|
|
Operating lease right-of-use assets
|
104
|
|
|
Long term assets
|
7
|
|
|
Total assets
|
$
|
3,713
|
|
|
|
||
Assumed Liabilities:
|
|
||
Accounts payable and accrued expenses
|
$
|
324
|
|
Deferred revenue
|
37
|
|
|
Operating lease current liabilities
|
28
|
|
|
Current maturities of debt
|
151
|
|
|
Long-term debt (a)
|
218
|
|
|
Operating lease liabilities
|
69
|
|
|
Other long-term liabilities
|
7
|
|
|
Total liabilities
|
$
|
834
|
|
Total consideration
|
$
|
2,879
|
|
(a)
|
In order to present the assets acquired and liabilities assumed, the conversion feature associated with Pandora's convertible notes for $62 has been included within Long-term debt in the table above and included within Additional paid-in-capital within our statement of stockholders' equity (deficit). Refer to Note 13 for additional information.
|
|
For the Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Total revenue
|
$
|
7,921
|
|
|
$
|
7,348
|
|
|
$
|
6,818
|
|
Net income
|
$
|
938
|
|
|
$
|
844
|
|
|
$
|
335
|
|
(4)
|
Fair Value Measurements
|
i.
|
Level 1 input: unadjusted quoted prices in active markets for identical instrument;
|
ii.
|
Level 2 input: observable market data for the same or similar instrument but not Level 1, including quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
|
iii.
|
Level 3 input: unobservable inputs developed using management's assumptions about the inputs used for pricing the asset or liability.
|
|
December 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Fair
Value |
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Fair
Value |
||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pandora investment (a)
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
523
|
|
|
—
|
|
|
$
|
523
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Debt (b)
|
—
|
|
|
$
|
8,378
|
|
|
—
|
|
|
$
|
8,378
|
|
|
—
|
|
|
$
|
6,633
|
|
|
—
|
|
|
$
|
6,633
|
|
(a)
|
During the year ended December 31, 2017, Sirius XM completed a $480 investment in Pandora. Prior to the Pandora Acquisition, we elected the fair value option to account for this investment. This investment was canceled in conjunction with the Pandora Acquisition. Refer to Note 3 for information on this acquisition.
|
(b)
|
The fair value for non-publicly traded instruments is based upon estimates from a market maker and brokerage firm. Refer to Note 13 for information related to the carrying value of our debt as of December 31, 2019 and 2018.
|
(5)
|
Earnings per Share
|
|
For the Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017(1)
|
||||||
Numerator:
|
|
|
|
|
|
||||||
Net Income available to common stockholders for basic net income per common share
|
$
|
914
|
|
|
$
|
1,176
|
|
|
$
|
648
|
|
Effect of interest on assumed conversions of convertible debt, net of tax
|
7
|
|
|
—
|
|
|
—
|
|
|||
Net Income available to common stockholders for dilutive net income per common share
|
$
|
921
|
|
|
$
|
1,176
|
|
|
$
|
648
|
|
Denominator:
|
|
|
|
|
|
|
|||||
Weighted average common shares outstanding for basic net income per common share
|
4,501
|
|
|
4,462
|
|
|
4,638
|
|
|||
Weighted average impact of assumed convertible notes
|
28
|
|
|
—
|
|
|
—
|
|
|||
Weighted average impact of dilutive equity instruments
|
87
|
|
|
99
|
|
|
86
|
|
|||
Weighted average shares for diluted net income per common share
|
4,616
|
|
|
4,561
|
|
|
4,724
|
|
|||
Net income per common share:
|
|
|
|
|
|
|
|||||
Basic
|
$
|
0.20
|
|
|
$
|
0.26
|
|
|
$
|
0.14
|
|
Diluted
|
$
|
0.20
|
|
|
$
|
0.26
|
|
|
$
|
0.14
|
|
(1)
|
Our net income per basic and diluted share includes the impact of $185 in income tax expense, or a decrease of approximately $0.04 per share, due to the reduction in our net deferred tax asset balance as a result of the Tax Act.
|
(6)
|
Receivables, net
|
|
December 31, 2019
|
|
December 31, 2018
|
||||
Gross customer accounts receivable
|
$
|
546
|
|
|
$
|
105
|
|
Allowance for doubtful accounts
|
(14
|
)
|
|
(7
|
)
|
||
Customer accounts receivable, net
|
$
|
532
|
|
|
$
|
98
|
|
Receivables from distributors
|
113
|
|
|
107
|
|
||
Other receivables
|
25
|
|
|
28
|
|
||
Total receivables, net
|
$
|
670
|
|
|
$
|
233
|
|
(7)
|
Inventory, net
|
|
December 31, 2019
|
|
December 31, 2018
|
||||
Raw materials
|
$
|
3
|
|
|
$
|
5
|
|
Finished goods
|
13
|
|
|
23
|
|
||
Allowance for obsolescence
|
(5
|
)
|
|
(6
|
)
|
||
Total inventory, net
|
$
|
11
|
|
|
$
|
22
|
|
(8)
|
Goodwill
|
|
Sirius XM
|
|
Pandora
|
|
Total
|
||||||
Balance at December 31, 2017
|
$
|
2,287
|
|
|
$
|
—
|
|
|
$
|
2,287
|
|
Acquisition
|
3
|
|
|
—
|
|
|
3
|
|
|||
Balance at December 31, 2018
|
2,290
|
|
|
—
|
|
|
2,290
|
|
|||
Acquisition
|
—
|
|
|
1,553
|
|
|
1,553
|
|
|||
Balance at December 31, 2019
|
$
|
2,290
|
|
|
$
|
1,553
|
|
|
$
|
3,843
|
|
(9)
|
Intangible Assets
|
|
|
|
December 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
|
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
|
|
251
|
|
|
—
|
|
|
251
|
|
|
251
|
|
|
—
|
|
|
251
|
|
||||||
Definite life intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
OEM relationships
|
15 years
|
|
220
|
|
|
(90
|
)
|
|
130
|
|
|
220
|
|
|
(76
|
)
|
|
144
|
|
||||||
Licensing agreements
|
12 years
|
|
45
|
|
|
(42
|
)
|
|
3
|
|
|
45
|
|
|
(38
|
)
|
|
7
|
|
||||||
Software and technology
|
7 years
|
|
35
|
|
|
(25
|
)
|
|
10
|
|
|
35
|
|
|
(20
|
)
|
|
15
|
|
||||||
Due to Pandora Acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Indefinite life intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Trademarks
|
Indefinite
|
|
$
|
331
|
|
|
$
|
—
|
|
|
$
|
331
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Definite life intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Customer relationships
|
8 years
|
|
403
|
|
|
(49
|
)
|
|
354
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Software and technology
|
5 years
|
|
373
|
|
|
(69
|
)
|
|
304
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total intangible assets
|
|
|
$
|
3,742
|
|
|
$
|
(275
|
)
|
|
$
|
3,467
|
|
|
$
|
2,635
|
|
|
$
|
(134
|
)
|
|
$
|
2,501
|
|
Years ending December 31,
|
|
Amount
|
||
2020
|
|
$
|
152
|
|
2021
|
|
146
|
|
|
2022
|
|
144
|
|
|
2023
|
|
134
|
|
|
2024
|
|
69
|
|
|
Thereafter
|
|
156
|
|
|
Total definite life intangible assets, net
|
|
$
|
801
|
|
(10)
|
Property and Equipment
|
|
December 31, 2019
|
|
December 31, 2018
|
||||
Satellite system
|
$
|
1,587
|
|
|
$
|
1,587
|
|
Terrestrial repeater network
|
100
|
|
|
98
|
|
||
Leasehold improvements
|
105
|
|
|
58
|
|
||
Broadcast studio equipment
|
137
|
|
|
111
|
|
||
Capitalized software and hardware
|
1,086
|
|
|
824
|
|
||
Satellite telemetry, tracking and control facilities
|
87
|
|
|
76
|
|
||
Furniture, fixtures, equipment and other
|
89
|
|
|
97
|
|
||
Land
|
38
|
|
|
38
|
|
||
Building
|
63
|
|
|
63
|
|
||
Construction in progress
|
505
|
|
|
412
|
|
||
Total property and equipment
|
3,797
|
|
|
3,364
|
|
||
Accumulated depreciation and amortization
|
(2,171
|
)
|
|
(1,851
|
)
|
||
Property and equipment, net
|
$
|
1,626
|
|
|
$
|
1,513
|
|
|
December 31, 2019
|
|
December 31, 2018
|
||||
Satellite system
|
$
|
371
|
|
|
$
|
296
|
|
Terrestrial repeater network
|
7
|
|
|
5
|
|
||
Capitalized software and hardware
|
107
|
|
|
77
|
|
||
Other
|
20
|
|
|
34
|
|
||
Construction in progress
|
$
|
505
|
|
|
$
|
412
|
|
Satellite Description
|
|
Year Delivered
|
|
Estimated End of
Depreciable Life |
SIRIUS FM-5
|
|
2009
|
|
2024
|
SIRIUS FM-6
|
|
2013
|
|
2028
|
XM-3
|
|
2005
|
|
2020
|
XM-4
|
|
2006
|
|
2021
|
XM-5
|
|
2010
|
|
2025
|
FCC satellite licenses
|
|
Expiration year
|
SIRIUS FM-5
|
|
2025
|
SIRIUS FM-6
|
|
2022
|
XM-3
|
|
2021
|
XM-4
|
|
2022
|
XM-5
|
|
2026
|
(11)
|
Leases
|
|
For the Year Ended December 31,
|
||
|
2019
|
||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
||
Operating cash flows from operating leases
|
$
|
70
|
|
Financing cash flows from finance leases
|
$
|
3
|
|
|
|
||
Right-of-use assets obtained in exchange for lease obligations:
|
|
||
Operating leases
|
$
|
83
|
|
|
December 31, 2019
|
||
Operating Leases
|
|
||
Operating lease right-of-use assets
|
$
|
466
|
|
|
|
||
Operating lease current liabilities
|
46
|
|
|
Operating lease liabilities
|
456
|
|
|
Total operating lease liabilities
|
$
|
502
|
|
|
December 31, 2019
|
||
Finance Leases
|
|
||
Property and equipment, gross
|
$
|
15
|
|
Accumulated depreciation
|
(12
|
)
|
|
Property and equipment, net
|
$
|
3
|
|
|
|
||
Current maturities of debt
|
$
|
1
|
|
Long-term debt
|
1
|
|
|
Total finance lease liabilities
|
$
|
2
|
|
|
December 31, 2019
|
Weighted Average Remaining Lease Term
|
|
Operating leases
|
9 years
|
Finance leases
|
2 years
|
|
December 31, 2019
|
|
Weighted Average Discount Rate
|
|
|
Operating leases
|
5.3
|
%
|
Finance leases
|
1.7
|
%
|
|
Operating Leases
|
|
Finance Leases
|
||||
Year ending December 31,
|
|
|
|
||||
2020
|
$
|
69
|
|
|
$
|
1
|
|
2021
|
74
|
|
|
1
|
|
||
2022
|
71
|
|
|
—
|
|
||
2023
|
68
|
|
|
—
|
|
||
2024
|
59
|
|
|
—
|
|
||
Thereafter
|
303
|
|
|
—
|
|
||
Total future minimum lease payments
|
644
|
|
|
2
|
|
||
Less imputed interest
|
(142
|
)
|
|
—
|
|
||
Total
|
$
|
502
|
|
|
$
|
2
|
|
(12)
|
Related Party Transactions
|
(13)
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value(a) at
|
||||||||
Issuer / Borrower
|
|
Issued
|
|
Debt
|
|
Maturity Date
|
|
Interest Payable
|
|
Principal Amount at December 31, 2019
|
|
December 31, 2019
|
|
December 31, 2018
|
||||||
Pandora
(b) (c) |
|
December 2015
|
|
1.75% Convertible Senior Notes
|
|
December 1, 2020
|
|
semi-annually on June 1 and December 1
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
—
|
|
Sirius XM
(d) |
|
July 2017
|
|
3.875% Senior Notes
|
|
August 1, 2022
|
|
semi-annually on February 1 and August 1
|
|
1,000
|
|
|
995
|
|
|
994
|
|
|||
Sirius XM
(d) |
|
May 2013
|
|
4.625% Senior Notes
|
|
May 15, 2023
|
|
semi-annually on May 15 and November 15
|
|
500
|
|
|
498
|
|
|
497
|
|
|||
Pandora
(b) (e) |
|
June 2018
|
|
1.75% Convertible Senior Notes
|
|
December 1, 2023
|
|
semi-annually on June 1 and December 1
|
|
193
|
|
|
163
|
|
|
—
|
|
|||
Sirius XM
(d) (h) |
|
May 2014
|
|
6.00% Senior Notes
|
|
July 15, 2024
|
|
semi-annually on January 15 and July 15
|
|
—
|
|
|
—
|
|
|
1,490
|
|
|||
Sirius XM
(d) (i) |
|
July 2019
|
|
4.625% Senior Notes
|
|
July 15, 2024
|
|
semi-annually on January 15 and July 15
|
|
1,500
|
|
|
1,485
|
|
|
—
|
|
|||
Sirius XM
(d) |
|
March 2015
|
|
5.375% Senior Notes
|
|
April 15, 2025
|
|
semi-annually on April 15 and October 15
|
|
1,000
|
|
|
993
|
|
|
992
|
|
|||
Sirius XM
(d) |
|
May 2016
|
|
5.375% Senior Notes
|
|
July 15, 2026
|
|
semi-annually on January 15 and July 15
|
|
1,000
|
|
|
992
|
|
|
991
|
|
|||
Sirius XM
(d) |
|
July 2017
|
|
5.00% Senior Notes
|
|
August 1, 2027
|
|
semi-annually on February 1 and August 1
|
|
1,500
|
|
|
1,488
|
|
|
1,487
|
|
|||
Sirius XM
(d) (g) |
|
June 2019
|
|
5.500% Senior Notes
|
|
July 1, 2029
|
|
semi-annually on January 1 and July 1
|
|
1,250
|
|
|
1,236
|
|
|
—
|
|
|||
Sirius XM
(f) |
|
December 2012
|
|
Senior Secured Revolving Credit Facility (the "Credit Facility")
|
|
June 29, 2023
|
|
variable fee paid quarterly
|
|
—
|
|
|
—
|
|
|
439
|
|
|||
Sirius XM
|
|
Various
|
|
Finance leases
|
|
Various
|
|
n/a
|
|
n/a
|
|
|
2
|
|
|
5
|
|
|||
Total Debt
|
|
7,853
|
|
|
6,895
|
|
||||||||||||||
Less: total current maturities
|
|
2
|
|
|
3
|
|
||||||||||||||
Less: total deferred financing costs
|
|
9
|
|
|
7
|
|
||||||||||||||
Total long-term debt
|
|
$
|
7,842
|
|
|
$
|
6,885
|
|
(a)
|
The carrying value of the obligations is net of any remaining unamortized original issue discount.
|
(b)
|
Holdings has unconditionally guaranteed all of the payment obligations of Pandora under these notes.
|
(c)
|
We acquired $152 in principal amount of the 1.75% Convertible Senior Notes due 2020 as part of the Pandora Acquisition. On February 14, 2019, Pandora announced a tender offer to repurchase for cash any and all of its outstanding 1.75% Convertible Senior Notes due 2020 at a price equal to 100% of the aggregate principal amount thereof plus accrued and unpaid interest thereon to, but not including, the repurchase date. On March 18, 2019, we purchased $151 in aggregate principal amount of the 1.75% Convertible Senior Notes due 2020 that had been validly tendered and not validly withdrawn in the repurchase offer. We recorded a $1 Loss on extinguishment of debt in connection with this transaction. In addition, we unwound a capped call security acquired as part of the Pandora Acquisition in March 2019 for $3.
|
(d)
|
All material domestic subsidiaries, including Pandora and its subsidiaries, that guarantee the Credit Facility have guaranteed these notes.
|
(e)
|
We acquired $193 in principal amount of the 1.75% Convertible Senior Notes due 2023 as part of the Pandora Acquisition. We allocate the principal amount of the 1.75% Convertible Senior Notes due 2023 between the liability and equity components. The value assigned to the debt components of the 1.75% Convertible Senior Notes due 2023 is the estimated fair value as of the issuance date of similar debt without the conversion feature. The difference between the fair value of the debt and this estimated fair value represents the value which has been assigned to the equity component. The equity component is recorded to additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification. The excess of the principal amount of the Notes over the carrying amount of the liability component is recorded as a debt discount and is being amortized to interest expense using the effective interest method through the December 1, 2023 maturity date. The 1.75% Convertible Senior Notes due 2023 were not convertible into common stock and not redeemable as of December 31, 2019. As a result, we have classified the debt as Long-term within our consolidated balance sheets.
|
(f)
|
The $1,750 Credit Facility expires in June 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. Interest on borrowings is payable on a monthly basis and accrues at a rate based on LIBOR plus an applicable rate. 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 December 31, 2019. All of Sirius XM's outstanding borrowings under the Credit Facility are classified as Long-term debt within our consolidated balance sheets due to the long-term maturity of this debt. Additionally, the amount available for future borrowing under the Credit Facility is reduced by letters of credit issued for the benefit of Pandora, which were $1 as of December 31, 2019.
|
(g)
|
On June 7, 2019, Sirius XM issued $1,250 aggregate principal amount of the 5.500% Senior Notes due 2029 with a net original issuance discount and deferred financing costs in the aggregate of $16.
|
(h)
|
On July 18, 2019, Sirius XM redeemed $1,500 in outstanding principal amount of the 6.00% Senior Notes due 2024 for an aggregate purchase price, including premium and interest, of $1,546. We recognized $56 to Loss on extinguishment of debt, consisting primarily of unamortized discount, deferred financing fees and redemption premium, as a result of this redemption.
|
(i)
|
On July 2, 2019, Sirius XM issued $1,500 aggregate principal amount of the 4.625% Senior Notes due 2024 with a net original issuance discount and deferred financing costs in the aggregate of $19.
|
(14)
|
Stockholders’ Equity
|
Declaration Date
|
|
Dividend Per Share
|
|
Record Date
|
|
Total Amount
|
|
Payment Date
|
||||
January 29, 2019
|
|
$
|
0.0121
|
|
|
February 11, 2019
|
|
$
|
57
|
|
|
February 28, 2019
|
April 23, 2019
|
|
$
|
0.0121
|
|
|
May 10, 2019
|
|
$
|
56
|
|
|
May 31, 2019
|
July 16, 2019
|
|
$
|
0.0121
|
|
|
August 9, 2019
|
|
$
|
54
|
|
|
August 30, 2019
|
October 10, 2019
|
|
$
|
0.01331
|
|
|
November 8, 2019
|
|
$
|
59
|
|
|
November 29, 2019
|
|
|
December 31, 2019
|
|
December 31, 2018
|
|
December 31, 2017
|
|||||||||||||||
Share Repurchase Type
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|||||||||
Open Market Repurchases
|
|
364
|
|
|
$
|
2,159
|
|
|
209
|
|
|
$
|
1,297
|
|
|
271
|
|
|
$
|
1,403
|
|
(15)
|
Benefit Plans
|
|
For the Years Ended December 31,
|
||||
|
2019
|
|
2018
|
|
2017
|
Risk-free interest rate
|
2.4%
|
|
2.7%
|
|
1.8%
|
Expected life of options — years
|
3.41
|
|
4.38
|
|
4.59
|
Expected stock price volatility
|
26%
|
|
23%
|
|
24%
|
Expected dividend yield
|
0.8%
|
|
0.7%
|
|
0.7%
|
|
Options
|
|
Weighted-
Average Exercise Price Per Share |
|
Weighted-
Average Remaining Contractual Term (Years) |
|
Aggregate
Intrinsic Value |
|||||
Outstanding at the beginning of January 1, 2017
|
333
|
|
|
$
|
3.50
|
|
|
|
|
|
||
Granted
|
26
|
|
|
$
|
5.49
|
|
|
|
|
|
||
Exercised
|
(73
|
)
|
|
$
|
3.21
|
|
|
|
|
|
||
Forfeited, cancelled or expired
|
(6
|
)
|
|
$
|
4.07
|
|
|
|
|
|
||
Outstanding as of December 31, 2017
|
280
|
|
|
$
|
3.76
|
|
|
|
|
|
||
Granted
|
32
|
|
|
$
|
6.59
|
|
|
|
|
|
||
Exercised
|
(65
|
)
|
|
$
|
3.35
|
|
|
|
|
|
||
Forfeited, cancelled or expired
|
(4
|
)
|
|
$
|
4.76
|
|
|
|
|
|
||
Outstanding as of December 31, 2018
|
243
|
|
|
$
|
4.22
|
|
|
|
|
|
||
Options granted in connection with Pandora Acquisition
|
7
|
|
|
$
|
3.85
|
|
|
|
|
|
||
Granted
|
15
|
|
|
$
|
6.10
|
|
|
|
|
|
||
Exercised
|
(53
|
)
|
|
$
|
3.65
|
|
|
|
|
|
||
Forfeited, cancelled or expired
|
(4
|
)
|
|
$
|
5.58
|
|
|
|
|
|
||
Outstanding as of December 31, 2019
|
208
|
|
|
$
|
4.46
|
|
|
5.58
|
|
$
|
560
|
|
Exercisable as of December 31, 2019
|
148
|
|
|
$
|
3.96
|
|
|
4.77
|
|
$
|
472
|
|
|
Shares
|
|
Grant Date
Fair Value Per Share |
|||
Nonvested at the beginning of January 1, 2017
|
30
|
|
|
$
|
4.03
|
|
Granted
|
12
|
|
|
$
|
5.35
|
|
Vested
|
(9
|
)
|
|
$
|
3.92
|
|
Forfeited
|
(2
|
)
|
|
$
|
4.42
|
|
Nonvested as of December 31, 2017
|
31
|
|
|
$
|
4.54
|
|
Granted
|
18
|
|
|
$
|
6.40
|
|
Vested
|
(13
|
)
|
|
$
|
4.43
|
|
Forfeited
|
(1
|
)
|
|
$
|
4.99
|
|
Nonvested as of December 31, 2018
|
35
|
|
|
$
|
5.50
|
|
Units granted in connection with Pandora Acquisition
|
48
|
|
|
$
|
5.83
|
|
Granted
|
38
|
|
|
$
|
6.01
|
|
Vested
|
(38
|
)
|
|
$
|
5.53
|
|
Forfeited
|
(8
|
)
|
|
$
|
5.85
|
|
Nonvested as of December 31, 2019
|
75
|
|
|
$
|
5.95
|
|
(16)
|
Commitments and Contingencies
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
Total
|
||||||||||||||
Debt obligations
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
1,000
|
|
|
$
|
693
|
|
|
$
|
1,500
|
|
|
$
|
4,750
|
|
|
$
|
7,946
|
|
Cash interest payments
|
396
|
|
|
390
|
|
|
390
|
|
|
339
|
|
|
321
|
|
|
703
|
|
|
2,539
|
|
|||||||
Satellite and transmission
|
87
|
|
|
4
|
|
|
2
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
96
|
|
|||||||
Programming and content
|
333
|
|
|
228
|
|
|
144
|
|
|
84
|
|
|
42
|
|
|
97
|
|
|
928
|
|
|||||||
Sales and marketing
|
56
|
|
|
28
|
|
|
21
|
|
|
9
|
|
|
3
|
|
|
8
|
|
|
125
|
|
|||||||
Satellite incentive payments
|
8
|
|
|
9
|
|
|
9
|
|
|
9
|
|
|
9
|
|
|
46
|
|
|
90
|
|
|||||||
Operating lease obligations
|
72
|
|
|
72
|
|
|
64
|
|
|
56
|
|
|
42
|
|
|
173
|
|
|
479
|
|
|||||||
Advertising sales commitments
|
20
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
35
|
|
|||||||
Royalties, minimum guarantees and other
|
512
|
|
|
233
|
|
|
162
|
|
|
17
|
|
|
7
|
|
|
—
|
|
|
931
|
|
|||||||
Total (1)
|
$
|
1,486
|
|
|
$
|
980
|
|
|
$
|
1,792
|
|
|
$
|
1,208
|
|
|
$
|
1,925
|
|
|
$
|
5,778
|
|
|
$
|
13,169
|
|
(1)
|
The table does not include our reserve for uncertain tax positions, which at December 31, 2019 totaled $12.
|
(17)
|
Income Taxes
|
|
For the Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Current taxes:
|
|
|
|
|
|
||||||
Federal
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
(24
|
)
|
|
12
|
|
|
(32
|
)
|
|||
Total current taxes
|
(24
|
)
|
|
12
|
|
|
(32
|
)
|
|||
Deferred taxes:
|
|
|
|
|
|
||||||
Federal
|
(229
|
)
|
|
(259
|
)
|
|
(564
|
)
|
|||
State
|
(30
|
)
|
|
2
|
|
|
(20
|
)
|
|||
Total deferred taxes
|
(259
|
)
|
|
(257
|
)
|
|
(584
|
)
|
|||
Total income tax expense
|
$
|
(283
|
)
|
|
$
|
(245
|
)
|
|
$
|
(616
|
)
|
|
For the Years Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
2017
|
|||
Federal tax expense, at statutory rate
|
21.0
|
%
|
|
21.0
|
%
|
|
35.0
|
%
|
State income tax expense, net of federal benefit
|
3.9
|
%
|
|
3.6
|
%
|
|
2.8
|
%
|
Change in valuation allowance
|
0.3
|
%
|
|
1.0
|
%
|
|
(0.1
|
)%
|
Tax credits
|
(2.7
|
)%
|
|
(6.8
|
)%
|
|
(1.7
|
)%
|
Share-based compensation
|
(2.4
|
)%
|
|
(3.1
|
)%
|
|
(2.9
|
)%
|
Impact of nondeductible officers' compensation
|
1.6
|
%
|
|
0.7
|
%
|
|
0.3
|
%
|
Federal tax reform - deferred rate change
|
—
|
%
|
|
—
|
%
|
|
14.6
|
%
|
Other, net
|
1.9
|
%
|
|
0.8
|
%
|
|
0.7
|
%
|
Effective tax rate
|
23.6
|
%
|
|
17.2
|
%
|
|
48.7
|
%
|
|
For the Years Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Deferred tax assets:
|
|
|
|
||||
Net operating loss carryforwards and tax credits
|
$
|
1,010
|
|
|
$
|
952
|
|
Deferred revenue
|
81
|
|
|
89
|
|
||
Accrued bonus
|
34
|
|
|
27
|
|
||
Expensed costs capitalized for tax
|
14
|
|
|
16
|
|
||
Investments
|
22
|
|
|
12
|
|
||
Stock based compensation
|
72
|
|
|
55
|
|
||
Other
|
10
|
|
|
6
|
|
||
Total deferred tax assets
|
1,243
|
|
|
1,157
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Depreciation of property and equipment
|
(228
|
)
|
|
(230
|
)
|
||
FCC license
|
(519
|
)
|
|
(515
|
)
|
||
Other intangible assets
|
(340
|
)
|
|
(102
|
)
|
||
Other
|
(3
|
)
|
|
2
|
|
||
Total deferred tax liabilities
|
(1,090
|
)
|
|
(845
|
)
|
||
Net deferred tax assets before valuation allowance
|
153
|
|
|
312
|
|
||
Valuation allowance
|
(70
|
)
|
|
(66
|
)
|
||
Total net deferred tax asset
|
$
|
83
|
|
|
$
|
246
|
|
|
2019
|
|
2018
|
||||
Balance, beginning of year
|
$
|
387
|
|
|
$
|
334
|
|
Increases in tax positions for prior years
|
—
|
|
|
65
|
|
||
Increases in tax positions for current years
|
31
|
|
|
15
|
|
||
Decreases in tax positions for prior years
|
(12
|
)
|
|
(27
|
)
|
||
Balance, end of year
|
$
|
406
|
|
|
$
|
387
|
|
(18)
|
Segments and Geographic Information
|
|
For the Year Ended December 31, 2019
|
||||||||||
|
Sirius XM
|
|
Pandora
|
|
Total
|
||||||
Revenue
|
|
|
|
|
|
||||||
Subscriber revenue
|
$
|
5,644
|
|
|
$
|
476
|
|
|
$
|
6,120
|
|
Advertising revenue
|
205
|
|
|
1,131
|
|
|
1,336
|
|
|||
Equipment revenue
|
173
|
|
|
—
|
|
|
173
|
|
|||
Other revenue
|
165
|
|
|
—
|
|
|
165
|
|
|||
Total revenue
|
6,187
|
|
|
1,607
|
|
|
7,794
|
|
|||
Cost of services (a)
|
(2,378
|
)
|
|
(1,005
|
)
|
|
(3,383
|
)
|
|||
Segment gross profit
|
$
|
3,809
|
|
|
$
|
602
|
|
|
$
|
4,411
|
|
|
For the Year Ended December 31, 2019
|
||
Segment Gross Profit
|
$
|
4,411
|
|
Subscriber acquisition costs
|
(427
|
)
|
|
Sales and marketing (a)
|
(859
|
)
|
|
Engineering, design and development (a)
|
(231
|
)
|
|
General and administrative (a)
|
(466
|
)
|
|
Depreciation and amortization
|
(468
|
)
|
|
Share-based payment expense
|
(229
|
)
|
|
Acquisition and other related costs
|
(84
|
)
|
|
Total other (expense) income
|
(450
|
)
|
|
Consolidated income before income taxes
|
$
|
1,197
|
|
(a)
|
Share-based payment expense of $44 related to cost of services, $78 related to sales and marketing, $49 related to engineering, design and development and $58 related to general and administrative has been excluded.
|
(19)
|
Subsequent Events
|
(20)
|
Quarterly Financial Data--Unaudited
|
|
For the Three Months Ended
|
||||||||||||||
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
2019
|
|
|
|
|
|
|
|
||||||||
Total revenue
|
$
|
1,744
|
|
|
$
|
1,977
|
|
|
$
|
2,011
|
|
|
$
|
2,062
|
|
Cost of services
|
$
|
(748
|
)
|
|
$
|
(882
|
)
|
|
$
|
(881
|
)
|
|
$
|
(916
|
)
|
Income from operations
|
$
|
333
|
|
|
$
|
439
|
|
|
$
|
476
|
|
|
$
|
399
|
|
Net income
|
$
|
162
|
|
|
$
|
263
|
|
|
$
|
246
|
|
|
$
|
243
|
|
Net income per common share--basic (1)
|
$
|
0.04
|
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.05
|
|
Net income per common share--diluted (1)
|
$
|
0.03
|
|
|
$
|
0.06
|
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
2018
|
|
|
|
|
|
|
|
||||||||
Total revenue
|
$
|
1,375
|
|
|
$
|
1,432
|
|
|
$
|
1,468
|
|
|
$
|
1,496
|
|
Cost of services
|
$
|
(535
|
)
|
|
$
|
(637
|
)
|
|
$
|
(565
|
)
|
|
$
|
(572
|
)
|
Income from operations
|
$
|
424
|
|
|
$
|
362
|
|
|
$
|
482
|
|
|
$
|
459
|
|
Net income
|
$
|
290
|
|
|
$
|
292
|
|
|
$
|
343
|
|
|
$
|
251
|
|
Net income per common share--basic (1)
|
$
|
0.06
|
|
|
$
|
0.07
|
|
|
$
|
0.08
|
|
|
$
|
0.06
|
|
Net income per common share--diluted (1)
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.07
|
|
|
$
|
0.06
|
|
(1)
|
Basic and Diluted earnings per share are computed quarterly and the sum of the quarterly calculation may not necessarily agree to the net income per share for the year due to rounding.
|
(in millions)
|
|
|
|
|
|
|
|
||||||
Description
|
Balance January 1,
|
|
Charged to
Expenses |
|
Write-offs/
Payments/ Other |
|
Balance December 31,
|
||||||
2019
|
|
|
|
|
|
|
|
||||||
Allowance for doubtful accounts
|
$
|
7
|
|
|
53
|
|
|
(46
|
)
|
|
$
|
14
|
|
Deferred tax assets—valuation allowance
|
$
|
66
|
|
|
4
|
|
|
—
|
|
|
$
|
70
|
|
2018
|
|
|
|
|
|
|
|
||||||
Allowance for doubtful accounts
|
$
|
10
|
|
|
51
|
|
|
(54
|
)
|
|
$
|
7
|
|
Deferred tax assets—valuation allowance
|
$
|
53
|
|
|
13
|
|
|
—
|
|
|
$
|
66
|
|
2017
|
|
|
|
|
|
|
|
||||||
Allowance for doubtful accounts
|
$
|
9
|
|
|
56
|
|
|
(55
|
)
|
|
$
|
10
|
|
Deferred tax assets—valuation allowance
|
$
|
48
|
|
|
4
|
|
|
1
|
|
|
$
|
53
|
|
1.
|
I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2019 of Sirius XM Holdings Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
By:
|
|
/s/ JAMES E. MEYER
|
|
|
James E. Meyer
Chief Executive Officer
(Principal Executive Officer)
|
1.
|
I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2019 of Sirius XM Holdings Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
By:
|
|
/s/ DAVID J. FREAR
|
|
|
David J. Frear
Senior Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
By:
|
|
/s/ JAMES E. MEYER
|
|
|
James E. Meyer
Chief Executive Officer
(Principal Executive Officer)
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
By:
|
|
/s/ DAVID J. FREAR
|
|
|
David J. Frear
Senior Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
|