Company Quick10K Filing
Sirius XM
Price6.21 EPS0
Shares4,641 P/E35
MCap28,821 P/FCF19
Net Debt7,826 EBIT1,351
TEV36,647 TEV/EBIT27
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-04-28
10-K 2019-12-31 Filed 2020-02-04
10-Q 2019-09-30 Filed 2019-10-31
10-Q 2019-06-30 Filed 2019-07-30
10-Q 2019-03-31 Filed 2019-04-24
10-K 2018-12-31 Filed 2019-01-30
10-Q 2018-09-30 Filed 2018-10-24
10-Q 2018-06-30 Filed 2018-07-25
10-Q 2018-03-31 Filed 2018-04-25
10-K 2017-12-31 Filed 2018-01-31
10-Q 2017-09-30 Filed 2017-10-25
10-Q 2017-06-30 Filed 2017-07-27
10-Q 2017-03-31 Filed 2017-04-27
10-K 2016-12-31 Filed 2017-02-02
10-Q 2016-09-30 Filed 2016-10-27
10-Q 2016-06-30 Filed 2016-07-26
10-Q 2016-03-31 Filed 2016-04-28
10-K 2015-12-31 Filed 2016-02-02
10-Q 2015-09-30 Filed 2015-10-22
10-Q 2015-06-30 Filed 2015-07-28
10-Q 2015-03-31 Filed 2015-04-28
10-K 2014-12-31 Filed 2015-02-05
10-Q 2014-09-30 Filed 2014-10-28
10-Q 2014-06-30 Filed 2014-07-29
10-Q 2014-03-31 Filed 2014-04-25
10-K 2013-12-31 Filed 2014-02-04
10-Q 2013-09-30 Filed 2013-10-24
10-Q 2013-06-30 Filed 2013-07-26
10-Q 2013-03-31 Filed 2013-04-30
10-K 2012-12-31 Filed 2013-02-06
10-Q 2012-09-30 Filed 2012-11-01
10-Q 2012-06-30 Filed 2012-08-07
10-Q 2012-03-31 Filed 2012-05-01
10-K 2011-12-31 Filed 2012-02-09
10-Q 2011-09-30 Filed 2011-11-03
10-Q 2011-06-30 Filed 2011-08-04
10-Q 2011-03-31 Filed 2011-05-03
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-07
10-K 2009-12-31 Filed 2010-02-25
8-K 2020-06-11
8-K 2020-06-08
8-K 2020-06-08
8-K 2020-06-05
8-K 2020-04-28
8-K 2020-02-04
8-K 2020-01-07
8-K 2019-11-22
8-K 2019-11-21
8-K 2019-10-31
8-K 2019-10-28
8-K 2019-10-15
8-K 2019-07-30
8-K 2019-07-18
8-K 2019-07-02
8-K 2019-06-18
8-K 2019-06-18
8-K 2019-06-07
8-K 2019-06-05
8-K 2019-06-05
8-K 2019-04-24
8-K 2019-03-14
8-K 2019-03-05
8-K 2019-02-14
8-K 2019-02-01
8-K 2019-01-31
8-K 2019-01-31
8-K 2019-01-30
8-K 2019-01-30
8-K 2019-01-25
8-K 2019-01-18
8-K 2019-01-08
8-K 2018-12-21
8-K 2018-11-19
8-K 2018-10-24
8-K 2018-09-24
8-K 2018-09-23
8-K 2018-08-16
8-K 2018-07-25
8-K 2018-07-18
8-K 2018-06-29
8-K 2018-06-11
8-K 2018-06-05
8-K 2018-04-25
8-K 2018-04-17
8-K 2018-01-31
8-K 2018-01-23
8-K 2018-01-11
8-K 2018-01-10

SIRI 10Q Quarterly Report

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risks
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 exhibit311-20200331.htm
EX-31.2 exhibit312-20200331.htm
EX-32.1 exhibit321-20200331.htm
EX-32.2 exhibit322-20200331.htm

Sirius XM Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
1411841-12012201420172020
Assets, Equity
2.11.71.20.80.3-0.12012201420172020
Rev, G Profit, Net Income
0.60.30.0-0.2-0.5-0.82012201420172020
Ops, Inv, Fin

Document
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The terms of the letters of credit primarily extend beyond one year.Cash and cash equivalents : March 31, 2020: $40, December 31, 2019: $106, March 31, 2019: $62, December 31, 2018: $54 Restricted cash included in Other long-term assets: March 31, 2020: $12, December 31, 2019: $14, March 31, 2019: $11, December 31, 2018: $11Total cash, cash equivalents and restricted cash at end of period: March 31, 2020: $52, December 31, 2019: $120, March 31, 2019: $73, December 31, 2018: $65 0000908937 2020-01-01 2020-03-31 0000908937 us-gaap:ConstructionInProgressMember 2020-01-01 2020-03-31 0000908937 2020-04-24 0000908937 siri:EquipmentProductsAndServicesMember 2020-01-01 2020-03-31 0000908937 2019-01-01 2019-03-31 0000908937 siri:EquipmentProductsAndServicesMember 2019-01-01 2019-03-31 0000908937 us-gaap:AdvertisingMember 2019-01-01 2019-03-31 0000908937 siri:CustomerServiceAndBillingMember 2020-01-01 2020-03-31 0000908937 siri:OtherRevenueMember 2020-01-01 2020-03-31 0000908937 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO ________
COMMISSION FILE NUMBER 001-34295
 
SIRIUS XM HOLDINGS INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
38-3916511
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification No.)
1221 Avenue of the Americas, 35th Floor, New York, NY
(Address of Principal Executive Offices)
10020
(Zip Code)
Registrant’s telephone number, including area code: (212584-5100
Former name, former address and former fiscal year, if changed since last report: Not Applicable
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of exchange on which registered
Common stock, $0.001 par value
 
SIRI
 
NASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☑        No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☑        No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer
 
Accelerated filer
 
Non-accelerated filer
 
 
 
 
 
 
 
Smaller reporting company
 
Emerging growth company
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No ☑
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
(Class)
 
(Outstanding as of April 24, 2020)
Common stock, $0.001 par value
 
4,379,119,828
shares
 



SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q

Item No.
 
Description
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
 
For the Three Months Ended March 31,
(in millions, except per share data)
2020
 
2019
Revenue:
 

 
 

Subscriber revenue
$
1,585

 
$
1,458

Advertising revenue
285

 
209

Equipment revenue
41

 
41

Other revenue
41

 
36

Total revenue
1,952

 
1,744

Operating expenses:
 

 
 

Cost of services:
 

 
 

Revenue share and royalties
570

 
492

Programming and content
118

 
106

Customer service and billing
118

 
113

Transmission
40

 
31

Cost of equipment
4

 
6

Subscriber acquisition costs
99

 
108

Sales and marketing
225

 
183

Engineering, design and development
71

 
54

General and administrative
107

 
135

Depreciation and amortization
132

 
107

Acquisition and other related costs

 
76

Total operating expenses
1,484

 
1,411

Income from operations
468

 
333

Other (expense) income:
 

 
 

Interest expense
(99
)
 
(90
)
Loss on extinguishment of debt

 
(1
)
Other (expense) income
4

 
1

Total other (expense) income
(95
)
 
(90
)
Income before income taxes
373

 
243

Income tax expense
(80
)
 
(81
)
Net income
$
293

 
$
162

Foreign currency translation adjustment, net of tax
(25
)
 
7

Total comprehensive income
$
268

 
$
169

Net income per common share:
 

 
 

Basic
$
0.07

 
$
0.04

Diluted
$
0.07

 
$
0.03

Weighted average common shares outstanding:
 

 
 

Basic
4,405

 
4,571

Diluted
4,515

 
4,678

 
See accompanying notes to the unaudited consolidated financial statements.


2


SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
March 31, 2020

December 31, 2019
ASSETS
(unaudited)



Current assets:
 

 
 

Cash and cash equivalents
$
40

 
$
106

Receivables, net
604

 
670

Inventory, net
12

 
11

Related party current assets
15

 
22

Prepaid expenses and other current assets
212

 
194

Total current assets
883

 
1,003

Property and equipment, net
1,609

 
1,626

Intangible assets, net
3,429

 
3,467

Goodwill
3,843

 
3,843

Related party long-term assets
495

 
452

Deferred tax assets
89

 
153

Operating lease right-of-use assets
452


466

Other long-term assets
135

 
139

Total assets
$
10,935

 
$
11,149

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 

 
 

Current liabilities:
 

 
 

Accounts payable and accrued expenses
$
1,029

 
$
1,151

Accrued interest
98

 
160

Current portion of deferred revenue
1,923

 
1,930

Current maturities of debt
2

 
2

Operating lease current liabilities
47


46

Related party current liabilities
3

 
4

Total current liabilities
3,102

 
3,293

Long-term deferred revenue
126

 
130

Long-term debt
7,847

 
7,842

Deferred tax liabilities
70

 
70

Operating lease liabilities
444


456

Other long-term liabilities
93

 
94

Total liabilities
11,682

 
11,885

Commitments and contingencies (Note 15)


 


Stockholders’ equity (deficit):
 

 
 

Common stock, par value $0.001 per share; 9,000 shares authorized; 4,379 and 4,412 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively
4

 
4

Accumulated other comprehensive income (loss), net of tax
(17
)
 
8

Additional paid-in capital
116

 
395

Treasury stock, at cost; 0 and 0 shares of common stock at March 31, 2020 and December 31, 2019, respectively

 

Accumulated deficit
(850
)
 
(1,143
)
Total stockholders’ equity (deficit)
(747
)
 
(736
)
Total liabilities and stockholders’ equity (deficit)
$
10,935

 
$
11,149


See accompanying notes to the unaudited consolidated financial statements.

3


SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
For the Three Months Ended March 31, 2020
 
 
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 December 31, 2019
 
4,412

 
$
4

 
$
8

 
$
395

 

 
$

 
$
(1,143
)
 
$
(736
)
Comprehensive income, net of tax
 

 

 
(25
)
 

 

 

 
293

 
268

Share-based payment expense
 

 

 

 
59

 

 

 

 
59

Exercise of stock options and vesting of restricted stock units
 
8

 

 

 

 

 

 

 

Withholding taxes on net share settlement of stock-based compensation
 

 

 

 
(36
)
 

 

 

 
(36
)
Cash dividends paid on common stock, $0.01331 per share
 

 

 

 
(59
)
 

 

 

 
(59
)
Common stock repurchased
 

 

 

 

 
41

 
(243
)
 

 
(243
)
Common stock retired
 
(41
)
 

 

 
(243
)
 
(41
)
 
243

 

 

Balance at March 31, 2020
 
4,379

 
$
4

 
$
(17
)
 
$
116

 

 
$

 
$
(850
)
 
$
(747
)

See accompanying notes to the unaudited consolidated financial statements.


4


SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
For the Three Months Ended March 31, 2019
 
 
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 December 31, 2018
 
4,346

 
$
4

 
$
(6
)
 
$
242

 

 
$

 
$
(2,057
)
 
$
(1,817
)
Comprehensive income, net of tax
 

 

 
7

 

 

 

 
162

 
169

Share-based payment expense
 

 

 

 
74

 

 

 

 
74

Exercise of stock options and vesting of restricted stock units
 
8

 

 

 

 

 

 

 

Withholding taxes on net share settlement of stock-based compensation
 

 

 

 
(34
)
 

 

 

 
(34
)
Cash dividends paid on common stock, $0.0121 per share
 

 

 

 
(57
)
 

 

 

 
(57
)
Issuance of common stock as part of Pandora Acquisition
 
392

 
1

 

 
2,354

 

 

 

 
2,355

Equity component of convertible note
 

 

 

 
68

 

 

 

 
68

Common stock repurchased
 

 

 

 

 
101

 
(604
)
 

 
(604
)
Common stock retired
 
(96
)
 

 

 
(576
)
 
(96
)
 
576

 

 

Balance at March 31, 2019
 
4,650

 
$
5

 
$
1

 
$
2,071

 
5

 
$
(28
)
 
$
(1,895
)
 
$
154


See accompanying notes to the unaudited consolidated financial statements.


5


SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
For the Three Months Ended March 31,
(in millions)
2020
 
2019
Cash flows from operating activities:
 
 
 
Net income
$
293

 
$
162

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation and amortization
132

 
107

Non-cash interest expense, net of amortization of premium
5

 
4

Provision for doubtful accounts
19

 
14

Amortization of deferred income related to equity method investment
(1
)
 
(1
)
Loss on extinguishment of debt

 
1

Loss on unconsolidated entity investments, net
2

 
4

Loss (gain) on other investments
5

 
(2
)
Share-based payment expense
55

 
70

Deferred income taxes
72

 
77

Changes in operating assets and liabilities:
 

 
 

Receivables
47

 
(13
)
Inventory
(1
)
 
2

Related party, net
6

 
(1
)
Prepaid expenses and other current assets
(18
)
 
(31
)
Other long-term assets
2

 
3

Operating lease right-of-use assets
14

 
19

Accounts payable and accrued expenses
(131
)
 
15

Accrued interest
(62
)
 
(42
)
Deferred revenue
(11
)
 
20

Operating lease liabilities
(11
)
 
(17
)
Other long-term liabilities
(1
)
 
5

Net cash provided by operating activities
416

 
396

Cash flows from investing activities:
 

 
 

Additions to property and equipment
(62
)
 
(90
)
Purchases of other investments
(6
)
 
(6
)
Acquisition of business, net of cash acquired

 
313

Sale of short-term investments

 
72

Investments in related parties and other equity investees
(80
)

(5
)
Repayment from related party
3

 

Net cash (used in) provided by investing activities
(145
)
 
284

Cash flows from financing activities:
 

 
 

Taxes paid from net share settlements for stock-based compensation
(35
)
 
(33
)
Revolving credit facility, net of deferred financing costs

 
143

Proceeds from sale of capped call security

 
3

Principal payments of long-term borrowings
(2
)
 
(152
)
Common stock repurchased and retired
(243
)
 
(576
)
Dividends paid
(59
)

(57
)
Net cash used in financing activities
(339
)
 
(672
)
Net (decrease) increase in cash, cash equivalents and restricted cash
(68
)
 
8

Cash, cash equivalents and restricted cash at beginning of period
120

 
65

Cash, cash equivalents and restricted cash at end of period (1)
$
52

 
$
73


See accompanying notes to the unaudited consolidated financial statements.

6


SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(UNAUDITED)

 
For the Three Months Ended March 31,
(in millions)
2020
 
2019
Supplemental Disclosure of Cash and Non-Cash Flow Information
 
 
 
Cash paid during the period for:
 
 
 
Interest, net of amounts capitalized
$
155

 
$
128

Income taxes paid
$
5

 
$
1

Non-cash investing and financing activities:
 
 
 
Treasury stock not yet settled
$

 
$
(28
)
Fair value of shares issued related to acquisition of a business
$

 
$
2,355

Accumulated other comprehensive income (loss), net of tax
$
(25
)
 
$
7



(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)
March 31, 2020
 
December 31, 2019
 
March 31, 2019
 
December 31, 2018
Cash and cash equivalents
$
40

 
$
106

 
$
62

 
$
54

Restricted cash included in Other long-term assets
12

 
14

 
11

 
11

Total cash, cash equivalents and restricted cash at end of period
$
52

 
$
120

 
$
73

 
$
65



See accompanying notes to the unaudited consolidated financial statements.


7

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)



(1)
Business & Basis of Presentation
This Quarterly Report on Form 10-Q presents information for Sirius XM Holdings Inc. and its subsidiaries (collectively “Holdings”).  The terms “Holdings,” “we,” “us,” “our,” and “our company” as used herein, and unless otherwise stated or indicated by context, refer to Sirius XM Holdings Inc. and its subsidiaries. “Sirius XM” refers to our wholly owned subsidiary Sirius XM Radio Inc. and its subsidiaries. “Pandora” refers to Sirius XM's wholly owned subsidiary Pandora Media, LLC (the successor to Pandora Media, Inc.) and its subsidiaries. Holdings has no operations independent of Sirius XM and Pandora.
Business
We operate two complementary audio entertainment businesses - our Sirius XM business and our Pandora business. 

Sirius XM
Our Sirius XM business features music, sports, entertainment, comedy, talk, news, traffic and weather channels, as well as infotainment services, in the United States on a subscription fee basis. The Sirius XM service is distributed through our two proprietary satellite radio systems and through the internet via applications for mobile devices, home devices and other consumer electronic equipment. Satellite radios are primarily distributed through automakers, retailers and our website. Our Sirius XM service is also available through our user interface, which we call “360L,” that combines our satellite and streaming services into a single, cohesive in-vehicle entertainment experience. The primary source of revenue from our Sirius XM business is generated from subscription fees, with most of our customers subscribing to monthly, quarterly, semi-annual or annual plans.  We also derive revenue from advertising on select non-music channels, direct sales of our satellite radios and accessories, and other ancillary services.  As of March 31, 2020, our Sirius XM business had approximately 34.8 million subscribers.
In addition to our audio entertainment businesses, we provide connected vehicle services to several automakers and directly to consumers through aftermarket devices. These services are designed to enhance the safety, security and driving experience of consumers. We also offer a suite of data services that includes graphical weather, fuel prices, sports schedules and scores and movie listings, a traffic information service that includes information as to road closings, traffic flow and incident data to consumers with compatible in-vehicle navigation systems, and real-time weather services in vehicles, boats and planes.
Sirius XM also holds a 70% equity interest and 33% voting interest in Sirius XM Canada Holdings Inc. (“Sirius XM Canada”). Sirius XM Canada's subscribers are not included in our subscriber count or subscriber-based operating metrics.

Pandora
Our Pandora business operates a music, comedy and podcast streaming discovery platform, offering a personalized experience for each listener wherever and whenever they want to listen, whether through mobile devices, car speakers or connected devices.  Pandora enables listeners to create personalized stations and playlists, discover new content, hear artist- and expert-curated playlists, podcasts and select Sirius XM content as well as search and play songs and albums on-demand.  Pandora is available as an ad-supported radio service, a radio subscription service, called Pandora Plus, and an on-demand subscription service, called Pandora Premium.  As of March 31, 2020, Pandora had approximately 6.3 million subscribers. The majority of revenue from our Pandora business is generated from advertising on our Pandora ad-supported radio service. In 2018, Pandora entered in to an agreement with SoundCloud Holdings, LLC ("SoundCloud") to be its exclusive US ad sales representative. Through this arrangement Pandora is able to offer advertisers the ability to execute campaigns in the US across the Pandora and SoundCloud listening platforms. In addition, through AdsWizz Inc., Pandora provides a comprehensive digital audio and programmatic advertising technology platform, which connects audio publishers and advertisers with a variety of ad insertion, campaign trafficking, yield optimization, programmatic buying, marketplace and podcast monetization solutions.
On February 10, 2020, Sirius XM invested $75 in SoundCloud. SoundCloud is the world’s largest open audio platform, with a connected community of creators, listeners, and curators. SoundCloud’s platform enables its users to upload, promote, share and create audio entertainment. The minority investment complements the existing ad sales relationship between SoundCloud and Pandora. Refer to Note 11 for more information on this investment. Together, Sirius XM, Pandora and SoundCloud reach more than 140 million listeners, creating North America's largest digital audio advertising marketplace.

8

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)

Impact of the coronavirus (“COVID-19”) pandemic
The extent to which the COVID-19 pandemic and the related economic impact may affect our financial condition or results of operations is uncertain. The extent of the impact on our operational and financial performance will depend on various factors, including the duration and spread of the outbreak and its impact on vehicle sales, advertising and consumer spending. To date, the pandemic has not increased our costs of or access to capital under our revolving credit facility, and we do not believe it is reasonably likely to in the future. In addition, we do not believe that the pandemic will affect our ongoing ability to meet the covenants in our debt instruments, including under our revolving credit facility. Due to the nature of our subscription business, the effect of the COVID-19 pandemic may not be fully reflected in our results of operations until future periods.
Liberty Media
As of March 31, 2020, Liberty Media Corporation (“Liberty Media”) beneficially owned, directly and indirectly, approximately 72% of the outstanding shares of our common stock.  As a result, we are a “controlled company” for the purposes of the NASDAQ corporate governance requirements.
Basis of Presentation
The accompanying unaudited consolidated financial statements of Holdings have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All significant intercompany transactions have been eliminated in consolidation. Certain numbers in our prior period consolidated financial statements and footnotes have been reclassified or consolidated to conform to our current period presentation.
In the opinion of our management, all normal recurring adjustments necessary for a fair presentation of our unaudited consolidated financial statements as of March 31, 2020 and for the three months ended March 31, 2020 and 2019 have been made.
Interim results are not necessarily indicative of the results that may be expected for a full year. This Quarterly Report on Form 10-Q should be read together with our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on February 4, 2020.
Public companies are required to disclose certain information about their reportable operating segments.  Operating segments are defined as significant components of an enterprise for which separate financial information is available and is evaluated on a regular basis by the chief operating decision maker in deciding how to allocate resources to an individual segment and in assessing performance of the segment. We have determined that we have two reportable segments as our chief operating decision maker, our Chief Executive Officer, assesses performance and allocates resources based on the financial results of these segments. Refer to Note 17 for information related to our segments.
We have evaluated events subsequent to the balance sheet date and prior to the filing of this Quarterly Report on Form 10-Q for the three months ended March 31, 2020 and have determined that no events have occurred that would require adjustment to our unaudited consolidated financial statements.  For a discussion of subsequent events that do not require adjustment to our unaudited consolidated financial statements refer to Note 18.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes.  Estimates, by their nature, are based on judgment and available information.  Actual results could differ materially from those estimates.  Significant estimates inherent in the preparation of the accompanying unaudited consolidated financial statements include asset impairment, depreciable lives of our satellites, share-based payment expense and income taxes.
We are not presently aware of any events or circumstances arising from the COVID-19 pandemic that would require us to update our estimates, judgments or revise the carrying value of our assets or liabilities. Our estimates may change, however, as new events occur and additional information is obtained, any such changes will be recognized in the consolidated financial statements. Actual results could differ from estimates, and any such differences may be material to our financial statements.

9

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)


(2)
Summary of Significant Accounting Policies
Fair Value Measurements
For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are based on unadjusted quoted prices in active markets for identical instruments. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. As of March 31, 2020 and December 31, 2019, the carrying amounts of cash and cash equivalents, receivables and accounts payable approximated fair value due to the short-term nature of these instruments.
Our liabilities measured at fair value were as follows:
 
March 31, 2020
 
December 31, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total Fair
Value
 
Level 1
 
Level 2
 
Level 3
 
Total Fair
Value
Liabilities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Debt (a)

 
$
8,013

 

 
$
8,013

 

 
$
8,378

 

 
$
8,378

(a)
The fair value for non-publicly traded debt is based upon estimates from a market maker and brokerage firm.  Refer to Note 12 for information related to the carrying value of our debt as of March 31, 2020 and December 31, 2019.

Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive loss of $17 was primarily comprised of the cumulative foreign currency translation adjustments related to our investment in and loan to Sirius XM Canada (refer to Note 11 for additional information). During the three months ended March 31, 2020, we recorded foreign currency translation adjustment loss of $25, net of tax benefit of $8. During the three months ended March 31, 2019, we recorded foreign currency translation adjustment income of $7, net of a tax expense of $2.
Recently Adopted Accounting Policies
In August 2018, the Financial Accounting Standards Board (“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. This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The implementation costs incurred in a hosting arrangement that is a service contract should be presented as a prepaid asset in the balance sheet and expensed over the term of the hosting arrangement to the same line item in the statement of income as the costs related to the hosting fees. The guidance in this ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted including adoption in any interim period. The amendments will be applied prospectively to all implementation costs incurred after adoption. This ASU will not have a material impact on our consolidated statements of operations.

(3)
Acquisition
On February 1, 2019, through a series of transactions, Pandora Media, Inc., became an indirect wholly owned subsidiary of Sirius XM and continues to operate as Pandora Media, LLC (the “Pandora Acquisition”). In connection with the Pandora Acquisition, we purchased all of the outstanding shares of the capital stock of Pandora for $2,355 by converting each outstanding share of Pandora common stock into 1.44 shares of our common stock and we also canceled our preferred stock investment in Pandora for $524 for total consideration of $2,879. Net cash acquired was $313. As part of the Pandora Acquisition, Holdings unconditionally guaranteed all of the payment obligations of Pandora under its outstanding 1.75% convertible senior notes due 2020 and 1.75% convertible senior notes due 2023.

10

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)

The table below shows the value of the consideration paid in connection with the Pandora 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


We recognized acquisition related costs of $76 that were expensed in Acquisition and other related costs in our unaudited consolidated statements of comprehensive income during the three months ended March 31, 2019.
Pro Forma Financial Information
Pandora was consolidated into our financial statements starting on the acquisition date, February 1, 2019. The aggregate revenue and net loss of Pandora consolidated into our financial statements was $251 and $122, respectively, for the three months ended March 31, 2019. The following pro forma financial information presents our results as if the Pandora Acquisition had occurred on January 1, 2019:
 
For the Three Months Ended March 31,
 
2020
 
2019
Total revenue
$
1,954

 
$
1,860

Net income
$
293

 
$
181

These pro forma results are based on estimates and assumptions, which we believe are reasonable. They are not the results that would have been realized had the acquisition actually occurred on January 1, 2019 and are not indicative of our consolidated results of operations in future periods. The pro forma results primarily include adjustments related to amortization of acquired intangible assets, depreciation of property and equipment, acquisition costs, fair value gain or loss on the Pandora investment and associated tax impacts.

(4)
Earnings per Share
Basic net income per common share is calculated by dividing the income available to common stockholders by the weighted average common shares outstanding during each reporting period.  Diluted net income per common share adjusts the weighted average number of common shares outstanding for the potential dilution that could occur if common stock equivalents (stock options, restricted stock units and convertible debt) were exercised or converted into common stock, calculated using the treasury stock method. We had no participating securities during the three months ended March 31, 2020 and 2019.

11

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)

Common stock equivalents of 40 and 60 for the three months ended March 31, 2020 and 2019, respectively, were excluded from the calculation of diluted net income per common share as the effect would have been anti-dilutive. We issued 392 shares of our common stock in connection with the Pandora Acquisition.
 
For the Three Months Ended March 31,
 
2020
 
2019
Numerator:
 

 
 

Net Income available to common stockholders for basic net income per common share
$
293

 
$
162

Effect of interest on assumed conversions of convertible notes, net of tax
2

 
1

Net Income available to common stockholders for dilutive net income per common share
$
295

 
$
163

Denominator:
 

 
 

Weighted average common shares outstanding for basic net income per common share
4,405

 
4,571

Weighted average impact of assumed convertible notes
29

 
25

Weighted average impact of dilutive equity instruments
81

 
82

Weighted average shares for diluted net income per common share
4,515

 
4,678

Net income per common share:
 

 
 

Basic
$
0.07

 
$
0.04

Diluted
$
0.07

 
$
0.03




(5)
Receivables, net
Receivables, net, includes customer accounts receivable, receivables from distributors and other receivables. We do not have any customer receivables that individually represent more than ten percent of our receivables.
Customer accounts receivable, net, includes receivables from our subscribers, advertising customers and other customers, and is stated at amounts due, net of an allowance for doubtful accounts. Our allowance for doubtful accounts is based upon our assessment of various factors.  We consider historical experience, the age of the receivable balances, current economic conditions, industry experience and other factors that may affect the counterparty’s ability to pay.  Bad debt expense is included in Customer service and billing expense in our unaudited consolidated statements of comprehensive income.
Receivables from distributors primarily include billed and unbilled amounts due from automakers for services included in the sale or lease price of vehicles, as well as billed amounts due from wholesale distributors of our satellite radios.  Other receivables primarily include amounts due from manufacturers of our radios, modules and chipsets where we are entitled to subsidies and royalties based on the number of units produced.  We have not established an allowance for doubtful accounts for our receivables from distributors or other receivables as we have historically not experienced any significant collection issues with automakers or other third parties.
Receivables, net, consists of the following:
 
March 31, 2020
 
December 31, 2019
Gross customer accounts receivable
$
481

 
$
546

Allowance for doubtful accounts
(17
)
 
(14
)
Customer accounts receivable, net
$
464

 
$
532

Receivables from distributors
115

 
113

Other receivables
25

 
25

Total receivables, net
$
604

 
$
670




12

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)

(6)
Inventory, net
Inventory consists of finished goods, refurbished goods, chipsets and other raw material components used in manufacturing radios and connected vehicle devices. Inventory is stated at the lower of cost or market.  We record an estimated allowance for inventory that is considered slow moving or obsolete or whose carrying value is in excess of net realizable value.  The provision related to products purchased for resale in our direct to consumer distribution channel and components held for resale by us is reported as a component of Cost of equipment in our unaudited consolidated statements of comprehensive income.  The provision related to inventory consumed in our OEM channel is reported as a component of Subscriber acquisition costs in our unaudited consolidated statements of comprehensive income.
Inventory, net, consists of the following:
 
March 31, 2020
 
December 31, 2019
Raw materials
$
4

 
$
3

Finished goods
12

 
13

Allowance for obsolescence
(4
)
 
(5
)
Total inventory, net
$
12

 
$
11



(7)
Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired in business combinations. Our annual impairment assessment of our two reporting units is performed as of the fourth quarter of each year, and an assessment is performed at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. ASC 350, Intangibles - Goodwill and Other, states that an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. ASC 350 also states that a reporting unit with a zero or negative carrying amount is not required to perform a qualitative assessment. Our Sirius XM reporting unit, which has an allocated goodwill balance of $2,290, had a negative carrying amount as of March 31, 2020.
As of March 31, 2020, there were no indicators of impairment, and no impairment losses were recorded for goodwill during the three months ended March 31, 2020 and 2019.  As of March 31, 2020, the cumulative balance of goodwill impairments recorded was $4,766, which was recognized during the year ended December 31, 2008 and is included in the carrying value of the goodwill allocated to our Sirius XM reporting unit.

As of March 31, 2020 and December 31, 2019, the carrying amount of goodwill for our Sirius XM and Pandora reporting units was $2,290 and $1,553, respectively. There was no activity related to goodwill during the three months ended March 31, 2020.


13

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)

(8)
Intangible Assets
Our intangible assets include the following:
 
 
 
March 31, 2020
 
December 31, 2019
 
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

 
(94
)
 
126

 
220

 
(90
)
 
130

Licensing agreements
12 years
 
45

 
(43
)
 
2

 
45

 
(42
)
 
3

Software and technology
7 years
 
35

 
(26
)
 
9

 
35

 
(25
)
 
10

Due to Pandora Acquisition:



















Indefinite life intangible assets:



















Trademarks
Indefinite

$
331


$


$
331


$
331