Liberty(FWONK) - 2021 Q4 - Annual Report

Part I Business Liberty Media operates diverse media and entertainment businesses across three tracking stock groups, including Sirius XM, Formula 1, Braves, and Live Nation - Liberty Media Corporation's structure is organized into three tracking stock groups: Liberty SiriusXM Group, Liberty Braves Group, and Liberty Formula One Group, which track the economic performance of specific attributed assets[16][18] - The company's principal businesses and assets include its consolidated subsidiaries Sirius XM Holdings Inc., Formula 1, and Braves Holdings, LLC, along with its equity affiliate Live Nation Entertainment, Inc[15] - In April 2020, the company executed a significant reattribution of assets and liabilities between the Formula One Group and the Liberty SiriusXM Group, including moving the Live Nation stake and reallocating certain debt instruments[20][25] - The COVID-19 pandemic significantly impacted operations in 2020, but operations saw a significant restart and recovery in 2021, with a record 22 Formula 1 events and a return to a normal MLB season schedule with fan attendance[31] Sirius XM Holdings Sirius XM Holdings generates revenue primarily from subscriptions and advertising, expanding into podcasting, with 34 million Sirius XM and 6.4 million Pandora subscribers Sirius XM Holdings Subscriber Metrics (as of Dec 31, 2021) | Business | Metric | Value | | :--- | :--- | :--- | | Sirius XM | Subscribers | ~34.0 million | | Pandora | Subscribers | ~6.4 million | | Pandora | Monthly Active Users | ~52.3 million | - Sirius XM's primary revenue source is subscription fees, while Pandora's is advertising on its ad-supported service[46][50] - The company is expanding its podcasting capabilities through acquisitions, including Stitcher (a podcast distribution and ad sales leader) and Simplecast (a podcast management and analytics platform)[52][105] - For its satellite radio service, the Copyright Royalty Board (CRB) set the statutory royalty rate for sound recordings at 15.5% of gross revenue for the period from 2018 to 2027[116][121] - For streaming services, the CRB set 2021 rates at $0.0021 per performance for non-subscription and $0.0026 for subscription transmissions[122] Formula 1 Formula 1 holds exclusive commercial rights to the World Championship, with revenue from race promotion, media rights, and sponsorship, recovering to a record 22 events in 2021 Formula 1 Revenue Mix (2021 vs. 2020) | Revenue Stream | % of Total Revenue (2021) | % of Total Revenue (2020) | | :--- | :--- | :--- | | Race Promotion | 31% | 13% | | Media Rights | 40% | 59% | | Sponsorship | 16% | 18% | - The 2021 season featured a record 22 events, compared to 17 in 2020, with fan attendance restrictions significantly reduced as the year progressed[127] - Formula 1's exclusive commercial rights to the World Championship are secured until the end of 2110 under the "100-Year Agreements" with the FIA[147] - The 2021 Concorde Agreement, which governs the relationship with the 10 participating teams, secures their commitment to the World Championship through December 31, 2025[152] Braves Holdings, LLC Braves Holdings operates the Atlanta Braves and The Battery Atlanta, with revenue from ballpark operations, broadcasting, and real estate, recovering from the 2020 season - Braves Holdings' revenue is seasonal, with the majority recognized during the second and third quarters, aligning with the MLB regular season[162] - The 2021 season returned to a normal schedule and number of games, with limitations on fan attendance lifted in May, contrasting with the 2020 season which was shortened to 60 games with no fans[165] - The Collective Bargaining Agreement (CBA) with MLB players expired in December 2021, leading to an MLB lockout during which player salaries are not paid[169] - The Battery Atlanta mixed-use development is a key asset, with Phase I and Phase II complete and operational, generating rental income from retail, office, hotel, and entertainment tenants[180] Live Nation Live Nation, a leading live entertainment company, saw a significant restart in Q3 2021 after COVID-19 impacts, with Liberty Media owning 31% equity - As of December 31, 2021, Liberty beneficially owned approximately 31% of Live Nation's common stock[188] - Live Nation's business was significantly impacted by COVID-19 but began a meaningful restart in Q3 2021 with the resumption of amphitheater events and festivals in the U.S. and U.K[183] - Under a stockholders agreement, Liberty has the right to nominate two directors to Live Nation's board and is limited to owning a maximum of 35% of the voting power[189][190] Risk Factors The company faces risks from its tracking stock structure, ongoing COVID-19 impacts, supply chain disruptions, intense competition, and dependence on key relationships - Risks related to the tracking stock structure include potential market confusion, stockholders being subject to risks of the entire company, and the board's ability to reattribute assets, making future prospects difficult to assess[415][416][421] - The COVID-19 pandemic continues to pose a significant risk, with potential impacts on auto sales and advertising (Sirius XM) and the risk of event cancellations, reduced attendance, and changes in consumer spending for live events (Formula 1, Braves, Live Nation)[240][244] - Sirius XM Holdings faces risks from the global semiconductor supply shortage, which could impact new vehicle production and thus subscriber acquisition, as well as substantial competition from other audio services like Spotify, Apple Music, and YouTube[251][252] - Formula 1's success is dependent on its continued popularity, the participation of its 10 teams (committed through 2025 via the Concorde Agreement), and its relationship with the FIA, which holds the rights to the World Championship until 2110[347][352][353] - The Braves Group's financial success depends heavily on the team's on-field performance, with risks including player injuries, organized labor matters such as the ongoing MLB lockout, and restrictions imposed by MLB rules and regulations[396][398][403] Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - None[454] Properties The company owns its corporate headquarters in Englewood, Colorado, while its subsidiaries own or lease various properties essential to their operations, including offices, studios, and stadiums - Liberty Media owns its corporate headquarters in Englewood, Colorado[455] - Sirius XM Holdings owns and leases numerous facilities for office, production, and technical purposes across the U.S. and leases space for its terrestrial repeater network[456] - Braves Holdings' key properties include Truist Park and the adjacent mixed-use development, The Battery Atlanta[457] Legal Proceedings The company discloses contingent liabilities from legal proceedings, including a settled TCPA class action and ongoing litigation regarding pre-1972 sound recordings - A class action suit against Sirius XM Holdings for alleged violations of the Telephone Consumer Protection Act (TCPA) was settled in 2019, with Sirius XM paying $25 million into a settlement fund[1001][1005] - Pandora (a Sirius XM subsidiary) is involved in a class action lawsuit alleging copyright violations for the public performance of sound recordings made before February 15, 1972, which the company intends to defend vigorously[1006][1013] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[459] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section details trading markets for tracking stocks, confirms no cash dividends, and outlines significant share repurchases in Q4 2021 - The company has no present intention of paying cash dividends on its common stock[467] Share Repurchases (Q4 2021) | Stock | Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | Series A Liberty SiriusXM | 711,487 | - | | Series C Liberty SiriusXM | 2,265,247 | - | | Series A Liberty Formula One | 154,135 | - | - As of December 31, 2021, approximately $496 million remained available under the company's share repurchase programs[470] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses 2021 financial results, highlighting a $2.0 billion revenue increase driven by recovery across all segments, ending the year with $2.8 billion cash Consolidated Operating Results (in millions) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Revenue | $11,400 | $9,363 | $10,292 | | Operating Income | $1,977 | $177 | $1,470 | | Adjusted OIBDA | $3,325 | $2,509 | $2,931 | - The $2.0 billion increase in consolidated revenue in 2021 was driven by increases at Formula 1 ($991 million), Sirius XM Holdings ($656 million), and Braves Holdings ($390 million), reflecting a strong recovery from the pandemic's impact in 2020[498] - As of December 31, 2021, the company had total cash and cash equivalents of $2.8 billion, with $598 million attributed to the Liberty SiriusXM Group, $142 million to the Braves Group, and $2.1 billion to the Formula One Group[524] - Material cash requirements over the next five years include significant payments for long-term debt, interest, and programming/royalty fees[542] Results of Operations—Businesses In 2021, Sirius XM revenue grew to $8.7 billion, Formula 1 nearly doubled to $2.1 billion, and Braves Holdings tripled to $568 million, reflecting strong recovery Sirius XM Holdings Revenue by Source (in millions) | Revenue Source | 2021 | 2020 | | :--- | :--- | :--- | | Subscriber Revenue | $6,614 | $6,372 | | Advertising Revenue | $1,730 | $1,340 | | Total Revenue | $8,696 | $8,040 | Formula 1 Revenue (in millions) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total Revenue | $2,136 | $1,145 | | Adjusted OIBDA | $495 | $56 | Braves Holdings Revenue (in millions) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total Revenue | $568 | $178 | | Adjusted OIBDA | $111 | $(49) | Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risk from interest rate changes on variable debt and stock price fluctuations from marketable securities and its Live Nation investment - The company manages interest rate risk by using a mix of fixed and variable rate debt, with significant variable rate debt tied to LIBOR as of December 31, 2021[629][630] - The company is preparing for the phase-out of LIBOR and expects to incorporate alternative reference rates, such as SOFR, into its debt agreements[631] - The company is exposed to stock price risk through its portfolio of marketable equity securities, valued at $217 million at year-end, and its investment in Live Nation[632][633] Financial Statements and Supplementary Data This section contains the company's audited consolidated financial statements for the fiscal year ended December 31, 2021, including balance sheets, statements of operations, cash flows, and comprehensive notes Notes to Consolidated Financial Statements The notes provide detailed financial information, including the tracking stock structure, acquisitions, $18.6 billion in debt, stock-based compensation, and segment data - As of December 31, 2021, the company had total debt with a carrying value of $18.6 billion, including corporate-level convertible and exchangeable notes, margin loans, and significant subsidiary-level debt[843] - In November 2021, Liberty acquired additional shares of Sirius XM Holdings, increasing its ownership to approximately 81% and causing Sirius XM Holdings to become part of Liberty's consolidated federal income tax group[684][928] - Sirius XM Holdings' SXM-7 satellite, launched in December 2020, was declared a total loss after in-orbit testing failures, resulting in a $220 million impairment charge offset by $225 million in insurance recoveries in 2021[994][995] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[635] Controls and Procedures Management concluded disclosure controls were effective as of December 31, 2021, with an unqualified opinion from KPMG LLP on internal control effectiveness - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[637] - The company's independent registered public accounting firm, KPMG LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2021[645] Other Information The company reports no other information for this item - None[639] Part III Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, and Principal Accountant Fees Information for Items 10-14, covering governance, compensation, and security ownership, is incorporated by reference from the 2022 proxy statement - The information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's definitive proxy statement for its 2022 Annual Meeting of Stockholders[1034] Part IV Exhibits and Financial Statement Schedules This section lists financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K, including corporate documents and material contracts - The financial statements are included in Part II of the report[1037] - All financial statement schedules have been omitted as they are not applicable, not material, or the required information is provided elsewhere in the report[1039] Form 10-K Summary This item is not applicable - Not applicable[1050]