Sirius XM(SIRI) - 2023 Q3 - Quarterly Report

PART I - Financial Information This section presents the company's unaudited financial statements, management's analysis of financial performance, market risk exposures, and internal controls Item 1. Financial Statements (unaudited) This section presents Sirius XM Holdings Inc.'s unaudited consolidated financial statements and accompanying notes Consolidated Statements of Comprehensive Income This statement details the company's revenues, expenses, and net income for the specified periods | Financial Metric | Q3 2023 (in millions) | Q3 2022 (in millions) | Nine Months 2023 (in millions) | Nine Months 2022 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $2,271 | $2,280 | $6,665 | $6,720 | | Subscriber revenue | $1,729 | $1,734 | $5,146 | $5,166 | | Advertising revenue | $460 | $457 | $1,278 | $1,292 | | Income from operations | $564 | $467 | $1,455 | $1,474 | | Net income | $363 | $247 | $906 | $848 | | Diluted EPS | $0.09 | $0.06 | $0.23 | $0.21 | Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and equity at specific dates | Balance Sheet Item | Sep 30, 2023 (in millions) | Dec 31, 2022 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $53 | $57 | | Total current assets | $1,041 | $1,038 | | Total assets | $10,129 | $10,022 | | Total current liabilities | $3,158 | $2,981 | | Long-term debt | $8,823 | $9,256 | | Total liabilities | $13,022 | $13,373 | | Total stockholders' equity (deficit) | $(2,893) | $(3,351) | Consolidated Statements of Stockholders' Equity (Deficit) This statement tracks changes in the company's equity, including net income, share repurchases, and dividends - The total stockholders' deficit improved from $(3,351) million at the end of 2022 to $(2,893) million as of September 30, 2023, primarily driven by net income of $906 million[15] - During the first nine months of 2023, the company repurchased 69 million shares of common stock for $274 million and paid cash dividends totaling $281 million[15] Consolidated Statements of Cash Flows This statement summarizes cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity (Nine Months Ended Sep 30) | 2023 (in millions) | 2022 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,279 | $1,300 | | Net cash used in investing activities | $(554) | $(415) | | Net cash used in financing activities | $(729) | $(1,036) | | Net decrease in cash, cash equivalents and restricted cash | $(4) | $(151) | Notes to the Consolidated Financial Statements These notes provide detailed explanations and additional information supporting the financial statements - The company operates and reports on two segments: 'SiriusXM' (satellite radio and connected vehicle services) and 'Pandora and Off-platform' (streaming and advertising technology)[34][48][166] - As of September 30, 2023, Liberty Media Corporation beneficially owned 83.5% of the company's outstanding common stock, making SiriusXM a 'controlled company'[44][88] - On September 22, 2023, the company received a non-binding proposal from Liberty Media for a potential combination transaction involving the split-off of Liberty's SiriusXM tracking stock group[90] - Total debt as of September 30, 2023, was approximately $9.36 billion, consisting of various senior notes, convertible notes, and borrowings under a credit facility[101] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes financial results, revenue trends, net income, EBITDA, cash flow, and key operating metrics | Metric | Q3 2023 | Q3 2022 | Change | Nine Months 2023 | Nine Months 2022 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $2,271M | $2,280M | (0.4%) | $6,665M | $6,720M | (0.8%) | | SiriusXM Revenue | $1,721M | $1,742M | (1.2%) | $5,124M | $5,181M | (1.1%) | | Pandora & Off-platform Revenue | $550M | $538M | +2.2% | $1,541M | $1,539M | +0.1% | | Net Income | $363M | $247M | +47.0% | $906M | $848M | +6.8% | | Adjusted EBITDA | $747M | $720M | +3.8% | $2,075M | $2,091M | (0.8%) | | Operating Metric | As of Sep 30, 2023 | As of Sep 30, 2022 | Change | | :--- | :--- | :--- | :--- | | SiriusXM Ending Subscribers | 33.97 million | 34.17 million | (0.6%) | | Pandora Monthly Active Users | 46.50 million | 48.77 million | (4.7%) | | Pandora Ending Subscribers | 6.12 million | 6.27 million | (2.4%) | - Free cash flow for the nine months ended September 30, 2023, decreased 26% to $758 million from $1,022 million in the prior-year period, primarily driven by higher cash taxes paid and increased satellite capital expenditures[279] - Sales and marketing expenses decreased 19% for the nine-month period due to lower spending on streaming marketing and brand support[244] Item 3. Quantitative and Qualitative Disclosures About Market Risks The company's primary market risk is interest rate fluctuations on variable-rate debt, with no current hedging - The company's main market risk is from interest rate fluctuations affecting its variable-rate debt under the Credit Facility[310] - As of September 30, 2023, the company did not hold any free-standing derivative instruments for hedging purposes[309] Item 4. Controls and Procedures Management concluded that disclosure controls were effective, with no material changes to internal controls this quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[312] - No material changes to the company's internal control over financial reporting occurred during the quarter ended September 30, 2023[313] PART II - Other Information This section details legal proceedings, updates on risk factors, equity repurchase activities, and a list of filed exhibits Item 1. Legal Proceedings The company faces class action lawsuits and arbitrations regarding its 'U.S. Music Royalty Fee' and intends to defend itself - The company is facing multiple class actions and mass arbitrations alleging deceptive practices related to its 'U.S. Music Royalty Fee'[151] - The company states it has substantial defenses to the claims and intends to defend the actions vigorously[156] Item 1A. Risk Factors The company reports that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to risk factors were reported since the filing of the 2022 Annual Report on Form 10-K[316] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities This section details the company's Q3 2023 common stock repurchase activity and remaining authorization | Period (2023) | Total Shares Purchased | Average Price Paid Per Share | Value Remaining in Program | | :--- | :--- | :--- | :--- | | July | 2,422,502 | $4.65 | $1.23B | | August | 6,127,426 | $4.44 | $1.20B | | September | 8,110,782 | $4.16 | $1.17B | | Q3 Total | 16,660,710 | $4.33 | $1.17B | - As of September 30, 2023, $1.2 billion remained available for future share repurchases under the company's existing stock repurchase program[317] Item 3. Defaults Upon Senior Securities This item is not applicable - Not applicable[319] Item 4. Mine Safety Disclosures This item is not applicable - Not applicable[320] Item 5. Other Information This item is not applicable - Not applicable[321] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and Inline XBRL data - The report includes required certifications from the CEO and CFO pursuant to the Sarbanes-Oxley Act[323] - Financial statements and notes are provided in Inline eXtensible Business Reporting Language (Inline XBRL) format[323] Signatures This section contains the official signatures certifying the accuracy and completeness of the report - The Form 10-Q report was signed on October 31, 2023, by Thomas D. Barry, Executive Vice President and Chief Financial Officer[326][327]