Liberty(LSXMK) - 2022 Q4 - Annual Report

Part I Item 1. Business The company operates a portfolio of media and entertainment businesses structured into three distinct tracking stock groups General Development of Business The company utilizes a tracking stock structure and plans to split-off the Braves Group in the first half of 2023 - A tracking stock is a type of common stock intended to reflect the economic performance of a specific business group, not the company as a whole[30] - The Liberty SiriusXM Group's assets include interests in Sirius XM Holdings and Live Nation, corporate cash, and various debt instruments[32] - The Liberty Braves Group's assets include the Atlanta Braves MLB club, Truist Park stadium, and the associated Mixed-Use Development[34] - The Liberty Formula One Group includes the Formula 1 business, cash, and an intergroup interest in the Braves Group[35] - In November 2022, the Board authorized a plan to split-off the Braves Group into a new public company, Atlanta Braves Holdings, Inc (ABH)[37][38][39] Sirius XM Holdings Sirius XM Holdings operates satellite radio and Pandora streaming services, with revenue driven by subscriptions and advertising Sirius XM Holdings Subscriber Metrics (as of Dec 31, 2022) | Business Segment | Subscribers | | :--- | :--- | | Sirius XM | ~34.3 million | | Pandora | ~6.2 million | - Liberty owns approximately 82% of the outstanding equity interest in Sirius XM Holdings as of year-end 2022[44] - Sirius XM's primary revenue source is subscription fees, supplemented by advertising, equipment sales, and connected vehicle services[47][48] - Pandora's primary revenue source is advertising on its ad-supported service, supplemented by subscription revenue[51] - The company's 360L platform, combining satellite and streaming, is expected in a majority of new Sirius XM-enabled vehicles[59] - Sirius XM Holdings must pay royalties for musical compositions and sound recordings under rates set by the Copyright Royalty Board[102][111] Formula 1 Formula 1 holds exclusive commercial rights to the global FIA Formula One World Championship motor racing series Formula 1 Revenue Breakdown (FY 2022) | Revenue Stream | % of Total Revenue | | :--- | :--- | | Media Rights | 36.4% | | Race Promotion | 28.6% | | Sponsorship | 16.9% | - The 2022 World Championship featured 22 events with record attendance well above pre-COVID-19 levels[121][122] - Formula 1 holds exclusive commercial rights to the World Championship until the end of 2110 under the "100-Year Agreements" with the FIA[137][142] - The 2021 Concorde Agreement secures the commitment of the 10 teams to participate through the 2025 season[146] - Strategic goals include expanding the event calendar, developing sponsorship revenue, and capturing digital media opportunities[161] Braves Holdings, LLC Braves Holdings operates the Atlanta Braves MLB club and The Battery Atlanta, a large mixed-use real estate development - Braves Holdings derives revenue from both the baseball franchise and the Mixed-Use Development, with baseball revenue being seasonal[158][159] - The Mixed-Use Development (The Battery Atlanta) is an approximately 2.25 million square-foot area around Truist Park[174] - The Braves have a long-term local television broadcasting agreement and participate in MLB's national broadcast revenue[164] - As an MLB club, the Braves must comply with all MLB Rules and Regulations, including the CBA and revenue sharing plans[175][176][179] Live Nation Liberty holds a significant equity interest in Live Nation, the world's leading live entertainment company - As of December 31, 2022, Liberty owned approximately 31% of Live Nation's issued and outstanding shares[186] - Live Nation's business segments are Concerts (event promotion), Ticketing (ticket sales), and Sponsorship & Advertising[181][184][185] - Liberty has the right to nominate two directors to Live Nation's board of directors[187] Item 1A. Risk Factors The company faces risks from its tracking stock structure, consumer spending, competition, and significant indebtedness - Company-Wide Risks: The tracking stock structure subjects holders to risks of the entire company, not just the attributed group[220][221][227][228] - SiriusXM Group Risks: Business is adversely affected by automotive supply chain issues and faces substantial competition from streaming services[241][247][285][326] - Formula One Group Risks: Business depends on the sport's popularity, key contract renewals, and avoiding event cancellations[359][361][365][373] - Braves Group Risks: Financial success is highly dependent on the team's on-field performance and is subject to MLB rules and real estate risks[413][419][431](index=431&type=chunk][446] - Split-Off and Reclassification Risks: The proposed transactions may not be completed, may not achieve intended benefits, and will incur significant costs[489][490][491] Item 2. Properties The company and its subsidiaries own or lease various properties essential for their corporate and operational needs - Liberty Media owns its corporate headquarters in Englewood, Colorado[493] - Sirius XM Holdings owns and leases numerous office, production, studio, and technical facilities across the U.S[494] - Formula 1 leases offices in England and owns land being developed for the Las Vegas Grand Prix[495] Item 3. Legal Proceedings The company's legal proceedings are detailed in Note 18 of the consolidated financial statements - Information on legal proceedings is detailed in Note 18 of the consolidated financial statements[496] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's tracking stocks trade on Nasdaq, with no current dividend plans and a share repurchase program in place - The company has three classes of stock for each of its three tracking stock groups, trading under various ticker symbols[499] - The company has no present intention of paying cash dividends on its common stock[504] - As of December 31, 2022, approximately $1.1 billion was available for future share repurchases under the company's authorized program[506][507] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated revenue and operating income increased in FY 2022, driven by growth across all business segments Consolidated Operating Results (in millions) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenue | $12,164 | $11,400 | $9,363 | | Operating Income | $2,064 | $1,977 | $177 | | Adjusted OIBDA | $3,419 | $3,325 | $2,509 | - The 2022 revenue increase of $764 million was driven by growth at Formula 1 ($437M), Sirius XM Holdings ($307M), and Braves Holdings ($20M)[536] - The company plans to split-off the Braves Group and reclassify its stock into three tracking stocks in the first half of 2023[525][526][529] Net Cash Flow Summary (in millions) | Cash Flow | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Operating Activities | $2,546 | $2,437 | $1,730 | | Investing Activities | $(46) | $(689) | $(736) | | Financing Activities | $(3,148) | $(1,698) | $574 | Results of Operations—Businesses In 2022, Sirius XM and Formula 1 saw revenue and OIBDA growth, while Braves Group OIBDA declined due to higher costs Sirius XM Holdings Performance (in millions) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Total Revenue | $9,003 | $8,696 | | Adjusted OIBDA | $2,833 | $2,770 | | Operating Income | $1,958 | $1,945 | Formula 1 Performance (in millions) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Total Revenue | $2,573 | $2,136 | | Adjusted OIBDA | $593 | $495 | | Operating Income | $239 | $92 | Braves Group Performance (in millions) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Total Revenue | $588 | $568 | | Adjusted OIBDA | $71 | $111 | | Operating Income (Loss) | $(15) | $31 | Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risk from changes in interest rates on its variable rate debt and stock price volatility - The company manages interest rate risk through a mix of fixed and variable rate debt, with $1.9 billion in variable rate debt at year-end[652][653] - The company is managing the phase-out of LIBOR by incorporating alternative reference rates like SOFR into its debt agreements[653][655] - The company is exposed to stock price risk through its holdings of publicly traded securities, including its investment in Live Nation[656][657] Item 8. Financial Statements and Supplementary Data This section contains the consolidated financial statements of Liberty Media Corporation - The consolidated financial statements for Liberty Media Corporation are filed within this item[658] Item 9A. Controls and Procedures Management concluded that the company's disclosure controls and internal controls over financial reporting were effective - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[660] - No material changes were made to the company's internal control over financial reporting during the fourth quarter of 2022[661] Financial Statements and Notes Reports of Independent Registered Public Accounting Firm KPMG LLP issued unqualified opinions on the financial statements and internal controls, identifying two critical audit matters - The auditor, KPMG LLP, issued an unqualified opinion, stating the company maintained effective internal control over financial reporting[668] - KPMG also issued an unqualified opinion on the consolidated financial statements, stating they present fairly the financial position[675] - Critical Audit Matters identified were the sufficiency of audit evidence over certain revenues and the impairment testing of Pandora[680][683][684] Consolidated Financial Statements The financial statements present the company's financial position, with total assets of $42.5 billion as of year-end 2022 Consolidated Balance Sheet Highlights (in millions) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $42,464 | $44,351 | | Goodwill | $19,341 | $19,248 | | Total Liabilities | $23,338 | $25,514 | | Total Equity | $19,126 | $18,262 | Consolidated Statement of Operations Highlights (in millions) | Account | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total Revenue | $12,164 | $11,400 | $9,363 | | Operating Income | $2,064 | $1,977 | $177 | | Net Earnings (Loss) Attributable to Liberty Stockholders | $1,815 | $398 | $(1,421) | Notes to Consolidated Financial Statements The notes provide detailed disclosures on accounting policies, debt, goodwill, and commitments supporting the financial statements - Note 2 provides a detailed explanation of the tracking stock structure and the planned 2023 Split-Off and Reclassification[717][721][736] - Note 7 details investments in affiliates, showing a fair value of $4.9 billion for the publicly-traded Live Nation stake[852] - Note 8 shows that as of Dec 31, 2022, the company had $19.3 billion in goodwill, with $15.2 billion allocated to Sirius XM Holdings[869] - Note 9 provides a detailed breakdown of the company's total debt of $16.6 billion[876] - Note 18 discloses commitments, including $868 million for Braves employment contracts and significant future music royalty payments[1012][1013] Part III Items 10-14 Information regarding directors, executive compensation, and security ownership is incorporated by reference from the proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's definitive proxy statement[1049] Part IV Item 15. Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed as part of the annual report - This item lists all financial statements, schedules, and exhibits filed with the 10-K report[1052] - All financial statement schedules were omitted because they were not applicable or the required information was otherwise provided[1054]