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 SEPTEMBER 30, ~~2020~~2021


☐						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: (212) 584-5100

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~~The Nasdaq Stock Market LLC

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 October ~~20, 2020)~~26, 2021)

Common stock, $0.001 par value

~~4,249,501,448~~3,999,493,824

Table of Contents

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q


Item No.	Description

	PART I - Financial Information

Item 1.	Financial Statements (unaudited)
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020	2
	Consolidated Balance Sheets as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020	3
	Consolidated Statements of Stockholders' Equity (Deficit) for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020	4
	Consolidated Statements of Cash Flows for the nine months ended ~~September~~September 30, ~~2020~~2021 and ~~2019~~2020	8
	Notes to the Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3335
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	6354
Item 4.	Controls and Procedures	6455

	PART II - Other Information

Item 1.	Legal Proceedings	6556
Item 1A.	Risk Factors	6556
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6556
Item 3.	Defaults Upon Senior Securities	6556
Item 4.	Mine Safety Disclosures	6556
Item 5.	Other Information	6556
Item 6.	Exhibits	6557
	Signatures	6759

Table of Contents

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


		For the Three Months Ended September 30,						For the Nine Months Ended September 30,							For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in millions, except per share data)	(in millions, except per share data)	2020		2019		2020		2019		(in millions, except per share data)	2021		2020		2021		2020
Revenue:	Revenue:									Revenue:
Subscriber revenue	Subscriber revenue	$	1,594	$	1,556	$	4,757	$	4,551	Subscriber revenue	$	1,666	$	1,594	$	4,918	$	4,757
Advertising revenue	Advertising revenue	345		366		866		933		Advertising revenue	451		345		1,235		866
Equipment revenue	Equipment revenue	47		45		113		127		Equipment revenue	41		47		149		113
Other revenue	Other revenue	39		44		115		121		Other revenue	40		39		113		115
Total revenue	Total revenue	2,025		2,011		5,851		5,732		Total revenue	2,198		2,025		6,415		5,851
Operating expenses:	Operating expenses:									Operating expenses:
Cost of services:	Cost of services:									Cost of services:
Revenue share and royalties	Revenue share and royalties	602		592		1,759		1,684		Revenue share and royalties	671		602		1,974		1,759
Programming and content	Programming and content	123		116		351		338		Programming and content	141		123		407		351
Customer service and billing	Customer service and billing	119		119		359		352		Customer service and billing	127		119		372		359
Transmission	Transmission	46		46		129		117		Transmission	54		46		155		129
Cost of equipment	Cost of equipment	5		8		13		20		Cost of equipment	4		5		12		13
Subscriber acquisition costs	Subscriber acquisition costs	110		101		257		313		Subscriber acquisition costs	71		110		245		257
Sales and marketing	Sales and marketing	222		233		664		648		Sales and marketing	269		222		725		664
Engineering, design and development	Engineering, design and development	64		78		196		206		Engineering, design and development	68		64		197		196
General and administrative	General and administrative	131		124		357		379		General and administrative	125		131		376		357
Depreciation and amortization	Depreciation and amortization	125		118		381		344		Depreciation and amortization	135		125		399		381
Acquisition and restructuring costs		0		0		24		83
Impairment, restructuring and acquisition costs										Impairment, restructuring and acquisition costs	(95)		—		13		24
Total operating expenses	Total operating expenses	1,547		1,535		4,490		4,484		Total operating expenses	1,570		1,547		4,875		4,490
Income from operations	Income from operations	478		476		1,361		1,248		Income from operations	628		478		1,540		1,361
Other (expense) income:	Other (expense) income:									Other (expense) income:
Interest expense	Interest expense	(96)		(104)		(297)		(291)		Interest expense	(111)		(96)		(313)		(297)
Loss on extinguishment of debt	Loss on extinguishment of debt	(40)		(56)		(40)		(57)		Loss on extinguishment of debt	(83)		(40)		(83)		(40)
Other income (expense)		2		0		10		(2)
Other (expense) income										Other (expense) income	(1)		2		8		10
Total other (expense) income	Total other (expense) income	(134)		(160)		(327)		(350)		Total other (expense) income	(195)		(134)		(388)		(327)
Income before income taxes	Income before income taxes	344		316		1,034		898		Income before income taxes	433		344		1,152		1,034
Income tax expense	Income tax expense	(72)		(70)		(226)		(227)		Income tax expense	(90)		(72)		(157)		(226)
Net income	Net income	$	272	$	246	$	808	$	671	Net income	$	343	$	272	$	995	$	808
Foreign currency translation adjustment, net of tax	Foreign currency translation adjustment, net of tax	7		(5)		(8)		9		Foreign currency translation adjustment, net of tax	(10)		7		2		(8)
Total comprehensive income	Total comprehensive income	$	279	$	241	$	800	$	680	Total comprehensive income	$	333	$	279	$	997	$	800
Net income per common share:	Net income per common share:									Net income per common share:
Basic	Basic	$	0.06	$	0.06	$	0.19	$	0.15	Basic	$	0.08	$	0.06	$	0.24	$	0.19
Diluted	Diluted	$	0.06	$	0.05	$	0.18	$	0.15	Diluted	$	0.08	$	0.06	$	0.24	$	0.18
Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic	Basic	4,326		4,450		4,367		4,529		Basic	4,044		4,326		4,086		4,367
Diluted	Diluted	4,415		4,564		4,465		4,641		Diluted	4,119		4,415		4,170		4,465

See accompanying notes to the unaudited consolidated financial statements.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


(in millions, except per share data)	(in millions, except per share data)	September 30, 2020		December 31, 2019		(in millions, except per share data)	September 30, 2021		December 31, 2020
ASSETS	ASSETS	(unaudited)				ASSETS	(unaudited)
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	33	$	106	Cash and cash equivalents	$	164	$	71
Receivables, net	Receivables, net	582		670		Receivables, net	652		672
Inventory, net	Inventory, net	10		11		Inventory, net	4		10
Related party current assets	Related party current assets	10		22		Related party current assets	10		20
Prepaid expenses and other current assets	Prepaid expenses and other current assets	194		194		Prepaid expenses and other current assets	206		194
Total current assets	Total current assets	829		1,003		Total current assets	1,036		967
Property and equipment, net	Property and equipment, net	1,587		1,626		Property and equipment, net	1,456		1,629
Intangible assets, net	Intangible assets, net	3,360		3,467		Intangible assets, net	3,225		3,340
Goodwill	Goodwill	3,860		3,843		Goodwill	3,150		3,122
Related party long-term assets	Related party long-term assets	514		452		Related party long-term assets	534		531
Deferred tax assets	Deferred tax assets	0		153		Deferred tax assets	111		111
Operating lease right-of-use assets	Operating lease right-of-use assets	423		466		Operating lease right-of-use assets	361		427
Other long-term assets	Other long-term assets	129		139		Other long-term assets	221		206
Total assets	Total assets	$	10,702	$	11,149	Total assets	$	10,094	$	10,333
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)					LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	1,088	$	1,151	Accounts payable and accrued expenses	$	1,202	$	1,223
Accrued interest	Accrued interest	84		160		Accrued interest	80		174
Current portion of deferred revenue	Current portion of deferred revenue	1,792		1,930		Current portion of deferred revenue	1,500		1,721
Current maturities of debt	Current maturities of debt	2		2		Current maturities of debt	—		1
Operating lease current liabilities	Operating lease current liabilities	47		46		Operating lease current liabilities	50		48
Related party current liabilities		1		4

Total current liabilities	Total current liabilities	3,014		3,293		Total current liabilities	2,832		3,167
Long-term deferred revenue	Long-term deferred revenue	121		130		Long-term deferred revenue	103		118
Long-term debt	Long-term debt	7,845		7,842		Long-term debt	8,827		8,499

Deferred tax liabilities	Deferred tax liabilities	91		70		Deferred tax liabilities	368		266
Operating lease liabilities	Operating lease liabilities	416		456		Operating lease liabilities	368		419
Other long-term liabilities	Other long-term liabilities	126		94		Other long-term liabilities	151		149
Total liabilities	Total liabilities	11,613		11,885		Total liabilities	12,649		12,618
Commitments and contingencies (Note 16)	Commitments and contingencies (Note 16)					Commitments and contingencies (Note 16)	0		0
Stockholders’ equity (deficit):	Stockholders’ equity (deficit):					Stockholders’ equity (deficit):
Common stock, par value $0.001 per share; 9,000 shares authorized; 4,283 and 4,412 shares issued; 4,278 and 4,412 shares outstanding at September 30, 2020 and December 31, 2019, respectively		4		4
Common stock, par value $0.001 per share; 9,000 shares authorized; 4,020 and 4,176 shares issued; 4,018 and 4,173 shares outstanding at September 30, 2021 and December 31, 2020, respectively						Common stock, par value $0.001 per share; 9,000 shares authorized; 4,020 and 4,176 shares issued; 4,018 and 4,173 shares outstanding at September 30, 2021 and December 31, 2020, respectively	4		4
Accumulated other comprehensive income, net of tax	Accumulated other comprehensive income, net of tax	0		8		Accumulated other comprehensive income, net of tax	17		15
Additional paid-in capital	Additional paid-in capital	0		395		Additional paid-in capital	—		—
Treasury stock, at cost; 5 and 0 shares of common stock at September 30, 2020 and December 31, 2019, respectively		(24)		0
Treasury stock, at cost; 2 and 3 shares of common stock at September 30, 2021 and December 31, 2020, respectively						Treasury stock, at cost; 2 and 3 shares of common stock at September 30, 2021 and December 31, 2020, respectively	(13)		(19)
Accumulated deficit	Accumulated deficit	(891)		(1,143)		Accumulated deficit	(2,563)		(2,285)
Total stockholders’ equity (deficit)	Total stockholders’ equity (deficit)	(911)		(736)		Total stockholders’ equity (deficit)	(2,555)		(2,285)
Total liabilities and stockholders’ equity (deficit)	Total liabilities and stockholders’ equity (deficit)	$	10,702	$	11,149	Total liabilities and stockholders’ equity (deficit)	$	10,094	$	10,333

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)


For the Nine Months Ended September 30, 2020
For the Nine Months Ended September 30, 2021																For the Nine Months Ended September 30, 2021
		Common Stock					Accumulated Other Comprehensive Income (Loss)		Additional Paid-in Capital	Treasury Stock							Accumulated Deficit		Total Stockholders’ Equity (Deficit)			Common Stock				Accumulated Other Comprehensive Income		Additional Paid-in Capital				Treasury Stock								Accumulated Deficit	Total Stockholders’ Equity (Deficit)
(in millions)	(in millions)	Shares	Amount							Shares		Amount									(in millions)	Shares		Amount						Shares				Amount
Balance at December 31, 2019		4,412	$	4	$	8	$	395	0	$	0	$	(1,143)	$	(736)
Comprehensive income (loss), net of tax		—	—		(8)		—		—	—		808		800
Balance at December 31, 2020																Balance at December 31, 2020		4,176		$	4	$	15	$	—		3			$	(19)			$	(2,285)			$	(2,285)
Comprehensive income, net of tax																Comprehensive income, net of tax		—		—		2		—		—		—				995				997
Share-based payment expense	Share-based payment expense	—	—		—		178		—	—		—		178		Share-based payment expense		—		—		—		159		—		—				—				159
Exercise of stock options and vesting of restricted stock units	Exercise of stock options and vesting of restricted stock units	22	—		—		—		—	—		—		0		Exercise of stock options and vesting of restricted stock units		35		—		—		6		—		—				—				6
Withholding taxes on net share settlement of stock-based compensation	Withholding taxes on net share settlement of stock-based compensation	—	—		—		(84)		—	—		—		(84)		Withholding taxes on net share settlement of stock-based compensation		—		—		—		(88)		—		—				—				(88)
Cash dividends paid on common stock, $0.03993 per share		—	—		—		(139)		—	—		(36)		(175)

Cash dividends paid on common stock, $0.043923 per share																Cash dividends paid on common stock, $0.043923 per share		—		—		—		(81)		—		—				(99)				(180)
Issuance of restricted stock in connection with business acquisition																Issuance of restricted stock in connection with business acquisition		—		—		—		4		—		—				—				4
Common stock repurchased	Common stock repurchased	—	—		—		—		156	(894)		—		(894)		Common stock repurchased		—		—		—		—		190		(1,168)				—				(1,168)
Common stock retired	Common stock retired	(151)	—		—		(350)		(151)	870		(520)		0		Common stock retired		(191)		—		—		—		(191)		1,174				(1,174)				—
Balance at September 30, 2020		4,283	$	4	$	0	$	0	5	$	(24)	$	(891)	$	(911)
Balance at September 30, 2021																Balance at September 30, 2021		4,020		$	4	$	17	$	—	2		$	(13)			$	(2,563)			$	(2,555)

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)


For the Three Months Ended September 30, 2020
For the Three Months Ended September 30, 2021																For the Three Months Ended September 30, 2021
		Common Stock					Accumulated Other Comprehensive Income (Loss)		Additional Paid-in Capital	Treasury Stock							Accumulated Deficit		Total Stockholders’ Equity (Deficit)			Common Stock				Accumulated Other Comprehensive Income		Additional Paid-in Capital				Treasury Stock								Accumulated Deficit	Total Stockholders’ Equity (Deficit)
(in millions)	(in millions)	Shares	Amount							Shares		Amount									(in millions)	Shares		Amount						Shares				Amount
Balance at June 30, 2020		4,355	$	4	$	(7)	$	(49)	2	$	(9)	$	(607)	$	(668)
Balance at June 30, 2021																Balance at June 30, 2021		4,059		$	4	$	27	$	—		1			$	(7)			$	(2,539)			$	(2,515)
Comprehensive income, net of tax	Comprehensive income, net of tax	—	—		7		—		—	—		272		279		Comprehensive income, net of tax		—		—		(10)		—		—		—				343				333
Share-based payment expense	Share-based payment expense	—	—		—		63		—	—		—		63		Share-based payment expense		—		—		—		55		—		—				—				55
Exercise of stock options and vesting of restricted stock units	Exercise of stock options and vesting of restricted stock units	11	—		—		—		—	—		—		0		Exercise of stock options and vesting of restricted stock units		12		—		—		—		—		—				—				—
Withholding taxes on net share settlement of stock-based compensation	Withholding taxes on net share settlement of stock-based compensation	—	—		—		(41)		—	—		—		(41)		Withholding taxes on net share settlement of stock-based compensation		—		—		—		(45)		—		—				—				(45)
Cash dividends paid on common stock, $0.01331 per share		—	—		—		(22)		—	—		(36)		(58)

Cash dividends paid on common stock, $0.014641 per share																Cash dividends paid on common stock, $0.014641 per share		—		—		—		(10)		—		—				(49)				(59)
Issuance of restricted stock in connection with business acquisition																Issuance of restricted stock in connection with business acquisition		—		—		—		—		—		—				—				—
Common stock repurchased	Common stock repurchased	—	—		—		—		86	(486)		—		(486)		Common stock repurchased		—		—		—		—		52		(324)				—				(324)
Common stock retired	Common stock retired	(83)	—		—		49		(83)	471		(520)		0		Common stock retired		(51)		—		—		—		(51)		318				(318)				—
Balance at September 30, 2020		4,283	$	4	$	0	$	0	5	$	(24)	$	(891)	$	(911)
Balance at September 30, 2021																Balance at September 30, 2021		4,020		$	4	$	17	$	—	2		$	(13)			$	(2,563)			$	(2,555)

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)

For the Nine Months Ended September 30, 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 0 $ 0 $ (2,057) $ (1,817)
Comprehensive income, net of tax — — 9 — — — 671 680
Share-based payment expense — — — 201 — — — 201
Exercise of stock options and vesting of restricted stock units 30 — — 8 — — — 8
Withholding taxes on net share settlement of stock-based compensation — — — (104) — — — (104)
Cash dividends paid on common stock, $0.0363 per share — — — (167) — — — (167)
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 — — — — 335 (1,966) — (1,966)
Common stock retired (334) (1) — (1,958) (334) 1,959 — 0
Balance at September 30, 2019 4,434 $ 4 $ 3 $ 638 1 $ (7) $ (1,386) $ (748)


For the Nine Months Ended September 30, 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 (loss) income, net of tax	—	—		(8)		—		—	—		808		800
Share-based payment expense	—	—		—		178		—	—		—		178
Exercise of stock options and vesting of restricted stock units	22	—		—		—		—	—		—		—
Withholding taxes on net share settlement of stock-based compensation	—	—		—		(84)		—	—		—		(84)

Cash dividends paid on common stock, $0.03993 per share	—	—		—		(139)		—	—		(36)		(175)

Common stock repurchased	—	—		—		—		156	(894)		—		(894)
Common stock retired	(151)	—		—		(350)		(151)	870		(520)		—
Balance at September 30, 2020	4,283	$	4	$	—	$	—	5	$	(24)	$	(891)	$	(911)

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)


For the Three Months Ended September 30, 2019
For the Three Months Ended September 30, 2020																For the Three Months Ended September 30, 2020
		Common Stock					Accumulated Other Comprehensive Income (Loss)		Additional Paid-in Capital	Treasury Stock							Accumulated Deficit		Total Stockholders’ Equity (Deficit)			Common Stock				Accumulated Other Comprehensive (Loss) Income		Additional Paid-in Capital				Treasury Stock								Accumulated Deficit	Total Stockholders’ Equity (Deficit)
(in millions)	(in millions)	Shares	Amount							Shares		Amount									(in millions)	Shares		Amount						Shares				Amount
Balance at June 30, 2019		4,497	$	4	$	8	$	1,159	5	$	(28)	$	(1,632)	$	(489)
Comprehensive income (loss), net of tax		—	—		(5)		—		—	—		246		241
Balance at June 30, 2020																Balance at June 30, 2020		4,355		$	4	$	(7)	$	(49)		2			$	(9)			$	(607)			$	(668)
Comprehensive income, net of tax																Comprehensive income, net of tax		—		—		7		—		—		—				272				279
Share-based payment expense	Share-based payment expense	—	—		—		67		—	—		—		67		Share-based payment expense		—		—		—		63		—		—				—				63
Exercise of stock options and vesting of restricted stock units	Exercise of stock options and vesting of restricted stock units	17	—		—		8		—	—		—		8		Exercise of stock options and vesting of restricted stock units		11		—		—		—		—		—				—				—
Withholding taxes on net share settlement of stock-based compensation	Withholding taxes on net share settlement of stock-based compensation	—	—		—		(57)		—	—		—		(57)		Withholding taxes on net share settlement of stock-based compensation		—		—		—		(41)		—		—				—				(41)
Cash dividends paid on common stock, $0.0121 per share		—	—		—		(54)		—	—		—		(54)

Cash dividends paid on common stock, $0.01331 per share																Cash dividends paid on common stock, $0.01331 per share		—		—		—		(22)		—		—				(36)				(58)

Common stock repurchased	Common stock repurchased	—	—		—		—		76	(464)		—		(464)		Common stock repurchased		—		—		—		—		86		(486)				—				(486)
Common stock retired	Common stock retired	(80)	—		—		(485)		(80)	485		—		0		Common stock retired		(83)		—		—		49		(83)		471				(520)				—
Balance at September 30, 2019		4,434	$	4	$	3	$	638	1	$	(7)	$	(1,386)	$	(748)
Balance at September 30, 2020																Balance at September 30, 2020		4,283		$	4	$	—	$	—	5		$	(24)			$	(891)			$	(911)

See accompanying notes to the unaudited consolidated financial statements.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


		For the Nine Months Ended September 30,							For the Nine Months Ended September 30,
(in millions)	(in millions)	2020		2019		(in millions)	2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	808	$	671	Net income	$	995	$	808
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	381		344		Depreciation and amortization	399		381
Non cash impairment and restructuring costs						Non cash impairment and restructuring costs	24		24
Non-cash interest expense, net of amortization of premium	Non-cash interest expense, net of amortization of premium	15		12		Non-cash interest expense, net of amortization of premium	16		15
Changes in fair value of contingent consideration						Changes in fair value of contingent consideration	(17)		—
Provision for doubtful accounts	Provision for doubtful accounts	48		40		Provision for doubtful accounts	37		48
Amortization of deferred income related to equity method investment	Amortization of deferred income related to equity method investment	(2)		(2)		Amortization of deferred income related to equity method investment	—		(2)
Loss on extinguishment of debt	Loss on extinguishment of debt	40		57		Loss on extinguishment of debt	83		40
Loss on unconsolidated entity investments, net	Loss on unconsolidated entity investments, net	8		16		Loss on unconsolidated entity investments, net	11		8

Dividend received from unconsolidated entity investment	Dividend received from unconsolidated entity investment	1		1		Dividend received from unconsolidated entity investment	1		1
Loss on restructuring		24		0

Gain on other investments	Gain on other investments	(1)		(3)		Gain on other investments	(4)		(1)
Share-based payment expense	Share-based payment expense	165		192		Share-based payment expense	149		165
Deferred income taxes		175		210
Deferred income tax expense						Deferred income tax expense	101		175
Amortization of right-of-use assets	Amortization of right-of-use assets	42		16		Amortization of right-of-use assets	46		42
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Receivables	Receivables	39		(85)		Receivables	(22)		39
Inventory	Inventory	(2)		8		Inventory	6		(2)
Related party, net	Related party, net	10		0		Related party, net	12		10
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(2)		(9)		Prepaid expenses and other current assets	(18)		(2)
Other long-term assets	Other long-term assets	14		8		Other long-term assets	(6)		14
Accounts payable and accrued expenses	Accounts payable and accrued expenses	(83)		79		Accounts payable and accrued expenses	(60)		(83)
Accrued interest	Accrued interest	(76)		(24)		Accrued interest	(94)		(76)
Deferred revenue	Deferred revenue	(147)		(46)		Deferred revenue	(236)		(147)
Operating lease liabilities	Operating lease liabilities	(39)		(4)		Operating lease liabilities	(47)		(39)
Other long-term liabilities	Other long-term liabilities	32		4		Other long-term liabilities	(5)		32
Net cash provided by operating activities	Net cash provided by operating activities	1,450		1,485		Net cash provided by operating activities	1,371		1,450
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Additions to property and equipment	Additions to property and equipment	(230)		(239)		Additions to property and equipment	(244)		(230)
Proceeds from insurance recoveries						Proceeds from insurance recoveries	225		—
Purchases of other investments	Purchases of other investments	(8)		(7)		Purchases of other investments	(3)		(8)
Acquisition of business, net of cash acquired	Acquisition of business, net of cash acquired	(28)		313		Acquisition of business, net of cash acquired	(14)		(28)
Sale of short-term investments		0		73

Investments in related parties and other equity investees	Investments in related parties and other equity investees	(89)		(14)		Investments in related parties and other equity investees	(16)		(89)
Repayment from related party	Repayment from related party	11		0		Repayment from related party	2		11
Net cash (used in) provided by investing activities		(344)		126
Net cash used in investing activities						Net cash used in investing activities	(50)		(344)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from exercise of stock options	Proceeds from exercise of stock options	0		8		Proceeds from exercise of stock options	6		—
Taxes paid from net share settlements for stock-based compensation	Taxes paid from net share settlements for stock-based compensation	(81)		(104)		Taxes paid from net share settlements for stock-based compensation	(88)		(81)
Revolving credit facility, net of deferred financing costs		0		(374)
Revolving credit facility, net						Revolving credit facility, net	(654)		—
Proceeds from long-term borrowings, net of costs	Proceeds from long-term borrowings, net of costs	1,481		2,715		Proceeds from long-term borrowings, net of costs	4,442		1,481
Proceeds from sale of capped call security		0		3

Principal payments of long-term borrowings	Principal payments of long-term borrowings	(1,506)		(1,663)		Principal payments of long-term borrowings	(3,503)		(1,506)
Payment of premiums on redemption of debt	Payment of premiums on redemption of debt	(31)		(45)		Payment of premiums on redemption of debt	(62)		(31)
Payment of contingent consideration for business acquisition						Payment of contingent consideration for business acquisition	(19)		—
Common stock repurchased and retired	Common stock repurchased and retired	(870)		(1,959)		Common stock repurchased and retired	(1,174)		(870)
Dividends paid	Dividends paid	(175)		(167)		Dividends paid	(180)		(175)
Net cash used in financing activities	Net cash used in financing activities	(1,182)		(1,586)		Net cash used in financing activities	(1,232)		(1,182)
Net (decrease) increase in cash, cash equivalents and restricted cash		(76)		25
Net increase (decrease) in cash, cash equivalents and restricted cash						Net increase (decrease) in cash, cash equivalents and restricted cash	89		(76)
Cash, cash equivalents and restricted cash at beginning of period ⁽¹⁾	Cash, cash equivalents and restricted cash at beginning of period ⁽¹⁾	120		65		Cash, cash equivalents and restricted cash at beginning of period (1)	83		120
Cash, cash equivalents and restricted cash at end of period ⁽¹⁾	Cash, cash equivalents and restricted cash at end of period ⁽¹⁾	$	44	$	90	Cash, cash equivalents and restricted cash at end of period (1)	$	172	$	44

See accompanying notes to the unaudited consolidated financial statements.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

(UNAUDITED)

For the Nine Months Ended September 30,
(in millions) 2020 2019
Supplemental Disclosure of Cash and Non-Cash Flow Information
Cash paid during the period for:
Interest, net of amounts capitalized $ 357 $ 300
Income taxes paid $ 26 $ 6
Non-cash investing and financing activities:
Treasury stock not yet settled $ (24) $ (7)
Fair value of shares issued related to acquisition of a business $ 0 $ 2,355
Accumulated other comprehensive (loss) income, net of tax $ (8) $ 9


	For the Nine Months Ended September 30,
(in millions)	2021		2020
Supplemental Disclosure of Cash and Non-Cash Flow Information
Cash paid during the period for:
Interest, net of amounts capitalized	$	390	$	357
Income taxes paid	$	57	$	26
Non-cash investing and financing activities:

Treasury stock not yet settled	$	6	$	(24)

Accumulated other comprehensive income (loss), net of tax	$	2	$	(8)

(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)	(in millions)	September 30, 2020		December 31, 2019		September 30, 2019		December 31, 2018		(in millions)	September 30, 2021		December 31, 2020		September 30, 2020		December 31, 2019
Cash and cash equivalents	Cash and cash equivalents	$	33	$	106	$	79	$	54	Cash and cash equivalents	$	164	$	71	$	33	$	106
Restricted cash included in Other long-term assets	Restricted cash included in Other long-term assets	11		14		11		11		Restricted cash included in Other long-term assets	8		12		11		14
Total cash, cash equivalents and restricted cash at end of period	Total cash, cash equivalents and restricted cash at end of period	$	44	$	120	$	90	$	65	Total cash, cash equivalents and restricted cash at end of period	$	172	$	83	$	44	$	120

See accompanying notes to the unaudited consolidated financial statements.

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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 2 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 and other content, as well as podcasts and infotainment services, in the United States on a subscription fee basis. Sirius XM bundles include live, curated and certain exclusive and on demand programming. The Sirius XM service is distributed through our 2 proprietary satellite radio systems and ~~through the internet~~streamed 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, which is sold under the SXM Media brand, direct sales of our satellite radios and accessories, and other ancillary services. As of September 30, ~~2020,~~2021, our Sirius XM business had approximately ~~34.4~~34.3 million subscribers.

In addition to our audio entertainment businesses, we provide connected vehicle services to several automakers. 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.

In May 2020, we terminated the Automatic Labs Inc. (“Automatic”) service, which was part of our connected vehicle services business. Automatic operated a service for consumers and auto dealers and offered an install-it-yourself adapter and mobile application, which transformed older vehicles into connected vehicles. During the nine months ended September 30, 2020, we recorded $24 of restructuring expenses in our unaudited consolidated statements of comprehensive income related to this termination of the service. ~~We did 0t record any restructuring expenses during the three months ended September 30, 2020.~~ Refer to Note 4 for more information.

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 (1) an ad-supported radio service, (2) a radio subscription service ~~called Pandora Plus,~~(Pandora Plus) and (3) an on-demand subscription service ~~called Pandora Premium.~~(Pandora Premium). As of September 30, ~~2020,~~2021, Pandora had approximately ~~6.4~~6.5 million subscribers.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

The majority of revenue from our Pandora business is generated from advertising on our Pandora ad-supported radio ~~service. In addition,~~service which is sold under the SXM Media brand. We also derive subscription revenue from our Pandora Plus and Pandora Premium subscribers.

Our Pandora business also sells advertising on audio platforms and in podcasts unaffiliated with us. Pandora has an arrangement 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. We also have arrangements to serve as the ad sales representative for certain podcasts. 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.

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~~SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(UNAUDITED)~~

~~(Dollars and shares in millions, except per share amounts)~~

~~On June 16, 2020, Sirius XM acquired Simplecast for $28 in cash. Simplecast is a podcast management and analytics platform. Refer to Note 3 for more information on this acquisition.~~

On February 10, 2020, Sirius XM invested $75 in SoundCloud. SoundCloud is ~~the world’s largest open audio platform, with~~ a ~~connected community~~next-generation music entertainment company, powered by an ecosystem of ~~creators,~~artists, listeners, and ~~curators.~~curators on the pulse of what's new, now and next in culture. 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 12 for more information on this investment.

~~Impact~~On June 16, 2020, Sirius XM acquired Simplecast for $28 in cash. Simplecast is a podcast management and analytics platform. Refer to Note 3 for more information on this acquisition.

On October 16, 2020, Sirius XM acquired certain assets and liabilities of Stitcher from The E.W. Scripps Company and certain of its subsidiaries (“Scripps”) for total consideration of $302, which included $266 in cash and $36 related to the acquisition date fair value of contingent consideration. As of September 30, 2021, we will potentially make up to $30 in additional payments to Scripps related to the contingent consideration based on Stitcher's achievement of certain financial metrics in 2021. During the three and nine months ended September 30, 2021, we recognized a $17 benefit related to the change in fair value of the ~~coronavirus (“COVID-19”) pandemic~~

The precise extent to which the COVID-19 pandemic will impact on our operational and financial performance will depend on various factors. To date, the pandemic has not increased our costs of or access to capital under our revolving credit facility and debt markets, 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 effect2021 portion of the ~~COVID-19 pandemic will not be fully reflected~~contingent consideration. The acquisition of Stitcher, in ~~certain of our results of operations until future periods.~~conjunction with Simplecast, created a full-service platform for podcast creators, publishers and advertisers. Refer to Note 3 for more information on this acquisition.

Liberty Media

As of September 30, ~~2020,~~2021, Liberty Media Corporation (“Liberty Media”) beneficially owned, directly and indirectly, approximately ~~74%~~79% 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 September 30, ~~2020~~2021 and for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 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,~~2020, which was filed with the SEC on February ~~4, 2020.~~2, 2021.

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 2 reportable segments as our chief

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

operating decision maker, our Chief Executive Officer, assesses performance and allocates resources based on the financial results of these segments. Refer to Note 18 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 and nine months ended September 30, ~~2020~~2021 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 19.

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

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~~SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(UNAUDITED)~~

~~(Dollars and shares in millions, except per share amounts)~~

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.

(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 September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, 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:


		September 30, 2020										December 31, 2019												September 30, 2021			December 31, 2020
		Level 1	Level 2		Level 3	Total Fair Value		Level 1	Level 2		Level 3	Total Fair Value			Level 1	Level 2		Level 3	Total Fair Value		Level 1	Level 2		Level 3	Total Fair Value
Liabilities:	Liabilities:													Liabilities:
Debt ^(a)	Debt ^(a)	0	$	8,255	0	$	8,255	0	$	8,378	0	$	8,378	Debt (a)	—	$	9,132	—	$	9,132	—	$	9,011	—	$	9,011

(a)The fair value for non-publicly traded debt 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 September 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive ~~loss~~income of $0$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 12 for additional information). During the three and nine months ended September 30, 2021, we recorded foreign currency translation adjustment (loss) income of $(10) and $2, respectively, net of tax benefit (expense) of $3 and $(1), respectively. During the three and nine months ended September 30, 2020, we recorded foreign currency translation adjustment income (loss) of $7 and $(8), respectively, net of a tax (expense) benefit of $(2) and $3, respectively. During the three and nine months ended September 30, 2019, we recorded foreign currency translation adjustment (loss) income of $(5) and $9, respectively, net of a tax benefit (expense) of $1 and $(4), respectively.

~~(3)Acquisitions~~

~~Simplecast~~

On June 16, 2020, Sirius XM acquired Simplecast for $28 in cash. Simplecast is a podcast management and analytics platform. In connection with the acquisition, we recognized goodwill of $17, amortizable intangible assets of $12, other assets of less than $1 and deferred tax liabilities of $1.

~~Pandora~~

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.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

(3)Acquisitions

Stitcher

On October 16, 2020, Sirius XM acquired certain assets and liabilities of Stitcher from Scripps for $266 in cash, which amount includes net working capital adjustments. The total purchase consideration of $302 includes $36 related to the acquisition date fair value of the contingent consideration. As of September 30, 2021, we will potentially make up to $30 in additional payments to Scripps related to the contingent consideration based on Stitcher's achievement of certain financial metrics in 2021. During the three and nine months ended September 30, 2021, we recognized a $17 benefit related to the change in fair value of the 2021 portion of the contingent consideration in Impairment, restructuring and acquisition costs on our unaudited consolidated statements of comprehensive income. The fair value of the contingent consideration was determined using a probability-weighted cash flow model and will be remeasured to fair value at each subsequent reporting period. Stitcher is included in our Pandora reporting unit.

The table below ~~shows~~summarizes the fair value of the ~~consideration paid in connection with~~assets acquired and liabilities assumed as of the ~~Pandora Acquisition:~~acquisition date:


	~~Total~~
~~Pandora common stock outstanding~~	~~272~~ Acquired Assets:
~~Exchange ratio~~	~~1.44~~
~~Common stock issued~~	~~392~~
~~Price per share of Holdings common stock~~Receivables, net	$	~~5.83~~21
~~Value of common stock issued to Pandora stockholders~~Prepaid expenses and other current assets	$		~~2,285~~16
~~Value of replacement equity awards attributable to pre-combination service~~Property and equipment	$		708
~~Consideration of common stock and replacement equity awards for pre-combination service~~Intangible assets	$		~~2,355~~38
~~Sirius XM’s Pandora preferred stock investment (related party fair value instrument) canceled~~Goodwill	$224
Operating lease right-of-use assets	~~524~~11
Total ~~consideration for Pandora Acquisition~~assets	$		~~2,879~~318
~~Value attributed to par at $0.001 par value~~
Assumed Liabilities:
Accounts payable and accrued expenses	$4
Deferred revenue	1
~~Balance to capital in excess of par value~~Operating lease current liabilities	2
Operating lease liabilities	9
Total liabilities	16
Total consideration	$	~~2,354~~302

The Stitcher acquisition was accounted for using the acquisition method of accounting and was financed through borrowings under our Credit Facility.

Simplecast

On June 16, 2020, Sirius XM acquired Simplecast for $28 in cash. Simplecast is a podcast management and analytics platform. Simplecast complements AdsWizz's advertising technology platform, allowing the company to offer podcasters of all sizes a powerful, comprehensive solution for publishing, analytics, distribution and advertising sales, and is included in the Pandora reporting unit. The Simplecast acquisition was accounted for using the acquisition method of accounting. We recognized goodwill of $17, amortizable intangible assets of $12, other assets of less than $1 and deferred tax liabilities of $1.

Other acquisitions

On April 23, 2021, we completed a small acquisition for total consideration of $27 which includes $20 in cash, a $3 deferred cash payment and $4 in restricted stock units. We recognized goodwill of $22 and other assets of $5.

Acquisition related costs of ~~$83 that~~$3 were ~~expensed in Acquisition and restructuring costs in our unaudited consolidated statements of comprehensive income during~~recognized for the nine months ended September 30, ~~2019.~~2021.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

(4)Restructuring Costs

During the nine months ended September 30, 2021, we evaluated our office space needs and, as a result of such analysis, surrendered certain office leases primarily in New York, New York and Oakland, California. We ~~did 0t record~~assessed the recoverability of the carrying value of the operating lease right of use assets related to these locations. Based on that assessment, the carrying values of the assets were not recoverable and we recorded an impairment of $18 to reduce the carrying value of the assets to their fair values. Additionally, we accrued expenses of $6 for which we will not recognize any future economic benefits and wrote off leasehold improvements of $1. The fair values of the assets were determined using a discounted cash flow model based on management's assumptions regarding the ability to sublease the locations and the remaining term of the leases. The total charge of $25 was recorded to Impairment, restructuring and acquisition ~~related~~ costs in our unaudited consolidated statement of comprehensive income for the nine months ended September 30, 2021. There were no restructuring charges recorded during the three months ended September 30, ~~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 $447 and $47, respectively, for the three months ended September 30, 2019 and $1,139 and $225, respectively, for the nine months ended September 30, 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 September 30, For the Nine Months Ended September 30,
2020 2019 2020 2019
Total revenue $ 2,027 $ 2,013 $ 5,857 $ 5,852
Net income $ 272 $ 245 $ 808 $ 690

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)Restructuring Costs~~2021.

In May 2020, we terminated the Automatic service, which was part of our connected services business. During the nine months ended September 30, 2020, we recorded $24 of restructuring expenses primarily related to the write down of property and equipment, definite lived intangible assets and certain other assets in Acquisition and restructuring costs in our unaudited consolidated statements of comprehensive income. We did 0tnot record any restructuring expenses during the three months ended September 30, 2020. The termination of the Automatic service does not meet the requirements to be reported as a discontinued operation in our unaudited consolidated statements of comprehensive income because the termination of the service does not represent a strategic shift that will have a major effect on our operations and financial results.

(5)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 0no participating securities during the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

Common stock equivalents of ~~106~~100 and 47106 for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and 6298 and 7662 for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, 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 September 30,						For the Nine Months Ended September 30,							For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Numerator:	Numerator:									Numerator:
Net Income available to common stockholders for basic net income per common share	Net Income available to common stockholders for basic net income per common share	$	272	$	246	$	808	$	671	Net Income available to common stockholders for basic net income per common share	$	343	$	272	$	995	$	808
Effect of interest on assumed conversions of convertible notes, net of tax	Effect of interest on assumed conversions of convertible notes, net of tax	2		2		6		5		Effect of interest on assumed conversions of convertible notes, net of tax	2		2		6		6
Net Income available to common stockholders for dilutive net income per common share	Net Income available to common stockholders for dilutive net income per common share	$	274	$	248	$	814	$	676	Net Income available to common stockholders for dilutive net income per common share	$	345	$	274	$	1,001	$	814
Denominator:	Denominator:									Denominator:
Weighted average common shares outstanding for basic net income per common share	Weighted average common shares outstanding for basic net income per common share	4,326		4,450		4,367		4,529		Weighted average common shares outstanding for basic net income per common share	4,044		4,326		4,086		4,367
Weighted average impact of assumed convertible notes	Weighted average impact of assumed convertible notes	29		29		29		28		Weighted average impact of assumed convertible notes	30		29		30		29
Weighted average impact of dilutive equity instruments	Weighted average impact of dilutive equity instruments	60		85		69		84		Weighted average impact of dilutive equity instruments	45		60		54		69
Weighted average shares for diluted net income per common share	Weighted average shares for diluted net income per common share	4,415		4,564		4,465		4,641		Weighted average shares for diluted net income per common share	4,119		4,415		4,170		4,465
Net income per common share:	Net income per common share:									Net income per common share:
Basic	Basic	$	0.06	$	0.06	$	0.19	$	0.15	Basic	$	0.08	$	0.06	$	0.24	$	0.19
Diluted	Diluted	$	0.06	$	0.05	$	0.18	$	0.15	Diluted	$	0.08	$	0.06	$	0.24	$	0.18

(6)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 and advertising customers, including advertising agencies 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.~~parties and do not expect issues in the foreseeable future.

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(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

Receivables, net, consists of the following:


		September 30, 2020		December 31, 2019			September 30, 2021		December 31, 2020
Gross customer accounts receivable	Gross customer accounts receivable	$	464	$	546	Gross customer accounts receivable	$	587	$	574
Allowance for doubtful accounts	Allowance for doubtful accounts	(16)		(14)		Allowance for doubtful accounts	(10)		(15)
Customer accounts receivable, net	Customer accounts receivable, net	$	448	$	532	Customer accounts receivable, net	$	577	$	559
Receivables from distributors	Receivables from distributors	105		113		Receivables from distributors	48		73
Other receivables	Other receivables	29		25		Other receivables	27		40
Total receivables, net	Total receivables, net	$	582	$	670	Total receivables, net	$	652	$	672

(7)Inventory, net

Inventory consists of finished goods and refurbished ~~goods, chipsets and other raw material components used in manufacturing radios.~~goods. 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:


		September 30, 2020		December 31, 2019			September 30, 2021		December 31, 2020
Raw materials		$	0	$	3

Finished goods	Finished goods	12		13		Finished goods	$	7	$	13
Allowance for obsolescence	Allowance for obsolescence	(2)		(5)		Allowance for obsolescence	(3)		(3)
Total inventory, net	Total inventory, net	$	10	$	11	Total inventory, net	$	4	$	10

(8)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 2 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 September 30, ~~2020.~~2021.

As of September 30, ~~2020,~~2021, there were no indicators of impairment, and 0no impairment losses were recorded for goodwill during the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020. As of September 30, ~~2020,~~2021, the cumulative balance of goodwill impairments recorded was $5,722, of which $4,766 ~~which~~ was recognized during the year ended December 31, 2008 and is included in the carrying ~~value~~amount of the goodwill allocated to our Sirius XM reporting unit and $956 was recognized during the year ended December 31, 2020 and is included in the carrying amount of the goodwill allocated to our Pandora reporting unit.

As of September 30, 2021, the carrying amount of goodwill for our Sirius XM and Pandora reporting units was $2,290 and $860, respectively. During the nine months ended September 30, 2021, we recorded $6 of goodwill related to purchase accounting adjustments for the acquisition of Stitcher and $22 of goodwill related to a small acquisition which was recorded to our Pandora reporting unit. As of December 31, 2020, the carrying amount of goodwill for our Sirius XM and Pandora reporting units was $2,290 and $1,570, respectively. We recorded additional goodwill of $17 during the nine months ended September 30, 2020 related to the acquisition of Simplecast in June 2020 which was recorded to our Pandora reporting unit. As of December 31, 2019, the carrying amount of goodwill for our Sirius XM and Pandora reporting units was $2,290 and $1,553,$832, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

(9)Intangible Assets

Our intangible assets include the following:


			September 30, 2020										December 31, 2019												September 30, 2021				December 31, 2020
		Weighted Average Useful Lives	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value			Weighted Average Useful Lives	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Indefinite life intangible assets:	Indefinite life intangible assets:														Indefinite life intangible assets:
FCC licenses	FCC licenses	Indefinite	$	2,084	$	—	$	2,084	$	2,084	$	—	$	2,084	FCC licenses	Indefinite	$	2,084	$	—	$	2,084	$	2,084	$	—	$	2,084
Trademarks	Trademarks	Indefinite	250		—		250		251		—		251		Trademarks	Indefinite	250		—		250		250		—		250
Definite life intangible assets:	Definite life intangible assets:														Definite life intangible assets:
OEM relationships	OEM relationships	15 years	220		(101)		119		220		(90)		130		OEM relationships	15 years	220		(116)		104		220		(105)		115
Licensing agreements	Licensing agreements	12 years	45		(44)		1		45		(42)		3		Licensing agreements	12 years	45		(45)		—		45		(45)		—
Software and technology	Software and technology	7 years	30		(16)		14		35		(25)		10		Software and technology	7 years	31		(18)		13		31		(16)		15
Due to Pandora Acquisition:
Due to Pandora and Stitcher Acquisitions:															Due to Pandora and Stitcher Acquisitions:
Indefinite life intangible assets:	Indefinite life intangible assets:														Indefinite life intangible assets:
Trademarks	Trademarks	Indefinite	$	331	$	—	$	331	$	331	$	—	$	331	Trademarks	Indefinite	311		—		311		311		—		311
Definite life intangible assets:	Definite life intangible assets:														Definite life intangible assets:
Customer relationships	Customer relationships	8 years	403		(89)		314		403		(49)		354		Customer relationships	8 years	441		(149)		292		441		(104)		337
Software and technology	Software and technology	5 years	373		(126)		247		373		(69)		304		Software and technology	5 years	373		(202)		171		373		(145)		228
Total intangible assets	Total intangible assets		$	3,736	$	(376)	$	3,360	$	3,742	$	(275)	$	3,467	Total intangible assets		$	3,755	$	(530)	$	3,225	$	3,755	$	(415)	$	3,340

Indefinite Life Intangible Assets

We have identified our FCC licenses and XM and Pandora trademarks as indefinite life intangible assets after considering the expected use of the assets, the regulatory and economic environment within which they are used and the effects of obsolescence on their use.

We hold FCC licenses to operate our satellite digital audio radio service and provide ancillary services. Each of the FCC licenses authorizes us to use radio spectrum, a reusable resource that does not deplete or exhaust over time.

Our annual impairment assessment of our identifiable indefinite lived intangible assets is performed as of the fourth quarter of each year. 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 the asset below its carrying value. If the carrying value of the intangible assets exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. As of September 30, 2021, there were no indicators of impairment, and 0 impairment loss was recognized for intangible assets with indefinite lives during the three and nine months ended September 30, 2021. During the nine months ended September 30, 2020, we recognized an impairment loss of less than $1 for intangible assets with indefinite lives related to the termination of the Automatic service. ~~NaN~~No impairment loss was recognized during the three months ended September 30, 2020. As of September 30, 2020, there were no other indicators of impairment. NaN impairment loss was recognized for intangible assets with indefinite lives during the three and nine months ended September 30, 2019.

Definite Life Intangible Assets

Amortization expense for all definite life intangible assets was ~~$37~~$38 and ~~$38~~$37 for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$113~~$115 and ~~$103~~$113 for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. There were retirements of definite lived intangible assets of $17, which included a loss of $4, due to the termination of the Automatic service, during the nine months ended September 30, 2020. ~~As part~~There were no retirements of ~~the Simplecast acquisition, $12 was allocated to identifiable~~definite lived intangible assets ~~subject to amortization and related to~~during the ~~assessed fair value of software and technology, which was determined by using the multi-period excess earnings method, as of the acquisition date.~~

nine months ended September 30, 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

The expected amortization expense for each of the fiscal years ~~2020~~2021 through ~~2024~~2025 and for periods thereafter is as follows:


Years ending December 31,	Years ending December 31,	Amount		Years ending December 31,	Amount
2020 (remaining)		$	37
2021		146
2021 (remaining)				2021 (remaining)	$	38
2022	2022	146		2022	154
2023	2023	136		2023	141
2024	2024	70		2024	75
2025				2025	69
Thereafter	Thereafter	160		Thereafter	103
Total definite life intangible assets, net	Total definite life intangible assets, net	$	695	Total definite life intangible assets, net	$	580

(10)Property and Equipment

Property and equipment, net, consists of the following:


		September 30, 2020		December 31, 2019			September 30, 2021		December 31, 2020
Satellite system	Satellite system	$	1,587	$	1,587	Satellite system	$	1,848	$	1,587
Terrestrial repeater network	Terrestrial repeater network	103		100		Terrestrial repeater network	105		105
Leasehold improvements	Leasehold improvements	106		105		Leasehold improvements	109		111
Broadcast studio equipment	Broadcast studio equipment	123		137		Broadcast studio equipment	108		100
Capitalized software and hardware	Capitalized software and hardware	1,201		1,086		Capitalized software and hardware	1,418		1,372
Satellite telemetry, tracking and control facilities	Satellite telemetry, tracking and control facilities	93		87		Satellite telemetry, tracking and control facilities	63		96
Furniture, fixtures, equipment and other	Furniture, fixtures, equipment and other	91		89		Furniture, fixtures, equipment and other	91		92
Land	Land	38		38		Land	38		38
Building	Building	63		63		Building	63		63
Construction in progress	Construction in progress	569		505		Construction in progress	288		510
Total property and equipment	Total property and equipment	3,974		3,797		Total property and equipment	4,131		4,074
Accumulated depreciation and amortization		(2,387)		(2,171)
Accumulated depreciation						Accumulated depreciation	(2,675)		(2,445)
Property and equipment, net	Property and equipment, net	$	1,587	$	1,626	Property and equipment, net	$	1,456	$	1,629

Construction in progress consists of the following:


		September 30, 2020		December 31, 2019			September 30, 2021		December 31, 2020
Satellite system	Satellite system	$	406	$	371	Satellite system	$	49	$	429
Terrestrial repeater network	Terrestrial repeater network	8		7		Terrestrial repeater network	11		8
Capitalized software and hardware	Capitalized software and hardware	144		107		Capitalized software and hardware	195		52
Other	Other	11		20		Other	33		21
Construction in progress	Construction in progress	$	569	$	505	Construction in progress	$	288	$	510

Depreciation and amortization expense on property and equipment was ~~$88~~$97 and ~~$80~~$88 for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$268~~$284 and ~~$241~~$268 for the nine months ended September 30, 2021 and 2020, respectively. We retired property and ~~2019,~~equipment of $47 and $54 during the three and nine months ended September 30, 2021, respectively. Property and equipment of $65, which included a loss of $13 related to the termination of the Automatic service, was retired during the nine months ended September 30, 2020. There were 0no retirements of property and equipment during the three ~~and nine~~ months ended September 30, ~~2019.~~2020.

We capitalize a portion of the interest on funds borrowed to finance the construction and launch of our satellites. Capitalized interest is recorded as part of the asset’s cost and depreciated over the satellite’s useful life. Capitalized interest costs were $5 and $4$1 and $5 for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$14~~$6 and ~~$12~~$14 for the nine ~~months ended September 30, 2020 and 2019, respectively, which related to the construction of our SXM-7 and SXM-8~~

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(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

~~satellites.~~months ended September 30, 2021 and 2020, respectively, which related to the construction of our SXM-8 satellite. We also capitalize a portion of share-based compensation related to employee time for capitalized software projects. Capitalized share-based compensation costs were $4 ~~and $2~~ for each of the three months ended September 30, 2021 and 2020 and ~~2019, respectively,~~$10 and $13 ~~and $9~~ for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Satellites

As of September 30, ~~2020,~~2021, we ~~owned~~operated a fleet of 56 satellites. Each satellite requires an FCC license, and prior to the expiration of each license, we are required to apply for a renewal of the FCC satellite license. The renewal and extension of our licenses is reasonably certain at minimal cost, which is expensed as incurred. The chart below provides certain information on our satellites as of September 30, ~~2020:~~2021:


Satellite Description	Satellite Description	Year Delivered	Estimated End of Depreciable Life	FCC License Expiration Year	Satellite Description	Year Delivered	Estimated End of Depreciable Life	FCC License Expiration Year

SIRIUS FM-5	SIRIUS FM-5	2009	2024	2025	SIRIUS FM-5	2009	2024	2025
SIRIUS FM-6	SIRIUS FM-6	2013	2028	2022	SIRIUS FM-6	2013	2028	2022
XM-3	XM-3	2005	2020	2021	XM-3	2005	2020	2026
XM-4	XM-4	2006	2021	2022	XM-4	2006	2021	2022
XM-5	XM-5	2010	2025	2026	XM-5	2010	2025	2026
SXM-8					SXM-8	2021	2036	2029

On December 13, 2020, our SXM-7 satellite was launched and in-orbit testing of SXM-7 began on January 4, 2021. During in-orbit testing of SXM-7, events occurred which caused failures of certain SXM-7 payload units. The evaluation of SXM-7 concluded that the satellite will not function as intended, which we considered to be a triggering event prompting the assessment as to whether the asset's carrying value of $220 was recoverable. In determining recoverability of SXM-7, we compared the asset's carrying value to the undiscounted cash flows derived from the satellite. SXM-7 was determined to be a total loss and therefore, we determined that the carrying value of the satellite is not recoverable and an impairment charge of $220 was recorded to Impairment, restructuring and acquisition costs in our unaudited consolidated statements of comprehensive income for the nine months ended September 30, 2021. SXM-7 remains in-orbit at its assigned orbital location, but is not being used to provide satellite radio service.

We procured insurance for SXM-7 to cover the risks associated with the satellite's launch and first year of in-orbit operation. The aggregate coverage under the insurance policies with respect to SXM-7 is $225. During the nine months ended September 30, 2021, we collected $225 of insurance recoveries. Of this amount, $80 and $220 have been recorded as a reduction to Impairment, restructuring and acquisition costs during the three and nine months ended September 30, 2021, respectively. The remaining $5 has been recorded in Other income during the three and nine months ended September 30, 2021.

Our SXM-8 satellite was successfully launched into a geostationary orbit on June 6, 2021 and was placed into service on September 8, 2021 following the completion of in-orbit testing. The SXM-8 satellite replaced the XM-3 satellite, which remains available as an in-orbit spare along with XM-5.

(11)Leases

We have operating and finance leases for offices, terrestrial repeaters, data centers and certain equipment. Our leases have remaining lease terms of less than 1 year to 17 years, some of which may include options to extend the leases for up to 5 years, and some of which may include options to terminate the leases within 1 year. We elected the practical expedient to account for the lease and non-lease components as a single component. Additionally, we elected the practical expedient to not recognize right-of-use assets or lease liabilities for short-term leases, which are those leases with a term of twelve months or less at the lease commencement date.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

The components of lease expense were as follows:


		For the Three Months Ended September 30,						For the Nine Months Ended September 30,							For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Operating lease cost	Operating lease cost	$	20	$	22	$	61	$	60	Operating lease cost	$	18	$	20	$	60	$	61
Finance lease cost	Finance lease cost	0		1		1		4		Finance lease cost	—		—		—		1
Sublease income	Sublease income	0		(1)		(1)		(3)		Sublease income	(2)		—		(4)		(1)
Total lease cost	Total lease cost	$	20	$	22	$	61	$	61	Total lease cost	$	16	$	20	$	56	$	61

During the nine months ended September 30, 2021, we ceased using certain leased locations and recorded an impairment charge of $18 to write down the carrying value of the right-of-use assets for these locations to their estimated fair values. Refer to Note 4 for additional information.

(12)Related Party Transactions

In the normal course of business, we enter into transactions with related parties such as Sirius XM Canada and SoundCloud.

Liberty Media

As of September 30, ~~2020,~~2021, Liberty Media beneficially owned, directly and indirectly, approximately ~~74%~~79% of the outstanding shares of our common stock. Liberty Media has ~~1 executive, 1 senior advisor~~3 of its executives and 1 of its directors on our board of directors. Gregory B. Maffei, the President and Chief Executive Officer of Liberty Media, is the Chairman of our board of directors.

Sirius XM Canada

Sirius XM holds a 70% equity interest and 33% voting interest in Sirius XM Canada, a privately held corporation. We own 591 shares of preferred stock of Sirius XM Canada, which has a liquidation preference of 1 Canadian dollar per share. Sirius XM also made a loan to Sirius XM Canada in the aggregate amount of $131. The loan is denominated in Canadian

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(UNAUDITED)~~

~~(Dollars and shares in millions, except per share amounts)~~

dollars and is considered a long-term investment with any unrealized gains or losses reported within Accumulated other comprehensive (loss) income. During the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, Sirius XM Canada repaid ~~$11~~$2 and ~~less than $1~~$11 of the principal amount of the loan, respectively.

Sirius XM has a Services Agreement and an Advisory Services Agreement with Sirius XM Canada. Each agreement has a thirty-year term. Pursuant to the Services Agreement, Sirius XM Canada currently pays Sirius XM 25% of its gross revenues on a monthly basis, and pursuant to the Advisory Services Agreement, Sirius XM Canada pays Sirius XM 5% of its gross revenues on a monthly basis.

Sirius XM Canada is accounted for as an equity method investment, and its results are not consolidated in our unaudited consolidated financial statements. Sirius XM Canada does not meet the requirements for consolidation as we do not have the ability to direct the most significant activities that impact Sirius XM Canada's economic performance.

Our related party long-term assets as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020 included the carrying value of our investment balance in Sirius XM Canada of ~~$320~~$338 and ~~$321,~~$332, respectively, and, as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, also included ~~$117~~$121 and ~~$131,~~$123, respectively, for the long-term value of the outstanding loan to Sirius XM Canada.

Sirius XM Canada paid gross dividends to us of less than $1 during ~~both~~each of the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, and $1 during ~~both~~each of the nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020. Dividends are first recorded as a reduction to our investment balance in Sirius XM Canada to the extent a balance exists and then as Other (expense) income for any remaining portion.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

We recorded revenue from Sirius XM Canada as Other revenue in our unaudited consolidated statements of comprehensive income of $25 ~~during both~~for each of the three months ended September 30, 2021 and 2020, and ~~2019,~~$76 and $73 ~~during both~~for the nine months ended September 30, 2021 and 2020, ~~and 2019.~~respectively.

SoundCloud

In February 2020, Sirius XM completed a $75 investment in SoundCloud's Series G Membership Units ("Series G Units"). The Series G Units are convertible at the option of the holders at any time into shares of ordinary membership units of SoundCloud at a ratio of 1 ordinary membership unit for each Series G Unit. The investment in SoundCloud is accounted for as an equity method investment which is recorded in Related party long-term assets in our unaudited consolidated balance ~~sheet.~~sheets. Sirius XM has appointed 2 individuals to serve on SoundCloud's 9-member board of managers. ~~For the three and nine months ended September 30, 2020,~~ Sirius XM's share of SoundCloud's net (loss) income ~~(loss)~~ was $(1) and less than $1 for the three months ended September 30, 2021 and 2020, respectively, and $(1)~~, respectively,~~ for each of the nine months ended September 30, 2021 and 2020, which was recorded in Other income (expense) in our unaudited consolidated statement of comprehensive income.

In addition to our investment in SoundCloud, Pandora has an agreement with SoundCloud to be its exclusive US ad sales representative. Through this arrangement, Pandora offers advertisers the ability to execute campaigns in the US across the Pandora and SoundCloud listening platforms. We recorded revenue share expense of $15 and $13 ~~related to this agreement during both~~for the three months ended September 30, 2021 and 2020, respectively, and ~~2019,~~$42 and $36 ~~and $24~~ for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. We also had related party liabilities of ~~$18~~$19 as of September 30, ~~2020~~2021 related to this agreement.

1921

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

(13)Debt

Our debt as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020 consisted of the following:

Carrying value^(a) at
Issuer / Borrower Issued Debt Maturity Date Interest Payable Principal Amount at September 30, 2020 September 30, 2020 December 31, 2019
Pandora
(b) (c) December 2015 1.75% Convertible Senior Notes December 1, 2020 semi-annually on June 1 and December 1 $ 1 $ 1 $ 1
Sirius XM
(d) July 2017 3.875% Senior Notes August 1, 2022 semi-annually on February 1 and August 1 1,000 997 995
Sirius XM
(d) (g) May 2013 4.625% Senior Notes May 15, 2023 semi-annually on May 15 and November 15 0 0 498
Pandora
(b) (e) June 2018
1.75% Convertible Senior Notes December 1, 2023 semi-annually on June 1 and December 1 193 168 163
Sirius XM
(d) July 2019 4.625% Senior Notes July 15, 2024 semi-annually on January 15 and July 15 1,500 1,487 1,485
Sirius XM
(d) (g) March 2015 5.375% Senior Notes April 15, 2025 semi-annually on April 15 and October 15 0 0 993
Sirius XM
(d) May 2016 5.375% Senior Notes July 15, 2026 semi-annually on January 15 and July 15 1,000 993 992
Sirius XM
(d) July 2017 5.00% Senior Notes August 1, 2027 semi-annually on February 1 and August 1 1,500 1,489 1,488
Sirius XM
(d) June 2019 5.500% Senior Notes July 1, 2029 semi-annually on January 1 and July 1 1,250 1,237 1,236
Sirius XM
(d) June 2020 4.125% Senior Notes July 1, 2030 semi-annually on January 1 and July 1 1,500 1,484 0
Sirius XM
(f) December 2012 Senior Secured Revolving Credit Facility (the "Credit Facility") June 29, 2023 variable fee paid quarterly 0 0 0
Sirius XM Various Finance leases Various n/a n/a 1 2
Total Debt 7,857 7,853
Less: total current maturities 2 2
Less: total deferred financing costs 10 9
Total long-term debt $ 7,845 $ 7,842

Principal Amount at

Carrying value(a) at

Issuer / Borrower

Issued

Debt

Maturity Date

Interest
Payable

September 30,
2021

September 30, 2021

December 31, 2020

Sirius XM
(b) (f)

July 2017

3.875% Senior Notes

August 1, 2022

semi-annually on February 1 and August 1

—

997

Pandora
(c) (d)

June 2018

1.75% Convertible Senior Notes

December 1, 2023

semi-annually on June 1 and December 1

193

175

170

Sirius XM
(b) (f)

July 2019

4.625% Senior Notes

July 15, 2024

semi-annually on January 15 and July 15

—

1,488

Sirius XM
(b) (f)

May 2016

5.375% Senior Notes

July 15, 2026

semi-annually on January 15 and July 15

—

993

Sirius XM
(b) (g)

August 2021

3.125% Senior Notes

September 1, 2026

semi-annually on March 1 and September 1

1,000

989

—

Sirius XM
(b)

July 2017

5.00% Senior Notes

August 1, 2027

semi-annually on February 1 and August 1

1,500

1,491

1,490

Sirius XM
(b)

June 2021

4.00% Senior Notes

July 15, 2028

semi-annually on January 15 and July 15

2,000

1,978

—

Sirius XM
(b)

June 2019

5.500% Senior Notes

July 1, 2029

semi-annually on January 1 and July 1

1,250

1,239

1,237

Sirius XM
(b)

June 2020

4.125% Senior Notes

July 1, 2030

semi-annually on January 1 and July 1

1,500

1,485

1,484

Sirius XM
(b) (g)

August 2021

3.875% Senior Notes

September 1, 2031

semi-annually on March 1 and September 1

1,500

1,483

—

Sirius XM
(e)

December 2012

Senior Secured Revolving Credit Facility (the "Credit Facility")

August 31, 2026

variable fee paid quarterly

—

649

Sirius XM

Various

Finance leases

Various

n/a

Total Debt

8,840

8,509

Less: total current maturities (g)

—

Less: total deferred financing costs

Total long-term debt

8,827

8,499

(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)~~(c)Holdings has unconditionally guaranteed all of the payment obligations of Pandora under these notes.

(d)We acquired $193 in principal amount of the 1.75% Convertible Senior Notes due 2023 as part of the acquisition of Pandora ~~Acquisition.~~Media, Inc. in 2019. 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

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~~SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(UNAUDITED)~~

~~(Dollars and shares in millions, except per share amounts)~~

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 September 30, ~~2020.~~2021. As a result, we have classified the debt as Long-term within our unaudited consolidated balance sheets.

~~(f)~~(e)~~The~~In August 2021, Sirius XM entered into an amendment to extend the maturity of the $1,750 Credit Facility ~~expires in June 2023.~~to August 31, 2026. 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

quarterly basis. The variable rate for the unused portion of the Credit Facility was 0.25% per annum as of September 30, ~~2020.~~2021. All of Sirius XM's outstanding borrowings under the Credit Facility are classified as Long-term debt within our unaudited 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 September 30, ~~2020.~~2021.

(f)On August 2, 2021, Sirius XM redeemed $1,000 in outstanding principal amount of the 3.875% Senior Notes due 2022 for an aggregate purchase price, including interest, of $1,019. On August 16, 2021, Sirius XM redeemed $1,500 in outstanding principal amount of the 4.625% Senior Notes due 2024 for an aggregate purchase price, including premium and interest, of $1,541. On September 2, 2021, Sirius XM redeemed $1,000 in outstanding principal amount of the 5.375% Senior Notes due 2026 for an aggregate purchase price, including premium and interest, of $1,034. During the three and nine months ended September 30, 2021, we recognized $83 to Loss on extinguishment of debt, consisting primarily of redemption premiums of $62, unamortized discount and unamortized deferred financing fees, as a result of these redemptions.

(g)On August 16, 2021, Sirius XM issued $1,000 aggregate principal amount of the 3.125% Senior Notes due 2026 and $1,500 aggregate principal amount of the 3.875% Senior Notes due 2031 with a net original issuance discount and deferred financing costs in aggregate of $13 and $19, respectively.

Retired Debt

On July 9, 2020, Sirius XM redeemed $500 inof its then outstanding ~~principal amount of the~~ 4.625% Senior Notes due 2023 for an aggregate purchase price, including premium and interest, of $507. On July 9, 2020, Sirius XM also redeemed $1,000 inof its then outstanding ~~principal amount of the~~ 5.375% Senior Notes due 2025 for an aggregate purchase price, including premium and interest, of $1,039. ~~Sirius XM used the proceeds from the 4.125% Senior Notes due 2030 for both redemptions.~~ During the three and nine months ended September 30, 2020, we recognized $40 to Loss on extinguishment of debt, consisting primarily of redemption premiums, unamortized discount and deferred financing fees, ~~and redemption premium,~~ as a result of ~~this redemption.~~

these redemptions.

Covenants and Restrictions

Under the Credit Facility, Sirius XM, our wholly owned subsidiary, must comply with a debt maintenance covenant that it cannot exceed a total leverage ratio, calculated as consolidated total debt to consolidated operating cash flow, of 5.0 to 1.0. The Credit Facility generally requires compliance with certain covenants that restrict Sirius XM's ability to, among other things, (i) incur additional indebtedness, (ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions with affiliates, (v) merge or consolidate with another person, (vi) sell, assign, lease or otherwise dispose of all or substantially all of Sirius XM's assets, and (vii) make voluntary prepayments of certain debt, in each case subject to exceptions.

The indentures governing Sirius XM's notes restrict Sirius XM's non-guarantor subsidiaries' ability to create, assume, incur or guarantee additional indebtedness without such non-guarantor subsidiary guaranteeing each such series of notes on a pari passu basis. The indentures governing the notes also contain covenants that, among other things, limit Sirius XM's ability and the ability of its subsidiaries to create certain liens; enter into sale/leaseback transactions; and merge or consolidate.

Under Sirius XM's debt agreements, the following generally constitute an event of default: (i) a default in the payment of interest; (ii) a default in the payment of principal; (iii) failure to comply with covenants; (iv) failure to pay other indebtedness after final maturity or acceleration of other indebtedness exceeding a specified amount; (v) certain events of bankruptcy; (vi) a judgment for payment of money exceeding a specified aggregate amount; and (vii) voidance of subsidiary guarantees, subject to grace periods where applicable. If an event of default occurs and is continuing, our debt could become immediately due and payable.

The ~~indentures~~indenture governing the Pandora ~~Convertible~~2023 Notes ~~contain~~(as defined below) contains covenants that limit Pandora’s ability to merge or consolidate and ~~provide~~provides for customary events of default, which include nonpayment of principal or interest, breach of covenants, payment defaults or acceleration of other indebtedness and certain events of bankruptcy.

At September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we were in compliance with our debt covenants.

Pandora Convertible Notes

Pandora's 1.75% Convertible Senior Notes due ~~2020 (the “Pandora 2020 Notes”) and Pandora's 1.75% Convertible Senior Notes due~~ 2023 (the “Pandora 2023 ~~Notes” and, together with the Pandora 2020 Notes, the “Pandora Convertible~~ Notes”) are unsecured, senior obligations of Pandora. Holdings has guaranteed the payment and performance obligations of Pandora under the Pandora ~~Convertible~~2023 Notes and the ~~indentures~~indenture governing the Pandora ~~Convertible~~2023 Notes.

The Pandora 2020 Notes will mature on December 1, 2020, unless earlier repurchased or redeemed by Pandora or converted in accordance with their terms. As of September 30, 2020, the conversion rate applicable to the Pandora 2020 Notes

2123

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

was 88.5816 shares of Holdings’ common stock per one thousand principal amount of the Pandora 2020 Notes plus carryforward adjustments not yet effected pursuant to the terms of the indenture governing the Pandora 2020 Notes. Pandora has irrevocably elected and determined to settle all conversion obligations from and after February 1, 2019 with respect to the Pandora 2020 Notes solely in cash. During the nine months ended September 30, 2019, we purchased $151 in aggregate principal amount of the Pandora 2020 Notes. See footnote (c) to the table above.

The Pandora 2023 Notes will mature on December 1, 2023, unless earlier repurchased or redeemed by Pandora or converted in accordance with their terms. As of September 30, ~~2020,~~2021, the conversion rate applicable to the Pandora 2023 Notes was ~~151.9533~~153.7797 shares of Holdings' common stock per one thousand principal amount of the Pandora 2023 Notes plus carryforward adjustments not yet effected pursuant to the terms of the indenture governing the Pandora 2023 Notes.

(14)Stockholders’ Equity

Common Stock, par value $0.001 per share

We are authorized to issue up to 9,000 shares of common stock. There were ~~4,283~~4,020 and ~~4,412~~4,176 shares of common stock issued and ~~4,278~~4,018 and ~~4,412~~4,173 shares of common stock outstanding on September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

As of September 30, ~~2020,~~2021, there were ~~272~~252 shares of common stock reserved for issuance in connection with outstanding stock-based awards to members of our board of directors, employees and third parties.

Quarterly Dividends

During the nine months ended September 30, ~~2020,~~2021, we declared and paid the following dividends:

Declaration Date Dividend Per Share Record Date Total Amount Payment Date
January 30, 2020 $ 0.01331 February 12, 2020 $ 59 February 28, 2020
April 21, 2020 $ 0.01331 May 8, 2020 $ 58 May 29, 2020
July 14, 2020 $ 0.01331 August 7, 2020 $ 58 August 31, 2020


Declaration Date	Dividend Per Share		Record Date	Total Amount		Payment Date
January 28, 2021	$	0.014641	February 10, 2021	$	61	February 26, 2021
April 20, 2021	$	0.014641	May 7, 2021	$	60	May 28, 2021
July 19, 2021	$	0.014641	August 6, 2021	$	59	August 30, 2021

Stock Repurchase Program

As of September 30, ~~2020,~~2021, our board of directors had approved for repurchase an aggregate of ~~$16,000~~$18,000 of our common stock. Our board of directors did not establish an end date for this stock repurchase program. Shares of common stock may be purchased from time to time on the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act, in privately negotiated transactions, including transactions with Liberty Media and its affiliates, or otherwise. As of September 30, ~~2020,~~2021, our cumulative repurchases since December 2012 under our stock repurchase program totaled ~~3,203~~3,504 shares for ~~$13,728,~~$15,576, and ~~$2,272~~$2,424 remained available for future share repurchases under our stock repurchase program.

The following table summarizes our total share repurchase activity for the nine months ended:


		September 30, 2020				September 30, 2019						September 30, 2021			September 30, 2020
Share Repurchase Type	Share Repurchase Type	Shares	Amount		Shares	Amount		Share Repurchase Type	Shares	Amount		Shares	Amount
Open Market Repurchases ^(a)	Open Market Repurchases ^(a)	156	$	894	335	$	1,966	Open Market Repurchases (a)	190	$	1,168	156	$	894

(a)As of September 30, ~~2020, $24~~2021, $13 of common stock repurchases had not settled, nor been retired, and were recorded as Treasury stock within our ~~unaudited~~ consolidated balance sheets and ~~unaudited~~ consolidated statement of stockholders’ equity (deficit).

Preferred Stock, par value $0.001 per share

We are authorized to issue up to 50 shares of undesignated preferred stock with a liquidation preference of $0.001 per share. There were 0no shares of preferred stock issued or outstanding as of September 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

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~~SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(UNAUDITED)~~

~~(Dollars and shares in millions, except per share amounts)~~

(15)Benefit Plans

We recognized share-based payment expense of ~~$58~~$51 and ~~$65~~$58 for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$165~~$149 and ~~$192~~$165 for the nine months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively. This amount includes $21 of share-based compensation expense recorded in Acquisition and restructuring costs in our unaudited consolidated statements of comprehensive income during the nine months ended September 30, 2019.

2015 Long-Term Stock Incentive Plan

In May 2015, our stockholders approved the Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan (the “2015 Plan”). Employees, consultants and members of our board of directors are eligible to receive awards under the 2015 Plan. The

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

2015 Plan provides for the grant of stock options, restricted stock awards, restricted stock units and other stock-based awards that the ~~compensation committee~~Compensation Committee of our ~~board~~Board of ~~directors~~Directors deems appropriate. Stock-based awards granted under the 2015 Plan are generally subject to a graded vesting requirement, which is generally three to four years from the grant date. Stock options generally expire ten years from the date of grant. Restricted stock units include performance-based restricted stock units (“PRSUs”), the vesting of which are subject to the achievement of performance goals and the employee's continued employment and generally cliff vest on the third anniversary of the grant date. Each restricted stock unit entitles the holder to receive 1 share of common stock upon vesting. As of September 30, ~~2020, 142~~2021, 128 shares of common stock were available for future grants under the 2015 Plan.

In February 2021, the Compensation Committee of our Board of Directors approved a modification to the design of our long-term equity compensation program for our senior management. The Compensation Committee intends to award equity-based compensation to our senior management in the form of: 25% stock options, which awards will vest in installments on the first 3 anniversaries of the date of grant; 25% restricted stock units, which awards will vest in installments on the first 3 anniversaries of the date of grant; 25% PRSUs, which will cliff vest on the third anniversary of the date of grant after a two-year performance period if the free cash flow target established by the Compensation Committee is achieved; and 25% PRSUs, which will cliff vest after a three-year performance period based on the performance of our common stock relative to the companies included in the S&P 500 Index. We refer to this performance measure as a relative “TSR” or “total stockholder return” metric. PRSUs based on the relative total stockholder return metric will only vest if our performance achieves at least the 25th percentile, with a target payout requiring performance at the 50th percentile. The settlement of PRSUs earned in respect of the applicable three-year performance period will be generally subject to the executive’s continued employment with us through the date the total stockholder return performance is certified by the Compensation Committee.

In connection with ~~the~~our February 2019 acquisition of Pandora, ~~Acquisition,~~ we assumed all shares available for issuance (including any shares that later become available for issuance in accordance with the terms of the applicable plans) under each of the 2014 Stock Incentive Plan of AdsWizz Inc., the Pandora Media, Inc. 2011 Equity Incentive Plan, the Pandora Media, Inc. 2004 Stock Plan and the TheSavageBeast.com, Inc. 2000 Stock Incentive Plan, which were previously approved by stockholders of Pandora or the applicable adopting entity. All shares available under these stock plans became additional shares available for grant pursuant to the terms of the 2015 Plan (as adjusted, to the extent appropriate, to reflect the application of the exchange ratio). Subject to certain limitations set forth in the 2015 Plan, such shares may be used for awards under the 2015 Plan.

Other Plans

We maintain 6 share-based benefit plans in addition to the 2015 Plan — the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan, the Amended and Restated Sirius Satellite Radio 2003 Long-Term Stock Incentive Plan, the 2014 Stock Incentive Plan of AdsWizz Inc., the Pandora Media, Inc. 2011 Equity Incentive Plan, the Pandora Media, Inc. 2004 Stock Plan and the TheSavageBeast.com, Inc. 2000 Stock Incentive Plan. Excluding dividend equivalent units granted as a result of a declared dividend, no further awards may be made under these plans.

The following table summarizes the weighted-average assumptions used to compute the fair value of options granted to ~~employees:~~employees, members of our board of directors and non-employees:

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2020 2020 2019
Risk-free interest rate 0.2% 1.3% 2.5%
Expected life of options — years 3.79 3.82 3.36
Expected stock price volatility 34% 25% 26%
Expected dividend yield 0.9% 0.7% 0.8%

~~There were 0 options granted to employees during the three months ended September 30, 2019.~~


	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2021	2020	2021	2020
Risk-free interest rate	0.5%	0.2%	0.6%	1.3%
Expected life of options — years	3.83	3.79	6.06	3.82
Expected stock price volatility	32%	34%	33%	25%
Expected dividend yield	0.9%	0.9%	1.0%	0.7%

2325

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

The following table summarizes stock option activity under our share-based plans for the nine months ended September 30, ~~2020:~~2021:


		Options	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value			Options	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value

Outstanding as of December 31, 2019		208	$	4.46
Outstanding as of December 31, 2020								Outstanding as of December 31, 2020	184	$	4.73
Granted	Granted	8	$	7.16				Granted	54	$	6.14
Exercised	Exercised	(18)	$	3.69				Exercised	(63)	$	3.96
Forfeited, cancelled or expired	Forfeited, cancelled or expired	(2)	$	6.21				Forfeited, cancelled or expired	(5)	$	6.72
Outstanding as of September 30, 2020		196	$	4.61	4.77	$	206
Exercisable as of September 30, 2020		154	$	4.25	4.13	$	195
Outstanding as of September 30, 2021								Outstanding as of September 30, 2021	170	$	5.40	5.85	$	144
Exercisable as of September 30, 2021								Exercisable as of September 30, 2021	99	$	4.80	4.79	$	142

The weighted average grant date fair value per stock option granted during the nine months ended September 30, ~~2020~~2021 was ~~$1.42.~~$1.77. The total intrinsic value of stock options exercised during the nine months ended September 30, 2021 and 2020 was $149 and ~~2019 was~~ $53, ~~and $83,~~ respectively. During the nine months ended September 30, ~~2020,~~2021, the number of net settled shares issued as a result of stock option exercises was 5.20.

We recognized share-based payment expense associated with stock options of ~~$11~~$10 and ~~$14~~$11 for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$34~~$32 and ~~$49~~$34 for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

The following table summarizes the restricted stock unit, including PRSU, activity under our share-based plans for the nine months ended September 30, ~~2020:~~2021:


		Shares	Grant Date Fair Value Per Share			Shares	Grant Date Fair Value Per Share

Nonvested as of December 31, 2019		75	$	5.95
Nonvested as of December 31, 2020					Nonvested as of December 31, 2020	75	$	6.06
Granted	Granted	33	$	6.14	Granted	39	$	6.35
Vested	Vested	(28)	$	5.82	Vested	(24)	$	6.02
Forfeited	Forfeited	(4)	$	6.00	Forfeited	(8)	$	6.09
Nonvested as of September 30, 2020		76	$	6.07
Nonvested as of September 30, 2021					Nonvested as of September 30, 2021	82	$	6.21

The total intrinsic value of restricted stock units, including PRSUs, vesting during the nine months ended September 30, 2021 and 2020 was $154 and ~~2019 was~~ $168, ~~and $192,~~ respectively. During the nine months ended September 30, ~~2020,~~2021, the number of net settled shares issued as a result of restricted stock units vesting totaled ~~17.~~15. During the nine months ended September 30, ~~2020,~~2021, we granted 37 PRSUs to certain employees. We believe it is probable that the performance target applicable to these PRSUs will be achieved.

In connection with the cash dividends paid during the nine months ended September 30, ~~2020,~~2021, we granted less than 1 restricted stock units, including PRSUs, in accordance with the terms of existing award agreements. These grants did not result in any additional incremental share-based payment expense being recognized during the nine months ended September 30, ~~2020.~~2021.

We recognized share-based payment expense associated with restricted stock units, including PRSUs, of ~~$47~~$41 and ~~$51~~$47 for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$131~~$117 and ~~$143~~$131 for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Total unrecognized compensation costs related to unvested share-based payment awards for stock options and restricted stock units, including PRSUs, granted to employees, members of our board of directors and third parties at September 30, ~~2020~~2021 and December 31, ~~2019~~2020 was ~~$418~~$513 and ~~$415,~~$385, respectively. The total unrecognized compensation costs at September 30, ~~2020~~2021 are expected to be recognized over a weighted-average period of ~~2.7~~2.6 years.

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(Dollars and shares in millions, except per share amounts)

401(k) Savings Plans

Sirius XM Radio Inc. 401(k) Savings Plan

Sirius XM sponsors the Sirius XM Radio Inc. 401(k) Savings Plan (the “Sirius XM Plan”) for eligible employees. The Sirius XM Plan allows eligible employees to voluntarily contribute from 1% to 50% of their pre-tax eligible earnings, subject to certain defined limits. We match 50% of an employee’s voluntary contributions per pay period on the first 6% of an employee’s pre-tax salary up to a maximum of 3% of eligible compensation. We may also make additional discretionary matching, true-up matching and non-elective contributions to the Sirius XM Plan. Employer matching contributions under the Sirius XM Plan vest at a rate of 33.33% for each year of employment and are fully vested after three years of employment for all current and future contributions. Our cash employer matching contributions are not used to purchase shares of our common stock on the open market, unless the employee elects our common stock as their investment option for this contribution.

~~Pandora Media, LLC 401(k) Profit Sharing Plan and Trust~~

~~Pandora sponsors~~ In October 2020, the Pandora Media, LLC 401(k) Profit Sharing Plan and Trust (the “Pandora Plan”) for eligible employees. The Pandora Plan allows eligible employees to voluntarily contribute from 1% to 75% of their pre-tax eligible earnings, subject to certain defined limits. Effective January 1, 2020, we began matching 50% of an employee’s voluntary contributions per pay period onmerged with the ~~first 6% of an employee’s pre-tax salary up to a maximum of 3% of eligible compensation.~~Sirius XM Plan.

We recognized expenses of $4 ~~and $2~~ for each of the three months ended September 30, 2021 and 2020, and ~~2019, respectively,~~$17 and $12 ~~and $6~~ for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, in connection with the Sirius XM and Pandora Plans.

Sirius XM Holdings Inc. Deferred Compensation Plan

The Sirius XM Holdings Inc. Deferred Compensation Plan (the “DCP”) allows members of our board of directors and certain eligible employees to defer all or a portion of their base salary, cash incentive compensation and/or board of directors’ cash compensation, as applicable. Pursuant to the terms of the DCP, we may elect to make additional contributions beyond amounts deferred by participants, but we are under no obligation to do so. We have established a grantor (or “rabbi”) trust to facilitate the payment of our obligations under the DCP.

Contributions to the DCP, net of withdrawals, were less than $1 and $1 for the three months ended September 30, ~~2020~~2021 and ~~2019 were $1 and less than $1,~~2020, respectively, and ~~were~~$3 and $8 ~~and $7~~ for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the fair value of the investments held in the trust were ~~$43~~$53 and ~~$34,~~$46, respectively, which is included in Other long-term assets in our unaudited consolidated balance sheets and classified as trading securities. Trading gains and losses associated with these investments are recorded in Other (expense) income within our unaudited consolidated statements of comprehensive income. The associated liability is recorded within Other long-term liabilities in our unaudited consolidated balance sheets, and any increase or decrease in the liability is recorded in General and administrative expense within our unaudited consolidated statements of comprehensive income. We recorded (losses) gains on investments held in the trust of ~~$2 and~~ less than $1$(1) and $2 for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and $1$4 and $3$1 for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

(16)Commitments and Contingencies

The following table summarizes our expected contractual cash commitments as of September 30, 2021:


	2021		2022		2023		2024		2025		Thereafter		Total
Debt obligations	$	—	$	—	$	193	$	—	$	—	$	8,750	$	8,943
Cash interest payments	3		392		383		379		379		1,357		2,893
Satellite and transmission	11		3		2		2		2		10		30
Programming and content	114		416		329		193		128		197		1,377
Sales and marketing	13		48		14		4		3		6		88
Satellite incentive payments	2		7		7		8		7		23		54
Operating lease obligations	13		73		64		50		47		136		383
Royalties, minimum guarantees and other	100		287		605		21		7		—		1,020
Total (1)	$	256	$	1,226	$	1,597	$	657	$	573	$	10,479	$	14,788

(1)The table does not include our reserve for uncertain tax positions, which at September 30, 2021 totaled $26.

Debt obligations. Debt obligations include principal payments on outstanding debt and finance lease obligations.

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~~(16)Commitments and Contingencies~~

~~The following table summarizes our expected contractual cash commitments as of September 30, 2020:~~

2020 2021 2022 2023 2024 Thereafter Total
Debt obligations $ 1 $ 1 $ 1,000 $ 193 $ 1,500 $ 5,250 $ 7,945
Cash interest payments 3 379 375 335 329 1,048 2,469
Satellite and transmission 19 48 2 1 1 2 73
Programming and content 72 261 169 89 43 97 731
Sales and marketing 14 28 18 9 3 8 80
Satellite incentive payments 1 8 9 9 9 47 83
Operating lease obligations 15 75 67 60 46 180 443
Royalties, minimum guarantees and other 130 279 196 22 7 0 634
Total ⁽¹⁾
$ 255 $ 1,079 $ 1,836 $ 718 $ 1,938 $ 6,632 $ 12,458

~~(1)The table does not include our reserve for uncertain tax positions, which at September 30, 2020 totaled $26.~~

~~Debt obligations.~~ ~~Debt obligations include principal payments on outstanding debt and finance lease obligations.~~

Cash interest payments. Cash interest payments include interest due on outstanding debt and capital lease payments through maturity.

Satellite and transmission. We have entered into agreements with ~~several~~a third ~~parties~~party to design and build ~~launch~~2 new satellites, SXM-9 and ~~insure 2 satellites, SXM-7 and SXM-8.~~SXM-10. We also have entered into agreements with third parties to operate and maintain satellite telemetry, tracking and control facilities and certain components of our terrestrial repeater networks.

Programming and content. We have entered into various programming and content agreements. Under the terms of these agreements, our obligations include fixed payments, advertising commitments and revenue sharing arrangements. In certain of these agreements, the future revenue sharing costs are dependent upon many factors and are difficult to estimate; therefore, they are not included in our minimum contractual cash commitments.

Sales and marketing. We have entered into various marketing, sponsorship and distribution agreements to promote our brands and are obligated to make payments to sponsors, retailers, automakers, radio manufacturers and other third parties under these agreements. Certain programming and content agreements also require us to purchase advertising on properties owned or controlled by the licensors.

Satellite incentive payments. Boeing Satellite Systems International, Inc., the manufacturer of certain of our in-orbit satellites, may be entitled to future in-orbit performance payments upon XM-4 meeting its fifteen-year design life, which we expect to occur. Boeing may also be entitled to up to $10 of additional incentive payments if our XM-4 satellite continues to operate above baseline specifications during the five years beyond the satellite’s fifteen-year design life.

Maxar Technologies (formerly Space Systems/Loral), the manufacturer of certain of our in-orbit satellites, may be entitled to future in-orbit performance payments upon XM-5, SIRIUS FM-5, ~~and~~ SIRIUS FM-6, and SXM-8 meeting their fifteen-year design life, which we expect to occur.

Operating lease obligations. We have entered into both cancelable and non-cancelable operating leases for office space, terrestrial repeaters, data centers and equipment. These leases provide for minimum lease payments, additional operating expense charges, leasehold improvements and rent escalations that have initial terms ranging from one to fifteen years, and certain leases have options to renew.

Royalties, Minimum Guarantees and Other. We have entered into music royalty arrangements that include fixed payments. Certain of our content agreements also contain minimum ~~guarantees and require that we make upfront minimum guaranteed payments.~~guarantees. During the nine months ended September 30, ~~2020,~~2021, we prepaid $5 in content costs related to minimum guarantees. As of September 30, ~~2020,~~2021, we had future fixed minimum guarantee commitments of ~~$35,~~$576, of which ~~$22~~$172 will be

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~~(Dollars and shares in millions, except per share amounts)~~

paid in ~~2020~~2021 and the remainder will be paid thereafter. On a quarterly basis, we record the greater of the cumulative actual content costs incurred or the cumulative minimum guarantee based on forecasted usage for the minimum guarantee period. The minimum guarantee period is the period of time that the minimum guarantee relates to, as specified in each agreement, which may be annual or a longer period. The cumulative minimum guarantee, based on forecasted usage, considers factors such as listening hours, revenue, subscribers and other terms of each agreement that impact our expected attainment or recoupment of the minimum guarantees based on the relative attribution method.

Several of our content agreements also include provisions related to the royalty payments and structures of those agreements relative to other content licensing arrangements, which, if triggered, ~~could~~ cause our payments under those agreements to escalate. In addition, record labels, publishers and performing rights organizations (“PROs”) with whom we have entered into direct license agreements have the right to audit our content payments, and ~~any~~ such ~~audit could~~audits often result in disputes over whether we have paid the proper content costs.

We have also entered into various agreements with third parties for general operating purposes. The cost of our common stock acquired in our capital return program but not paid for as of September 30, ~~2020~~2021 was also included in this category.

In addition to the minimum contractual cash commitments described above, we have entered into other variable cost arrangements. These future costs are dependent upon many factors and are difficult to anticipate; however, these costs may be substantial. We may enter into additional programming, distribution, marketing and other agreements that contain similar variable cost provisions. We also have a surety bond of approximately $45 primarily used as security against non-performance

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in the normal course of business. We do not have any other significant off-balance sheet financing arrangements that are reasonably likely to have a material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Legal Proceedings

In the ordinary course of business, we are a defendant or party to various claims and lawsuits, including those discussed below.

We record a liability when we believe that it is both probable that a liability will be incurred, and the amount of loss can be reasonably estimated. We evaluate developments in legal matters that could affect the amount of liability that has been previously accrued and make adjustments as appropriate. Significant judgment is required to determine both probability and the estimated amount of a loss or potential loss. We may be unable to reasonably estimate the reasonably possible loss or range of loss for a particular legal contingency for various reasons, including, among others, because: (i) the damages sought are indeterminate; (ii) the proceedings are in the relative early stages; (iii) there is uncertainty as to the outcome of pending proceedings (including motions and appeals); (iv) there is uncertainty as to the likelihood of settlement and the outcome of any negotiations with respect thereto; (v) there remain significant factual issues to be determined or resolved; (vi) the relevant law is unsettled; or (vii) the proceedings involve novel or untested legal theories. In such instances, there may be considerable uncertainty regarding the ultimate resolution of such matters, including the likelihood or magnitude of a possible eventual loss, if any.

Pre-1972 Sound Recording Litigation. On October 2, 2014, Flo & Eddie Inc. filed a class action suit against Pandora in the federal district court for the Central District of California. The complaint alleges a violation of California Civil Code Section 980, unfair competition, misappropriation and conversion in connection with the public performance of sound recordings recorded prior to February 15, 1972 (which we refer to as, “pre-1972 recordings”). On December 19, 2014, Pandora filed a motion to strike the complaint pursuant to California’s Anti-Strategic Lawsuit Against Public Participation (“Anti-SLAPP”) statute, which following denial of Pandora’s motion was appealed to the Ninth Circuit Court of Appeals. In March 2017, the Ninth Circuit requested certification to the California Supreme Court on the substantive legal questions. The California Supreme Court accepted certification. In May 2019, the California Supreme Court issued an order dismissing consideration of the certified questions on the basis that, following the enactment of the Orrin G. Hatch-Bob Goodlatte Music Modernization Act, Pub. L. No. 115-264, 132 Stat. 3676 (2018) (the “MMA”), resolution of the questions posed by the Ninth Circuit Court of Appeals was no longer “necessary to . . . settle an important question of law.”

The MMA grants a potential federal preemption defense to the claims asserted in the aforementioned lawsuits. In July 2019, Pandora took steps to avail itself of this preemption defense, including making the required payments under the MMA for

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~~(Dollars and shares in millions, except per share amounts)~~

certain of its uses of pre-1972 recordings. Based on the federal preemption contained in the MMA (along with other considerations), Pandora asked the Ninth Circuit to order the dismissal of the Flo & Eddie, Inc. v. Pandora Media, Inc. case. On October 17, 2019, the Ninth Circuit Court of Appeals issued a memorandum disposition concluding that the question of whether the MMA preempts Flo and Eddie's claims challenging Pandora's performance of pre-1972 recordings “depends on various unanswered factual questions” and remanded the case to the District Court for further proceedings.

In October 2020, the District Court denied Pandora’s renewed motion to dismiss the case under California’s anti-SLAPP statute, finding the case no longer qualified for anti-SLAPP due to intervening changes in the law, and denied Pandora’s renewed attempt to end the case. Alternatively, the District Court ruled that the preemption defense likely did not apply to Flo & Eddie’s claims, in part because the District Court believed that the MMA did not apply retroactively. Pandora promptly appealed the District Court’s decision to the Ninth Circuit, and moved to stay appellate briefing pending the appeal of a related case against Sirius XM. On January 13, 2021, the Ninth Circuit issued an order granting the stay of appellate proceedings pending the resolution of a related case against Sirius XM.

On August 23, 2021, the United States Court of Appeals for the Ninth Circuit issued an Opinion in a related case, Flo & Eddie Inc. v. Sirius XM Radio Inc. The related case also concerned a class action suit brought by Flo & Eddie Inc. regarding the public performance of pre-1972 recordings under California law. Relying on California’s copyright statute, Flo & Eddie argued that California law gave it the “exclusive ownership” of its pre-1972 songs, including the right of public performance. The Ninth Circuit reversed the District Court’s grant of partial summary judgment to Flo & Eddie Inc. The Ninth Circuit held that the District Court in this related case erred in concluding that “exclusive ownership” under California’s copyright statute

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included the right of public performance. The Ninth Circuit remanded the case for entry of judgment consistent with the terms of the parties’ contingent settlement agreement, and on October 6, 2021, the parties to the related case stipulated to its dismissal with prejudice.

Following issuance of the Flo & Eddie Inc. v. Sirius XM Radio Inc. opinion, on September 3, 2021, the Ninth Circuit lifted the stay of appellate proceedings in Flo & Eddie, Inc. v. Pandora Media, LLC. The Flo & Eddie Inc. v. Sirius XM Radio Inc. decision is precedential in the Ninth Circuit, and therefore we believe substantially narrows the claims that Flo & Eddie may continue to assert against Pandora. We believe we have substantial defenses to the remaining claims asserted in this action, and we intend to defend ~~these actions~~this action vigorously.

~~Copyright Royalty Board Proceeding to Determine the Rate for Statutory Webcasting~~. Pursuant to Sections 112 and 114 of the Copyright Act, the Copyright Royalties Board (the "CRB") initiated a proceeding in January 2019 to set the rates and terms by which webcasters may perform sound recordings via digital transmission over the internet and make ephemeral reproductions of those recordings during the 2021-2025 rate period under the authority of statutory licenses provided under Sections 112 and 114 of the Copyright Act. We filed a petition to participate in the proceeding on behalf of our Sirius XM and Pandora businesses, as did other webcasters including Google Inc. and the National Association of Broadcasters. SoundExchange, a collective organization that collects and distributes digital performance royalties to artists and copyright holders, represents the various copyright owner participants in the proceeding, including Sony Music Entertainment, Universal Music Group and Warner Music Group. Because the proceeding focuses on setting statutory rates for non-interactive online music streaming (commonly identified as “webcasting”), the proceeding will set the rates that our Pandora business pays for music streaming on its free, ad-supported tier and that our Sirius XM business pays for streaming on its subscription internet radio service. This proceeding will not set the rates that we pay for our other music offerings (satellite radio, business establishment services) or that we pay for interactive streaming on our Pandora Plus and Pandora Premium services.

In September 2019, the participants filed written direct statements, including proposed rates and terms for the 2021-2025 period. We and other webcaster participants proposed rates below the existing statutory rates, which for commercial webcasters are currently set at $0.0018 per performance for non-subscription transmissions (such as offered by our Pandora ad-supported business) and $0.0024 per performance for subscription transmissions (such as offered by our Sirius XM internet radio service). SoundExchange has proposed increasing the commercial webcasting rates to $0.0028 per performance for non-subscription transmissions and $0.0031 per performance for subscription transmissions.

~~During the summer, the CRB held a multi-week hearing which concluded in September 2020. An initial determination by the CRB is expected to be issued during the first half of 2021.~~

Other Matters. In the ordinary course of business, we are a defendant in various other lawsuits and arbitration proceedings, including derivative actions; actions filed by subscribers, both on behalf of themselves and on a class action basis; former employees; parties to contracts or leases; and owners of patents, trademarks, copyrights or other intellectual property. None of these other matters, in our opinion, is likely to have a material adverse effect on our business, financial condition or results of operations.

(17)Income Taxes

We file a consolidated federal income tax return for all of our wholly owned subsidiaries. For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, income tax expense was ~~$72~~$90 and ~~$70,~~$72, respectively, and ~~$226~~$157 and ~~$227~~$226 for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Our effective tax rate for the three months ended September 30, 2021 and 2020 was 20.8% and ~~2019 was~~ 20.9% ~~and 22.2%~~, respectively. Our effective tax rate for the nine months ended September 30, 2021 and 2020 was 13.6% and ~~2019 was~~ 21.9% ~~and 25.3%~~, respectively. The effective tax rate for the three months ended September 30, 2021 was primarily impacted by the recognition of excess tax benefits related to share-based compensation. The effective tax rate for the nine months ended September 30, 2021 was primarily impacted by a $95 benefit associated with a state tax audit settlement and the recognition of excess tax benefits related to share-based compensation. The effective tax rates for the three and nine months ended September 30, 2020 were primarily impacted by federal and state tax credits and the recognition of excess tax benefits related to share-based compensation. The effective tax rate for the three months ended September 30, 2019 was primarily impacted by the recognition of excess tax benefits related to share-based compensation. The effective tax rate for the nine months ended September 30, 2019 was primarily impacted by the increase to the valuation allowance related to certain federal research and development credits that are no longer expected to be realizable. We estimate our effective tax rate for the year ending December 31, ~~2020~~2021 will be approximately ~~23%~~16%.

As of September 30, 2021 and December 31, 2020, we had a valuation allowance related to deferred tax assets of $76 and $54, respectively, that were not likely to be realized due to the timing of certain federal and state net operating loss limitations.

We are participating in the Compliance Assurance Process of the U.S. Internal Revenue Service (“IRS”) for 2021 which is expected to conclude during 2022. This program allows us to work with the IRS to identify and resolve potential U.S. Federal tax issues before the filing of tax returns. We are continuously audited by various taxing jurisdictions. There are no material assessments which we believe are probable at this time.

Under the Internal Revenue Code, two corporations may form a consolidated tax group, and file a consolidated federal income tax return, if one corporation owns stock representing at least 80% of the voting power and value of the outstanding capital stock of the other corporation. As of September 30, 2021, Liberty Media beneficially owned, directly and indirectly, approximately 79% of the outstanding shares of our common stock. We expect that Liberty Media could beneficially own, directly and indirectly, over 80% of the outstanding shares of our common stock at some time in 2021, and Holdings and Liberty Media would then become members of the same consolidated tax group. Should that happen, the tax sharing agreement would govern certain matters related to the resulting consolidated federal income tax returns, as well as state and local returns filed on a consolidated or combined basis.

The tax sharing agreement contains provisions that Holdings believes are customary for tax sharing agreements between members of a consolidated group. The tax sharing agreement and our inclusion in Liberty Media’s consolidated tax group is not expected to have any material adverse effect on us.

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As of September 30, 2020 and December 31, 2019, we had a valuation allowance related to deferred tax assets of $69 and $70, respectively, that was not likely to be realized due to certain net operating loss limitations, including tax credits, and acquired net operating losses that were not more likely than not going to be utilized.

(18)Segments and Geographic Information

In accordance with FASB ASC Topic 280, Segment Reporting, we disaggregate our operations into 2 reportable segments: Sirius XM and Pandora. The financial results of these segments are utilized by the chief operating decision maker, who is our Chief Executive Officer, for evaluating segment performance and allocating resources. We report our segment information based on the "management" approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of our reportable segments. For additional information on our segments refer to Note 1.

Segment results include the revenues and cost of services which are directly attributable to each segment. There are no indirect revenues or costs incurred that are allocated to the segments. There are planned intersegment advertising campaigns which will be eliminated. We had less than $1 of intersegment advertising revenue during ~~both~~each of the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020.

Segment revenue and gross profit were as follows during the ~~periods~~period presented:


		For the Three Months Ended September 30, 2020											For the Three Months Ended September 30, 2021
		Sirius XM		Pandora		Total			Sirius XM		Pandora			Total
Revenue	Revenue							Revenue
Subscriber revenue	Subscriber revenue	$	1,462	$	132	$	1,594	Subscriber revenue	$	1,532	$	134		$	1,666
Advertising revenue	Advertising revenue	39		306		345		Advertising revenue	47		404			451
Equipment revenue	Equipment revenue	47		0		47		Equipment revenue	41		—			41
Other revenue	Other revenue	39		0		39		Other revenue	40		—			40
Total revenue	Total revenue	1,587		438		2,025		Total revenue	1,660		538			2,198
Cost of services ^(a)	Cost of services ^(a)	(610)		(274)		(884)		Cost of services (a)	(645)		(341)			(986)
Segment gross profit	Segment gross profit	$	977	$	164	$	1,141	Segment gross profit	$	1,015	$	197		$	1,212

The reconciliation between reportable segment gross profit to consolidated income before income tax is as follows:


	For the Three Months Ended September 30, 2021
Segment Gross Profit	$	1,212
Subscriber acquisition costs	(71)
Sales and marketing (a)	(254)
Engineering, design and development (a)	(59)
General and administrative (a)	(109)
Depreciation and amortization	(135)
Share-based payment expense	(51)
Impairment, restructuring and acquisition costs	95
Total other (expense) income	(195)
Consolidated income before income taxes	$	433

(a) Share-based payment expense of $11 related to cost of services, $15 related to sales and marketing, $9 related to engineering, design and development and $16 related to general and administrative has been excluded.

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	For the Three Months Ended September 30, 2020
	Sirius XM		Pandora		Total
Revenue
Subscriber revenue	$	1,462	$	132	$	1,594
Advertising revenue	39		306		345
Equipment revenue	47		—		47
Other revenue	39		—		39
Total revenue	1,587		438		2,025
Cost of services (b)	(610)		(274)		(884)
Segment gross profit	$	977	$	164	$	1,141

The reconciliation between reportable segment gross profit to consolidated income before income tax is as follows:


	For the Three Months Ended September 30, 2020
Segment Gross Profit	$	1,141
Subscriber acquisition costs	(110)
Sales and marketing ^(a)(b)	(205)
Engineering, design and development ^(a)(b)	(53)
General and administrative ^(a)(b)	(112)
Depreciation and amortization	(125)
Share-based payment expense	(58)

Total other (expense) income	(134)
Consolidated income before income taxes	$	344

~~(a)~~(b) Share-based payment expense of $11 related to cost of services, $17 related to sales and marketing, $11 related to engineering, design and development and $19 related to general and administrative has been excluded.

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~~(Dollars and shares in millions, except per share amounts)~~

For the Three Months Ended September 30, 2019
Sirius XM Pandora Total
Revenue
Subscriber revenue $ 1,424 $ 132 $ 1,556
Advertising revenue 51 315 366
Equipment revenue 45 0 45
Other revenue 44 0 44
Total revenue 1,564 447 2,011
Cost of services ^(b)
(597) (273) (870)
Segment gross profit $ 967 $ 174 $ 1,141

~~The reconciliation between reportable segment gross profit to consolidated income before income tax is as follows:~~


	~~For the Three Months Ended September 30, 2019~~
~~Segment Gross Profit~~	$	~~1,141~~
~~Subscriber acquisition costs~~	~~(101)~~
~~Sales and marketing~~ ^(b)	~~(210)~~
~~Engineering, design and development~~ ^(b)	~~(63)~~
~~General and administrative~~ ^(b)	~~(108)~~
~~Depreciation and amortization~~	~~(118)~~
~~Share-based payment expense~~	~~(65)~~

~~Total other (expense) income~~	~~(160)~~
~~Consolidated income before income taxes~~	$	~~316~~

(b) Share-based payment expense of $11 related to cost of services, $23 related to sales and marketing, $15 related to engineering, design and development and $16 related to general and administrative has been excluded.


		For the Nine Months Ended September 30, 2020											For the Nine Months Ended September 30, 2021
		Sirius XM		Pandora		Total			Sirius XM		Pandora			Total
Revenue	Revenue							Revenue
Subscriber revenue	Subscriber revenue	$	4,372	$	385	$	4,757	Subscriber revenue	$	4,521	$	397		$	4,918
Advertising revenue	Advertising revenue	108		758		866		Advertising revenue	135		1,100			1,235
Equipment revenue	Equipment revenue	113		0		113		Equipment revenue	149		—			149
Other revenue	Other revenue	115		0		115		Other revenue	113		—			113
Total revenue	Total revenue	4,708		1,143		5,851		Total revenue	4,918		1,497			6,415
Cost of services ^(c)	Cost of services ^(c)	(1,796)		(783)		(2,579)		Cost of services (c)	(1,916)		(971)			(2,887)
Segment gross profit	Segment gross profit	$	2,912	$	360	$	3,272	Segment gross profit	$	3,002	$	526		$	3,528

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

The reconciliation between reportable segment gross profit to consolidated income before income tax is as follows:


	For the Nine Months Ended September 30, 2021
Segment Gross Profit	$	3,528
Subscriber acquisition costs	(245)
Sales and marketing (c)	(682)
Engineering, design and development (c)	(171)
General and administrative (c)	(329)
Depreciation and amortization	(399)
Share-based payment expense	(149)
Impairment, restructuring and acquisition costs	(13)

Total other (expense) income	(388)
Consolidated income before income taxes	$	1,152

(c) Share-based payment expense of $33 related to cost of services, $43 related to sales and marketing, $26 related to engineering, design and development and $47 related to general and administrative has been excluded.


	For the Nine Months Ended September 30,2020
	Sirius XM		Pandora		Total
Revenue
Subscriber revenue	$	4,372	$	385	$	4,757
Advertising revenue	108		758		866
Equipment revenue	113		—		113
Other revenue	115		—		115
Total revenue	4,708		1,143		5,851
Cost of services (d)	(1,796)		(783)		(2,579)
Segment gross profit	$	2,912	$	360	$	3,272

The reconciliation between reportable segment gross profit to consolidated income before income tax is as follows:


	For the Nine Months Ended September 30, 2020
Segment Gross Profit	$	3,272
Subscriber acquisition costs	(257)
Sales and marketing ^(c)(d)	(614)
Engineering, design and development ^(c)(d)	(165)
General and administrative ^(c)(d)	(305)
Depreciation and amortization	(381)
Share-based payment expense	(165)
~~Acquisition~~Impairment, restructuring and ~~restructuring~~acquisition costs	(24)

Total other (expense) income	(327)
Consolidated income before income taxes	$	1,034

~~(c)~~(d) Share-based payment expense of $32 related to cost of services, $50 related to sales and marketing, $31 related to engineering, design and development and $52 related to general and administrative has been excluded.

For the Nine Months Ended September 30, 2019
Sirius XM Pandora Total
Revenue
Subscriber revenue $ 4,196 $ 355 $ 4,551
Advertising revenue 149 784 933
Equipment revenue 127 0 127
Other revenue 121 0 121
Total revenue 4,593 1,139 5,732
Cost of services ^(d)
(1,761) (720) (2,481)
Segment gross profit $ 2,832 $ 419 $ 3,251

~~The reconciliation between reportable segment gross profit to consolidated income before income tax is as follows:~~


	~~For the Nine Months Ended September 30, 2019~~
~~Segment Gross Profit~~	$	~~3,251~~
~~Subscriber acquisition costs~~	~~(313)~~
~~Sales and marketing~~ ^(d)	~~(591)~~
~~Engineering, design and development~~ ^(d)	~~(169)~~
~~General and administrative~~ ^(d)	~~(332)~~
~~Depreciation and amortization~~	~~(344)~~
~~Share-based payment expense~~	~~(171)~~
~~Acquisition and restructuring costs~~	~~(83)~~
~~Total other (expense) income~~	~~(350)~~
~~Consolidated income before income taxes~~	$	~~898~~

(d) Share-based payment expense of $30 related to cost of services, $57 related to sales and marketing, $37 related to engineering, design and development and $47 related to general and administrative has been excluded.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

A measure of segment assets is not currently provided to the Chief Executive Officer and has therefore not been provided.

As of September 30, ~~2020,~~2021, long-lived assets were predominantly located in the United States. No individual foreign country represented a material portion of our consolidated revenue during the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020.

(19)Subsequent Events

Capital Return Program

For the period from October 1, ~~2020~~2021 to October ~~20, 2020~~26, 2021, we repurchased 2919 shares of our common stock on the open market for an aggregate purchase price of ~~$168,~~$115, including fees and commissions.

On October ~~6, 2020,~~25, 2021, our board of directors declared a quarterly dividend on our common stock in the amount of ~~$0.014641~~$0.0219615 per share of common stock payable on November ~~30, 2020~~29, 2021 to stockholders of record as of the close of business on November ~~6, 2020.~~

~~Stitcher Acquisition~~

On July 13, 2020, Sirius XM entered into an agreement with The E.W. Scripps Company and certain of its subsidiaries ("Scripps") to acquire the assets of Stitcher, a pioneer in podcast production, distribution, and ad sales. On October 16, 2020, Sirius XM closed the acquisition of the assets of Stitcher. Under the terms of the asset purchase agreement, Sirius XM paid Scripps $272 in cash, which amount includes a working capital adjustment. The agreement provides that Sirius XM will potentially make up to $60 in additional contingent payments to Scripps based on Stitcher achieving certain financial metrics in 2020 and5, 2021.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All amounts referenced in this Item 2 are in millions, except subscriber amounts are in thousands and per subscriber and per installation amounts are in ones, unless otherwise stated.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

This Quarterly Report on Form 10-Q presents information for Sirius XM Holdings Inc. (“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.

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Special Note Regarding Forward-Looking Statements

The following cautionary statements identify important factors that could cause our actual results to differ materially from those projected in forward-looking statements made in this Quarterly Report on Form 10-Q and in other reports and documents published by us from time to time. Any statements about our beliefs, plans, objectives, expectations, assumptions, future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “intend,” “plan,” “projection” and “outlook.” Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this Quarterly Report on Form 10-Q and in other reports and documents published by us from time to time, including the risk factor described under “Risk Factors” in Part I, Item 1A of this Quarterly Report on Form 10-Q, the risk factors described under “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December ~~31, 2019, the risk factor described under “Risk Factors” in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March~~ 31, 2020 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein and in Part II, Item 7, of our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~

2020.

Among the significant factors that could cause our actual results to differ materially from those expressed in the forward-looking statements are:

•~~The current COVID-19 pandemic has, and may continue to, adversely impact our business~~

•We face substantial competition and that competition is likely to increase over time

•Our business depends in part upon the auto industry; vehicle production and sales are dependent on many factors, including the availability of consumer credit, general economic conditions, consumer confidence, fuel costs and component supply shortages

•If our efforts to attract and retain subscribers and listeners, or convert listeners into subscribers, are not successful, our business will be adversely affected

•~~Our Pandora ad-supported business has suffered a loss of monthly active users, which may adversely affect our Pandora business~~

•~~Privacy and data security laws and regulations may hinder our ability to market our services, sell advertising and impose legal liabilities~~

•We engage in extensive marketing efforts and the continued effectiveness of those efforts ~~are~~is an important part of our business

•~~Consumer protection laws~~We rely on third parties for the operation of our business, and ~~our~~the failure of third parties to ~~comply with them~~perform could ~~damage~~adversely affect our business

•We may not realize the benefits of acquisitions or other strategic investments and initiatives

•A substantial number of our Sirius XM service subscribers periodically cancel their subscriptions and we cannot predict how successful we will be at retaining customers

•Our ability to profitably attract and retain subscribers to our Sirius XM service as our marketing efforts reach more price-sensitive consumers is uncertain

•The impact of COVID-19, including its variant strains, on our business

•Failure of our satellites would significantly damage our business

•Our Sirius XM service may experience harmful interference from wireless operations

•Our Pandora ad-supported business has suffered a substantial and consistent loss of monthly active users, which may adversely affect our Pandora business

•Our failure to convince advertisers of the benefits of our Pandora ad-supported service could harm our business

•If we are unable to maintain revenue growth from our advertising products, particularly in mobile advertising, our results of operations will be adversely affected

•Changes to mobile operating systems and browsers may hinder our ability to sell advertising and market our services

•If we fail to accurately predict and play music, comedy or other content that our Pandora listeners enjoy, we may fail to retain existing and attract new listeners

•Privacy and data security laws and regulations may hinder our ability to market our services, sell advertising and impose legal liabilities

•Consumer protection laws and our failure to comply with them could damage our business

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•Failure to comply with FCC requirements could damage our business

•If we fail to protect the security of personal information about our customers, we could be subject to costly government enforcement actions and private litigation and our reputation could suffer

•Interruption or failure of our information technology and communications systems could impair the delivery of our service and harm our business

•~~We rely on third parties for the operation of our business, and the failure of third parties to perform could adversely affect our business~~

•~~Our business depends in part upon the auto industry~~

•~~Our Pandora business depends in part upon consumer electronics manufacturers~~

•The market for music rights is changing and is subject to significant uncertainties

•Our ~~ability to offer interactive features in our~~ Pandora services ~~depends~~depend upon maintaining complex licenses with copyright owners, and these licenses contain onerous terms

•The rates we must pay for “mechanical rights” to use musical works on our Pandora service have increased substantially and these ~~new~~ rates may adversely affect our business

•~~Failure of our satellites would significantly damage our business~~

•~~Our Sirius XM service may experience harmful interference from wireless operations~~

•~~Failure to comply with FCC requirements could damage our business~~

•~~Economic conditions, including advertising budgets and discretionary spending, may adversely affect our business and operating results~~

•~~If we are unable to attract and retain qualified personnel, our business could be harmed~~

•~~We may not realize the benefits of acquisitions or other strategic investments and initiatives, including the acquisitions of Pandora and Simplecast~~

•Our use of pre-1972 sound recordings on our Pandora service could result in additional costs

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•~~We may from time to time modify our business plan, and these changes could adversely affect us and our financial condition~~

•~~We have a significant amount of indebtedness, and our debt contains certain covenants that restrict our operations~~

•~~Our facilities could be damaged by natural catastrophes or terrorist activities~~

•~~The unfavorable outcome of pending or future litigation could have an adverse impact on our operations and financial condition~~

•Failure to protect our intellectual property or actions by third parties to enforce their intellectual property rights could substantially harm our business and operating results

•Some of our services and technologies may use “open source” software, which may restrict how we use or distribute our services or require that we release the source code subject to those licenses

•Rapid technological and industry changes and new entrants could adversely impact our services

•~~Existing or future laws~~We have a significant amount of indebtedness, and ~~regulations could harm~~ our ~~business~~

•~~We may be exposed to liabilities~~debt contains certain covenants that ~~other entertainment service providers would not customarily be subject to~~

•~~Our business and prospects depend on the strength of~~restrict our ~~brands~~operations

•We are a “controlled company” within the meaning of the NASDAQ listing rules and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements

•While we currently pay a quarterly cash dividend to holders of our common stock, we may change our dividend policy at any time

•Our principal stockholder has significant influence, including over actions requiring stockholder approval, and its interests may differ from the interests of other holders of our common stock

•If we are unable to attract and retain qualified personnel, our business could be harmed

•Our facilities could be damaged by natural catastrophes or terrorist activities

•The unfavorable outcome of pending or future litigation could have an adverse impact on our operations and financial condition

•We may be exposed to liabilities that other entertainment service providers would not customarily be subject to

•Our business and prospects depend on the strength of our brands

•We face supply chain risks as a result of the global semiconductor supply shortage.

Because the risk factors referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any of these forward-looking statements. In addition, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which the statement is made, to reflect the occurrence of unanticipated events or otherwise, except as required by law. New factors emerge from time to time, and it is not possible for us to predict which will arise or to assess with any precision the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

~~Special Note Regarding the Impact of the COVID-19 Pandemic on Our Business and Operations~~

The statements set forth below should be read in combination with the information contained in this Item 2., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contained in this Quarterly Report on Form 10-Q.

~~General~~

In general, the COVID-19 pandemic, has had, and is continuing to have, a widespread and broad reaching effect on the economy. Vehicle sales have declined and concerts have been postponed indefinitely. The impact of the COVID-19 pandemic on the travel industry has been far-reaching, adversely affecting airlines, hotels, cruise ships and theme parks. Unemployment rates, while improving, remain high. Similarly, although media spending by businesses is recovering, spending continues to be down compared to prior periods. While certain regions of the United States are in various phases of reopening, it remains unclear what a full economic recovery will look like as the United States continues to struggle with rolling outbreaks of the virus.

Against this background and these broad-based economic effects, the full extent to which the COVID-19 pandemic may negatively impact our business is still uncertain. The scope of the effects of the COVID-19 pandemic on our businesses depends on many factors beyond our control, and the effects are difficult to assess or predict with meaningful precision both generally and specifically as to our Sirius XM and Pandora businesses. The COVID-19 pandemic did not have a material effect on our revenues and expenses for the first quarter ended March 31, 2020, with the effects on our business first emerging in the quarter ended June 30, 2020. Refer to the discussion below under "Business Performance Update" for an update on the impact on our business during the quarter ended September 30, 2020.

~~Liquidity~~

To date, the COVID-19 pandemic and its related economic impact has not affected our capital and financial resources, including our liquidity position. We believe that we have sufficient cash and cash equivalents, as well as debt capacity, to cover our estimated short-term and long-term funding needs, including amounts necessary to construct, launch and insure replacement satellites, as well as fund future stock repurchases, future dividend payments and pursue strategic opportunities. We expect to

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continue repurchasing our common stock. These repurchases are subject to numerous factors, including but not limited to market conditions. We have not suspended our quarterly common stock dividend payments as a result of the COVID-19 pandemic. As of September 30, 2020, we had approximately $33 of cash on hand and $1,749 was available for future borrowing under our revolving credit facility (after giving effect to outstanding letters of credit).

The COVID-19 pandemic to date has not impacted our ability to access our traditional funding sources. The pandemic has not increased our costs of or reduced our access to capital under our revolving credit facility or in the debt capital markets, and we do not believe it is reasonably likely to do so in the near-term. In addition, we do not expect the pandemic to affect our ongoing ability to meet the covenants in our debt instruments, including under our revolving credit facility.

~~Business Performance Update~~

We remain focused on the well-being of our employees, customers and all those we serve while also taking responsive measures to adapt to the current environment. Against the backdrop of the COVID-19 pandemic we are seeing certain positive trends in certain key indicators that support our business. For example, in the quarter ended September 30, 2020, new vehicle sales recovered compared to the prior three and six month periods. Similarly, we have seen recent increases in advertising orders, although the outlook for advertising revenue remains uncertain and we cannot reasonably predict when advertising activity will return to pre-pandemic levels. For more information regarding the trends in our businesses, including the trends in revenues and expenses, see the information contained under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contained in this Quarterly Report on Form 10-Q.

We have taken actions to help ensure that our audio entertainment service will continue uninterrupted through the COVID-19 pandemic, including activating our business continuity plans and implementing steps to enable employees to work remotely. The impact of these actions on our workforce are also difficult to assess, but the experience has presented new challenges for our employees as they balance the demands of the pandemic with their daily operational role. To date, however, we do not believe that these remote work arrangements have adversely affected our ability to maintain our financial reporting systems, internal control over financial reporting and disclosure controls and procedures. In addition, we do not expect to encounter any significant challenges to our ability to maintain these systems and controls.

We have undertaken and are continually in the process of making a diverse range of operational adjustments in response to the effects of COVID-19 pandemic. From a customer care and support perspective, we have adjusted our operations with call center vendors. These adjustments have included shifting call center demand to “chat” platforms, activating interactive voice response (or “IVR”) systems and online capabilities, and working with call center vendors to increase the capability for customer service agents to work remotely. We are focused on optimizing customer support performance in this new environment.

We also do not expect the pandemic to affect the assets on our balance sheet and our ability to timely account for those assets. For example, we do not anticipate making any significant changes as a result of the pandemic in judgments in determining the fair-value of assets measured in accordance with generally accepted accounting principles.

In addition, we do not anticipate any material impairments with respect to goodwill, indefinite life and definite life intangible assets, right of use assets or investments, increases in allowances for credit losses, restructuring charges, other expenses, or changes in accounting judgments that would have an adverse impact on our financial statements.

We are taking advantage of recent Federal tax relief to defer our portion of the social security payroll tax. This tax relief will not have a material impact on our liquidity position in either the short- or long-term. We have not received any financial assistance in the form of loans under the CARES Act.

You should not place undue reliance on any of our forward-looking statements. In addition, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which the statement is made, to reflect the occurrence of unanticipated events or otherwise, except as required by law. New factors emerge from time to time, and it is not possible for us to predict which will arise or to assess with any precision the impact of each factor on our business or the extent to whic~~h any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.~~

For additional discussion of the risks to our business related to the COVID-19 pandemic, see “Risk factors—Risks related to our business—The current coronavirus (COVID-19) pandemic is adversely impacting our business” contained in our Quarterly Report on Form 10-Q for the three months ended March 31, 2020. To the extent the COVID-19 pandemic or any other global health crisis does adversely impact our business or financial condition, it may also have the effect of heightening

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~~many of the other “Risk factors” included in our Annual Report on Form 10-K for the year ended December 31, 2019 and in our Quarterly Report on Form 10-Q for the three months ended March 31, 2020.~~

Executive Summary

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 and other content, as well as podcasts and infotainment services, in the United States on a subscription fee basis. Sirius XM's bundles include live, curated and certain exclusive and on demand programming. The Sirius XM service is distributed through our two proprietary satellite radio systems and ~~through the internet~~streamed 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.

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In May 2020, we terminated the Automatic Labs Inc. (“Automatic”) service, which was part of our connected services business. Automatic operated a service for consumers and auto dealers and offered an install-it-yourself adapter and mobile application, which transformed older vehicles into connected vehicles. During the nine months ended September 30, 2020, we recorded $24 of restructuring expenses in our unaudited consolidated statements of comprehensive income related to this termination of the service. We did not record any restructuring expenses during the three months ended September 30, 2020.

Pandora

The majority of revenue from our Pandora business is generated from advertising on our Pandora ad-supported radio ~~service.~~service which is sold under the SXM Media brand. We also derive subscription revenue from our Pandora Plus and Pandora Premium subscribers.

Our Pandora business also sells advertising on audio platforms and in podcasts unaffiliated with us. Pandora is the exclusive US ad sales representative for SoundCloud. Through this arrangement, Pandora offers advertisers the ability to execute campaigns in the US across the Pandora and SoundCloud listening platforms. We also have arrangements to serve as the ad sales representative for certain podcasts. In addition, through AdsWizz, Pandora provides a comprehensive digital audio 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. As of September 30, ~~2020,~~2021, our Pandora business had approximately ~~58.6~~52.6 million monthly active users.

OnIn February 2020, Sirius XM completed a $75 investment in SoundCloud. SoundCloud is a next-generation music entertainment company, powered by an ecosystem of artists, listeners, and curators on the pulse of what's new, now and next in culture. 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.

In June ~~16,~~ 2020, Sirius XM acquired Simplecast for $28 in cash. Simplecast is a podcast management and analytics platform. Refer to Note 3 to our unaudited consolidated financial statements ~~in Part I, Item I, of this Quarterly Report on Form 10-Q~~ for more information on this acquisition.

In ~~February~~October 2020, Sirius XM ~~completed~~acquired the assets of Stitcher from The E.W. Scripps Company and certain of its subsidiaries (“Scripps”) for total consideration of $302, which included $266 in cash and $36 related to contingent consideration. As of September 30, 2021, we will potentially make up to $30 in additional payments to Scripps related to the contingent consideration based on Stitcher's achievement of certain financial metrics in 2021. During each of the three and nine months ended September 30, 2021, we recognized a ~~$75 investment~~$17 benefit related to the change in ~~SoundCloud. SoundCloud is~~fair value of the ~~world’s largest open audio~~2021 portion of the contingent consideration. The acquisition of Stitcher, in conjunction with Simplecast, creates a full-service platform ~~with a connected community of~~for podcast creators, ~~listeners,~~publishers and ~~curators. SoundCloud’s platform enables its users~~advertisers. Refer to ~~upload,~~

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~~promote, share and create audio entertainment. The minority investment complements the existing ad sales relationship between SoundCloud and Pandora.~~Note 3 to our unaudited consolidated financial statements for more information on this acquisition.

Liberty Media

As of September 30, ~~2020,~~2021, Liberty Media beneficially owned, directly and indirectly, approximately ~~74%~~79% 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.

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Results of Operations

~~Actual Results~~

Set forth below are our results of operations for the three and nine months ended September 30, ~~2020~~2021 compared with the three and nine months ended September 30, 2019. The discussion of our results of operations for the three and nine months ended September 30, 2020 and the three months ended September 30, 2019 includes the financial results of Pandora for the entire period, while the results of operations for the nine months ended September 30, 2019 includes the financial results of Pandora from the date of the Pandora Acquisition, February 1, 2019. The inclusion of Pandora's results in the nine months ended September 30, 2020 for the entire period may render direct comparisons with results for prior year period less meaningful.2020. The results of operations are presented for each of our reporting segments for revenue and cost of services and on a consolidated basis for all other items.


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				2021 vs 2020 Change
									Three Months				Nine Months
	2021		2020		2021		2020		Amount		%		Amount		%
Revenue
Sirius XM:
Subscriber revenue	$	1,532	$	1,462	$	4,521	$	4,372	$	70	5	%	$	149	3	%
Advertising revenue	47		39		135		108		8		21	%	27		25	%
Equipment revenue	41		47		149		113		(6)		(13)	%	36		32	%
Other revenue	40		39		113		115		1		3	%	(2)		(2)	%
Total Sirius XM revenue	1,660		1,587		4,918		4,708		73		5	%	210		4	%
Pandora:
Subscriber revenue	134		132		397		385		2		2	%	12		3	%
Advertising revenue	404		306		1,100		758		98		32	%	342		45	%
Total Pandora revenue	538		438		1,497		1,143		100		23	%	354		31	%
Total consolidated revenue	2,198		2,025		6,415		5,851		173		9	%	564		10	%
Cost of services
Sirius XM:
Revenue share and royalties	378		369		1,144		1,100		9		2	%	44		4	%
Programming and content	129		114		373		330		15		13	%	43		13	%
Customer service and billing	106		99		309		291		7		7	%	18		6	%
Transmission	39		33		108		90		6		18	%	18		20	%
Cost of equipment	4		5		12		13		(1)		(20)	%	(1)		(8)	%
Total Sirius XM cost of services	656		620		1,946		1,824		36		6	%	122		7	%
Pandora:
Revenue share and royalties	293		233		830		659		60		26	%	171		26	%
Programming and content	12		9		34		21		3		33	%	13		62	%
Customer service and billing	21		20		63		68		1		5	%	(5)		(7)	%
Transmission	15		13		47		39		2		15	%	8		21	%
Total Pandora cost of services	341		275		974		787		66		24	%	187		24	%
Total consolidated cost of services	997		895		2,920		2,611		102		11	%	309		12	%
Subscriber acquisition costs	71		110		245		257		(39)		(35)	%	(12)		(5)	%
Sales and marketing	269		222		725		664		47		21	%	61		9	%
Engineering, design and development	68		64		197		196		4		6	%	1		1	%
General and administrative	125		131		376		357		(6)		(5)	%	19		5	%
Depreciation and amortization	135		125		399		381		10		8	%	18		5	%
Impairment, restructuring and acquisition costs	(95)		—		13		24		(95)		nm		(11)		(46)	%

Total operating expenses	1,570		1,547		4,875		4,490		23		1	%	385		9	%
Income from operations	628		478		1,540		1,361		150		31	%	179		13	%
Other (expense) income:
Interest expense	(111)		(96)		(313)		(297)		(15)		(16)	%	(16)		(5)	%
Loss on extinguishment of debt	(83)		(40)		(83)		(40)		(43)		(108)	%	(43)		(108)	%
Other (expense) income	(1)		2		8		10		(3)		(150)	%	(2)		(20)	%
Total other (expense) income	(195)		(134)		(388)		(327)		(61)		(46)	%	(61)		(19)	%
Income before income taxes	433		344		1,152		1,034		89		26	%	118		11	%
Income tax expense	(90)		(72)		(157)		(226)		(18)		(25)	%	69		31	%
Net income	$	343	$	272	$	995	$	808	$	71	26	%	$	187	23	%

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2020 vs 2019 Change
For the Three Months Ended September 30, For the Nine Months Ended September 30, Three Months Nine Months
2020 2019 2020 2019 Amount % Amount %
Revenue
Sirius XM:
Subscriber revenue $ 1,462 $ 1,424 $ 4,372 $ 4,196 $ 38 3 % $ 176 4 %
Advertising revenue 39 51 108 149 (12) (24) % (41) (28) %
Equipment revenue 47 45 113 127 2 4 % (14) (11) %
Other revenue 39 44 115 121 (5) (11) % (6) (5) %
Total Sirius XM revenue 1,587 1,564 4,708 4,593 23 1 % 115 3 %
Pandora:
Subscriber revenue 132 132 385 355 — — % 30 8 %
Advertising revenue 306 315 758 784 (9) (3) % (26) (3) %
Total Pandora revenue 438 447 1,143 1,139 (9) (2) % 4 — %
Total consolidated revenue 2,025 2,011 5,851 5,732 14 1 % 119 2 %
Cost of services
Sirius XM:
Revenue share and royalties 369 358 1,100 1,065 11 3 % 35 3 %
Programming and content 114 113 330 328 1 1 % 2 1 %
Customer service and billing 99 99 291 296 — — % (5) (2) %
Transmission 33 29 90 79 4 14 % 11 14 %
Cost of equipment 5 8 13 20 (3) (38) % (7) (35) %
Total Sirius XM cost of services 620 607 1,824 1,788 13 2 % 36 2 %
Pandora:
Revenue share and royalties 233 234 659 619 (1) — % 40 6 %
Programming and content 9 3 21 10 6 200 % 11 110 %
Customer service and billing 20 20 68 56 — — % 12 21 %
Transmission 13 17 39 38 (4) (24) % 1 3 %
Total Pandora cost of services 275 274 787 723 1 — % 64 9 %
Total consolidated cost of services 895 881 2,611 2,511 14 2 % 100 4 %
Subscriber acquisition costs 110 101 257 313 9 9 % (56) (18) %
Sales and marketing 222 233 664 648 (11) (5) % 16 2 %
Engineering, design and development 64 78 196 206 (14) (18) % (10) (5) %
General and administrative 131 124 357 379 7 6 % (22) (6) %
Depreciation and amortization 125 118 381 344 7 6 % 37 11 %
Acquisition and restructuring costs — — 24 83 — nm (59) (71) %
Total operating expenses 1,547 1,535 4,490 4,484 12 1 % 6 — %
Income from operations 478 476 1,361 1,248 2 — % 113 9 %
Other (expense) income:
Interest expense (96) (104) (297) (291) 8 8 % (6) (2) %
Loss on extinguishment of debt (40) (56) (40) (57) 16 29 % 17 30 %
Other income (expense) 2 — 10 (2) 2 nm 12 600 %
Total other (expense) income (134) (160) (327) (350) 26 16 % 23 7 %
Income before income taxes 344 316 1,034 898 28 9 % 136 15 %
Income tax expense (72) (70) (226) (227) (2) (3) % 1 — %
Net income $ 272 $ 246 $ 808 $ 671 $ 26 11 % $ 137 20 %

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~~Sirius XM Revenue~~

~~Refer to page 44 for our discussion on Sirius XM revenue.~~

~~Pandora Revenue~~

The nine months ended September 30, 2020 includes Pandora's revenue for the entire period while the nine months ended September 30, 2019 includes Pandora's revenue from the acquisition date, February 1, 2019. Refer to page 44 for our discussion on Pandora revenue.

~~Sirius XM Cost of Services~~

~~Refer to page 45 for our discussion on Sirius XM cost of services.~~

~~Pandora Cost of Services~~

The nine months ended September 30, 2020 includes Pandora's cost of services for the entire period while the nine months ended September 30, 2019 includes Pandora's cost of services from the acquisition date, February 1, 2019. Refer to page 46 for our discussion on Pandora cost of services.

~~Operating Costs~~

~~Subscriber Acquisition Costs~~ are costs associated with our satellite radio service and include hardware subsidies paid to radio manufacturers, distributors and automakers; subsidies paid for chipsets and certain other components used in manufacturing radios; device royalties for certain radios and chipsets; product warranty obligations; and freight. The majority of subscriber acquisition costs are incurred and expensed in advance of acquiring a subscriber. Subscriber acquisition costs do not include advertising costs, marketing, loyalty payments to distributors and dealers of satellite radios or revenue share payments to automakers and retailers of satellite radios.

For the three months ended September 30, 2020 and 2019, subscriber acquisition costs were $110 and $101, respectively, an increase of 9%, or $9, and increased as a percentage of total revenue. For the nine months ended September 30, 2020 and 2019, subscriber acquisition costs were $257 and $313, respectively, a decrease of 18% or $56, and decreased as a percentage of total revenue. The increase for the three month period was driven by higher OEM installations as automakers pushed to produce pre-COVID-19 volumes, partially offset by lower hardware subsidies as certain subsidy rates decreased. The decrease for the nine month period was driven by a decline in OEM installations as a result of the COVID-19 pandemic as well as lower hardware subsidies as certain subsidy rates decreased.

~~We expect subscriber acquisition costs to fluctuate with OEM installations; however, the subsidized chipsets cost is~~

~~expected to decline as we transition to a new generation of chipsets. We intend to continue to offer subsidies and other~~

~~incentives to induce OEMs to include our technology in their vehicles.~~

~~Sales and Marketing~~ includes costs for marketing, advertising, media and production, including promotional events and sponsorships; cooperative and artist marketing; and personnel related costs including salaries, commissions, and sales support. Marketing costs include expenses related to direct mail, outbound telemarketing, email communications, social media, television and digital performance media.

For the three months ended September 30, 2020 and 2019, sales and marketing expenses were $222 and $233, respectively, a decrease of 5%, or $11, and decreased as a percentage of total revenue. For the nine months ended September 30, 2020 and 2019, sales and marketing expenses were $664 and $648, respectively, an increase of 2% or $16, and increased as a percentage of total revenue. The decrease for the three month period was primarily due to lower travel and entertainment and personnel-related costs. The increase for the nine month period was primarily due to the inclusion of Pandora for a full nine months in 2020, and additional subscriber communications, streaming services and products, retention programs and acquisition campaigns; partially offset by lower travel and entertainment costs.

~~We anticipate that sales and marketing expenses will increase as we expand programs to retain our existing subscribers,~~

~~win back former subscribers, and attract new subscribers and listeners.~~

~~Table of Contents~~

~~Engineering, Design and Development~~ consists primarily of compensation and related costs to develop chipsets and new products and services, including streaming and connected vehicle services, research and development for broadcast information systems and the design and development costs to incorporate Sirius XM radios into new vehicles manufactured by automakers.

For the three months ended September 30, 2020 and 2019, engineering, design and development expenses were $64 and $78, respectively, a decrease of 18%, or $14, and decreased as a percentage of total revenue. For the nine months ended September 30, 2020 and 2019, engineering, design and development expenses were $196 and $206, respectively, a decrease of 5% or $10, and decreased as a percentage of total revenue. The decreases were driven by lower personnel-related costs. The decrease for the nine-month period was partially offset by the inclusion of Pandora for a full nine months in 2020.

~~We expect engineering, design and development expenses to increase in future periods as we continue to develop our infrastructure, products and services.~~

~~General and Administrative~~ ~~primarily consists of compensation and related costs for personnel and facilities, and include costs related to our finance, legal, human resources and information technologies departments.~~

For the three months ended September 30, 2020 and 2019, general and administrative expenses were $131 and $124, respectively, an increase of 6%, or $7, and increased as a percentage of total revenue. For the nine months ended September 30, 2020 and 2019, general and administrative expenses were $357 and $379, respectively, a decrease of 6% or $22, and decreased as a percentage of total revenue. The increase for the three month period was primarily driven by higher personnel-related and legal costs. The decrease for the nine month period was driven by a one-time $25 legal settlement reserve associated with Do-Not-Call litigation recorded in the first quarter of 2019, lower personnel-related costs, the closure of a sales and use tax audit in the second quarter of 2020, and lower travel and entertainment costs, partially offset by the inclusion of Pandora for a full nine months in 2020 and higher legal costs.

~~We expect our general and administrative expenses to increase to support the growth of our business.~~

~~Depreciation and Amortization~~ ~~represents the recognition in earnings of the cost of assets used in operations, including our satellite constellations, property, equipment and intangible assets, over their estimated service lives.~~

For the three months ended September 30, 2020 and 2019, depreciation and amortization expense was $125 and $118, respectively, an increase of 6%, or $7. For the nine months ended September 30, 2020 and 2019, depreciation and amortization expense was $381 and $344, respectively, an increase of 11% or $37. The increase was driven by additional assets placed in-service. The increase for the nine month period was also impacted by the inclusion of Pandora for a full nine months in 2020.

~~Acquisition and Restructuring Costs~~ ~~represents expenses associated with the acquisitions of Pandora and Simplecast and restructuring costs.~~

For the three months ended September 30, 2020 and 2019, there were no acquisition and restructuring costs. For the nine months ended September 30, 2020 and 2019, acquisition and restructuring costs were $24 and $83, respectively. The acquisition and restructuring costs for the nine months ended September 30, 2020 include costs associated with the termination of the Automatic service and costs associated with the acquisition of Simplecast. The acquisition and restructuring costs for the nine months ended September 30, 2019 include costs associated with the Pandora Acquisition as well as related reorganization costs.

~~Other (Expense) Income~~

~~Interest Expense~~ ~~includes interest on outstanding debt.~~

For the three months ended September 30, 2020 and 2019, interest expense was $96 and $104, respectively. For the nine months ended September 30, 2020 and 2019, interest expense was $297 and $291, respectively. The decrease for the three month period was primarily driven by lower average debt and interest rates. The increase for the nine month period was primarily driven by higher average debt due to the issuances of Sirius XM's 5.500% Senior Notes due 2029, 4.625% Senior Notes due 2024, and the 4.125% Senior Notes due 2030; partially offset by the redemption of Sirius XM's 6.00% Senior Notes due 2024, redemption of the Pandora convertible notes in 2019, and lower interest rates.

~~Table of Contents~~

~~Loss on Extinguishment of Debt~~ ~~includes losses incurred as a result of the redemption of certain debt.~~

We recorded a $40 loss on extinguishment of debt during the three and nine months ended September 30, 2020 and losses on extinguishment of debt of $56 and $57 during the three and nine months ended September 30, 2019, respectively The loss on extinguishment of debt recorded in 2020 was due to the redemption of $500 principal amount of Sirius XM's 4.625% Senior Notes due 2023 and $1,000 principal amount of Sirius XM's 5.375% Senior Notes due 2025. The loss recorded in 2019 was due to the repurchase of $151 principal amount of Pandora's 1.75% Convertible Senior Notes due 2020.

~~Other Income (Expense)~~ ~~primarily~~includes realized and unrealized gains and losses from our Deferred Compensation Plan and other investments, interest and dividend income, our share of the income or loss from equity investments in Sirius XM Canada and SoundCloud, and transaction costs related to non-operating investments.

For the three months ended September 30, 2020 and 2019, other income (expense) was $2 and $0, respectively. For the nine months ended September 30, 2020 and 2019, other income (expense) was $10 and $(2), respectively. During the nine months ended September 30, 2020, we recorded a one-time lawsuit settlement of $7.

~~Income Taxes~~

~~Income Tax Expense~~ ~~includes the change in our deferred tax assets, current federal and state tax expenses, and foreign withholding taxes.~~

~~For the three months ended September 30, 2020 and 2019, income tax expense was $72 and $70, respectively, and $226 and $227 for the nine months ended September 30, 2020 and 2019, respectively.~~

Our effective tax rate for the three months ended September 30, 2020 and 2019 was 20.9% and 22.2%, respectively. Our effective tax rate for the nine months ended September 30, 2020 and 2019 was 21.9% and 25.3%, respectively. The effective tax rates for the three and nine months ended September 30, 2020 were primarily impacted by federal and state tax credits and the recognition of excess tax benefits related to share-based compensation. The effective tax rate for the three months ended September 30, 2019 was primarily impacted by the recognition of excess tax benefits related to share-based compensation. The effective tax rate for the nine months ended September 30, 2019 was primarily impacted by the increase to the valuation allowance related to certain federal research and development credits that are no longer expected to be realizable. We estimate our effective tax rate for the year ending December 31, 2020 will be approximately 23%.

In connection with the Pandora Acquisition, we acquired gross net operating loss ("NOLs") carryforwards of approximately $1,287 for federal income tax purposes. These NOL carryforwards are available to offset future taxable income. The acquired NOLs are limited annually by Section 382 of the Internal Revenue Code but we expect to fully utilize those NOLs within the carryforward period.

~~Unaudited Pro Forma Results~~

Set forth below are our pro forma results of operations for the three and nine months ended September 30, 2020 compared with the three and nine months ended September 30, 2019. 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 Pandora 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~~. Pro forma adjustments are not included for the acquisition of Simplecast. Please refer to the Footnotes to Results of Operations (pages 49 through 54) following our discussion of results of operations.

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2020 vs 2019 Change
For the Three Months Ended September 30, For the Nine Months Ended September 30, Three Months Nine Months
2020 2019 2020 2019 Amount % Amount %
Revenue (Pro Forma) (Pro Forma) (Pro Forma) (Pro Forma)
Sirius XM:
Subscriber revenue $ 1,462 $ 1,424 $ 4,372 $ 4,196 $ 38 3 % $ 176 4 %
Advertising revenue 39 51 108 149 (12) (24) % (41) (28) %
Equipment revenue 47 45 113 127 2 4 % (14) (11) %
Other revenue 41 46 121 127 (5) (11) % (6) (5) %
Total Sirius XM revenue 1,589 1,566 4,714 4,599 23 1 % 115 3 %
Pandora:
Subscriber revenue 132 132 385 401 — — % (16) (4) %
Advertising revenue 306 315 758 852 (9) (3) % (94) (11) %
Total Pandora revenue 438 447 1,143 1,253 (9) (2) % (110) (9) %
Total consolidated revenue 2,027 2,013 5,857 5,852 14 1 % 5 — %
Cost of services
Sirius XM:
Revenue share and royalties 369 358 1,100 1,065 11 3 % 35 3 %
Programming and content 114 113 330 328 1 1 % 2 1 %
Customer service and billing 99 99 291 296 — — % (5) (2) %
Transmission 33 29 90 79 4 14 % 11 14 %
Cost of equipment 5 8 13 20 (3) (38) % (7) (35) %
Total Sirius XM cost of services 620 607 1,824 1,788 13 2 % 36 2 %
Pandora:
Revenue share and royalties 235 238 665 701 (3) (1) % (36) (5) %
Programming and content 9 3 21 10 6 200 % 11 110 %
Customer service and billing 20 20 68 64 — — % 4 6 %
Transmission 13 17 39 43 (4) (24) % (4) (9) %
Total Pandora cost of services 277 278 793 818 (1) — % (25) (3) %
Total consolidated cost of services 897 885 2,617 2,606 12 1 % 11 — %
Subscriber acquisition costs 110 101 257 313 9 9 % (56) (18) %
Sales and marketing 222 233 664 684 (11) (5) % (20) (3) %
Engineering, design and development 64 78 196 220 (14) (18) % (24) (11) %
General and administrative 131 124 357 395 7 6 % (38) (10) %
Depreciation and amortization 125 118 381 359 7 6 % 22 6 %
Acquisition and restructuring costs — — 24 — — nm 24 nm
Total operating expenses 1,549 1,539 4,496 4,577 10 1 % (81) (2) %
Income from operations 478 474 1,361 1,275 4 1 % 86 7 %
Other (expense) income:
Interest expense (96) (104) (297) (293) 8 8 % (4) (1) %
Loss on extinguishment of debt (40) (56) (40) (57) 16 29 % 17 30 %
Other income (expense) 2 — 10 (1) 2 nm 11 1100 %
Total other (expense) income (134) (160) (327) (351) 26 16 % 24 7 %
Income before income taxes 344 314 1,034 924 30 10 % 110 12 %
Income tax expense (72) (69) (226) (234) (3) (4) % 8 3 %
Net income $ 272 $ 245 $ 808 $ 690 $ 27 11 % $ 118 17 %
Adjusted EBITDA $ 661 $ 657 $ 1,915 $ 1,841 $ 4 1 % $ 74 4 %

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Sirius XM Revenue

Sirius XM Subscriber Revenue includes fees charged for self-pay and paid promotional subscriptions, U.S. Music Royalty Fees and other ancillary fees.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, subscriber revenue was ~~$1,462~~$1,532 and ~~$1,424,~~$1,462, respectively, an increase of 3%5%, or ~~$38.~~$70. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, subscriber revenue was ~~$4,372~~$4,521 and ~~$4,196,~~$4,372, respectively, an increase of 4%3% or ~~$176.~~$149. The increases were primarily driven by growth in our self-pay subscriber base of 5% driving higher self-pay revenue ~~as a result of increases in certain subscription plans~~ and ~~higher~~ U.S. Music Royalty Fees, ~~due to a higher music royalty rate,~~ partially offset by lower revenue generated from automakers offering paid promotional ~~revenue.~~subscriptions.

We expect subscriber revenues to increase based on ~~the growth of our subscriber base,~~ increases in the average price charged and the sale of additional services to subscribers.

Sirius XM Advertising Revenue includes the sale of advertising on Sirius XM’s non-music channels.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, advertising revenue was $47 and $39, ~~and $51,~~ respectively, ~~a decrease~~an increase of ~~24%~~21%, or ~~$12.~~$8. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, advertising revenue was $135 and $108, ~~and $149,~~ respectively, ~~a decrease~~an increase of ~~28%~~25% or ~~$41.~~$27. The ~~decreases~~increases were due to ~~lower~~higher advertising ~~as a result of the impact of the COVID-19 pandemic~~ primarily on news and sports channels ~~related~~as we continue to ~~the cancellation of live sporting events.~~recover to pre-COVID-19 levels.

We expect our Sirius XM advertising revenue to grow as we continue ~~our recovery~~ to ~~pre-COVID-19 levels.~~offer a broader set of channels.

Sirius XM Equipment Revenue includes revenue and royalties from the sale of satellite radios, components and accessories.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, equipment revenue was $41 and $47, ~~and $45,~~ respectively, ~~an increase~~a decrease of 4%13%, or ~~$2.~~$6. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, equipment revenue was $149 and $113, respectively, an increase of 32% or $36. The decrease for the three month period was primarily driven by semiconductor supply shortages, automaker plant closings during the quarter due to COVID-19, and ~~$127, respectively, a decrease~~lower sales of ~~11% or $14.~~components and accessories. The increase for the ~~three~~nine month period was driven by higher royalty revenue asfrom new vehicle production ~~increased~~ as automakers pushed to get back to pre-COVID-19 ~~levels. The decrease for~~manufacturing levels during the ~~nine month period was driven by lower royalty revenue as new vehicle production decreased~~first half of 2021 and due to our transition to a new generation of chipsets, partially offset by semiconductor supply shortages in the ~~impact~~third quarter of ~~the COVID-19 pandemic and by lower direct sales to consumers.~~2021.

We expect equipment revenue to increase as ~~royalty~~the volume of chipsets sold and revenue ~~associated with certain new chipsets increases.~~per unit sold increases.

Sirius XM Other Revenue includes service and advisory revenue from ~~our~~ Sirius XM Canada, our connected vehicle services, and ancillary revenues.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, other revenue was ~~$41~~$40 and ~~$46,~~$39, respectively, ~~a decrease~~an increase of ~~11%~~3%, or ~~$5.~~ $1. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, other revenue was ~~$121~~$113 and ~~$127,~~$115, respectively, a decrease of 5%2% or ~~$6.~~ $2. The ~~decreases were~~increase for the three month period was primarily driven by higher revenue generated by our connected vehicle services and Sirius XM Canada, partially offset by lower revenue generated by rental car arrangements. The decrease for the nine month period was primarily driven by lower revenue generated by ~~our connected vehicle services.~~rental car arrangements.

We expect other revenue to remain relatively flat.

Pandora Revenue

Pandora Subscriber Revenue includes fees charged for Pandora Plus and Pandora Premium subscriptions as well as Stitcher podcast subscriptions.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, Pandora subscriber revenue was ~~$132.~~$134 and $132, respectively, an increase of 2%, or $2. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, Pandora subscriber revenue was $397 and $385, ~~and $401,~~ respectively, ~~a decrease~~an increase of 4%3% or ~~$16. For~~$12. The increases were primarily driven by the ~~three month period, higher revenue from~~inclusion of Stitcher and growth in Pandora Premium plans was offset by a decrease due to the expiration in 2019 of the one-year promotional subscriptions generated through an expired agreement with T-Mobile. The decrease for the nine month period was primarily due to the expiration of the one-year promotional subscriptions generated through an expired agreement with T-Mobile.

~~We expect Pandora subscriber revenues to increase with growth of our Pandora~~Pandora's subscriber base.

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We expect Pandora subscriber revenues to remain relatively flat.

Pandora Advertising Revenue is generated primarily from audio, display and video advertising from on-platform and off-platform advertising.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, Pandora advertising revenue was $404 and $306, ~~and $315,~~ respectively, ~~a decrease~~an increase of 3%32%, or ~~$9.~~$98. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, Pandora advertising revenue was $1,100 and $758, ~~and $852,~~ respectively, ~~a decrease~~an increase of ~~11%~~45% or ~~$94.~~$342. The ~~decreases~~increases were primarily due to ~~lower~~growth in Pandora owned and operated revenue from higher sell-through, increases in the price of advertising sold, the inclusion of Stitcher as ~~a result of the impact of the COVID-19 pandemic.~~well as increased revenue from AdsWizz.

We expect our advertising revenue to increase due to ~~our off-platform advertising opportunities~~growth of Stitcher and ~~as we continue to recover to pre-COVID-19 levels.~~AdsWizz.

Total Consolidated Revenue

Total Consolidated Revenue for the three months ended September 30, 2021 and 2020, was $2,198 and ~~2019, was $2,027 and $2,013,~~$2,025, respectively, an increase of 1%9%, or ~~$14.~~$173. Total Consolidated Revenuefor the nine months ended September 30, 2021 and 2020, was $6,415 and ~~2019, was $5,857 and $5,852,~~$5,851, respectively, an increase of ~~$5.~~10% or $564.

Sirius XM Cost of Services

Sirius XM Cost of Services includes revenue share and royalties, programming and content, customer service and billing, transmission and ~~transmission~~equipment expenses.

Sirius XM Revenue Share and Royalties include royalties for transmitting content, including streaming royalties, as well as automaker, content provider and advertising revenue share.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, revenue share and royalties were ~~$369~~$378 and ~~$358,~~$369, respectively, an increase of 3%2%, or ~~$11, and increased~~$9, but decreased as a percentage of total Sirius XM revenue. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, revenue share and royalties were ~~$1,100~~$1,144 and ~~$1,065,~~$1,100, respectively, an increase of 3%4%, or ~~$35, and increased~~$44, but decreased as a percentage of total Sirius XM revenue. The increases were driven by overall greater revenues subject to music royalties and revenue share.

We expect our Sirius XM revenue share and royalty costs to increase as our revenues grow.

Sirius XM Programming and Content includes costs to acquire, create, promote and produce content. We have entered into various agreements with third parties for music and non-music programming that require us to pay license fees and other amounts.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, programming and content expenses were ~~$114~~$129 and ~~$113,~~$114, respectively, an increase of 1%13%, or ~~$1,~~$15, and ~~decreased~~increased as a percentage of total Sirius XM revenue. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, programming and content expenses were $373 and $330, ~~and $328,~~ respectively, ~~a slight~~an increase of ~~$2, but decreased~~13%, or $43, and increased as a percentage of total Sirius XM revenue. The ~~increase for the three month period was~~increases were driven by higher content licensing costs. The increase for the nine month period was primarily driven by higher content licensing costs as well as greater personnel-related costs partially offset by one-time benefits for reduced sports programming as a result of shortened sports seasons due to the COVID-19 pandemic.

We expect our Sirius XM programming and content expenses to increase as we offer additional programming and renew

or replace expiring agreements.

Sirius XM Customer Service and Billing includes costs associated with the operation and management of internal and third-party customer service centers, and our subscriber management systems as well as billing and collection costs, bad debt expense, and transaction fees.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, customer service and billing expenses were ~~$99.~~$106 and $99, respectively, an increase of 7%, or $7, and increased as a percentage of total Sirius XM revenue. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, customer service and billing expenses were $309 and $291, ~~and $296,~~ respectively, ~~a decrease~~an increase of 2%6%, or ~~$5,~~$18, and ~~decreased~~increased as a percentage of total Sirius XM revenue. The ~~decrease~~increase for the ~~nine-month~~three month period was driven by ~~reduced staffing resulting from stay at home orders issued in countries in which our vendors operate~~higher transaction costs, bad debt expense, consulting, and personnel-related costs, partially offset by lower call ~~centers.~~center expenses. The increase for the nine month period was driven by higher transaction costs, consulting, and personnel-related cost; partially offset by lower bad debt expense and lower call center expenses.

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We expect our Sirius XM customer service and billing expenses to increase as ~~our subscriber base grows.~~

~~Table of Contents~~

bad debt expense grows tied to higher expected non-pay rates.

Sirius XM Transmission consists of costs associated with the operation and maintenance of our terrestrial repeater networks; satellites; satellite telemetry, tracking and control systems; satellite uplink facilities; studios; and delivery of our Internet streaming and connected vehicle services.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, transmission expenses were ~~$33~~$39 and ~~$29,~~$33, respectively, an increase of ~~14%~~18%, or ~~$4,~~$6, and increased as a percentage of total Sirius XM revenue. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, transmission expenses were ~~$90~~$108 and ~~$79,~~$90, respectively, an increase of ~~14%~~20%, or ~~$11,~~$18, and increased as a percentage of total Sirius XM revenue. The increases were primarily driven by higher cloud hosting and wireless costs associated with our 360L platform, streaming content and our ~~streaming and~~ connected vehicle services.

We expect our Sirius XM transmission expenses to increase as costs associated with our 360L platform and investments in internet streaming grow.

Sirius XM Cost of Equipment includes costs from the sale of satellite radios, components and accessories and provisions for inventory allowance attributable to products purchased for resale in our direct to consumer distribution channels.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, cost of equipment was $5$4 and ~~$8,~~$5, respectively, a decrease of ~~38%,~~20% or ~~$3,~~$1, and decreased as a percentage of ~~equipment~~total Sirius XM revenue. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, cost of equipment was ~~$13~~$12 and ~~$20,~~$13, respectively, a decrease of ~~35%,~~8% or ~~$7,~~$1, and decreased as a percentage of ~~equipment~~total Sirius XM revenue. The decreases were ~~primarily due to~~driven by lower ~~direct sales to consumers~~component and ~~lower inventory reserves.~~accessories sales.

We expect our Sirius XM cost of equipment to fluctuate with the sales of our satellite radios.

Pandora Cost of Services

Pandora Cost of Services includes revenue share and royalties, programming and content, customer service and billing, and transmission expenses.

Pandora Revenue Share and Royalties includes licensing fees paid for streaming music or other content to our subscribers and listeners as well as revenue share paid to third party ad servers. We make payments to third party ad servers for the period the advertising impressions are delivered or click-through actions occur, and accordingly, we record this as a cost of service in the related period.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, revenue share and royalties were ~~$235~~$293 and ~~$238,~~$233, respectively, ~~a decrease~~an increase of 1%26%, or ~~$3, but~~$60, and increased as a percentage of total Pandora revenue. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, revenue share and royalties were ~~$665~~$830 and ~~$701,~~$659, respectively, ~~a decrease~~an increase of 5%26%, or ~~$36,~~$171, but ~~increased~~decreased as a percentage of total Pandora revenue. The ~~decrease for the three month period was~~increases were primarily due to ~~lower listening hours. The decrease for~~higher royalty rates and owned and operated revenue as well as higher AdsWizz revenue, the ~~nine month period was primarily driven by a reversal~~inclusion of ~~a pre-acquisition reserve of $16 for royalties during~~Stitcher and the ~~first quarter of 2020, lower listening hours, and lower costs resulting from the presence of minimum guarantees associated with direct license agreements with major record labels which ended~~growth in ~~2019.~~other off-platform revenue.

We expect our Pandora revenue share to increase as off-platform revenue ~~increases~~grow and our royalty costs to increase due to higher music royalty rates.

Pandora Programming and Content includes costs to produce live listener events and promote content.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, programming and content expenses were $9$12 and ~~$3,~~$9, respectively, an increase of ~~200%~~33%, or ~~$6,~~$3, and increased as a percentage of total Pandora revenue. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, programming and content expenses were ~~$21~~$34 and ~~$10,~~$21, respectively, an increase of ~~110%~~62%, or ~~$11,~~$13, and increased as a percentage of total Pandora revenue. The increases were primarily attributable to higher license, production ~~costs~~ and personnel-related ~~costs.~~costs driven by the inclusion of Stitcher.

We expect our Pandora programming and content costs to increase as we offer additional programming and continue to

produce live listener events and promotions.

Pandora Customer Service and Billing includes transaction fees on subscription purchases through mobile app stores, and bad debt expense.

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For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, customer service and billing expenses were $21 and $20, ~~remaining relatively flat,~~respectively, an increase of 5% or $1, but ~~increased~~decreased as a percentage of total Pandora revenue. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, customer service and billing expenses were $63 and $68, ~~and $64,~~ respectively, ~~an increase~~a decrease of 6%7%, or ~~$4,~~$5, and ~~increased~~decreased as a percentage of total Pandora revenue. The increase for the three month period was primarily driven by higher transaction fees and bad debt expense. The decrease for the nine month period was primarily driven by lower bad debt expense, partially offset by ~~lower~~higher transaction ~~costs.~~fees.

We expect our Pandora customer service and billing costs to increase as our ~~subscriber base~~advertising revenue grows.

Pandora Transmission includes costs associated with content streaming, maintaining our streaming radio and on-demand subscription services and creating and serving advertisements through third-party ad servers.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, transmission expenses were $15 and $13, ~~and $17,~~ respectively, ~~a decrease~~an increase of ~~24%~~15%, or ~~$4, and~~$2, but decreased as a percentage of total Pandora revenue. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, transmission expenses were $47 and $39, ~~and $43,~~ respectively, ~~a decrease~~an increase of 9%21%, or ~~$4, and~~$8, but decreased as a percentage of total Pandora revenue. The ~~decreases~~increases were driven by ~~lower~~higher streaming ~~costs driven by lower listener hours.~~costs.

We expect our Pandora transmission costs to fluctuate with changes in listener hours.

Operating Costs

Subscriber Acquisition Costs are costs associated with our satellite radio service and include hardware subsidies paid to radio manufacturers, distributors and automakers; subsidies paid for chipsets and certain other components used in manufacturing radios; device royalties for certain radios and chipsets; product warranty obligations; and freight. The majority of subscriber acquisition costs are incurred and expensed in advance of acquiring a subscriber. Subscriber acquisition costs do not include advertising costs, marketing, loyalty payments to distributors and dealers of satellite radios or revenue share payments to automakers and retailers of satellite radios.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, subscriber acquisition costs were $71 and $110, ~~and $101,~~ respectively, ~~an increase~~a decrease of 9%35%, or ~~$9,~~$39, and ~~increased~~decreased as a percentage of total revenue. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, subscriber acquisition costs were ~~$257~~$245 and ~~$313,~~$257, respectively, a decrease of ~~18%~~5%, or ~~$56,~~$12, and decreased as a percentage of total revenue. The ~~increase~~decrease for the three month period was driven by ~~higher~~lower OEM installations as ~~automakers pushed to regain pre-COVID-19 volumes, partially offset by~~a result of factory shutdowns during the three months ended September 30, 2021 as well as the semiconductor supply shortages and lower ~~hardware~~ subsidies asfrom contract improvements with certain ~~subsidy rates decreased.~~automakers. The decrease for the nine month period was driven by ~~a decline in OEM installations as a result of the COVID-19 pandemic~~lower subsidies from contract improvements with certain automakers as well as lower ~~hardware subsidies as certain subsidy rates decreased.~~costs resulting from the semiconductor supply shortages during the three months ended September 30, 2021, partially offset by higher OEM installations following factory shutdowns in the second quarter of 2020 associated with the COVID-19 pandemic.

We expect subscriber acquisition costs to ~~fluctuate with OEM installations; however,~~grow as the ~~subsidized chipsets cost is~~

~~expected~~semiconductor supply shortages abate and production returns to ~~decline as we transition to a new generation of chipsets.~~normal levels. We intend to continue to offer subsidies and other

incentives to induce OEMs to include our technology in their vehicles.

Sales and Marketing includes costs for marketing, advertising, media and production, including promotional events and sponsorships; cooperative and artist marketing; and personnel related costs including salaries, commissions, and sales support. Marketing costs include expenses related to direct mail, outbound telemarketing, email communications, social media, television and digital performance media.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, sales and marketing expenses were $269 and $222, ~~and $233,~~ respectively, ~~a decrease~~an increase of 5%21%, or ~~$11,~~$47, and ~~decreased~~increased as a percentage of total revenue. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, sales and marketing expenses were $725 and $664, ~~and $684,~~ respectively, ~~a decrease~~an increase of 3%9%, or ~~$20, and~~$61, but decreased as a percentage of total revenue. The ~~decreases~~increases were primarily due to ~~lower~~higher streaming and trial-related direct marketing costs as well as higher personnel-related ~~costs and lower travel and entertainment costs, partially offset by additional subscriber communications and acquisition campaigns.~~costs.

We anticipate that sales and marketing expenses will increase as we expand programs to retain our existing subscribers,

win back former subscribers, and attract new subscribers and listeners.

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Engineering, Design and Development consists primarily of compensation and related costs to develop chipsets and new products and services, including streaming and connected vehicle services, research and development for broadcast information systems and the design and development costs ~~associated with the incorporation of our~~to incorporate Sirius XM radios into new vehicles manufactured by automakers.

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For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, engineering, design and development expenses were $68 and $64, ~~and $78,~~ respectively, ~~a decrease~~an increase of ~~18%~~6%, or ~~$14, and~~$4, but decreased as a percentage of total revenue. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, engineering, design and development expenses were $197 and $196, ~~and $220,~~ respectively, ~~a decrease~~an increase of ~~11%~~1%, or ~~$24, and~~$1, but decreased as a percentage of total revenue. The ~~decreases~~increases were driven by higher personnel-related costs partially offset by lower ~~personnel-related~~research and development costs.

We expect engineering, design and development expenses to increase in future periods as we continue to develop our

infrastructure, products and services.

General and Administrative primarily consists of compensation and related costs for personnel and facilities, and include costs related to our finance, legal, human resources and information technologies departments.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, general and administrative expenses were $125 and $131, ~~and $124,~~ respectively, ~~an increase~~a decrease of 6%5%, or ~~$7,~~$6, and ~~increased~~decreased as a percentage of total revenue. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, general and administrative expenses were $376 and $357, ~~and $395,~~ respectively, ~~a decrease~~an increase of ~~10%~~5%, or ~~$38, and~~$19, but decreased as a percentage of total revenue. The ~~increase~~decrease for the three month period was ~~primarily~~ driven by ~~higher~~lower personnel-related costs. The ~~decrease~~increase for the nine month period was primarily driven by ~~a one-time $25 legal settlement reserve associated with Do-Not-Call litigation recorded in the first quarter of 2019, lower~~higher personnel-related costs, ~~and~~ the closure of a sales and use tax audit in 2020 which resulted in lower tax expense during the ~~second quarter of~~nine months ended September 30, 2020, and increased performance on our deferred compensation investments during the nine months ended September 30, 2021 compared to deferred compensation investments during the nine months ended September 30, 2020 as well as higher consulting and technology related costs, partially offset by ~~higher~~lower legal ~~costs.~~and rent expense.

We expect our general and administrative expenses to increase to support the growth of our business.

Depreciation and Amortization represents the recognition in earnings of the cost of assets used in operations, including our satellite constellations, property, equipment and intangible assets, over their estimated service lives.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, depreciation and amortization expense was $135 and $125, ~~and $118, respectively, an increase of 6%, or $7.~~respectively. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, depreciation and amortization expense was $399 and $381, ~~and $359, respectively, an increase of 6%, or $22.~~respectively. The increases were primarily driven by ~~additional assets~~developed software and our SXM-8 satellite being placed ~~in-service.~~in service.

~~Acquisition~~Impairment, Restructuring and ~~Restructuring~~Acquisition Costs represents impairment charges, net of insurance recoveries, associated with the carrying amount of an asset exceeding the asset's fair value, restructuring expenses associated with the ~~termination~~abandonment of ~~the Automatic service~~certain leased office spaces and ~~the~~ acquisition ~~of Simplecast.~~costs.

For the three months ended September 30, 2021, impairment, restructuring and acquisition costs were $(95). For the three months ended September 30, 2020, ~~there were no~~we did not record any impairment, restructuring and acquisition ~~and restructuring~~ costs. For the nine months ended September 30, 2021 and 2020, impairment, restructuring and acquisition costs were $13 and $24, respectively. During the three months ended September 30, 2021, we recorded insurance recoveries related to our SXM-7 satellite of $80 as well as the reversal of a liability related to the Stitcher acquisition. During the nine month period ended September 30, 2021, we recorded restructuring costs ~~were $24. The acquisition and restructuring costs for~~of $25 resulting from the termination of leased office space, partially offset by the reversal of a liability related to the Stitcher acquisition. During the nine months ended September 30, 2020, ~~include~~we recorded costs of $24 associated with the termination of the Automatic service and costs associated with the acquisition of Simplecast. ~~There were no acquisition and restructuring costs for the three and nine months ended September 30, 2019.~~

Other (Expense) Income

Interest Expense includes interest on outstanding debt.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, interest expense was $111 and $96, ~~and $104, respectively, a decrease of 8%, or $8.~~respectively. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, interest expense was $313 and $297, ~~and $293, respectively, an increase of 1%, or $4.~~respectively. The ~~decrease for the three month period was~~increases were primarily driven by ~~lower average debt and lower average interest rates. The increase for the nine month period was primarily driven by~~a higher average outstanding debt balance due to the ~~issuances~~issuance of ~~the 5.500%~~Sirius XM's 4.00% Senior Notes due ~~2029, the 4.625%~~2028, 3.125% Senior Notes due ~~2024~~2026, and ~~the 4.125%~~3.875% Senior Notes due ~~2030;~~2031 as well as lower capitalized interest, partially offset by ~~the redemption~~lower interest rates.

Table of ~~the 6.00% Senior Notes due 2024 and lower average interest rates.~~Contents

Loss on Extinguishment of Debt, includes losses incurred as a result of the redemption of certain debt.

WeFor the three and nine months ended September 30, 2021, we recorded a ~~$40~~$83 loss on extinguishment of debt. The loss on extinguishment of debt ~~during~~recorded in 2021 was due to the redemption of $1,000 principal amount of Sirius XM's 3.875% Senior Notes due 2022, $1,500 of principal amount of Sirius XM's 4.625% Senior Notes due 2024, and $1,000 of principal amount of Sirius XM's 5.375% Senior Notes due 2026. For the three and nine months ended September 30, 2020, ~~and losses~~we recorded $40 loss on extinguishment of ~~debt of $56 and $57 loss during the three and nine months ended September 30, 2019, respectively.~~debt. The loss on extinguishment of debt recorded in 2020 was due to the redemption of $500 principal amount of Sirius XM's 4.625% Senior Notes due 2023 and $1,000 principal amount of Sirius XM's 5.375% Senior Notes due 2025. ~~The loss on extinguishment of debt recorded in 2019 was due to the repurchase of $151 principal amount of Pandora's 1.75% Convertible Senior Notes due 2020.~~

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Other (Expense) Income ~~(Expense)~~ primarily includes realized and unrealized gains and losses from our Deferred Compensation Plan and other investments, interest and dividend income, our share of the income or loss from ~~our~~ equity investments in Sirius XM Canada and SoundCloud, and transaction costs related to non-operating investments.

For the three months ended September 30, 2021 and 2020, other (expense) income was $(1) and ~~2019, other income (expense) was~~ $2, ~~and $0,~~ respectively. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, other income ~~(expense)~~ was $8 and $10, respectively. For the three months ended September 30, 2021, we recorded losses on other investments and ~~$(1), respectively.~~our share of Sirius XM Canada's net loss, partially offset by interest earned on our loan to Sirius XM Canada. For the nine months ended September 30, 2021, we recorded interest earned on our loan to Sirius XM Canada and our share of Sirius XM Canada's net income. For the three and nine months ended September 30, 2020, we recorded our share of Sirius XM Canada's net income and interest earned on our loan to Sirius XM Canada; partially offset by losses on other investments. During the nine months ended September 30, 2020, we also recorded a one-time lawsuit settlement of $7.

Income Taxes

Income Tax Expense includes the change in our deferred tax assets, current federal and state tax expenses, and foreign withholding taxes.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, income tax expense was $90 and $72, ~~and $69, respectively, and $226 and $234 for~~respectively. For the nine months ended September 30, 2021 and 2020, income tax expense was $157 and ~~2019,~~$226, respectively.

Our effective tax rate for the three months ended September 30, 2021 and 2020 was 20.8% and ~~2019 was~~ 20.9% ~~and 22.0%~~, respectively. Our effective tax rate for the nine months ended September 30, 2021 and 2020 was 13.6% and ~~2019 was~~ 21.9% ~~and 25.3%~~, respectively. The effective tax rate for the three months ended September 30, 2021 was primarily impacted by the recognition of excess tax benefits related to share-based compensation. The effective tax rate for the nine months ended September 30, 2021 was primarily impacted by a $95 benefit associated with a state tax audit settlement and the recognition of excess tax benefits related to share-based compensation. The effective tax rates for the three and nine months ended September 30, 2020 were primarily impacted by federal and state tax credits and the recognition of excess tax benefits related to share-based compensation. The effective tax rate for the three months ended September 30, 2019 was primarily impacted by the recognition of excess tax benefits related to share-based compensation. The effective tax rate for the nine months ended September 30, 2019 was primarily impacted by the increase to the valuation allowance related to certain federal research and development credits that are no longer expected to be realizable. We estimate our effective tax rate for the year ending December 31, ~~2020~~2021 will be approximately ~~23%~~16%.

In connection with the Pandora Acquisition, we acquired gross NOL carryforwards of approximately $1,287 for federal income tax purposes. These NOL carryforwards are available to offset future taxable income. The acquired NOLs are limited annually by Section 382 of the Internal Revenue Code but we expect to fully utilize those NOLs within the carryforward period.

~~Footnotes to Pro Forma Results of Operations~~

~~The following tables reconcile our results of operations as reported to our~~ ~~pro forma~~ results of operations for the three and nine months ended September 30, 2020 and 2019 which includes the Pandora pre-acquisition financial information for the applicable periods and the effects of purchase price accounting. 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 Pandora 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.

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Unaudited for the Three Months Ended September 30, 2020
As Reported Predecessor Financial Information Purchase Price
Accounting Adjustments Ref Pro Forma
Revenue
Sirius XM:
Subscriber revenue $ 1,462 $ — $ — $ 1,462
Advertising revenue 39 — — 39
Equipment revenue 47 — — 47
Other revenue 39 — 2 (a) 41
Total Sirius XM revenue 1,587 — 2 1,589
Pandora:
Subscriber revenue 132 — — 132
Advertising revenue 306 — — 306
Total Pandora revenue 438 — — 438
Total consolidated revenue 2,025 — 2 2,027
Cost of services
Sirius XM:
Revenue share and royalties 369 — — 369
Programming and content 114 — — 114
Customer service and billing 99 — — 99
Transmission 33 — — 33
Cost of equipment 5 — — 5
Total Sirius XM cost of services 620 — — 620
Pandora:
Revenue share and royalties 233 — 2 (b) 235
Programming and content 9 — — 9
Customer service and billing 20 — — 20
Transmission 13 — — 13
Total Pandora cost of services 275 — 2 277
Total consolidated cost of services 895 — 2 897
Subscriber acquisition costs 110 — — 110
Sales and marketing 222 — — 222
Engineering, design and development 64 — — 64
General and administrative 131 — — 131
Depreciation and amortization 125 — — 125
Acquisition and restructuring costs — — — —
Total operating expenses 1,547 — 2 1,549
Income from operations 478 — — 478
Other (expense) income:
Interest expense (96) — — (96)
Loss on extinguishment of debt (40) — — (40)
Other income (expense) 2 — — 2
Total other (expense) income (134) — — (134)
Income before income taxes 344 — — 344
Income tax expense (72) — — (72)
Net income $ 272 $ — $ — $ 272

~~(a) 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").~~

~~(b) This adjustment includes the impact of additional expense associated with minimum guarantee royalty contracts recorded as part of the Pandora Acquisition.~~

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Unaudited for the Three Months Ended September 30, 2019
As Reported Predecessor Financial Information Purchase Price
Accounting Adjustments Ref Pro Forma
Revenue
Sirius XM:
Subscriber revenue $ 1,424 $ — $ — $ 1,424
Advertising revenue 51 — — 51
Equipment revenue 45 — — 45
Other revenue 44 — 2 (c) 46
Total Sirius XM revenue 1,564 — 2 1,566
Pandora:
Subscriber revenue 132 — — 132
Advertising revenue 315 — — 315
Total Pandora revenue 447 — — 447
Total consolidated revenue 2,011 — 2 2,013
Cost of services
Sirius XM:
Revenue share and royalties 358 — — 358
Programming and content 113 — — 113
Customer service and billing 99 — — 99
Transmission 29 — — 29
Cost of equipment 8 — — 8
Total Sirius XM cost of services 607 — — 607
Pandora:
Revenue share and royalties 234 — 4 (d) 238
Programming and content 3 — — 3
Customer service and billing 20 — — 20
Transmission 17 — — 17
Total Pandora cost of services 274 — 4 278
Total consolidated cost of services 881 — 4 885
Subscriber acquisition costs 101 — — 101
Sales and marketing 233 — — 233
Engineering, design and development 78 — — 78
General and administrative 124 — — 124
Depreciation and amortization 118 — — 118
Acquisition and restructuring costs — — — —
Total operating expenses 1,535 — 4 1,539
Income from operations 476 — (2) 474
Other (expense) income:
Interest expense (104) — — (104)
Loss on extinguishment of debt (56) — — (56)
Other income (expense) — — — —
Total other (expense) income (160) — — (160)
Income before income taxes 316 — (2) 314
Income tax expense (70) — 1 (e) (69)
Net income $ 246 $ — $ (1) $ 245

~~(c) This adjustment eliminates the impact of additional revenue associated with certain programming agreements recorded as part of the XM Merger.~~

~~(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 to income taxes was calculated by applying Sirius XM's statutory tax rate at September 30, 2019 to the pro forma adjustments of $(2).~~

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Unaudited for the Nine Months Ended September 30, 2020
As Reported Predecessor Financial Information Purchase Price
Accounting Adjustments Ref Pro Forma
Revenue
Sirius XM:
Subscriber revenue $ 4,372 $ — $ — $ 4,372
Advertising revenue 108 — — 108
Equipment revenue 113 — — 113
Other revenue 115 — 6 (f) 121
Total Sirius XM revenue 4,708 — 6 4,714
Pandora:
Subscriber revenue 385 — — 385
Advertising revenue 758 — — 758
Total Pandora revenue 1,143 — — 1,143
Total consolidated revenue 5,851 — 6 5,857
Cost of services
Sirius XM:
Revenue share and royalties 1,100 — — 1,100
Programming and content 330 — — 330
Customer service and billing 291 — — 291
Transmission 90 — — 90
Cost of equipment 13 — — 13
Total Sirius XM cost of services 1,824 — — 1,824
Pandora:
Revenue share and royalties 659 — 6 (g) 665
Programming and content 21 — — 21
Customer service and billing 68 — — 68
Transmission 39 — — 39
Total Pandora cost of services 787 — 6 793
Total consolidated cost of services 2,611 — 6 2,617
Subscriber acquisition costs 257 — — 257
Sales and marketing 664 — — 664
Engineering, design and development 196 — — 196
General and administrative 357 — — 357
Depreciation and amortization 381 — — 381
Acquisition and restructuring costs 24 — — 24
Total operating expenses 4,490 — 6 4,496
Income from operations 1,361 — — 1,361
Other (expense) income:
Interest expense (297) — — (297)
Loss on extinguishment of debt (40) — — (40)
Other income (expense) 10 — — 10
Total other (expense) income (327) — — (327)
Income before income taxes 1,034 — — 1,034
Income tax expense (226) — — (226)
Net income $ 808 $ — $ — $ 808

~~(f) This adjustment eliminates the impact of additional revenue associated with certain programming agreements recorded as part of the XM Merger.~~

~~(g) This adjustment includes the impact of additional expense associated with minimum guarantee royalty contracts recorded as part of the Pandora Acquisition.~~

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Unaudited for the Nine Months Ended September 30, 2019
As Reported Predecessor Financial Information (h) Purchase Price
Accounting Adjustments Ref Pro Forma
Revenue
Sirius XM:
Subscriber revenue $ 4,196 $ — $ — $ 4,196
Advertising revenue 149 — — 149
Equipment revenue 127 — — 127
Other revenue 121 — 6 (i) 127
Total Sirius XM revenue 4,593 — 6 4,599
Pandora:
Subscriber revenue 355 46 — 401
Advertising revenue 784 68 — 852
Total Pandora revenue 1,139 114 — 1,253
Total consolidated revenue 5,732 114 6 5,852
Cost of services
Sirius XM:
Revenue share and royalties 1,065 — — 1,065
Programming and content 328 — — 328
Customer service and billing 296 — — 296
Transmission 79 — — 79
Cost of equipment 20 — — 20
Total Sirius XM cost of services 1,788 — — 1,788
Pandora:
Revenue share and royalties 619 71 11 (j) 701
Programming and content 10 — — 10
Customer service and billing 56 8 — 64
Transmission 38 5 — 43
Total Pandora cost of services 723 84 11 818
Total consolidated cost of services 2,511 84 11 2,606
Subscriber acquisition costs 313 — — 313
Sales and marketing 648 36 — 684
Engineering, design and development 206 14 — 220
General and administrative 379 16 — 395
Depreciation and amortization 344 6 9 (k) 359
Acquisition and restructuring costs 83 1 (84) (l) —
Total operating expenses 4,484 157 (64) 4,577
Income from operations 1,248 (43) 70 1,275
Other (expense) income:
Interest expense (291) (2) — (293)
Loss on extinguishment of debt (57) — — (57)
Other income (expense) (2) 1 — (1)
Total other (expense) income (350) (1) — (351)
Income before income taxes 898 (44) 70 924
Income tax expense (227) — (7) (m) (234)
Net income $ 671 $ (44) $ 63 $ 690

~~(h) Represents Pandora’s results for the period January 1, 2019 through January 31, 2019.~~

~~(i) This adjustment eliminates the impact of additional revenue associated with certain programming agreements recorded as part of the XM Merger.~~

~~(j) This adjustment includes the impact of additional expense associated with minimum guarantee royalty contracts recorded as part of the Pandora Acquisition.~~

(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 acquisition and other related costs.~~

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(m) This adjustment to income taxes was calculated by applying Sirius XM's statutory tax rate at September 30, 2019 to the pro forma adjustments of $70 and Pandora's loss before income tax of $44.

Key Financial and Operating Performance Metrics

In this section, we present certain financial performance measures, some of which are presented as Non-GAAP items, which include free cash flow and adjusted EBITDA. We also present certain operating performance measures. Our adjusted EBITDA excludes the impact of share-based payment expense and certain purchase price accounting adjustments related to the merger of Sirius and XM ~~Merger~~("XM Merger") and our February 2019 acquisition of Pandora ("the Pandora ~~Acquisition.~~Acquisition"). Additionally, when applicable, our adjusted EBITDA metric excludes the effect of significant items that do not relate to the on-going performance of our business. We use these Non-GAAP financial and operating performance measures to manage our business, to set operational goals and as a basis for determining performance-based compensation for our employees. See the accompanying glossary on pages 6051 through 6354 for more details and for the reconciliation to the most directly comparable GAAP measure (where applicable).

We believe these Non-GAAP financial and operating performance measures provide useful information to investors regarding our financial condition and results of operations. We believe these Non-GAAP financial and operating performance measures may be useful to investors in evaluating our core trends because they provide a more direct view of our underlying costs. We believe investors may use our adjusted EBITDA to estimate our current enterprise value and to make investment decisions. We believe free cash flow provides useful supplemental information to investors regarding our cash available for future subscriber acquisitions and capital expenditures, to repurchase or retire debt, to acquire other companies and our ability to return capital to stockholders. By providing these Non-GAAP financial and operating performance measures, together with

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the reconciliations to the most directly comparable GAAP measure (where applicable), we believe we are enhancing investors' understanding of our business and our results of operations.

Our Non-GAAP financial measures should be viewed in addition to, and not as an alternative for or superior to, our reported results prepared in accordance with GAAP. In addition, our Non-GAAP financial measures may not be comparable to similarly-titled measures by other companies. Please refer to the glossary (pages 6051 through ~~63)~~54) for a further discussion of such Non-GAAP financial and operating performance measures and reconciliations to the most directly comparable GAAP measure (where applicable). Subscribers and subscription related revenues and expenses associated with our connected vehicle services and Sirius XM Canada are not included in Sirius XM's subscriber count or subscriber-based operating metrics.

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Set forth below are our subscriber balances as of September 30, ~~2020~~2021 compared to September 30, ~~2019.~~2020.


		As of September 30,			2020 vs 2019 Change					As of September 30,				2021 vs 2020 Change
(subscribers in thousands)	(subscribers in thousands)	2020	2019	Amount	%		(subscribers in thousands)	2021	2020		Amount	%
Sirius XM	Sirius XM						Sirius XM
Self-pay subscribers	Self-pay subscribers	30,480	29,637	843	3	%	Self-pay subscribers	31,985	30,480		1,505	5	%
Paid promotional subscribers	Paid promotional subscribers	3,955	4,917	(962)	(20)	%	Paid promotional subscribers	2,280	3,955		(1,675)	(42)	%
Ending subscribers	Ending subscribers	34,435	34,554	(119)	—	%	Ending subscribers	34,265	34,435		(170)	—	%
Traffic users	Traffic users	9,430	9,378	52	1	%	Traffic users	8,886	9,430		(544)	(6)	%
Sirius XM Canada subscribers	Sirius XM Canada subscribers	2,612	2,706	(94)	(3)	%	Sirius XM Canada subscribers	2,262	2,612		(350)	(13)	%

Pandora	Pandora						Pandora
Monthly active users - all services	Monthly active users - all services	58,583	63,100	(4,517)	(7)	%	Monthly active users - all services	52,618	58,583		(5,965)	(10)	%
Self-pay subscribers	Self-pay subscribers	6,361	6,257	104	2	%	Self-pay subscribers	6,452	6,344		108	2	%
Paid promotional subscribers	Paid promotional subscribers	43	45	(2)	(4)	%	Paid promotional subscribers	71	60		11	18	%
Ending subscribers	Ending subscribers	6,404	6,302	102	2	%	Ending subscribers	6,523	6,404		119	2	%

The following table contains our Non-GAAP ~~pro forma~~ financial and operating performance measures which are based on our adjusted results of operations for the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020.

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														2020 vs 2019 Change																					For the Three Months Ended September 30,				For the Nine Months Ended September 30,									2021 vs 2020 Change
		For the Three Months Ended September 30,									For the Nine Months Ended September 30,								Three Months					Nine Months														For the Three Months Ended September 30,						For the Nine Months Ended September 30,						Three Months	Nine Months
(subscribers in thousands)	(subscribers in thousands)	2020			2019			2020			2019 ⁽¹⁾			Amount			%		Amount			%			(subscribers in thousands)	2021			2020			2021			2020				Amount			%						%
Sirius XM	Sirius XM																								Sirius XM
Self-pay subscribers	Self-pay subscribers	169			302			502			723			(133)			(44)	%	(221)			(31)	%		Self-pay subscribers	616			169			1,097			502				447			264	%		595			119	%
Paid promotional subscribers	Paid promotional subscribers	17			(92)			(975)			(207)			109			(118)	%	(768)			371	%		Paid promotional subscribers	(828)			17			(1,547)			(975)				(845)			(4,971)	%		(572)			(59)	%
Net additions	Net additions	186			210			(473)			516			(24)			(11)	%	(989)			(192)	%		Net additions	(212)			186			(450)			(473)				(398)			(214)	%		23			(5)	%
Weighted average number of subscribers	Weighted average number of subscribers	34,330			34,397			34,480			34,181			(67)			—	%	299			1	%		Weighted average number of subscribers	34,372			34,330			34,435			34,480				42			—	%		(45)			—	%
Average self-pay monthly churn	Average self-pay monthly churn	1.7		%	1.7		%	1.7		%	1.7		%	—		%	—	%	—		%	—	%		Average self-pay monthly churn	1.5		%	1.7		%	1.6		%	1.7		%		(0.2)		%	(12)	%		(0.1)		%	(6)	%
ARPU ⁽²⁾⁽¹⁾	ARPU ⁽²⁾⁽¹⁾	$	14.15		$	13.90		$	14.02		$	13.75		$	0.25		2	%	$	0.27		2	%		ARPU ⁽²⁾⁽¹⁾	$	14.84		$	14.15		$	14.57		$	14.02			$	0.69		5	%		$	0.55		4	%
SAC, per installation	SAC, per installation	$	20.98		$	21.01		$	20.49		$	22.62		$	(0.03)		—	%	$	(2.13)		(9)	%		SAC, per installation	$	13.66		$	20.98		$	13.14		$	20.49			$	(7.32)		(35)	%		$	(7.35)		(36)	%

Pandora	Pandora																								Pandora
Self-pay subscribers	Self-pay subscribers	105			33			196			343			72			218	%	(147)			(43)	%		Self-pay subscribers	(59)			99			172			179				(158)			(160)	%		(7)			(4)	%
Paid promotional subscribers	Paid promotional subscribers	(3)			(688)			(6)			(711)			685			(100)	%	705			(99)	%		Paid promotional subscribers	4			3			9			11				1			(33)	%		(2)			18	%
Net additions	Net additions	102			(655)			190			(368)			757			(116)	%	558			(152)	%		Net additions	(55)			102			181			190				(157)			(154)	%		(9)			5	%
Weighted average number of subscribers	Weighted average number of subscribers	6,376			6,753			6,281			6,778			(377)			(6)	%	(497)			(7)	%		Weighted average number of subscribers	6,554			6,376			6,486			6,281				178			3	%		205			3	%
ARPU	ARPU	$	6.83		$	6.46		$	6.79		$	6.56		$	0.37		6	%	$	0.23		4	%		ARPU	$	6.70		$	6.83		$	6.68		$	6.79			$	(0.13)		(2)	%		$	(0.11)		(2)	%
Ad supported listener hours (in billions)	Ad supported listener hours (in billions)	3.12			3.32			9.53			10.23			(0.20)			(6)	%	(0.70)			(7)	%		Ad supported listener hours (in billions)	2.89			3.12			8.78			9.53				(0.23)			(7)	%		(0.75)			(8)	%
Advertising revenue per thousand listener hours (RPM)	Advertising revenue per thousand listener hours (RPM)	$	84.46		$	85.33		$	68.83		$	75.96		$	(0.87)		(1)	%	$	(7.13)		(9)	%		Advertising revenue per thousand listener hours (RPM)	$	109.02		$	84.46		$	98.44		$	68.83			$	24.56		29	%		$	29.61		43	%
Licensing costs per thousand listener hours (LPM)	Licensing costs per thousand listener hours (LPM)	$	40.16		$	39.05		$	38.11		$	37.83		$	1.11		3	%	$	0.28		1	%		Licensing costs per thousand listener hours (LPM)	$	51.08		$	40.16		$	46.93		$	38.11			$	10.92		27	%		$	8.82		23	%
Licensing costs per paid subscriber (LPU)	Licensing costs per paid subscriber (LPU)	$	4.19		$	4.09		$	4.12		$	4.07		$	0.10		2	%	$	0.05		1	%		Licensing costs per paid subscriber (LPU)	$	4.16		$	4.19		$	4.18		$	4.12			$	(0.03)		(1)	%		$	0.06		1	%

Total Company	Total Company																								Total Company
Adjusted EBITDA	Adjusted EBITDA	$	661		$	657		$	1,915		$	1,841		$	4		1	%	$	74		4	%		Adjusted EBITDA	$	719		$	661		$	2,101		$	1,915			$	58		9	%		$	186		10	%
Free cash flow ⁽³⁾	Free cash flow ⁽³⁾	$	361		$	465		$	1,212		$	1,239		$	(104)		(22)	%	$	(27)		(2)	%		Free cash flow ⁽³⁾	$	588		$	361		$	1,349		$	1,212			$	227		63	%		$	137		11	%

(1) ~~Includes Pandora's results for the nine month period, including pre-acquisition results for the period January 1, 2019 through January 31, 2019.~~

~~(2)~~ ARPU for Sirius XM excludes subscriber revenue from our connected vehicle services of ~~$44~~$49 and ~~$41~~$44 for the three months ended September 30, 2021 and 2020, respectively, and $141 and $130 ~~and $116~~ for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

~~(3) Free cash flow has not been adjusted for Pandora's pre-acquisition results.~~

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Sirius XM

Subscribers. At September 30, ~~2020,~~2021, Sirius XM had approximately ~~34,435~~34,265 subscribers, a decrease of ~~119,~~170, from the approximately ~~34,554~~34,435 subscribers as of September 30, ~~2019.~~2020. The decrease was due to the decrease in paid promotional subscribers generated by automakers driven by a shift to shorter paid trials and unpaid trials, partially offset by the growth in our self-pay subscriber base ~~from subsequent owner trial conversions~~ as ~~well as subscriber win back programs.~~a result of vehicle sales growth, lower churn rate, and higher new vehicle penetration rate.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, net subscriber additions were ~~186~~(212) and ~~210,~~186, respectively. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, net subscriber additions were ~~(473)~~(450) and ~~516,~~(473), respectively. For the three month period, paid promotional subscribers increased as shipments and trial subscription starts from automakers offering paid subscriptions rebounded from the impact of the COVID-19 pandemic. For the nine month period, paidPaid promotional subscribers decreased asdue to a shift to shorter paid or free trials at certain automakers, and to a lesser extent, lower vehicle shipments ~~and trial subscription starts from automakers offering paid subscriptions declined as a result of the COVID-19 pandemic.~~due to semiconductor supply shortages. Self-pay net additions ~~decreased year over year as increases in subsequent owner~~increased driven by higher new vehicle conversion resulting from vehicle sales growth during the first half of 2021 and automakers shift to shorter trial conversions and reductions in vehicle related and non-pay churn were offset by reduced additions from win back programs, new car conversions, and aftermarket programs as well as increases in voluntary churn.

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periods than 2020 which drove higher conversion opportunities.

Traffic Users. We offer services that provide graphic information as to road closings, traffic flow and incident data to consumers with compatible in-vehicle navigation systems. At September 30, ~~2020,~~2021, Sirius XM had approximately ~~9,430~~8,886 traffic users, ~~an increase~~a decrease of 52544 users, or 1%6%, from the approximately ~~9,378~~9,430 traffic users as of September 30, ~~2019.~~2020.

Sirius XM Canada Subscribers. At September 30, ~~2020,~~2021, Sirius XM Canada had approximately ~~2,612~~2,262 subscribers, a decrease of ~~94,~~350, or 3%13%, from the approximately ~~2,706~~2,612 Sirius XM Canada subscribers as of September 30, ~~2019.~~2020.

Average Self-pay Monthly Churn is derived by dividing the monthly average of self-pay deactivations for the period by the average number of self-pay subscribers for the period. (See accompanying glossary on pages 6051 through 6354 for more details.)

For ~~both~~ the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, our average self-pay monthly churn rate was 1.5% and 1.7%., respectively. For ~~both~~ the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, our average self-pay monthly churn rate was 1.6% and 1.7%~~. Lower~~, respectively. The decrease for the three month period was driven by lower vehicle ~~and~~related churn. The decrease for the nine month period was driven by lower non-pay churn ~~was offset by increased~~and voluntary churn.

ARPU is derived from total earned Sirius XM subscriber revenue (excluding revenue derived from our connected vehicle services) and net advertising revenue, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. (See the accompanying glossary on pages 6051 through 6354 for more details.)

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, subscriber ARPU - Sirius XM was ~~$14.15~~$14.84 and ~~$13.90,~~$14.15, respectively. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, subscriber ARPU - Sirius XM was ~~$14.02~~$14.57 and ~~$13.75,~~$14.02, respectively. The ~~increase was~~increases were driven by an increase in certain subscription rates and the U.S. Music Royalty ~~Fee.~~Fee and the decline in paid trials as well as higher advertising revenue as we continue to recover to pre-COVID-19 levels.

SAC, Per Installation, is derived from subscriber acquisition costs and margins from the sale of radios, components and accessories (excluding connected vehicle services), divided by the number of satellite radio installations in new vehicles and shipments of aftermarket radios for the period. (See the accompanying glossary on pages 6051 through 6354 for more details.)

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, SAC, per installation, was ~~$20.98~~$13.66 and ~~$21.01,~~$20.98, respectively. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, SAC, per installation, was ~~$20.49~~$13.14 and ~~$22.62,~~$20.49, respectively. The decreases were driven by reductions to OEM hardware subsidy rates.

Pandora

Monthly Active Users. At September 30, ~~2020,~~2021, Pandora had approximately ~~58,583~~52,618 monthly active users, a decrease of ~~4,517~~5,965 monthly active users, or 7%10%, from the ~~63,100~~58,583 monthly active users as of September 30, ~~2019.~~2020. The decrease in monthly active users was driven by ~~an increase in ad-supported listener churn and~~ a ~~decrease~~decline in the number of new users.

Subscribers. At September 30, ~~2020,~~2021, Pandora had approximately ~~6,404~~6,523 subscribers, an increase of ~~102,~~119, or 2%, from the approximately ~~6,302~~6,404 subscribers as of September 30, ~~2019.~~2020.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, net subscriber additions were ~~102~~(55) and ~~(655),~~102, respectively. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, net subscriber additions were ~~190~~181 and ~~(368),~~190, respectively. The ~~increases~~decreases were driven by a ~~result~~decline in trial starts, partially offset by lower churn.

Table of ~~the expiration of an agreement with T-Mobile during the nine months ended September 30, 2019.~~Contents

ARPU is defined as average monthly revenue per paid subscriber on our Pandora subscription services. (See the accompanying glossary on pages 6051 through 6354 for more details.)

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, subscriber ARPU - Pandora was ~~$6.83~~$6.70 and ~~$6.46,~~$6.83, respectively. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, subscriber ARPU - Pandora was ~~$6.79~~$6.68 and ~~$6.56,~~$6.79, respectively. The ~~increases~~decreases in subscriber ARPU were primarily ~~driven by~~due to a change in the ~~expiration~~mix of ~~a lower rate T-Mobile plan in 2019 and a continued shift in subscriber mix toward more Pandora Premium~~Pandora's premium plans.

Ad supported listener hours are a key indicator of our Pandora business and the engagement of our Pandora listeners. We include ad supported listener hours related to Pandora's non-radio content offerings in the definition of listener hours.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, ad supported listener hours were ~~3,120~~2,890 and ~~3,320,~~3,120, respectively. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, ad supported listener hours were ~~9,530~~8,780 and ~~10,230,~~9,530, respectively. The ~~decrease~~decreases in ad supported listener hours ~~was~~were primarily driven by the decline in monthly active users, partially offset by higher hours per active user.

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RPM is a key indicator of our ability to monetize advertising inventory created by our listener hours on the Pandora services. Ad RPM is calculated by dividing advertising revenue by the number of thousands of listener hours of our Pandora advertising-based service.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, RPM was ~~$84.46~~$109.02 and ~~$85.33,~~$84.46, respectively. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, RPM was ~~$68.83~~$98.44 and ~~$75.96,~~$68.83, respectively. The ~~decreases~~increases were athe result of ~~lower~~higher sell-through ~~percentages as a result of the COVID-19 pandemic.~~and pricing increases in advertising implemented by Pandora.

LPM is tracked for our non-subscription, ad-supported service across all Pandora delivery platforms. The content acquisition costs included in our ad LPM calculations are based on the rates set by our license agreements with record labels, performing rights organizations and music publishers or the applicable rates set by the Copyright Royalty Board if we have not entered into a license agreement with the copyright owner of a particular sound recording.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, LPM was ~~$40.16~~$51.08 and ~~$39.05,~~$40.16, respectively. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, LPM was ~~$38.11~~$46.93 and ~~$37.83,~~$38.11, respectively. The increases were primarily due to ~~an increase~~the provisions of certain direct licenses between Pandora and the owners of copyrights in ~~track~~sound recordings which require Pandora, under certain circumstances, to pay royalties on the greater of a percentage of its applicable revenue or a per play per consumer basis as well as higher statutory webcasting royalty rates.

LPU is defined as average monthly licensing costs per paid subscriber on our Pandora subscription services. LPU is a key measure of our ability to manage costs for our subscription services.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, LPU was ~~$4.19~~$4.16 and ~~$4.09,~~$4.19, respectively. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, LPU was ~~$4.12~~$4.18 and ~~$4.07,~~$4.12, respectively. The ~~increases were~~decrease for the three month period was driven by lower publisher rates. The increase for the nine month period was due to ~~increased Pandora subscriber ARPU.~~lower minimum guarantees during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2021.

Total Company

Adjusted EBITDA. Adjusted EBITDA is defined as net income before interest expense, income tax expense and depreciation and ~~amortization, adjusted for pro forma information which includes of the predecessor periods. (Pandora's results for the period January 1, 2019 through January 31, 2019.)~~amortization. Adjusted EBITDA excludes the impact of other expense (income), loss on extinguishment of debt, other non-cash charges, such as certain purchase price accounting adjustments, share-based payment expense, legal settlements and reserves, and ~~acquisition~~impairment, restructuring and ~~restructuring~~acquisition costs (if applicable). (See the accompanying glossary on pages 6051 through 6354 for a reconciliation to GAAP and for more details.)

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, adjusted EBITDA was ~~$661~~$719 and ~~$657,~~$661, respectively, an increase of 1%9%, or ~~$4.~~$58. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, adjusted EBITDA was ~~$1,915~~$2,101 and ~~$1,841,~~$1,915, respectively, an increase of 4%10%, or ~~$74.~~$186. The increases were driven by higher advertising and subscriber revenue ~~and~~as well as lower ~~travel and entertainment,~~subscriber acquisition costs, partially offset by ~~lower advertising revenue and~~ higher revenue share and ~~royalties. The nine month period was also impacted by lower subscriber acquisitions~~royalties, sales and marketing, programming, and personnel-related costs.

Free Cash Flow includes cash provided by operations, net of additions to property and equipment, and restricted and other investment activity. (See the accompanying glossary on pages 6051 through 6354 for a reconciliation to GAAP and for more details.)

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For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, free cash flow was $588 and $361, ~~and $465,~~ respectively, ~~a decrease~~an increase of ~~$104,~~$227, or ~~22%~~63%. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, free cash flow was $1,349 and $1,212, respectively, an increase of $137 or 11%. The increases were primarily driven by satellite insurance recoveries and ~~$1,239, respectively,~~growth in cash generated by operations, partially offset by higher spending on property and equipment and a decrease ~~of $27, or 2%. The decreases were~~in deferred revenue driven by ~~higher interest payments primarily due~~a shift to ~~timing, lower ad revenue receipts~~shorter term self-pay and ~~paid promotional~~ trial ~~receipts. We paid~~subscriptions as well as a ~~one-time amount of $25 for a legal settlement during the nine months ended September 30, 2019~~shift to free trials at certain automakers.

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Liquidity and Capital Resources

Cash Flows for the nine months ended September 30, ~~2020~~2021 compared with the nine months ended September 30, ~~2019.~~2020.

The following table presents a summary of our cash flow activity for the periods set forth below:


		For the Nine Months Ended September 30,									For the Nine Months Ended September 30,				2021 vs 2020
		2020		2019		2020 vs 2019			2021		2020		Amount
Net cash provided by operating activities	Net cash provided by operating activities	$	1,450	$	1,485	$	(35)	Net cash provided by operating activities	$	1,371	$	1,450	$	(79)
Net cash (used in) provided by investing activities		(344)		126		(470)
Net cash used in investing activities								Net cash used in investing activities	(50)		(344)		294
Net cash used in financing activities	Net cash used in financing activities	(1,182)		(1,586)		404		Net cash used in financing activities	(1,232)		(1,182)		(50)
Net (decrease) increase in cash, cash equivalents and restricted cash		(76)		25		(101)
Net increase (decrease) in cash, cash equivalents and restricted cash								Net increase (decrease) in cash, cash equivalents and restricted cash	89		(76)		165
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	120		65		55		Cash, cash equivalents and restricted cash at beginning of period	83		120		(37)
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	44	$	90	$	(46)	Cash, cash equivalents and restricted cash at end of period	$	172	$	44	$	128

Cash Flows Provided by Operating Activities

Cash flows provided by operating activities decreased by ~~$35~~$79 to $1,371 for the nine months ended September 30, 2021 from $1,450 for the nine months ended September 30, ~~2020 from $1,485 for the nine months ended September 30, 2019.~~2020.

Our largest source of cash provided by operating activities is cash generated by subscription and subscription-related revenues. We also generate cash from the sale of advertising through our Pandora business, advertising on certain non-music channels on Sirius XM and the sale of satellite radios, components and accessories. Our primary uses of cash from operating activities include revenue share and royalty payments to distributors, programming and content providers, and payments to radio manufacturers, distributors and automakers. In addition, uses of cash from operating activities include payments to vendors to service, maintain and acquire listeners and subscribers, general corporate expenditures, and compensation and related costs. ~~We paid a one-time amount of $25 for a legal settlement during~~

Cash Flows Used in Investing Activities

Cash flows used in investing activities in the nine months ended September 30, ~~2019.~~

~~Cash Flows (Used in) Provided~~2021 were primarily due to spending primarily for capitalized software and hardware, and to construct a replacement satellite, partially offset by ~~Investing Activities~~

proceeds collected from satellite insurance policies associated with SXM-7. Cash flows used in investing activities in the nine months ended September 30, 2020 were primarily due to our $75 investment in SoundCloud, the acquisition of Simplecast offor $28, spending primarily for capitalized software and hardware, and to construct replacement satellites. Cash flows provided by investing activities in the nine months ended September 30, 2019 were primarily due to cash received of $313 from the Pandora Acquisition and from the sale of short-term investments of $73, partially offset by additional spending primarily for capitalized software and hardware, and to construct replacement satellites. We spent ~~$167~~$172 and ~~$146~~$167 on capitalized software and hardware as well as ~~$36~~$39 and ~~$46~~$36 to construct replacement satellites during the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Cash Flows Used in Financing Activities

Cash flows used in financing activities consists of the issuance and repayment of long-term debt, the purchase of common stock under our share repurchase program, the payment of cash dividends and taxes paid in lieu of shares issued for stock-based compensation. Proceeds from long term debt have been used to fund our operations, construct and launch new satellites, invest in other infrastructure improvements and purchase shares of our common stock.

Cash flows used in financing activities in the nine months ended September 30, 2021 were primarily due to the redemptions of Sirius XM's 3.875% Senior Notes due 2022 for $1,019, 4.625% Senior Notes due 2024 for $1,541 and 5.375% Senior Notes due 2026 for $1,034, the purchase and retirement of shares of our common stock under our repurchase program for $1,174, the payment of cash dividends of $180, payment of $88 for taxes in lieu of shares issued for share-based compensation, and the repayment of borrowings under our Credit Facility of $654; partially offset by the issuance of $2,000 in aggregate principal amount of 4.00% Senior Notes due 2028, $1,000 in aggregate principal amount of the 3.125% Senior Notes due 2026, and $1,500 in aggregate principal amount of the 3.875% Senior Notes due 2031. Cash flows used in financing

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activities in the nine months ended September 30, 2020 were primarily due to the redemption of Sirius XM's 4.625% Senior Notes due 2023 in the aggregate amount of $507 and Sirius XM's 5.375% Senior Notes due 2025 in the aggregate amount of $1,039, the purchase and retirement for $870 of shares of our common stock under our repurchase program, ~~for $870,~~ the payment of cash dividends of $175 and payment of $81 for taxes ~~paid~~ in lieu of shares issued for share-based compensation; partially offset by the issuance of $1,481 in aggregate principal amount of Sirius XM's 4.125% Senior Notes due 2030, net of costs. Cash flows used in financing activities in the nine months ended September 30, 2019 were primarily due to the purchase and retirement for $1,959 of shares of our common stock under our repurchase program, the redemption of Sirius XM's 6.00% Senior Notes due 2024 in the aggregate amount of $1,546, repayment under the Credit Facility of $374, the repurchase for $152 of Pandora's 1.75% Convertible Senior Notes due 2020, the payment of cash dividends of $167 and payment of $104 for taxes paid in lieu of shares issued for share-based compensation, partially offset by the issuance of $1,481 in aggregate principal amount of Sirius XM's 4.625% Senior Notes due 2024 and the issuance of $1,234 in aggregate principal amount of Sirius XM's 5.500% Senior Notes due 2029, net of costs.

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Future Liquidity and Capital Resource Requirements

Based upon our current business plans, we expect to fund operating expenses, capital expenditures, including the construction of replacement satellites, working capital requirements, interest payments, taxes and scheduled maturities of our debt with existing cash, cash flow from operations and borrowings under our Credit Facility. As of September 30, ~~2020, $0 was~~2021, no amounts were outstanding under our Credit Facility. As the amount available for future borrowing is reduced by $1 related to letters of credit issued for the benefit of Pandora, $1,749 was available for future borrowing under our Credit Facility. We believe that we have sufficient cash and cash equivalents, as well as debt capacity, to cover our estimated short-term and long-term funding needs, including amounts to construct, launch and insure replacement satellites, as well as fund future stock repurchases, future dividend payments and to pursue strategic opportunities.

Our ability to meet our debt and other obligations depends on our future operating performance and on economic, financial, competitive and other factors. We continually review our operations for opportunities to adjust the timing of expenditures to ensure that sufficient resources are maintained.

We regularly evaluate our business plans and strategy. These evaluations often result in changes to our business plans and strategy, some of which may be material and significantly change our cash requirements. These changes in our business plans or strategy may include: the acquisition of unique or compelling programming; the development and introduction of new features or services; significant new or enhanced distribution arrangements; investments in infrastructure, such as satellites, equipment or radio spectrum; and acquisitions and investments, including acquisitions and investments that are not directly related to our existing business.

We may from time to time purchase our outstanding debt through open market purchases, privately negotiated transactions or otherwise. Purchases or retirement of debt, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Capital Return Program

As of September 30, ~~2020,~~2021, our board of directors had authorized for repurchase an aggregate of ~~$16,000~~$18,000 of our common stock. As of September 30, ~~2020,~~2021, our cumulative repurchases since December 2012 under our stock repurchase program totaled ~~3,203~~3,504 shares for ~~$13,728,~~$15,576, and ~~$2,272~~$2,424 remained available for additional repurchases under our existing stock repurchase program authorization.

Shares of common stock may be purchased from time to time on the open market and in privately negotiated transactions, including in accelerated stock repurchase transactions and transactions with Liberty Media and its affiliates. We intend to fund the additional repurchases through a combination of cash on hand, cash generated by operations and future borrowings. The size and timing of any purchases will be based on a number of factors, including price and business and market conditions.

On October ~~6, 2020,~~25, 2021, our board of directors declared a quarterly dividend in the amount of ~~$0.014641~~$0.0219615 per share of common stock payable on November ~~30, 2020~~29, 2021 to stockholders of record as of the close of business on November ~~6, 2020.~~5, 2021. Our board of directors expects to declare regular quarterly dividends, in an aggregate annual amount of ~~$0.058564~~$0.087846 per share of common stock.

Debt Covenants

The indentures governing Sirius XM's senior notes and Pandora's convertible notes and the agreement governing the Sirius XM Credit Facility include restrictive covenants. As of September 30, ~~2020,~~2021, we were in compliance with such covenants. For a discussion of our “Debt Covenants,” refer to Note 13 to our unaudited consolidated financial statements in ~~Part I, Item I, of~~ this Quarterly Report on Form 10-Q.

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Off-Balance Sheet Arrangements

We do not have any significant off-balance sheet arrangements other than those disclosed in Note 16 to our unaudited consolidated financial statements in ~~Part I, Item I, of~~ this Quarterly Report on Form 10-Q that are reasonably likely to have a material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

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Contractual Cash Commitments

For a discussion of our “Contractual Cash Commitments,” refer to Note 16 to our unaudited consolidated financial statements in ~~Part I, Item I, of~~ this Quarterly Report on Form 10-Q.

Related Party Transactions

For a discussion of “Related Party Transactions,” refer to Note 12 to our unaudited consolidated financial statements in ~~Part I, Item I, of~~ this Quarterly Report on Form 10-Q.

On February 1, 2021, Holdings entered into a tax sharing agreement with Liberty Media governing the allocation of consolidated U.S. income tax liabilities and setting forth agreements with respect to other tax matters. The tax sharing agreement was negotiated and approved by a special committee of Holdings’ board of directors, all of whom are independent of Liberty Media.

Under the Internal Revenue Code, two corporations may form a consolidated tax group, and file a consolidated federal income tax return, if one corporation owns stock representing at least 80% of the voting power and value of the outstanding capital stock of the other corporation. As of September 30, 2021, Liberty Media beneficially owned, directly and indirectly, approximately 79% of the outstanding shares of our common stock. We expect that Liberty Media could beneficially own, directly and indirectly, over 80% of the outstanding shares of our common stock in the fourth quarter of 2021, and Holdings and Liberty Media would then become members of the same consolidated tax group. Should that happen, the tax sharing agreement would govern certain matters related to the resulting consolidated federal income tax returns, as well as state and local returns filed on a consolidated or combined basis.

Critical Accounting Policies and Estimates

For a discussion of our “Critical Accounting Policies and Estimates,” refer to “Management's Discussion and Analysis of

Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~ 2020.

There have been no material changes to our critical accounting policies and estimates since December 31, ~~2019.~~2020.

Glossary

Monthly active users - the number of distinct registered users on the Pandora services, including subscribers, which have consumed content within the trailing 30 days to the end of the final calendar month of the period. The number of monthly active users on the Pandora services may overstate the number of unique individuals who actively use our Pandora service, as one individual may use multiple accounts. To become a registered user on the Pandora services, a person must sign-up using an email address or phone number, or access our service using a device with a unique identifier, which we use to create an account for our service.

Average self-pay monthly churn - the Sirius XM monthly average of self-pay deactivations for the period divided by the average number of self-pay subscribers for the period.

Adjusted EBITDA - EBITDA is defined as net income before interest expense, income tax expense and depreciation and amortization. We adjust EBITDA to exclude the impact of other expense (income) as well as certain other charges discussed below. Adjusted EBITDA is a Non-GAAP financial measure that excludes or adjusts for (if applicable): (i) certain adjustments as a result of the purchase price accounting for the XM Merger and the Pandora Acquisition, (ii) ~~predecessor net income adjusted for certain expenses, including depreciation and amortization, other income (loss), and~~ share-based payment expense, ~~for January 2019,~~ (iii) ~~share-based payment expense~~impairment, restructuring and acquisition costs, (iv) legal settlements/reserves and (v) other significant operating expense (income) that do not relate to the on-going performance of our business. We believe adjusted EBITDA is a useful measure of the underlying trend of our operating performance, which provides useful information about our business apart from the costs associated with our capital structure and purchase price accounting.

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We believe investors find this Non-GAAP financial measure useful when analyzing our past operating performance with our current performance and comparing our operating performance to the performance of other communications, entertainment and media companies. We believe investors use adjusted EBITDA to estimate our current enterprise value and to make investment decisions. As a result of large capital investments in our satellite radio system, our results of operations reflect significant charges for depreciation expense. We believe the exclusion of share-based payment expense is useful as it is not directly related to the operational conditions of our business. We also believe the exclusion of the legal settlements and reserves, impairment, restructuring and acquisition related costs, and loss on extinguishment of debt, to the extent they occur during the period, is useful as they are significant expenses not incurred as part of our normal operations for the period.

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Adjusted EBITDA has certain limitations in that it does not take into account the impact to our ~~unaudited~~ consolidated statements of comprehensive income of certain expenses, including share-based payment expense and certain purchase price accounting for the XM Merger and the Pandora Acquisition. We endeavor to compensate for the limitations of the Non-GAAP measure presented by also providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the Non-GAAP measure. Investors that wish to compare and evaluate our operating results after giving effect for these costs, should refer to net income as disclosed in our unaudited consolidated statements of comprehensive income. Since adjusted EBITDA is a Non-GAAP financial performance measure, our calculation of adjusted EBITDA may be susceptible to varying calculations; may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP. The reconciliation of net income to the adjusted EBITDA is calculated as follows:

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2020 2019 2020 2019
Net income: $ 272 $ 246 $ 808 $ 671
Add back items excluded from Adjusted EBITDA:
Legal settlements and reserves — — (16) 25
Acquisition and restructuring costs ⁽¹⁾
— — 24 83
Share-based payment expense ⁽³⁾
58 65 165 171
Depreciation and amortization 125 118 381 344
Interest expense 96 104 297 291
Loss on extinguishment of debt 40 56 40 57
Other expense (income) (2) — (10) 2
Income tax expense 72 70 226 227
Purchase price accounting adjustments:
Revenues 2 2 6 6
Operating expenses (2) (4) (6) (11)
Pro forma adjustments ⁽²⁾
— — — (25)
Adjusted EBITDA $ 661 $ 657 $ 1,915 $ 1,841

~~(1) Acquisition and restructuring costs include $21 of share-based compensation expense for the nine months ended September 30, 2019.~~

(2) Pro forma adjustment for nine months ended September 30, 2019 includes Pandora's Net income for the nine months ended September 30, 2019 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.


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Net income:	$	343	$	272	$	995	$	808
Add back items excluded from Adjusted EBITDA:
Legal settlements and reserves	—		—		—		(16)
Impairment, restructuring and acquisition costs	(95)		—		13		24
Share-based payment expense (1)	51		58		149		165
Depreciation and amortization	135		125		399		381

Interest expense	111		96		313		297
Loss on extinguishment of debt	83		40		83		40
Other expense (income)	1		(2)		(8)		(10)
Income tax expense	90		72		157		226
Purchase price accounting adjustments:
Revenues	—		2		—		6
Operating expenses	—		(2)		—		(6)

Adjusted EBITDA	$	719	$	661	$	2,101	$	1,915

~~(3)~~(1)Allocation of share-based payment expense:

For the Three Months Ended September 30, For the Nine Months Ended September 30,
(in millions) 2020 2019 2020 2019
Programming and content $ 9 $ 8 $ 24 $ 22
Customer service and billing 1 1 4 3
Transmission 1 2 4 5
Sales and marketing 17 23 50 57
Engineering, design and development 11 15 31 37
General and administrative 19 16 52 47
Total share-based payment expense $ 58 $ 65 $ 165 $ 171


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in millions)	2021		2020		2021		2020
Programming and content	$	8	$	9	$	24	$	24
Customer service and billing	2		1		5		4
Transmission	1		1		4		4
Sales and marketing	15		17		43		50
Engineering, design and development	9		11		26		31
General and administrative	16		19		47		52
Total share-based payment expense	$	51	$	58	$	149	$	165

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Free cash flow - is derived from cash flow provided by operating activities plus insurance recoveries on our satellites, net of additions to property and equipment and purchases of other investments. Free cash flow is a metric that our management and board of directors use to evaluate the cash generated by our operations, net of capital expenditures and other investment activity. In a capital intensive business, with significant investments in satellites, we look at our operating cash flow, net of these investing cash outflows, to determine cash available for future subscriber acquisition and capital expenditures, to repurchase or retire debt, to acquire other companies and to evaluate our ability to return capital to stockholders. We exclude from free cash flow certain items that do not relate to the on-going performance of our business, such as cash flows related to acquisitions, strategic and short-term investments, and net loan activity with related parties and other equity investees. We believe free cash flow is an indicator of the long-term financial stability of our business. Free cash flow, which is reconciled to “Net cash provided by operating activities,” is a Non-GAAP financial measure. This measure can be calculated by deducting amounts under the captions “Additions to property and equipment” and deducting or adding Restricted and other investment activity from “Net cash provided by operating activities” from the unaudited consolidated statements of cash flows. Free cash flow should be used in conjunction with other GAAP financial performance measures and may not be comparable to free cash flow measures presented by other companies. Free cash flow should be viewed as a supplemental measure rather than an alternative measure of cash flows from operating activities, as determined in accordance with GAAP. Free cash flow is limited and does not represent remaining cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt maturities. We believe free cash flow provides useful supplemental information to investors regarding our current cash flow, along with other GAAP measures (such as cash flows from operating and investing activities), to determine our financial condition, and to compare our operating performance to other communications, entertainment and media companies. Free cash flow is calculated as follows:


		For the Three Months Ended September 30,						For the Nine Months Ended September 30,							For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Cash Flow information	Cash Flow information									Cash Flow information
Net cash provided by operating activities	Net cash provided by operating activities	$	443	$	544	$	1,450	$	1,485	Net cash provided by operating activities	$	460	$	443	$	1,371	$	1,450
Net cash (used in) provided by investing activities		$	(79)	$	(83)	$	(344)	$	126
Net cash used in investing activities										Net cash used in investing activities	123		(79)		(50)		(344)
Net cash used in financing activities	Net cash used in financing activities	$	(2,101)	$	(597)	$	(1,182)	$	(1,586)	Net cash used in financing activities	(1,543)		(2,101)		(1,232)		(1,182)
Free Cash Flow	Free Cash Flow									Free Cash Flow
Net cash provided by operating activities	Net cash provided by operating activities	$	443	$	544	$	1,450	$	1,485	Net cash provided by operating activities	460		443		1,371		1,450
Additions to property and equipment	Additions to property and equipment	(81)		(79)		(230)		(239)		Additions to property and equipment	(80)		(81)		(244)		(230)
Purchases of other investments	Purchases of other investments	(1)		—		(8)		(7)		Purchases of other investments	—		(1)		(3)		(8)
Satellite insurance recoveries										Satellite insurance recoveries	208		—		225		—
Free cash flow	Free cash flow	$	361	$	465	$	1,212	$	1,239	Free cash flow	$	588	$	361	$	1,349	$	1,212

ARPU - Sirius XM ARPU is derived from total earned subscriber revenue (excluding revenue associated with our connected vehicle services) and advertising revenue, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. Pandora ARPU is defined as average monthly subscriber revenue per paid subscriber on our Pandora subscription services.

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Subscriber acquisition cost, per installation - or SAC, per installation, is derived from subscriber acquisition costs ~~and~~less margins from the sale of radios and accessories (excluding connected vehicle services), divided by the number of satellite radio installations in new vehicles and shipments of aftermarket radios for the period. SAC, per installation, is calculated as follows:


		For the Three Months Ended September 30,						For the Nine Months Ended September 30,							For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Subscriber acquisition costs, excluding connected vehicle services	Subscriber acquisition costs, excluding connected vehicle services	$	110	$	101	$	257	$	313	Subscriber acquisition costs, excluding connected vehicle services	$	71	$	110	$	245	$	257
Less: margin from sales of radios and accessories, excluding connected vehicle services	Less: margin from sales of radios and accessories, excluding connected vehicle services	(43)		(38)		(101)		(106)		Less: margin from sales of radios and accessories, excluding connected vehicle services	(37)		(43)		(137)		(101)
		$	67	$	63	$	156	$	207		$	34	$	67	$	108	$	156
Installations	Installations	3,212		2,998		7,615		9,153		Installations	2,446		3,212		8,237		7,615
SAC, per installation^(a)	SAC, per installation^(a)	$	20.98	$	21.01	$	20.49	$	22.62	SAC, per installation (a)	$	13.66	$	20.98	$	13.14	$	20.49

(a)Amounts may not recalculate due to rounding.

Ad supported listener hours - is based on the total bytes served over our Pandora advertising supported platforms for each track that is requested and served from our Pandora servers, as measured by our internal analytics systems, whether or not a listener listens to the entire track. For non-music content such as podcasts, episodes are divided into approximately track-length parts, which are treated as tracks. To the extent that third-party measurements of advertising hours are not calculated using a similar server-based approach, the third-party measurements may differ from our measurements.

RPM - is calculated by dividing advertising revenue, excluding AdsWizz and other off-platform revenue, by the number of thousands of listener hours on our Pandora advertising-based service.

LPM - is calculated by dividing advertising licensing costs by the number of thousands of listener hours on our Pandora advertising-based service.

LPU - is calculated by dividing subscriber licensing costs by the number of paid subscribers on our Pandora subscription services.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

As of September 30, ~~2020,~~2021, we did not hold or issue any free-standing derivatives. We hold investments in money market funds and certificates of deposit. These securities are consistent with the objectives contained within our investment policy. The basic objectives of our investment policy are the preservation of capital, maintaining sufficient liquidity to meet operating requirements and maximizing yield. As of September 30, ~~2020,~~2021, we also held the following material investment:

•In connection with the recapitalization of Sirius XM Canada, on May 25, 2017, we loaned Sirius XM Canada $131 million. The loan is denominated in Canadian dollars and is subject to changes in foreign currency. It is considered a long-term investment with any unrealized gains or losses reported within Accumulated other comprehensive (loss) income. Such loan has a term of fifteen years, bears interest at a rate of 7.62% per annum and includes customary covenants and events of default, including an event of default relating to Sirius XM Canada’s failure to maintain specified leverage ratios. The carrying value of the loan as of September 30, ~~2020~~2021 was ~~$117.0~~$121.0 million and approximates its fair value as of such date. Had the Canadian to U.S. dollar exchange rate been 10% lower as of September 30, ~~2020,~~2021, the value of this loan would have been approximately $12 million lower.

Our debt includes fixed rate instruments and the fair market value of our debt is sensitive to changes in interest rates. Sirius XM’s borrowings under the Credit Facility carry a variable interest rate based on London Inter-bank Offered Rate (“LIBOR”) plus anan applicable rate based on its debt to operating cash flow ratio. LIBOR is the subject of national, international and other regulatory guidance and proposals for reform. On July 27, 2017, the United Kingdom's Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that it intends to phase out LIBOR. On March 5, 2021, the FCA announced that all LIBOR ~~by the end of 2021. It is unclear if at that time LIBOR~~settings will either cease to ~~exist~~be provided by any administrator or ifno longer be representative: (a) immediately after December 31, 2021, in the case of the one week and two month U.S. dollar settings; and (b) immediately after June 30, 2023, in the case of the remaining U.S. dollar settings. The United States Federal Reserve has also advised banks to cease entering into new contracts that use USD LIBOR as a reference rate. The Alternative Reference Rate Committee, a committee convened by

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the Federal Reserve that includes major market participants, has identified the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities, as its preferred alternative rate for LIBOR. At this time, it is not possible to predict how markets will respond to SOFR or other alternative reference rates as the transition away from the LIBOR benchmarks is anticipated in coming years. Accordingly, the outcome of these reforms is uncertain and any changes in the methods ~~of calculating~~by which LIBOR ~~will be established such that it will continue~~is determined or regulatory activity related to ~~exist after 2021.~~ LIBOR’s phaseout could cause LIBOR to perform differently than in the past or cease to exist. The consequences of these developments cannot be entirely predicted, but could include an increase in the cost of our borrowings under the Credit Facility. In addition, we may, in the future, hedge against interest rate fluctuations by using hedging instruments such as swaps, caps, options, forwards, futures or other similar products. These instruments may be used to selectively manage risks, but there can be no assurance that we will be fully protected against material interest rate fluctuations.

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ITEM 4. CONTROLS AND PROCEDURES

Controls and Procedures

We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. The design of any disclosure controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.

As of September 30, ~~2020,~~2021, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and ~~Principal~~Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as that term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, our management, including our Chief Executive Officer and our ~~Principal~~Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of September 30, ~~2020.~~2021.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as that term is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the quarter ended September 30, ~~2020~~2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a discussion of our “Legal Proceedings,” refer to Note 16 to our unaudited consolidated financial statements in ~~Part I, Item I, of~~ this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

~~In connection with~~The following risk factor supplements the ~~COVID-19 pandemic we supplemented the risk factors~~Risk Factors previously disclosed in ~~response to Part I, "Item 1A. Risk Factors," of~~ our Annual Report on Form 10-K for the year ended December 31, ~~2019 to reflect~~2020, which was filed with the ~~uncertainties that we believe~~Securities and Exchange Commission on February 2, 2021.

We face supply chain risks as a result of the ~~COVID-19 pandemic~~global semiconductor supply shortage.

The global semiconductor supply shortage is having wide-ranging effects across multiple industries, including direct and ~~its related economic impact has created for~~indirect effects on our business. ~~The additional risk factor appears~~We have experienced, and may continue to experience, delays in ~~Part II, "Item 1A Risk Factors,"~~securing certain application specific integrated circuits (which are commonly referred to as "chipsets") that are essential components of our satellite radios. In addition, automakers are experiencing, and may continue to experience, delays in securing certain chipsets that are essential components of new vehicles for a variety of reasons, including due to closures at semiconductor manufacturing facilities. All of these affected automakers manufacture and sell vehicles that include our ~~Quarterly Report~~satellite radios. For example, some automobile plants in North America and elsewhere have halted or reduced vehicle production due to the shortage of semiconductors used in the production of their vehicles. As a result, the semiconductor supply shortage has had, and may continue to have, an impact on ~~Form 10-Q for the three months ended March 31, 2020.~~new vehicle deliveries, which in turn may affect our subscriber acquisition efforts.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

As of September 30, ~~2020,~~2021, our board of directors had approved for repurchase an aggregate of ~~$16~~$18.0 billion of our common stock. Our board of directors did not establish an end date for this stock repurchase program. Shares of common stock may be purchased from time to time on the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act, in privately negotiated transactions, including transactions with Liberty Media and its affiliates, or otherwise. As of September 30, ~~2020,~~2021, our cumulative repurchases since December 2012 under our stock repurchase program totaled ~~3.2~~3.5 billion shares for ~~$13.7~~$15.6 billion, and ~~$2.3~~$2.4 billion remained available under our existing ~~$16.0~~$18.0 billion stock repurchase program. The size and timing of these purchases will be based on a number of factors, including price and business and market conditions.

The following table provides information about our purchases of equity securities registered pursuant to Section 12 of the Exchange Act, as amended, during the quarter ended September 30, ~~2020:~~2021:

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)
July 1, 2020 - July 31, 2020 15,046,929 $ 5.85 15,046,929 $ 2,670,623,507
August 1, 2020 - August 30, 2020 30,750,000 $ 5.93 30,750,000 $ 2,488,189,232
September 1, 2020 - September 30, 2020 40,000,000 $ 5.40 40,000,000 $ 2,272,352,207
Total 85,796,929 $ 5.67 85,796,929


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)
July 1, 2021 - July 31, 2021	11,245,895	$	6.51	11,245,895	$	2,674,933,848
August 1, 2021 - August 30, 2021	19,444,698	$	6.23	19,444,698	$	2,553,709,870
September 1, 2021 - September 30, 2021	21,231,309	$	6.12	21,231,309	$	2,423,848,408
Total	51,921,902	$	6.25	51,921,902

(a)These amounts include fees and commissions associated with the shares repurchased.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

See Exhibit Index attached hereto, which is incorporated herein by reference.

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EXHIBIT INDEX

Exhibit

Description

4.1

Indenture, dated as of August 16, 2021, relating to the 3.125% Senior Notes due 2026, among Sirius XM Radio Inc., the guarantors named therein and U.S. Bank National Association, as trustee, including the form of 3.125% Senior Notes due 2026 (incorporated by reference to Exhibit 4.1 to Sirius XM Holdings Inc.’s Current Report on Form 8-K dated August 16, 2021 (File No. 001-34295)).

4.2

Indenture, dated as of August 16, 2021, relating to the 3.875% Senior Notes due 2031, among Sirius XM Radio Inc., the guarantors named therein and U.S. Bank National Association, as trustee, including the form of 3.125% Senior Notes due 2026 (incorporated by reference to Exhibit 4.1 to Sirius XM Holdings Inc.’s Current Report on Form 8-K dated August 16, 2021 (File No. 001-34295)).

10.1

~~Employment~~Amendment No. 5 to Credit Agreement, dated as of ~~September 14, 2020, between~~August 31, 2021, to the Credit Agreement, dated as of December 5, 2012, among Sirius XM Radio Inc., JPMorgan Chase Bank, N.A. as administrative agent, and ~~Jennifer C. Witz~~the other agents and lenders parties thereto (incorporated by reference to Exhibit 10.1 to Sirius XM Holdings Inc.’s Current Report on Form 8-K ~~filed~~dated September ~~15, 2020~~1, 2021 (File No. 001-34295)).

~~10.2~~

Letter Agreement, dated September 14, 2020, regarding private use of aircraft between Sirius XM Radio Inc. and Jennifer C. Witz (incorporated by reference to Exhibit 10.2 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed September 15, 2020 (File No. 001-34295)).

~~10.3~~

Employment Agreement, dated as of September 14, 2020, between Sirius XM Radio Inc. and Sean S. Sullivan (incorporated by reference to Exhibit 10.3 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed September 15, 2020 (File No. 001-34295)).

3131.1

Certificate of ~~James E. Meyer,~~Jennifer C. Witz, Chief Executive Officer and ~~Principal~~Director, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2

Certificate of Sean S. Sullivan, Executive Vice President and Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

3232.1

Certificate of ~~James E. Meyer,~~Jennifer C. Witz, Chief Executive Officer and ~~Principal~~Director, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.2

Certificate of Sean S. Sullivan, Executive Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ~~(furnished~~(filed herewith).

101.1

The following financial information from our Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2020~~2021 formatted in Inline eXtensible Business Reporting Language (Inline XBRL): (i) Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended September 30, ~~2020~~2021 and ~~2019;~~2020; (ii) Consolidated Balance Sheets as of September 30, ~~2020~~2021 (Unaudited) and December 31, ~~2019;~~2020; (iii) Consolidated Statements of Stockholders’ Equity (Deficit) for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 (Unaudited); (iv) Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, ~~2020~~2021 and ~~2019;~~2020; and (v) Notes to Consolidated Financial Statements (Unaudited).

104

The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2020,~~2021, formatted in Inline XBRL.

____________________

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them other than for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document as of the date they were made and may not describe the actual state of affairs for any other purpose or at any other time.

6658

Table of Contents

SIGNATURES

Pursuant to the requirements ~~of Section 13 or 15(d)~~ of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this ~~22nd~~28th day of October ~~2020.~~2021.

SIRIUS XM HOLDINGS INC.

By:

/s/ ~~Thomas D. Barry~~Sean S. Sullivan

~~Thomas D. Barry~~Sean S. Sullivan

~~Senior~~Executive Vice President and ~~Corporate Controller~~Chief Financial Officer

(~~Chief Accounting~~Principal Financial Officer and Authorized Officer)

6759


	Unaudited for the Three Months Ended September 30, 2020
	As Reported		Predecessor Financial Information		Purchase Price Accounting Adjustments		Ref	Pro Forma
Revenue
Sirius XM:
Subscriber revenue	$	1,462	$	—	$	—		$	1,462
Advertising revenue	39		—		—			39
Equipment revenue	47		—		—			47
Other revenue	39		—		2		(a)	41
Total Sirius XM revenue	1,587		—		2			1,589
Pandora:
Subscriber revenue	132		—		—			132
Advertising revenue	306		—		—			306
Total Pandora revenue	438		—		—			438
Total consolidated revenue	2,025		—		2			2,027
Cost of services
Sirius XM:
Revenue share and royalties	369		—		—			369
Programming and content	114		—		—			114
Customer service and billing	99		—		—			99
Transmission	33		—		—			33
Cost of equipment	5		—		—			5
Total Sirius XM cost of services	620		—		—			620
Pandora:
Revenue share and royalties	233		—		2		(b)	235
Programming and content	9		—		—			9
Customer service and billing	20		—		—			20
Transmission	13		—		—			13
Total Pandora cost of services	275		—		2			277
Total consolidated cost of services	895		—		2			897
Subscriber acquisition costs	110		—		—			110
Sales and marketing	222		—		—			222
Engineering, design and development	64		—		—			64
General and administrative	131		—		—			131
Depreciation and amortization	125		—		—			125
Acquisition and restructuring costs	—		—		—			—
Total operating expenses	1,547		—		2			1,549
Income from operations	478		—		—			478
Other (expense) income:
Interest expense	(96)		—		—			(96)
Loss on extinguishment of debt	(40)		—		—			(40)
Other income (expense)	2		—		—			2
Total other (expense) income	(134)		—		—			(134)
Income before income taxes	344		—		—			344
Income tax expense	(72)		—		—			(72)
Net income	$	272	$	—	$	—		$	272


	Unaudited for the Nine Months Ended September 30, 2019
	As Reported		Predecessor Financial Information (h)		Purchase Price Accounting Adjustments		Ref	Pro Forma
Revenue
Sirius XM:
Subscriber revenue	$	4,196	$	—	$	—		$	4,196
Advertising revenue	149		—		—			149
Equipment revenue	127		—		—			127
Other revenue	121		—		6		(i)	127
Total Sirius XM revenue	4,593		—		6			4,599
Pandora:
Subscriber revenue	355		46		—			401
Advertising revenue	784		68		—			852
Total Pandora revenue	1,139		114		—			1,253
Total consolidated revenue	5,732		114		6			5,852
Cost of services
Sirius XM:
Revenue share and royalties	1,065		—		—			1,065
Programming and content	328		—		—			328
Customer service and billing	296		—		—			296
Transmission	79		—		—			79
Cost of equipment	20		—		—			20
Total Sirius XM cost of services	1,788		—		—			1,788
Pandora:
Revenue share and royalties	619		71		11		(j)	701
Programming and content	10		—		—			10
Customer service and billing	56		8		—			64
Transmission	38		5		—			43
Total Pandora cost of services	723		84		11			818
Total consolidated cost of services	2,511		84		11			2,606
Subscriber acquisition costs	313		—		—			313
Sales and marketing	648		36		—			684
Engineering, design and development	206		14		—			220
General and administrative	379		16		—			395
Depreciation and amortization	344		6		9		(k)	359
Acquisition and restructuring costs	83		1		(84)		(l)	—
Total operating expenses	4,484		157		(64)			4,577
Income from operations	1,248		(43)		70			1,275
Other (expense) income:
Interest expense	(291)		(2)		—			(293)
Loss on extinguishment of debt	(57)		—		—			(57)
Other income (expense)	(2)		1		—			(1)
Total other (expense) income	(350)		(1)		—			(351)
Income before income taxes	898		(44)		70			924
Income tax expense	(227)		—		(7)		(m)	(234)
Net income	$	671	$	(44)	$	63		$	690