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~~JUNE 30, ~~2021~~2022


☐						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

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 Exchange 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~~July 26, ~~2021)~~2022)
Common stock, $0.001 par value	~~3,999,493,824~~3,894,220,452	shares

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~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	2
	Consolidated Balance Sheets as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021	3
	Consolidated Statements of Stockholders' Equity (Deficit) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	4
	Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	8
	Notes to the Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3531
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	5449
Item 4.	Controls and Procedures	5549

	PART II - Other Information

Item 1.	Legal Proceedings	5650
Item 1A.	Risk Factors	5650
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5650
Item 3.	Defaults Upon Senior Securities	5650
Item 4.	Mine Safety Disclosures	5650
Item 5.	Other Information	5650
Item 6.	Exhibits	5750
	Signatures	5952

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 June 30,				For the Six Months Ended June 30,
(in millions, except per share data)	(in millions, except per share data)	2021		2020		2021		2020		(in millions, except per share data)	2022		2021		2022		2021
Revenue:	Revenue:									Revenue:
Subscriber revenue	Subscriber revenue	$	1,666	$	1,594	$	4,918	$	4,757	Subscriber revenue	$	1,719	$	1,641	$	3,432	$	3,252
Advertising revenue	Advertising revenue	451		345		1,235		866		Advertising revenue	452		429		835		783
Equipment revenue	Equipment revenue	41		47		149		113		Equipment revenue	45		51		98		108
Other revenue	Other revenue	40		39		113		115		Other revenue	37		38		75		74
Total revenue	Total revenue	2,198		2,025		6,415		5,851		Total revenue	2,253		2,159		4,440		4,217
Operating expenses:	Operating expenses:									Operating expenses:
Cost of services:	Cost of services:									Cost of services:
Revenue share and royalties	Revenue share and royalties	671		602		1,974		1,759		Revenue share and royalties	711		662		1,381		1,303
Programming and content	Programming and content	141		123		407		351		Programming and content	153		136		292		265
Customer service and billing	Customer service and billing	127		119		372		359		Customer service and billing	125		128		251		244
Transmission	Transmission	54		46		155		129		Transmission	54		52		106		101
Cost of equipment	Cost of equipment	4		5		12		13		Cost of equipment	3		4		6		9
Subscriber acquisition costs	Subscriber acquisition costs	71		110		245		257		Subscriber acquisition costs	91		89		181		175
Sales and marketing	Sales and marketing	269		222		725		664		Sales and marketing	285		240		557		456
Engineering, design and development	Engineering, design and development	68		64		197		196		Engineering, design and development	72		65		139		130
General and administrative	General and administrative	125		131		376		357		General and administrative	127		130		250		251
Depreciation and amortization	Depreciation and amortization	135		125		399		381		Depreciation and amortization	135		131		270		263
Impairment, restructuring and acquisition costs	Impairment, restructuring and acquisition costs	(95)		—		13		24		Impairment, restructuring and acquisition costs	1		(136)		1		108
Total operating expenses	Total operating expenses	1,570		1,547		4,875		4,490		Total operating expenses	1,757		1,501		3,434		3,305
Income from operations	Income from operations	628		478		1,540		1,361		Income from operations	496		658		1,006		912
Other (expense) income:	Other (expense) income:									Other (expense) income:
Interest expense	Interest expense	(111)		(96)		(313)		(297)		Interest expense	(104)		(103)		(206)		(203)
Loss on extinguishment of debt		(83)		(40)		(83)		(40)

Other (expense) income	Other (expense) income	(1)		2		8		10		Other (expense) income	(4)		5		(2)		8
Total other (expense) income	Total other (expense) income	(195)		(134)		(388)		(327)		Total other (expense) income	(108)		(98)		(208)		(195)
Income before income taxes	Income before income taxes	433		344		1,152		1,034		Income before income taxes	388		560		798		717
Income tax expense	Income tax expense	(90)		(72)		(157)		(226)		Income tax expense	(96)		(127)		(197)		(65)
Net income	Net income	$	343	$	272	$	995	$	808	Net income	$	292	$	433	$	601	$	652
Foreign currency translation adjustment, net of tax	Foreign currency translation adjustment, net of tax	(10)		7		2		(8)		Foreign currency translation adjustment, net of tax	(10)		7		(2)		12
Total comprehensive income	Total comprehensive income	$	333	$	279	$	997	$	800	Total comprehensive income	$	282	$	440	$	599	$	664
Net income per common share:	Net income per common share:									Net income per common share:
Basic	Basic	$	0.08	$	0.06	$	0.24	$	0.19	Basic	$	0.07	$	0.11	$	0.15	$	0.16
Diluted	Diluted	$	0.08	$	0.06	$	0.24	$	0.18	Diluted	$	0.07	$	0.10	$	0.15	$	0.16
Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic	Basic	4,044		4,326		4,086		4,367		Basic	3,928		4,079		3,938		4,108
Diluted	Diluted	4,119		4,415		4,170		4,465		Diluted	4,005		4,163		4,016		4,193

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, 2021		December 31, 2020		(in millions, except per share data)	June 30, 2022		December 31, 2021
ASSETS	ASSETS	(unaudited)				ASSETS	(unaudited)
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	164	$	71	Cash and cash equivalents	$	126	$	191
Receivables, net	Receivables, net	652		672		Receivables, net	660		722
Inventory, net		4		10

Related party current assets	Related party current assets	10		20		Related party current assets	19		21
Prepaid expenses and other current assets	Prepaid expenses and other current assets	206		194		Prepaid expenses and other current assets	328		246
Total current assets	Total current assets	1,036		967		Total current assets	1,133		1,180
Property and equipment, net	Property and equipment, net	1,456		1,629		Property and equipment, net	1,467		1,450
Intangible assets, net	Intangible assets, net	3,225		3,340		Intangible assets, net	3,128		3,186
Goodwill	Goodwill	3,150		3,122		Goodwill	3,249		3,151
Related party long-term assets	Related party long-term assets	534		531		Related party long-term assets	527		526
Deferred tax assets	Deferred tax assets	111		111		Deferred tax assets	200		200
Operating lease right-of-use assets	Operating lease right-of-use assets	361		427		Operating lease right-of-use assets	336		358
Other long-term assets	Other long-term assets	221		206		Other long-term assets	230		223
Total assets	Total assets	$	10,094	$	10,333	Total assets	$	10,270	$	10,274
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	$	1,202	$	1,223	Accounts payable and accrued expenses	$	1,219	$	1,299
Accrued interest	Accrued interest	80		174		Accrued interest	164		173
Current portion of deferred revenue	Current portion of deferred revenue	1,500		1,721		Current portion of deferred revenue	1,432		1,454
Current maturities of debt		—		1

Operating lease current liabilities	Operating lease current liabilities	50		48		Operating lease current liabilities	49		49

Related party current liabilities						Related party current liabilities	20		5
Total current liabilities	Total current liabilities	2,832		3,167		Total current liabilities	2,884		2,980
Long-term deferred revenue	Long-term deferred revenue	103		118		Long-term deferred revenue	87		97
Long-term debt	Long-term debt	8,827		8,499		Long-term debt	9,866		8,832

Deferred tax liabilities	Deferred tax liabilities	368		266		Deferred tax liabilities	539		478
Operating lease liabilities	Operating lease liabilities	368		419		Operating lease liabilities	333		362
Other long-term liabilities	Other long-term liabilities	151		149		Other long-term liabilities	140		150
Total liabilities	Total liabilities	12,649		12,618		Total liabilities	13,849		12,899
Commitments and contingencies (Note 16)		0		0
Commitments and contingencies (Note 15)						Commitments and contingencies (Note 15)	0		0
Stockholders’ equity (deficit):	Stockholders’ equity (deficit):					Stockholders’ equity (deficit):
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
Common stock, par value $0.001 per share; 9,000 shares authorized; 3,909 and 3,968 shares issued; 3,908 and 3,967 shares outstanding at June 30, 2022 and December 31, 2021, respectively						Common stock, par value $0.001 per share; 9,000 shares authorized; 3,909 and 3,968 shares issued; 3,908 and 3,967 shares outstanding at June 30, 2022 and December 31, 2021, respectively	4		4
Accumulated other comprehensive income, net of tax	Accumulated other comprehensive income, net of tax	17		15		Accumulated other comprehensive income, net of tax	13		15
Additional paid-in capital	Additional paid-in capital	—		—		Additional paid-in capital	—		—
Treasury stock, at cost; 2 and 3 shares of common stock at September 30, 2021 and December 31, 2020, respectively		(13)		(19)
Treasury stock, at cost; 1 shares of common stock at June 30, 2022 and December 31, 2021						Treasury stock, at cost; 1 shares of common stock at June 30, 2022 and December 31, 2021	(10)		(8)
Accumulated deficit	Accumulated deficit	(2,563)		(2,285)		Accumulated deficit	(3,586)		(2,636)
Total stockholders’ equity (deficit)	Total stockholders’ equity (deficit)	(2,555)		(2,285)		Total stockholders’ equity (deficit)	(3,579)		(2,625)
Total liabilities and stockholders’ equity (deficit)	Total liabilities and stockholders’ equity (deficit)	$	10,094	$	10,333	Total liabilities and stockholders’ equity (deficit)	$	10,270	$	10,274

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, 2021
For the Six Months Ended June 30, 2022																									For the Six Months Ended June 30, 2022
		Common Stock			Accumulated Other Comprehensive Income				Additional Paid-in Capital				Treasury Stock						Accumulated Deficit				Total Stockholders’ Equity (Deficit)					Common Stock				Accumulated Other Comprehensive Income (loss)				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, 2020		4,176	$	4			$	15			$	—		3			$	(19)			$	(2,285)				$	(2,285)
Comprehensive income, net of tax		—	—		2				—				—		—				995				997
Balance at December 31, 2021																									Balance at December 31, 2021			3,968		$	4		$	15			$	—		1		$	(8)		$	(2,636)		$	(2,625)
Cumulative effect of change in accounting principles																									Cumulative effect of change in accounting principles			—		—		—				—			—		—			(14)			(14)
Comprehensive (loss) income, net of tax																									Comprehensive (loss) income, net of tax			—		—		(2)				—			—		—			601			599
Share-based payment expense	Share-based payment expense	—	—		—				159				—		—				—				159		Share-based payment expense			—		—		—				101			—		—			—			101
Exercise of stock options and vesting of restricted stock units	Exercise of stock options and vesting of restricted stock units	35	—		—				6				—		—				—				6		Exercise of stock options and vesting of restricted stock units			8		—		—				—			—		—			—			—
Withholding taxes on net share settlement of stock-based compensation	Withholding taxes on net share settlement of stock-based compensation	—	—		—				(88)				—		—				—				(88)		Withholding taxes on net share settlement of stock-based compensation			—		—		—				(39)			—		—			—			(39)
Capital contribution related to Tax Sharing Agreement with Liberty Media																									Capital contribution related to Tax Sharing Agreement with Liberty Media			—		—		—				—			—		—			(25)			(25)
Cash dividends paid on common stock, $0.293923 per share																									Cash dividends paid on common stock, $0.293923 per share			—		—		—				(62)			—		—			(1,097)			(1,159)

Cash dividends paid on common stock, $0.043923 per share		—	—		—				(81)				—		—				(99)				(180)
Issuance of restricted stock in connection with business acquisition		—	—		—				4				—		—				—				4
Common stock repurchased	Common stock repurchased	—	—		—				—				190		(1,168)				—				(1,168)		Common stock repurchased			—		—		—				—			67		(417)			—			(417)
Common stock retired	Common stock retired	(191)	—		—				—				(191)		1,174				(1,174)				—		Common stock retired			(67)		—		—				—			(67)		415			(415)			—
Balance at September 30, 2021		4,020	$	4	$	17			$	—			2		$	(13)			$	(2,563)			$	(2,555)
Balance at June 30, 2022																									Balance at June 30, 2022			3,909		$	4	$	13			$	—		1		$	(10)		$	(3,586)		$	(3,579)

See accompanying notes to the unaudited consolidated financial statements.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)


For the Three Months Ended September 30, 2021
For the Three Months Ended June 30, 2022																									For the Three Months Ended June 30, 2022
		Common Stock			Accumulated Other Comprehensive Income				Additional Paid-in Capital				Treasury Stock						Accumulated Deficit				Total Stockholders’ Equity (Deficit)					Common Stock				Accumulated Other Comprehensive Income (loss)				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, 2021		4,059	$	4			$	27			$	—		1			$	(7)			$	(2,539)				$	(2,515)
Comprehensive income, net of tax		—	—		(10)				—				—		—				343				333
Balance at March 31, 2022																									Balance at March 31, 2022			3,940		$	4		$	23			$	—		—		$	(2)		$	(3,612)		$	(3,587)

Comprehensive (loss) income, net of tax																									Comprehensive (loss) income, net of tax			—		—		(10)				—			—		—			292			282
Share-based payment expense	Share-based payment expense	—	—		—				55				—		—				—				55		Share-based payment expense			—		—		—				51			—		—			—			51
Exercise of stock options and vesting of restricted stock units	Exercise of stock options and vesting of restricted stock units	12	—		—				—				—		—				—				—		Exercise of stock options and vesting of restricted stock units			3		—		—				—			—		—			—			—
Withholding taxes on net share settlement of stock-based compensation	Withholding taxes on net share settlement of stock-based compensation	—	—		—				(45)				—		—				—				(45)		Withholding taxes on net share settlement of stock-based compensation			—		—		—				(10)			—		—			—			(10)
Capital contribution related to Tax Sharing Agreement with Liberty Media																									Capital contribution related to Tax Sharing Agreement with Liberty Media			—		—		—				—			—		—			(12)			(12)
Cash dividends paid on common stock, $0.0219615 per share																									Cash dividends paid on common stock, $0.0219615 per share			—		—		—				(41)			—		—			(45)			(86)

Cash dividends paid on common stock, $0.014641 per share		—	—		—				(10)				—		—				(49)				(59)
Issuance of restricted stock in connection with business acquisition		—	—		—				—				—		—				—				—
Common stock repurchased	Common stock repurchased	—	—		—				—				52		(324)				—				(324)		Common stock repurchased			—		—		—				—			35		(217)			—			(217)
Common stock retired	Common stock retired	(51)	—		—				—				(51)		318				(318)				—		Common stock retired			(34)		—		—				—			(34)		209			(209)			—
Balance at September 30, 2021		4,020	$	4	$	17			$	—			2		$	(13)			$	(2,563)			$	(2,555)
Balance at June 30, 2022																									Balance at June 30, 2022			3,909		$	4	$	13			$	—		1		$	(10)		$	(3,586)		$	(3,579)

See accompanying notes to the unaudited consolidated financial statements.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)


For the Nine Months Ended September 30, 2020
For the Six Months Ended June 30, 2021																									For the Six Months Ended June 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		—			$	—			$	(1,143)				$	(736)
Comprehensive (loss) income, 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			—		—		12				—			—		—			652			664
Share-based payment expense	Share-based payment expense	—	—		—				178				—		—				—				178		Share-based payment expense			—		—		—				104			—		—			—			104
Exercise of stock options and vesting of restricted stock units	Exercise of stock options and vesting of restricted stock units	22	—		—				—				—		—				—				—		Exercise of stock options and vesting of restricted stock units			23		—		—				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			—		—		—				(43)			—		—			—			(43)

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

Cash dividends paid on common stock, $0.029282 per share																									Cash dividends paid on common stock, $0.029282 per share			—		—		—				(71)			—		—			(50)			(121)
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			—		—		—				—			138		(844)			—			(844)
Common stock retired	Common stock retired	(151)	—		—				(350)				(151)		870				(520)				—		Common stock retired			(140)		—		—				—			(140)		856			(856)			—
Balance at September 30, 2020		4,283	$	4	$	—			$	—			5		$	(24)			$	(891)			$	(911)
Balance at June 30, 2021																									Balance at June 30, 2021			4,059		$	4	$	27			$	—		1		$	(7)		$	(2,539)		$	(2,515)

See accompanying notes to the unaudited consolidated financial statements.

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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 June 30, 2021																									For the Three Months Ended June 30, 2021
		Common Stock			Accumulated Other Comprehensive (Loss) Income				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 March 31, 2021																									Balance at March 31, 2021			4,107		$	4		$	20			$	—		2		$	(13)		$	(2,614)		$	(2,603)
Comprehensive income, net of tax	Comprehensive income, net of tax	—	—		7				—				—		—				272				279		Comprehensive income, net of tax			—		—		7				—			—		—			433			440
Share-based payment expense	Share-based payment expense	—	—		—				63				—		—				—				63		Share-based payment expense			—		—		—				49			—		—			—			49
Exercise of stock options and vesting of restricted stock units	Exercise of stock options and vesting of restricted stock units	11	—		—				—				—		—				—				—		Exercise of stock options and vesting of restricted stock units			6		—		—				6			—		—			—			6
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			—		—		—				(23)			—		—			—			(23)

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			—		—		—				(36)			—		—			(24)			(60)
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	—	—		—				—				86		(486)				—				(486)		Common stock repurchased			—		—		—				—			53		(328)			—			(328)
Common stock retired	Common stock retired	(83)	—		—				49				(83)		471				(520)				—		Common stock retired			(54)		—		—				—			(54)		334			(334)			—
Balance at September 30, 2020		4,283	$	4	$	—			$	—			5		$	(24)			$	(891)			$	(911)
Balance at June 30, 2021																									Balance at June 30, 2021			4,059		$	4	$	27			$	—		1		$	(7)		$	(2,539)		$	(2,515)

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 Six Months Ended June 30,
(in millions)	(in millions)	2021		2020			(in millions)	2022		2021
Cash flows from operating activities:	Cash flows from operating activities:						Cash flows from operating activities:
Net income	Net income	$	995	$	808		Net income	$	601	$	652
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	399		381			Depreciation and amortization	270		263
Non cash impairment and restructuring costs	Non cash impairment and restructuring costs	24		24			Non cash impairment and restructuring costs	—		245
Non-cash interest expense, net of amortization of premium	Non-cash interest expense, net of amortization of premium	16		15			Non-cash interest expense, net of amortization of premium	9		10
Changes in fair value of contingent consideration		(17)		—

Provision for doubtful accounts	Provision for doubtful accounts	37		48			Provision for doubtful accounts	29		24
Amortization of deferred income related to equity method investment		—		(2)
Loss on extinguishment of debt		83		40
Loss on unconsolidated entity investments, net		11		8

(Gain) loss on unconsolidated entity investments, net							(Gain) loss on unconsolidated entity investments, net	(3)		3

Dividend received from unconsolidated entity investment	Dividend received from unconsolidated entity investment	1		1			Dividend received from unconsolidated entity investment	—		1

Gain on other investments		(4)		(1)
Loss (gain) on other investments							Loss (gain) on other investments	9		(4)
Share-based payment expense	Share-based payment expense	149		165			Share-based payment expense	92		98
Deferred income tax expense	Deferred income tax expense	101		175			Deferred income tax expense	60		37
Amortization of right-of-use assets	Amortization of right-of-use assets	46		42			Amortization of right-of-use assets	21		28
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:						Changes in operating assets and liabilities:
Receivables	Receivables	(22)		39			Receivables	35		(11)
Inventory		6		(2)

Related party, net	Related party, net	12		10			Related party, net	1		11
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(18)		(2)			Prepaid expenses and other current assets	(83)		(136)
Other long-term assets	Other long-term assets	(6)		14			Other long-term assets	6		(4)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	(60)		(83)			Accounts payable and accrued expenses	(81)		(99)
Accrued interest	Accrued interest	(94)		(76)			Accrued interest	(9)		(1)
Deferred revenue	Deferred revenue	(236)		(147)			Deferred revenue	(32)		(145)
Operating lease liabilities	Operating lease liabilities	(47)		(39)			Operating lease liabilities	(30)		(26)
Other long-term liabilities	Other long-term liabilities	(5)		32			Other long-term liabilities	(7)		(18)
Net cash provided by operating activities	Net cash provided by operating activities	1,371		1,450			Net cash provided by operating activities	888		928
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	(244)		(230)			Additions to property and equipment	(196)		(164)
Proceeds from insurance recoveries		225		—
Purchases of other investments		(3)		(8)

Sale (purchases) of other investments							Sale (purchases) of other investments	1		(3)
Acquisition of business, net of cash acquired	Acquisition of business, net of cash acquired	(14)		(28)			Acquisition of business, net of cash acquired	(137)		(14)

Investments in related parties and other equity investees	Investments in related parties and other equity investees	(16)		(89)			Investments in related parties and other equity investees	(1)		(11)
Repayment from related party	Repayment from related party	2		11			Repayment from related party	—		2
Net cash used in investing activities	Net cash used in investing activities	(50)		(344)			Net cash used in investing activities	(333)		(190)
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	6		—			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	(88)		(81)			Taxes paid from net share settlements for stock-based compensation	(39)		(43)
Revolving credit facility, net	Revolving credit facility, net	(654)		—			Revolving credit facility, net	510		(649)
Proceeds from long-term borrowings, net of costs	Proceeds from long-term borrowings, net of costs	4,442		1,481			Proceeds from long-term borrowings, net of costs	499		1,976
Principal payments of long-term borrowings							Principal payments of long-term borrowings	(2)		(2)

Principal payments of long-term borrowings		(3,503)		(1,506)
Payment of premiums on redemption of debt		(62)		(31)
Payment of contingent consideration for business acquisition	Payment of contingent consideration for business acquisition	(19)		—			Payment of contingent consideration for business acquisition	(3)		—
Distribution to parent related to Tax Sharing Agreement							Distribution to parent related to Tax Sharing Agreement	(11)		—
Common stock repurchased and retired	Common stock repurchased and retired	(1,174)		(870)			Common stock repurchased and retired	(415)		(856)
Dividends paid	Dividends paid	(180)		(175)			Dividends paid	(1,159)		(121)
Net cash used in financing activities		(1,232)		(1,182)
Net increase (decrease) in cash, cash equivalents and restricted cash		89		(76)
Net cash (used in) provided by financing activities							Net cash (used in) provided by financing activities	(620)		311
Net (decrease) increase in cash, cash equivalents and restricted cash							Net (decrease) increase in cash, cash equivalents and restricted cash	(65)		1,049
Cash, cash equivalents and restricted cash at beginning of period (1)	Cash, cash equivalents and restricted cash at beginning of period (1)	83		120			Cash, cash equivalents and restricted cash at beginning of period (1)	199		83
Cash, cash equivalents and restricted cash at end of period (1)	Cash, cash equivalents and restricted cash at end of period (1)	$	172	$	44		Cash, cash equivalents and restricted cash at end of period (1)	$	134	$	1,132

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,				For the Six Months Ended June 30,
(in millions)	(in millions)	2021		2020			(in millions)	2022		2021
Supplemental Disclosure of Cash and Non-Cash Flow Information	Supplemental Disclosure of Cash and Non-Cash Flow Information						Supplemental Disclosure of Cash and Non-Cash Flow Information
Cash paid during the period for:	Cash paid during the period for:						Cash paid during the period for:
Interest, net of amounts capitalized	Interest, net of amounts capitalized	$	390	$	357		Interest, net of amounts capitalized	$	205	$	193
Income taxes paid	Income taxes paid	$	57	$	26		Income taxes paid	$	145	$	34
Non-cash investing and financing activities:	Non-cash investing and financing activities:						Non-cash investing and financing activities:

Capital lease obligations incurred to acquire assets							Capital lease obligations incurred to acquire assets	$	3	$	—
Treasury stock not yet settled	Treasury stock not yet settled	$	6	$	(24)		Treasury stock not yet settled	$	(2)	$	12

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

Accumulated other comprehensive (loss) income, net of tax							Accumulated other comprehensive (loss) income, net of tax	$	(2)	$	12
Capital contribution pursuant to Tax Sharing Agreement							Capital contribution pursuant to Tax Sharing Agreement	$	14	$	—

(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, 2021		December 31, 2020		September 30, 2020		December 31, 2019		(in millions)	June 30, 2022		December 31, 2021		June 30, 2021		December 31, 2020
Cash and cash equivalents	Cash and cash equivalents	$	164	$	71	$	33	$	106	Cash and cash equivalents	$	126	$	191	$	1,124	$	71
Restricted cash included in Other long-term assets	Restricted cash included in Other long-term assets	8		12		11		14		Restricted cash included in Other long-term assets	8		8		8		12
Total cash, cash equivalents and restricted cash at end of period	Total cash, cash equivalents and restricted cash at end of period	$	172	$	83	$	44	$	120	Total cash, cash equivalents and restricted cash at end of period	$	134	$	199	$	1,132	$	83

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 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~~one of which we refer to as “SiriusXM” and ~~our Pandora business.~~ the second of which we refer to as “Pandora and Off-platform”.

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~~packages include live, curated and certain exclusive and on demand programming. The Sirius XM service is distributed through our 2 proprietary satellite radio systems and 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 in-car 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 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~~June 30, ~~2021,~~2022, our Sirius XM business had approximately ~~34.3~~34.0 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. 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 and Off-platform

~~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 computers, tablets, mobile devices, ~~car~~vehicle 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 (Pandora Plus) and (3) an on-demand subscription service (Pandora Premium). As of ~~September~~June 30, ~~2021,~~2022, Pandora had approximately ~~6.5~~6.3 million subscribers.

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

We also sell advertising on other audio platforms and in widely distributed podcasts, which we consider to be off-platform services. We have an arrangement with SoundCloud Holdings, LLC (“SoundCloud”) to be its exclusive ad sales representative in the US and certain European countries and are able to offer advertisers the ability to execute campaigns across the Pandora and SoundCloud platforms. We also have arrangements to serve as the ad sales representative for certain podcasts.

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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 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~~we provide a comprehensive digital audio and programmatic advertising technology platform, which connects audio publishers and advertisers with a variety of ad insertion, campaign trafficking, yield optimization, programmatic buying, marketplace and podcast monetization solutions.

On February 10, 2020, Sirius XM invested $75 in SoundCloud. SoundCloud is 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. Refer to Note 12 for more information on this investment.

~~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 2021 portion of the contingent consideration. The acquisition of Stitcher, in 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~~June 30, ~~2021,~~2022, Liberty Media Corporation (“Liberty Media”) beneficially owned, directly and indirectly, approximately ~~79%~~82% 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. Refer to Note 11 for more information regarding related parties.

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~~June 30, ~~2021~~2022 and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 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, ~~2020,~~2021, which was filed with the SEC on February ~~2, 2021.~~1, 2022.

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

~~Table of Contents~~

~~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 1817 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~~six months ended ~~September~~June 30, ~~2021~~2022 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.~~18.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes. Estimates, by their nature, are based on judgment and available information. Actual results could differ materially from those estimates. Significant estimates inherent in the preparation of the accompanying unaudited consolidated financial statements include asset impairment, depreciable lives of our satellites, share-based payment expense and income taxes.

(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~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the carrying amounts of cash and cash equivalents, receivables and accounts payable approximated fair value due to the short-term nature of these instruments.

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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)

Our liabilities measured at fair value were as follows:


		September 30, 2021						December 31, 2020							June 30, 2022						December 31, 2021
		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)	—	$	9,132	—	$	9,132	—	$	9,011	—	$	9,011	Debt (a)	—	$	8,793	—	$	8,793	—	$	9,052	—	$	9,052

(a)The fair value for non-publicly traded debt is based upon estimates from a market maker and brokerage firm. Refer to Note 1312 for information related to the carrying value of our debt as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020.~~

2021.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income of ~~$17~~$13 was primarily comprised of the cumulative foreign currency translation adjustments related to our investment in and loan to Sirius XM Canada (refer to Note 1211 for additional information). During the three and ~~nine~~six months ended ~~September~~June 30, 2022, we recorded foreign currency translation adjustment loss of $10 and $2, respectively, net of tax benefit of $4 and $1, respectively. During the three and six months ended June 30, 2021, we recorded foreign currency translation adjustment ~~(loss)~~ income of ~~$(10)~~$7 and ~~$2,~~$12, respectively, net of tax ~~benefit (expense)~~expense of $3$2 and ~~$(1),~~$4, respectively.

Recently Adopted Accounting Policies

Accounting Standard Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40). In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06 which removes the separation models for convertible debt with cash conversion or beneficial conversion features. ASU 2020-06 also requires the application of the if-converted method for calculating diluted earnings per share as the treasury stock method will no longer be permitted for convertible instruments. During the three ~~and nine~~ months ended ~~September~~March 31, 2022, we adopted ASU 2020-06 as of January 1, 2022 using the modified retrospective approach and recorded a $14 increase to the carrying value of Pandora's 1.75% Convertible Senior Notes due 2023 and a corresponding increase to our accumulated deficit. The adoption of ASU 2020-06 did not have a material impact on our diluted earnings per share.

(3)Acquisitions

On May 20, 2022, we completed an acquisition for total cash consideration of $93. We recognized goodwill of $69, indefinite-lived intangible assets of $1 and other assets of $23. The other assets represent acquired content which will be amortized over its estimated useful life to Programming and content in our unaudited consolidated statements of comprehensive income.

On January 12, 2022, we completed an acquisition for total cash consideration of $44. We recognized goodwill of $29, other definite-lived intangible assets of $19 and liabilities of $4.

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

Acquisition related costs for the three and six months ended June 30, ~~2020, we recorded foreign currency translation adjustment income (loss) of $7 and $(8), respectively, net of a tax (expense) benefit of $(2)~~2022 were $1 and $3, respectively. Acquisition related costs of $3 were recognized for the three and six months ended June 30, 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)

~~(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 summarizes the fair value of the assets acquired and liabilities assumed as of the acquisition date:~~


~~Acquired Assets:~~
~~Receivables, net~~	$	21
~~Prepaid expenses and other current assets~~	16
~~Property and equipment~~	8
~~Intangible assets~~	38
~~Goodwill~~	~~224~~
~~Operating lease right-of-use assets~~	11
~~Total assets~~	~~318~~

~~Assumed Liabilities:~~
~~Accounts payable and accrued expenses~~	4
~~Deferred revenue~~	1
~~Operating lease current liabilities~~	2
~~Operating lease liabilities~~	9
~~Total liabilities~~	16
~~Total consideration~~	$	~~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 $3 were recognized for the nine months ended September 30, 2021.~~

~~Table of Contents~~

~~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

No restructuring costs were recognized during the three and six months ended June 30, 2022.

There were no restructuring charges recorded during the three months ended June 30, 2021.During the ~~nine~~six months ended ~~September~~June 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 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 costs in our unaudited consolidated ~~statement~~statements of comprehensive income for the ~~nine~~six months ended ~~September~~June 30, 2021. ~~There were no restructuring charges recorded during the three months ended September 30, 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 not 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 no participating securities during the three and ~~nine~~six months ended ~~September~~June 30, 2022 and 2021.

Common stock equivalents of 84 and 96 for the three months ended June 30, 2022 and 2021, respectively, and ~~2020.~~81 and 93 for the six months ended June 30, 2022 and 2021, respectively, were excluded from the calculation of diluted net income per common share as the effect would have been anti-dilutive.


	For The Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Numerator:
Net Income available to common stockholders for basic net income per common share	$	292	$	433	$	601	$	652
Effect of interest on assumed conversions of convertible notes, net of tax	1		2		3		4
Net Income available to common stockholders for dilutive net income per common share	$	293	$	435	$	604	$	656
Denominator:
Weighted average common shares outstanding for basic net income per common share	3,928		4,079		3,938		4,108
Weighted average impact of assumed convertible notes	31		30		31		30
Weighted average impact of dilutive equity instruments	46		54		47		55
Weighted average shares for diluted net income per common share	4,005		4,163		4,016		4,193
Net income per common share:
Basic	$	0.07	$	0.11	$	0.15	$	0.16
Diluted	$	0.07	$	0.10	$	0.15	$	0.16

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

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

Common stock equivalents of 100 and 106 for the three months ended September 30, 2021 and 2020, respectively, and 98 and 62 for the nine months ended September 30, 2021 and 2020, respectively, were excluded from the calculation of diluted net income per common share as the effect would have been anti-dilutive.

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2021 2020 2021 2020
Numerator:
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 2 2 6 6
Net Income available to common stockholders for dilutive net income per common share $ 345 $ 274 $ 1,001 $ 814
Denominator:
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 30 29 30 29
Weighted average impact of dilutive equity instruments 45 60 54 69
Weighted average shares for diluted net income per common share 4,119 4,415 4,170 4,465
Net income per common share:
Basic $ 0.08 $ 0.06 $ 0.24 $ 0.19
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 and do not expect issues in the foreseeable future.

~~Table of Contents~~

~~SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(UNAUDITED)~~

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

Receivables, net, consists of the following:


		September 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Gross customer accounts receivable	Gross customer accounts receivable	$	587	$	574	Gross customer accounts receivable	$	586	$	636
Allowance for doubtful accounts	Allowance for doubtful accounts	(10)		(15)		Allowance for doubtful accounts	(11)		(10)
Customer accounts receivable, net	Customer accounts receivable, net	$	577	$	559	Customer accounts receivable, net	$	575	$	626
Receivables from distributors	Receivables from distributors	48		73		Receivables from distributors	55		62
Other receivables	Other receivables	27		40		Other receivables	30		34
Total receivables, net	Total receivables, net	$	652	$	672	Total receivables, net	$	660	$	722

(7)~~Inventory, net~~

Inventory consists of finished goods and refurbished 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, 2021 December 31, 2020
Finished goods $ 7 $ 13
Allowance for obsolescence (3) (3)
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~~June 30, ~~2021.~~2022.

As of ~~September~~June 30, ~~2021,~~2022, there were no indicators of impairment, and no impairment losses were recorded for goodwill during the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021. As of ~~September~~June 30, ~~2021,~~2022, the cumulative balance of goodwill impairments recorded was $5,722, of which $4,766 was recognized during the year ended December 31, 2008 and is included in the carrying 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 and Off-platform reporting unit.

As of ~~September~~June 30, 2022, the carrying amount of goodwill for our Sirius XM and Pandora and Off-platform reporting units was $2,290 and $959, respectively. During the six months ended June 30, 2022, we recorded $98 of goodwill related to acquisitions which were recorded to our Pandora and Off-platform reporting unit. Refer to Note 3 for information regarding these acquisitions. As of December 31, 2021, the carrying amount of goodwill for our Sirius XM and Pandora and Off-platform 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 $832,$861, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

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

~~(9)~~(8)Intangible Assets

Our intangible assets include the following:


			September 30, 2021						December 31, 2020								June 30, 2022						December 31, 2021
		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		250		—		250		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		(116)		104		220		(105)		115		OEM relationships	15 years	220		(127)		93		220		(120)		100
Licensing agreements	Licensing agreements	12 years	45		(45)		—		45		(45)		—		Licensing agreements	12 years	45		(45)		—		45		(45)		—
Software and technology	Software and technology	7 years	31		(18)		13		31		(16)		15		Software and technology	7 years	31		(20)		11		31		(19)		12
Due to Pandora and Stitcher Acquisitions:
Due to Acquisitions recorded to Pandora and Off-platform Reporting Unit:															Due to Acquisitions recorded to Pandora and Off-platform Reporting Unit:
Indefinite life intangible assets:	Indefinite life intangible assets:														Indefinite life intangible assets:
Trademarks	Trademarks	Indefinite	311		—		311		311		—		311		Trademarks	Indefinite	312		—		312		311		—		311
Definite life intangible assets:	Definite life intangible assets:														Definite life intangible assets:
Customer relationships	Customer relationships	8 years	441		(149)		292		441		(104)		337		Customer relationships	8 years	442		(195)		247		441		(164)		277
Software and technology	Software and technology	5 years	373		(202)		171		373		(145)		228		Software and technology	5 years	391		(260)		131		373		(221)		152
Total intangible assets	Total intangible assets		$	3,755	$	(530)	$	3,225	$	3,755	$	(415)	$	3,340	Total intangible assets		$	3,775	$	(647)	$	3,128	$	3,755	$	(569)	$	3,186

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~~June 30, ~~2021,~~2022, there were no indicators of impairment, and 0 impairment loss was recognized for intangible assets with indefinite lives during the three and ~~nine~~six months ended ~~September~~June 30, 2022 and 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. No impairment loss was recognized during the three months ended September 30, 2020.

Definite Life Intangible Assets

Amortization expense for all definite life intangible assets was ~~$38~~$39 and ~~$37~~$38 for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$115~~$78 and ~~$113~~$77 for the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, ~~and 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.~~ There were no retirements of definite lived intangible assets during the ~~nine~~three and six months ended ~~September~~June 30, 2022 and 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 ~~2021~~2022 through ~~2025~~2026 and for periods thereafter is as follows:


Years ending December 31,	Years ending December 31,	Amount		Years ending December 31,	Amount
2021 (remaining)		$	38
2022		154
2022 (remaining)				2022 (remaining)	$	78
2023	2023	141		2023	144
2024	2024	75		2024	77
2025	2025	69		2025	72
2026				2026	71
Thereafter	Thereafter	103		Thereafter	40
Total definite life intangible assets, net	Total definite life intangible assets, net	$	580	Total definite life intangible assets, net	$	482

~~(10)~~(9)Property and Equipment

Property and equipment, net, consists of the following:


		September 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Satellite system	Satellite system	$	1,848	$	1,587	Satellite system	$	1,841	$	1,841
Terrestrial repeater network	Terrestrial repeater network	105		105		Terrestrial repeater network	116		116
Leasehold improvements	Leasehold improvements	109		111		Leasehold improvements	109		109
Broadcast studio equipment	Broadcast studio equipment	108		100		Broadcast studio equipment	123		119
Capitalized software and hardware	Capitalized software and hardware	1,418		1,372		Capitalized software and hardware	1,599		1,591
Satellite telemetry, tracking and control facilities	Satellite telemetry, tracking and control facilities	63		96		Satellite telemetry, tracking and control facilities	68		67
Furniture, fixtures, equipment and other	Furniture, fixtures, equipment and other	91		92		Furniture, fixtures, equipment and other	90		92
Land	Land	38		38		Land	38		38
Building	Building	63		63		Building	82		81
Construction in progress	Construction in progress	288		510		Construction in progress	332		156
Total property and equipment	Total property and equipment	4,131		4,074		Total property and equipment	4,398		4,210
Accumulated depreciation	Accumulated depreciation	(2,675)		(2,445)		Accumulated depreciation	(2,931)		(2,760)
Property and equipment, net	Property and equipment, net	$	1,456	$	1,629	Property and equipment, net	$	1,467	$	1,450

Construction in progress consists of the following:


		September 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Satellite system	Satellite system	$	49	$	429	Satellite system	$	116	$	64
Terrestrial repeater network	Terrestrial repeater network	11		8		Terrestrial repeater network	3		1
Capitalized software and hardware	Capitalized software and hardware	195		52		Capitalized software and hardware	191		78
Other	Other	33		21		Other	22		13
Construction in progress	Construction in progress	$	288	$	510	Construction in progress	$	332	$	156

Depreciation ~~and amortization~~ expense on property and equipment was ~~$97~~$96 and ~~$88~~$93 for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$284~~$192 and ~~$268~~$186 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020, respectively. We retired property and 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 no retirements of property and equipment during the three months ended ~~September~~June 30, ~~2020.~~2022. We retired property and equipment of $3 during the three months ended June 30, 2021 and $22 and $8 during the six months ended June 30, 2022 and 2021, respectively.

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 ~~and~~ $1 and $5$2 for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and $6$2 and ~~$14~~$5 for the ~~nine~~six months ended June 30, 2022 and 2021, respectively, which related to the construction of our satellites. We also capitalize a portion of share-based compensation related to employee time for capitalized software projects. Capitalized share-based compensation costs

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)

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

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 $3 for ~~each of~~ the three months ended ~~September~~June 30, 2022 and 2021, respectively, and ~~2020~~$9 and ~~$10 and $13~~$6 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Satellites

As of ~~September~~June 30, ~~2021,~~2022, we operated a fleet of 6 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 June 30, 2022:


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

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

(a)We expect to file an application with the FCC to extend the licenses for our SIRIUS FM-6 and XM-4 satellites during the quarter ended September 30, ~~2021:~~

Satellite Description Year Delivered Estimated End of
Depreciable Life FCC License Expiration Year
SIRIUS FM-5 2009 2024 2025
SIRIUS FM-6 2013 2028 2022
XM-3 2005 2020 2026
XM-4 2006 2021 2022
XM-5 2010 2025 2026
SXM-8 2021 2036 2029

~~On December 13, 2020, our SXM-7 satellite was launched~~2022 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 consideredexpect it to be ~~a triggering event prompting~~granted routinely.

During the ~~assessment as to whether the asset's carrying value of $220 was recoverable. In determining recoverability of SXM-7,~~three months ended March 31, 2021, 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 andrecorded an impairment charge of $220 ~~was recorded~~ to Impairment, restructuring and acquisition costs in our unaudited consolidated statements of comprehensive income ~~for~~related to the ~~nine months ended September 30, 2021.~~total loss of the SXM-7 ~~remains in-orbit at its assigned orbital location, but is not being used to provide satellite radio service.~~

satellite. 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~~three and six months ended ~~September~~June 30, 2021, we ~~collected $225~~recorded insurance recoveries of ~~insurance recoveries. Of this amount, $80 and $220~~$140 which have been recorded as a reduction to Impairment, restructuring and acquisition costs in our unaudited consolidated statements of comprehensive income. The aggregate coverage under the insurance policies with respect to SXM-7 was $225, all of which was collected during the ~~three and nine months~~year ended ~~September 30, 2021, respectively. The remaining $5 has been recorded in Other income during the three and nine months ended September 30,~~December 31, 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~~Our SXM-8 satellite replaced our XM-3 satellite. During the six months ended June 30, 2022, we replaced our XM-4 satellite with our XM-5 satellite. Our XM-3 ~~satellite, which remains~~and our XM-4 satellites remain available as an in-orbit ~~spare along with XM-5.~~spares.

~~(11)~~(10)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 1720 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.

~~Table of Contents~~

~~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 June 30,				For the Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Operating lease cost	Operating lease cost	$	18	$	20	$	60	$	61	Operating lease cost	$	17	$	21	$	30	$	42
Finance lease cost		—		—		—		1

Sublease income	Sublease income	(2)		—		(4)		(1)		Sublease income	—		—		(1)		(1)
Total lease cost	Total lease cost	$	16	$	20	$	56	$	61	Total lease cost	$	17	$	21	$	29	$	41

During the ~~nine~~six months ended ~~September~~June 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.

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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)

~~(12)~~(11)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~~June 30, ~~2021,~~2022, Liberty Media beneficially owned, directly and indirectly, approximately ~~79%~~82% of the outstanding shares of our common stock. Liberty Media has 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.

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. Refer to Note 16 for more information regarding the tax sharing agreement.

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 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, 2021 and 2020, Sirius XM Canada repaid $2 and $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.

On March 15, 2022, Sirius XM and Sirius XM Canada entered into an amended and restated services and distribution agreement. The amended and restated services and distribution agreement modified the existing Services Agreement and terminated the existing Advisory Agreement, each dated as of May 25, 2017, between Sirius XM and Sirius XM Canada. Pursuant to the amended and restated services and distribution agreement, the fee payable by Sirius XM Canada to Sirius XM was modified from a fixed percentage of revenue to a variable fee, based on a target operating profit for Sirius XM Canada. Such variable fee is expected to be evaluated annually based on comparable companies. In accordance with the amended and restated services and distribution agreement, the fee is payable on a monthly basis, in arrears, beginning January 1, 2022.

In May 2017, Sirius XM extended a loan to Sirius XM Canada in the principal amount of $131. In connection with the execution of the amended and restated services and distribution agreement, Sirius XM forgave $113 in principal amount of such loan to Sirius XM Canada, leaving an outstanding principal amount of $8 on such loan. The principal amount that was forgiven by Sirius XM was considered satisfied and as contributed capital from Sirius XM.

Our related party long-term assets as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 included the carrying value of our investment balance in Sirius XM Canada of ~~$338~~$448 and ~~$332,~~$334, respectively, and, as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, also included ~~$121~~$8 and ~~$123,~~$120, 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 ~~each of~~ the three months ended ~~September~~June 30, 2021. No dividends were paid during the three months ended June 30, 2022. During the six months ended June 30, 2022 and 2021, ~~and 2020,~~Sirius XM Canada paid gross dividends to us of less than $1 and $1, ~~during each of the nine months ended September 30, 2021 and 2020.~~respectively. 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.

We recorded revenue from Sirius XM Canada as Other revenue in our unaudited consolidated statements of comprehensive income of $28 and $26 during the three months ended June 30, 2022 and 2021, respectively, and $55 and $50 during the six months ended June 30, 2022 and 2021, respectively.

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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 for each of the three months ended September 30, 2021 and 2020, and $76 and $73 for the nine months ended September 30, 2021 and 2020, respectively.

SoundCloud

~~In February 2020, Sirius XM completed a $75~~We have an investment in ~~SoundCloud's Series G Membership Units ("Series G Units"). The Series G Units are convertible at the option of the holders at any time into shares of ordinary membership units of~~ SoundCloud ~~at a ratio of 1 ordinary membership unit for each Series G Unit. The investment in SoundCloud~~which is accounted for as an equity method investment ~~which is~~and recorded in Related party long-term assets in our unaudited consolidated balance sheets. Sirius XM has appointed 2 individuals to serve on SoundCloud's 9-member board of managers. Sirius XM's share of SoundCloud's net (loss) income was ~~$(1)~~$(2) and ~~less than~~ $1 for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$(1)~~$(3) and $1 for ~~each of~~ the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, ~~and 2020,~~respectively, which was recorded in Other (expense) income ~~(expense)~~ in our unaudited consolidated ~~statement~~statements of comprehensive income.

In addition to our investment in SoundCloud, Pandora has an agreement with SoundCloud to be its exclusive US ad sales ~~representative.~~representative in the US and certain European countries. 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 related to this agreement of ~~$15 and $13~~$14 for each of the three months ended ~~September~~June 30, 2022 and 2021, and ~~2020, respectively, and $42 and $36~~$27 for each of the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020, respectively.~~2021. We also had related party liabilities of ~~$19~~$18 and $24 as of ~~September~~June 30, 2022 and December 31, 2021, respectively, related to this agreement.

~~Table of Contents~~

~~SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(UNAUDITED)~~

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

~~(13)~~(12)Debt

Our debt as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 consisted of the following:

Principal Amount at

Carrying value(a) at

Principal Amount at

Carrying value(a) at

Issuer / Borrower

Issued

Debt

Maturity Date

Interest
Payable

September 30,
2021

September 30, 2021

December 31, 2020

Issuer / Borrower

Issued

Debt

Maturity Date

Interest
Payable

June 30, 2022

December 31, 2021

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

Pandora
(c) (d)

June 2018

1.75% Convertible Senior Notes

December 1, 2023

semi-annually on June 1 and December 1

193

177

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)~~(f)

August 2021

3.125% Senior Notes

September 1, 2026

semi-annually on March 1 and September 1

1,000

989

—

Sirius XM
(b) ~~(g)~~(f)

April 2022

Incremental Term Loan

April 11, 2024

variable fee paid monthly

500

—

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)

August 2021

3.125% Senior Notes

September 1, 2026

semi-annually on March 1 and September 1

1,000

991

990

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)

July 2017

5.00% Senior Notes

August 1, 2027

semi-annually on February 1 and August 1

1,500

1,492

1,491

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 2021

4.00% Senior Notes

July 15, 2028

semi-annually on January 15 and July 15

2,000

1,980

1,979

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)

June 2019

5.500% Senior Notes

July 1, 2029

semi-annually on January 1 and July 1

1,250

1,240

1,239

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
(b)

June 2020

4.125% Senior Notes

July 1, 2030

semi-annually on January 1 and July 1

1,500

1,486

1,485

Sirius XM
(b)

August 2021

3.875% Senior Notes

September 1, 2031

semi-annually on March 1 and September 1

1,500

1,484

Sirius XM
(e)

December 2012

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

August 31, 2026

variable fee paid quarterly

—

649

Sirius XM(e)

December 2012

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

August 31, 2026

variable fee paid quarterly

510

—

Sirius XM(e)

Various

Finance leases

Various

n/a

Sirius XM

Various

Finance leases

Various

n/a

—

Total Debt

8,840

8,509

Total Debt

9,878

8,845

Less: total current maturities (g)

—

Less: total deferred financing costs

Total long-term debt

8,827

8,499

Total long-term debt

9,866

8,832

(a)The carrying value of the obligations is net of any remaining unamortized original issue discount.

(b)All material domestic subsidiaries, including Pandora and its subsidiaries, that guarantee the Credit Facility have guaranteed these notes.

(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 Media, Inc. in 2019. ~~We allocate~~Prior to the adoption of ASU 2020-06, we allocated the principal amount of the 1.75% Convertible Senior Notes due 2023 between the liability and equity components. ~~The value assigned~~During the three months ended March

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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)

31, 2022, we adopted ASU 2020-06 as of January 1, 2022, which removed the separation model for convertible debt with cash conversion features, and we recorded a $14 decrease 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 over the carrying amount of the liability component is recorded as a debt discount and ~~is being amortized~~a corresponding increase to ~~interest expense using~~accumulated deficit. Refer to Note 2 for more information on the ~~effective interest method through the December 1, 2023 maturity date.~~adoption of ASU 2020-06. The 1.75% Convertible Senior Notes due 2023 were not convertible into common stock and were not redeemable as of ~~September~~June 30, ~~2021.~~2022. As a result, we have classified the debt as Long-term within our unaudited consolidated balance sheets.

(e)In August 2021, Sirius XM entered into an amendment to extend the maturity of the $1,750 Credit Facility 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

~~Table of Contents~~

~~SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES~~

~~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~~June 30, ~~2021.~~2022. 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~~

(f)In April 2022, Sirius XM entered into an amendment to the Credit Facility to incorporate an Incremental Term Loan borrowing of $500 which matures on April 11, 2024. Interest on the Incremental Term Loan borrowing is ~~reduced by letters of credit issued for~~based on the ~~benefit of Pandora, which were $1 as of September 30, 2021.~~

~~(f)On August 2, 2021, Sirius XM redeemed $1,000 in outstanding principal amount of the 3.875% Senior Notes due 2022 for~~Adjusted Term Secured Overnight Financing Rate plus 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.applicable rate.

~~(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 of its then outstanding 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 of its then outstanding 5.375% Senior Notes due 2025 for an aggregate purchase price, including premium and interest, of $1,039. 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, as a result of 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 indenture governing the Pandora 2023 Notes (as defined below) contains covenants that limit Pandora’s ability to merge or consolidate and 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~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we were in compliance with our debt covenants.

Pandora Convertible Notes

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

~~Table of Contents~~

~~SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(UNAUDITED)~~

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

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~~June 30, ~~2021,~~2022, the conversion rate applicable to the Pandora 2023 Notes was ~~153.7797~~161.0187 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.

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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)

~~(14)~~

(13)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 ~~4,020~~3,909 and ~~4,176~~3,968 shares of common stock issued and ~~4,018~~3,908 and ~~4,173~~3,967 shares of common stock outstanding on ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

As of ~~September~~June 30, ~~2021,~~2022, there were ~~252~~237 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.

Special Dividend

During the six months ended June 30, 2022, our board of directors declared and paid the following special cash dividend on our common stock:

Declaration Date

Dividend Per Share

Record Date

Total Amount

Payment Date

January 31, 2022

0.25

February 11, 2022

987

February 25, 2022

Quarterly Dividends

During the ~~nine~~six months ended ~~September~~June 30, ~~2021, we~~2022, our board of directors also declared and paid the following dividends:

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


Declaration Date	Dividend Per Share		Record Date	Total Amount		Payment Date
January 26, 2022	$	0.0219615	February 11, 2022	$	86	February 25, 2022
April 19, 2022	$	0.0219615	May 6, 2022	$	86	May 25, 2022

Stock Repurchase Program

As of ~~September~~June 30, ~~2021,~~2022, our board of directors had approved for repurchase an aggregate of $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~~June 30, ~~2021,~~2022, our cumulative repurchases since December 2012 under our stock repurchase program totaled ~~3,504~~3,626 shares for ~~$15,576,~~$16,337, and ~~$2,424~~$1,663 remained available for future share repurchases under our stock repurchase program.

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

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


	June 30, 2022			June 30, 2021
Share Repurchase Type	Shares	Amount		Shares	Amount
Open Market Repurchases (a)	67	$	417	138	$	844

(a)As of ~~September~~June 30, ~~2021, $13~~2022, $10 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 no shares of preferred stock issued or outstanding as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020.~~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)

~~(15)~~(14)Benefit Plans

We recognized share-based payment expense of ~~$51 and $58~~$47 for each of the three months ended ~~September~~June 30, 2022 and 2021 and ~~2020, respectively,~~$92 and ~~$149 and $165~~$98 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

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

~~Table of Contents~~

~~SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES~~

~~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 of our Board of 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~~June 30, ~~2021, 128~~2022, 127 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 equal installments on the first 3 anniversaries of the date of grant; 25% restricted stock units, which awards will vest in equal 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 our February 2019 acquisition of Pandora, 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, members of our board of directors and non-employees:


		For the Three Months Ended September 30,		For the Nine Months Ended September 30,			For the Three Months Ended June 30,		For the Six Months Ended June 30,
		2021	2020	2021	2020		2022	2021	2022	2021
Risk-free interest rate	Risk-free interest rate	0.5%	0.2%	0.6%	1.3%	Risk-free interest rate	3.0%	0.3%	1.5%	0.6%
Expected life of options — years	Expected life of options — years	3.83	3.79	6.06	3.82	Expected life of options — years	3.89	2.71	3.60	6.06
Expected stock price volatility	Expected stock price volatility	32%	34%	33%	25%	Expected stock price volatility	32%	34%	32%	33%
Expected dividend yield	Expected dividend yield	0.9%	0.9%	1.0%	0.7%	Expected dividend yield	1.4%	1.0%	1.3%	1.0%

2522

Table of Contents

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~~six months ended ~~September~~June 30, ~~2021:~~2022:


		Options	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value			Options	Weighted-Average Exercise Price Per Share (1)		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value

Outstanding as of December 31, 2020		184	$	4.73
Outstanding as of December 31, 2021								Outstanding as of December 31, 2021	161	$	5.23
Granted	Granted	54	$	6.14				Granted	9	$	6.44
Exercised	Exercised	(63)	$	3.96				Exercised	(12)	$	4.38
Forfeited, cancelled or expired	Forfeited, cancelled or expired	(5)	$	6.72				Forfeited, cancelled or expired	(2)	$	6.47
Outstanding as of September 30, 2021		170	$	5.40	5.85	$	144
Exercisable as of September 30, 2021		99	$	4.80	4.79	$	142
Outstanding as of June 30, 2022								Outstanding as of June 30, 2022	156	$	5.35	5.57	$	138
Exercisable as of June 30, 2022								Exercisable as of June 30, 2022	98	$	4.92	4.74	$	128

(1) The weighted-average exercise price for options outstanding and exercisable as of December 31, 2021 and June 30, 2022 and the options granted as of June 30, 2022 in the table above have been adjusted to reflect the reduction of $0.25 to the exercise price related to the February 25, 2022 special cash dividend.

The weighted average grant date fair value per stock option granted during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$1.77.~~$1.50. The total intrinsic value of stock options exercised during the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021 was $24 and ~~2020 was $149 and $53,~~$130, respectively. During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the number of net settled shares issued as a result of stock option exercises was ~~20.~~2.

We recognized share-based payment expense associated with stock options of ~~$10~~$9 and $11 for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$32~~$18 and ~~$34~~$22 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

The following table summarizes the restricted stock unit, including PRSU, activity under our share-based plans for the ~~nine~~six months ended ~~September~~June 30, ~~2021:~~2022:


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

Nonvested as of December 31, 2020		75	$	6.06
Nonvested as of December 31, 2021					Nonvested as of December 31, 2021	80	$	6.22
Granted	Granted	39	$	6.35	Granted	15	$	6.78
Vested	Vested	(24)	$	6.02	Vested	(10)	$	6.00
Forfeited	Forfeited	(8)	$	6.09	Forfeited	(4)	$	6.31
Nonvested as of September 30, 2021		82	$	6.21
Nonvested as of June 30, 2022					Nonvested as of June 30, 2022	81	$	6.32

The total intrinsic value of restricted stock units, including PRSUs, vesting during the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021 was $63 and ~~2020 was $154 and $168,~~$54, respectively. During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the number of net settled shares issued as a result of restricted stock units vesting totaled ~~15.~~6. During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we granted 75 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~~six months ended ~~September~~June 30, ~~2021,~~2022, we granted ~~less than 1~~4 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~~six months ended ~~September~~June 30, ~~2021.~~2022.

We recognized share-based payment expense associated with restricted stock units, including PRSUs, of ~~$41~~$38 and ~~$47~~$36 for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$117~~$74 and ~~$131~~$76 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, 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~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~$513~~$418 and ~~$385,~~$455, respectively. The total unrecognized compensation costs at ~~September~~June 30, ~~2021~~2022 are expected to be recognized over a weighted-average period of ~~2.6~~2.3 years.

2623

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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. ~~In October 2020, the Pandora Media, LLC 401(k) Profit Sharing Plan and Trust merged with the Sirius XM Plan.~~

We recognized expenses of $4$5 and $8 for ~~each of~~ the three months ended ~~September~~June 30, 2022 and 2021, respectively, and ~~2020,~~$10 and ~~$17 and $12~~$13 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, in connection with the Sirius XM ~~and Pandora Plans.~~Plan.

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 $(1) and less than ~~$1 and~~ $1 for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and $3$(1) and $8$3 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the fair value of the investments held in the trust were ~~$53~~$46 and ~~$46,~~$56, 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 ~~less than $(1)~~$(6) and $2$3 for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and $4$(9) and $1$4 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

~~(16)~~(15)Commitments and Contingencies

The following table summarizes our expected contractual cash commitments as of ~~September~~June 30, ~~2021:~~2022:


		2021		2022		2023		2024		2025		Thereafter		Total			2022		2023		2024		2025		2026		Thereafter		Total
Debt obligations	Debt obligations	$	—	$	—	$	193	$	—	$	—	$	8,750	$	8,943	Debt obligations	$	—	$	193	$	501	$	1	$	1,510	$	7,750	$	9,955
Cash interest payments	Cash interest payments	3		392		383		379		379		1,357		2,893		Cash interest payments	206		410		398		394		388		979		2,775
Satellite and transmission	Satellite and transmission	11		3		2		2		2		10		30		Satellite and transmission	57		163		110		27		1		9		367
Programming and content	Programming and content	114		416		329		193		128		197		1,377		Programming and content	201		348		231		201		122		165		1,268
Sales and marketing	Sales and marketing	13		48		14		4		3		6		88		Sales and marketing	25		41		8		7		7		4		92
Satellite incentive payments	Satellite incentive payments	2		7		7		8		7		23		54		Satellite incentive payments	4		7		8		7		4		19		49
Operating lease obligations	Operating lease obligations	13		73		64		50		47		136		383		Operating lease obligations	30		67		52		48		45		96		338
Royalties, minimum guarantees and other	Royalties, minimum guarantees and other	100		287		605		21		7		—		1,020		Royalties, minimum guarantees and other	225		472		186		21		1		2		907
Total (1)	Total (1)	$	256	$	1,226	$	1,597	$	657	$	573	$	10,479	$	14,788	Total (1)	$	748	$	1,701	$	1,494	$	706	$	2,078	$	9,024	$	15,751

(1)The table does not include our reserve for uncertain tax positions, which at ~~September~~June 30, ~~2021~~2022 totaled ~~$26.~~$40.

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.

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~~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 a third ~~party~~parties to design, build and ~~build~~launch 2 new satellites, SXM-9 and 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, 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~~In addition, certain of our podcast content agreements also contain minimum guarantees. During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we prepaid ~~$5 in content costs~~$69 primarily related to the podcast content minimum guarantees. As of ~~September~~June 30, ~~2021,~~2022, we had future fixed ~~minimum guarantee~~ commitments related to these music royalty and podcast agreements of ~~$576,~~$559, of which ~~$172~~$77 will be paid in ~~2021~~2022 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, downloads, 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, 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 such 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~~June 30, ~~2021~~2022 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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~~(UNAUDITED)~~

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

~~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.

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

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. 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.

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~~Pandora promptly filed an appeal of the District Court’s order denying the renewed motion to dismiss the case under California’s anti-SLAAP statute.

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On June 2, 2022, the Ninth Circuit upheld the District Court’s order denying dismissal of the case under California’s anti-SLAPP statute, finding that Pandora had failed to demonstrate that Flo & Eddie’s claims arise from Pandora’s protected conduct. As part of the decision, the Ninth Circuit noted that Pandora had forcefully argued that the Court’s decision in Flo & Eddie Inc. v. Sirius XM Radio Inc.,~~decision is precedential in~~ and other decisions under New York, Florida and Georgia law, foreclosed Flo & Eddie’s claims as a matter of law. Because the case has been pending for over seven years, the Ninth Circuit remanded the case to the District Court and ~~therefore we believe substantially narrows~~directed “the district court to consider expedited motions practice on the ~~claims that~~legal validity of Flo & ~~Eddie may~~Eddie’s claims in light of the intervening precedent.”

The District Court has scheduled a hearing to review next steps in this case. We continue to ~~assert against Pandora. We~~ believe we have substantial defenses to the remaining claims asserted in this action, and we intend to defend this action vigorously.

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)~~(16)Income Taxes

We ~~file~~have historically filed a consolidated federal income tax return for all of our wholly owned ~~subsidiaries. For~~subsidiaries, including Sirius XM and Pandora. On February 1, 2021, we 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 contains provisions that we believe are customary for tax sharing agreements between members of a consolidated group. On November 3, 2021, Liberty Media informed us that it beneficially owned over 80% of the outstanding shares of our common stock; as a result of this, we are included in the consolidated tax return of Liberty Media beginning November 4, 2021. 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. We have calculated the provision for income taxes by using a separate return method. Any payment made to Liberty Media, pursuant to the tax sharing agreement, shall be treated as a capital contribution or a distribution. Income tax expense was $96 and $127 for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020, income tax expense was $90 and $72,~~2021, respectively, and ~~$157~~$197 and ~~$226~~$65 for the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, respectively. In addition, we recorded $25 as a capital contribution related to the tax sharing agreement with Liberty Media, of which $11 has been paid and ~~2020, respectively.~~the balance is recorded within Related party current liabilities on our unaudited consolidated balance sheet as of June 30, 2022.

Our effective tax rate for the three months ended ~~September~~June 30, 2022 and 2021 was 24.7% and ~~2020 was 20.8% and 20.9%~~22.7%, respectively. Our effective tax rate for the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021 was 24.7% and ~~2020 was 13.6% and 21.9%~~9.1%, respectively. The effective tax rate for the three and six months ended ~~September~~June 30, 2022 was primarily impacted by a benefit associated with the recognition of excess tax benefits related to share-based compensation. The effective tax rate for the three months ended June 30, 2021 was primarily impacted by the recognition of excess tax benefits related to share-based compensation. The effective tax rate for the ~~nine~~six months ended ~~September~~June 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. We estimate our effective tax rate for the year ending December 31, ~~2021~~2022 will be approximately ~~16%~~25%.

As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had a valuation allowance related to deferred tax assets of ~~$76~~$81 and ~~$54,~~$83, 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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~~(Dollars and shares in millions, except per share amounts)~~

~~(18)~~(17)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.~~Pandora and Off-platform. 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.

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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 intersegment advertising revenue of less than $1 ~~of intersegment advertising revenue~~and $1 during the three and six months ended June 30, 2022, respectively, and less than $1 during each of the three and ~~nine~~six months ended ~~September~~June 30, ~~2021 and 2020.~~2021.

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


		For the Three Months Ended September 30, 2021				For the Three Months Ended June 30, 2022
		Sirius XM		Pandora			Total			Sirius XM		Pandora and Off-platform		Total
Revenue	Revenue								Revenue
Subscriber revenue	Subscriber revenue	$	1,532	$	134		$	1,666	Subscriber revenue	$	1,588	$	131	$	1,719
Advertising revenue	Advertising revenue	47		404			451		Advertising revenue	49		403		452
Equipment revenue	Equipment revenue	41		—			41		Equipment revenue	45		—		45
Other revenue	Other revenue	40		—			40		Other revenue	37		—		37
Total revenue	Total revenue	1,660		538			2,198		Total revenue	1,719		534		2,253
Cost of services (a)	Cost of services (a)	(645)		(341)			(986)		Cost of services (a)	(668)		(367)		(1,035)
Segment gross profit	Segment gross profit	$	1,015	$	197		$	1,212	Segment gross profit	$	1,051	$	167	$	1,218

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


	For the Three Months Ended ~~September~~June 30, ~~2021~~2022
Segment Gross Profit	$	~~1,212~~1,218
Subscriber acquisition costs	~~(71)~~(91)
Sales and marketing (a)	~~(254)~~(272)
Engineering, design and development (a)	~~(59)~~(63)
General and administrative (a)	~~(109)~~(113)
Depreciation and amortization	(135)
Share-based payment expense	~~(51)~~(47)
Impairment, restructuring and acquisition costs	95 (1)
Total other ~~(expense) income~~expense	~~(195)~~(108)
Consolidated income before income taxes	$	~~433~~388

(a) Share-based payment expense of $11 related to cost of services, ~~$15~~$13 related to sales and marketing, $9 related to engineering, design and development and ~~$16~~$14 related to general and administrative has been excluded.


	For the Three Months Ended June 30, 2021
	Sirius XM		Pandora and Off-platform		Total
Revenue
Subscriber revenue	$	1,508	$	133	$	1,641
Advertising revenue	46		383		429
Equipment revenue	51		—		51
Other revenue	38		—		38
Total revenue	1,643		516		2,159
Cost of services (b)	(647)		(323)		(970)
Segment gross profit	$	996	$	193	$	1,189

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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~~June 30, ~~2020~~2021
Segment Gross Profit	$	~~1,141~~1,189
Subscriber acquisition costs	~~(110)~~(89)
Sales and marketing (b)	~~(205)~~(227)
Engineering, design and development (b)	~~(53)~~(59)
General and administrative (b)	~~(112)~~(114)
Depreciation and amortization	~~(125)~~(131)
Share-based payment expense	~~(58)~~(47)
Impairment, restructuring and acquisition costs	136
Total other ~~(expense) income~~expense	~~(134)~~(98)
Consolidated income before income taxes	$	~~344~~560

(b) Share-based payment expense of ~~$11~~$12 related to cost of services, ~~$17~~$13 related to sales and marketing, ~~$11~~$6 related to engineering, design and development and ~~$19~~$16 related to general and administrative has been excluded.


		For the Nine Months Ended September 30, 2021				For the Six Months Ended June 30, 2022
		Sirius XM		Pandora			Total			Sirius XM		Pandora and Off-platform		Total
Revenue	Revenue								Revenue
Subscriber revenue	Subscriber revenue	$	4,521	$	397		$	4,918	Subscriber revenue	$	3,170	$	262	$	3,432
Advertising revenue	Advertising revenue	135		1,100			1,235		Advertising revenue	97		738		835
Equipment revenue	Equipment revenue	149		—			149		Equipment revenue	98		—		98
Other revenue	Other revenue	113		—			113		Other revenue	75		—		75
Total revenue	Total revenue	4,918		1,497			6,415		Total revenue	3,440		1,000		4,440
Cost of services (c)	Cost of services (c)	(1,916)		(971)			(2,887)		Cost of services (c)	(1,317)		(697)		(2,014)
Segment gross profit	Segment gross profit	$	3,002	$	526		$	3,528	Segment gross profit	$	2,123	$	303	$	2,426

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


	For the Six Months Ended June 30, 2022
Segment Gross Profit	$	2,426
Subscriber acquisition costs	(181)
Sales and marketing (c)	(531)
Engineering, design and development (c)	(122)
General and administrative (c)	(223)
Depreciation and amortization	(270)
Share-based payment expense	(92)
Impairment, restructuring and acquisition costs	(1)

Total other expense	(208)
Consolidated income before income taxes	$	798

(c) Share-based payment expense of $22 related to cost of services, $26 related to sales and marketing, $17 related to engineering, design and development and $27 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)

~~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				For the Six Months Ended June 30, 2021
		Sirius XM		Pandora			Total			Sirius XM		Pandora and Off-platform		Total
Revenue	Revenue								Revenue
Subscriber revenue	Subscriber revenue	$	4,372	$	385		$	4,757	Subscriber revenue	$	2,989	$	263	$	3,252
Advertising revenue	Advertising revenue	108		758			866		Advertising revenue	87		696		783
Equipment revenue	Equipment revenue	113		—			113		Equipment revenue	108		—		108
Other revenue	Other revenue	115		—			115		Other revenue	74		—		74
Total revenue	Total revenue	4,708		1,143			5,851		Total revenue	3,258		959		4,217
Cost of services (d)	Cost of services (d)	(1,796)		(783)			(2,579)		Cost of services (d)	(1,270)		(630)		(1,900)
Segment gross profit	Segment gross profit	$	2,912	$	360		$	3,272	Segment gross profit	$	1,988	$	329	$	2,317

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


	For the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021
Segment Gross Profit	$	~~3,272~~2,317
Subscriber acquisition costs	~~(257)~~(175)
Sales and marketing (d)	~~(614)~~(428)
Engineering, design and development (d)	~~(165)~~(113)
General and administrative (d)	~~(305)~~(220)
Depreciation and amortization	~~(381)~~(263)
Share-based payment expense	~~(165)~~(98)
Impairment, restructuring and acquisition costs	~~(24)~~(108)

Total other ~~(expense) income~~expense	~~(327)~~(195)
Consolidated income before income taxes	$	~~1,034~~717

(d) Share-based payment expense of ~~$32~~$22 related to cost of services, ~~$50~~$28 related to sales and marketing, ~~$31~~$17 related to engineering, design and development and ~~$52~~$31 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~~June 30, ~~2021,~~2022, 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~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.

~~(19)~~(18)Subsequent Events

Capital Return Program

For the period from ~~October~~July 1, ~~2021~~2022 to ~~October~~July 26, ~~2021,~~2022, we repurchased 1913 shares of our common stock on the open market for an aggregate purchase price of ~~$115,~~$80, including fees and commissions.

On ~~October 25, 2021,~~July 14, 2022, our board of directors declared a quarterly dividend on our common stock in the amount of $0.0219615 per share of common stock payable on ~~November 29, 2021~~August 31, 2022 to stockholders of record as of the close of business on ~~November~~August 5, ~~2021.~~2022.

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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, ~~2020.~~2021.

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 and its subsidiaries. Holdings has no operations independent of Sirius XM and Pandora.

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, ~~2020~~2021 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, 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, ~~2020.~~2021.

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

•We have been, and may continue to be, adversely affected by certain supply chain issues

•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

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

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

•The ongoing COVID-19 pandemic has introduced significant uncertainty to our business

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

•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~~service

•Our failure to convince advertisers of the benefits of our Pandora and Off-platform 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

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•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

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

•Our Pandora services 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 rates may adversely affect our business

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

•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

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

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.

Executive Summary

We operate two complementary audio entertainment businesses - ~~our Sirius XM business~~one of which we refer to as “SiriusXM” and ~~our Pandora business.~~ the second of which we refer to as “Pandora and Off-platform”.

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~~packages include live, curated and certain exclusive and on demand programming. The Sirius XM service is distributed through our two proprietary satellite radio systems and 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 in-car 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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Sirius XM also holds a 70% equity interest and 33% voting interest in Sirius XM ~~Canada Holdings Inc. (“Sirius XM Canada”).~~Canada. Sirius XM Canada's subscribers are not included in our subscriber count or subscriber-based operating metrics.

Pandora and Off-platform

The majority of revenue from ~~our~~ Pandora ~~business~~ is generated from advertising on our Pandora ad-supported radio 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~~We also ~~sells~~sell advertising on other audio platforms and in widely distributed podcasts, ~~unaffiliated~~which we consider to be off-platform services. We have an arrangement with ~~us. Pandora is the~~SoundCloud Holdings, LLC ("SoundCloud") to be its exclusive US ad sales representative ~~for SoundCloud. Through this arrangement, Pandora offers~~in the US and certain European countries and are 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 ~~Pandora provides~~Inc., we provide 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. ~~As of September 30, 2021, our Pandora business had approximately 52.6 million monthly active users.~~

In 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 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 for more information on this acquisition.

In October 2020, Sirius XM 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 $17 benefit related to the change in fair value of the 2021 portion of the contingent consideration. The acquisition of Stitcher, in conjunction with Simplecast, creates a full-service platform for podcast creators, publishers and advertisers. Refer to Note 3 to our unaudited consolidated financial statements for more information on this acquisition.

Liberty Media

As of ~~September~~June 30, ~~2021,~~2022, Liberty Media beneficially owned, directly and indirectly, approximately ~~79%~~82% 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

Set forth below are our results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared with the three and ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. 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									For the Three Months Ended June 30,							For the Six Months Ended June 30,									2022 vs 2021 Change
												Three Months			Nine Months																			Three Months					Six Months
				2021			2020			2021		2020			Amount		%		Amount		%								2022			2021				2022		2021						Amount				%			Amount			%
Revenue	Revenue																							Revenue
Sirius XM:	Sirius XM:																							Sirius XM:
Subscriber revenue	Subscriber revenue	$	1,532		$	1,462		$	4,521	$	4,372		$	70	5	%	$	149	3	%				Subscriber revenue		$	1,588		$	1,508		$	3,170			$	2,989				$	80		5		%		$	181		6		%
Advertising revenue	Advertising revenue	47			39			135		108			8		21	%	27		25	%				Advertising revenue		49			46			97				87					3			7		%		10			11		%
Equipment revenue	Equipment revenue	41			47			149		113			(6)		(13)	%	36		32	%				Equipment revenue		45			51			98				108					(6)			(12)		%		(10)			(9)		%
Other revenue	Other revenue	40			39			113		115			1		3	%	(2)		(2)	%				Other revenue		37			38			75				74					(1)			(3)		%		1			1		%
Total Sirius XM revenue	Total Sirius XM revenue	1,660			1,587			4,918		4,708			73		5	%	210		4	%				Total Sirius XM revenue		1,719			1,643			3,440				3,258					76			5		%		182			6		%
Pandora:
Pandora and Off-platform:																							Pandora and Off-platform:
Subscriber revenue	Subscriber revenue	134			132			397		385			2		2	%	12		3	%				Subscriber revenue		131			133			262				263					(2)			(2)		%		(1)			—		%
Advertising revenue	Advertising revenue	404			306			1,100		758			98		32	%	342		45	%				Advertising revenue		403			383			738				696					20			5		%		42			6		%
Total Pandora revenue		538			438			1,497		1,143			100		23	%	354		31	%
Total Pandora and Off-platform revenue																							Total Pandora and Off-platform revenue		534			516			1,000				959					18			3		%		41			4		%
Total consolidated revenue	Total consolidated revenue	2,198			2,025			6,415		5,851			173		9	%	564		10	%				Total consolidated revenue		2,253			2,159			4,440				4,217					94			4		%		223			5		%
Cost of services	Cost of services																							Cost of services
Sirius XM:	Sirius XM:																							Sirius XM:
Revenue share and royalties	Revenue share and royalties	378			369			1,144		1,100			9		2	%	44		4	%				Revenue share and royalties		397			387			779				766					10			3		%		13			2		%
Programming and content	Programming and content	129			114			373		330			15		13	%	43		13	%				Programming and content		139			125			268				243					14			11		%		25			10		%
Customer service and billing	Customer service and billing	106			99			309		291			7		7	%	18		6	%				Customer service and billing		103			105			207				202					(2)			(2)		%		5			2		%
Transmission	Transmission	39			33			108		90			6		18	%	18		20	%				Transmission		36			36			77				70					—			—		%		7			10		%
Cost of equipment	Cost of equipment	4			5			12		13			(1)		(20)	%	(1)		(8)	%				Cost of equipment		3			4			6				9					(1)			(25)		%		(3)			(33)		%
Total Sirius XM cost of services	Total Sirius XM cost of services	656			620			1,946		1,824			36		6	%	122		7	%				Total Sirius XM cost of services		678			657			1,337				1,290					21			3		%		47			4		%
Pandora:
Pandora and Off-platform:																							Pandora and Off-platform:
Revenue share and royalties	Revenue share and royalties	293			233			830		659			60		26	%	171		26	%				Revenue share and royalties		314			275			602				537					39			14		%		65			12		%
Programming and content	Programming and content	12			9			34		21			3		33	%	13		62	%				Programming and content		14			11			24				22					3			27		%		2			9		%
Customer service and billing	Customer service and billing	21			20			63		68			1		5	%	(5)		(7)	%				Customer service and billing		22			23			44				42					(1)			(4)		%		2			5		%
Transmission	Transmission	15			13			47		39			2		15	%	8		21	%				Transmission		18			16			29				31					2			13		%		(2)			(6)		%
Total Pandora cost of services		341			275			974		787			66		24	%	187		24	%
Total Pandora and Off-platform cost of services																							Total Pandora and Off-platform cost of services		368			325			699				632					43			13		%		67			11		%
Total consolidated cost of services	Total consolidated cost of services	997			895			2,920		2,611			102		11	%	309		12	%				Total consolidated cost of services		1,046			982			2,036				1,922					64			7		%		114			6		%
Subscriber acquisition costs	Subscriber acquisition costs	71			110			245		257			(39)		(35)	%	(12)		(5)	%				Subscriber acquisition costs		91			89			181				175					2			2		%		6			3		%
Sales and marketing	Sales and marketing	269			222			725		664			47		21	%	61		9	%				Sales and marketing		285			240			557				456					45			19		%		101			22		%
Engineering, design and development	Engineering, design and development	68			64			197		196			4		6	%	1		1	%				Engineering, design and development		72			65			139				130					7			11		%		9			7		%
General and administrative	General and administrative	125			131			376		357			(6)		(5)	%	19		5	%				General and administrative		127			130			250				251					(3)			(2)		%		(1)			—		%
Depreciation and amortization	Depreciation and amortization	135			125			399		381			10		8	%	18		5	%				Depreciation and amortization		135			131			270				263					4			3		%		7			3		%
Impairment, restructuring and acquisition costs	Impairment, restructuring and acquisition costs	(95)			—			13		24			(95)		nm		(11)		(46)	%				Impairment, restructuring and acquisition costs		1			(136)			1				108					137			nm				(107)			nm

Total operating expenses	Total operating expenses	1,570			1,547			4,875		4,490			23		1	%	385		9	%				Total operating expenses		1,757			1,501			3,434				3,305					256			17		%		129			4		%
Income from operations	Income from operations	628			478			1,540		1,361			150		31	%	179		13	%				Income from operations		496			658			1,006				912					(162)			(25)		%		94			10		%
Other (expense) income:	Other (expense) income:																							Other (expense) income:
Interest expense	Interest expense	(111)			(96)			(313)		(297)			(15)		(16)	%	(16)		(5)	%				Interest expense		(104)			(103)			(206)				(203)					(1)			(1)		%		(3)			(1)		%
Loss on extinguishment of debt		(83)			(40)			(83)		(40)			(43)		(108)	%	(43)		(108)	%

Other (expense) income	Other (expense) income	(1)			2			8		10			(3)		(150)	%	(2)		(20)	%				Other (expense) income		(4)			5			(2)				8					(9)			nm				(10)			nm
Total other (expense) income	Total other (expense) income	(195)			(134)			(388)		(327)			(61)		(46)	%	(61)		(19)	%				Total other (expense) income		(108)			(98)			(208)				(195)					(10)			(10)		%		(13)			(7)		%
Income before income taxes	Income before income taxes	433			344			1,152		1,034			89		26	%	118		11	%				Income before income taxes		388			560			798				717					(172)			(31)		%		81			11		%
Income tax expense	Income tax expense	(90)			(72)			(157)		(226)			(18)		(25)	%	69		31	%				Income tax expense		(96)			(127)			(197)				(65)					31			24		%		(132)			nm
Net income	Net income	$	343		$	272		$	995	$	808		$	71	26	%	$	187	23	%				Net income		$	292		$	433		$	601			$	652				$	(141)		(33)		%		$	(51)		(8)		%

nm - not meaningful

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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~~June 30, ~~2021~~2022 and ~~2020,~~2021, subscriber revenue was ~~$1,532~~$1,588 and ~~$1,462,~~$1,508, respectively, an increase of 5%, or ~~$70.~~$80. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, subscriber revenue was ~~$4,521~~$3,170 and ~~$4,372,~~$2,989, respectively, an increase of 3%6%, or ~~$149.~~$181. The increases were primarily driven by ~~growth~~increases of 7% and 8% in ~~our self-pay subscriber base~~ARPU for the three and six month periods, respectively, as a result of ~~5% driving~~ higher self-pay revenue and U.S. Music Royalty Fees, partially offset by a decrease in paid promotional subscribers driving lower revenue generated from automakers offering paid promotional subscriptions.

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

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

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, advertising revenue was ~~$47~~$49 and ~~$39,~~$46, respectively, an increase of ~~21%~~7%, or ~~$8.~~$3. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, advertising revenue was ~~$135~~$97 and ~~$108,~~$87, respectively, an increase of ~~25%~~11%, or ~~$27.~~$10. The increases were due to ~~higher advertising~~a greater number of spots sold and aired primarily on sports and news ~~and sports channels as we continue to recover to pre-COVID-19 levels.~~channels.

We expect our Sirius XM advertising revenue to grow as we ~~continue to offer a broader set of channels.~~improve monetization opportunities through through our advertising sales organization, which we call SXM Media.

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

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, equipment revenue was ~~$41~~$45 and ~~$47,~~$51, respectively, a decrease of ~~13%~~12%, or $6. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, equipment revenue was ~~$149~~$98 and ~~$113,~~$108, respectively, ~~an increase~~a decrease of ~~32%~~9%, or ~~$36.~~$10. The ~~decrease for the three month period was~~decreases were primarily driven by lower OEM royalties due to supplier cost increases related to the semiconductor supply shortages, automaker plant closings during the quarter due to COVID-19, and lower sales of components and accessories. The increase for the nine month period was driven by higher royalty revenue from new vehicle production as automakers pushed to get back to pre-COVID-19 manufacturing levels during the first half of 2021 and due to our transition to a new generation of chipsets, partially offset by ~~semiconductor supply shortages in the third quarter of 2021.~~higher chipset volume.

We expect equipment revenue to ~~increase as the volume of chipsets sold and revenue per unit sold increases~~.remain relatively flat.

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

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, other revenue was ~~$40~~$37 and ~~$39,~~$38, respectively, a decrease of 3%, or $1. For the six months ended June 30, 2022 and 2021, other revenue was $75 and $74, respectively, an increase of 3%1%, or $1. ~~For the nine months ended September 30, 2021 and 2020, other revenue was $113 and $115, respectively, a~~The decrease ~~of 2% or $2.~~ ~~The increase~~ for the three month period was primarily driven by ~~higher~~lower revenue generated by our connected vehicle services, ~~and~~partially offset by higher revenue generated by Sirius XM Canada. The increase for the six month period was driven by higher revenue generated by 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 rental car arrangements.~~our connected vehicle services.

We expect other revenue to remain relatively flat.

Pandora and Off-platform Revenue

Pandora and Off-platform Subscriber Revenue includes fees charged for Pandora Plus, ~~and~~ Pandora Premium ~~subscriptions as well as~~and Stitcher ~~podcast~~ subscriptions.

For the three months ended ~~September~~June 30, 2022 and 2021, Pandora and ~~2020, Pandora~~Off-platform subscriber revenue was ~~$134~~$131 and ~~$132,~~$133, respectively, ~~an increase~~a decrease of 2%, or $2. For the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, Pandora and ~~2020, Pandora~~Off-platform subscriber revenue was ~~$397~~$262 and ~~$385,~~$263, respectively, ~~an increase~~a decrease of 3%less than 1%, or ~~$12.~~$1. The ~~increases~~decreases were primarily driven by the ~~inclusion of Stitcher and growth~~decrease in Pandora's subscriber base.

We expect Pandora and Off-platform subscriber revenues to remain relatively flat.

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~~We expect~~ Pandora ~~subscriber revenues to remain relatively flat.~~

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

For the three months ended ~~September~~June 30, 2022 and 2021, Pandora and ~~2020, Pandora~~Off-platform advertising revenue was ~~$404~~$403 and ~~$306,~~$383, respectively, an increase of ~~32%~~5%, or ~~$98.~~$20. For the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, Pandora and ~~2020, Pandora~~Off-platform advertising revenue was ~~$1,100~~$738 and ~~$758,~~$696, respectively, an increase of ~~45%~~6%, or ~~$342.~~$42. The increases were primarily due to ~~growth in Pandora owned and operated~~additional revenue ~~from higher sell-through, increases in the price of advertising sold, the inclusion of Stitcher~~generated by our AdsWizz platform as well as ~~increased~~higher podcast revenue from ~~AdsWizz.~~increased downloads.

We expect ~~our~~Pandora and Off-platform advertising revenue to increase ~~due to growth of Stitcher~~as our off-platform and ~~AdsWizz.~~podcast revenue grows.

Total Consolidated Revenue

Total Consolidated Revenue for the three months ended ~~September~~June 30, 2022 and 2021 was $2,253 and ~~2020, was $2,198 and $2,025,~~$2,159, respectively, an increase of 9%4%, or ~~$173.~~$94. Total Consolidated Revenuefor the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021 was $4,440 and ~~2020, was $6,415 and $5,851,~~$4,217, respectively, an increase of ~~10%~~5%, or ~~$564.~~$223.

Sirius XM Cost of Services

Sirius XM Cost of Services includes revenue share and royalties, programming and content, customer service and billing, ~~transmission~~ and ~~equipment~~transmission 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~~June 30, ~~2021~~2022 and ~~2020,~~2021, revenue share and royalties were ~~$378~~$397 and ~~$369,~~$387, respectively, an increase of 2%3%, or ~~$9,~~$10, but decreased as a percentage of total Sirius XM revenue. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, revenue share and royalties were ~~$1,144~~$779 and ~~$1,100,~~$766, respectively, an increase of 4%2%, or ~~$44,~~$13, 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~~June 30, ~~2021~~2022 and ~~2020,~~2021, programming and content expenses were ~~$129~~$139 and ~~$114,~~$125, respectively, an increase of ~~13%~~11%, or ~~$15,~~$14, and increased as a percentage of total Sirius XM revenue. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, programming and content expenses were ~~$373~~$268 and ~~$330,~~$243, respectively, an increase of ~~13%~~10%, or ~~$43,~~$25, and increased as a percentage of total Sirius XM revenue. The increases were driven by higher content licensing costs.

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~~June 30, ~~2021~~2022 and ~~2020,~~2021, customer service and billing expenses were ~~$106~~$103 and ~~$99,~~$105, respectively, ~~an increase~~a decrease of 7%2%, or ~~$7,~~$2, and ~~increased~~decreased as a percentage of total Sirius XM revenue. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, customer service and billing expenses were ~~$309~~$207 and ~~$291,~~$202, respectively, an increase of 6%2%, or ~~$18, and increased~~$5, but decreased as a percentage of total Sirius XM revenue. The decrease for the three month period was primarily driven by lower call center costs. The increase for the ~~three~~six month period was driven by higher transaction costs and bad debt expense ~~consulting, and personnel-related costs,~~resulting from a higher average self-pay subscriber base, partially offset by lower call 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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costs.

We expect our Sirius XM customer service and billing expenses to increase as ~~bad debt expense grows tied to higher expected non-pay rates.~~our subscriber base grows.

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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 and 360L streaming and connected vehicle services.

For each of the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, transmission expenses were ~~$39~~$36 and ~~$33, respectively, an increase of 18%, or $6, and increased~~decreased as a percentage of total Sirius XM revenue. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, transmission expenses were ~~$108~~$77 and ~~$90,~~$70, respectively, an increase of ~~20%~~10%, or ~~$18,~~$7, and increased as a percentage of total Sirius XM revenue. The ~~increases were~~increase was primarily driven by higher ~~cloud hosting and~~ wireless costs associated with consumers using our 360L platform ~~streaming content~~ and our connected vehicle services.

We expect our Sirius XM transmission expenses to increase as costs associated with consumers using our 360L platform rise 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~~June 30, ~~2021~~2022 and ~~2020,~~2021, cost of equipment was $4$3 and ~~$5,~~$4, respectively, a decrease of ~~20%~~25% or $1, and decreased as a percentage of total Sirius XM revenue. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, cost of equipment was ~~$12~~$6 and ~~$13,~~$9, respectively, a decrease of 8%33% or ~~$1,~~$3, and decreased as a percentage of total Sirius XM revenue. The decreases were driven by lower component and accessories sales.

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

Pandora and Off-platform Cost of Services

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

Pandora and Off-platform Revenue Share and Royalties includes licensing fees paid for streaming music or other content costs related to ~~our subscribers and listeners~~podcasts 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~~June 30, ~~2021~~2022 and ~~2020,~~2021, revenue share and royalties were ~~$293~~$314 and ~~$233,~~$275, respectively, an increase of ~~26%~~14%, or ~~$60,~~$39, and increased as a percentage of total Pandora and Off-platform revenue. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, revenue share and royalties were ~~$830~~$602 and ~~$659,~~$537, respectively, an increase of ~~26%~~12%, or ~~$171, but decreased~~$65, and increased as a percentage of total Pandora and Off-platform revenue. The increases were primarily due to ~~higher royalty rates and owned and operated revenue as well as higher AdsWizz revenue,~~costs related to the ~~inclusion~~acquisition of ~~Stitcher and the growth in other off-platform revenue.~~rights to certain podcasts.

We expect our Pandora and Off-platform revenue share and royalties to increase as ~~off-platform~~streaming revenue ~~grow~~increases and ~~our royalty costs to increase due to~~we incur higher ~~music royalty rates.~~podcast costs.

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

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, programming and content expenses were ~~$12~~$14 and ~~$9,~~$11, respectively, an increase of ~~33%~~27%, or $3, and increased as a percentage of total Pandora and Off-platform revenue. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, programming and content expenses were ~~$34~~$24 and ~~$21,~~$22, respectively, an increase of ~~62%~~9%, or ~~$13,~~$2, and increased as a percentage of total Pandora and Off-platform revenue. The increases were primarily attributable to higher ~~license, production and~~ personnel-related ~~costs driven by the inclusion of Stitcher.~~costs.

We expect our Pandora and Off-platform programming and content costs to increase as we offer additional programming and ~~continue to~~

produce live listener events and promotions.

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

For the three months ended June 30, 2022 and 2021, customer service and billing expenses were $22 and $23, respectively, a decrease of 4% or $1, and decreased as a percentage of total Pandora and Off-platform revenue. For the six months ended June 30, 2022 and 2021, customer service and billing expenses were $44 and $42, respectively, an

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~~For the three months ended September 30, 2021 and 2020, customer service and billing expenses were $21 and $20, respectively, an~~ increase of 5% or ~~$1, but decreased~~$2, and increased as a percentage of total Pandora and Off-platform revenue. ~~For~~The decrease for the ~~nine months ended September 30, 2021~~three month period was driven by lower bad debt and ~~2020, customer service and billing expenses were $63 and $68, respectively, a decrease of 7%, or $5, and decreased as a percentage of total Pandora revenue.~~transaction fees costs. The increase for the ~~three~~six 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 higher transaction fees.~~due to recoveries in the first half of 2021.

We expect our Pandora and Off-platform customer service and billing costs to ~~increase as our advertising revenue grows.~~remain relatively flat.

Pandora and Off-platform 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~~June 30, ~~2021~~2022 and ~~2020,~~2021, transmission expenses were ~~$15~~$18 and ~~$13,~~$16, respectively, an increase of ~~15%~~13%, or $2, ~~but~~and increased as a percentage of total Pandora and Off-platform revenue. For the six months ended June 30, 2022 and 2021, transmission expenses were $29 and $31, respectively, a decrease of 6%, or $2, and decreased as a percentage of total Pandora ~~revenue. For the nine months ended September 30, 2021~~ and ~~2020, transmission expenses were $47 and $39, respectively, an increase of 21%, or $8, but decreased as a percentage of total Pandora~~Off-platform revenue. The ~~increases were~~increase for the three month period was driven by greater data center costs. The decrease for the six month period was driven by lower streaming costs resulting from a decline in listener hours, partially offset by higher ~~streaming~~personnel-related costs.

We expect our Pandora and Off-platform transmission costs to fluctuate ~~with~~primarily as a result of 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~~June 30, ~~2021~~2022 and ~~2020,~~2021, subscriber acquisition costs were ~~$71~~$91 and ~~$110,~~$89, respectively, ~~a decrease~~an increase of ~~35%~~2%, or ~~$39, and~~$2, but decreased as a percentage of total revenue. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, subscriber acquisition costs were ~~$245~~$181 and ~~$257,~~$175, respectively, ~~a decrease~~an increase of 5%3%, or ~~$12, and~~$6, but decreased as a percentage of total revenue. The ~~decrease for the three month period was~~increases were driven by lower OEM installations as a result of factory shutdowns during the three months ended September 30, 2021 as well as the semiconductor supply shortages and lower subsidies from contract improvements with certain automakers. The decrease for the nine month period was driven by lower subsidies from contract improvements with certain automakers as well as lower 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.~~installations.

We expect subscriber acquisition costs to ~~grow as the semiconductor supply shortages abate and production returns to normal levels.~~fluctuate with OEM installations. 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.~~media, and third party promotional offers.

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, sales and marketing expenses were ~~$269~~$285 and ~~$222,~~$240, respectively, an increase of ~~21%~~19%, or ~~$47,~~$45, and increased as a percentage of total revenue. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, sales and marketing expenses were ~~$725~~$557 and ~~$664,~~$456, respectively, an increase of 9%22%, or ~~$61, but decreased~~$101, and increased as a percentage of total revenue. The increases were primarily due to ~~higher streaming~~additional investments in advertising and ~~trial-related direct~~ marketing ~~costs~~to support our brands, digital marketing expenditures as well as higher personnel-related costs.

We anticipate that sales and marketing expenses will increase with growth in our free trial subscriber base, as we expand programs to retain our existing subscribers,

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

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listeners, and as we grow advertising revenue.

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~~June 30, ~~2021~~2022 and ~~2020,~~2021, engineering, design and development expenses were ~~$68~~$72 and ~~$64,~~$65, respectively, an increase of 6%11%, or ~~$4, but decreased~~$7, and increased as a percentage of total revenue. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, engineering, design and development expenses were ~~$197~~$139 and ~~$196,~~$130, respectively, an increase of 1%7%, or ~~$1, but decreased~~$9, and increased as a percentage of total revenue. The increases were driven by higher ~~personnel-related costs partially offset by lower research and development~~cloud hosting costs.

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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~~June 30, ~~2021~~2022 and ~~2020,~~2021, general and administrative expenses were ~~$125~~$127 and ~~$131,~~$130, respectively, a decrease of 5%2%, or ~~$6,~~$3, and decreased as a percentage of total revenue. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, general and administrative expenses were ~~$376~~$250 and ~~$357,~~$251, respectively, ~~an increase~~a decrease of 5%less than 1%, or ~~$19, but~~$1, and decreased as a percentage of total revenue. The ~~decrease for the three month period was~~decreases were driven by lower personnel-related costs. The increase for the nine month period was primarily driven by higher personnel-related costs, the closure of a sales and use tax audit in 2020 which resulted in lower tax expense during the 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 ~~lower~~higher legal, data center, and ~~rent expense.~~consulting costs.

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

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~~June 30, ~~2021~~2022 and ~~2020,~~2021, depreciation and amortization expense was $135 and ~~$125,~~$131, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, depreciation and amortization expense was ~~$399~~$270 and ~~$381,~~$263, respectively. The increases were primarily driven by developed software ~~and our SXM-8 satellite~~ being placed in service.

Impairment, Restructuring and 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 abandonment of certain leased office spaces and acquisition costs.

For the three and six months ended ~~September~~June 30, 2022, impairment, restructuring and acquisition costs were $1. For the six months ended June 30, 2021, impairment, restructuring and acquisition costs were $(95). For the three months ended September 30, 2020, we did not record any impairment, restructuring and acquisition costs. For the nine months ended September 30, 2021 and 2020, impairment, restructuring and acquisition costs were $13 and $24, respectively.$108. During the three months ended ~~September~~June 30, 2022, we recorded $1 of acquisition costs. During the six month period ended June 30, 2022, we recorded $3 of acquisition costs which was partially offset by other impairment and restructuring costs of $2. During the three months ended June 30, 2021, we recorded insurance recoveries related to our SXM-7 satellite of ~~$80 as well as the reversal~~$140 which was partially offset by acquisition and restructuring costs of ~~a liability related to the Stitcher acquisition.~~$3. During the ~~nine~~six month period ended ~~September~~June 30, 2021, we also recorded $220 to write down the value of our SXM-7 satellite after it experienced failures of certain payload units during in-orbit testing, and restructuring costs 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, we recorded costs of $24 associated with the termination of the Automatic service and costs associated with the acquisition of Simplecast.space.

Other (Expense) Income

Interest Expense includes interest on outstanding debt.

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, interest expense was ~~$111~~$104 and ~~$96,~~$103, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, interest expense was ~~$313~~$206 and ~~$297,~~$203, respectively. The ~~increases were~~increase was primarily driven by a higher average outstanding debt balance ~~due to the issuance of Sirius XM's 4.00% Senior Notes due 2028, 3.125% Senior Notes due 2026, and 3.875% Senior Notes due 2031~~ as well as ~~lower capitalized interest,~~a higher average drawn balance of the Credit Facility, partially offset by lower interest rates.

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

For the three and nine months ended September 30, 2021, we recorded a $83 loss on extinguishment of debt. The loss on extinguishment of debt 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, we recorded $40 loss on extinguishment of 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.

Other (Expense) Income 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~~June 30, ~~2021~~2022 and ~~2020,~~2021, other (expense) income was ~~$(1)~~$(4) and ~~$2,~~$5, respectively. For the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, ~~and 2020,~~ other (expense) income was $8$(2) and ~~$10,~~$8, respectively. For the three months and six months ended ~~September~~June 30, ~~2021,~~2022, we recorded trading losses ~~on other~~associated with the investments ~~and~~held for our ~~share of Sirius XM Canada's net loss,~~Deferred Compensation Plan, 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~~Canada. For the ~~nine~~three and six months ended ~~September~~June 30, ~~2020,~~2021, we ~~also~~ recorded ~~a one-time lawsuit settlement~~our share of ~~$7.~~Sirius XM Canada's net income, interest earned on our loan to Sirius XM Canada, and trading gains associated with the investments held for our Deferred Compensation Plan.

Income Taxes

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

Table of Contents

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, income tax expense was ~~$90~~$96 and ~~$72,~~$127, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, income tax expense was ~~$157~~$197 and ~~$226,~~$65, respectively.

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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 ("XM Merger") and our February 2019 acquisition of Pandora ("the Pandora Acquisition").~~expense. 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 51 through 54~~Glossary 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

~~Table of Contents~~

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 51 through 54)~~Glossary 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~~June 30, ~~2021~~2022 compared to ~~September~~June 30, ~~2020.~~2021.


		As of September 30,		2021 vs 2020 Change			As of June 30,			2022 vs 2021 Change
(subscribers in thousands)	(subscribers in thousands)	2021	2020	Amount	%			(subscribers in thousands)	2022	2021	Amount	%
Sirius XM	Sirius XM							Sirius XM
Self-pay subscribers	Self-pay subscribers	31,985	30,480	1,505	5	%		Self-pay subscribers	32,037	31,368	669	2	%
Paid promotional subscribers	Paid promotional subscribers	2,280	3,955	(1,675)	(42)	%		Paid promotional subscribers	1,994	3,108	(1,114)	(36)	%
Ending subscribers	Ending subscribers	34,265	34,435	(170)	—	%		Ending subscribers	34,031	34,476	(445)	(1)	%
Traffic users		8,886	9,430	(544)	(6)	%

Sirius XM Canada subscribers	Sirius XM Canada subscribers	2,262	2,612	(350)	(13)	%		Sirius XM Canada subscribers	2,574	2,578	(4)	—	%

Pandora
Pandora and Off-platform								Pandora and Off-platform
Monthly active users - all services	Monthly active users - all services	52,618	58,583	(5,965)	(10)	%		Monthly active users - all services	50,478	55,137	(4,659)	(8)	%
Self-pay subscribers	Self-pay subscribers	6,452	6,344	108	2	%		Self-pay subscribers	6,319	6,510	(191)	(3)	%
Paid promotional subscribers	Paid promotional subscribers	71	60	11	18	%		Paid promotional subscribers	—	67	(67)	(100)	%
Ending subscribers	Ending subscribers	6,523	6,404	119	2	%		Ending subscribers	6,319	6,577	(258)	(4)	%

The following table contains our Non-GAAP financial and operating performance measures which are based on our adjusted results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.


		For the Three Months Ended September 30,								For the Nine Months Ended September 30,							2021 vs 2020 Change											For the Three Months Ended June 30,								For the Six Months Ended June 30,									2022 vs 2021 Change
																Three Months				Nine Months														Three Months											Six Months
(subscribers in thousands)	(subscribers in thousands)				2021				2020				2021			2020				Amount		%			Amount		%								(subscribers in thousands)				2022			2021				2022	2021					Amount			%		Amount	%
Sirius XM	Sirius XM																													Sirius XM
Self-pay subscribers	Self-pay subscribers	616				169				1,097			502				447			264	%	595			119	%				Self-pay subscribers	23					355			(1)			481					(332)			(94)	%	(482)			(100)	%
Paid promotional subscribers	Paid promotional subscribers	(828)				17				(1,547)			(975)				(845)			(4,971)	%	(572)			(59)	%				Paid promotional subscribers	54					(378)			—			(719)					432			114	%	719			100	%
Net additions	Net additions	(212)				186				(450)			(473)				(398)			(214)	%	23			(5)	%				Net additions	77					(23)			(1)			(238)					100			435	%	237			100	%
Weighted average number of subscribers	Weighted average number of subscribers	34,372				34,330				34,435			34,480				42			—	%	(45)			—	%				Weighted average number of subscribers	33,953					34,473			33,927			34,468					(520)			(2)	%	(541)			(2)	%
Average self-pay monthly churn	Average self-pay monthly churn	1.5		%		1.7		%		1.6		%	1.7		%		(0.2)		%	(12)	%	(0.1)		%	(6)	%				Average self-pay monthly churn	1.5		%			1.5		%	1.6		%	1.6		%			—		%	—	%	—		%	—	%
ARPU (1)	ARPU (1)	$	14.84			$	14.15			$	14.57		$	14.02			$	0.69		5	%	$	0.55		4	%				ARPU (1)	$	15.62				$	14.57		$	15.58		$	14.43				$	1.05		7	%	$	1.15		8	%
SAC, per installation	SAC, per installation	$	13.66			$	20.98			$	13.14		$	20.49			$	(7.32)		(35)	%	$	(7.35)		(36)	%				SAC, per installation	$	16.27				$	15.20		$	14.46		$	12.93				$	1.07		7	%	$	1.53		12	%

Pandora
Pandora and Off-platform																													Pandora and Off-platform
Self-pay subscribers	Self-pay subscribers	(59)				99				172			179				(158)			(160)	%	(7)			(4)	%				Self-pay subscribers	(9)					118			(5)			231					(127)			(108)	%	(236)			(102)	%
Paid promotional subscribers	Paid promotional subscribers	4				3				9			11				1			(33)	%	(2)			18	%				Paid promotional subscribers	—					3			(69)			5					(3)			(100)	%	(74)			(1,480)	%
Net additions	Net additions	(55)				102				181			190				(157)			(154)	%	(9)			5	%				Net additions	(9)					121			(74)			236					(130)			(107)	%	(310)			(131)	%
Weighted average number of subscribers	Weighted average number of subscribers	6,554				6,376				6,486			6,281				178			3	%	205			3	%				Weighted average number of subscribers	6,313					6,518			6,334			6,451					(205)			(3)	%	(117)			(2)	%
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)	2.89				3.12				8.78			9.53				(0.23)			(7)	%	(0.75)			(8)	%				Ad supported listener hours (in billions)	2.84					3.03			5.53			5.90					(0.19)			(6)	%	(0.37)			(6)	%
Advertising revenue per thousand listener hours (RPM)	Advertising revenue per thousand listener hours (RPM)	$	109.02			$	84.46			$	98.44		$	68.83			$	24.56		29	%	$	29.61		43	%				Advertising revenue per thousand listener hours (RPM)	$	99.75				$	100.35		$	94.90		$	93.26				$	(0.60)		(1)	%	$	1.64		2	%
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)		$	4.16			$	4.19			$	4.18		$	4.12			$	(0.03)		(1)	%	$	0.06		1	%

Total Company	Total Company																													Total Company
Adjusted EBITDA	Adjusted EBITDA	$	719			$	661			$	2,101		$	1,915			$	58		9	%	$	186		10	%				Adjusted EBITDA	$	679				$	700		$	1,369		$	1,381				$	(21)		(3)	%	$	(12)		(1)	%
Free cash flow	Free cash flow	$	588			$	361			$	1,349		$	1,212			$	227		63	%	$	137		11	%				Free cash flow	$	435				$	550		$	693		$	761				$	(115)		(21)	%	$	(68)		(9)	%

(1) ARPU for Sirius XM excludes subscriber revenue from our connected vehicle services of ~~$49 and $44~~$47 for each of the three months ended ~~September~~June 30, 2022 and 2021, and ~~2020, respectively,~~$95 and ~~$141 and $130~~$92 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

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Sirius XM

Subscribers. At ~~September~~June 30, ~~2021,~~2022, Sirius XM had approximately ~~34,265~~34,031 subscribers, a decrease of ~~170,~~445, from the approximately ~~34,435~~34,476 subscribers as of ~~September~~June 30, ~~2020.~~2021. The decrease was due to the ~~decrease~~decline in paid promotional subscribers generated by automakers driven by a shift to shorter paid trials and unpaid trials as well as a decrease in the seasonally adjusted annual rate of new vehicle sales, partially offset by the growth in our self-pay subscriber ~~base as a result of vehicle sales growth, lower churn rate, and higher new vehicle penetration rate.~~base.

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, net subscriber additions were ~~(212)~~77 and ~~186,~~(23), respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, net subscriber additions were ~~(450)~~(1) and ~~(473)~~(238), respectively. The decrease in self-pay net additions was driven by lower vehicle sales and lower vehicle conversion rates, partially offset by an increase in digital subscribers as well as lower vehicle related and voluntary churn. Paid promotional ~~subscribers decreased~~net additions increased due to a ~~shift to shorter paid or free trials at certain automakers, and to a lesser extent, lower vehicle shipments due to~~larger impact of the semiconductor supply ~~shortages. Self-pay net additions increased driven by higher new vehicle conversion resulting from vehicle sales growth during~~shortage in the first half of 2021 ~~and automakers~~as well as a shift to ~~shorter trial 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, 2021, Sirius XM had approximately 8,886 traffic users,free trials at a ~~decrease of 544 users, or 6%, from the approximately 9,430 traffic users as of September 30, 2020.~~certain automaker during 2021.

Sirius XM Canada Subscribers. At ~~September~~June 30, ~~2021,~~2022, Sirius XM Canada had approximately ~~2,262~~2,574 subscribers, a decrease of ~~350,~~4, or ~~13%~~less than 1%, from the approximately ~~2,612~~2,578 Sirius XM Canada subscribers as of ~~September~~June 30, ~~2020.~~2021.

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 51 through 54~~Glossary for more details.)

For each of the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, our average self-pay monthly churn rate was 1.5% ~~and 1.7%, respectively.~~. For each of the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, our average self-pay monthly churn rate was 1.6% ~~and 1.7%, respectively. The decrease for the three month period was driven by lower vehicle related churn. The decrease for the nine month period was driven by lower non-pay churn 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 51 through 54~~Glossary for more details.)

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, subscriber ARPU - Sirius XM was ~~$14.84~~$15.62 and ~~$14.15,~~$14.57, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, subscriber ARPU - Sirius XM was ~~$14.57~~$15.58 and ~~$14.02,~~$14.43, respectively. The increases were driven by ~~an increase~~increases in certain subscription rates and ~~the U.S. Music Royalty Fee and the decline in paid trials as well as higher~~ advertising revenue, ~~as we continue to recover to pre-COVID-19 levels.~~partially offset by the impact of the mix of promotional plans.

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 51 through 54~~Glossary for more details.)

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, SAC, per installation, was ~~$13.66~~$16.27 and ~~$20.98,~~$15.20, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, SAC, per installation, was ~~$13.14~~$14.46 and ~~$20.49,~~$12.93, respectively. The ~~decreases~~increases were driven by ~~reductions to~~higher OEM hardware subsidy ~~rates.~~rates combined with a change in the mix of OEMs.

Pandora and Off-platform

Monthly Active Users. At ~~September~~June 30, ~~2021,~~2022, Pandora had approximately ~~52,618~~50,478 monthly active users, a decrease of ~~5,965~~4,659 monthly active users, or ~~10%~~8%, from the ~~58,583~~55,137 monthly active users as of ~~September~~June 30, ~~2020.~~2021. The decrease in monthly active users was driven by churn and a decline in the number of new users.

Subscribers. At ~~September~~June 30, ~~2021,~~2022, Pandora had approximately ~~6,523~~6,319 subscribers, ~~an increase~~a decrease of ~~119,~~258, or 2%4%, from the approximately ~~6,404~~6,577 subscribers as of ~~September~~June 30, ~~2020.~~2021.

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, net subscriber additions were ~~(55)~~(9) and ~~102,~~121, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, net subscriber additions were ~~181~~(74) and ~~190,~~236, respectively. The decreases were driven by a decline in ~~trial starts, partially offset by lower churn.~~

~~Table of Contents~~

~~ARPU~~ ~~is defined as average monthly revenue per paid subscriber on our Pandora subscription services. (See the accompanying glossary on pages 51 through 54 for more details.)~~

For the three months ended September 30, 2021 and 2020, subscriber ARPU - Pandora was $6.70 and $6.83, respectively. For the nine months ended September 30, 2021 and 2020, subscriber ARPU - Pandora was $6.68 and $6.79, respectively. The decreases in subscriber ARPU were primarily due to a change in the mix of Pandora's premium plans.self-pay subscribers.

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~~non-music content offerings in the definition of listener hours.

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, ad supported listener hours were ~~2,890~~2,842 and ~~3,120,~~3,029, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, ad supported listener hours were ~~8,780~~5,530 and ~~9,530,~~5,895, respectively. The decreases in ad supported listener hours ~~were~~was primarily driven by the decline in monthly active ~~users, partially offset by higher hours per active user.~~users.

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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~~June 30, ~~2021~~2022 and ~~2020,~~2021, RPM was ~~$109.02~~$99.75 and ~~$84.46,~~$100.35, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, RPM was ~~$98.44~~$94.90 and ~~$68.83,~~$93.26, respectively. The ~~increases were~~decrease in the three month period was driven by slightly lower sell-through and pricing. The increase in the six month period was the result of ~~higher sell-through~~a strong first three months of 2022 driving ad product mix 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 setpartially offset by the ~~Copyright Royalty Board if we have not entered into a license agreement with the copyright owner of a particular sound recording.~~

~~For~~lower sell-through and pricing noted in the three months ended ~~September~~June 30, 2021 and 2020, LPM was $51.08 and $40.16, respectively. For the nine months ended September 30, 2021 and 2020, LPM was $46.93 and $38.11, respectively. The increases were primarily due to the provisions of certain direct licenses between Pandora and the owners of copyrights in 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, 2021 and 2020, LPU was $4.16 and $4.19, respectively. For the nine months ended September 30, 2021 and 2020, LPU was $4.18 and $4.12, respectively. The decrease for the three month period was driven by lower publisher rates. The increase for the nine month period was due to lower minimum guarantees during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2021.2022.

Total Company

Adjusted EBITDA. Adjusted EBITDA is defined as net income before interest expense, income tax expense and depreciation and 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 impairment, restructuring and acquisition costs (if applicable). (See the accompanying ~~glossary on pages 51 through 54~~Glossary for a reconciliation to GAAP and for more details.)

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, adjusted EBITDA was ~~$719~~$679 and ~~$661,~~$700, respectively, ~~an increase~~a decrease of 9%3%, or ~~$58.~~$21. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, adjusted EBITDA was ~~$2,101~~$1,369 and ~~$1,915,~~$1,381, respectively, ~~an increase~~a decrease of ~~10%~~1%, or ~~$186.~~$12. The ~~increases~~decreases were driven by higher ~~advertising~~sales and ~~subscriber~~marketing, revenue ~~as well as lower subscriber acquisition costs,~~share and royalties, and programming and content, partially offset by higher ~~revenue share~~subscriber and ~~royalties, sales and marketing, programming, and personnel-related costs.~~advertising revenue.

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 51 through 54~~Glossary for a reconciliation to GAAP and for more details.)

~~Table of Contents~~

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, free cash flow was ~~$588~~$435 and ~~$361,~~$550, respectively, ~~an increase~~a decrease of ~~$227,~~$115, or ~~63%~~21%. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, free cash flow was ~~$1,349~~$693 and ~~$1,212,~~$761, respectively, ~~an increase~~a decrease of ~~$137~~$68, or ~~11%~~9%. The ~~increases were~~decrease for the three month period was primarily driven by higher income tax payments and satellite insurance recoveries in 2021. The decrease for the six month period was primarily driven by higher income tax payments, the construction of new satellites, and ~~growth~~satellite insurance recoveries in ~~cash generated by operations,~~2021; partially offset by higher ~~spending on property and equipment and a decrease in deferred revenue driven by a shift to shorter term self-pay and trial subscriptions as well as a shift to free trials at certain automakers.~~receipts from customers.

Liquidity and Capital Resources

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

The following table presents a summary of our cash flow activity for the ~~periods set forth below:~~six months ended June 30, 2022 compared with the six months ended June 30, 2021.


		For the Nine Months Ended September 30,				2021 vs 2020			For the Six Months Ended June 30,
		2021		2020		Amount			2022		2021		2022 vs 2021
Net cash provided by operating activities	Net cash provided by operating activities	$	1,371	$	1,450	$	(79)	Net cash provided by operating activities	$	888	$	928	$	(40)
Net cash used in investing activities	Net cash used in investing activities	(50)		(344)		294		Net cash used in investing activities	(333)		(190)		(143)
Net cash used in financing activities		(1,232)		(1,182)		(50)
Net increase (decrease) in cash, cash equivalents and restricted cash		89		(76)		165
Net cash (used in) provided by financing activities								Net cash (used in) provided by financing activities	(620)		311		(931)
Net (decrease) increase in cash, cash equivalents and restricted cash								Net (decrease) increase in cash, cash equivalents and restricted cash	(65)		1,049		(1,114)
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	83		120		(37)		Cash, cash equivalents and restricted cash at beginning of period	199		83		116
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	172	$	44	$	128	Cash, cash equivalents and restricted cash at end of period	$	134	$	1,132	$	(998)

Cash Flows Provided by Operating Activities

Cash flows provided by operating activities decreased by ~~$79~~$40 to ~~$1,371~~$888 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 from ~~$1,450~~$928 for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

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

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vendors to service, maintain and acquire listeners and subscribers, general corporate expenditures, and compensation and related costs.

Cash Flows Used in Investing Activities

Cash flows used in investing activities in the ~~nine~~six months ended ~~September~~June 30, 2022 were primarily due to spending for capitalized software and hardware, to construct satellites, and acquisitions for total cash consideration of $137. Cash flows used in investing activities in the six months ended June 30, 2021 were primarily due to spending ~~primarily~~ for capitalized software and hardware and to construct a replacement satellite, partially offset by 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 acquisitionand acquisitions for total cash consideration of ~~Simplecast for $28, spending for capitalized software and hardware, and to construct replacement satellites.~~$14. We spent ~~$172~~$124 and ~~$167~~$116 on capitalized software and hardware as well as ~~$39~~$51 and ~~$36~~$25 to construct ~~replacement~~ satellites during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, 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~~long-term debt have been used to fund our operations, construct and launch new satellites, fund acquisitions, invest in other infrastructure improvements and purchase shares of our common stock.

Cash flows used in financing activities in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 were primarily due to the ~~redemptions~~payment 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,~~cash dividends of $1,159, the purchase and retirement of shares of our common stock under our repurchase program for ~~$1,174,~~$415, and payment of $39 for taxes in lieu of shares issued for share-based compensation, partially offset by net borrowings under our Credit Facility of $510 and an amendment to our Credit Facility to incorporate an Incremental Term Loan borrowing of $500 ($499 net of costs) which matures on April 11, 2024. Cash flows provided by financing activities in the six months ended June 30, 2021 were primarily due to the issuance of $2,000 in aggregate principal amount of 4.00% Senior Notes due 2028, ($1,976 net of costs); partially offset by the purchase and retirement of shares of our common stock under our repurchase program for $856, the payment of cash dividends of ~~$180,~~$121, payment of ~~$88~~$43 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, the payment of cash dividends of $175 and payment of $81 for taxes 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.$649.

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~~June 30, ~~2021, no amounts were~~2022, $510 was 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~~Facility and $1,240 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~~June 30, ~~2021,~~2022, our board of directors had authorized for repurchase an aggregate of $18,000 of our common stock. As of ~~September~~June 30, ~~2021,~~2022, our cumulative repurchases since December 2012 under our stock repurchase program totaled ~~3,504~~3,626 shares for ~~$15,576,~~$16,337, and ~~$2,424~~$1,663 remained available for additional repurchases under our existing stock repurchase program authorization.

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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 25, 2021,~~July 14, 2022, our board of directors declared a quarterly dividend in the amount of $0.0219615 per share of common stock payable on ~~November 29, 2021~~August 31, 2022 to stockholders of record as of the close of business on ~~November~~August 5, ~~2021.~~2022. Our board of directors expects to declare regular quarterly dividends, in an aggregate annual amount of $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~~June 30, ~~2021,~~2022, we were in compliance with such covenants. For a discussion of our “Debt Covenants,” refer to Note 1312 to our unaudited consolidated financial statements in 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 1615 to our unaudited consolidated financial statements in 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.

Contractual Cash Commitments

For a discussion of our “Contractual Cash Commitments,” refer to Note 1615 to our unaudited consolidated financial statements in this Quarterly Report on Form 10-Q.

Related Party Transactions

For a discussion of “Related Party Transactions,” refer to Note 1211 to our unaudited consolidated financial statements in this Quarterly Report on Form 10-Q.

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, ~~2020.~~2021.

There have been no material changes to our critical accounting policies and estimates since December 31, ~~2020.~~2021.

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 - for satellite-enabled subscriptions, 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~~the impact of other expense (income), loss on extinguishment of debt, other non-cash charges such as ~~a result of the purchase price accounting for the XM Merger and the Pandora Acquisition, (ii)~~ share-based payment expense, ~~(iii)~~legal settlements and reserves, and 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.~~(if applicable). 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. We believe

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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.

Adjusted EBITDA has certain limitations in that it does not take into account the impact to our 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.~~expense. 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,					For the Three Months Ended June 30,				For the Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Net income:	Net income:	$	343	$	272	$	995	$	808	Net income:	$	292	$	433	$	601	$	652
Add back items excluded from Adjusted EBITDA:	Add back items excluded from Adjusted EBITDA:									Add back items excluded from Adjusted EBITDA:
Legal settlements and reserves		—		—		—		(16)

Impairment, restructuring and acquisition costs	Impairment, restructuring and acquisition costs	(95)		—		13		24		Impairment, restructuring and acquisition costs	1		(136)		1		108
Share-based payment expense (1)	Share-based payment expense (1)	51		58		149		165		Share-based payment expense (1)	47		47		92		98
Depreciation and amortization	Depreciation and amortization	135		125		399		381		Depreciation and amortization	135		131		270		263

Interest expense	Interest expense	111		96		313		297		Interest expense	104		103		206		203
Loss on extinguishment of debt		83		40		83		40

Other expense (income)	Other expense (income)	1		(2)		(8)		(10)		Other expense (income)	4		(5)		2		(8)
Income tax expense	Income tax expense	90		72		157		226		Income tax expense	96		127		197		65
Purchase price accounting adjustments:
Revenues		—		2		—		6
Operating expenses		—		(2)		—		(6)

Adjusted EBITDA	Adjusted EBITDA	$	719	$	661	$	2,101	$	1,915	Adjusted EBITDA	$	679	$	700	$	1,369	$	1,381

(1)Allocation of share-based payment expense:


		For the Three Months Ended September 30,				For the Nine Months Ended September 30,					For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in millions)		2021		2020		2021		2020
											2022		2021		2022		2021
Programming and content	Programming and content	$	8	$	9	$	24	$	24	Programming and content	$	9	$	8	$	16	$	16
Customer service and billing	Customer service and billing	2		1		5		4		Customer service and billing	1		2		3		3
Transmission	Transmission	1		1		4		4		Transmission	1		2		3		3
Sales and marketing	Sales and marketing	15		17		43		50		Sales and marketing	13		13		26		28
Engineering, design and development	Engineering, design and development	9		11		26		31		Engineering, design and development	9		6		17		17
General and administrative	General and administrative	16		19		47		52		General and administrative	14		16		27		31
Total share-based payment expense	Total share-based payment expense	$	51	$	58	$	149	$	165	Total share-based payment expense	$	47	$	47	$	92	$	98

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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 June 30,				For the Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Cash Flow information	Cash Flow information									Cash Flow information
Net cash provided by operating activities	Net cash provided by operating activities	$	460	$	443	$	1,371	$	1,450	Net cash provided by operating activities	$	533	$	636	$	888	$	928
Net cash used in investing activities	Net cash used in investing activities	123		(79)		(50)		(344)		Net cash used in investing activities	(191)		(112)		(333)		(190)
Net cash used in financing activities		(1,543)		(2,101)		(1,232)		(1,182)
Net cash (used in) provided by financing activities										Net cash (used in) provided by financing activities	(292)		541		(620)		311
Free Cash Flow	Free Cash Flow									Free Cash Flow
Net cash provided by operating activities	Net cash provided by operating activities	460		443		1,371		1,450		Net cash provided by operating activities	533		636		888		928
Additions to property and equipment	Additions to property and equipment	(80)		(81)		(244)		(230)		Additions to property and equipment	(99)		(86)		(196)		(164)
Purchases of other investments		—		(1)		(3)		(8)
Satellite insurance recoveries		208		—		225		—
Sale (purchases) of other investments										Sale (purchases) of other investments	1		—		1		(3)

Free cash flow	Free cash flow	$	588	$	361	$	1,349	$	1,212	Free cash flow	$	435	$	550	$	693	$	761

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 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 June 30,				For the Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Subscriber acquisition costs, excluding connected vehicle services	Subscriber acquisition costs, excluding connected vehicle services	$	71	$	110	$	245	$	257	Subscriber acquisition costs, excluding connected vehicle services	$	91	$	89	$	181	$	175
Less: margin from sales of radios and accessories, excluding connected vehicle services	Less: margin from sales of radios and accessories, excluding connected vehicle services	(37)		(43)		(137)		(101)		Less: margin from sales of radios and accessories, excluding connected vehicle services	(42)		(47)		(92)		(100)
		$	34	$	67	$	108	$	156		$	49	$	42	$	89	$	75
Installations		2,446		3,212		8,237		7,615
Installations (in thousands)										Installations (in thousands)	2,974		2,724		6,099		5,791
SAC, per installation (a)	SAC, per installation (a)	$	13.66	$	20.98	$	13.14	$	20.49	SAC, per installation (a)	$	16.27	$	15.20	$	14.46	$	12.93

(a)Amounts may not recalculate due to rounding.

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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~~June 30, ~~2021,~~2022, 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, 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, 2021 was $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, 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”) (except for the Incremental Term Loan which carries a variable interest rate based on the Secured Overnight Financing Rate (“SOFR”) 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 settings will either cease to be provided by any administrator or no 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 by which LIBOR is determined or regulatory activity related to 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.

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~~June 30, ~~2021,~~2022, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and 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 Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2021.~~2022.

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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~~June 30, ~~2021~~2022 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 1615 to our unaudited consolidated financial statements in this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

~~The following~~There have been no material changes to the risk ~~factor supplements the Risk Factors~~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, ~~2020, which was filed with~~2021 and our Quarterly Report on Form 10-Q for the ~~Securities and Exchange Commission on February 2, 2021.~~

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

The global semiconductor supply shortage is having wide-ranging effects across multiple industries, including direct and indirect effects on our business. We have experienced, and may continue to experience, delays in 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 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 new vehicle deliveries, which in turn may affect our subscriber acquisition efforts.quarter ended March 31, 2022.

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

As of ~~September~~June 30, ~~2021,~~2022, our board of directors had approved for repurchase an aggregate of $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~~June 30, ~~2021,~~2022, our cumulative repurchases since December 2012 under our stock repurchase program totaled ~~3.5~~3.6 billion shares for ~~$15.6~~$16.3 billion, and ~~$2.4~~$1.7 billion remained available under our existing $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~~June 30, ~~2021:~~2022:

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


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)
April 1, 2022 - April 30, 2022	4,499,958	$	6.38	4,499,958	$	1,851,824,801
May 1, 2022 - May 31, 2022	14,024,234	$	6.16	14,024,234	$	1,765,418,533
June 1, 2022 - June 30, 2022	16,750,000	$	6.11	16,750,000	$	1,663,135,758
Total	35,274,192	$	6.16	35,274,192

(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.

~~Table of Contents~~

ITEM 6. EXHIBITS

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

5750

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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

Amendment No. ~~5 to Credit Agreement,~~6, dated as of ~~August 31, 2021,~~April 11, 2022, to the Credit Agreement, dated as of December 5, 2012, among Sirius XM Radio Inc., JPMorgan Chase Bank, N.A., as administrative agent, and 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 on April 11, 2022 (File No. 001-34295)).

10.2

Employment Agreement, dated ~~September 1, 2021~~June 28, 2022, between Sirius XM Radio Inc. and Joseph A. Verbrugge (incorporated by reference to Exhibit 10.1 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed on June 29, 2022 (File No. 001-34295)).

31.1

Certificate of Jennifer C. Witz, Chief Executive Officer and 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).

32.1

Certificate of Jennifer C. Witz, Chief Executive Officer and 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 (filed herewith).

101.1

The following financial information from our Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2021~~2022 formatted in Inline eXtensible Business Reporting Language (Inline XBRL): (i) Consolidated Statements of Comprehensive Income (Unaudited) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020;~~2021; (ii) Consolidated Balance Sheets as of ~~September~~June 30, ~~2021~~2022 (Unaudited) and December 31, ~~2020;~~2021; (iii) Consolidated Statements of Stockholders’ Equity (Deficit) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 (Unaudited); (iv) Consolidated Statements of Cash Flows (Unaudited) for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020;~~2021; 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~~June 30, ~~2021,~~2022, 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.

5851

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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 28th day of ~~October 2021.~~July 2022.


SIRIUS XM HOLDINGS INC.

By:						/s/ Sean S. Sullivan
						Sean S. Sullivan
						Executive Vice President and Chief Financial Officer
						(Principal Financial Officer and Authorized Officer)

5952


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Numerator:
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	2		2		6		6
Net Income available to common stockholders for dilutive net income per common share	$	345	$	274	$	1,001	$	814
Denominator:
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	30		29		30		29
Weighted average impact of dilutive equity instruments	45		60		54		69
Weighted average shares for diluted net income per common share	4,119		4,415		4,170		4,465
Net income per common share:
Basic	$	0.08	$	0.06	$	0.24	$	0.19
Diluted	$	0.08	$	0.06	$	0.24	$	0.18


	September 30, 2021		December 31, 2020

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