Liberty Media Corporation 2022 Form 10-K Summary
Business context and reporting period
Liberty Media Corporation filed its Form 10-K for the fiscal year ended December 31, 2022, filed March 1, 2023. Liberty owns interests in media and entertainment businesses through three tracking-stock groups: Liberty SiriusXM, Liberty Braves and Liberty Formula One. Principal holdings include approximately 82% of Sirius XM Holdings, wholly owned Formula 1 and Braves Holdings, and an approximately 31% equity interest in Live Nation accounted for under the equity method.
The tracking-stock groups are not separate legal entities. Holders own common stock of Liberty as a whole, do not directly own the underlying businesses or assets, and remain exposed to liabilities and risks across all groups.
Key financial metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $12.164 billion | $11.400 billion | +6.7% |
| Operating income | $2.064 billion | $1.977 billion | +4.4% |
| Net earnings | $2.029 billion | $744 million | +$1.285 billion |
| Net earnings attributable to Liberty stockholders | $1.815 billion | $398 million | +$1.417 billion |
| Adjusted OIBDA | $3.419 billion | $3.325 billion | +2.8% |
| Net cash from operating activities | $2.546 billion | $2.437 billion | +4.5% |
| Capital expenditures | $735 million | $440 million | +$295 million |
| Cash and cash equivalents | $2.246 billion | $2.814 billion | -$568 million |
| Total debt principal | $16.617 billion | $18.590 billion | -$1.973 billion |
Consolidated operating margin was approximately 17.0%, Adjusted OIBDA margin was approximately 28.1%, net margin was approximately 16.7%, and operating cash flow margin was approximately 20.9%. Adjusted OIBDA is a non-GAAP measure and excludes depreciation and amortization, stock-based compensation, litigation settlements, restructuring, acquisition and impairment charges.
- Liberty SiriusXM Group: Revenue was $9.003 billion, up from $8.696 billion. Adjusted OIBDA was $2.807 billion, compared with $2.755 billion. Sirius XM Holdings revenue was $9.003 billion, with approximately 34.3 million Sirius XM subscribers and 6.2 million Pandora subscribers at year-end.
- Formula One Group: Revenue was $2.573 billion, up from $2.136 billion. Adjusted OIBDA was $551 million, compared with $466 million. Formula 1 held 22 events in 2022, with attendance and hospitality levels above pre-COVID-19 levels; the Russian Grand Prix was cancelled.
- Braves Group: Revenue was $588 million, up from $568 million, but Adjusted OIBDA declined to $61 million from $104 million and operating income declined to a loss of $15 million from income of $31 million. The Braves played a full 162-game regular season, but had fewer postseason home games than in 2021.
- Live Nation: Liberty recognized $72 million of equity-method earnings from Live Nation, versus a $235 million loss in 2021. Live Nation reported 2022 revenue of $16.681 billion and net earnings attributable to its stockholders of $296 million.
Cash flow, debt and liquidity
Operating cash flow increased to $2.546 billion from $2.437 billion. Investing activities used $46 million, including $735 million of capital expenditures, while financing activities used $3.148 billion. The company’s cash balance declined primarily because of debt repayments, stock repurchases and investment in land for the Las Vegas Grand Prix.
Liberty reported $2.246 billion of consolidated cash and cash equivalents at year-end: $362 million attributed to the Liberty SiriusXM Group, $151 million to the Braves Group and $1.733 billion to the Formula One Group. Access to subsidiary cash is restricted by noncontrolling interests, debt covenants and operating requirements. Liberty stated that it had $875 million of available capacity under its Sirius XM Holdings margin loan and $400 million under its Live Nation margin loan.
Total debt principal was $16.617 billion, including approximately $4.1 billion of corporate-level debt and subsidiary debt at Sirius XM Holdings, Braves Holdings and Formula 1. Current debt was $1.679 billion. Consolidated material cash requirements totaled $25.704 billion, including $16.617 billion of debt principal, $4.637 billion of estimated interest, $1.873 billion of programming and royalty commitments, $868 million of employment agreements, $677 million of lease obligations and $1.032 billion of other obligations.
During 2022, Liberty repaid approximately $2.0 billion of debt, repurchased $358 million of Liberty SiriusXM stock and $37 million of Liberty Formula One stock, purchased Las Vegas land for $241 million, issued $475 million of 2.25% convertible notes due 2027 and borrowed $350 million under margin loans. The company, Sirius XM Holdings, Formula 1 and Braves Holdings were in compliance with debt covenants at December 31, 2022.
Material changes versus the prior comparable period
- Revenue growth was led by Formula 1, which benefited from higher race-promotion fees, new sponsors, broadcasting agreements, F1 TV growth and expanded hospitality and freight activity.
- Sirius XM Holdings delivered modest revenue and Adjusted OIBDA growth. Subscriber revenue increased, while Pandora subscriber revenue declined and Pandora’s monthly active user base continued to contract.
- Braves Group revenue increased only modestly, while profitability declined because of higher player salaries, game-day and facility costs, MLB revenue-sharing costs and fewer postseason home games.
- Live Nation returned to profitability as live entertainment activity normalized after the pandemic-related disruption in 2020 and 2021.
- Net earnings benefited materially from a $599 million net gain on financial instruments in 2022, compared with a $451 million loss in 2021, and from the improvement in Live Nation’s equity-method results. These items make reported net earnings less representative of recurring operating performance.
- Liberty Media Acquisition Corporation was unwound and dissolved in December 2022 after failing to identify a business combination before its contractual deadline.
- Liberty authorized the proposed Split-Off of the Braves Group into Atlanta Braves Holdings, Inc., followed by a Reclassification intended to create a new Liberty Live tracking-stock group. Completion was expected in the first half of 2023, subject to stockholder, MLB, IRS and other conditions.
Guidance, outlook, commentary, risks and unusual items
The filing does not provide a consolidated numerical revenue, earnings or cash-flow guidance range. Management expects to fund projected uses with cash on hand, operating cash flow, Sirius XM dividends, margin-loan capacity and debt financing, and states that available liquidity is sufficient for projected needs.
- Formula 1’s strategy emphasizes expanding the event calendar, increasing sponsorship and media monetization, growing digital and direct-to-consumer offerings, and expanding into new markets.
- Sirius XM Holdings faces competition from AM/FM radio, Spotify, Apple, Amazon, Google, YouTube and other streaming platforms; automotive production and semiconductor supply constraints may affect subscriber acquisition.
- Music royalties, podcast commitments, advertising demand, subscriber churn, declining Pandora monthly active users and technology investment may pressure Sirius XM margins and cash flow.
- Formula 1 remains exposed to event cancellations, geopolitical events, foreign exchange, counterparties, competition-law enforcement, contract renewals and the continued participation of its teams.
- Braves Holdings faces risks from on-field performance, player injuries and contracts, MLB rules and labor disputes, regional sports broadcasting counterparties, stadium and mixed-use development costs, and real-estate leasing conditions.
- COVID-19 effects were substantially reduced in 2022, but future pandemics, cancelled events, venue closures or reduced attendance could materially affect revenue and cash flow.
- Unusual 2022 items included Sirius XM Holdings restructuring and impairment charges, including $43 million related to terminated software projects; approximately $6 million of hurricane-related impairment at Braves Holdings; and significant fair-value gains on debt and other financial instruments.
- The company carries $29.307 billion of goodwill and indefinite-lived intangible assets, including $15.209 billion of goodwill and $8.600 billion of FCC licenses. The 2022 impairment testing indicated that Pandora-related goodwill and trademark fair values exceeded carrying values, but these valuations are sensitive to revenue growth, discount rates and long-term growth assumptions.
Most important facts for investors to verify
- Whether the Braves Split-Off and subsequent Liberty Live Reclassification were completed on the proposed terms and timeline, and the resulting ownership, tax and debt allocation.
- The maturity and refinancing requirements for 2023 debt, including the $790 million of 1.375% cash convertible notes, the remaining 1% cash convertible notes and the 2.125% exchangeable debentures subject to holder redemption or purchase rights.
- Actual access to cash held by Sirius XM Holdings and Formula 1 after subsidiary covenants, noncontrolling interests and restricted-payment tests.
- Sirius XM subscriber trends, churn, average revenue per subscriber, Pandora monthly active users and advertising monetization.
- Formula 1 event additions, media-rights renewals, sponsorship growth and the effect of team payments and higher interest expense on cash generation.
- Braves regional broadcasting exposure, including potential disruption or credit losses involving Diamond Sports Group and its affiliates.
- Sensitivity of goodwill, FCC-license and Pandora valuations to weaker operating performance or higher discount rates.
- Pending litigation and tax matters, including the Pandora pre-1972 sound-recording litigation; management states that expected losses are not material, but the ultimate outcomes remain uncertain.