Liberty Media Corporation — Q3 2021 Form 10-Q Summary
Business context and reporting period
Unaudited results for the three and nine months ended September 30, 2021, compared with the corresponding 2020 periods. Liberty operates primarily through Sirius XM Holdings, Formula 1 and Braves Holdings, and holds an equity-method investment in Live Nation. Liberty’s Series A, B and C tracking stocks are intended to reflect separate economic groups but are not separate legal entities; holders remain exposed to Liberty’s consolidated liabilities and risks.
Key financial metrics
| Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Revenue | $3,100 million | $2,732 million | $8,230 million | $6,654 million |
| Operating income | $702 million | $320 million | $1,466 million | $780 million |
| Adjusted OIBDA | $946 million | $667 million | $2,473 million | $1,780 million |
| Net earnings attributable to Liberty stockholders | $328 million | $(114) million | $629 million | $(516) million |
| Net cash provided by operating activities | Not provided for the quarter | Not provided for the quarter | $1,673 million | $1,056 million |
Revenue increased 13% in Q3 and 24% for the nine-month period. Operating margin was approximately 22.6% in Q3 2021 versus 11.7% in Q3 2020; nine-month operating margin was approximately 17.8% versus 11.7%. Adjusted OIBDA margin was approximately 30.5% in Q3 and 30.0% for the nine-month period, compared with 24.4% and 26.7%, respectively, in the prior-year periods.
- Sirius XM Holdings revenue was $2,198 million in Q3 and $6,415 million for nine months, up from $2,025 million and $5,851 million. Adjusted OIBDA was $720 million and $2,101 million, respectively.
- Formula 1 revenue was $668 million in Q3 and $1,349 million for nine months, compared with $597 million and $660 million. Adjusted OIBDA was $180 million and $312 million, compared with $14 million and $(34) million.
- Braves Holdings revenue was $234 million in Q3 and $466 million for nine months, compared with $110 million and $143 million. Adjusted OIBDA was $55 million and $86 million, compared with $5 million and $(49) million.
- Cash and cash equivalents were $2,858 million at September 30, 2021, compared with $2,831 million at December 31, 2020. Including restricted cash, total cash was $2,949 million.
- Total debt was $18,098 million at September 30, 2021, including $2,573 million classified as current; long-term debt was $15,525 million. Debt decreased from $17,429 million at December 31, 2020 on a carrying-value basis, while current maturities increased because certain convertible and exchangeable instruments met conversion or repurchase conditions.
- Liberty generated $1,673 million of operating cash flow, used $615 million in investing activities and used $981 million in financing activities, resulting in a $72 million increase in cash, cash equivalents and restricted cash.
- Liberty reported $393 million of unencumbered marketable equity securities and available borrowing capacity of $875 million under the Sirius XM margin loan and $200 million under the Live Nation margin loan.
Material changes versus the prior comparable period
- Results benefited from the normalization of the 2021 MLB season and increased fan attendance, a substantially fuller Formula 1 calendar, and the restart of Live Nation’s live-event operations.
- Formula 1 held 15 Events through nine months in 2021 versus 10 in the prior-year period; the full-year 2021 calendar was revised from 23 to 22 Events.
- Live Nation’s Q3 revenue increased to $2,699 million from $184 million, and its Adjusted OIBDA improved to $306 million from $(320) million. Live Nation remained an equity-method investment, so these amounts were eliminated in Liberty’s consolidated revenue and operating results.
- Consolidated share of affiliate losses improved to $9 million of income in Q3 from a $187 million loss, but remained a $134 million loss for nine months versus a $442 million loss.
- Operating improvement was partly offset by higher interest expense, higher taxes and a $72 million Q3 loss in “other, net.” A $142 million Q3 gain and $152 million nine-month gain resulted from dilution of Liberty’s Live Nation investment.
- Sirius XM redeemed $3.5 billion of senior notes and issued $4.5 billion of new senior notes during 2021, extending maturities and refinancing higher-coupon debt. It also recorded an $83 million loss on debt extinguishment.
- Sirius XM recorded a $220 million SXM-7 satellite impairment, substantially offset by $220 million of insurance recoveries; it successfully placed the SXM-8 satellite into service in September 2021.
- Liberty repurchased $398 million of its own stock during the first nine months and subsidiaries repurchased approximately $1.174 billion of subsidiary shares. During Q3, Liberty repurchased 3.34 million tracking-stock shares for approximately $143 million based on the reported monthly activity.
Guidance, outlook, risks and unusual items
- The filing does not provide formal consolidated earnings or revenue guidance. Management expected a 22-Event Formula 1 season, continued recovery in live entertainment and more normalized Braves and Formula 1 seasonality.
- Management stated that available liquidity was sufficient for projected uses of cash, including debt service, investments, share repurchases and operating requirements. Access to subsidiary cash may be restricted by minority ownership, debt covenants or Formula 1’s restricted-payment test.
- Formula 1’s net leverage covenant was waived through the quarter ending March 31, 2022, subject to conditions including minimum liquidity of $200 million and restrictions on dividends, payments and additional debt. Certain Braves Holdings covenant relief also remained subject to conditions.
- COVID-19 remained a risk to event attendance, cancellations, venue operations, sponsorship and advertising demand, and operating cash flow. The filing notes a meaningful Live Nation restart in Q3 but states that the continuing effect of the pandemic remained uncertain.
- The global semiconductor shortage affected Sirius XM’s chipset supply, automaker production and subscriber acquisition activity.
- LIBOR-based borrowings expose Liberty and subsidiaries to risks from the transition to alternative reference rates, including potentially higher borrowing costs.
- Live Nation’s market value is not reflected directly at fair value in Liberty’s balance sheet. A 10% decline in Live Nation’s share price would have reduced the value of Liberty’s interest by approximately $635 million at September 30, 2021; a 10% decline in Liberty’s marketable equity securities would have reduced value by approximately $39 million.
- Liberty formed and consolidated Liberty Media Acquisition Corporation, a SPAC, which held $575 million in IPO proceeds in a trust account at September 30, 2021. The filing does not identify a completed business combination during the period.
- Subsequent to quarter-end, Liberty entered into an exchange agreement to acquire 43.7 million Sirius XM shares in exchange for 5.35 million Series A Liberty SiriusXM shares. Following completion on November 3, 2021, Liberty owned approximately 80% of Sirius XM. Liberty also announced actions relating to the redemption or settlement of its 2.25% exchangeable debentures due 2048.
- The company reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Reconcile the tracking-stock attributed financial information with consolidated results and understand that tracking-stock holders have no direct ownership claim to the underlying subsidiaries or assets.
- Review debt maturities, conversion and repurchase conditions, margin-loan collateral requirements and covenant relief, particularly the $2.573 billion current debt balance.
- Assess the sustainability of improved results after COVID-related comparisons, including Live Nation’s recovery, Formula 1 event scheduling and Braves attendance.
- Evaluate exposure to Sirius XM subscriber trends, advertising growth, semiconductor availability, music royalties and satellite replacement spending.
- Review the valuation sensitivity of Live Nation and other public investments, as well as the potential dilution from convertible notes, warrants and tracking-stock exchanges.
- Monitor the Sirius XM ownership increase, related tax-sharing arrangements and any future corporate actions affecting the tracking-stock structure.
- Review the SXM-7 insurance recovery, satellite replacement program and the pending Pandora pre-1972 sound-recording litigation.