Liberty Media Corporation 10-Q Summary
Business context and reporting period
Liberty Media Corporation reported unaudited consolidated results for the three months ended March 31, 2021, compared with the same period in 2020. Its principal businesses and investments include Sirius XM Holdings, Formula 1, Braves Holdings and an equity-method investment in Live Nation. Liberty reports three tracking-stock groups: Liberty SiriusXM, Liberty Braves and Liberty Formula One. These groups are not separate legal entities, and holders of tracking stock remain exposed to Liberty’s company-wide liabilities and risks.
Key financial metrics
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $2,254 million | $2,013 million | +$241 million, approximately 12% |
| Operating income | $142 million | $246 million | -$104 million |
| Operating margin | Approximately 6.3% | Approximately 12.2% | Down approximately 5.9 percentage points |
| Adjusted OIBDA | $714 million | $564 million | +$150 million, approximately 27% |
| Adjusted OIBDA margin | Approximately 31.7% | Approximately 28.0% | Up approximately 3.7 percentage points |
| Net earnings attributable to Liberty stockholders | $(116) million | $(76) million | Loss increased by $40 million |
| Net cash provided by operating activities | $497 million | $557 million | Down $60 million |
Sirius XM Holdings revenue was $2,058 million, up from $1,952 million. Formula 1 revenue increased to $180 million from $39 million, primarily because one event occurred in the current quarter versus none in the prior-year quarter and because of season-based revenue recognition. Braves Holdings revenue declined to $16 million from $22 million.
Adjusted OIBDA increased to $714 million, led by Sirius XM Holdings at $682 million versus $639 million and Formula 1 at $66 million versus a $32 million loss. Braves Holdings’ Adjusted OIBDA loss improved to $22 million from $26 million.
Operating income was reduced by $245 million of impairment, restructuring and acquisition costs, including a $220 million impairment of the SXM-7 satellite and $25 million of Sirius XM lease restructuring costs. Excluding these charges, operating performance improved; however, the filing does not present a GAAP adjusted operating-income measure.
Other expense was $287 million versus $208 million. The principal unfavorable items were a $95 million share-of-loss from affiliates, including a $111 million Live Nation loss, and $49 million of net realized and unrealized losses on financial instruments. Interest expense was $158 million versus $164 million.
Balance sheet, debt and liquidity
- Cash and cash equivalents were $2,994 million at March 31, 2021, compared with $2,831 million at December 31, 2020. Cash, cash equivalents and restricted cash totaled $3,039 million.
- Total debt was $18,108 million, including $778 million classified as current; long-term debt was $17,330 million. Total debt increased from $17,429 million at year-end 2020.
- Liberty SiriusXM Group cash was approximately $1,030 million, Braves Group cash was approximately $181 million and Formula One Group cash was approximately $1,783 million.
- Available borrowing capacity included $875 million under the Sirius XM Holdings margin loan, $200 million under the Live Nation margin loan and $726 million under Sirius XM Holdings’ revolving credit facility.
- Liberty had $366 million of unencumbered marketable equity securities. Liberty does not have a debt rating.
- The company, Sirius XM Holdings, Formula 1 and Braves Holdings were in compliance with their debt covenants at March 31, 2021. Certain Formula 1 and Braves Holdings financial covenants were subject to temporary waivers and conditions.
Cash flow and capital allocation
- Operating cash flow was $497 million, compared with $557 million in Q1 2020.
- Investing cash flow was $(716) million, including a $575 million investment of Liberty Media Acquisition Corporation IPO proceeds into a trust account and $91 million of capital expenditures.
- Financing cash flow was $383 million, including $1,090 million of debt borrowings, $593 million of debt repayments, $107 million of Liberty SiriusXM stock repurchases and $522 million of subsidiary share repurchases.
- Liberty repurchased 2.47 million Liberty SiriusXM shares during the quarter for approximately $107 million. The remaining authorization shown in the filing was approximately $944 million at March 31, 2021.
- Sirius XM Holdings declared and paid $61 million of dividends, of which Liberty received $47 million. A subsequent quarterly dividend of $0.014641 per Sirius XM Holdings common share was declared on April 20, 2021.
Material changes versus the prior comparable period
- Revenue increased approximately 12%, driven by Sirius XM Holdings and Formula 1.
- Adjusted OIBDA increased approximately 27%, while GAAP operating income declined because of the $245 million impairment, restructuring and acquisition charge.
- Sirius XM Holdings’ revenue increased 5%. Pandora advertising revenue increased 29%, while Sirius XM subscriber revenue increased 2% and Sirius XM advertising revenue declined 5%.
- Sirius XM Holdings had approximately 34.5 million subscribers; Pandora had approximately 6.5 million subscribers and 55.9 million monthly active users at March 31, 2021.
- Live Nation revenue was $291 million versus $1,366 million in Q1 2020, and Liberty recorded a $111 million share of Live Nation losses in Q1 2021. Live Nation continued to be materially affected by COVID-19 restrictions.
- Formula 1 improved substantially because the 2021 calendar began with an event in the first quarter, while the comparable 2020 period had no events.
- Comprehensive loss attributable to Liberty stockholders was $161 million versus comprehensive earnings of $77 million, primarily reflecting changes in fair values and credit risk associated with financial instruments.
Guidance, outlook, management commentary and risks
The filing does not provide consolidated full-year revenue or earnings guidance. Management stated that available liquidity is believed to be sufficient for projected future uses of cash, including debt service, investments, share repurchases and subsidiary funding needs.
- Formula 1 scheduled 23 events in 2021, and the 2021 MLB regular season was expected to include approximately 160 games. Fan attendance could remain limited or prohibited, affecting revenue, cash flow and seasonality.
- COVID-19 remained a material risk to Formula 1, Braves Holdings and Live Nation through event cancellations, postponements, reduced attendance, lower sponsorship and advertising demand and potentially incomplete expense reductions.
- SXM-7 was determined to be a total loss. Sirius XM Holdings had $225 million of insurance coverage, had notified underwriters and expected to file a claim in Q2 2021, but the timing and amount of any recovery were not reliably estimable.
- The Copyright Royalty Board’s determination of statutory webcasting rates for 2021–2025 was delayed until no later than June 14, 2021. Proposed rates from Sirius XM and Pandora were below SoundExchange’s proposed rates, creating uncertainty regarding future royalty expense.
- Other risks include high leverage, dependence on subsidiary cash and dividends, restrictions on distributions from Formula 1, interest-rate exposure, the planned phaseout of LIBOR, market-value volatility in public investments, litigation, regulatory matters and competition.
- At March 31, 2021, debt included significant variable-rate borrowings: $1,898 million for the Liberty SiriusXM Group, $259 million for the Braves Group and $832 million for the Formula One Group. Formula 1 had interest-rate swaps on $2.1 billion of its $2.9 billion senior loan facility.
- Liberty’s disclosure controls and procedures were evaluated as effective as of March 31, 2021, with no reported material change in internal control over financial reporting.
Most important facts for investors to verify
- Whether the $220 million SXM-7 impairment will be substantially recovered through insurance and whether satellite replacement plans create additional capital needs.
- Actual event attendance, cancellations, sponsorship trends and cash generation for Formula 1, Braves Holdings and Live Nation as COVID-19 restrictions evolve.
- Debt maturities, covenant-waiver conditions and distribution restrictions, particularly at Formula 1 and Braves Holdings.
- The future level of music royalty rates following the Copyright Royalty Board proceeding and the effect on Pandora and Sirius XM margins.
- The sustainability of Sirius XM subscriber growth, Pandora advertising growth and subsidiary dividend payments.
- The economic effect of Liberty’s tracking-stock structure, intergroup interests, exchangeable debt, margin loans and potential dilution from warrants and convertible instruments.
- Potential recoveries, liabilities or developments associated with pending litigation, tax matters and other contingencies.