Liberty Media Corporation 2020 Q2 SEC Filing Summary
Business context and reporting period
Liberty Media Corporation filed an unaudited Form 10-Q for the quarter and six months ended June 30, 2020, comparing results with the corresponding 2019 periods. The company operates through three tracking-stock groups: Liberty SiriusXM, Liberty Braves and Liberty Formula One. Principal businesses include Sirius XM Holdings, Formula 1, the Atlanta Braves and investments in affiliates including Live Nation.
Results were materially affected by COVID-19. Formula 1 and Major League Baseball seasons were delayed, Live Nation suspended large-scale events, and Sirius XM and Pandora experienced lower advertising, vehicle production and related revenue.
Key financial metrics
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $1.909 billion | $2.805 billion | $3.922 billion | $4.817 billion |
| Operating income | $214 million | $461 million | $460 million | $661 million |
| Adjusted OIBDA | $549 million | $815 million | $1.113 billion | $1.429 billion |
| Net earnings attributable to Liberty stockholders | $(326) million | $116 million | $(402) million | $(42) million |
| Operating margin | Approximately 11.2% | Approximately 16.4% | Approximately 11.7% | Approximately 13.7% |
| Adjusted OIBDA margin | Approximately 28.8% | Approximately 29.1% | Approximately 28.4% | Approximately 29.7% |
- Q2 earnings before taxes were a loss of $308 million, compared with earnings of $262 million in Q2 2019. The six-month loss before taxes was $270 million versus earnings of $193 million.
- Q2 other expense included a $193 million loss from equity-method affiliates and a $180 million net loss on financial instruments. Six-month losses were $255 million and $179 million, respectively.
- Income tax benefits were $46 million in Q2 and $10 million for the six-month period, compared with tax expense of $70 million and $128 million in the comparable 2019 periods.
- Cash provided by operating activities was $869 million for the six months, down from $1.172 billion in 2019. Capital expenditures were $206 million, compared with $221 million.
- Cash, cash equivalents and restricted cash totaled $4.031 billion at June 30, 2020, including $3.999 billion of cash and cash equivalents.
- Total debt was $16.936 billion, including $1.874 billion classified as current and $14.980 billion classified as long-term. Total debt increased from $15.476 billion at December 31, 2019.
- Total equity was $22.088 billion, compared with $21.925 billion at year-end 2019. Total assets were $46.208 billion.
Material changes versus the prior comparable period
- Consolidated revenue declined $896 million, or approximately 32%, in Q2 and $895 million, or approximately 19%, for the six-month period.
- Formula 1 revenue fell to $24 million in Q2 from $620 million and to $63 million for the six months from $866 million. No Formula 1 events occurred during the reported periods, compared with seven events in Q2 2019 and nine in the first six months of 2019.
- Braves Holdings revenue decreased to $11 million in Q2 from $208 million and to $33 million for the six months from $230 million because the baseball season was postponed and the 2020 season was reduced to 60 games.
- Sirius XM Holdings revenue declined 5% in Q2 but increased 3% for the six months. Sirius XM subscriber revenue increased, while advertising, equipment and other revenue declined. Pandora advertising revenue decreased 31% in Q2 and 16% for the six months.
- Consolidated Adjusted OIBDA declined $266 million in Q2 and $316 million for the six months. Sirius XM Holdings provided relative stability, while Formula 1 and Braves Holdings generated significant declines.
- Liberty completed a Series C Liberty SiriusXM rights offering in June 2020, issuing approximately 29.6 million shares and receiving approximately $754 million. Proceeds repaid the intergroup loan and accrued interest.
- On April 22, 2020, Liberty reattributed its Live Nation stake, certain debt and related instruments from the Formula One Group to the Liberty SiriusXM Group, together with related intergroup interests and cash transfers.
Guidance, outlook, commentary and risks
- Management expects Formula 1 to hold 13 events in 2020, with potential for additional events, but the number and timing remain uncertain. Formula 1 resumed racing in July without fan attendance.
- Major League Baseball resumed in late July with a shortened season, and attendance remained uncertain. Revenue and performance may be further affected by cancellations, postponements, attendance restrictions and rescheduling.
- Live Nation events remained subject to substantial cancellations, postponements, refunds and restrictions. Management stated that the effects of COVID-19 on future revenue, cash flow and financial condition cannot reasonably be estimated and could be material.
- Braves Holdings was expected to be out of compliance with certain debt covenants as of June 30, 2020. The company was negotiating waivers and covenant modifications with lenders.
- Liberty, Sirius XM Holdings and Formula 1 were in compliance with their debt covenants. Formula 1 obtained an amendment deferring its net leverage covenant, subject to maintaining minimum liquidity of $200 million and other restrictions.
- Formula 1 had no distributions to Liberty as of June 30, 2020 because its restricted-payment test was not satisfied.
- Available liquidity included $600 million under the Sirius XM Holdings margin loan and $270 million under the Live Nation margin loan. Sirius XM Holdings also had $1.749 billion available under its secured revolving credit facility.
- Sirius XM issued $1.5 billion of 4.125% senior notes due 2030 and used the proceeds to redeem its 4.625% notes due 2023 and 5.375% notes due 2025 in July 2020. The redemptions are expected to produce an approximately $40 million loss on debt extinguishment in Q3 2020.
- Sirius XM acquired Simplecast for $28 million in June 2020. In July 2020, it agreed to acquire Stitcher for $265 million in cash, plus potential contingent payments of up to $60 million, subject to closing conditions.
- Key ongoing risks include COVID-19, event cancellations, reduced consumer and advertising demand, dependence on automakers, subscriber retention, music royalties, leverage and refinancing, interest-rate and equity-price volatility, regulatory matters, litigation, technology and cybersecurity risks, and the transition away from LIBOR.
Most important facts for investors to verify
- Whether Formula 1, Braves Holdings and Live Nation can resume operations at planned volumes and with meaningful attendance or sponsorship revenue.
- The status of Braves Holdings’ covenant waivers, amendments and refinancing needs.
- Actual cash availability by tracking-stock group, including restrictions on subsidiary cash and Formula 1 distributions.
- Future performance of Sirius XM and Pandora advertising, subscriber trends, vehicle installations and churn.
- The effect of debt maturities, margin loans, interest rates and LIBOR replacement on liquidity and interest expense.
- Whether the Stitcher acquisition closes and the related cash and contingent payment obligations.
- The impact of fair-value changes in exchangeable debt, bond hedges, warrants, Live Nation and other market-sensitive investments on reported earnings.
- The filing’s tracking-stock structure: holders own Liberty Media Corporation stock and do not have a direct claim on the assets or equity of the businesses attributed to a particular group.