What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-02-01 compared with 2021-02-02 · 398 added, 453 removed, 1442 unchanged (37% of the section changed)

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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 December 31, 2021 at the reasonable assurance level.

We acquired Pandora in February 2019.

Except for the changes in internal controls at Pandora, 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 Exchange Act) during the year ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our 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 Exchange Act) during the year ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management's Report on Internal Control over Financial Reporting

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OTHER INFORMATION

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.

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 December 31, 2020, Liberty Media beneficially owned, directly and indirectly, approximately 76% 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.

A copy of the tax sharing agreement has been filed as Exhibit 10.44 to this Annual Report on Form 10-K for the year ended December 31, 2020.

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.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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PRINCIPAL ACCOUNTANT FEES AND SERVICES

Our independent registered public accounting firm is KPMG LLP , New York, NY , Auditor ID:

The information required by this Item 14 is incorporated in this report by reference to the applicable information in our definitive proxy statement for the 2022 annual meeting of stockholders set forth under the caption Item 2.

Ratification of Independent Registered Public Accountants - Principal Accountant Fees and Services , which we expect to file with the Securities and Exchange Commission prior to April 30, 2022.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

Documents filed as part of this report:

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4.1 Form of certificate for shares of Sirius XM Holdings Inc.’s common stock (incorporated by reference to Exhibit 4.1 to Sirius XM Holdings Inc.'s Annual Report on Form 10-K for the year ended December 31, 2013 (File No.

4.2 Indenture, dated as of May 23, 2016, among Sirius XM Radio Inc., the guarantors named therein and U.S.

Bank National Association, as a trustee, relating to the 5.375% Senior Notes due 2026 (incorporated by reference to Exhibit 4.1 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed on May 24, 2016 (File No.

4.2 Indenture, dated as of July 5, 2017, among Sirius XM Radio Inc., the guarantors named therein and U.S.

Bank National Association, as trustee, relating to the 5.000% Senior Notes due 2027 (incorporated by reference to Exhibit 4.2 to Sirius XM Holdings Inc.'s Current Report on Form 8-K filed on July 5, 2017 (File No.

4.4 Indenture, dated as of July 5, 2017, among Sirius XM Radio Inc., the guarantors named therein and U.S.

4.5 Indenture, dated as of July 2, 2019, among Sirius XM Radio Inc., the guarantors named therein and U.S.

Bank National Association, as trustee, relating to the 4.625% Senior Notes due 2024 (incorporated by reference to Exhibit 4.1 to Sirius XM Holdings Inc.'s Current Report on Form 8-K filed on July 2, 2019 (File No.

4.3 Indenture, dated as of June 7, 2019, among Sirius XM Radio Inc., the guarantors named therein and U.S.

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Bank National Association, as trustee, including the form of 4.125% Senior Notes due 2030 (incorporated by reference to Exhibit 4.1 to Sirius XM Holdings Inc.’s Current Report on Form 8-K dated June 11, 2020 (File No.

4.7 Indenture, dated as of June 21, 2021, relating to the 4.000% Senior Notes due 2028, among Sirius XM Radio Inc., the guarantors named therein and U.S.

Bank National Association, as trustee, including the form of 4.000% Senior Notes due 2028 (incorporated by reference to Exhibit 4.1 to Sirius XM Holdings Inc.’s Current Report on Form 8-K dated June 21, 2021 (File No.

4.8 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.

4.9 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 3.875% Senior Notes due 2031 (incorporated by reference to Exhibit 4.2 to Sirius XM Holdings Inc.’s Current Report on Form 8-K dated August 16, 2021 (File No.

4.10 Investment Agreement, dated as of February 17, 2009, between Sirius XM Radio Inc.

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and Liberty Radio LLC, dated as of November 15, 2013 (incorporated by reference to Exhibit 4.15 to Sirius XM Holdings Inc.'s Annual Report on Form 10-K for the year ended December 31, 2013 (File No.

4.12 Description of Registrant's Securities (incorporated by reference to Exhibit 4.15 to Sirius XM Holdings Inc.'s Annual Report on Form 10-K for the year ended December 31, 2019 (File No.

Exhibit Description

4.12 Description of Registrant's Securities (incorporated by reference to Exhibit 4.15 to Sirius XM Holdings Inc.'s Annual Report on Form 10-K for the year ended December 31, 2019 (File No.

10.1 Credit Agreement, dated as of December 5, 2012, among Sirius XM Radio Inc., JPMorgan Chase Bank, N.A.

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3, dated as of June 29, 2018, 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 July 3, 2018 (File No.

10.5 Amendment No.

5, dated as of August 31, 2021, 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 September 1, 2021 (File No.

**10.6 Technology Licensing Agreement among XM Satellite Radio Inc., XM Satellite Radio Holdings Inc., WorldSpace Management Corporation and American Mobile Satellite Corporation, dated as of January 1, 1998, amended by Amendment No.

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2009 Long-Term Stock Incentive Plan (incorporated by reference to Exhibit 10.35 to Sirius XM Radio Inc.’s Annual Report on Form 10-K for the year ended December 31, 2011 (File No.

Exhibit Description

*10.17 Form of Non-Qualified Stock Option Agreement pursuant to the Sirius XM Holdings Inc.

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2015 Long-Term Stock Incentive Plan (incorporated by reference to Exhibit 10.22 to Sirius XM Holdings Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015 (File No.

Exhibit Description

*10.19 Form of Non-Qualified Stock Option Agreement pursuant to the Sirius XM Holdings Inc.

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and Jennifer Witz (incorporated by reference to Exhibit 10.1 to Sirius XM Holdings Inc.'s Current Report on Form 8-K filed on September 15, 2020 (File No.

Exhibit Description

*10.35 Letter Agreement, dated September 14, 2020, regarding private use of aircraft between Sirius XM Radio Inc.

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Witz (incorporated by reference to Exhibit 10.2 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed September 15, 2020 (File No.

*10.36 First Amendment, dated February 16, 2021, to the Employment Agreement, dated as of September 14, 2020, between Sirius XM Radio Inc.

and Jennifer C.

Witz (incorporated by reference to Exhibit 10.1 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed February 17, 2021 (File No.

*10.37 Employment Agreement, dated as of September 14, 2020, between Sirius XM Radio Inc.

Sullivan (incorporated by reference to Exhibit 10.3 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed September 15, 2020 (File No.

Exhibit Description

*10.38 First Amendment, dated February 16, 2021, to the Employment Agreement, dated as of September 14, 2020, between Sirius XM Radio Inc.

Sullivan (incorporated by reference to Exhibit 10.2 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed F ebruary 17, 2021 (File No.

*10.39 Employment Agreement, dated as of December 27, 2020 between Sirius XM Radio Inc.

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*10.40 Agreement and Release, dated as of September 21, 2020 between Sirius XM Radio Inc.

Frear (filed herewith).

Frear (incorporated by reference to Exhibit 10.37 to Sirius XM Holdings Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020 (File No.

*10.41 Consulting Agreement, dated as of January 1, 2021 between Sirius XM Radio Inc.

and James E Meyer (filed herewith).

and James E Meyer (incorporated by reference to Exhibit 10.38 to Sirius XM Holdings Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020 (File No.

*10.42 Letter Agreement, dated March 5, 2019, between Sirius XM Radio Inc.

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Verbrugge (incorporated by reference to Exhibit 10.3 to Sirius XM Holdings Inc.'s Current Report on Form 8-K filed on March 6, 2019 (File No.

*10.44 Employment Agreement, dated as of May 5, 2021, between Sirius XM Radio Inc.

Altman (incorporated by reference to Exhibit 10.1 to Sirius XM Holdings Inc.'s Current Report on Form 8-K filed on May 7 , 2021 (File No.

*10.45 Employment Agreement, dated December 10, 2021, between Sirius XM Radio Inc.

and Joseph Inzerillo (incorporated by reference to Exhibit 10.

1 to Sirius XM Holdings Inc.'s Current Report on Form 8-K filed on December 13 , 20 21 (File No.

*10.46 Assignment and Assumption Agreement, dated as of November 15, 2013, among Sirius XM Holdings Inc.

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10.49 Tax Sharing Agreement, dated as of February 1, 2021 between Sirius XM Holdings Inc.

and Liberty Media Corporation (filed herewith).

and Liberty Media Corporation ( incorporated by reference to Exhibit 10.44 to Sirius XM Holdings Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020 filed on February 2, 2021 (File No.

001-34295 )) .

10.50 Section 253 Agreement, dated as of November 1, 2021, between Sirius XM Holdings Inc.

and Liberty Media Corporation (incorporated by reference to Exhibit 10.2 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed on November 4, 2021 (File No.

21.1 List of Subsidiaries (filed herewith).

23.1 Consent of KPMG LLP (filed herewith).

Exhibit Description

31.1 Certificate of Jennifer C.

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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 and may not describe the actual state of affairs for any other purpose as of the date they were made or at any other time.

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 2nd day of February 2021.

SIRIUS XM HOLDINGS INC.

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(Principal Accounting Officer) February 1, 2022

/s/ D AVID A.

Director February 1, 2022

/s/ R OBIN S.

H ICKENLOOPER

Director February 1, 2022

Hickenlooper)

/s/ J AMES P.

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Director February 1, 2022

/s/ J AMES F.

Director February 2, 2021

/s/ J ONELLE P ROCOPE

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 1, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standard Update (ASU) 2016-02 and all related amendments, which established Accounting Standard Codification (ASC) Topic 842, Leases .

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sufficiency of audit evidence over certain subscriber and advertising revenues

As discussed in Notes 2 and 19 to the consolidated financial statements, and disclosed in the consolidated statements of comprehensive income, the Company generated $8.0 billion of revenues, of which $5.9 billion was Sirius XM subscriber revenue and $1.2 billion was Pandora (Pandora Media, LLC and subsidiaries, the successor to Pandora Media, Inc.

As discussed in Notes 2 and 18 to the consolidated financial statements, and disclosed in the consolidated statements of comprehensive income, the Company generated $8,696 million of revenues, of which $6,084 million was Sirius XM subscriber revenue and $1,542 million was Pandora (Pandora Media, LLC and subsidiaries, the successor to Pandora Media, Inc.

and subsidiaries) advertising revenue, for the year ended December 31, 2021.

The Company’s accounting for these subscriber and advertising revenues involve multiple information technology (IT) systems.

We identified the evaluation of the sufficiency of audit evidence related to these subscriber and advertising revenues as a critical audit matter.

Evaluating the sufficiency of audit evidence required our subjective judgment regarding, among other things, the nature and extent of the evidence relating to each revenue stream, due principally to the number of IT applications utilized in the revenue recognition process to capture and aggregate the data.

The Company’s accounting for these subscriber and advertising revenues involved multiple information technology (IT) systems.

We identified the evaluation of the sufficiency of audit evidence related to Sirius XM subscriber revenue and Pandora advertising revenue as a critical audit matter.

Evaluating the sufficiency of audit evidence obtained required auditor judgment due to the number of IT applications used by the Company that involved IT professionals with specialized skills and knowledge.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter.

This included controls related to the Company’s subscriber and advertising revenue recognition processes.

We involved IT professionals with specialized skills and knowledge, who assisted in testing relevant IT applications and controls used by the Company in its revenue recognition processes and testing the interface of relevant revenue data between different IT systems used in the revenue recognition processes.

We applied auditor judgment to determine the nature and extent of procedures to be performed over subscriber and advertising revenues.

For each revenue stream within Sirius XM subscriber revenues where procedures were performed, we developed an estimate of subscriber revenues.

These estimates were based on a combination of internal data and publicly available external data and the estimates were compared to the Company’s recorded amounts.

In addition, we evaluated the relevance and reliability of the internal and external data used to develop those estimates.

On a sample basis, we tested Pandora advertising revenues by tracing the recorded amounts to underlying source documents and system reports.

We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed.

Fair value of the Pandora tradename and goodwill in the Pandora reporting unit

As discussed in Note 9 to the consolidated financial statements, the Company’s goodwill balance associated with the Pandora reporting unit was $832 million as of December 31, 2020.

Additionally, as discussed in Note 10 to the consolidated financial statements, the Pandora tradename balance was $311 million as of December 31, 2020.

The Company performs goodwill and indefinite-lived assets impairment testing as of the fourth quarter of each fiscal year, and whenever events and changes in circumstances indicate that the carrying value of a tradename more likely than not exceeds its fair value or the carrying value of a reporting unit more likely than not exceeds its fair value.

The Company identified events that indicated that it was more likely than not that the carrying value of the Pandora reporting unit and the Pandora tradename exceeded their fair values.

The Company estimated the fair value of the Pandora reporting unit using a combination of a discounted cash flow model and a market approach, and the Pandora tradename using a discounted cash flow model.

As a result, the Company recognized an impairment charge of $956 million for the Pandora reporting unit goodwill and an impairment charge of $20 million for the Pandora tradename.

We identified the evaluation of the Company’s fair value assessment of the Pandora tradename and goodwill in the Pandora reporting unit as a critical audit matter.

There was a high degree of subjective auditor judgment in applying and evaluating the results of our audit procedures over the discounted cash flow model used to calculate the fair value of the goodwill in the Pandora reporting unit and the Pandora tradename.

Specifically, the revenue growth rates, long-term growth rate, and the discount rates (the key assumptions), which were used by the Company to estimate the fair value of the reporting unit involved a higher degree of subjectivity.

In addition, these key assumptions used in the fair value assessment were challenging to test due to the sensitivity of the fair value to changes in these assumptions.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company's goodwill and tradename impairment process.

This included controls over the selection of the revenue growth rates, long-term growth rate, and the discount rates used to estimate the fair value of the Pandora reporting unit and the Pandora tradename.

We performed sensitivity analyses to assess the impact of possible changes to the revenue growth rates, long-term growth rate, and discount rate assumptions on the fair value of the Pandora reporting unit and the Pandora tradename.

We compared the Company’s forecasted revenue growth rate assumptions to the Pandora reporting unit’s historical revenue growth rates, to projected revenue growth rates for comparable companies, and to other publicly available data, including third party market studies.

We compared the Company’s historical revenue forecasts to actual results to assess the Company’s ability to accurately forecast.

We evaluated the relevance and reliability of the internal and external data used to develop those assumptions.

We involved valuation professionals with specialized skills and knowledge who assisted in :

• evaluating the Company's discount rates by comparing them to discount rate ranges that were developed using publicly available market data for comparable entities;

• developing an estimated range of fair value of the Pandora reporting unit using the reporting unit's cash flow projections, estimated discount rate range, and comparing the result to the Company’s fair value estimate;

• developing an estimated range of fair value of the Pandora trademark using the Company’s cash flow projections and an estimated discount rate range and comparing the result to the Company’s fair value estimate.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Sirius XM subscriber and Pandora advertising revenue recognition processes.

We involved IT professionals with specialized skills and knowledge, who assisted in testing certain IT application controls and general IT controls used by the Company in its revenue recognition processes and testing the interface of relevant revenue data between different IT systems used in the revenue

recognition processes.

For Sirius XM subscriber revenue, we assessed the recorded revenue by comparing the total cash received during the year, adjusted for reconciling items, to the revenue recorded in the general ledger.

For a sample of Pandora advertising revenues, we traced the recorded amounts to underlying source documents and system reports.

We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the appropriateness of the nature and extent of such evidence.

We have served as the Company’s auditor since 2008.

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Depreciation and amortization 533 506 468

Acquisition and restructuring costs 28 84 3

Impairment charges 976 — —

Impairment, restructuring and acquisition costs 20 1,004 84

Total operating expenses 6,681 7,182 6,147

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Receivables, net 722 672

Inventory, net 10 11

Related party current assets 21 20

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Common Stock Accumulated

Comprehensive Income (Loss) Additional

Comprehensive Income Additional

Capital Treasury Stock Accumulated

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Balance at January 1, 2019 4,346 $ 4 $ ( 6 ) $ 242 — $ — $ ( 2,057 ) $ ( 1,817 )

Cumulative effect of change in accounting principles — — 4 30 — — 10 44

Comprehensive income, net of tax — — 14 — — — 914 928

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— — — ( 226 ) — — — ( 226 )

Issuance of common stock as part of Pandora Acquisition 392 1 — 2,354 — — — 2,355

Equity component of convertible note — — — 62 — — — 62

Common stock repurchased — — — — 364 ( 2,159 ) — ( 2,159 )

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— — — ( 170 ) — — ( 67 ) ( 237 )

Issuance of common stock as part of Pandora Acquisition 392 1 — 2,354 — — — 2,355

Equity component of convertible note — — — 62 — — — 62

Common stock repurchased — — — — 267 ( 1,574 ) — ( 1,574 )

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— — — ( 126 ) — — ( 142 ) ( 268 )

Issuance of restricted stock units in connection with business acquisition — — — 4 — — — 4

Common stock repurchased — — — — 245 ( 1,512 ) — ( 1,512 )

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Depreciation and amortization 533 506 468

Impairment charges 976 — —

Non cash impairment and restructuring costs 24 1,000 —

Non-cash interest expense, net of amortization of premium 21 20 17

Change in fair value of contingent consideration ( 17 ) — —

Provision for doubtful accounts 53 60 53

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Loss on unconsolidated entity investments, net 18 16 21

Gain on fair value instrument — — ( 43 )

Dividend received from unconsolidated entity investment 2 2 2

Loss on restructuring 24 — —

(Gain) loss on other investments ( 3 ) ( 3 ) 1

Gain on other investments ( 5 ) ( 3 ) ( 3 )

Share-based payment expense 202 223 250

Deferred income taxes 238 259 257

Deferred income tax expense 131 238 259

Amortization of right-of-use assets 50 56 56

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Receivables ( 108 ) ( 36 ) ( 137 )

Inventory ( 2 ) 11 ( 2 )

Related party, net 7 — ( 10 )

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Additions to property and equipment ( 388 ) ( 350 ) ( 363 )

Proceeds from insurance recoveries 225 — —

Purchases of other investments ( 4 ) ( 8 ) ( 7 )

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Taxes paid from net share settlements for stock-based compensation ( 103 ) ( 114 ) ( 150 )

Revolving credit facility, net of deferred financing costs 649 ( 439 ) 136

Revolving credit facility, net ( 653 ) 649 ( 439 )

Proceeds from long-term borrowings, net of costs 4,442 1,481 2,715

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Payment of premiums on redemption of debt ( 62 ) ( 31 ) ( 45 )

Payment of contingent consideration for business acquisition ( 22 ) — —

Common stock repurchased and retired ( 1,523 ) ( 1,555 ) ( 2,159 )

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Net cash used in financing activities ( 1,682 ) ( 1,314 ) ( 1,959 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 37 ) 55 ( 14 )

Net increase (decrease) in cash, cash equivalents and restricted cash 116 ( 37 ) 55

Cash, cash equivalents and restricted cash at beginning of period (1)

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Fair value of shares issued related to acquisition of a business $ — $ — $ 2,355

Accumulated other comprehensive income (loss), net of tax $ 7 $ 14 $ ( 29 )

Accumulated other comprehensive income, net of tax $ — $ 7 $ 14

(1) The following table reconciles cash, cash equivalents and restricted cash per the statement of cash flows to the balance sheet.

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and its subsidiaries.

“Pandora” refers to Sirius XM's wholly owned subsidiary Pandora Media, LLC (the successor to Pandora Media, 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.

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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 premier content bundles include live, curated and certain exclusive and on demand programming.

Sirius XM bundles 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.

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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, direct sales of our satellite radios and accessories, and other ancillary services.

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 December 31, 2021, our Sirius XM business had approximately 34.0 million subscribers.

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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 services business.

Automatic operated a service for consumers and auto dealers and offered an install-it-yourself adapter and mobile application, which transformed vehicles into connected vehicles.

During the year ended December 31, 2020, we recorded $ 24 of restructuring expenses in our consolidated statements of comprehensive income related to this termination of the service.

We did no t record any restructuring expenses during the years ended December 31, 2019 and 2018.

Refer to Note 5 for more information.

Sirius XM also holds a 70 % equity interest and 33 % voting interest in Sirius XM Canada Holdings Inc.

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As of December 31, 2021, Pandora had approximately 6.4 million subscribers.

The majority of revenue from our Pandora business is generated from advertising on our Pandora ad-supported radio service.

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.

SIRIUS XM HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

Our Pandora business also sells advertising on audio platforms and in podcasts unaffiliated with us.

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We also have arrangements to serve as the ad sales representative for certain podcasts.

In addition, through AdsWizz Inc., Pandora provides 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 October 16, 2020, Sirius XM acquired certain assets and liabilities of Stitcher from The E.W.

Scripps Company and certain of its subsidiaries for a total consideration of $ 296 , which included $ 272 in cash and $ 30 related to contingent consideration, partially offset by working capital adjustments of $ 6 .

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.

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.

In addition, through

SIRIUS XM HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

AdsWizz Inc., Pandora provides 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 the world’s largest open audio platform, with a connected community of creators, listeners, and curators.

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 music culture.

SoundCloud’s platform enables its users to upload, promote, share and create audio entertainment.

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Refer to Note 12 for more information on this investment.

Impact of the coronavirus (“COVID-19”) pandemic

The precise extent to which the COVID-19 pandemic will impact our operational and financial performance will depend on various factors.

To date, the pandemic has not increased our costs of or access to capital under our revolving credit facility and in the debt markets, and we do not believe it is reasonably likely to in the future.

In addition, we do not believe that the pandemic will affect our ongoing ability to meet the covenants in our debt instruments, including under our revolving credit facility.

Due to the nature of our subscription business, the effect of the COVID-19 pandemic will not be fully reflected in certain of our results of operations until future periods.

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 a solution for management, hosting, analytics and advertising sales.

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.

During the year ended December 31, 2021, Stitcher did not achieve certain financial metrics, as a result of which we do not expect to pay to Scripps the 2021 portion of the contingent consideration associated with the transaction.

During the year ended December 31, 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

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As a result, we are a “controlled company” for the purposes of the NASDAQ corporate governance requirements.

Refer to Note 12 for more information regarding related parties.

Basis of Presentation

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Certain numbers in our prior period consolidated financial statements and footnotes have been reclassified or consolidated to conform to our current period presentation.

Music Royalty Fee revenue was reported as Other revenue in our December 31, 2018 Annual Report on Form 10-K.

This revenue was reclassified to Subscriber revenue to conform with the current period presentation.

SIRIUS XM HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

For the Year Ended December 31, 2018

As Reported Reclassification Current Report

Subscriber revenue $ 4,594 $ 670 $ 5,264

Advertising revenue 188 — 188

Equipment revenue 155 — 155

Other revenue 834 ( 670 ) 164

Total revenue $ 5,771 $ — $ 5,771

Public companies are required to disclose certain information about their reportable operating segments.

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Significant estimates inherent in the preparation of the accompanying consolidated financial statements include asset impairment, depreciable lives of our satellites, share-based payment expense and income taxes.

We are not presently aware of any events or circumstances arising from the COVID-19 pandemic that would require us to update our estimates, judgments or revise the carrying value of our assets or liabilities.

Our estimates may change, however, as new events occur and additional information is obtained.

Any such changes will be recognized in the consolidated financial statements.

Actual results could differ from estimates, and any such differences may be material to our financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

(2) Summary of Significant Accounting Policies

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Income Taxes 17 F- 39

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

Cash and Cash Equivalents

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The related costs we incur for the right to broadcast music and other programming are recorded as Revenue share and royalties expense.

Fees received from subscribers for the MRF are recorded as deferred revenue and amortized to Subscriber revenue ratably over the service period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

received from subscribers for the MRF are recorded as deferred revenue and amortized to Subscriber revenue ratably over the service period.

We recognize revenue from the sale of advertising as performance obligations are satisfied, which generally occurs as ads are delivered.

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Changes in the deferred revenue balance during the year ended December 31, 2021 were not materially impacted by other factors.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

As the majority of our contracts are one year or less, we have utilized the optional exemption under ASC 606-10-50-14 and do not disclose information about the remaining performance obligations for contracts which have original expected durations of one year or less.

As of December 31, 2020, less than ten percent of our total deferred revenue balance related to contracts that extend beyond one year.

As of December 31, 2021, less than seven percent of our total deferred revenue balance related to contracts that extend beyond one year.

These contracts primarily include prepaid data trials which are typically provided for three to five years as well as for self-pay customers who prepay for their audio subscriptions for up to three years in advance.

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Revenue share on non-music channels and podcasts is recognized in Revenue share and royalties in our consolidated statements of comprehensive income when it is earned.

In some cases we prepay minimum guarantees for revenue share to podcast talent which is recorded in Prepaid and other current assets in our consolidated statements of financial position.

In some cases, we pay minimum guarantees for revenue share to podcast talent which is recorded in Prepaid and other current assets in our consolidated balance sheets.

The minimum guarantee is recognized in Revenue share and royalties primarily on a straight line basis over the contractual term.

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We pay performance royalties for our Sirius XM and Pandora businesses to holders and rights administrators of musical compositions copyrights, including performing rights organizations and other copyright owners.

These performance royalties are based on agreements with performing rights organizations which represent the holders of these performance rights.

These performance royalties

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

are based on agreements with performing rights organizations which represent the holders of these performance rights.

Our Sirius XM and Pandora businesses have arrangements with these performance rights organizations.

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These mechanical royalties are calculated as the greater of a percentage of our revenue or a percentage of our payments to record labels.

For our interactive music services offered by our Pandora business, we pay mechanical royalties to copyright holders at the rates determined by the Copyright Royalty Board (the “CRB”) in accordance with the statutory license set forth in Section 115 of the United States Copyright Act.

Sound Recording Copyrights

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satellite digital audio radio subscribers, and advertising revenue from channels other than those channels that make only incidental performances of sound recordings.

SIRIUS XM HOLDINGS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

paid to us for intellectual property, sales and use taxes, bad debt expense and generally revenue attributable to areas of our business that do not involve the use of copyrighted sound recordings.

The rates and terms permit us to reduce the payment due each month for those sound recording directly licensed from copyright owners and exclude from our revenue certain other items, such as royalties paid to us for intellectual property, sales and use taxes, bad debt expense and generally revenue attributable to areas of our business that do not involve the use of copyrighted sound recordings.

For our Pandora business, we have entered into direct license agreements with major and independent music labels and distributors for a significant majority of the sound recordings that stream on the Pandora ad-supported service, Pandora Plus and Pandora Premium.

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and provisions for inventory allowance attributable to inventory consumed in our automotive and retail distribution channels.

Subscriber acquisition costs do not include advertising costs, loyalty payments to distributors and dealers of radios and revenue share payments to automakers and retailers of radios.

SIRIUS XM HOLDINGS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

acquisition costs do not include advertising costs, loyalty payments to distributors and dealers of radios and revenue share payments to automakers and retailers of radios.

Subsidies paid to radio manufacturers and automakers are expensed upon installation, shipment, receipt of product or activation and are included in Subscriber acquisition costs because we are responsible for providing the service to the customers.

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These costs are reported as a component of Engineering, design and development expense in our consolidated statements of comprehensive income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

Accumulated Other Comprehensive Income (Loss), net of tax

Accumulated other comprehensive income of $ 15 was primarily comprised of the cumulative foreign currency translation adjustments related to Sirius XM Canada (refer to Note 12 for additional information).

During the year ended December 31, 2020, we recorded a foreign currency translation adjustment gain of $ 7 , which is recorded net of tax expense of $ 2 .

During the years ended December 31, 2019 and 2018, we recorded foreign currency translation adjustment gain (loss) of $ 14 and $( 29 ), respectively, net of tax.

Recently Adopted Accounting Policies

ASU 2016-02, Leases (Topic 842).

In February 2016, FASB issued ASU 2016-02 which requires companies to recognize lease assets and liabilities arising from operating leases in the statement of financial position.

This ASU does not significantly change the previous lease guidance for how a lessee should recognize, measure, and present expenses and cash flows arising from a lease.

Additionally, the criteria for classifying a finance lease versus an operating lease are substantially the same as the previous guidance.

This ASU was effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption was permitted.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements , amending certain aspects of the new leasing standard.

The amendment allows an additional optional transition method whereby an entity records a cumulative effect adjustment to opening retained earnings in the year of adoption without restating prior periods.

We adopted this ASU on January 1, 2019 and elected the additional transition method per ASU 2018-11.

Our leases consist of repeater leases, facility leases and equipment leases.

We elected the package of practical expedients permitted under the transition guidance within the new standard.

Adoption of the new standard resulted in the recording of additional lease assets and lease liabilities of approximately $ 347 and $ 369 , respectively, as of January 1, 2019.

The standard did not impact our consolidated statements of comprehensive income, consolidated statements of cash flows or debt.

Additionally, we did not record a cumulative effect adjustment to opening retained earnings.

The effect of the changes made to our consolidated balance sheet as of January 1, 2019 for the adoption of ASU 2016-02 is included in the table below.

Balance at December 31, 2018 Adjustments Due to ASU 2016-02 Balance at January 1, 2019

Balance Sheet

Operating lease right-of-use assets $ — $ 347 $ 347

Accounts payable and accrued expenses $ 736 $ ( 1 ) $ 735

Operating lease current liabilities — 30 30

Operating lease liabilities — 339 339

Other long-term liabilities 102 ( 21 ) 81

During the year ended December 31, 2021, we recorded a net foreign currency translation adjustment of less than $1.

During the years ended December 31, 2020 and 2019, we recorded a foreign currency translation adjustment gain of $ 7 and $ 14 , respectively, net of tax.

(3) Acquisitions

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 $ 272 in cash, which amount includes net working capital adjustments.

The agreement provides that Sirius XM will potentially make up to $ 60 in additional contingent payments to Scripps based on Stitcher achieving certain financial metrics in 2020 and 2021.

The total purchase consideration of $ 296 includes $ 30 related to the acquisition date fair value of the contingent consideration, partially offset by working capital adjustments of $ 6 .

Other acquisitions

On April 23, 2021, we completed a small 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 .

On October 16, 2020, Sirius XM acquired certain assets and liabilities of Stitcher from Scripps for $ 266 in cash, which amount included net working capital adjustments of $ 5 during the year ended December 31, 2021.

The total purchase consideration of $ 302 included $ 36 related to the acquisition date fair value of the contingent consideration.

During the year ended December 31, 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 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.

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Total consideration $ 302

The Stitcher acquisition was accounted for using the acquisition method of accounting.

We recognized acquisition related costs of $ 4 that were expensed in Acquisition and restructuring costs in our consolidated statements of comprehensive income during the year ended December 31, 2020.

The acquisition of Stitcher was financed through borrowings under our Credit Facility.

The Stitcher acquisition was accounted for using the acquisition method of accounting and was financed through borrowings under Sirius XM's Credit Facility.

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 a simple solution for management, hosting, analytics and advertising sales, and is included in the Pandora reporting unit.

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 .

Acquisition related costs of less than $ 1 were expensed in Acquisition and restructuring costs in our consolidated statements of comprehensive income during the year ended December 31, 2020.

On February 1, 2019, through a series of transactions, Pandora Media, Inc., became an indirect wholly owned subsidiary of Sirius XM and continues to operate as Pandora Media, LLC (the “Pandora Acquisition”).

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Those limitations are not expected to impact our ability to fully utilize those NOL's within the carryforward period.

We recognized acquisition related costs of $ 84 that were expensed in Acquisition and restructuring costs in our consolidated statements of comprehensive income during the year ended December 31, 2019.

We recognized acquisition related costs of $ 84 related to the Pandora Acquisition during the year ended December 31, 2019.

Pro Forma Financial Information

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December 31, 2021 December 31, 2020

Level 1 Level 2 Level 3 Total Fair

Value Level 1 Level 2 Level 3 Total Fair

Level 1 Level 2 Level 3 Total Fair Value Level 1 Level 2 Level 3 Total Fair Value

— $ 9,052 — $ 9,052 — $ 9,011 — $ 9,011

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(5) Restructuring Costs

During the year ended December 31, 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 consolidated statement of comprehensive income for the years ended December 31, 2021.

In May 2020, we terminated the Automatic service, which was part of our connected services business.

During the year ended December 31, 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 consolidated statements of comprehensive income.

During the year ended December 31, 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 Impairment, restructuring and acquisition costs in our consolidated statements of comprehensive income.

The termination of the Automatic service does not meet the requirements to be reported as a discontinued operation in our 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.

There were no restructuring costs during the years ended December 31, 2019 and 2018.

We did no t record any restructuring expenses during the year ended December 31, 2019.

(6) Earnings per Share

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Common stock equivalents of $ 93 , $ 62 and $ 66 for the years ended December 31, 2021, 2020 and 2019, respectively, were excluded from the calculation of diluted net income per common share as the effect would have been anti-dilutive.

We issued 392 shares of our common stock in connection with the Pandora Acquisition.

For the Years Ended December 31,

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Weighted average shares for diluted net income per common share 4,143 4,429 4,616

4,429 4,616 4,561

Net income per common share:

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Diluted $ 0.32 $ 0.03 $ 0.20

SIRIUS XM HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

(7) Receivables, net

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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, advertising customers, including advertising agencies and other customers, and is stated at amounts due, net of an allowance for doubtful accounts.

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.

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Bad debt expense is included in Customer service and billing expense in our consolidated statements of comprehensive income.

SIRIUS XM HOLDINGS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

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.

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Total receivables, net $ 722 $ 672

(8) Inventory, net

Inventory consists of finished goods, refurbished goods, chipsets and other raw material components used in manufacturing radios.

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 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 consolidated statements of comprehensive income.

Inventory, net, consists of the following:

December 31, 2020 December 31, 2019

Raw materials $ — $ 3

Finished goods 13 13

Allowance for obsolescence ( 3 ) ( 5 )

Total inventory, net $ 10 $ 11

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.

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Our Sirius XM reporting unit, which has an allocated goodwill balance of $ 2,290 , had a negative carrying amount as of December 31, 2021.

We determined the fair value of our reporting units using a combination of an income approach, employing a discounted cash flow model, and a market approach.

The discounted cash flow model relies on making assumptions, such as the extent of the economic downturn related to the COVID-19 pandemic, the expected timing of recovery, expected growth in profitability and discount rate, which we believe are appropriate.

Additionally, assumptions related to guideline company financial multiples used in the market approach decreased based on current market observations.

As of December 31, 2021, there were no indicators of impairment, and no impairment losses were recorded for goodwill during the year ended December 31, 2021.

During the year ended December 31, 2020, we performed a quantitative goodwill assessment and determined the fair value of our reporting units using a combination of an income approach, employing a discounted cash flow model, and a market approach.

The discounted cash flow model relied on making assumptions, such as the extent of the economic downturn related to the COVID-19 pandemic, the expected timing of recovery, expected growth in profitability and discount rate, which we believed were appropriate.

Additionally, assumptions related to guideline company financial multiples used in the market approach decreased based on market observations.

The results of our 2020 goodwill impairment test indicated that the estimated fair value of the Sirius XM reporting unit exceeded its carrying amount.

The carrying amount of the Pandora reporting unit exceeded its estimated fair value primarily due to a reduction in the long-term forecast to reflect

The carrying amount of the Pandora reporting unit exceeded its estimated fair value primarily due to a reduction in the long-term forecast to reflect increased costs related to royalty rates for streaming and increased uncertainty surrounding the projected demand for advertising and decrease of listening hours.

As a result, we recorded a goodwill impairment charge of $ 956 during the year ended December 31, 2020 to write down the carrying amount of the Pandora goodwill in the Impairment, restructuring and acquisitions line item in our

SIRIUS XM HOLDINGS INC.

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

increased costs related to royalty rates for streaming and increased uncertainty surrounding the projected demand for advertising and decrease of listening hours.

As a result, we recorded a goodwill impairment charge of $ 956 during the year ended December 31, 2020 to write down the carrying amount of the Pandora goodwill in the Impairment charges line item in our consolidated statements of comprehensive income.

No impairment losses were recorded for goodwill during the years ended December 31, 2019 and 2018.

consolidated statements of comprehensive income.

No impairment losses were recorded for goodwill during the year ended December 31, 2019.

As of December 31, 2021, 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 reporting unit.

As a result of the Simplecast and Stitcher acquisitions, we recorded additional goodwill of $ 17 and $ 218 , respectively, during the year ended December 31, 2020 in our Pandora reporting unit.

The goodwill of Simplecast is not deductible for tax purposes, however, the goodwill of Stitcher is deductible as it was an asset acquisition.

Refer to Note 3 for information on these acquisitions.

As of December 31, 2021, the carrying amount of goodwill for our Sirius XM and Pandora reporting units was $ 2,290 and $ 861 , respectively.

During the year ended December 31, 2021, we recorded $ 6 of goodwill related to purchase accounting adjustments for the acquisition of Stitcher and $ 23 of goodwill related to a small acquisition which was recorded to our Pandora reporting unit.

Refer to Note 3 for information regarding these acquisitions.

Refer to the table below for our goodwill activity for the years ended December 31, 2021 and 2020:

Sirius XM Pandora Total

Balance at December 31, 2018 $ 2,290 $ — $ 2,290

Balance at January 1, 2020 $ 2,290 $ 1,553 $ 3,843

Acquisition — 235 235

Impairment charge — ( 956 ) ( 956 )

Balance at December 31, 2020 2,290 832 3,122

Acquisition — 29 29

Impairment charge — ( 956 ) ( 956 )

Balance at December 31, 2021 $ 2,290 $ 861 $ 3,151

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Useful Lives Gross

Value Accumulated Amortization Net Carrying

Value Accumulated Amortization Net

Indefinite life intangible assets:

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Total intangible assets $ 3,755 $ ( 569 ) $ 3,186 $ 3,755 $ ( 415 ) $ 3,340

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.

SIRIUS XM HOLDINGS INC.

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

Indefinite Life Intangible Assets

We hold FCC licenses to operate our satellite digital audio radio service and provide ancillary services.

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If the carrying value of the intangible assets exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

We completed a quantitative assessment of our FCC licenses and XM and Pandora trademarks during the fourth quarter of 2020 and qualitative assessments during the fourth quarter of 2019 and 2018.

We completed our qualitative assessments of our FCC licenses and XM and Pandora trademarks during the fourth quarter of 2021.

As of the date of our annual assessment, our qualitative impairment assessment of the fair value of our indefinite intangible assets indicated that the fair value of such assets exceeded their carrying value and therefore were not at risk of impairment.

We completed a quantitative assessment of our FCC licenses and XM and Pandora trademarks during the fourth quarter of 2020 and qualitative assessments during the fourth quarter of 2019.

As of the date of our annual assessment for 2020, our impairment assessment of the fair value of our indefinite intangible assets indicated that the carrying value of our Pandora trademark exceeded the fair value of the asset by $ 20 .

The excess carrying value has been written off and recognized in the Impairment charges line item in our consolidated statements of comprehensive income.

The excess carrying value was written off and recognized in the Impairment, restructuring and acquisition costs line item in our consolidated statements of comprehensive income.

The impairment assessment for our FCC licenses and XM trademark indicate that the fair value of such assets substantially exceeded their carrying value and therefore were not at risk of impairment.

As of the date of our annual assessment for 2019 and 2018, our impairment assessment of the fair value of our indefinite intangible assets indicated that the fair value of such assets substantially exceeded their carrying value and therefore were not at risk of impairment.

During the year ended December 31, 2020, we also 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 for intangible assets with indefinite lives during the years ended December 31, 2019 and 2018.

No impairment loss was recognized for intangible assets with indefinite lives during the year ended December 31, 2019.

Definite Life Intangible Assets

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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 year ended December 31, 2020.

As part of the Simplecast acquisition, $ 12 was allocated to identifiable intangible assets subject to amortization and related to the assessed fair value of software and technology, which was determined by using the multi-period excess earnings method, as of the acquisition date.

As part of the Stitcher acquisition, $ 38 was allocated to identifiable intangible assets subject to amortization and related to the assessed fair value of advertising relationship of $ 6 , trademark of $ 3 and talent and content contracts of $ 29 .

There were no retirements of definite lived intangible assets during the year ended December 31, 2021.

SIRIUS XM HOLDINGS INC.

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If the carrying amount of an asset exceeds the estimated future cash flows, an impairment charge is recognized in an amount by which the carrying amount exceeds the fair value of the asset.

During the year ended December 31, 2021, we recorded an impairment charge of $ 220 related to our SXM-7 satellite which was offset by insurance recoveries.

Refer to the discussion below for more information.

We did no t record any impairments during the years ended December 31, 2020 and 2019.

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Total property and equipment 4,210 4,074

Accumulated depreciation and amortization ( 2,445 ) ( 2,171 )

Accumulated depreciation ( 2,760 ) ( 2,445 )

Property and equipment, net $ 1,450 $ 1,629

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Depreciation and amortization expense on property and equipment was $ 379 , $ 354 , and $ 327 for the years ended December 31, 2021, 2020 and 2019, respectively.

We retired property and equipment of $ 65 during the year ended December 31, 2021.

Property and equipment of $ 94 , which included a loss of $ 13 related to the termination of the Automatic service, was retired during the year ended December 31, 2020.

We retired property and equipment of $ 9 and $ 35 during the years ended December 31, 2019 and 2018.

We retired property and equipment of $ 9 during the year ended December 31, 2019.

We capitalize a portion of the interest on funds borrowed to finance the construction and launch of our satellites.

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Capitalized share-based compensation costs were $ 13 , $ 17 and $ 13 for the years ended December 31, 2021, 2020 and 2019, respectively.

We did no t capitalize any share-based compensation for the year ended December 31, 2018.

SIRIUS XM HOLDINGS INC.

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

As of December 31, 2020, we operate a fleet of five satellites.

As of December 31, 2021, we operated a fleet of six 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.

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XM-5 2010 2025 2026

We have entered into agreements for the design construction and launch of two satellites, SXM-7 and SXM-8.

On December 13, 2020, SXM-7 was successfully launched.

In-orbit testing of SXM-7 began on January 4, 2021.

During in-orbit testing of SXM-7, events occurred which have caused failures of certain SXM-7 payload units.

An evaluation of SXM-7 is underway.

The full extent of the damage to SXM-7 is not yet known.

As of December 31, 2020, we had $ 220 capitalized in construction in progress related to SXM-7.

SXM-8 2021 2036 2029

On December 13, 2020, our SXM-7 satellite was launched 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 considered to be a triggering event prompting the assessment as to whether the asset's carrying value of $ 220 was recoverable.

In determining recoverability of SXM-7, 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 was not recoverable and an impairment charge of $ 220 was recorded to Impairment, restructuring and acquisition costs in our consolidated statements of comprehensive income for the year ended December 31, 2021.

SXM-7 remains in-orbit at its assigned orbital location, but is not being used to provide satellite radio service.

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 was $ 225 .

During the year ended December 31, 2021, we collected $ 225 of insurance recoveries.

Of this amount, $ 220 has been recorded as a reduction to Impairment, restructuring and acquisition costs during the year ended December 31, 2021.

The remaining $ 5 has been recorded in Other income during the year ended 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 SXM-8 satellite replaced the XM-3 satellite, which remains available as an in-orbit spare along with XM-5.

We have operating and finance leases for offices, terrestrial repeaters, data centers and certain equipment.

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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.

During the year ended December 31, 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 5 for additional information.

SIRIUS XM HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

The components of lease expense were as follows:

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Operating leases $ 3 $ 7

SIRIUS XM HOLDINGS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

Supplemental balance sheet information related to leases was as follows:

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Operating leases 8 years 9 years

Finance leases 1 year 2 years

Finance leases 0 years 1 year

SIRIUS XM HOLDINGS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

December 31, 2021 December 31, 2020

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Year ending December 31,

2020 (remaining) $ 71 $ —

2022 $ 69 $ —

Thereafter 187 —

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Total $ 411 $ —

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

(12) Related Party Transactions

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As of December 31, 2021, Liberty Media beneficially owned, directly and indirectly, approximately 81 % of the outstanding shares of our common stock.

Liberty Media has one executive, one senior advisor and one of its directors on our board of directors.

Liberty Media has three of its executives and one of its directors on our board of directors.

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.

As of December 31, 2021, Liberty Media beneficially owned, directly and indirectly, approximately 81 % of the outstanding shares of our common stock resulting in Holdings and Liberty Media becoming members of the same consolidated tax group.

The tax sharing agreement governs 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.

Sirius XM Canada

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During the years ended December 31, 2021, 2020 and 2019, Sirius XM Canada repaid $ 2 , $ 11 and less than $ 1 of the principal amount of the loan, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

Sirius XM has a Services Agreement and an Advisory Services Agreement with Sirius XM Canada.

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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 consolidated statements of comprehensive income of $ 97 , $ 98 and $ 97 during the years ended December 31, 2020, 2019 and 2018.

We recorded revenue from Sirius XM Canada as Other revenue in our consolidated statements of comprehensive income of $ 101 , $ 97 and $ 98 for the years ended December 31, 2021, 2020 and 2019, respectively.

In February 2020, Sirius XM completed a $ 75 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 one ordinary membership unit for each Series G Unit.

The investment in SoundCloud is accounted for as an equity method investment which is recorded in Related party long-term assets in our consolidated balance sheet.

The investment in SoundCloud is accounted for as an equity method investment which is recorded in Related party long-term assets in our consolidated balance sheets.

Sirius XM has appointed two individuals to serve on SoundCloud's nine -member board of managers.

For the year ended December 31, 2020, Sirius XM's share of SoundCloud's net loss was $ 1 , which was recorded in Other income (expense) in our consolidated statement of comprehensive income.

Sirius XM's share of SoundCloud's net loss was $ 2 and $ 1 for the years ended December 31, 2021 and 2020, respectively, which was recorded in Other (expense) income in our consolidated 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.

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We recorded revenue share expense of $ 60 , $ 55 and $ 40 for the years ended December 31, 2021, 2020 and 2019, respectively.

We also had related party liabilities of $ 24 as of December 31, 2020 related to this agreement.

We also had related party liabilities of $ 24 as of each of December 31, 2021 and 2020, related to this agreement.

SIRIUS XM HOLDINGS INC.

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Our debt as of December 31, 2021 and December 31, 2020 consisted of the following:

Carrying value (a) at

Issuer / Borrower Issued Debt Maturity Date Interest Payable Principal Amount at December 31, 2020 December 31, 2020 December 31, 2019

(b) (c) (h) December 2015 1.75 % Convertible Senior Notes

December 1, 2020 semi-annually on June 1 and December 1 $ — $ — $ 1

(d) July 2017 3.875 % Senior Notes

Principal Amount at Carrying value (a) at

Issuer / Borrower Issued Debt Maturity Date Interest

Payable December 31,

2021 December 31, 2021 December 31, 2020

(b) (f) July 2017 3.875 % Senior Notes

August 1, 2022 semi-annually on February 1 and August 1 $ — $ — $ 997

(d) (g) May 2013 4.625 % Senior Notes

May 15, 2023 semi-annually on May 15 and November 15 — — 498

(b) (e) June 2018

1.75 % Convertible Senior Notes

December 1, 2023 semi-annually on June 1 and December 1 193 177 170

(d) July 2019 4.625 % Senior Notes

(b) (f) July 2019 4.625 % Senior Notes

July 15, 2024 semi-annually on January 15 and July 15 — — 1,488

(d) (g) March 2015 5.375 % Senior Notes

April 15, 2025 semi-annually on April 15 and October 15 — — 993

(d) May 2016 5.375 % Senior Notes

(b) (f) May 2016 5.375 % Senior Notes

July 15, 2026 semi-annually on January 15 and July 15 — — 993

(d) July 2017 5.00 % Senior Notes

(b) (g) August 2021 3.125 % Senior Notes

September 1, 2026 semi-annually on March 1 and September 1 1,000 990 —

(b) July 2017 5.00 % Senior Notes

August 1, 2027 semi-annually on February 1 and August 1 1,500 1,491 1,490

(d) June 2019 5.500 % Senior Notes

(b) (g) June 2021 4.00 % Senior Notes

July 15, 2028 semi-annually on January 15 and July 15 2,000 1,979 —

(d) June 2020 4.125 % Senior Notes

(b) June 2019 5.500 % Senior Notes

July 1, 2029 semi-annually on January 1 and July 1 1,250 1,239 1,237

(f) December 2012 Senior Secured Revolving Credit Facility (the "Credit Facility") June 29, 2023 variable fee paid quarterly 649 649 —

(b) June 2020 4.125 % Senior Notes

July 1, 2030 semi-annually on January 1 and July 1 1,500 1,485 1,484

(b) (g) August 2021 3.875 % Senior Notes

September 1, 2031 semi-annually on March 1 and September 1 1,500 1,484 —

(e) December 2012 Senior Secured Revolving Credit Facility (the "Credit Facility") August 31, 2026 variable fee paid quarterly — — 649

Sirius XM Various Finance leases Various n/a n/a — 1

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

(b) Holdings has unconditionally guaranteed all of the payment obligations of Pandora under these notes.

(c) We acquired $ 152 in principal amount of the 1.75 % Convertible Senior Notes due 2020 as part of the Pandora Acquisition.

On February 14, 2019, Pandora announced a tender offer to repurchase for cash any and all of its outstanding 1.75 % Convertible Senior Notes due 2020 at a price equal to 100 % of the aggregate principal amount thereof plus accrued and unpaid interest thereon to, but not including, the repurchase date.

On March 18, 2019, we purchased $ 151 in aggregate principal amount of the 1.75 % Convertible Senior Notes due 2020 that had been validly tendered and not validly withdrawn in the repurchase offer.

We recorded a $ 1 Loss on extinguishment of debt in connection with this transaction.

In addition, we unwound a capped call security acquired as part of the Pandora Acquisition in March 2019 for $ 3 .

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

(e) We acquired $ 193 in principal amount of the 1.75 % Convertible Senior Notes due 2023 as part of the Pandora Acquisition.

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

We allocate the principal amount of the 1.75 % Convertible Senior Notes due 2023 between the liability and equity components.

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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

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 to interest expense using the effective interest method through the December 1, 2023 maturity date.

The 1.75 % Convertible Senior Notes due 2023 were not convertible into common stock and not redeemable as of December 31, 2021.

As a result, we have classified the debt as Long-term within our 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,

SIRIUS XM HOLDINGS INC.

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

over the carrying amount of the liability component is recorded as a debt discount and is being amortized to interest expense using the effective interest method through the December 1, 2023 maturity date.

The 1.75 % Convertible Senior Notes due 2023 were not convertible into common stock and not redeemable as of December 31, 2020.

As a result, we have classified the debt as Long-term within our consolidated balance sheets.

(f) The $ 1,750 Credit Facility expires in June 2023.

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.

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.

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Additionally, the amount available for future borrowing under the Credit Facility is reduced by letters of credit issued for the benefit of Pandora, which were $ 1 as of December 31, 2021.

(g) On July 9, 2020, Sirius XM redeemed $ 500 in outstanding principal amount of the 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 in outstanding principal amount of the 5.375 % Senior Notes due 2025 for an aggregate purchase price, including premium and interest, of $ 1,039 .

Sirius XM used the proceeds from the 4.125 % Senior Notes due 2030 for both redemptions.

During the year ended December 31, 2020, we recognized $ 40 to Loss on extinguishment of debt, consisting primarily of unamortized discount, deferred financing fees and redemption premium, as a result of these redemptions.

(h) On December 1, 2020, the 1.75 % Convertible Senior Notes due 2020 were paid at their stated maturity.

(f) On August 2, 2021, Sirius XM redeemed $ 1,000 in outstanding principal amount of the 3.875 % Senior Notes due 2022 for an aggregate redemption 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 redemption 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 redemption price, including premium and interest, of $ 1,034 .

During the years ended December 31, 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.

(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.

On June 21, 2021, Sirius XM issued $ 2,000 aggregate principal amount of the 4.00 % Senior Notes due 2028 with a net original issuance discount and deferred financing costs in the aggregate of $ 26 .

On July 9, 2020, Sirius XM redeemed $ 500 of its then outstanding 4.625 % Senior Notes due 2023 for an aggregate redemption 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 redemption price, including premium and interest, of $ 1,039 .

During the year ended December 31, 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.

On July 18, 2019, Sirius XM redeemed $ 1,500 in outstanding principal amount of the 6.00 % Senior Notes due 2024 for an aggregate redemption price, including premium and interest, of $ 1,546 .

During the year ended December 31, 2019, we recognized $ 57 to Loss on extinguishment of debt, consisting primarily of unamortized discount, deferred financing fees and redemption premium, as a result of this redemption.

Covenants and Restrictions

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If an event of default occurs and is continuing, our debt could become immediately due and payable.

The indentures governing the Pandora Convertible Notes contain covenants that limit Pandora’s ability to merge or consolidate and provide 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

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 December 31, 2021 and December 31, 2020, we were in compliance with our debt covenants.

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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 December 31, 2020, the conversion rate applicable to the Pandora 2023 Notes

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

was 151.9533 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.

As of December 31, 2021, the conversion rate applicable to the Pandora 2023 Notes was 153.7797 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.

(14) Stockholders’ Equity

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As of December 31, 2021, our cumulative repurchases since December 2012 under our stock repurchase program totaled 3,559 shares for $ 15,920 , and $ 2,080 remained available for future share repurchases under our stock repurchase program.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

The following table summarizes our total share repurchase activity for the years ended:

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We recognized share-based payment expense of $ 202 , $ 223 and $ 250 for the years ended December 31, 2021, 2020 and 2019, respectively.

The amount recognized during the year ended December 31, 2019 includes $ 21 of share-based compensation expense recorded in Acquisition and restructuring costs in our consolidated statements of comprehensive income.

The amount recognized during the year ended December 31, 2019 includes $ 21 of share-based compensation expense recorded in Impairment, restructuring, and acquisition costs in our consolidated statements of comprehensive income.

We account for equity instruments granted in accordance with ASC 718, Compensation - Stock Compensation .

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We use the Black-Scholes-Merton option-pricing model to value stock option awards and have elected to treat awards with graded vesting as a single award.

Share-based compensation expense is recognized ratably over the requisite service period, which is generally

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

the vesting period.

We measure restricted stock awards and units using the fair market value of the restricted shares of common stock on the day the award is granted.

Share-based compensation expense is recognized ratably over the requisite service period, which is generally the vesting period.

We measure restricted stock unit awards using the fair market value of the restricted shares of common stock on the day the award is granted.

We measure the value of restricted units that will vest depending a relative total stockholder return metric – that is, the performance of our common stock as compared other companies included in the S&P 500 Index – using a special option-based valuation method, known as a Monte Carlo simulation.

Since the results of such awards depend on future results, which are not known on the grant date, the Monte Carlo simulation attempts to take into consideration the terms of the awards, potential future returns, payout rates, and other factors to estimate a fair value of the award.

The Monte Carlo simulation method uses factual data for the company and employs various assumptions.

Stock-based awards granted to employees, non-employees and members of our board of directors include stock options and restricted stock units.

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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 one share of common stock upon vesting.

Each restricted stock unit entitles the holder to

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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

receive one share of common stock upon vesting.

As of December 31, 2021, 134 shares of common stock were available for future grants under the 2015 Plan.

In connection with the Pandora Acquisition, 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.

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 three anniversaries of the date of grant;

25 % restricted stock units, which awards will vest in equal installments on the first three 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.

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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 and members of our board of directors:

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 Years Ended December 31,

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The following table summarizes stock option activity under our share-based plans for the years ended December 31, 2021, 2020 and 2019:

Options Weighted-

Price Per Share Weighted-

Term (Years) Aggregate

Options Weighted-Average

Exercise Price

Per Share Weighted-Average

Contractual Term (Years) Aggregate

Outstanding at the beginning of January 1, 2019 243 $ 4.22

Awards granted in connection with acquisition 7 $ 3.85

Granted 15 $ 6.10

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Outstanding as of December 31, 2019 208 $ 4.46

Awards granted in connection with acquisition 7 $ 3.85

Granted 11 $ 6.87

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Exercisable as of December 31, 2021 101 $ 5.01 4.92 $ 144

The weighted average grant date fair value per stock option granted during the years ended December 31, 2020, 2019 and 2018 was $ 1.46 , $ 1.26 and $ 1.45 .

The weighted average grant date fair value per stock option granted during the years ended December 31, 2021, 2020 and 2019 was $ 1.77 , $ 1.46 and $ 1.26 , respectively.

The total intrinsic value of stock options exercised during the years ended December 31, 2021, 2020 and 2019 was $ 170 , $ 94 and $ 146 , respectively.

During the years ended December 31, 2020, 2019 and 2018, the number of net settled shares issued as a result of stock option exercises were 8 , 15 and 19 , respectively.

In connection with the Pandora Acquisition, each option granted by Pandora under its stock incentive plans to purchase shares of Pandora common stock, whether vested or unvested, was assumed and converted into an option to purchase shares of our common stock, with appropriate adjustments (based on the 1.44 exchange ratio) to the exercise price and number of shares of our common stock subject to such option, and has the same vesting schedule and exercise conditions as in effect as of immediately prior to the closing of the Pandora Acquisition;

provided, that any Pandora stock option that had an exercise price per share that was equal to or greater than the value, at the closing of the Pandora Acquisition, of our common stock issued as merger consideration in exchange for each share of Pandora common stock, was canceled without payment.

We recorded $ 8 to Goodwill related to pre-acquisition replacement equity awards attributable to pre-combination service.

During the years ended December 31, 2021, 2020 and 2019, the number of net settled shares issued as a result of stock option exercises was 22 , 8 and 15 , respectively.

We recognized share-based payment expense associated with stock options of $ 42 , $ 45 and $ 60 for the years ended December 31, 2021, 2020 and 2019, respectively.

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Shares Grant Date

Fair Value Per Share

Nonvested at the beginning of January 1, 2019 35 $ 5.50

Awards granted in connection with acquisition 48 $ 5.83

Granted 38 $ 6.01

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Nonvested as of December 31, 2019 75 $ 5.95

Awards granted in connection with acquisition 48 $ 5.83

Granted 37 $ 6.14

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During the years ended December 31, 2021, 2020 and 2019, the number of net settled shares issued as a result of restricted stock units vesting totaled 16 , 20 and 23 , respectively.

During the years ended December 31, 2020, 2019 and 2018, we granted 4 , 6 and 5 , respectively PRSUs to certain employees.

During the years ended December 31, 2021, 2020 and 2019, we granted 7 , 4 and 6 PRSUs to certain employees, respectively.

We believe it is probable that the performance target applicable to these PRSUs will be achieved.

In connection with the Pandora Acquisition, each unvested restricted stock unit granted by Pandora under its stock incentive plans was assumed and converted into an unvested restricted stock unit of Holdings, with appropriate adjustments (based on the 1.44 exchange ratio) to the number of shares of our common stock to be received, and has the same vesting schedule and settlement date as in effect as of immediately prior to the closing of the Pandora Acquisition.

We recorded $ 62 to Goodwill related to pre-acquisition replacement equity awards attributable to pre-combination service.

In connection with the cash dividends paid during the years ended December 31, 2020, 2019 and 2018, we granted 1 restricted stock units, including PRSUs, in accordance with the terms of existing award agreements.

In connection with the cash dividends paid during each of the years ended December 31, 2021, 2020 and 2019, we granted less than 1 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 years ended December 31, 2021, 2020 and 2019.

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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

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.

SIRIUS XM HOLDINGS INC.

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

matching and non-elective contributions to the Sirius XM Plan.

Pandora Media, LLC 401(k) Profit Sharing Plan and Trust

Pandora sponsors the Pandora Media, LLC 401(k) Profit Sharing Plan and Trust (the “Pandora Plan”) for eligible employees.

The Pandora Plan allows eligible employees to voluntarily contribute from 1 % to 75 % of their pre-tax eligible earnings, subject to certain defined limits.

Effective January 1, 2020, we began matching 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 recognized expenses of $ 21 , $ 16 and $ 9 for the years ended December 31, 2021, 2020 and 2019, respectively, in connection with the Sirius XM and Pandora Plans.

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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, for the years ended December 31, 2020, 2019 and 2018 were $ 8 , $ 7 and $ 8 , respectively.

As of December 31, 2020 and 2019, the fair value of the investments held in the trust were $ 46 and $ 34 , respectively, which is included in Other long-term assets in our consolidated balance sheets and classified as trading securities.

Contributions to the DCP, net of withdrawals, were $ 4 , $ 8 and $ 7 for the years ended December 31, 2021, 2020 and 2019, respectively.

As of December 31, 2021 and December 31, 2020, the fair value of the investments held in the trust were $ 56 and $ 46 , respectively, which is included in Other long-term assets in our consolidated balance sheets and classified as trading securities.

Trading gains and losses associated with these investments are recorded in Other (expense) income within our consolidated statements of comprehensive income.

The associated liability is recorded within Other long-term liabilities in our consolidated balance sheets, and any increase or decrease in the liability is recorded in General and administrative expense within our consolidated statements of comprehensive income.

For both the years ended December 31, 2020 and 2019, we recorded gains on investments held in the trust of $ 3 .

We recorded gains on investments held in the trust of $ 5 , $ 3 and $ 3 for the years ended December 31, 2021, 2020 and 2019, respectively.

(16) Commitments and Contingencies

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Cash interest payments include interest due on outstanding debt and capital lease payments through maturity.

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Satellite and transmission.

We have entered into agreements with several third parties to design, build, launch and insure two satellites, SXM-7 and SXM-8.

We have entered into agreements with third parties to design, build and launch two 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.

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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.

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these agreements.

Certain programming and content agreements also require us to purchase advertising on properties owned or controlled by the licensors.

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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 and SIRIUS FM-6 meeting their fifteen-year design life, which we expect to occur.

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.

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We have entered into music royalty arrangements that include fixed payments.

Certain of our content agreements also contain minimum guarantees and require that we make upfront minimum guaranteed payments.

Certain of our content agreements also contain minimum guarantees.

During the year ended December 31, 2021, we prepaid $ 5 in content costs related to minimum guarantees.

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The cumulative minimum guarantee, based on forecasted usage, considers factors such as listening hours, 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, could 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 any such audit could result in disputes over whether we have paid the proper content costs.

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.

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We also have a surety bond of approximately $ 45 primarily used as security against non-performance in the normal course of business.

We do not have any other significant off-balance sheet financing arrangements that are

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reasonably likely to have a material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

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

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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:

We may be unable to reasonably estimate the reasonably possible loss or range of

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loss for a particular legal contingency for various reasons, including, among others, because:

(i) the damages sought are indeterminate;

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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 Music Modernization Act did not apply retroactively.

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.

We believe we have substantial defenses to the claims asserted in this action, and we intend to defend these actions vigorously.

Pursuant to Sections 112 and 114 of the Copyright Act, the Copyright Royalties Board (the "CRB") initiated a proceeding in January 2019 to set the rates and terms by which webcasters may perform sound recordings via digital transmission over the internet and make ephemeral reproductions of those recordings during the 2021-2025 rate period under the authority of statutory licenses provided under

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Sections 112 and 114 of the Copyright Act.

We filed a petition to participate in the proceeding on behalf of our Sirius XM and Pandora businesses, as did other webcasters including Google Inc.

and the National Association of Broadcasters.

SoundExchange, a collective organization that collects and distributes digital performance royalties to artists and copyright holders, represents the various copyright owner participants in the proceeding, including Sony Music Entertainment, Universal Music Group and Warner Music Group.

Because the proceeding focuses on setting statutory rates for non-interactive online music streaming (commonly identified as “webcasting”), the proceeding will set the rates that our Pandora business pays for music streaming on its free, ad-supported tier and that our Sirius XM business pays for streaming on its subscription internet radio service.

This proceeding will not set the rates that we pay for our other music offerings (satellite radio, business establishment services) or that we pay for interactive streaming on our Pandora Plus and Pandora Premium services.

In light of the COVID-19 pandemic, the multi-week hearing before the Copyright Royalty Judges originally scheduled to begin in Washington, DC in March 2020, was postponed and conducted virtually via videoconference between August 4 and September 9, 2020.

Subsequent to the hearing, the parties submitted post-trial briefing and reply briefing.

Closing arguments were held in November 2020.

The final rates proposed for the 2021-2025 period by Sirius XM, Pandora, and the other webcaster participants are below the existing statutory rates.

Specifically, Sirius XM and Pandora proposed rates of $ 0.0011 per performance for nonsubscription commercial webcasters and $ 0.0016 per performance for subscription commercial webcasters.

SoundExchange proposed increasing the existing statutory rates to $ 0.0028 per performance for nonsubscription commercial webcasters and $ 0.0031 per performance for commercial subscription webcasters.

Given the delay in the proceeding, the deadline for the CRB to deliver its initial rate determination has been extended to April 15, 2021.

On August 23, 2021, the United States Court of Appeals for the Ninth Circuit issued an Opinion in a related case, Flo & Eddie Inc.

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 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.

Following issuance of the Flo & Eddie Inc.

Sirius XM Radio Inc.

opinion, on September 3, 2021, the Ninth Circuit lifted the stay of appellate proceedings in Flo & Eddie, Inc.

Pandora Media, LLC .

The Flo & Eddie Inc.

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.

We believe we have substantial defenses to the remaining claims asserted in this action, and we intend to defend this action vigorously.

Other Matters .

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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.

SIRIUS XM HOLDINGS INC.

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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) Income Taxes

There is no current U.S.

federal income tax provision, as all federal taxable income was offset by utilizing U.S.

federal net operating loss carryforwards.

Current federal income tax expense or benefit represents the amounts expected to be reported on the Company's income tax return, and deferred income tax expense or benefits represents the change in net deferred tax assets and liabilities.

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted income tax rates that will be in effect when these differences reverse.

The current state income tax provision is primarily related to taxable income in certain states that have suspended or limited the ability to use net operating loss carryforwards or where net operating losses have been fully utilized.

Income tax expense is the sum of current income tax plus the change in deferred tax assets and liabilities.

We file a consolidated federal income tax return for all of our wholly owned subsidiaries, including Sirius XM and Pandora.

We have historically filed a consolidated federal income tax return for all of our wholly owned 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 will now be 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.

Our current tax expense is the amount of tax payable on the basis of a hypothetical, current-year separate return.

We provided deferred taxes on temporary differences and on any carryforwards that we could claim on our hypothetical return and assess the need for a valuation allowance on the basis of our projected separate return results.

Any difference between the tax expense (or benefit) allocated to us under the separate return method and payments to be made for (or received from) Liberty Media for tax expense are treated as either dividends or capital contributions.

Income tax expense consisted of the following:

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Total income tax expense $ ( 212 ) $ ( 299 ) $ ( 283 )

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The following table presents a reconciliation of the U.S.

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Uncertain tax positions ( 0.1 ) % 4.4 % — %

Audit Settlements ( 7.6 ) % — % — %

Other, net 0.1 % 0.1 % 1.9 %

Effective tax rate 13.9 % 69.5 % 23.6 %

Our effective tax rate of 13.9 % for the year ended December 31, 2021 was primarily impacted by settlements with various states as well as a benefit related to research and development and certain other credits, partially offset by federal and state income tax expense.

Our effective tax rate of 69.5 % for the year ended December 31, 2020 was primarily impacted by the nondeductible Pandora goodwill impairment charge, partially offset by the recognition of excess tax benefits related to share-based compensation, a benefit related to state and federal research and development and certain other credits and a worthless stock deduction associated with the termination of the Automatic service.

Our effective tax rate of 23.6 % for the year ended December 31, 2019 was primarily impacted by the recognition of excess tax benefits related to share-based compensation and benefits related to state and federal research and development and certain other credits, partially offset by the impact of nondeductible compensation.

Our effective tax rate of 17.2 % for the year ended December 31, 2018 was primarily impacted by the recognition of excess tax benefits related to share-based compensation and a benefit related to state and federal research and development credits.

Deferred income taxes are recognized for the tax consequences related to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for tax purposes at each year-end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable

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The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences can be carried forward under tax law.

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A valuation allowance is recognized when, based on the weight of all available evidence, it is considered more likely than not that all, or some portion, of the deferred tax assets will not be realized.

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The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities, shown before jurisdictional netting, are presented below:

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As of December 31, 2021, our gross federal net operating loss carryforwards were approximately $ 643 .

We expect to utilize a majority of our federal income tax credits, which consist of research and development tax credits, refined coal credits and foreign tax credits, by December 31, 2022.

As of December 31, 2020 and 2019, we had a valuation allowance related to deferred tax assets of $ 54 and $ 70 , respectively, which were not likely to be realized due to the timing of certain federal and state net operating loss limitations.

During the year ended December 31, 2020, our allowance decreased primarily due to the expiration of unused federal research and development credit carryforwards.

We expect to utilize a majority of our federal income tax credits, which consist of research and development tax credits, other tax credits and foreign tax credits, by December 31, 2022.

As of December 31, 2021 and 2020, we had a valuation allowance related to deferred tax assets of $ 83 and $ 54 , respectively, which were not likely to be realized due to the timing of certain state net operating loss limitations.

During the year ended December 31, 2021, our valuation allowance increased primarily as a result of the increase in net deferred tax asset related to prior net operating loss carryforwards as a result of settlements with various states.

As a portion of these net operating losses are not anticipated to be realizable, we increased our valuation allowance for those expected to expire un-utilized based on taxable income projections.

ASC 740, Income Taxes , requires a company to first determine whether it is more likely than not that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information.

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If the tax position is not more likely than not to be sustained, the gross amount of the unrecognized tax position will not be recorded in the financial statements but will be shown in tabular format within the uncertain income tax positions.

Changes in recognition or measurement are reflected in the period in which the change in judgment occurs due to the

Changes in recognition or measurement are reflected in the period in which the change in judgment occurs due to the following conditions:

(1) the tax position is “more likely than not” to be sustained, (2) the tax position, amount, and/or timing is ultimately settled through negotiation or litigation, or (3) the statute of limitations for the tax position has expired.

A number of years may elapse before an uncertain tax position is effectively settled or until there is a lapse in the applicable statute of limitations.

We record interest and penalties related to uncertain tax positions in Income tax expense in our consolidated statements of comprehensive income.

SIRIUS XM HOLDINGS INC.

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following conditions:

A number of years may elapse before an uncertain tax position is effectively settled or until there is a lapse in the applicable statute of limitations.

We record interest and penalties related to uncertain tax positions in Income tax expense in our consolidated statements of comprehensive income.

As of December 31, 2021 and 2020, we had unrecognized tax benefits and uncertain tax positions of $ 179 and $ 433 , respectively.

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Decreases in tax positions for prior years ( 24 ) ( 7 )

Decreases related to settlement with taxing authorities ( 252 ) —

Balance, end of year $ 179 $ 433

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We had less than $ 1 of intersegment advertising revenue during the years ended December 31, 2021 and 2020.

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

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Segment gross profit $ 4,030 $ 743 $ 4,773

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

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Share-based payment expense ( 202 )

Acquisition and restructuring costs ( 28 )

Impairment charges ( 976 )

Impairment, restructuring and acquisition costs ( 20 )

Total other (expense) income ( 489 )

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

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For the Year Ended December 31, 2020

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Share-based payment expense ( 223 )

Acquisition and other related costs ( 84 )

Impairment, restructuring and acquisition costs ( 1,004 )

Total other (expense) income ( 428 )

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(b) Share-based payment expense of $ 44 related to cost of services, $ 68 related to sales and marketing, $ 43 related to engineering, design and development and $ 68 related to general and administrative has been excluded for the year ended December 31, 2020.

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For the Year Ended December 31, 2019

Sirius XM Pandora Total

Subscriber revenue $ 5,644 $ 476 $ 6,120

Advertising revenue 205 1,131 1,336

Equipment revenue 173 — 173

Other revenue 165 — 165

Total revenue 6,187 1,607 7,794

Cost of services (c)

( 2,378 ) ( 1,005 ) ( 3,383 )

Segment gross profit $ 3,809 $ 602 $ 4,411

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

For the Year Ended December 31, 2019

Segment Gross Profit $ 4,411

Subscriber acquisition costs ( 427 )

Sales and marketing (c)

Engineering, design and development (c)

General and administrative (c)

Depreciation and amortization ( 468 )

Share-based payment expense ( 229 )

Impairment, restructuring and acquisition costs ( 84 )

Total other (expense) income ( 450 )

Consolidated income before income taxes $ 1,197

(c) Share-based payment expense of $ 44 related to cost of services, $ 78 related to sales and marketing, $ 49 related to engineering, design and development and $ 58 related to general and administrative has been excluded for the year ended December 31, 2019.

A measure of segment assets is not currently provided to the Chief Executive Officer and has therefore not been provided.

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On January 26, 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 February 25, 2022 to stockholders of record as of the close of business on February 11, 2022.

Tax Sharing Agreement

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.

As of December 31, 2020, Liberty Media beneficially owned, directly and indirectly, approximately 76 % 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.

The tax sharing agreement contains provisions that Holdings believes are customary for tax sharing agreements between members of a consolidated group.

SXM-7 Satellite

We have entered into agreements for the design, construction and launch of two additional satellites, SXM-7 and SXM-8.

On December 13, 2020, SXM-7 was successfully launched.

In-orbit testing of SXM-7 began on January 4, 2021.

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During in-orbit testing of SXM-7, events occurred which have caused failures of certain SXM-7 payload units.

An evaluation of SXM-7 is underway.

The full extent of the damage to SXM-7 is not yet known.

We do not expect our satellite radio service to be impacted by these adverse SXM-7 events.

Our XM-3 and XM-4 satellites continue to operate and are expected to support our satellite radio service for several years.

In addition, our XM-5 satellite remains available as an in-orbit spare.

Construction of our SXM-8 satellite is underway and that satellite is expected to be launched into a geostationary orbit in 2021.

We have procured insurance for SXM-7 and SXM-8 to cover the risks associated with each satellite's launch and first year of in-orbit operation.

The aggregate coverage under those insurance policies with respect to SXM-7 is $ 225 .

We have notified the underwriters of these policies of a potential claim with respect to SXM-7.

As of December 31, 2020, we have $ 220 capitalized in construction in progress related to SXM-7.

(21) Quarterly Financial Data--Unaudited

Our quarterly results of operations are summarized below:

For the Three Months Ended

March 31 June 30 September 30 December 31

Total revenue $ 1,952 $ 1,874 $ 2,025 $ 2,189

Cost of services $ ( 850 ) $ ( 866 ) $ ( 895 ) $ ( 968 )

Income from operations $ 468 $ 415 $ 478 $ ( 503 )

Net income $ 293 $ 243 $ 272 $ ( 677 )

Net income per common share--basic (1)

$ 0.07 $ 0.06 $ 0.06 $ ( 0.16 )

Net income per common share--diluted (1)

$ 0.07 $ 0.05 $ 0.06 $ ( 0.16 )

Total revenue $ 1,744 $ 1,977 $ 2,011 $ 2,062

Cost of services $ ( 748 ) $ ( 882 ) $ ( 881 ) $ ( 916 )

Income from operations $ 333 $ 439 $ 476 $ 399

Net income $ 162 $ 263 $ 246 $ 243

Net income per common share--basic (1)

$ 0.04 $ 0.06 $ 0.06 $ 0.05

Net income per common share--diluted (1)

$ 0.03 $ 0.06 $ 0.05 $ 0.05

(1) Basic and Diluted earnings per share are computed quarterly and the sum of the quarterly calculation may not necessarily agree to the net income per share for the year due to rounding.

On January 31, 2022, our board of directors declared a special cash dividend on our common stock in the amount of $ 0.25 per share of common stock payable on February 25, 2022 to stockholders of record as of the close of business on February 11, 2022.

SIRIUS XM HOLDINGS INC.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures