SIRIUS XM HOLDINGS INC. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. An evaluation was performed under the supervision and with the participation of our management, including Jennifer C. Witz, our Chief Executive Officer, and Sean S. Sullivan, our Executive Vice President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as that term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2021. 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. 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 Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. We have performed an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our internal control over financial reporting. Our management used the Internal Control-Integrated Framework ( 2013 ) issued by the Committee of Sponsoring Organizations of the Treadway Commission to perform this evaluation. Based 54 Table of Contents on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our internal control over financial reporting was effective as of December 31, 2021. KPMG LLP, an independent registered public accounting firm, which has audited and reported on the consolidated financial statements contained in this Annual Report on Form 10-K, has issued its report on the effectiveness of our internal control over financial reporting. Audit Report of the Independent Registered Public Accounting Firm The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their audit report appearing on page F-4 of this Annual Report on Form 10-K. ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. 55 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information about our executive officers is contained in the discussion entitled “Information About Our Executive Officers” in Part I of this Annual Report on Form 10-K. The additional information required by this Item 10 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 captions Stock Ownership , Governance of the Company, Item 1. Election of Directors and Item 2. Ratification of Independent Registered Public Accountants , which we expect to file with the Securities and Exchange Commission prior to April 30, 2022. Code of Ethics We have adopted a code of ethics that applies to all employees, including executive officers, and to directors. The Code of Ethics is available on the Corporate Governance page of our website at www.siriusxm.com. If we ever were to amend or waive any provision of our Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or any person performing similar functions, we intend to satisfy our disclosure obligations with respect to any such waiver or amendment by posting such information on our internet website set forth above rather than filing a Form 8-K. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item 11 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 captions Item 1. Election of Directors and Executive Compensation , which we expect to file with the Securities and Exchange Commission prior to April 30, 2022. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Certain information required by this Item 12 is set forth under the heading “Equity Compensation Plan Information” in Part II, Item 5, of this Annual Report on Form 10-K. The additional information required by this Item 12 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 Stock Ownership , which we expect to file with the Securities and Exchange Commission prior to April 30, 2022. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE The information required by this Item 13 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 captions Governance of the Company and Item 1. Election of Directors , which we expect to file with the Securities and Exchange Commission prior to April 30, 2022. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Our independent registered public accounting firm is KPMG LLP , New York, NY , Auditor ID: 185 . 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. 56 Table of Contents PART IV ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES Documents filed as part of this report: (1) Financial Statements. See Index to Consolidated Financial Statements appearing on page F-1. (2) Financial Statement Schedules. See Index to Consolidated Financial Statements appearing on page F-1. (3) Exhibits. See Exhibit Index, which is incorporated herein by reference. ITEM 16. FORM 10-K SUMMARY None. 57 Table of Contents EXHIBIT INDEX Exhibit Description 2.1 Certificate of Ownership and Merger, dated as of January 12, 2011, merging XM Satellite Radio Inc. with and into Sirius XM Radio Inc. (incorporated by reference to Exhibit 3.1 to Sirius XM Radio Inc.’s Current Report on Form 8-K filed on January 12, 2011 (File No. 001-34295)). 2.2 Agreement and Plan of Merger, dated as of November 14, 2013, by and among Sirius XM Radio Inc., Sirius XM Holdings Inc. and Sirius XM Merger Sub Inc. (incorporated by reference to Exhibit 2.1 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed on November 15, 2013 (File No. 001-34295)). 2.3 Agreement and Plan of Merger and Reorganization by and among Sirius XM Holdings Inc., Pandora Media, Inc. and White Oaks Acquisition Corp., dated as of September 23, 2018 (incorporated by reference to Exhibit 2.1 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed on September 24, 2018 (File No. 001-34295)). 3.1 Amended and Restated Certificate of Incorporation of Sirius XM Holdings Inc. (incorporated by reference to Exhibit 3.1 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed on November 15, 2013 (File No. 001-34295)). 3.2 Amended and Restated By-Laws of Sirius XM Holdings Inc. (incorporated by reference to Exhibit 3.2 to Sirius XM Holdings Inc.'s Current Report on Form 8-K filed on November 15, 2013 (File No. 001-34295)). 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. 001-34295)). 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. 001-34295)). 4.3 Indenture, dated as of June 7, 2019, among Sirius XM Radio Inc., the guarantors named therein and U.S. Bank National Association, as trustee, relating to the 5.500% Senior Notes due 2029 (incorporated by reference to Exhibit 4.1 to Sirius XM Holdings Inc.'s Current Report on Form 8-K filed on June 7, 2019 (File No. 001-34295)). 4.4 First Supplemental Indenture, dated as of January 31, 2019, relating to the 1.75% Convertible Senior Notes due 2023, between Pandora Media, Inc. and Citibank, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Sirius XM Holdings Inc.'s Current Report on Form 8-K filed on January 31, 2019 (File No. 001-34295)). 4.5 Third Supplemental Indenture, dated as of February 1, 2019, relating to the 1.75% Convertible Senior Notes due 2023, among Pandora Media, LLC (f/k/a Pandora Media, Inc.), Sirius XM Holdings Inc. and Citibank, N.A. as trustee ((incorporated by reference to Exhibit 4.1 to Sirius XM Holdings Inc.'s Current Report on Form 8-K filed on February 1, 2019 (File No. 001-34295)). 4.6 Indenture, dated as of June 11, 2020, relating to the 4.125% Senior Notes due 2030, among Sirius XM Radio Inc., the guarantors named therein and U.S. 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. 001-34295)). 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. 001-34295)). 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. 001-34295)). 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. 001-34295)). 4.10 Investment Agreement, dated as of February 17, 2009, between Sirius XM Radio Inc. and Liberty Radio LLC (incorporated by reference to Exhibit 4.55 to Sirius XM Radio Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-34295)). 4.11 Assignment and Assumption of Investment Agreement among Sirius XM Radio Inc., Sirius XM Holdings Inc. 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. 001-34295)). 58 Table of Contents 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. 001-34295)). 10.1 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 party thereto (incorporated by reference to Exhibit 10.1 to Sirius XM Radio Inc.’s Current Report on Form 8-K filed on December 10, 2012 (File No. 001-34295)). 10.2 Amendment No. 1, dated as of April 22, 2014, to the Credit Agreement, dated as of December 5, 2012, among Sirius XM Radio Inc., the Lenders party thereto and JPMorgan Chase Bank, N.A. as administrative agent for the Lenders, as collateral agent for the Secured Parties and as an Issuing Bank (incorporated by reference to Exhibit 10.1 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed on April 22, 2014 (File No. 001-34295)). 10.3 Amendment No. 2, dated as of June 16, 2015, 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 June 19, 2015 (File No. 001-34295)). 10.4 Amendment No. 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. 001-34295)). 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. 001-34295)). **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. 1 to Technology Licensing Agreement (incorporated by reference to Exhibit 10.4 to Amendment No. 1 to XM Satellite Radio Holdings Inc.’s Registration Statement on Form S-1 (File No. 333-83619)). *10.7 Amended and Restated Sirius Satellite Radio 2003 Long-Term Stock Incentive Plan (incorporated by reference to Exhibit 10.10 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (File No. 001-34295)). *10.8 XM Satellite Radio Holdings Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to XM Satellite Radio Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 000-27441)). *10.9 Form of Non-Qualified Stock Option Agreement pursuant to the XM Satellite Radio Holdings Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed June 1, 2007 (File No. 000-27441)). *10.10 Form of Restricted Stock Agreement pursuant to the XM Satellite Radio Holdings Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed June 1, 2007 (File No. 000-27441)). *10.11 Sirius XM Radio 401(k) Savings Plan, January 1, 2009 Restatement (incorporated by reference to Exhibit 10.30 to Sirius XM Radio Inc.’s Annual Report on Form 10-K for the year ended December 31, 2009 (File No. 001-34295)). *10.12 Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan (incorporated by reference to Exhibit 4.9 to Sirius XM Radio Inc.’s Registration Statement on Form S-8 (File No. 333-160386)). *10.13 Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan (incorporated by reference to Appendix A to Sirius XM Holdings Inc.’s definitive Proxy Statement on Schedule 14A filed on April 6, 2015 (File No. 001-34295)). *10.14 Form of Director Non-Qualified Stock Option Agreement pursuant to the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan (incorporated by reference to Exhibit 10.34 to Sirius XM Radio Inc.’s Annual Report on Form 10-K for the year ended December 31, 2011 (File No. 001-34295)). *10.15 Form of Director Non-Qualified Stock Option Agreement pursuant to the Sirius XM Holdings Inc. 2009 Long-Term Stock Incentive Plan (incorporated by reference to Exhibit 10.18 to Sirius XM Holdings Inc.’s Annual Report for the year ended December 31, 2014 (File No. 001-34295)). *10.16 Form of Non-Qualified Stock Option Agreement pursuant to the Sirius XM Radio Inc. 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. 001-34295)). 59 Table of Contents Exhibit Description *10.17 Form of Non-Qualified Stock Option Agreement pursuant to the Sirius XM Holdings Inc. 2009 Long-Term Stock Incentive Plan (incorporated by reference to Exhibit 10.20 to Sirius XM Holdings Inc.’s Annual Report filed for the year ended December 31, 2014 (File No. 001-34295)). *10.18 Form of Director Non-Qualified Stock Option Agreement pursuant to the Sirius XM Holdings Inc. 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. 001-34295)). *10.19 Form of Non-Qualified Stock Option Agreement pursuant to the Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan (incorporated by reference to Exhibit 10.23 to Sirius XM Holdings Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015 (File No. 001-34295)). *10.20 Form of SVP Restricted Stock Unit Agreement pursuant to the Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan (incorporated by reference to Exhibit 10.24 to Sirius XM Holdings Inc.'s Annual Report on Form 10-K for the year ended December 31, 2016 (001-34295)). *10.21 Form of Performance-Based Restricted Stock Unit Agreement pursuant to the Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan (incorporated by reference to Exhibit 10.25 to Sirius XM Holdings Inc.'s Annual Report on Form 10-K for the year ended December 31, 2016 (001-34295)). *10.22 Form of SVP Non-Qualified Stock Option Agreement pursuant to the Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan (incorporated by reference to Exhibit 10.26 to Sirius XM Holdings Inc.'s Annual Report on Form 10-K for the year ended December 31, 2016 (001-34295)). *10.23 Employment Agreement, dated as of May 31, 2018, between Sirius XM Radio Inc. and Dara F Altman (incorporated by reference to Exhibit 10.1 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed on June 5, 2018 (File No. 001-34295)). *10.24 Employment Agreement, dated as of June 29, 2015, between Sirius XM Radio Inc. and James A. Cady (incorporated by reference to Exhibit 10.1 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed on June 30, 2015 (File No. 001-34295)). *10.25 Amendment to the Employment Agreement between Sirius XM Radio Inc. and James A Cady, dated as of February 23, 2016 (incorporated by reference to Exhibit 10.1 to Sirius XM Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (File No. 001-34295)). *10.26 Employment Agreement, dated as of June 1, 2018, between Sirius XM Radio Inc. and David J. Frear (incorporated by reference to Exhibit 10.2 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed on June 5, 2018 (File No. 001-34295)). *10.27 Form of Option Award Agreement between Sirius XM Radio Inc. and James E. Meyer (incorporated by reference to Exhibit 10.1 to Sirius XM Radio Inc.’s Current Report on Form 8-K filed October 16, 2009 (File No. 001-34295)). *10.28 Employment Agreement, dated December 24, 2018 between Sirius XM Radio Inc. and Scott A. Greenstein (incorporated by reference to Exhibit 10.1 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed on December 26, 2018 (File No. 001-34295)). *10.29 Employment Agreement, dated as of November 22, 2016 between Sirius XM Radio Inc. and Patrick L. Donnelly (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, 2016 (File No. 001-34295)). *10.30 Employment Agreement, dated as of August 21, 2017 between Sirius XM Radio Inc. and Jennifer Witz (incorporated by reference to Exhibit 10.30 to Sirius XM Holdings Inc.'s Annual Report on Form 10-K for the year ended December 31, 2017 (File No. 001-34295)). *10.31 Employment Agreement, dated August 16, 2018, between Sirius XM Radio Inc. and James E. Meyer (incorporated by reference to Exhibit 10.1 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed on August 16, 2018 (File No. 001-34295)). *10.32 Letter agreement, dated August 16, 2018, regarding use of private aircraft between Sirius XM Radio Inc. and James E. Meyer (incorporated by reference to Exhibit 10.2 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed on August 16, 2018 (File No. 001-34295)). *10.33 Employment Agreement, dated as of March 5, 2019 between Sirius XM Radio Inc. and Jennifer Witz (incorporated by reference to Exhibit 10.1 to Sirius XM Holdings Inc.'s Current Report on Form 8-K filed on March 6, 2019 (File No. 001-34295)). *10.34 Employment Agreement, dated as of September 14, 2020 between Sirius XM Radio Inc. 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. 001-34295)). 60 Table of Contents Exhibit Description *10.35 Letter Agreement, dated September 14, 2020, regarding private use of aircraft between Sirius XM Radio Inc. and Jennifer C. 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. 001-34295)). *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. 001-34295)). *10.37 Employment Agreement, dated as of September 14, 2020, between Sirius XM Radio Inc. and Sean S. 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. 001-34295)). *10.38 First Amendment, dated February 16, 2021, to the Employment Agreement, dated as of September 14, 2020, between Sirius XM Radio Inc. and Sean S. 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. 001-34295)). *10.39 Employment Agreement, dated as of December 27, 2020 between Sirius XM Radio Inc. and Scott A. Greenstein (incorporated by reference to Exhibit 10.1 to Sirius XM Holdings Inc.'s Current Report on Form 8-K filed on December 8, 2020 (File No. 001-34295)). *10.40 Agreement and Release, dated as of September 21, 2020 between Sirius XM Radio Inc. and David J. 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. 001-34295)). *10.41 Consulting Agreement, dated as of January 1, 2021 between Sirius XM Radio Inc. 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. 001-34295)). *10.42 Letter Agreement, dated March 5, 2019, between Sirius XM Radio Inc. and Stephen R. Cook (incorporated by reference to Exhibit 10.2 to Sirius XM Holdings Inc.'s Current Report on Form 8-K filed on March 6, 2019 (File No. 001-34295)). *10.43 Letter Agreement, dated March 5, 2019, between Sirius XM Radio Inc. and Joseph A. 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. 001-34295)). *10.44 Employment Agreement, dated as of May 5, 2021, between Sirius XM Radio Inc. and Dara F. 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. 001-34295)). *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. 001-34295)). *10.46 Assignment and Assumption Agreement, dated as of November 15, 2013, among Sirius XM Holdings Inc. and Sirius XM Radio Inc. (incorporated by reference to Exhibit 10.1 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed on November 15, 2013 (File No. 001-34295)). *10.47 Omnibus Amendment, dated November 15, 2013, to the XM Satellite Radio Holdings Inc. Talent Option Plan, the XM Satellite Radio Holdings Inc. 1998 Shares Award Plan, as amended, the Amended and Restated Sirius Satellite Radio 2003 Long-Term Stock Incentive Plan, the XM Satellite Radio Holdings Inc. 2007 Stock Incentive Plan and the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan and their Related Stock Option Agreements, Restricted Stock Agreements and Restricted Stock Unit Agreements (incorporated by reference to Exhibit 10.2 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed on November 15, 2013 (File No. 001-34295)). *10.48 Sirius XM Holdings Inc. Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 to Sirius XM Holdings Inc.’s Current Report on Form 8-K filed on June 30, 2015 (File No. 001-34295)). 10.49 Tax Sharing Agreement, dated as of February 1, 2021 between Sirius XM Holdings Inc. 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. 001-34295)). 21.1 List of Subsidiaries (filed herewith). 23.1 Consent of KPMG LLP (filed herewith). 61 Table of Contents Exhibit Description 31.1 Certificate of Jennifer C. Witz, Chief Executive Officer and Director, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 31.2 Certificate of Sean S. Sullivan, Executive Vice President and Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 32.1 Certificate of Jennifer C. Witz, Chief Executive Officer and Director, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). 32.2 Certificate of Sean S. Sullivan, Executive Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). 99.1 Amended and Restated Certificate of Incorporation of Sirius XM Radio Inc., as amended (incorporated by reference to Exhibit 3.3 to Sirius XM Holdings Inc.'s Annual Report on Form 10-K for the year ended December 31, 2013 (File No. 001-34295)). 99.2 Amended and Restated By-Laws of Sirius XM Radio Inc., as amended (incorporated by reference to Exhibit 3.4 to Sirius XM Holdings Inc.'s Annual Report on Form 10-K for the year ended December 31, 2013 (File No. 001-34295)). 101.1 The following financial information from our Annual Report on Form 10-K for the year ended December 31, 2021 formatted in Inline eXtensible Business Reporting Language (Inline XBRL): (i) Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019; (ii) Consolidated Balance Sheets as of December 31, 2021 and 2020; (iii) Consolidated Statements of Stockholders’ (Deficit) Equity for the years ended December 31, 2021, 2020 and 2019; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019; and (v) Combined Notes to Consolidated Financial Statements. 104.1 Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101.1) _________________ * This document has been identified as a management contract or compensatory plan or arrangement. ** Pursuant to the Commission’s Orders Granting Confidential Treatment under Rule 406 of the Securities Act of 1933 or Rule 24(b)-2 under the Securities Exchange Act of 1934, certain confidential portions of this Exhibit were omitted by means of redacting a portion of the text. The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for any other purpose. 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. 62 Table of Contents SIGNATURES 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 1st day of February 2022. SIRIUS XM HOLDINGS INC. By: /s/ Sean S. Sullivan Sean S. Sullivan Executive Vice President and Chief Financial Officer (Principal Financial Officer and Authorized Officer) 63 Table of Contents Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ G REGORY B. M AFFEI Chairman of the Board of Directors and Director February 1, 2022 (Gregory B. Maffei) /s/ J AMES E. M EYER Vice Chairman of the Board of Directors and Director February 1, 2022 (James E. Meyer) /s/ J ENNIFER C. W ITZ Chief Executive Officer and Director (Principal Executive Officer) February 1, 2022 (Jennifer C. Witz) /s/ S EAN S. S ULLIVAN Executive Vice President and Chief Financial Officer (Principal Financial Officer) February 1, 2022 (Sean S. Sullivan) /s/ T HOMAS D. B ARRY Senior Vice President and Controller (Principal Accounting Officer) February 1, 2022 (Thomas D. Barry) /s/ D AVID A. B LAU Director February 1, 2022 (David A. Blau) /s/ E DDY W. H ARTENSTEIN Director February 1, 2022 (Eddy W. Hartenstein) /s/ R OBIN S. P. H ICKENLOOPER Director February 1, 2022 (Robin S. P. Hickenlooper) /s/ J AMES P. H OLDEN Director February 1, 2022 (James P. Holden) /s/ E VAN D. M ALONE Director February 1, 2022 (Evan D. Malone) /s/ J ONELLE P ROCOPE Director February 1, 2022 (Jonelle Procope) /s/ M ICHAEL R APINO Director February 1, 2022 (Michael Rapino) /s/ K RISTINA M. S ALEN Director February 1, 2022 (Kristina M. Salen) /s/ C ARL E. V OGEL Director February 1, 2022 (Carl E. Vogel) /s/ D AVID M. Z ASLAV Director February 1, 2022 (David M. Zaslav) 64 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Reports of Independent Registered Public Accounting Firm F- 2 Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019 F- 5 Consolidated Balance Sheets as of December 31, 2021 and 2020 F- 6 Consolidated Statements of Stockholders' (Deficit) Equity for the years ended December 31, 2021, 2020 and 2019 F- 7 Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019 F- 8 Notes to Consolidated Financial Statements F- 10 Schedule II - Schedule of Valuation and Qualifying Accounts F- 45 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Sirius XM Holdings Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Sirius XM Holdings Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of comprehensive income, stockholders’ equity (deficit), and cash flows for each of the years in the three‑year period ended December 31, 2021, and the related notes and financial statement schedule II (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. 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. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. 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 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 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 applied auditor judgment to determine the nature and extent of procedures to be performed over subscriber and advertising revenues. 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 F-2 Table of Contents 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. /s/ KPMG LLP We have served as the Company’s auditor since 2008. New York, New York February 1, 2022 F-3 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Sirius XM Holdings Inc.: Opinion on Internal Control Over Financial Reporting We have audited Sirius XM Holdings Inc. and subsidiaries' (the Company) 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. In our opinion, the Company maintained, in all material respects, effective 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. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of comprehensive income, stockholders' equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and our report dated February 1, 2022 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting . Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP New York, New York February 1, 2022 F-4 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Years Ended December 31, (in millions, except per share data) 2021 2020 2019 Revenue: Subscriber revenue $ 6,614 $ 6,372 $ 6,120 Advertising revenue 1,730 1,340 1,336 Equipment revenue 201 173 173 Other revenue 151 155 165 Total revenue 8,696 8,040 7,794 Operating expenses: Cost of services: Revenue share and royalties 2,672 2,421 2,291 Programming and content 559 481 462 Customer service and billing 501 481 475 Transmission 218 177 170 Cost of equipment 18 19 29 Subscriber acquisition costs 325 362 427 Sales and marketing 1,056 957 937 Engineering, design and development 265 263 280 General and administrative 514 511 524 Depreciation and amortization 533 506 468 Impairment, restructuring and acquisition costs 20 1,004 84 Total operating expenses 6,681 7,182 6,147 Income from operations 2,015 858 1,647 Other (expense) income: Interest expense ( 415 ) ( 394 ) ( 390 ) Loss on extinguishment of debt ( 83 ) ( 40 ) ( 57 ) Other income (expense) 9 6 ( 3 ) Total other (expense) income ( 489 ) ( 428 ) ( 450 ) Income before income taxes 1,526 430 1,197 Income tax expense ( 212 ) ( 299 ) ( 283 ) Net income $ 1,314 $ 131 $ 914 Foreign currency translation adjustment, net of tax — 7 14 Total comprehensive income $ 1,314 $ 138 $ 928 Net income per common share: Basic $ 0.32 $ 0.03 $ 0.20 Diluted $ 0.32 $ 0.03 $ 0.20 Weighted average common shares outstanding: Basic 4,062 4,330 4,501 Diluted 4,143 4,429 4,616 See accompanying notes to the consolidated financial statements. F-5 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, (in millions, except per share data) 2021 2020 ASSETS Current assets: Cash and cash equivalents $ 191 $ 71 Receivables, net 722 672 Related party current assets 21 20 Prepaid expenses and other current assets 246 204 Total current assets 1,180 967 Property and equipment, net 1,450 1,629 Intangible assets, net 3,186 3,340 Goodwill 3,151 3,122 Related party long-term assets 526 531 Deferred tax assets 200 111 Operating lease right-of-use assets 358 427 Other long-term assets 223 206 Total assets $ 10,274 $ 10,333 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable and accrued expenses $ 1,299 $ 1,223 Accrued interest 173 174 Current portion of deferred revenue 1,454 1,721 Current maturities of debt — 1 Operating lease current liabilities 49 48 Related party current liabilities 5 — Total current liabilities 2,980 3,167 Long-term deferred revenue 97 118 Long-term debt 8,832 8,499 Deferred tax liabilities 478 266 Operating lease liabilities 362 419 Other long-term liabilities 150 149 Total liabilities 12,899 12,618 Commitments and contingencies (Note 16) Stockholders’ equity (deficit): Common stock, par value $ 0.001 per share; 9,000 shares authorized; 3,968 and 4,176 shares issued; 3,967 and 4,173 shares outstanding at December 31, 2021 and December 31, 2020, respectively 4 4 Accumulated other comprehensive income, net of tax 15 15 Additional paid-in capital — — Treasury stock, at cost; 1 and 3 shares of common stock at December 31, 2021 and December 31, 2020, respectively ( 8 ) ( 19 ) Accumulated deficit ( 2,636 ) ( 2,285 ) Total stockholders’ equity (deficit) ( 2,625 ) ( 2,285 ) Total liabilities and stockholders’ equity (deficit) $ 10,274 $ 10,333 See accompanying notes to the consolidated financial statements. F-6 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT) Common Stock Accumulated Other Comprehensive Income Additional Paid-in Capital Treasury Stock Accumulated Deficit Total Stockholders’ Equity (Deficit) (in millions) Shares Amount Shares Amount Balance at January 1, 2019 4,346 $ 4 $ ( 6 ) $ 242 — $ — $ ( 2,057 ) $ ( 1,817 ) Comprehensive income, net of tax — — 14 — — — 914 928 Share-based payment expense — — — 263 — — — 263 Exercise of stock options and vesting of restricted stock units 38 — — 8 — — — 8 Withholding taxes on net share settlement of stock-based compensation — — — ( 150 ) — — — ( 150 ) Cash dividends paid on common stock, $ 0.04961 per share — — — ( 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 ) Common stock retired ( 364 ) ( 1 ) — ( 2,158 ) ( 364 ) 2,159 — — Balance at December 31, 2019 4,412 $ 4 $ 8 $ 395 — $ — $ ( 1,143 ) $ ( 736 ) Comprehensive income, net of tax — — 7 — — — 131 138 Share-based payment expense — — — 239 — — — 239 Exercise of stock options and vesting of restricted stock units 28 — — — — — — — Withholding taxes on net share settlement of stock-based compensation — — — ( 115 ) — — — ( 115 ) Cash dividends paid on common stock, $ 0.05457 per share — — — ( 170 ) — — ( 67 ) ( 237 ) Common stock repurchased — — — — 267 ( 1,574 ) — ( 1,574 ) Common stock retired ( 264 ) — — ( 349 ) ( 264 ) 1,555 ( 1,206 ) — Balance at December 31, 2020 4,176 $ 4 $ 15 $ — 3 $ ( 19 ) $ ( 2,285 ) $ ( 2,285 ) Comprehensive income, net of tax — — — — — — 1,314 1,314 Share-based payment expense — — — 215 — — — 215 Exercise of stock options and vesting of restricted stock units 38 — — 10 — — — 10 Withholding taxes on net share settlement of stock-based compensation — — — ( 103 ) — — — ( 103 ) Cash dividends paid on common stock, $ 0.0658845 per share — — — ( 126 ) — — ( 142 ) ( 268 ) Issuance of restricted stock units in connection with business acquisition — — — 4 — — — 4 Common stock repurchased — — — — 245 ( 1,512 ) — ( 1,512 ) Common stock retired ( 246 ) — — — ( 247 ) 1,523 ( 1,523 ) — Balance at December 31, 2021 3,968 $ 4 $ 15 $ — 1 $ ( 8 ) $ ( 2,636 ) $ ( 2,625 ) See accompanying notes to the consolidated financial statements. F-7 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, (in millions) 2021 2020 2019 Cash flows from operating activities: Net income $ 1,314 $ 131 $ 914 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 533 506 468 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 Amortization of deferred income related to equity method investment — ( 3 ) ( 3 ) Loss on extinguishment of debt 83 40 57 Loss on unconsolidated entity investments, net 18 16 21 Dividend received from unconsolidated entity investment 2 2 2 Gain on other investments ( 5 ) ( 3 ) ( 3 ) Share-based payment expense 202 223 250 Deferred income tax expense 131 238 259 Amortization of right-of-use assets 50 56 56 Changes in operating assets and liabilities: Receivables ( 108 ) ( 36 ) ( 137 ) Related party, net 7 — ( 10 ) Prepaid expenses and other current assets ( 47 ) 12 21 Other long-term assets ( 8 ) ( 61 ) 7 Accounts payable and accrued expenses 104 42 109 Accrued interest ( 1 ) 13 32 Deferred revenue ( 287 ) ( 223 ) ( 58 ) Operating lease liabilities ( 55 ) ( 53 ) ( 47 ) Other long-term liabilities ( 16 ) 38 9 Net cash provided by operating activities 1,998 2,018 2,017 Cash flows from investing activities: Additions to property and equipment ( 388 ) ( 350 ) ( 363 ) Proceeds from insurance recoveries 225 — — Purchases of other investments ( 4 ) ( 8 ) ( 7 ) Acquisition of business, net of cash acquired ( 14 ) ( 300 ) 313 Sale of short-term investments — — 73 Investments in related parties and other equity investees ( 21 ) ( 94 ) ( 19 ) Repayment from related party 2 11 — Net cash used in investing activities ( 200 ) ( 741 ) ( 3 ) Cash flows from financing activities: Proceeds from exercise of stock options 10 — 8 Taxes paid from net share settlements for stock-based compensation ( 103 ) ( 114 ) ( 150 ) Revolving credit facility, net ( 653 ) 649 ( 439 ) Proceeds from long-term borrowings, net of costs 4,442 1,481 2,715 Proceeds from sale of capped call security — — 3 Principal payments of long-term borrowings ( 3,503 ) ( 1,507 ) ( 1,666 ) 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 ) Dividends paid ( 268 ) ( 237 ) ( 226 ) Net cash used in financing activities ( 1,682 ) ( 1,314 ) ( 1,959 ) Net increase (decrease) in cash, cash equivalents and restricted cash 116 ( 37 ) 55 Cash, cash equivalents and restricted cash at beginning of period (1) 83 120 65 Cash, cash equivalents and restricted cash at end of period (1) $ 199 $ 83 $ 120 See accompanying notes to the consolidated financial statements. F-8 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued For the Years Ended December 31, (in millions) 2021 2020 2019 Supplemental Disclosure of Cash and Non-Cash Flow Information Cash paid during the period for: Interest, net of amounts capitalized $ 393 $ 358 $ 337 Income taxes paid $ 82 $ 38 $ 10 Non-cash investing and financing activities: Treasury stock not yet settled $ 11 $ ( 19 ) $ — Fair value of shares issued related to acquisition of a business $ — $ — $ 2,355 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. The restricted cash balances are primarily due to letters of credit which have been issued to the landlords of leased office space. The terms of the letters of credit primarily extend beyond one year. (in millions) December 31, 2021 December 31, 2020 December 31, 2019 December 31, 2018 Cash and cash equivalents $ 191 $ 71 $ 106 $ 54 Restricted cash included in Other long-term assets 8 12 14 11 Total cash, cash equivalents and restricted cash at end of period $ 199 $ 83 $ 120 $ 65 See accompanying notes to the consolidated financial statements. F-9 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars and shares in millions, except per share amounts) (1) Business & Basis of Presentation This Annual Report on Form 10-K presents information for Sirius XM Holdings Inc. and its subsidiaries (collectively “Holdings”). The terms “Holdings,” “we,” “us,” “our,” and “our company” as used herein, and unless otherwise stated or indicated by context, refer to Sirius XM Holdings Inc. and its subsidiaries. “Sirius XM” refers to our wholly owned subsidiary Sirius XM Radio 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. Business We operate two complementary audio entertainment businesses - our Sirius XM business and our Pandora business. Sirius XM 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 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. Satellite radios are primarily distributed through automakers, retailers and our website. Our Sirius XM service is also available through our user interface, which we call “360L,” that combines our satellite and streaming services into a single, cohesive in-vehicle entertainment experience. 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, 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. In addition to our audio entertainment businesses, we provide connected vehicle services to several automakers. These services are designed to enhance the safety, security and driving experience of consumers. 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. Sirius XM also holds a 70 % equity interest and 33 % voting interest in Sirius XM Canada Holdings Inc. (“Sirius XM Canada”). Sirius XM Canada's subscribers are not included in our subscriber count or subscriber-based operating metrics. Pandora Our Pandora business operates a music, comedy and podcast streaming discovery platform, offering a personalized experience for each listener wherever and whenever they want to listen, whether through mobile devices, car speakers or connected devices. Pandora enables listeners to create personalized stations and playlists, discover new content, hear artist- and expert-curated playlists, podcasts and select Sirius XM content as well as search and play songs and albums on-demand. Pandora is available as (1) an ad-supported radio service, (2) a radio subscription service (Pandora Plus) and (3) an on-demand subscription service (Pandora Premium). 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 which is sold under the SXM Media brand. We also derive subscription revenue from our Pandora Plus and Pandora Premium subscribers. Our Pandora business also sells advertising on audio platforms and in podcasts unaffiliated with us. Pandora has an arrangement with SoundCloud Holdings, LLC ("SoundCloud") to be its exclusive US ad sales representative. Through this arrangement, Pandora is able to offer advertisers the ability to execute campaigns in the US across the Pandora and SoundCloud listening platforms. We also have arrangements to serve as the ad sales representative for certain podcasts. In addition, through F-10 Table of Contents 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 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. The minority investment complements the existing ad sales relationship between SoundCloud and Pandora. Refer to Note 12 for more information on this investment. 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 As of December 31, 2021, Liberty Media Corporation (“Liberty Media”) beneficially owned, directly and indirectly, approximately 81 % of the outstanding shares of our common stock. 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 The accompanying consolidated financial statements of Holdings have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All significant intercompany transactions have been eliminated in consolidation. Certain numbers in our prior period consolidated financial statements and footnotes have been reclassified or consolidated to conform to our current period presentation. Public companies are required to disclose certain information about their reportable operating segments. Operating segments are defined as significant components of an enterprise for which separate financial information is available and is evaluated on a regular basis by the chief operating decision maker in deciding how to allocate resources to an individual segment and in assessing performance of the segment. We have determined that we have two reportable segments as our chief operating decision maker, our Chief Executive Officer, assesses performance and allocates resources based on the financial results of these segments. Refer to Note 18 for information related to our segments. We have evaluated events subsequent to the balance sheet date and prior to the filing of this Annual Report on Form 10-K for the year ended December 31, 2021 and have determined that no events have occurred that would require adjustment to our consolidated financial statements. For a discussion of subsequent events that do not require adjustment to our consolidated financial statements refer to Note 19. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes. Estimates, by their nature, are based on judgment and available information. Actual results could differ materially from those estimates. 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. F-11 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) (2) Summary of Significant Accounting Policies In addition to the significant accounting policies discussed in this Note 2, the following table includes our significant accounting policies that are described in other notes to our consolidated financial statements, including the number and page of the note: Significant Accounting Policy Note # Page # Acquisition 3 F- 15 Fair Value Measurements 4 F- 18 Goodwill 8 F- 20 Intangible Assets 9 F- 21 Property and Equipment 10 F- 23 Equity Method Investments 12 F- 27 Share-Based Compensation 15 F- 32 Legal Reserves 16 F- 36 Income Taxes 17 F- 39 Cash and Cash Equivalents Our cash and cash equivalents consist of cash on hand, money market funds, certificates of deposit, in-transit credit card receipts and highly liquid investments purchased with an original maturity of three months or less. Revenue Recognition Revenue is measured according to Accounting Standards Codification (“ASC”) 606, Revenue - Revenue from Contracts with Customers , and is recognized based on consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. We recognize revenue when we satisfy a performance obligation by transferring control over a service or product to a customer. We report revenues net of any tax assessed by a governmental authority that is both imposed on, and concurrent with, a specific revenue-producing transaction between a seller and a customer in our consolidated statements of comprehensive income. Collected taxes are recorded within Other current liabilities until remitted to the relevant taxing authority. For equipment sales, we are responsible for arranging for shipping and handling. Shipping and handling costs billed to customers are recorded as revenue and are reported as a component of Cost of equipment. The following is a description of the principal activities from which we generate our revenue, including from self-pay and paid promotional subscribers, advertising, and sales of equipment. Subscriber revenue consists primarily of subscription fees and other ancillary subscription based revenues. Revenue is recognized on a straight line basis when the performance obligations to provide each service for the period are satisfied, which is over time as our subscription services are continuously transmitted and can be consumed by customers at any time. Consumers purchasing or leasing a vehicle with a factory-installed satellite radio may receive between a three and twelve month subscription to our service. In certain cases, the subscription fees for these consumers are prepaid by the applicable automaker. Prepaid subscription fees received from automakers or directly from consumers are recorded as deferred revenue and amortized to revenue ratably over the service period which commences upon sale. Activation fees are recognized over one month as the activation fees are non-refundable and do not provide for a material right to the customer. There is no revenue recognized for unpaid trial subscriptions. In some cases we pay a loyalty fee to the automakers when we receive a certain amount of payments from self-pay customers acquired from that automaker. These fees are considered incremental costs to obtain a contract and are, therefore, recognized as an asset and amortized to Subscriber acquisition costs over an average subscriber life. Revenue share and loyalty fees paid to an automaker offering a paid trial are accounted for as a reduction of revenue as the payment does not provide a distinct good or service. Music royalty fee primarily consists of U.S. music royalty fees (“MRF”) collected from subscribers. The related costs we incur for the right to broadcast music and other programming are recorded as Revenue share and royalties expense. Fees F-12 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES 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. For our satellite radio service, ads are delivered when they are aired. For our streaming services, ads are delivered primarily based on impressions. Agency fees are calculated based on a stated percentage applied to gross billing revenue for our advertising inventory and are reported as a reduction of advertising revenue. Additionally, we pay certain third parties a percentage of advertising revenue. Advertising revenue is recorded gross of such revenue share payments as we control the advertising service, including the ability to establish pricing, and we are primarily responsible for providing the service. Advertising revenue share payments are recorded to Revenue share and royalties during the period in which the advertising is transmitted. Equipment revenue and royalties from the sale of satellite radios, components and accessories are recognized upon shipment, net of discounts and rebates. Shipping and handling costs billed to customers are recorded as revenue. Shipping and handling costs associated with shipping goods to customers are reported as a component of Cost of equipment. Other revenue primarily includes revenue recognized from royalties received from Sirius XM Canada. Customers pay for the services in advance of the performance obligation and therefore these prepayments are recorded as deferred revenue. The deferred revenue is recognized as revenue in our consolidated statement of comprehensive income as the services are provided. Changes in the deferred revenue balance during the year ended December 31, 2021 were not materially impacted by other factors. 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, 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. These amounts are recognized on a straight-line basis as our services are provided. Revenue Share We share a portion of our subscription revenues earned from self-pay subscribers with certain automakers. The terms of the revenue share agreements vary with each automaker, but are typically based upon the earned audio revenue as reported or gross billed audio revenue. Revenue share on self-pay revenue is recognized as an expense and recorded in Revenue share and royalties in our consolidated statements of comprehensive income. We also pay revenue share to certain talent on non-music stations on our satellite radio service and to podcast talent based on advertising revenue for the related channel or podcast. 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 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. The prepaid balance is regularly reviewed for recoverability and any amount not deemed to be recoverable is recognized as an expense in the period. Royalties In connection with our businesses, we must enter into royalty arrangements with two sets of rights holders: holders of musical compositions copyrights (that is, the music and lyrics) and holders of sound recordings copyrights (that is, the actual recording of a work). Our Sirius XM and Pandora businesses use both statutory and direct music licenses as part of their businesses. We license varying rights - such as performance and mechanical rights - for use in our Sirius XM and Pandora businesses based on the various radio and interactive services they offer. The music rights licensing arrangements for our Sirius XM and Pandora businesses are complex. Musical Composition Copyrights 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 F-13 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES 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. Arrangements with Sirius XM generally include fixed payments during the term of the agreement and arrangements with Pandora for its ad-supported radio service have variable payments based on usage and ownership of a royalty pool. Pandora must also license reproduction rights, which are also referred to as mechanical rights, to offer the interactive features of the Pandora services. For our Pandora subscription services, copyright holders receive payments for these rights at the rates determined in accordance with the statutory license set forth in Section 115 of the United States Copyright Act. These mechanical royalties are calculated as the greater of a percentage of our revenue or a percentage of our payments to record labels. Sound Recording Copyrights For our non-interactive satellite radio or streaming services we may license sound recordings under direct licenses with the owners of sound recordings or based on the royalty rate established by the CRB. For our Sirius XM business, the royalty rate for sound recordings has been set by the CRB. The revenue subject to royalty includes subscription revenue from our U.S. satellite digital audio radio subscribers, and advertising revenue from channels other than those channels that make only incidental performances of 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. For sound recordings that we stream and for which we have not entered into a direct license agreement with the sound recording rights holders, the sound recordings are streamed pursuant to the statutory royalty rates set by the CRB. Pandora pays royalties to owners of sound recordings on either a per-performance fee based on the number of sound recordings transmitted or a percentage of revenue associated with the applicable service. Certain of these agreements also require Pandora to pay a per subscriber minimum amount. Programming Costs Programming costs which are for a specified number of events are amortized on an event-by-event basis; programming costs which are for a specified season or include programming through a dedicated channel are amortized over the season or period on a straight-line basis. We allocate a portion of certain programming costs which are related to sponsorship and marketing activities to Sales and marketing expense on a straight-line basis over the term of the agreement. Advertising Costs Media is expensed when aired and advertising production costs are expensed as incurred. Advertising production costs include expenses related to marketing and retention activities, including expenses related to direct mail, outbound telemarketing and email communications. We also incur advertising production costs related to cooperative marketing and promotional events and sponsorships. During the years ended December 31, 2021, 2020 and 2019, we recorded advertising costs of $ 515 , $ 443 and $ 392 , respectively. These costs are reflected in Sales and marketing expense in our consolidated statements of comprehensive income. Subscriber Acquisition Costs Subscriber acquisition costs consist of costs incurred to acquire new subscribers which include hardware subsidies paid to radio manufacturers, distributors and automakers, including subsidies paid to automakers who include a satellite radio and a prepaid subscription to our service in the sale or lease price of a new vehicle; subsidies paid for chipsets and certain other components used in manufacturing radios; device royalties for certain radios and chipsets; commissions paid to retailers and automakers as incentives to purchase, install and activate radios; product warranty obligations; freight; and provisions for inventory allowance attributable to inventory consumed in our automotive and retail distribution channels. Subscriber F-14 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES 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. Commissions paid to retailers and automakers are expensed upon either the sale or activation of radios. Chipsets that are shipped to radio manufacturers and held on consignment are recorded as inventory and expensed as Subscriber acquisition costs when placed into production by radio manufacturers. Costs for chipsets are expensed as Subscriber acquisition costs when the automaker confirms receipt. Research & Development Costs Research and development costs are expensed as incurred and primarily include the cost of new product development, chipset design, software development and engineering. During the years ended December 31, 2021, 2020 and 2019, we recorded research and development costs of $ 229 , $ 220 and $ 231 , respectively. These costs are reported as a component of Engineering, design and development expense in our consolidated statements of comprehensive income. 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, 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 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 . Stitcher 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, 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 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. Stitcher is included in our Pandora reporting unit. F-15 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) The table below summarizes the fair value of the assets acquired and liabilities assumed as of the acquisition date: Acquired Assets: Receivables, net $ 21 Prepaid expenses and other current assets 16 Property and equipment 8 Intangible assets 38 Goodwill 224 Operating lease right-of-use assets 11 Total assets $ 318 Assumed Liabilities: Accounts payable and accrued expenses $ 4 Deferred revenue 1 Operating lease current liabilities 2 Operating lease liabilities 9 Total liabilities $ 16 Total consideration $ 302 The Stitcher acquisition was accounted for using the acquisition method of accounting and was financed through borrowings under Sirius XM's Credit Facility. Simplecast 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 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 . Pandora 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”). In connection with the Pandora Acquisition, we purchased all of the outstanding shares of the capital stock of Pandora for $ 2,355 by converting each outstanding share of Pandora common stock into 1.44 shares of our common stock and we also canceled our preferred stock investment in Pandora for $ 524 for total consideration of $ 2,879 . Net cash acquired was $ 313 . As part of the Pandora Acquisition, Holdings unconditionally guaranteed all of the payment obligations of Pandora under its outstanding 1.75 % convertible senior notes due 2020 and 1.75 % convertible senior notes due 2023. F-16 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) The table below shows the value of the consideration paid in connection with the Pandora Acquisition: Total Pandora common stock outstanding 272 Exchange ratio 1.44 Common stock issued 392 Price per share of Holdings common stock $ 5.83 Value of common stock issued to Pandora stockholders $ 2,285 Value of replacement equity awards attributable to pre-combination service $ 70 Consideration of common stock and replacement equity awards for pre-combination service $ 2,355 Sirius XM’s Pandora preferred stock investment (related party fair value instrument) canceled $ 524 Total consideration for Pandora Acquisition $ 2,879 Value attributed to par at $ 0.001 par value $ 1 Balance to capital in excess of par value $ 2,354 The table below summarizes the fair value of the assets acquired and liabilities assumed as of the acquisition date: Acquired Assets: Cash and cash equivalents $ 313 Receivables, net 353 Prepaid expenses and other current assets 109 Property and equipment 65 Intangible assets 1,107 Goodwill 1,553 Deferred tax assets 102 Operating lease right-of-use assets 104 Long term assets 7 Total assets $ 3,713 Assumed Liabilities: Accounts payable and accrued expenses $ 324 Deferred revenue 37 Operating lease current liabilities 28 Current maturities of debt 151 Long-term debt (a) 218 Operating lease liabilities 69 Other long-term liabilities 7 Total liabilities $ 834 Total consideration $ 2,879 (a) In order to present the assets acquired and liabilities assumed, the conversion feature associated with Pandora's convertible notes for $ 62 has been included within Long-term debt in the table above and included within Additional paid-in-capital within our statement of stockholders' equity (deficit). Refer to Note 13 for additional information. The Pandora Acquisition was accounted for using the acquisition method of accounting. The excess purchase price over identifiable net tangible and intangible assets of $ 1,553 was recorded to Goodwill in our consolidated balance sheets as of December 31, 2019. Refer to Note 8 for a further discussion of Pandora goodwill which was impaired in the year ended December 31, 2020. A total of $ 776 has been allocated to identifiable intangible assets subject to amortization and relates to the assessed fair value of the acquired customer relationships and software and technology and is being amortized over the estimated weighted average useful lives of 8 and 5 years, respectively. A total of $ 331 has been allocated to identifiable F-17 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) indefinite lived intangible assets and relates to the assessed fair value of the acquired trademarks. The fair value assessed for the majority of the remaining assets acquired and liabilities assumed equaled their carrying value. Goodwill represents synergies and economies of scale expected from the combination of services. Goodwill has been allocated to the Pandora segment. Additionally, in connection with the Pandora Acquisition, we acquired gross net operating loss (“NOL”) carryforwards of approximately $ 1,287 for federal income tax purposes that are available to offset future taxable income. The acquired NOL's are limited by Section 382 of the Internal Revenue Code. 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 related to the Pandora Acquisition during the year ended December 31, 2019. Pro Forma Financial Information Pandora was consolidated into our financial statements starting on the acquisition date, February 1, 2019. The aggregate revenue and net loss of Pandora consolidated into our financial statements was $ 1,607 and $ 303 , respectively, for the year ended December 31, 2019. The following pro forma financial information presents our results as if the Pandora Acquisition had occurred on January 1, 2019: For the Years Ended December 31, 2021 2020 2019 Total revenue $ 8,696 $ 8,046 $ 7,921 Net income $ 1,314 $ 131 $ 938 These pro forma results are based on estimates and assumptions, which we believe are reasonable. They are not the results that would have been realized had the acquisition actually occurred on January 1, 2019 and are not indicative of our consolidated results of operations in future periods. The pro forma results primarily include adjustments related to amortization of acquired intangible assets, depreciation of property and equipment, acquisition costs, fair value gain or loss on the Pandora investment and associated tax impacts. (4) Fair Value Measurements The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants. As of December 31, 2021 and 2020, the carrying amounts of cash and cash equivalents, receivables, and accounts payable approximated fair value due to the short-term nature of these instruments. ASC 820, Fair Value Measurements and Disclosures , establishes a fair value hierarchy for input into valuation techniques as follows: i. Level 1 input: unadjusted quoted prices in active markets for identical instrument; ii. Level 2 input: observable market data for the same or similar instrument but not Level 1, including quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and iii. Level 3 input: unobservable inputs developed using management's assumptions about the inputs used for pricing the asset or liability. Investments are periodically reviewed for impairment and an impairment is recorded whenever declines in fair value below carrying value are determined to be other than temporary. In making this determination, we consider, among other factors, the severity and duration of the decline as well as the likelihood of a recovery within a reasonable timeframe. Our assets and liabilities measured at fair value were as follows: December 31, 2021 December 31, 2020 Level 1 Level 2 Level 3 Total Fair Value Level 1 Level 2 Level 3 Total Fair Value Liabilities: Debt (a) — $ 9,052 — $ 9,052 — $ 9,011 — $ 9,011 F-18 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) (a) The fair value for non-publicly traded instruments is based upon estimates from a market maker and brokerage firm. Refer to Note 13 for information related to the carrying value of our debt as of December 31, 2021 and 2020. (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 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. We did no t record any restructuring expenses during the year ended December 31, 2019. (6) Earnings per Share Basic net income per common share is calculated by dividing the income available to common stockholders by the weighted average common shares outstanding during each reporting period. Diluted net income per common share adjusts the weighted average number of common shares outstanding for the potential dilution that could occur if common stock equivalents (stock options, restricted stock units and convertible debt) were exercised or converted into common stock, calculated using the treasury stock method. We had no participating securities during the years ended December 31, 2021, 2020 and 2019. 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. For the Years Ended December 31, 2021 2020 2019 Numerator: Net Income available to common stockholders for basic net income per common share $ 1,314 $ 131 $ 914 Effect of interest on assumed conversions of convertible notes, net of tax 8 8 7 Net Income available to common stockholders for dilutive net income per common share $ 1,322 $ 139 $ 921 Denominator: Weighted average common shares outstanding for basic net income per common share 4,062 4,330 4,501 Weighted average impact of assumed convertible notes 30 30 28 Weighted average impact of dilutive equity instruments 51 69 87 Weighted average shares for diluted net income per common share 4,143 4,429 4,616 Net income per common share: Basic $ 0.32 $ 0.03 $ 0.20 Diluted $ 0.32 $ 0.03 $ 0.20 F-19 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) (7) Receivables, net Receivables, net, includes customer accounts receivable, receivables from distributors and other receivables. 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 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. We consider historical experience, the age of the receivable balances, current economic conditions, industry experience and other factors that may affect the counterparty’s ability to pay. Bad debt expense is included in Customer service and billing expense in our consolidated statements of comprehensive income. 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. Other receivables primarily include amounts due from manufacturers of our radios, modules and chipsets where we are entitled to subsidies and royalties based on the number of units produced. We have not established an allowance for doubtful accounts for our receivables from distributors or other receivables as we have historically not experienced any significant collection issues with automakers or other third parties and do not expect issues in the foreseeable future. Receivables, net, consists of the following: December 31, 2021 December 31, 2020 Gross customer accounts receivable $ 636 $ 574 Allowance for doubtful accounts ( 10 ) ( 15 ) Customer accounts receivable, net $ 626 $ 559 Receivables from distributors 62 73 Other receivables 34 40 Total receivables, net $ 722 $ 672 (8) Goodwill 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. Our annual impairment assessment of our two reporting units is performed as of the fourth quarter of each year, and an assessment is performed at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. ASC 350, Intangibles - Goodwill and Other , states that an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. ASC 350 also states that a reporting unit with a zero or negative carrying amount is not required to perform a qualitative assessment. Our Sirius XM reporting unit, which has an allocated goodwill balance of $ 2,290 , had a negative carrying amount as of December 31, 2021. 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 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 F-20 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) 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 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 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 Balance at December 31, 2021 $ 2,290 $ 861 $ 3,151 (9) Intangible Assets Our intangible assets include the following: December 31, 2021 December 31, 2020 Weighted Average Useful Lives Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value Indefinite life intangible assets: FCC licenses Indefinite $ 2,084 $ — $ 2,084 $ 2,084 $ — $ 2,084 Trademarks Indefinite 250 — 250 250 — 250 Definite life intangible assets: OEM relationships 15 years 220 ( 120 ) 100 220 ( 105 ) 115 Licensing agreements 12 years 45 ( 45 ) — 45 ( 45 ) — Software and technology 7 years 31 ( 19 ) 12 31 ( 16 ) 15 Due to Pandora and Stitcher Acquisitions: Indefinite life intangible assets: Trademarks Indefinite 311 — 311 311 — 311 Definite life intangible assets: Customer relationships 8 years 441 ( 164 ) 277 441 ( 104 ) 337 Software and technology 5 years 373 ( 221 ) 152 373 ( 145 ) 228 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. F-21 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) We hold FCC licenses to operate our satellite digital audio radio service and provide ancillary services. Each of the FCC licenses authorizes us to use radio spectrum, a reusable resource that does not deplete or exhaust over time. ASC 350-30-35, Intangibles - Goodwill and Other , provides for an option to first perform a qualitative assessment to determine whether it is more likely than not that an asset is impaired. If the qualitative assessment supports that it is more likely than not that the fair value of the asset exceeds its carrying value, a quantitative impairment test is not required. If the qualitative assessment does not support the fair value of the asset, then a quantitative assessment is performed. Our annual impairment assessment of our identifiable indefinite lived intangible assets is performed as of the fourth quarter of each year. An assessment is performed at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of the asset below its carrying value. 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 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 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. 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 year ended December 31, 2019. Definite Life Intangible Assets Definite-lived intangible assets are amortized over their respective estimated useful lives to their estimated residual values, in a pattern that reflects when the economic benefits will be consumed, and are reviewed for impairment under the provisions of ASC 360-10-35, Property, Plant and Equipment/Overall/Subsequent Measurement . We review intangible assets subject to amortization for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted and without interest, is less than the carrying amount of the asset, an impairment loss is recognized in an amount by which the carrying amount of the asset exceeds its fair value. No impairment loss was recognized for intangible assets with definite lives during the years ended December 31, 2021, 2020 and 2019. Amortization expense for all definite life intangible assets was $ 154 , $ 152 , and $ 141 for the years ended December 31, 2021, 2020 and 2019, respectively. 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. There were no retirements of definite lived intangible assets during the year ended December 31, 2021. F-22 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) The expected amortization expense for each of the fiscal years 2022 through 2026 and for periods thereafter is as follows: Years ending December 31, Amount 2022 $ 153 2023 141 2024 75 2025 69 2026 68 Thereafter 35 Total definite life intangible assets, net $ 541 (10) Property and Equipment Property and equipment, including satellites, are stated at cost, less accumulated depreciation. Equipment under capital leases is stated at the present value of minimum lease payments. Depreciation is calculated using the straight-line method over the following estimated useful life of the asset: Satellite system 15 years Terrestrial repeater network 5 - 15 years Broadcast studio equipment 3 - 15 years Capitalized software and hardware 2 - 7 years Satellite telemetry, tracking and control facilities 3 - 15 years Furniture, fixtures, equipment and other 2 - 7 years Building 20 or 30 years Leasehold improvements Lesser of useful life or remaining lease term We review long-lived assets, such as property and equipment, for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. 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. F-23 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) Property and equipment, net, consists of the following: December 31, 2021 December 31, 2020 Satellite system $ 1,841 $ 1,587 Terrestrial repeater network 116 105 Leasehold improvements 109 111 Broadcast studio equipment 119 100 Capitalized software and hardware 1,591 1,372 Satellite telemetry, tracking and control facilities 67 96 Furniture, fixtures, equipment and other 92 92 Land 38 38 Building 81 63 Construction in progress 156 510 Total property and equipment 4,210 4,074 Accumulated depreciation ( 2,760 ) ( 2,445 ) Property and equipment, net $ 1,450 $ 1,629 Construction in progress consists of the following: December 31, 2021 December 31, 2020 Satellite system $ 64 $ 429 Terrestrial repeater network 1 8 Capitalized software and hardware 78 52 Other 13 21 Construction in progress $ 156 $ 510 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 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. Capitalized interest is recorded as part of the asset’s cost and depreciated over the satellite’s useful life. Capitalized interest costs were $ 7 , $ 19 , and $ 17 for the years ended December 31, 2021, 2020 and 2019, respectively, which related to the construction of our SXM-7 and SXM-8 satellites. We also capitalize a portion of share-based compensation related to employee time for capitalized software projects. Capitalized share-based compensation costs were $ 13 , $ 17 and $ 13 for the years ended December 31, 2021, 2020 and 2019, respectively. F-24 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) 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. The renewal and extension of our licenses is reasonably certain at minimal cost, which is expensed as incurred. The chart below provides certain information on our satellites as of December 31, 2021: Satellite Description Year Delivered Estimated End of Depreciable Life FCC License Expiration Year SIRIUS FM-5 2009 2024 2025 SIRIUS FM-6 2013 2028 2022 XM-3 2005 2020 2026 XM-4 2006 2021 2022 XM-5 2010 2025 2026 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. (11) Leases We have operating and finance leases for offices, terrestrial repeaters, data centers and certain equipment. Our leases have remaining lease terms of less than 1 year to 20 years, some of which may include options to extend the leases for up to 5 years, and some of which may include options to terminate the leases within 1 year. We elected the practical expedient to account for the lease and non-lease components as a single component. 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. F-25 Table of Contents 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: For the Years Ended December 31, 2021 2020 Operating lease cost $ 76 $ 82 Finance lease cost 1 1 Sublease income ( 4 ) ( 2 ) Total lease cost $ 73 $ 81 Supplemental cash flow information related to leases was as follows: For the Years Ended December 31, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 82 $ 79 Financing cash flows from finance leases $ 1 $ 1 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 3 $ 7 Supplemental balance sheet information related to leases was as follows: December 31, 2021 December 31, 2020 Operating Leases Operating lease right-of-use assets $ 358 $ 427 Operating lease current liabilities 49 48 Operating lease liabilities 362 419 Total operating lease liabilities $ 411 $ 467 December 31, 2021 December 31, 2020 Finance Leases Property and equipment, gross $ 9 $ 8 Accumulated depreciation ( 8 ) ( 7 ) Property and equipment, net $ 1 $ 1 Current maturities of debt $ — $ 1 Long-term debt — — Total finance lease liabilities $ — $ 1 December 31, 2021 December 31, 2020 Weighted Average Remaining Lease Term Operating leases 8 years 9 years Finance leases 0 years 1 year F-26 Table of Contents 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 Weighted Average Discount Rate Operating leases 5.3 % 5.3 % Finance leases — % 1.7 % Maturities of lease liabilities were as follows: Operating Leases Finance Leases Year ending December 31, 2022 $ 69 $ — 2023 71 — 2024 61 — 2025 60 — 2026 58 — Thereafter 187 — Total future minimum lease payments 506 — Less imputed interest ( 95 ) — Total $ 411 $ — (12) Related Party Transactions In the normal course of business, we enter into transactions with related parties such as Sirius XM Canada and SoundCloud. Liberty Media 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 three of its executives and one of its directors on our board of directors. Gregory B. 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. 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, 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 Sirius XM holds a 70 % equity interest and 33 % voting interest in Sirius XM Canada, a privately held corporation. We own 591 shares of preferred stock of Sirius XM Canada, which has a liquidation preference of one Canadian dollar per share. Sirius XM also made a loan to Sirius XM Canada in the aggregate amount of $ 131 . The loan is denominated in Canadian dollars and is considered a long-term investment with any unrealized gains or losses reported within Accumulated other comprehensive (loss) income. 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. F-27 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES 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. Each agreement has a thirty-year term. Pursuant to the Services Agreement, Sirius XM Canada currently pays Sirius XM 25 % of its gross revenues on a monthly basis, and pursuant to the Advisory Services Agreement, Sirius XM Canada pays Sirius XM 5 % of its gross revenues on a monthly basis. Sirius XM Canada is accounted for as an equity method investment, and its results are not consolidated in our consolidated financial statements. Sirius XM Canada does not meet the requirements for consolidation as we do not have the ability to direct the most significant activities that impact Sirius XM Canada's economic performance. Our related party long-term assets as of December 31, 2021 and December 31, 2020 included the carrying value of our investment balance in Sirius XM Canada of $ 334 and $ 332 , respectively, and, as of December 31, 2021 and December 31, 2020, also included $ 120 and $ 123 , respectively, for the long-term value of the outstanding loan to Sirius XM Canada. Sirius XM Canada paid gross dividends to us of $ 2 during each of the years ended December 31, 2021, 2020 and 2019. 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 $ 101 , $ 97 and $ 98 for the years ended December 31, 2021, 2020 and 2019, respectively. SoundCloud 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 sheets. Sirius XM has appointed two individuals to serve on SoundCloud's nine -member board of managers. 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. Through this arrangement, Pandora offers advertisers the ability to execute campaigns in the US across the Pandora and SoundCloud listening platforms. 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 each of December 31, 2021 and 2020, related to this agreement. F-28 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) (13) Debt Our debt as of December 31, 2021 and December 31, 2020 consisted of the following: Principal Amount at Carrying value (a) at Issuer / Borrower Issued Debt Maturity Date Interest Payable December 31, 2021 December 31, 2021 December 31, 2020 Sirius XM (b) (f) July 2017 3.875 % Senior Notes August 1, 2022 semi-annually on February 1 and August 1 $ — $ — $ 997 Pandora (c) (d) June 2018 1.75 % Convertible Senior Notes December 1, 2023 semi-annually on June 1 and December 1 193 177 170 Sirius XM (b) (f) July 2019 4.625 % Senior Notes July 15, 2024 semi-annually on January 15 and July 15 — — 1,488 Sirius XM (b) (f) May 2016 5.375 % Senior Notes July 15, 2026 semi-annually on January 15 and July 15 — — 993 Sirius XM (b) (g) August 2021 3.125 % Senior Notes September 1, 2026 semi-annually on March 1 and September 1 1,000 990 — Sirius XM (b) July 2017 5.00 % Senior Notes August 1, 2027 semi-annually on February 1 and August 1 1,500 1,491 1,490 Sirius XM (b) (g) June 2021 4.00 % Senior Notes July 15, 2028 semi-annually on January 15 and July 15 2,000 1,979 — Sirius XM (b) June 2019 5.500 % Senior Notes July 1, 2029 semi-annually on January 1 and July 1 1,250 1,239 1,237 Sirius XM (b) June 2020 4.125 % Senior Notes July 1, 2030 semi-annually on January 1 and July 1 1,500 1,485 1,484 Sirius XM (b) (g) August 2021 3.875 % Senior Notes September 1, 2031 semi-annually on March 1 and September 1 1,500 1,484 — Sirius XM (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 Total Debt 8,845 8,509 Less: total current maturities — 1 Less: total deferred financing costs 13 9 Total long-term debt $ 8,832 $ 8,499 (a) The carrying value of the obligations is net of any remaining unamortized original issue discount. (b) All material domestic subsidiaries, including Pandora and its subsidiaries, that guarantee the Credit Facility have guaranteed these notes. (c) Holdings has unconditionally guaranteed all of the payment obligations of Pandora under 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. in 2019. We allocate the principal amount of the 1.75 % Convertible Senior Notes due 2023 between the liability and equity components. The value assigned to the debt components of the 1.75 % Convertible Senior Notes due 2023 is the estimated fair value as of the issuance date of similar debt without the conversion feature. The difference between the fair value of the debt and this estimated fair value represents the value which has been assigned to the equity component. 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 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, F-29 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) 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. Sirius XM is also required to pay a variable fee on the average daily unused portion of the Credit Facility which is payable on a quarterly basis. The variable rate for the unused portion of the Credit Facility was 0.25 % per annum as of December 31, 2021. All of Sirius XM's outstanding borrowings under the Credit Facility are classified as Long-term debt within our consolidated balance sheets due to the long-term maturity of this debt. 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. (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 . Retired Debt 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 Under the Credit Facility, Sirius XM, our wholly owned subsidiary, must comply with a debt maintenance covenant that it cannot exceed a total leverage ratio, calculated as consolidated total debt to consolidated operating cash flow, of 5.0 to 1.0 . The Credit Facility generally requires compliance with certain covenants that restrict Sirius XM's ability to, among other things, (i) incur additional indebtedness, (ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions with affiliates, (v) merge or consolidate with another person, (vi) sell, assign, lease or otherwise dispose of all or substantially all of Sirius XM's assets, and (vii) make voluntary prepayments of certain debt, in each case subject to exceptions. The indentures governing Sirius XM's notes restrict Sirius XM's non-guarantor subsidiaries' ability to create, assume, incur or guarantee additional indebtedness without such non-guarantor subsidiary guaranteeing each such series of notes on a pari passu basis. The indentures governing the notes also contain covenants that, among other things, limit Sirius XM's ability and the ability of its subsidiaries to create certain liens; enter into sale/leaseback transactions; and merge or consolidate. Under Sirius XM's debt agreements, the following generally constitute an event of default: (i) a default in the payment of interest; (ii) a default in the payment of principal; (iii) failure to comply with covenants; (iv) failure to pay other indebtedness after final maturity or acceleration of other indebtedness exceeding a specified amount; (v) certain events of bankruptcy; (vi) a judgment for payment of money exceeding a specified aggregate amount; and (vii) voidance of subsidiary guarantees, subject to grace periods where applicable. If an event of default occurs and is continuing, our debt could become immediately due and payable. F-30 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES 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. Pandora Convertible Notes Pandora's 1.75 % Convertible Senior Notes due 2023 (the “Pandora 2023 Notes”) are unsecured, senior obligations of Pandora. Holdings has guaranteed the payment and performance obligations of Pandora under the Pandora 2023 Notes and the indenture governing the Pandora 2023 Notes. 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, 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 Common Stock, par value $ 0.001 per share We are authorized to issue up to 9,000 shares of common stock. There were 3,968 and 4,176 shares of common stock issued and 3,967 and 4,173 shares of common stock outstanding on December 31, 2021 and December 31, 2020, respectively. As of December 31, 2021, there were 241 shares of common stock reserved for issuance in connection with outstanding stock-based awards to members of our board of directors, employees and third parties. Quarterly Dividends During the year ended December 31, 2021, we declared and paid the following dividends: Declaration Date Dividend Per Share Record Date Total Amount Payment Date January 28, 2021 $ 0.014641 February 10, 2021 $ 61 February 26, 2021 April 20, 2021 $ 0.014641 May 7, 2021 $ 60 May 28, 2021 July 19, 2021 $ 0.014641 August 6, 2021 $ 59 August 30, 2021 October 25, 2021 $ 0.0219615 November 5, 2021 $ 88 November 29, 2021 Stock Repurchase Program As of December 31, 2021, our board of directors had approved for repurchase an aggregate of $ 18,000 of our common stock. Our board of directors did not establish an end date for this stock repurchase program. Shares of common stock may be purchased from time to time on the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act, in privately negotiated transactions, including transactions with Liberty Media and its affiliates, or otherwise. 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. F-31 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES 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: December 31, 2021 December 31, 2020 December 31, 2019 Share Repurchase Type Shares Amount Shares Amount Shares Amount Open Market Repurchases (a) 245 $ 1,512 267 $ 1,574 364 $ 2,159 (a) As of December 31, 2021, $ 8 of common stock repurchases had not settled, nor been retired, and were recorded as Treasury stock within our consolidated balance sheets and consolidated statement of stockholders’ equity (deficit). Preferred Stock, par value $ 0.001 per share We are authorized to issue up to 50 shares of undesignated preferred stock with a liquidation preference of $ 0.001 per share. There were no shares of preferred stock issued or outstanding as of December 31, 2021 and December 31, 2020. (15) Benefit Plans 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 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 . ASC 718 requires all share-based compensation payments to be recognized in the financial statements based on fair value. 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 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. Fair value as determined using the Black-Scholes-Merton model varies based on assumptions used for the expected life, expected stock price volatility, expected dividend yield and risk-free interest rates. For the years ended December 31, 2021, 2020 and 2019, we estimated the fair value of awards granted using the hybrid approach for volatility, which weights observable historical volatility and implied volatility of qualifying actively traded options on our common stock. The expected life assumption represents the weighted-average period stock-based awards are expected to remain outstanding. These expected life assumptions are established through a review of historical exercise behavior of stock-based award grants with similar vesting periods. Where historical patterns do not exist for non-employees, contractual terms are used. Dividend yield is based on the current expected annual dividend per share and our stock price. The risk-free interest rate represents the daily treasury yield curve rate at the grant date based on the closing market bid yields on actively traded U.S. treasury securities in the over-the-counter market for the expected term. Our assumptions may change in future periods. 2015 Long-Term Stock Incentive Plan In May 2015, our stockholders approved the Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan (the “2015 Plan”). Employees, consultants and members of our board of directors are eligible to receive awards under the 2015 Plan. The 2015 Plan provides for the grant of stock options, restricted stock awards, restricted stock units and other stock-based awards that the Compensation Committee of our Board of Directors deems appropriate. Stock-based awards granted under the 2015 Plan are generally subject to a graded vesting requirement, which is generally three to four years from the grant date. Stock options generally expire ten years from the date of grant. 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 F-32 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES 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 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. 2004 Stock Plan and the TheSavageBeast.com, Inc. 2000 Stock Incentive Plan, which were previously approved by stockholders of Pandora or the applicable adopting entity. All shares available under these stock plans became additional shares available for grant pursuant to the terms of the 2015 Plan (as adjusted, to the extent appropriate, to reflect the application of the exchange ratio). Subject to certain limitations set forth in the 2015 Plan, such shares may be used for awards under the 2015 Plan. Other Plans We maintain six share-based benefit plans in addition to the 2015 Plan — the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan, the Amended and Restated Sirius Satellite Radio 2003 Long-Term Stock Incentive Plan, the 2014 Stock Incentive Plan of AdsWizz Inc., the Pandora Media, Inc. 2011 Equity Incentive Plan, the Pandora Media, Inc. 2004 Stock Plan and the TheSavageBeast.com, Inc. 2000 Stock Incentive Plan. 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, members of our board of directors and non-employees: For the Years Ended December 31, 2021 2020 2019 Risk-free interest rate 0.6 % 1.0 % 2.4 % Expected life of options — years 6.06 3.91 3.41 Expected stock price volatility 33 % 28 % 26 % Expected dividend yield 1.0 % 0.8 % 0.8 % F-33 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) The following table summarizes stock option activity under our share-based plans for the years ended December 31, 2021, 2020 and 2019: Options Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding at the beginning of January 1, 2019 243 $ 4.22 Awards granted in connection with acquisition 7 $ 3.85 Granted 15 $ 6.10 Exercised ( 53 ) $ 3.65 Forfeited, cancelled or expired ( 4 ) $ 5.58 Outstanding as of December 31, 2019 208 $ 4.46 Granted 11 $ 6.87 Exercised ( 33 ) $ 3.66 Forfeited, cancelled or expired ( 2 ) $ 6.28 Outstanding as of December 31, 2020 184 $ 4.73 Granted 54 $ 6.14 Exercised ( 72 ) $ 3.98 Forfeited, cancelled or expired ( 5 ) $ 6.73 Outstanding as of December 31, 2021 161 $ 5.47 5.74 $ 156 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, 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, 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. F-34 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) The following table summarizes the restricted stock unit, including PRSU, activity under our share-based plans for the years ended December 31, 2021, 2020 and 2019: 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 Vested ( 38 ) $ 5.53 Forfeited ( 8 ) $ 5.85 Nonvested as of December 31, 2019 75 $ 5.95 Granted 37 $ 6.14 Vested ( 32 ) $ 5.89 Forfeited ( 5 ) $ 6.00 Nonvested as of December 31, 2020 75 $ 6.06 Granted 40 $ 6.35 Vested ( 26 ) $ 6.02 Forfeited ( 9 ) $ 6.11 Nonvested as of December 31, 2021 80 $ 6.22 The total intrinsic value of restricted stock units, including PRSUs, vesting during the years ended December 31, 2021, 2020 and 2019 was $ 166 , $ 196 and $ 235 , respectively. 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, 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 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. We recognized share-based payment expense associated with restricted stock units, including PRSUs, of $ 160 , $ 178 and $ 190 for the years ended December 31, 2021, 2020 and 2019, respectively. Total unrecognized compensation costs related to unvested share-based payment awards for stock options and restricted stock units, including PRSUs, granted to employees, members of our board of directors and third parties at December 31, 2021 and December 31, 2020 was $ 455 and $ 385 , respectively. The total unrecognized compensation costs at December 31, 2021 are expected to be recognized over a weighted-average period of 2.5 years. 401(k) Savings Plans Sirius XM Radio Inc. 401(k) Savings Plan Sirius XM sponsors the Sirius XM Radio Inc. 401(k) Savings Plan (the “Sirius XM Plan”) for eligible employees. The Sirius XM Plan allows eligible employees to voluntarily contribute from 1 % to 50 % of their pre-tax eligible earnings, subject to certain defined limits. 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 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. F-35 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) 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. Sirius XM Holdings Inc. Deferred Compensation Plan The Sirius XM Holdings Inc. Deferred Compensation Plan (the “DCP”) allows members of our board of directors and certain eligible employees to defer all or a portion of their base salary, cash incentive compensation and/or board of directors’ cash compensation, as applicable. Pursuant to the terms of the DCP, we may elect to make additional contributions beyond amounts deferred by participants, but we are under no obligation to do so. 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, 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. 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 The following table summarizes our expected contractual cash commitments as of December 31, 2021: 2022 2023 2024 2025 2026 Thereafter Total Debt obligations $ — $ 193 $ — $ — $ 1,000 $ 7,750 $ 8,943 Cash interest payments 392 383 379 379 378 979 2,890 Satellite and transmission 114 141 120 27 1 9 412 Programming and content 496 395 247 128 50 148 1,464 Sales and marketing 67 21 4 3 3 3 101 Satellite incentive payments 7 7 8 7 4 19 52 Operating lease obligations 68 65 51 48 44 92 368 Royalties, minimum guarantees and other 303 498 26 8 1 2 838 Total (1) $ 1,447 $ 1,703 $ 835 $ 600 $ 1,481 $ 9,002 $ 15,068 (1) The table does not include our reserve for uncertain tax positions, which at December 31, 2021 totaled $ 35 . Debt obligations. Debt obligations include principal payments on outstanding debt and finance lease obligations. Cash interest payments. Cash interest payments include interest due on outstanding debt and capital lease payments through maturity. Satellite and transmission. 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. Programming and content. We have entered into various programming and content agreements. Under the terms of these agreements, our obligations include fixed payments, advertising commitments and revenue sharing arrangements. In certain of these agreements, the future revenue sharing costs are dependent upon many factors and are difficult to estimate; therefore, they are not included in our minimum contractual cash commitments. 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 F-36 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) these agreements. Certain programming and content agreements also require us to purchase advertising on properties owned or controlled by the licensors. Satellite incentive payments. Boeing Satellite Systems International, Inc., the manufacturer of certain of our in-orbit satellites, may be entitled to future in-orbit performance payments upon XM-4 meeting its fifteen-year design life, which we expect to occur. 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, SIRIUS FM-6, and SXM-8 meeting their fifteen-year design life, which we expect to occur. Operating lease obligations. We have entered into both cancelable and non-cancelable operating leases for office space, terrestrial repeaters, data centers and equipment. These leases provide for minimum lease payments, additional operating expense charges, leasehold improvements and rent escalations that have initial terms ranging from one to fifteen years , and certain leases have options to renew. Total rent recognized in connection with leases for the years ended December 31, 2021, 2020 and 2019 was $ 69 , $ 73 and $ 75 , respectively. Royalties, Minimum Guarantees and Other. We have entered into music royalty arrangements that include fixed 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. As of December 31, 2021, we had future fixed minimum guarantee commitments of $ 444 , of which $ 24 will be paid in 2022 and the remainder will be paid thereafter. On a quarterly basis, we record the greater of the cumulative actual content costs incurred or the cumulative minimum guarantee based on forecasted usage for the minimum guarantee period. The minimum guarantee period is the period of time that the minimum guarantee relates to, as specified in each agreement, which may be annual or a longer period. 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, 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. The cost of our common stock acquired in our capital return program but not paid for as of December 31, 2021 was also included in this category. In addition to the minimum contractual cash commitments described above, we have entered into other variable cost arrangements. These future costs are dependent upon many factors and are difficult to anticipate; however, these costs may be substantial. We may enter into additional programming, distribution, marketing and other agreements that contain similar variable cost provisions. 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 reasonably likely to have a material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources. Legal Proceedings In the ordinary course of business, we are a defendant or party to various claims and lawsuits, including those discussed below. We record a liability when we believe that it is both probable that a liability will be incurred, and the amount of loss can be reasonably estimated. We evaluate developments in legal matters that could affect the amount of liability that has been previously accrued and make adjustments as appropriate. 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 F-37 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) loss for a particular legal contingency for various reasons, including, among others, because: (i) the damages sought are indeterminate; (ii) the proceedings are in the relative early stages; (iii) there is uncertainty as to the outcome of pending proceedings (including motions and appeals); (iv) there is uncertainty as to the likelihood of settlement and the outcome of any negotiations with respect thereto; (v) there remain significant factual issues to be determined or resolved; (vi) the relevant law is unsettled; or (vii) the proceedings involve novel or untested legal theories. In such instances, there may be considerable uncertainty regarding the ultimate resolution of such matters, including the likelihood or magnitude of a possible eventual loss, if any. Pre-1972 Sound Recording Litigation. On October 2, 2014, Flo & Eddie Inc. filed a class action suit against Pandora in the federal district court for the Central District of California. The complaint alleges a violation of California Civil Code Section 980, unfair competition, misappropriation and conversion in connection with the public performance of sound recordings recorded prior to February 15, 1972 (which we refer to as, “pre-1972 recordings”). On December 19, 2014, Pandora filed a motion to strike the complaint pursuant to California’s Anti-Strategic Lawsuit Against Public Participation (“Anti-SLAPP”) statute, which following denial of Pandora’s motion was appealed to the Ninth Circuit Court of Appeals. In March 2017, the Ninth Circuit requested certification to the California Supreme Court on the substantive legal questions. The California Supreme Court accepted certification. In May 2019, the California Supreme Court issued an order dismissing consideration of the certified questions on the basis that, following the enactment of the Orrin G. Hatch-Bob Goodlatte Music Modernization Act, Pub. L. No. 115-264, 132 Stat. 3676 (2018) (the “MMA”), resolution of the questions posed by the Ninth Circuit Court of Appeals was no longer “necessary to . . . settle an important question of law.” The MMA grants a potential federal preemption defense to the claims asserted in the aforementioned lawsuits. In July 2019, Pandora took steps to avail itself of this preemption defense, including making the required payments under the MMA for certain of its uses of pre-1972 recordings. Based on the federal preemption contained in the MMA (along with other considerations), Pandora asked the Ninth Circuit to order the dismissal of the Flo & Eddie, Inc. v. Pandora Media, Inc. case. On October 17, 2019, the Ninth Circuit Court of Appeals issued a memorandum disposition concluding that the question of whether the MMA preempts Flo and Eddie's claims challenging Pandora's performance of pre-1972 recordings “depends on various unanswered factual questions” and remanded the case to the District Court for further proceedings. 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 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. On August 23, 2021, the United States Court of Appeals for the Ninth Circuit issued an Opinion in a related case, Flo & Eddie Inc. v. 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. v. Sirius XM Radio Inc. opinion, on September 3, 2021, the Ninth Circuit lifted the stay of appellate proceedings in Flo & Eddie, Inc. v. Pandora Media, LLC . The Flo & Eddie Inc. v. 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 . In the ordinary course of business, we are a defendant in various other lawsuits and arbitration proceedings, including derivative actions; actions filed by subscribers, both on behalf of themselves and on a class action basis; former employees; parties to contracts or leases; and owners of patents, trademarks, copyrights or other intellectual property. F-38 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) 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 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 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: For the Years Ended December 31, 2021 2020 2019 Current taxes: Federal $ ( 31 ) $ — $ — State ( 50 ) ( 61 ) ( 24 ) Total current taxes ( 81 ) ( 61 ) ( 24 ) Deferred taxes: Federal ( 210 ) ( 219 ) ( 229 ) State 79 ( 19 ) ( 30 ) Total deferred taxes ( 131 ) ( 238 ) ( 259 ) Total income tax expense $ ( 212 ) $ ( 299 ) $ ( 283 ) F-39 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) The following table presents a reconciliation of the U.S. federal statutory tax rate and our effective tax rate: For the Years Ended December 31, 2021 2020 2019 Federal tax expense, at statutory rate 21.0 % 21.0 % 21.0 % State income tax expense, net of federal benefit 4.1 % 4.2 % 3.9 % Change in valuation allowance 1.5 % 0.7 % 0.3 % Tax credits ( 4.7 ) % ( 10.2 ) % ( 2.7 ) % Share-based compensation ( 1.0 ) % ( 3.5 ) % ( 2.4 ) % Impact of nondeductible compensation 0.6 % 2.6 % 1.6 % Automatic worthless stock deduction — % ( 3.5 ) % — % Goodwill impairment — % 53.7 % — % 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. 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 income. 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. Our evaluation of the realizability of deferred tax assets considers both positive and negative evidence, including historical financial performance, scheduled reversal of deferred tax assets and liabilities, projected taxable income and tax planning strategies. The weight given to the potential effects of positive and negative evidence is based on the extent to which it can be objectively verified. 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. F-40 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) 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: For the Years Ended December 31, 2021 2020 Deferred tax assets: Net operating loss carryforwards and tax credits $ 681 $ 745 Deferred revenue 52 62 Accrued bonus 35 29 Expensed costs capitalized for tax 9 11 Investments 20 21 Stock based compensation 57 74 Operating lease liability 104 118 Other 12 — Total deferred tax assets 970 1,060 Deferred tax liabilities: Depreciation of property and equipment ( 286 ) ( 237 ) FCC license ( 522 ) ( 521 ) Other intangible assets ( 263 ) ( 292 ) Right of use asset ( 89 ) ( 106 ) Other ( 5 ) ( 5 ) Total deferred tax liabilities ( 1,165 ) ( 1,161 ) Net deferred tax assets before valuation allowance ( 195 ) ( 101 ) Valuation allowance ( 83 ) ( 54 ) Total net deferred tax (liability) asset $ ( 278 ) $ ( 155 ) Net operating loss carryforwards and tax credits decreased as a result of the utilization of net operating losses related to current year taxable income. For the years ended December 31, 2021 and 2020, we recorded $ 71 and $ 44 for state and federal tax credits, respectively. 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, 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. A tax position that meets this more likely than not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority. 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 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. F-41 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) As of December 31, 2021 and 2020, we had unrecognized tax benefits and uncertain tax positions of $ 179 and $ 433 , respectively. If recognized, $ 179 of unrecognized tax benefits would affect our effective tax rate. Uncertain tax positions are recognized in Other long-term liabilities which, as of December 31, 2021 and 2020, were $ 35 and $ 30 , respectively, including accrued interest. We have state income tax audits pending. We do not expect the ultimate outcome of these audits to have a material adverse effect on our financial position or results of operations. We also do not currently anticipate that our existing reserves related to uncertain tax positions as of December 31, 2021 will significantly increase or decrease during the year ending December 31, 2022. Various events could cause our current expectations to change. Should our position with respect to the majority of these uncertain tax positions be upheld, the effect would be recorded in our consolidated statements of comprehensive income as part of the income tax provision. We recorded interest expense of $ 1 and $ 6 for the years ended December 31, 2021 and 2020, respectively, related to unrecognized tax benefits. Changes in our unrecognized tax benefits and uncertain tax positions from January 1 through December 31 are set forth below: 2021 2020 Balance, beginning of year $ 433 $ 406 Increases in tax positions for prior years 9 14 Increases in tax positions for current year 13 20 Decreases in tax positions for prior years ( 24 ) ( 7 ) Decreases related to settlement with taxing authorities ( 252 ) — Balance, end of year $ 179 $ 433 (18) Segments and Geographic Information In accordance with FASB ASC Topic 280, Segment Reporting , we disaggregate our operations into two reportable segments: Sirius XM and Pandora. The financial results of these segments are utilized by the chief operating decision maker, who is our Chief Executive Officer, for evaluating segment performance and allocating resources. We report our segment information based on the "management" approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of our reportable segments. For additional information on our segments refer to Note 1. Segment results include the revenues and cost of services which are directly attributable to each segment. There are no indirect revenues or costs incurred that are allocated to the segments. There are planned intersegment advertising campaigns which will be eliminated. We had less than $ 1 of intersegment advertising revenue during the years ended December 31, 2021 and 2020. Segment revenue and gross profit were as follows during the periods presented: For the Year Ended December 31, 2021 Sirius XM Pandora Total Revenue Subscriber revenue $ 6,084 $ 530 $ 6,614 Advertising revenue 188 1,542 1,730 Equipment revenue 201 — 201 Other revenue 151 — 151 Total revenue 6,624 2,072 8,696 Cost of services (a) ( 2,594 ) ( 1,329 ) ( 3,923 ) Segment gross profit $ 4,030 $ 743 $ 4,773 F-42 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Dollars and shares in millions, except per share amounts) The reconciliation between reportable segment gross profit to consolidated income before income tax is as follows: For the Year Ended December 31, 2021 Segment Gross Profit $ 4,773 Subscriber acquisition costs ( 325 ) Sales and marketing (a) ( 998 ) Engineering, design and development (a) ( 229 ) General and administrative (a) ( 451 ) Depreciation and amortization ( 533 ) Share-based payment expense ( 202 ) Impairment, restructuring and acquisition costs ( 20 ) Total other (expense) income ( 489 ) Consolidated income before income taxes $ 1,526 (a) Share-based payment expense of $ 45 related to cost of services, $ 58 related to sales and marketing, $ 36 related to engineering, design and development and $ 63 related to general and administrative has been excluded for the year ended December 31, 2021. For the Year Ended December 31, 2020 Sirius XM Pandora Total Revenue Subscriber revenue $ 5,857 $ 515 $ 6,372 Advertising revenue 157 1,183 1,340 Equipment revenue 173 — 173 Other revenue 155 — 155 Total revenue 6,342 1,698 8,040 Cost of services (b) ( 2,430 ) ( 1,105 ) ( 3,535 ) Segment gross profit $ 3,912 $ 593 $ 4,505 The reconciliation between reportable segment gross profit to consolidated income before income tax is as follows: For the Year Ended December 31, 2020 Segment Gross Profit $ 4,505 Subscriber acquisition costs ( 362 ) Sales and marketing (b) ( 889 ) Engineering, design and development (b) ( 220 ) General and administrative (b) ( 443 ) Depreciation and amortization ( 506 ) Share-based payment expense ( 223 ) Impairment, restructuring and acquisition costs ( 1,004 ) Total other (expense) income ( 428 ) Consolidated income before income taxes $ 430 (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. F-43 Table of Contents 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, 2019 Sirius XM Pandora Total Revenue 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) ( 859 ) Engineering, design and development (c) ( 231 ) General and administrative (c) ( 466 ) 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. As of December 31, 2021, long-lived assets were predominantly located in the United States. No individual foreign country represented a material portion of our consolidated revenue during the year ended December 31, 2021. (19) Subsequent Events Capital Return Program For the period from January 1, 2022 to January 28, 2022, we repurchased 19 shares of our common stock on the open market for an aggregate purchase price of $ 116 , including fees and commissions. 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. 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. F-44 Table of Contents SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES Schedule II - Schedule of Valuation and Qualifying Accounts (in millions) Description Balance January 1, Charged to Expenses Write-offs/ Payments/ Other Balance December 31, 2021 Allowance for doubtful accounts $ 15 53 ( 58 ) $ 10 Deferred tax assets—valuation allowance $ 54 29 — $ 83 2020 Allowance for doubtful accounts $ 14 60 ( 59 ) $ 15 Deferred tax assets—valuation allowance $ 70 3 ( 19 ) $ 54 2019 Allowance for doubtful accounts $ 7 53 ( 46 ) $ 14 Deferred tax assets—valuation allowance $ 66 4 — $ 70 F-45