10-Q: Liberty Media Reports Q2 2024 Results: Formula 1 Revenue Surges, SiriusXM Holdings Revenue Declines

Sentiment:

Quarterly Report 8 August 2024 6:16 PM

Liberty Media Corporation reports increased operating income driven by Formula 1, while SiriusXM Holdings experiences a revenue decrease in Q2 2024.

Worse than expectedSirius XM Holdings revenue decreased by 3% to $4.34 billion for the six months ended June 30, 2024.

Summary

Liberty Media Corporation's consolidated revenue decreased by $78 million in Q2 2024 compared to Q2 2023, but increased by $115 million for the six months ended June 30, 2024.
The decrease in Q2 revenue was primarily due to the Split-Off of Braves Holdings in 2023 and a decrease in Sirius XM Holdings revenue, partially offset by an increase in Formula 1 revenue and revenue from QuintEvents.
Consolidated operating income increased by $5 million in Q2 2024 and $167 million for the six months ended June 30, 2024.
The increase in operating income was primarily driven by increases in Formula 1 and Sirius XM Holdings operating results.
Net earnings were $507 million for Q2 2024 and $752 million for the six months ended June 30, 2024.
Sirius XM Holdings revenue decreased by 3% to $4.34 billion for the six months ended June 30, 2024.
Formula 1 revenue increased by $270 million to $1.42 billion for the six months ended June 30, 2024, driven by more events and increased media rights and sponsorship revenue.
Liberty expects to complete the proposed Transactions on September 9, 2024.

Sentiment

Score: 6

Explanation: The sentiment is neutral. While Formula 1 shows positive growth, SiriusXM's decline tempers the overall outlook. The upcoming transactions add uncertainty.

Positives

Formula 1 revenue increased due to more events and higher media rights and sponsorship revenue.
Consolidated operating income increased due to improvements in Formula 1 and Sirius XM Holdings.
The IRS completed its review of the Reclassification and agreed with the nontaxable characterization of the transaction.
Liberty expects to complete the proposed Transactions on September 9, 2024.

Negatives

Consolidated revenue decreased in Q2 2024 due to the Split-Off of Braves Holdings and a decrease in Sirius XM Holdings revenue.
Sirius XM Holdings revenue decreased due to a decline in average subscribers and lower self-pay average monthly revenue per subscriber.

Risks

Weak economic conditions could impact consumer demand for products, services, and events.
Operational risks of subsidiaries and business affiliates with operations outside of the U.S.
Competition faced by Sirius XM Holdings and Formula 1.
The ability of Sirius XM Holdings to attract and retain subscribers and listeners.
The ability of Sirius XM Holdings to market its services and sell advertising.
The ability of Sirius XM Holdings to maintain revenue growth from its advertising products.
The ability of Sirius XM Holdings to protect the security of personal information about its customers.
The interruption or failure of Sirius XM Holdings information technology and communication systems.
The impact of the market for music rights on Sirius XM Holdings and the rates Sirius XM Holdings must pay for rights to use musical works.
The ability of Sirius XM Holdings to successfully monetize and generate revenue from podcasts and other non-music content.
Termination of or changes in any of the agreements, commitments or policies Formula 1 relies on to operate and the limitations such agreements, commitments and policies impose on Formula 1.
Challenges by tax authorities in the jurisdictions where Formula 1 operates.
Changes in tax laws that affect Formula 1 and the Formula One Group.
The ability of Formula 1 to expand into new markets.
Changes in laws and regulations and/or their interpretations related to advertising, media rights and the environment.
The relationship between the United Kingdom (U.K.) and the European Union (E.U.) following Brexit.
The establishment of rival motorsports events or other circumstances that impact the competitive position of Formula 1.
The impact of cancelations or postponements of events or accidents or terrorist attacks during events.
Changes in consumer viewing habits and the emergence of new content distribution platforms.
Fluctuations in currencies against the U.S. dollar.
The risks associated with the Company as a whole and our use of tracking stock groups, even if a holder does not own shares of common stock of all of our groups.
Market confusion that results from misunderstandings about our capital structure.
Market price of our tracking stocks may be volatile.
We may not pay dividends equally to our tracking stocks or at all.
Our directors or officers equity ownership may create the appearance of conflicts of interest.
Geopolitical incidents, accidents, terrorist acts, international conflicts, natural disasters, including the effects of climate change, or other events that cause one or more events to be cancelled or postponed, are not covered by insurance, or cause reputational damage to our subsidiaries and business affiliates.
Challenges related to assessing the future prospects of tracking stock groups based on past performance.
Our ability to recognize anticipated benefits from the Split-Off and the Reclassification, each as defined below.
Our ability to recognize the anticipated benefits from the proposed Transactions.
The possibility that we may be unable to obtain stockholder approval required for the proposed Transactions.
The possibility that our business may suffer as a result of uncertainty surrounding the proposed Transactions.
The possibility that the proposed Transactions may have unexpected costs.

Future Outlook

Liberty expects to complete the proposed Transactions on September 9, 2024. The projected uses of Liberty's cash are primarily capital expenditures, the investment in existing or new businesses, including the acquisition of Dorna Sports, S.L., debt service and the potential buyback of common stock under the approved share buyback program.

Industry Context

The report reflects the ongoing trends in the media and entertainment industry, including the shift towards streaming services and the importance of live events. The performance of SiriusXM highlights the challenges in the satellite radio business, while the growth of Formula 1 underscores the increasing popularity of global motorsports.

Comparison to Industry Standards

Comparing Liberty Media's performance to industry peers requires considering the diverse nature of its holdings.
For SiriusXM, key competitors include Spotify and Apple Music.
For Formula 1, there are no direct competitors, but other major motorsports leagues like NASCAR and IndyCar can be considered.
Live Nation is the world's leading live entertainment company.

Legal Proceedings

The Company has contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business.
Vladmir Fishel v. Liberty Media Corporation, et al.: A settlement was reached and approved by the Court.
New York State v. Sirius XM Radio Inc.: Sirius XM Holdings intends to defend this action vigorously.
U.S. Music Royalty Fee Actions and Mass Arbitrations: Sirius XM Holdings believes it has substantial defenses to the claims asserted in these actions and arbitrations, and intends to defend these actions vigorously.

Related Party Transactions

Sirius XM Holdings recorded revenue share expense related to its agreement with SoundCloud of $15 million and $13 million for the three months ended June 30, 2024 and 2023, respectively, and $30 million and $25 million for the six months ended June 30, 2024 and 2023, respectively.

Stakeholder Impact

Shareholders: The proposed Transactions and tracking stock structure impact shareholder value and voting rights.
Employees: Restructuring activities at SiriusXM Holdings have resulted in workforce reductions.
Customers: SiriusXM and Pandora subscribers are affected by changes in subscription plans and content offerings.
Business Partners: Formula 1's relationships with race promoters, media rights holders, and sponsors are crucial to its revenue.

Next Steps

Completion of the proposed Transactions expected on September 9, 2024.
Continued monitoring of SiriusXM's performance and subscriber trends.
Integration of QuintEvents into the Formula One Group.
Potential acquisition of Dorna Sports, S.L.

Key Dates

Date	Description
November 26, 2019	Liberty closed a private offering of approximately $604 million aggregate principal amount of its 2.75% exchangeable senior debentures due 2049.
February 2020	Sirius XM Holdings completed a $75 million investment in Series G Membership Units of SoundCloud Holdings, LLC (SoundCloud).
November 2020	Liberty closed a private offering of approximately $920 million aggregate principal amount of its 0.5% exchangeable senior debentures due 2050.
February 2021	Liberty Siri MarginCo, LLC (Siri MarginCo), a wholly-owned subsidiary of Liberty, amended its margin loan agreement secured by shares of Sirius XM Holdings common stock (the Sirius XM Holdings Margin Loan).
February 1, 2021	A tax sharing agreement with Sirius XM Holdings, dated February 1, 2021, governs the allocation of consolidated and combined tax liabilities and sets forth agreements with respect to tax matters.
April 11, 2022	Sirius XM Holdings entered into an amendment to the Credit Facility to incorporate an incremental term loan borrowing of $500 million.
May 9, 2022	The Live Nation Margin Loan agreement was amended, replacing a delayed draw term loan with a $400 million revolving line of credit, changing the interest rate to the Adjusted Term SOFR plus Term SOFR Adjustment (0.1%) plus 2.0% and extending the maturity to May 9, 2025.
August 12, 2022	Liberty issued $475 million convertible notes at an interest rate of 2.25% per annum, which, at Libertys election, are convertible into cash, shares of Series C Liberty Formula One common stock or a combination of cash and shares of Series C Liberty Formula One common stock and mature on August 15, 2027.
November 23, 2022	Formula 1 refinanced its previous $2.9 billion first lien Term Loan B and $500 million revolving credit facility with a new $725 million first lien Term Loan A, a refinanced $1.7 billion Term Loan B and a new $500 million revolving credit facility (collectively, the Senior Loan Facilities).
March 10, 2023	Liberty issued $575 million convertible notes at an interest rate of 3.75% per annum, which, at Libertys election, are convertible into cash, shares of Series A Liberty SiriusXM common stock or a combination of cash and shares of Series A Liberty SiriusXM common stock and mature on March 15, 2028.
March 2023	Siri MarginCo amended the Sirius XM Holdings Margin Loan, increasing the revolving line of credit to $1,075 million, extending the maturity to March 2026 and changing the interest rate to the Secured Overnight Financing Rate (SOFR) plus 2.25%.
July 18, 2023	The Company completed the split-off (the Split-Off) of its wholly owned subsidiary, Atlanta Braves Holdings, Inc. (Atlanta Braves Holdings).
August 3, 2023	The Company reclassified its then-outstanding shares of common stock into three new tracking stocks Liberty SiriusXM common stock, Liberty Formula One common stock and Liberty Live common stock, and, in connection therewith, provided for the attribution of the businesses, assets and liabilities of the Companys remaining tracking stock groups among its newly created Liberty SiriusXM Group, Formula One Group and Liberty Live Group (the Reclassification).
September 2023	Liberty closed a private offering of approximately $1.15 billion aggregate principal amount of its 2.375% exchangeable senior debentures due 2053 (the 2.375% Exchangeable Senior Debentures due 2053).
December 11, 2023	Liberty entered into definitive agreements, subject to the terms thereof, to redeem each outstanding share of its Liberty SiriusXM common stock in exchange for a number of shares of common stock of a newly formed entity (the Liberty Sirius XM Holdings Split-Off), Liberty Sirius XM Holdings Inc. (Liberty Sirius XM Holdings) equal to the Exchange Ratio.
January 1, 2024	The Company adopted ASU 2023-02 on January 1, 2024 on a modified retrospective basis and recorded a $122 million increase to investments in affiliates, accounted for using the equity method, $124 million increase to other liabilities, $5 million decrease to deferred income tax liabilities and a $3 million cumulative effect adjustment to retained earnings.
January 2, 2024	The Company purchased QuintEvents, LLC (QuintEvents) for total consideration of approximately $277 million, comprised of $205 million of cash, net of cash acquired of $66 million, and a $6 million settlement of a pre-existing condition.
January 26, 2024	Sirius XM Holdings entered into an amendment to the Credit Facility to, among other things, incorporate a $1.1 billion delayed draw incremental term loan.
March 29, 2024	The Company agreed, subject to certain conditions, to acquire approximately 86% of the equity interests in Dorna Sports, S.L., for a purchase price of approximately 3.0 billion, to be funded with cash and shares of Series C Liberty Formula One common stock.
July 2024	The IRS completed its review of the Reclassification and notified the Company that it agreed with the nontaxable characterization of the transaction.
July 24, 2024	Sirius XM Holdings board of directors declared a quarterly dividend on its common stock in the amount of $0.0266 per share of common stock payable on August 26, 2024 to stockholders of record as of the close of business on August 9, 2024.
August 2024	Liberty issued a redemption notice for all of its 0.5% Exchangeable Senior Debentures due 2050.
September 9, 2024	Subject to the satisfaction of various conditions, the Company expects to complete the proposed Transactions on September 9, 2024.
October 2024	Settlement of any debentures properly surrendered for exchange is expected to be completed in October 2024.
December 1, 2024	The debentures may be redeemed by Liberty, in whole or in part, on or after December 1, 2024.

Keywords

Formula 1, SiriusXM, Liberty Media, Revenue, Operating Income, Tracking Stock, Live Nation, QuintEvents, Split-Off, Reclassification

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