Liberty Media Corporation Reports Fourth Quarter and Year End 2021 Financial Results
February 25, 2022 at 08:15 AM EST
Liberty Media Corporation ("Liberty Media" or “Liberty”) (NASDAQ: LSXMA, LSXMB, LSXMK, FWONA, FWONK, BATRA, BATRK) today reported fourth quarter and year end 2021 results. Headlines include (1):
“It was a strong end to 2021 for the Liberty companies. The finish to the Formula 1 World Championship could not have been more suspenseful. The compelling action on the track continues to power the business’s flywheel and we recently made numerous announcements around value-creating agreements. SiriusXM hit record revenue and adjusted EBITDA levels and announced a $1 billion special dividend. The Atlanta Braves are still basking in the glory of their World Series title. Live Nation benefited from incredible fan demand in the back half of the year and all leading indicators point to record performance in 2022,” said Greg Maffei, Liberty Media President and CEO. “We enter this year energized and excited for the next areas of growth across the board.”
Discussion of Results
Unless otherwise noted, the following discussion compares financial information for the three months or year ended December 31, 2021 to the same period in 2020.
LIBERTY SIRIUSXM GROUP – The following table provides the financial results attributed to Liberty SiriusXM Group for the fourth quarter and full year 2021. Approximately $8 million and $28 million of corporate level selling, general and administrative expense (including stock-based compensation expense) was allocated to the Liberty SiriusXM Group in the fourth quarter and full year 2021, respectively.
SiriusXM is a separate publicly traded company and additional information about SiriusXM can be obtained through its website and filings with the Securities and Exchange Commission. SiriusXM reported its stand-alone fourth quarter and full year results on February 1, 2022. For additional detail on SiriusXM’s financial results, please see SiriusXM’s earnings release posted to its Investor Relations website. For presentation purposes on page one of this release, we include the results of SiriusXM, as reported by SiriusXM, without regard to the purchase accounting adjustments applied by us for purposes of our financial statements. Liberty Media believes the presentation of financial results as reported by SiriusXM is useful to investors as the comparability of those results is best understood in the context of SiriusXM's historical financial presentation.
The businesses and assets attributed to Liberty SiriusXM Group consist primarily of Liberty Media’s interests in SiriusXM, which includes its subsidiary Pandora, and Live Nation.
FORMULA ONE GROUP – The following table provides the financial results attributed to the Formula One Group for the fourth quarter and full year 2021. Approximately $16 million and $40 million of corporate level selling, general and administrative expense (including stock-based compensation expense) was allocated to the Formula One Group in the fourth quarter and full year 2021, respectively.
“2021 was a remarkable year for Formula 1 in all respects. The racing was spectacular and the business produced outstanding results,” said Stefano Domenicali, Formula 1 President and CEO. “We continue to build off this strong foundation and look forward to our record setting 23-race calendar for 2022 with new cars, regulations, races and drivers.”
The following table provides the operating results of Formula 1 (“F1”).
F1 Operating Results
Primary F1 revenue represents the majority of F1’s revenue and is derived from (i) race promotion revenue, (ii) media rights fees (formerly referred to as broadcasting fees) and (iii) sponsorship fees. For the year ended December 31, 2021, these revenue streams comprised 31%, 40% and 16%, respectively, of total F1 revenue.
Beginning January 1, 2021, F1 began reclassifying certain components previously reported in Other F1 revenue into Primary F1 revenue to better align with the way it currently evaluates the business. In addition, broadcasting revenue was renamed media rights revenue. The more significant components that were reclassified into Primary F1 revenue include fees for F1 TV subscriptions, fees for licensing commercial rights for Formula 2 and Formula 3 races, fees for the origination and support of program footage, fees for broadcast rights for Formula 2 and Formula 3 races and fees for advertising rights on Formula 1’s digital platforms. Following the reclassification, Other F1 revenue is primarily comprised of freight and hospitality revenue. There was $24 million and $65 million of Other F1 revenue reclassified as Primary F1 revenue for the three and twelve months ended December 31, 2020, respectively, to conform to the current period presentation. The impact of the revenue reclassification for the years ended December 31, 2019 and 2020 can be found in Schedule 4 of this press release.
There were 7 and 22 races held in the fourth quarter and full year 2021, respectively, compared to 7 and 17 races held in the fourth quarter and full year 2020 due to the compact schedule driven by the COVID-19 pandemic. Fan attendance continued to be assessed by relevant government authorities on a race-by-race basis throughout the year, with restrictions easing as the year progressed and significantly higher fan attendance beginning in the third quarter of 2021 compared to the prior year. The Paddock Club operated at only one event in 2020, and even then with strictly limited capacity, and resumed more normal operations in July 2021, operating at 6 races in the third quarter and 5 in the fourth quarter.
Primary F1 revenue grew in the fourth quarter, primarily driven by increased race promotion revenue compared to the prior year where limitations on fan attendance led to one-time changes in the contractual terms of races held. Media rights revenue was flat in the fourth quarter as contractual increases and growth in F1 TV subscription revenue were offset by the impact of lower proportionate recognition of season-based income in 2021 (7/22 races took place in the fourth quarter of 2021 compared to 7/17 in the fourth quarter of 2020). Sponsorship revenue increased in the fourth quarter driven by revenue from new sponsors in the current year and pandemic-related reductions to sponsorship revenue recognized in the prior year, where F1 honored one-time changes in certain sponsorship contracts due to the cancellation of races that had specific sponsorship-related inventory.
Primary F1 revenue grew for the full year with increases across all primary revenue streams. Race promotion revenue grew due to five more events held in 2021, including more non-European races, some of which saw the return of capacity crowds, whereas limitations on fan attendance in the prior year led to one-time changes in the contractual terms of races held. Race promotion revenue for the full year also benefited from a one-time settlement recognized in the first quarter related to the cancellation of a race originally scheduled to commence in 2020. Media rights revenue increased for the full year driven by higher broadcasting fees due to improved terms in certain new and renewed broadcasting agreements, other contractual rate increases, strong growth in F1 TV subscription revenue and the effect on the prior year of one-time changes in contract fees resulting from the pandemic and associated calendar disruptions. Sponsorship revenue increased due to revenue from new sponsors and the impact of more races held as well as pandemic-related reductions to sponsorship revenue recognized in the prior year.
Other F1 revenue increased in the fourth quarter and full year driven by hospitality revenue generated from the return of the Paddock Club, higher licensing revenue from new contracts and growth in gaming and merchandising royalties, as well as higher freight and travel income with more races held outside Europe compared to the prior year. Other F1 revenue for the full year also benefited from the additional races held.
Operating income and adjusted OIBDA grew in the fourth quarter and full year 2021. Team payments increased in both periods driven by the growth in Primary F1 revenue and the associated impact on the calculation of the team payments, which are 100% variable under the 2021 Concorde Agreement. Team payments in 2020 included one-time fees paid to teams upon signing the 2021 Concorde Agreement and certain fixed and minimum guaranteed payments to teams under the previous agreement.
Other cost of F1 revenue is largely variable in nature and mostly relates to revenue opportunities. These costs increased in the fourth quarter and full year due to costs associated with the operation of the Paddock Club and higher technical, freight and logistics, digital media and other related costs driven by five more races in the full year and the logistic costs of more non-European races. Selling, general and administrative expense increased in the fourth quarter and full year primarily due to higher personnel costs, discretionary marketing expenses and professional fees.
The Liberty SiriusXM Group holds an approximate 2.2% intergroup interest (5.3 million notional shares) in the Formula One Group as of January 31, 2022. These shares are not included in the outstanding share count of Formula One Group in Liberty Media’s most recent Form 10-K. Assuming the issuance of the shares underlying this intergroup interest, the Formula One Group outstanding share count as of January 31, 2022 would have been 237 million.
The businesses and assets attributed to the Formula One Group consist of Liberty Media’s subsidiary F1, its interest in Liberty Media Acquisition Corporation, other minority investments and an inter-group interest in the Braves Group.
BRAVES GROUP - The following table provides the financial results attributed to the Braves Group for the fourth quarter and full year 2021. Approximately $2 million and $11 million of corporate level selling, general and administrative expense (including stock-based compensation expense) was allocated to the Braves Group in the fourth quarter and full year 2021, respectively.
The following table provides the operating results of Braves Holdings, LLC (“Braves”).
Braves Operating Results
Baseball revenue is comprised of (i) ballpark operations (ticket sales, concessions, corporate sales, retail, suites, premium seat fees and postseason), (ii) local broadcast rights and (iii) shared Major League Baseball revenue streams, including national broadcast rights and licensing. Development revenue is derived from the Battery Atlanta mixed-use facilities and primarily includes rental income.
There were 11 and 87 home games (including postseason) played in the fourth quarter and full year 2021, respectively, compared to 6 and 37 home games played in the comparable prior year periods. The 2021 regular season began with fans in attendance at 33% capacity for the first home game beginning April 9th, which increased to 50% capacity beginning April 23rd and further expanded to 100% capacity beginning May 7th. There were no fans in attendance during the 2020 regular season.
Baseball revenue increased in the fourth quarter and full year as all primary sources of revenue grew driven by the increase in the number of regular and postseason home games played with significantly more fans in attendance and the Braves success in the 2021 postseason as World Series Champions. Development revenue decreased in the fourth quarter due to modified timing of revenue recognition surrounding various 2021 lease commencements. Development revenue for the full year increased due to rental income from various new lease commencements and a reduction in deferred payment arrangements.
Operating income and adjusted OIBDA increased in the fourth quarter and full year. Revenue growth more than offset increased operating costs as player salaries and facility and game day expenses returned to more normalized levels in 2021. Selling, general and administrative expense increased in the fourth quarter and full year primarily due to higher marketing expense and the absence of COVID-19 related cost reduction initiatives that impacted the 2020 season.
The Formula One Group holds an approximate 11.0% intergroup interest (6.8 million notional shares) and the Liberty SiriusXM Group holds an approximate 3.7% intergroup interest (2.3 million notional shares) in the Braves Group as of January 31, 2022. These shares are not included in the outstanding share count of the Braves Group in Liberty Media’s most recent Form 10-K. Assuming the issuance of the shares underlying these intergroup interests, the Braves Group outstanding share count as of January 31, 2022 would have been 62 million.
The businesses and assets attributed to the Braves Group consist primarily of Liberty Media’s subsidiary the Braves, which indirectly owns the Atlanta Braves Major League Baseball Club and certain assets and liabilities associated with the Braves’ ballpark and mixed-use development project.
From November 1, 2021 through January 31, 2022, Liberty SiriusXM Group repurchased approximately 2.9 million Series C Liberty SiriusXM shares (Nasdaq: LSXMK) at an average cost per share of $49.98 for total cash consideration of $146 million and repurchased approximately 879 thousand Series A Liberty SiriusXM shares (Nasdaq: LSXMA) at an average cost per share of $48.22 for total cash consideration of $42 million.
From November 1, 2021 through January 31, 2022, Formula One Group repurchased approximately 472 thousand Series A Liberty Formula One shares (Nasdaq: FWONA) at an average cost per share of $56.10 for total cash consideration of $26 million.
The total remaining repurchase authorization for Liberty Media as of February 1, 2022 is approximately $406 million and can be applied to repurchases of Series A and Series C shares of any of the Liberty Media Corporation tracking stocks.
The following financial information with respect to Liberty Media's equity affiliates and available for sale securities is intended to supplement Liberty Media's consolidated balance sheet and statement of operations to be included in its Form 10-K for the year ended December 31, 2021.
Fair Value of Corporate Public Holdings
Fair Value of Intergroup Assets and Liabilities
The intergroup interests represent quasi-equity interests which are not represented by outstanding shares of common stock; rather, the Formula One Group and Liberty SiriusXM Group have attributed interests in the Braves Group, which are generally stated in terms of a number of shares of Liberty Braves common stock, and the Liberty SiriusXM Group also has an attributed interest in the Formula One Group, which is generally stated in terms of a number of shares of Liberty Formula One common stock. Each reporting period, the notional shares representing the intergroup interests are marked to fair value. The changes in fair value are recorded in the unrealized gain (loss) on the intergroup interest line item in the unaudited attributed consolidated statements of operations. The intergroup interests will remain outstanding until the redemption of the outstanding interests, at the discretion of Liberty Media’s Board of Directors, through transfer of securities, cash and/or other assets from the Braves Group or Formula One Group, respectively, to the respective tracking stock group.
Cash and Debt
The following presentation is provided to separately identify cash and liquid investments and debt information.
Liberty Media, SiriusXM, Formula 1 and Braves Holdings are in compliance with their debt covenants as of December 31, 2021.
Total cash and liquid investments attributed to Liberty SiriusXM Group increased $69 million during the fourth quarter as cash from operations at SiriusXM more than offset return of capital at both SiriusXM and Liberty SiriusXM. Included in the cash and liquid investments balance attributed to Liberty SiriusXM Group at December 31, 2021 is $191 million held at SiriusXM. Although SiriusXM is a consolidated subsidiary, it is a separate public company with a significant non-controlling interest, therefore Liberty Media does not have ready access to SiriusXM’s cash balance. Total debt attributed to Liberty SiriusXM Group was flat in the fourth quarter.
On February 1, 2022, SiriusXM announced they will pay a special cash dividend of $0.25 per share for an aggregate dividend of $1 billion payable to SiriusXM stockholders of record as of the close of business on February 11, 2022. The payment date of the special cash dividend is February 25, 2022, and Liberty SiriusXM expects to receive approximately $770 million of proceeds, net of extraordinary cash distributions that will be paid to holders of its 2.125% SiriusXM exchangeable senior debentures due 2048 and its 2.75% SiriusXM exchangeable senior debentures due 2049.
On December 3, 2021, the Live Nation margin loan was amended, increasing the borrowing capacity to $400 million reflecting appreciation in the underlying share price. Other terms of the margin loan are unchanged, including its maturity on December 9, 2022 and the 9 million shares of Live Nation common stock pledged as collateral to the margin loan.
In October 2021, Liberty Media issued a notice of redemption in full for the 2.25% Live Nation exchangeable senior debentures due 2048 on or before December 1, 2021. All holders exercised their right to exchange the debentures in the fourth quarter. On January 21, 2022, the exchanges of debentures were settled in cash for $664 million. The exchanges were funded with cash on hand and incremental borrowing under Liberty’s margin loan facilities.
Total cash and liquid investments attributed to Formula One Group decreased $121 million during the fourth quarter. Debt repayment, stock repurchases and withholding taxes on net share settlements at the Formula One Group more than offset proceeds from stock options exercises and growth in cash from operations at F1, which was primarily driven by the timing of cash payments and receipts with commercial partners.
Total debt attributed to Formula One Group decreased $91 million in the fourth quarter. On October 5, 2021, Liberty Media redeemed in full the outstanding $25 million principal amount of its 2.25% AT&T exchangeable senior debentures due 2046, which was funded with the sale of Liberty Media’s remaining approximately 800 thousand shares of AT&T as well as cash on hand. Also in the fourth quarter, Liberty opportunistically repurchased $64 million face value of 1% FWONK cash convertible notes due 2023, effectively repurchasing 1.7 million shares of FWONK underlying the retired bonds.
Total cash and liquid investments attributed to the Braves Group increased $8 million during the fourth quarter as cash from operations primarily attributed to the postseason more than offset net debt repayment and capital expenditures related to the mixed-use development.
Total debt attributed to the Braves Group decreased $21 million during the fourth quarter due to repayment under the Braves team revolver, partially offset by increased borrowing to fund the mixed-use development. The second phase of the Battery Atlanta mixed-use development is nearing an on-time and on-budget completion. It is expected to cost approximately $200 million, of which the Braves and affiliated entities have already funded approximately $55 million in equity and $120 million in debt, with $25 million incremental debt funding remaining.
Important Notice: Liberty Media Corporation (Nasdaq: LSXMA, LSXMB, LSXMK, FWONA, FWONK, BATRA, BATRK) President and CEO, Greg Maffei, will discuss Liberty Media's earnings release in a conference call which will begin at 10:00 a.m. (E.S.T.) on February 25, 2022. The call can be accessed by dialing (800) 458-4121 or +1 (720) 543-0206, passcode 2857380 at least 10 minutes prior to the start time. The call will also be broadcast live across the Internet and archived on our website. To access the webcast go to https://www.libertymedia.com/investors/news-events/ir-calendar. Links to this press release will also be available on the Liberty Media website.
This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about business strategies, market potential, future financial performance and prospects, Formula 1’s race calendar and new races, timing, costs and funding associated with the Battery Atlanta mixed-use development and new Braves facilities, the continuation of our stock repurchase plan, matters relating to SiriusXM’s special cash dividend and other matters that are not historical facts. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, possible changes in market acceptance of new products or services, regulatory matters affecting our businesses, the unfavorable outcome of pending or future litigation, the failure to realize benefits of acquisitions, rapid technological and industry change, failure of third parties to perform, continued access to capital on terms acceptable to Liberty Media, changes in law, including consumer protection laws, and their enforcement, the impact of COVID-19, including on general market conditions and the ability of Formula 1, the Braves and Live Nation to hold live events and fan attendance at such events, and market conditions conducive to stock repurchases. These forward-looking statements speak only as of the date of this press release, and Liberty Media expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Liberty Media's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Please refer to the publicly filed documents of Liberty Media, including the most recent Form 10-K, for additional information about Liberty Media and about the risks and uncertainties related to Liberty Media's business which may affect the statements made in this press release.
NON-GAAP FINANCIAL MEASURES
To provide investors with additional information regarding our financial results, this press release includes a presentation of Adjusted OIBDA, which is a non-GAAP financial measure, for the Liberty SiriusXM Group, the Braves Group and the Formula One Group, together with reconciliations to operating income, as determined under GAAP. Liberty Media defines Adjusted OIBDA as operating income (loss) plus depreciation and amortization, stock-based compensation, separately reported litigation settlements, restructuring, acquisition and other related costs and impairment charges.
Liberty Media believes Adjusted OIBDA is an important indicator of the operational strength and performance of its businesses by identifying those items that are not directly a reflection of each business’ performance or indicative of ongoing business trends. In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. Because Adjusted OIBDA is used as a measure of operating performance, Liberty Media views operating income as the most directly comparable GAAP measure. Adjusted OIBDA is not meant to replace or supersede operating income or any other GAAP measure, but rather to supplement such GAAP measures in order to present investors with the same information that Liberty Media's management considers in assessing the results of operations and performance of its assets.
The following table provides a reconciliation of adjusted OIBDA for Liberty Media to operating income (loss) calculated in accordance with GAAP for the three months and years ended December 31, 2020 and December 31, 2021, respectively.
This press release also includes a presentation of adjusted EBITDA of SiriusXM, which is a non-GAAP financial measure used by SiriusXM, together with a reconciliation to SiriusXM's stand-alone net income, as determined under GAAP. SiriusXM defines adjusted EBITDA as net income before interest expense, income tax expense and depreciation and amortization. SiriusXM adjusts EBITDA to exclude the impact of other expense (income) as well as certain other charges discussed below. Adjusted EBITDA is a Non-GAAP financial measure that excludes or adjusts for (if applicable): (i) certain adjustments as a result of the purchase price accounting for the XM merger and the Pandora acquisition, (ii) share-based payment expense, (iii) impairment, restructuring and acquisition costs, (iv) legal settlements/reserves and (v) other significant operating expense (income) that do not relate to the on-going performance of SiriusXM’s business. SiriusXM believes adjusted EBITDA is a useful measure of the underlying trend of its operating performance, which provides useful information about its business apart from the costs associated with its capital structure and purchase price accounting. SiriusXM believes investors find this Non-GAAP financial measure useful when analyzing past operating performance with current performance and comparing SiriusXM’s operating performance to the performance of other communications, entertainment and media companies. SiriusXM believes investors use adjusted EBITDA to estimate current enterprise value and to make investment decisions. As a result of large capital investments in SiriusXM’s satellite radio system, its results of operations reflect significant charges for depreciation expense. SiriusXM believes the exclusion of share-based payment expense is useful as it is not directly related to the operational conditions of its business. SiriusXM also believes the exclusion of the legal settlements and reserves, impairment, restructuring and acquisition related costs, and loss on extinguishment of debt, to the extent they occur during the period, is useful as they are significant expenses not incurred as part of its normal operations for the period.
Adjusted EBITDA has certain limitations in that it does not take into account the impact to SiriusXM’s statements of comprehensive income of certain expenses, including share-based payment expense and certain purchase price accounting for the XM Merger and the Pandora Acquisition. SiriusXM endeavors to compensate for the limitations of the Non-GAAP measure presented by also providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the Non-GAAP measure. Investors that wish to compare and evaluate operating results after giving effect for these costs, should refer to net income as disclosed in SiriusXM’s unaudited consolidated statements of comprehensive income. Since adjusted EBITDA is a Non-GAAP financial performance measure, SiriusXM’s calculation of adjusted EBITDA may be susceptible to varying calculations; may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP. The reconciliation of net income to the adjusted EBITDA is calculated as follows:
This press release also includes a presentation of net operating income for the Battery development, which is a non-GAAP financial measure used by the Braves, together with a reconciliation from operating income for the Battery development. Liberty Media and the Braves define net operating income for the Battery development as operating income for the Battery development less parking & other revenue, plus corporate overhead, stock-based compensation and depreciation and amortization.
Liberty Media and the Braves believe net operating income for the Battery development is an important indicator of the operational strength and performance of the Battery development. Liberty Media and the Braves view operating income as the most directly comparable GAAP measure. Net operating income is not meant to replace or supersede operating income or any other GAAP measure, but rather to supplement such GAAP measures in order to present investors with the same information that Liberty Media and the Brave's management considers in assessing the results of operations and performance of its assets.
The following table provides a reconciliation of net operating income for the Battery development to operating income for the Battery development for the twelve months ended December 31, 2021.
Beginning January 1, 2021, F1 began reclassifying certain components previously reported in Other F1 revenue into Primary F1 revenue to better align with the way it currently evaluates the business. In addition, broadcasting revenue was renamed media rights revenue. The more significant components that were reclassified into Primary F1 revenue include fees for F1 TV subscriptions, fees for licensing commercial rights for Formula 2 and Formula 3 races, fees for the origination and support of program footage, fees for broadcast rights for Formula 2 and Formula 3 races and fees for advertising rights on Formula 1’s digital platforms.
For comparative purposes, the following table provides additional detail on Primary Formula 1 revenue calculated in accordance with the revenue reclassification for the years ended December 31, 2019 and December 31, 2020.
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