Equity Method Investments

12 Months Ended

Dec. 31, 2021

Equity Method Investments

Equity Method Investments

Note 7. Equity Method Investments

The Company makes investments that support its underlying business strategy and enables it to enter new markets. The Company holds equity investments in Canal 1 and Snap JV (in each case, as defined and discussed below), which are variable interest entities (“VIEs”), for which the Company is not the primary beneficiary. The primary beneficiary is the party involved with the VIE that (i) has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The activities of each VIE that most significantly impact the VIE’s economic performance are controlled by the VIE’s board of directors and the Company’s representation on the board of directors of each VIE is commensurate with its voting equity interest. As the Company does not hold a majority voting interest or disproportionate voting or other rights, it does not have the power to direct the activities that most significantly impact the economic performance of any of these VIEs.

On November 30, 2016, we, in partnership with Colombian content producers, Radio Television Interamericana S.A., Compania de Medios de Informacion S.A.S. and NTC Nacional de Television y Comunicaciones S.A., were awarded a ten (10) year renewable television broadcast concession license for Canal 1 in Colombia. The partnership began operating Canal 1 on May 1, 2017. On February 7, 2018, Colombian regulatory authorities approved an increase in our ownership in the joint venture from 20% to 40%. In July 2019, the Colombian government enacted legislation resulting in the extension of the concession license for Canal 1 for an additional ten years for no additional consideration. The concession is now due to expire on April 30, 2037 and is renewable for an additional 20-year period. The joint venture is deemed a VIE that is accounted for under the equity method. As of December 31, 2021, we have funded $126.3 million in capital contributions to Canal 1. The Canal 1 joint venture losses-to-date have exceeded the capital contributions of the common equity partners and in accordance with equity method accounting, losses in excess of the common equity have been recorded against the next layer of the capital structure, in this case, preferred equity. The Company is currently the sole preferred equity holder in Canal 1 and therefore, the Company has recorded nearly 100% of the losses of the joint venture. We record the income or loss on investment on a one quarter lag. For years ended December 31, 2021 and 2020, we recorded $12.4 million and $22.1 million in loss on equity method investment in the accompanying Consolidated Statements of Operations, respectively. The net balance recorded in equity method investments in the accompanying Consolidated Balance Sheets related to Canal 1 was $24.2 million and $29.9 million at December 31, 2021 and 2020, respectively. At December 31, 2021 and 2020, we had a receivable balance of $2.6 million, which is included in other assets in the accompanying Consolidated Balance Sheets.

On April 28, 2017, we acquired a 25.5% interest in REMEZCLA, a digital media company targeting English speaking and bilingual U.S. Hispanic millennials through innovative content, for $5.0 million. At March 31, 2020, given the negative impacts caused by the COVID-19 pandemic and the associated liquidity and going-concern uncertainties related to REMEZCLA, the Company determined that the investment in REMEZCLA was other-than-temporarily impaired and recorded a non-cash impairment charge of $5.5 million reflecting the write-off of the full carrying amount of our investment. The write-off was recorded in impairment of equity method investment in the Consolidated Statements of Operations. Due to the write-off of the investment carrying value, we did not record any share of the loss from the investment for the years ended December 31, 2021 and 2020. The net balance recorded in equity method investments was $0 million as of December 31, 2021 and 2020.

On November 26, 2018, Snap Media acquired a 50% interest in Snap JV, LLC (“Snap JV”) (as of July 15, 2021, the Company owns 100% of Snap Media), a newly formed joint venture with Mar Vista Entertainment, LLC (“MarVista”), to co-produce original movies and series. The investment is deemed a VIE that is accounted for under the equity method. As of December 31, 2021, we have funded $0.4 million into Snap JV. We record the income or loss on investment on a one quarter lag. For the years ended December 31, 2021 and 2020, we have recorded $0 million and $0.2 million, respectively, in loss on equity method investments in the accompanying Consolidated Statements of Operations. The net balance recorded in equity method investments related to Snap JV was $0.0 million as of December 31, 2021 and 2020, and is included in equity method investments in the accompanying Consolidated Balance Sheets.

On March 31, 2021, the Company acquired the remaining 75% equity interest in Pantaya. As a result of the acquisition, Pantaya is now a wholly owned consolidated subsidiary, and as of April 1, 2021, is no longer treated as an equity method investment. For more information, see Note 3, “Business Combination” of Notes to Consolidated Financial Statements.

The Company records the income or loss on investments on a one quarter lag. Summary unaudited financial data for our equity investments, in the aggregate as of and for the twelve months ended September 30, 2021 are included below (amounts in thousands):

	Total Equity Investees
Current assets	$	14,180
Non-current assets		20,341
Current liabilities		73,079
Non-current liabilities		2,352
Net revenue		11,174
Operating loss		(11,712)
Net loss	$	(33,801)