Nature of Business (Policies)

6 Months Ended

Jun. 30, 2022

Nature of Business

Basis of presentation:

Basis of presentation: The accompanying Condensed Consolidated Financial Statements for Hemisphere and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. In our opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. Our financial condition as of, and operating results, for the three and six months ended June 30, 2022 are not necessarily indicative of the financial condition or results that may be expected for any future interim period or for the year ending December 31, 2022. These Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Net (loss) income per common share:

Net (loss) income per common share: Basic (loss) income per share is computed by dividing (loss) income attributable to Hemisphere Media Group, Inc. common stockholders by the number of weighted-average outstanding shares of common stock. Diluted loss per share reflects the effect of the assumed exercise of stock options and vesting of restricted shares only in the periods in which such effect would have been dilutive.

The following table sets forth the computation of the common shares outstanding used in determining basic and diluted (loss) income per share attributable to Hemisphere Media Group, Inc. (amounts in thousands, except per share amounts):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Numerator for (loss) income per common share calculation:
Net (loss) income attributable to Hemisphere Media Group, Inc.	$	(3,911)	$	(6,286)	$	(17,139)	$	27,072
Denominator for (loss) income per common share calculation:
Weighted-average common shares, basic		39,991		39,641		39,861		39,511
Effect of dilutive securities
Stock options and restricted stock		—		—		—		389
Weighted-average common shares, diluted		39,991		39,641		39,861		39,900
(Loss) income per share attributable to Hemisphere Media Group, Inc.
Basic	$	(0.10)	$	(0.16)	$	(0.43)	$	0.69
Diluted	$	(0.10)	$	(0.16)	$	(0.43)	$	0.68

We apply the treasury stock method to measure the dilutive effect of our outstanding stock options and restricted stock awards and include the respective common share equivalents in the denominator of our diluted loss per common share calculation. Per the Accounting Standards Codification (“ASC”) 260, under the treasury stock method, the incremental shares (difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted income per share computation (ASC 260-10-45-23). The assumed exercise only occurs when the options are “In the Money” (exercise price is lower than the average market price for the period). If the options are “Out of the Money” (exercise price is higher than the average market price for the period), the exercise is not assumed since the result would be anti-dilutive. Potentially dilutive securities representing 4.1 and 1.6 million shares of common stock for the three months ended June 30, 2022 and 2021, respectively, were excluded from the computation of diluted (loss) income per common share for this period because their effect would have been anti-dilutive. Potentially dilutive securities representing 4.1 million and 2.1 million shares of common stock for the six months ended June 30, 2022 and 2021, respectively, were excluded from the computation of diluted (loss) income per common share for these periods because their effects would have been anti-dilutive. The net (loss) income per share attributable to Hemisphere Media Group, Inc. amounts are the same for our Class A and Class B common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.

As a result of the net loss for the three months ended June 30, 2022 and 2021, outstanding awards totaling 0.1 million and 0.4 million, respectively, were not included in the computation of diluted loss per share because their effect was anti-dilutive. As a result of the net loss for the six months ended June 30, 2022, 0.1 million outstanding awards were not included in the computation of diluted loss per share because their effect was anti-dilutive.

Held for sale:

Held for sale: In accordance with ASC 360, the sale of Pantaya qualified as assets and liabilities held for sale as: (i) the Company has committed to a plan to sell, (ii) the disposal entities are available for immediate sale, (iii) the buyer has been identified and has committed to purchase, subject to satisfaction of certain closing conditions, and (iv) it is probable to occur within 1 year from the date of the classification. Assets and liabilities held for sale are measured at the lower of carrying amount and the fair value less cost to sell. Intangible assets and fixed assets are not amortized or depreciated once classified as held for sale. Assets and liabilities classified as held for sale are presented separately as current and non-current items in the Condensed Consolidated Balance Sheets.

Use of estimates:

Use of estimates: In preparing these financial statements, management had to make estimates and assumptions that affected the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the balance sheet dates, and the reported revenues and expenses for each of the three and six months ended June 30, 2022 and 2021. Such estimates are based on

historical experience and other assumptions that are considered appropriate in the circumstances. However, actual results could differ from those estimates.

Accounting guidance not yet adopted:

Accounting guidance not yet adopted: In March 2020, the FASB issued ASU 2020-04-Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The update provides optional expedients and exceptions for applying U.S. GAAP principles to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued due to reference rate reform. This guidance was effective beginning on March 12, 2020, and can be adopted on a prospective basis no later than December 31, 2022. We are currently evaluating the impact, if any, that the updated accounting guidance will have on our Condensed Consolidated Financial Statements.