REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

12 Months Ended

Dec. 31, 2023

REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

2. REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

In connection with the preparation of the interim consolidated financial statements for the quarterly period as of March 31, 2023, the Company identified immaterial errors in its accounting for its stock-based compensation expense, the Company’s investment in the operations of RVA Entertainment Holdings, LLC (“RVAEH”), and related tax effects. The Company assessed the materiality of the adjustments both quantitatively and qualitatively and concluded that the adjustments were not material to its previously issued consolidated financial statements as of December 31, 2022 and 2021 and for the years then ended. However, the Company concluded that the effect of correcting these adjustments in 2023 would materially misstate the Company’s unaudited consolidated financial statements as of and for the three months ended March 31, 2023. Accordingly, the Company determined that it was necessary to reflect these adjustments, as well as other immaterial adjustments previously identified during fiscal year 2022 and revised the previously issued consolidated financial statements with respect to the quarters ended March 31, June 30, and September 30, 2022, and the year ended December 31, 2022. See Note 16 – Quarterly Financial Data (Unaudited) for the revised quarterly and year-to-date unaudited consolidated financial statements for the quarters ended March 31, June 30, and September 30, 2022. The remainder of the notes to the Company’s consolidated financial statements have been updated and revised, as applicable, to reflect the impact of these adjustments.

Adjustments Background

Stock-Based Compensation

On September 27, 2022, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) approved the principal terms of new employment agreements for the Company’s Founder and Executive Chairperson, President and Chief Executive Officer and Executive Vice President and Chief Financial Officer. Pursuant to the terms, annual Class D stock awards and stock options with fixed monetary value known at inception were awarded. The first tranche of equity awards was granted and vested on September 27, 2022. The second and third annual grants were scheduled to vest in January 2023 and January 2024, respectively, with the grant price equal to the closing share price on the fifth calendar day of the month following the date on which vesting occurs (February 5, each of 2023 and 2024) (“Executive Awards”).

During the first quarter of 2023, the Company determined that it should have recognized expense for the second tranche of the Executive Awards during the third and fourth quarters of 2022 beginning at the service inception date that precedes the grant date and to classify these grants as a liability until vested. The effect of this adjustment was an understatement of stock-based compensation expense in the consolidated statements of operations for the year ended December 31, 2022 and understatements of other current liabilities and accumulated deficit in the consolidated balance sheet at December 31, 2022.

RVAEH

In 2021, the Company and Peninsula Pacific Entertainment entered into a 75/25 partnership of RVAEH. During the preparation of the interim consolidated financial statements for the quarter ended March 31, 2023, the Company evaluated whether it should have consolidated RVAEH due to its 75% ownership interest. As the Company had control and was the primary beneficiary of RVAEH, it was determined that RVAEH should have been consolidated in 2021 in accordance with ASC 810, “Consolidation”.

The Company historically recognized its 75% ownership portion of RVAEH’s financial statements on its consolidated financial statements under the equity method of accounting. The adjustment primarily impacted restricted cash, other current assets, property and equipment, net, other current liabilities, other long-term liabilities, redeemable noncontrolling interests, and accumulated deficit in the consolidated balance sheets, and corporate selling, general and administrative expenses, and net income attributable to noncontrolling interests in the consolidated statements of operations.

Other Adjustments

The Company, in the process of correcting the immaterial errors discussed above, recorded other immaterial adjustments previously identified during fiscal year 2022. The adjustments, in aggregate, impacted trade accounts receivable, net, accounts payable, other long-term liabilities, and accumulated deficit in the consolidated balance sheets and selling, general and administrative expenses, corporate selling, general and administrative expenses, and related tax effect in the consolidated statements of operations.

Revised Consolidated Financial Statements

The following tables reflect the correction of the immaterial errors and adjustments, discussed above, on the affected line items presented in the Company’s consolidated financial statements as of and for the year ended December 31, 2022. The previously reported amounts were derived from the Company's fiscal year 2022 Form 10-K. These amounts are labeled as “As Previously Reported” in the tables below. The columns labeled “Adjustments” represent the combined effects of the corrections of the stock-based compensation, the consolidation of RVAEH, and related tax effects. The columns labeled “Other Adjustments” represent the combined effects of the corrections of other immaterial adjustments and related tax effects.

Revised Consolidated Balance Sheet

	As of December 31, 2022
	As Previously
	Reported		Adjustments		Other Adjustments		As Revised
	(In thousands)
ASSETS
CURRENT ASSETS:
Restricted cash	$	19,975	$	6,500	$	—	$	26,475
Trade accounts receivable, net of allowance for doubtful accounts of $9,223		143,264		—		(1,219)		142,045
Other current assets		8,372		378		—		8,750
Total current assets		289,747		6,878		(1,219)		295,406
PROPERTY AND EQUIPMENT, net		27,758		500		—		28,258
Total assets	$	1,338,487	$	7,378	$	(1,219)	$	1,344,646
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	18,003	$	—	$	(807)	$	17,196
Other current liabilities		36,320		3,362		—		39,682
Total current liabilities		130,263		3,362		(807)		132,818
OTHER LONG-TERM LIABILITIES		34,540		858		(542)		34,856
DEFERRED TAX LIABILITIES, net		39,704		(214)		(101)		39,389
Total liabilities		979,417		4,006		(1,450)		981,973
REDEEMABLE NONCONTROLLING INTERESTS		25,298		6,625		—		31,923
STOCKHOLDERS’ EQUITY:
Accumulated deficit		(732,988)		(3,253)		231		(736,010)
Total stockholders’ equity		333,772		(3,253)		231		330,750
Total liabilities, redeemable noncontrolling interests and equity	$	1,338,487	$	7,378	$	(1,219)	$	1,344,646

Revised Consolidated Statement of Operations

	Year Ended December 31, 2022
	As Previously				Other
	Reported		Adjustments		Adjustments		As Revised
	(In thousands, except per share data)
OPERATING EXPENSES:
Selling, general and administrative, including stock-based compensation of $239	$	160,230	$	—	$	412	$	160,642
Corporate selling, general and administrative, including stock-based compensation of $9,666		56,334		3,728		(542)		59,520
Total operating expenses		389,917		3,728		(130)		393,515
Operating income (loss)		94,687		(3,728)		130		91,089
Income (loss) before provision for (benefit from) income taxes and noncontrolling interests in income of subsidiaries		56,676		(3,728)		130		53,078
PROVISION FOR (BENEFIT FROM) INCOME TAXES		16,721		(202)		(101)		16,418
NET INCOME (LOSS)		39,955		(3,526)		231		36,660
NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS		2,626		(309)		—		2,317
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	37,329	$	(3,217)	$	231	$	34,343
BASIC NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS
Net income (loss) attributable to common stockholders	$	0.76	$	(0.06)	$	—	$	0.70
DILUTED NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS
Net income (loss) attributable to common stockholders	$	0.72	$	(0.06)	$	—	$	0.66

Revised Consolidated Statement of Comprehensive Income

	Year Ended December 31, 2022
	As Previously				Other
	Reported		Adjustments		Adjustments		As Revised
	(In thousands)
COMPREHENSIVE INCOME (LOSS)	$	58,232	$	(3,526)	$	231	$	54,937
LESS: COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS		2,626		(309)		—		2,317
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	55,606	$	(3,217)	$	231	$	52,620

Revised Consolidated Statement of Changes in Stockholders’ Equity

		As Previously Reported
												Accumulated
		Convertible		Common		Common		Common		Common		Other		Additional				Total
		Preferred		Stock		Stock		Stock		Stock		Comprehensive		Paid-In		Accumulated		Stockholders’
For the year ended December 31, 2022		Stock		Class A		Class B		Class C		Class D		Income		Capital		Deficit		Equity
BALANCE, as of December 31, 2021	$	—	$	9	$	3	$	2	$	37	$	54,950	$	1,018,996	$	(770,317)	$	303,680
Net income		—		—		—		—		—		—		—		37,329		37,329
Stock-based compensation expense		—		1		—		—		1		—		6,593		—		6,595
Repurchase of 5,124,671 shares of Class D common stock		—		—		—		—		(4)		—		(26,539)		—		(26,543)
Exercise of options for 60,240 shares of Class D common stock		—		—		—		—		—		—		50		—		50
Other comprehensive income, net of tax		—		—		—		—		—		18,277		—		—		18,277
Adjustment of redeemable noncontrolling interests to estimated redemption value		—		—		—		—		—		—		(5,616)		—		(5,616)
BALANCE, as of December 31, 2022	$	—	$	10	$	3	$	2	$	34	$	73,227	$	993,484	$	(732,988)	$	333,772

		Adjustments and Other Adjustments
												Accumulated
		Convertible		Common		Common		Common		Common		Other		Additional				Total
		Preferred		Stock		Stock		Stock		Stock		Comprehensive		Paid-In		Accumulated		Stockholders’
For the year ended December 31, 2022		Stock		Class A		Class B		Class C		Class D		Income		Capital		Deficit		Equity
BALANCE, as of December 31, 2021	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	(36)	$	(36)
Net (loss)		—		—		—		—		—		—		—		(2,986)		(2,986)
Total Adjustments	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	(3,022)	$	(3,022)

		As Revised
												Accumulated
		Convertible		Common		Common		Common		Common		Other		Additional				Total
		Preferred		Stock		Stock		Stock		Stock		Comprehensive		Paid-In		Accumulated		Stockholders'
For the year ended December 31, 2022		Stock		Class A		Class B		Class C		Class D		Income		Capital		Deficit		Equity
BALANCE, as of December 31, 2021	$	—	$	9	$	3	$	2	$	37	$	54,950	$	1,018,996	$	(770,353)	$	303,644
Net income (loss)		—		—		—		—		—		—		—		34,343		34,343
Stock-based compensation expense		—		1		—		—		1		—		6,593		—		6,595
Repurchase of 5,124,671 shares of Class D common stock		—		—		—		—		(4)		—		(26,539)		—		(26,543)
Exercise of options for 60,240 shares of Class D common stock		—		—		—		—		—		—		50		—		50
Adjustment of redeemable noncontrolling interests to estimated redemption value		—		—		—		—		—		—		(5,616)		—		(5,616)
Other comprehensive income, net of tax		—		—		—		—		—		18,277		—		—		18,277
BALANCE, as of December 31, 2022	$	—	$	10	$	3	$	2	$	34	$	73,227	$	993,484	$	(736,010)	$	330,750

Revised Consolidated Statement of Cash Flows

	Year Ended December 31, 2022
	As
	Previously				Other		As
	Reported		Adjustments		Adjustments		Revised
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	39,955	$	(3,526)	$	231	$	36,660
Adjustments to reconcile net income (loss) to net cash from operating activities:
Bad debt expense		1,425		—		412		1,837
Deferred income taxes		14,878		(202)		(101)		14,575
Stock-based compensation		6,595		3,317		—		9,912
Effect of change in operating assets and liabilities, net of assets acquired:
Trade accounts receivable		(16,930)		—		807		(16,123)
Prepaid expenses and other current assets		(6,691)		40		—		(6,651)
Accounts payable		1,111		—		(807)		304
Other liabilities		(3,710)		(141)		(542)		(4,393)
Net cash flows (used in) provided by operating activities		67,060		(512)		—		66,548
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from noncontrolling interest members of RVAEH		—		512		—		512
Net cash flows provided by (used in) financing activities		(95,216)		512		—		(94,704)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period		152,218		6,500		—		158,718
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period	$	95,379	$	6,500	$	—	$	101,879