Equity Method Investments

6 Months Ended

Jun. 30, 2022

Equity Method Investments

Equity Method Investments

Note 6. 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 June 30, 2022, we have funded $126.6 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 three months ended June 30, 2022 and 2021, we recorded $2.3 million gain on equity method investment and $8.6 million loss from equity method investment in the accompanying Condensed Consolidated Statements of Operations, respectively. For the six months ended June 30, 2022 and 2021, we recorded $2.5 million loss on equity method investment and $6.1 million loss from equity method investment activity in the accompanying Condensed Consolidated Statements of Operations, respectively. The net balance recorded in equity method investments in the accompanying Condensed Consolidated Balance Sheets related to Canal 1 was $22.0 million and $24.2 million at June 30, 2022 and December 31, 2021, respectively. At June 30, 2022 and December 31, 2021 we had a receivable balance of $2.6 million, which is included in other assets in the accompanying Condensed 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. Due to the write-off of the investment carrying value, we did not record any share of the loss from the investment for the three and six months ended June 30, 2022 and 2021. The net balance recorded in equity method investments in the accompanying Condensed Consolidated Balance Sheets was $0 million as of June 30, 2022 and December 31, 2021. For more information, see Note 15, "Subsequent Events" of Notes to Condensed Consolidated Financial Statements.

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 June 30, 2022, we have funded $0.4 million into Snap JV. We record the income or loss on investment on a one quarter lag. For the three months ended June 30, 2022 and 2021, we have recorded $0.0 million and $0 million, respectively, in loss on equity method investments in the accompanying Condensed Consolidated Statements of Operations. For the six months ended June 30, 2022 and 2021, we recorded $0.0 million and $0 million, respectively, in loss on equity method investments in the accompanying Condensed Consolidated Statements of Operations. The net balance recorded in equity method investments related to Snap JV was $0.0 million as of June 30, 2022 and December 31, 2021, and is included in equity method investments in the accompanying Condensed Consolidated Balance Sheets.

The Company records the income or loss on investments on a one quarter lag. Summary unaudited financial data for our equity method investments in the aggregate as of and for the three months ended March 31, 2022, are included below (amounts in thousands):

	Total Equity Investees
Current assets	$	12,434
Non-current assets	$	22,804
Current liabilities	$	8,572
Non-current liabilities	$	80,604
Net revenue	$	5,334
Operating loss	$	(4,451)
Net loss	$	(14,410)