Signal management

HEMISPHERE MEDIA GROUP, INC. Management report and analysis of the financial situation and operating results. (Form 10-K)

The following discussion and analysis summarizes our financial condition and
operating performance and should be read in conjunction with our historical
Consolidated Financial Statements and notes thereto included above. Unless the
context indicates otherwise, the terms the "Company," "Hemisphere," "we," "our"
or "us" are used to refer to Hemisphere Media Group, Inc. and its consolidated
subsidiaries.

Important elements of the management report and the analysis of results of operations and financial position include:

? Overview. The Overview section provides a summary of our business, operations

divisions and business trends, outlook and strategy.

Consolidated operating results. Consolidated operating results

? presents an analysis of our results on a consolidated basis to

the year has ended December 31, 2021 compared to the year ended December 31, 2020.

Cash and capital resources. The Liquidity and Capital Resources Section

? provides an analysis of our cash flows for the year ended December 31, 2021

compared to the year ended December 31, 2020.

Critical accounting policies and estimates. The discussion of our accounting

? policies considered important for understanding our finances

the status and results of operations, and which require considerable judgment and

management estimates in their application.

OVERVIEW

Our Company

We are a leading U.S. Spanish-language media company serving the fast growing
and highly attractive U.S. Hispanic and Latin American markets with a premium
Spanish-language streaming platform distributed in the U.S., five
Spanish-language cable television networks distributed in the U.S., two
Spanish-language cable television networks distributed in Latin America, the
#1-rated

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broadcast television network in Puerto Rico, a leading distributor of content to
television and digital media platforms in Latin America and a 40% interest in
the #3-rated broadcast television network in Colombia.

Based at Miami, Floridaour portfolio consists of the following:

Pantaya: the very first premium subscription streaming service from

Spanish-language media offering the largest selection of news and classics,

free commercial blockbusters and exclusive rights to critically acclaimed

movies and series Latin America and the we including original

? productions and titles from our library, as well as titles from third parties

producers. The company formed Pantaya in partnership with Lionsgate and

launched the service in August 2017 with a 25% stake. At March, 31st,

2021, the Company acquired the remaining 75% interest from Lionsgate,

and Pantaya is now a wholly owned consolidated subsidiary of the Company. From

December 31, 2021Pantaya had nearly a million subscribers.

Cinelatino: the first cable film network in the Spanish language with approximately

3.4 million(1) subscribers in the we and 13.7 million(1) subscribers through

Latin America and Canada. Cinelatino is programmed with programming featuring the

? best contemporary movies and original tv series from MexicoLatin

America, and United States. Driven by the strength of its programming and

distribution, Cinelatino is the highest rated original film in Spanish

network in the we

WAPA: first broadcasting network and producer of television content

in Porto Rico. WAPA was the #1 ranked broadcast television network in

Porto Rico since the start of Nielsen audience measurement twelve years ago.

? WAPA is Porto Rico leader in news and the largest local producer of news and

entertainment programming, producing over 71 hours in total each week.

Additionally, we operate WAPA.TV, a leading news and entertainment website in

Porto Ricoas well as mobile applications, with content produced by WAPA.

WAPA Deportes: via its multicast signal, WAPA distributes WAPA Deportes, a

? first sports television channel in Porto Ricowith MLB, NBA and

professional sporting events Porto Rico.

WAPA America: a cable television network serving primarily Puerto Ricans and

other Caribbean Hispanics living in the we WAPA America programming

? presents information and entertainment programs produced by WAPA. WAPA America is

distributed in the we to approximately 3.3 million(1) subscribers, excluding

basic digital subscribers.

Pasiones: a cable television network dedicated to presenting the most popular

telenovelas and drama series, distributed in the we and Latin America.

Pasiones offers the best telenovelas of Latin America, Turkey, Indiaand

? South Korea (dubbed in Spanish), and is currently top rated

prime time telenovela cable television network. Pasiones about

3.7 million(1) subscribers in the we and 15.4 million(1) subscribers in Latin

America.

Centroamerica TV: a cable television network targeting Central Americans living

in the wethe third largest we Hispanic and fastest growing group

part of the we Hispanic population. Centroamerica TV offers the most

? popular news and entertainment from central Americaas well as soccer

programming of the best professional soccer leagues in the region.

Centroamerica TV is distributed in the we around 3.2 million(1)

the subscribers.

Television Dominicana: a cable television network targeting Dominicans living

in the wethe fourth largest we Hispanic National Group. Television

? Dominicana broadcasts the most popular news and entertainment programs from the

Dominican Republicas good as Dominican Republic professional baseball

league, featuring current and former MLB players. Dominican television is

distributed in the we to approximately 2.2 million(1) subscribers.

Snap Media: A Content Distributor for Broadcast and Cable TV Networks

and OTT, SVOD and AVOD platforms in Latin America. At November 26, 2018we

acquired a 75% stake in Snap Media and, as part of the acquisition,

Snap Media has entered into a joint venture with MarVista, an independent company

? entertainment studio and shareholder of Snap Media, to produce

movies and series. Snap Media is responsible for content distribution

owned and/or controlled by our Networks, as well as content to be produced by

the production joint venture between Snap Media and MarVista. At July 15, 2021,

   the Company entered into an omnibus agreement, pursuant to which, minority
   shareholders


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relinquished the 25% non-controlling interest in Snap Media, in which case Snap

Media became a wholly owned subsidiary of the Company.

Channel 1: the #3 ranked broadcast television network in Colombia. We own 40%

interest in Canal 1 in partnership with the main producers of information and

entertainment content in Colombia. The partnership was awarded a 10-year contract

television concession renewable in 2016. The partnership began

? operation of channel 1 on May 1, 2017 and launched a new program on

August 14, 2017. In July 2019the Colombian government has enacted a law

resulting in the extension of the concession license for another ten

years without additional compensation. The concession is now due to expire on

April 30, 2037 and is renewable for a further period of 20 years.

REMEZCLA: a digital media company targeting Anglophones and bilinguals we

? Hispanic millennials through innovative content. At April 28, 2017we acquired

a 25.5% stake in REMEZCLA.

(1) Subscription amounts are based on the most recent installments received from our

Distributors at the period end date, which is generally two months before

at the period end date.

Our two primary sources of revenues are advertising revenue and subscriber
revenue. All of our Networks derive revenues from advertising. Advertising
revenue is generated from the sale of advertising time, which is typically sold
pursuant to advertising orders with advertisers. Our advertising revenue is tied
to the success of our programming, including the popularity of our programming
with our target audience. Our advertising is variable in nature and tends to
reflect seasonal patterns of our advertisers' demand, which is generally
greatest during the fourth quarter of each year, driven by the holiday buying
season. In addition, Puerto Rico's political election cycle occurs every four
years and we benefit from political advertising in an election year. For
example, in 2020, we experienced higher advertising sales as a result of
political advertising spending during the 2020 Puerto Rico gubernatorial
elections. The next election in Puerto Rico will be in 2024.

All of our Networks receive fees paid by MVPDs. These revenues are generally
based on a per subscriber fee pursuant to multi-year contracts, commonly
referred to as "affiliation agreements," which typically provide for annual rate
increases. The specific subscriber revenue we earn varies from period to period,
Distributor to Distributor and also varies among our Networks, but is generally
based upon the number of each Distributor's paying subscribers who receive our
Networks. The terms of certain non-U.S. affiliation agreements provide for
payment of a fixed contractual monthly fee. Changes in subscriber revenue at our
Networks are primarily derived from changes in contractual affiliation rates
charged for our Networks and changes in the number of subscribers. MVPDs report
their subscriber numbers to our Networks generally on a two month lag. We record
revenue based on estimates of the number of subscribers utilizing the most
recently received remittance reporting of each MVPD, which is consistent with
our past practice and industry practice. Revenue is recognized on a month by
month basis when the performance obligations to provide service to the MVPDs is
satisfied. Payment is typically due and received within sixty days of the
remittance. We also generate subscriber revenue from subscriptions to Pantaya,
our streaming platform. Pantaya is available directly to consumers through our
web application as well as through distribution partners. Certain distribution
partners charge a fee, which is recorded in cost of revenues. Subscribers are
billed at the start of their monthly or annual membership and revenue is
recognized ratably over each applicable membership period. Subscriber revenue
varies from period to period and is generally based upon the number of paying
subscribers to our streaming platform. Estimates of revenue generated but not
yet reported by the Company's third party Distributors are made based on the
estimated number of subscribers using the most recently received remittance
reporting from each Distributor, which is consistent with our past practice and
industry practice.

In 2021, we generated approximately 95% of our net revenue from United States. For the years ended December 31, 2021 and 2020, we generated net revenues of $185.3 million and $141.9 millionrespectively, of United States. For the years ended December 31, 2021 and 2020, we generated net revenues of $10.4 million and $9.3 millionrespectively, from the outside United States.

WAPA has been the #1-rated broadcast television network in Puerto Rico since the
start of Nielsen audience measurement twelve years ago and management believes
it is highly valued by its viewers and cable, satellite and telecommunications
service providers. WAPA is distributed by all pay-TV distributors in Puerto Rico
and has been successfully growing affiliate revenue. WAPA's primetime household
rating for the year ended December 31, 2021 was nearly four times higher than
the most highly rated English-language U.S. broadcast network in the U.S., CBS,
and higher than the combined ratings of CBS, NBC, ABC, FOX and the CW. As a

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Following the success of its audiences since the start of Nielsen’s audience measurement, management believes that WAPA is well positioned for future subscription revenue growth.

WAPA America, Cinelatino, Pasiones, Centroamerica TV and Television Dominicana
occupy a valuable and unique position, as they are among the small group of
Hispanic cable networks to have achieved broad distribution in the U.S. As a
result, management believes our U.S. cable networks are well-positioned to
benefit from growth in both the growing national advertising spend targeted at
the highly sought-after U.S. Hispanic cable television audience, and growth in
the U.S. Hispanic population, which is expected to continue its long-term upward
trajectory.

Hispanics represent 18% of the total U.S. television household population and
11% of the total U.S. buying power, but the aggregate linear television media
spend targeted at U.S. Hispanics significantly under-indexes both of these
metrics. As a result, advertisers have been allocating a higher proportion of
marketing dollars to the Hispanic market.

Management expects our U.S. networks to benefit from growth in the U.S. Hispanic
population, as it continues its long-term growth. According to the 2020 U.S.
Census, nearly 62.1 million Hispanics resided in the United States in 2020,
representing an increase of more than 27 million people between 2000 and 2020,
and that number is projected to grow to approximately 75 million by 2030. U.S.
Hispanic television households grew by 35% during the period from 2010 to 2021,
from 12.9 million households to 17.5 million households.

Similarly, management expects Cinelatino and Pasiones to benefit from growth in
Latin America. Pay-TV subscribers in Latin America (excluding Brazil) are
projected to grow from 53 million in 2021 to 60 million by 2025. Furthermore, as
of December 31, 2021, Cinelatino and Pasiones were distributed to approximately
26% and 29% of total pay-TV subscribers throughout Latin America (excluding
Brazil), respectively.

Colombia, where we own 40% of Canal 1, the #3-rated broadcast television
network, is a large and appealing market for broadcast television. Colombia had
an estimated population of 51.6 million as of January 1, 2022, the second
largest in Latin America (excluding Brazil). According to IBOPE, the three major
broadcast networks in Colombia receive a 55% share of overall viewing. These
factors result in an annual market for free-to-air television advertising of
approximately $256 million for 2021 (as converted utilizing the average foreign
exchange rate during the period).

MVS, one of our stockholders, provides operational, technical and distribution
services to Cinelatino pursuant to several agreements, including an agreement
pursuant to which MVS provides satellite and technical support and other
administrative support services, an agreement that grants MVS the non-exclusive
right to distribute the Cinelatino service to third party distributors in
Mexico, and an agreement between Cinelatino and Dish Mexico (an affiliate of
MVS), pursuant to which Dish Mexico distributes Cinelatino and pays subscriber
fees to Cinelatino.

From January 31, 2021, Univision Holdings II, Inc.with its wholly owned subsidiary, Univision Communications, Inc. and Grupo Televisa, SAB (“Televisa”) have completed a merger to create a new combined company named
Televisa Univision, Inc. (“TelevisaUnivision”). The Company has entered into various agreements with TelevisaUnivision (including its various divisions and affiliates), which has directors in common with the Company (WHO may hold a material financial interest in TelevisaUnivision).

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COVID-19 Pandemic
In March 2020, the World Health Organization characterized the coronavirus
("COVID-19") as a pandemic, and the President of the United States declared the
COVID-19 outbreak a national emergency. The impact of COVID-19 and measures to
prevent its spread have continued to affect our businesses in a number of ways.
Beginning in March 2020, the Company experienced adverse advertising revenue
impacts. Operationally, most non-production and programming personnel are
working remotely, and the Company has restricted business travel. The Company
has managed the remote workforce transition effectively and there have been no
material adverse impacts on operations through December 31, 2021. The Company's
advertising revenue improved during the second part of 2020, however, the
Company is unable to reasonably predict the impact that a significant change in
circumstances, including the ability of our workforce and/or key personnel to
work effectively because of illness, government actions or other restrictions in
connection with the COVID-19 pandemic, may have on our businesses in the future.
The nature and full extent of the impact of the COVID-19 pandemic on our future
operations will depend on numerous factors, all of which are highly uncertain
and cannot be reasonably predicted. These factors include the length and
severity of the outbreak, including the extent of surges in positive cases
related to variants of COVID-19, such as the Delta and Omicron variants, as well
as the availability and efficacy of vaccines and treatments for the disease and
whether individuals choose to vaccinate themselves, the responses of private
sector businesses and governments, including the timing and amount of government
stimulus, the impact on economic activity and the impact on our customers,
employees and suppliers. For more information on the risks associated with the
COVID-19 pandemic, see "Item 1A-Risk Factors" included elsewhere in this Annual
Report.

The Company has evaluated and continues to evaluate the potential impact of the
COVID-19 pandemic on its Consolidated Financial Statements, including the
impairment of goodwill and indefinite-lived intangible assets and the fair value
of equity method investments. The ultimate impact of the COVID-19 pandemic,
including the extent of any adverse impact on our business, results of
operations and financial condition, remains uncertain.

Given the global nature of the COVID-19 pandemic, our investment in Canal 1,
which operates in Colombia, has also been negatively impacted. Colombia's
President declared a state of emergency, locking down the country on March 20,
2020. Since then, most restrictions have been lifted allowing services to work
at full capacity including retail and mass transportation, however some
limitations are still in place for public events and the state of emergency
declaration has been extended to April 30, 2022. The COVID-19 pandemic had a
material adverse impact on advertising spending, and accordingly, had a material
adverse impact on Canal 1's advertising revenue in 2020. However, advertising
spend and Canal 1's advertising revenue improved and surpassed pre-COVID-19
levels in 2021.

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CONSOLIDATED OPERATING RESULTS

Comparison of consolidated results of operations for the years ended December 31, 2021 and December 31, 2020 (amounts in thousands)

                                                  Years Ended             $ Change          % Change
                                                 December 31,            Favorable/        Favorable/
                                               2021          2020       (Unfavorable)    (Unfavorable)
Net revenues                                $  195,650    $  151,184           44,466            29.4 %
Operating expenses:
Cost of revenues                                59,555        48,309         (11,246)          (23.3) %
Selling, general and administrative             93,813        44,646         (49,167)              NM
Depreciation and amortization                   25,504        11,472         (14,032)              NM
Other expenses                                   8,959         3,226          (5,733)              NM
Gain from FCC spectrum repack and other        (2,638)         (953)            1,685              NM
Impairment of goodwill and intangibles               -         2,784       
    2,784           100.0 %
Total operating expenses                       185,193       109,484         (75,709)          (69.2) %
Operating income                                10,457        41,700         (31,243)          (74.9) %
Other income (expense), net:
Interest expense and other, net               (11,983)      (10,376)          (1,607)          (15.5) %
Gain (loss) on equity method investments        17,679      (22,258)           39,937              NM
Impairment of equity method investment               -       (5,479)            5,479           100.0 %
Other (expense) income, net                      (128)         3,267          (3,395)              NM
Total other income (expense), net                5,568      (34,846)       
   40,414              NM
Income before income taxes                      16,025         6,854            9,171              NM
Income tax expense                             (4,994)       (8,992)            3,998            44.5 %
Net income (loss)                               11,031       (2,138)           13,169              NM
Net loss attributable to non-controlling
interest                                            32           903            (871)          (96.5) %
Net income (loss) attributable to
Hemisphere Media Group, Inc.                $   11,063    $  (1,235)           12,298              NM


NM = not meaningful

Net Revenues

Net revenues were $195.7 million for the year ended December 31, 2021, an
increase of $44.5 million, or 29%, as compared to $151.2 million for the year
ended December 31, 2020. Subscriber revenue increased $39.8 million, or 51%,
primarily due to the inclusion of Pantaya, which the Company acquired on March
31, 2021, as well as contractual rate increases, offset in part by a decline in
U.S. pay television subscribers. Advertising revenue increased $3.6 million, or
5%, primarily due to growth in the Puerto Rico television advertising market,
offset in part by political advertising revenue in the prior year period. Other
revenue increased $1.1 million, or 22%, driven primarily by the timing of the
licensing of our content to third parties. Excluding political advertising in
the prior year period, net revenues increased $48.7 million, or 33%.

Functionnary costs

Cost of Revenues: Cost of revenues consists primarily of programming and
production costs, programming amortization, technical and streaming delivery
costs and distribution fees. Cost of revenues for the year ended December 31,
2021, were $59.6 million, an increase of $11.2 million, or 23%, compared to
$48.3 million for the year ended December 31, 2020, due to the inclusion of
Pantaya, primarily comprised of programming, streaming delivery costs and
third-party distribution fees. Additionally, programming and production costs
increased due to the launch of new programming and certain programming and
sporting events produced and broadcast in the current year period that were
cancelled in the prior year period due to the COVID-19 pandemic, offset in part
by lower programming amortization.

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Selling, General and Administrative: Selling, general and administrative
expenses consist principally of marketing, research, employee costs, stock-based
compensation, and other general administrative costs. Selling, general, and
administrative expenses for the year ended December 31, 2021, were $93.8
million, an increase of $49.2 million, compared to $44.6 million for the year
ended December 31, 2020, due to the inclusion of Pantaya, primarily comprised of
marketing and personnel expenses. Additionally, the increase was due to higher
advertising sales commissions, as a result of the growth in advertising revenue,
higher stock-based compensation, offset in part by lower bad debt reserves. The
prior year also reflected cost reductions implemented in response to the
pandemic, including salary reductions and employee retention credits, which the
Company did not have in the current year period.

Depreciation and Amortization: Depreciation and amortization expense consists of
depreciation of fixed assets and amortization of intangibles. Depreciation and
amortization for the year ended December 31, 2021, was $25.5 million, an
increase of $14.0 million, compared to $11.5 million for the year ended December
31, 2020, due to the amortization of intangible assets recognized as part of the
Pantaya Acquisition.

Other Expenses: Other expenses include legal and financial advisory fees, and
other fees incurred in connection with acquisition and corporate finance
activities, including debt and equity financings. Other expenses for the year
ended December 31, 2021, were $9.0 million, an increase of $5.7 million,
compared to $3.2 million for the year ended December 31, 2020, primarily due to
expenses incurred in connection with the Pantaya Acquisition and the incremental
borrowing on our Third Amended Term Loan Facility.

Gain from FCC Spectrum Repack and Other: Gain from FCC spectrum repack and other
primarily reflects reimbursements we have received from the FCC for equipment
purchased as a result of the FCC spectrum repack, and gain or loss from the sale
of assets no longer utilized in the operations of the business. Gain from FCC
spectrum repack and other for the year ended December 31, 2021, was $2.6
million, an increase as compared to $1.0 million for the year ended December 31,
2020, due to the timing of reimbursements received from the FCC for equipment
purchases.

Impairment of goodwill and intangibles: Impairment of goodwill and intangibles
represents the amount by which the carrying value of an asset exceeds the
asset's fair value. The $2.8 million charge for the year ended December 31,
2020, was related to impairment of goodwill and intangible assets identified in
connection with the acquisition of Snap. There were no impairment charges in the
current year.

Other income (expense), net

Interest Expense and Other, net: Interest expense for the year ended December
31, 2021, increased $1.6 million, or 16%, due to incremental borrowing on our
Third Amended Term Loan Facility, offset in part by a lower average interest
rate due to the decline in LIBOR.

Gain (Loss) on Equity Method Investments: Gain on equity method investments for
the year ended December 31, 2021, was $17.7 million, an improvement of $39.9
million, compared to a loss of $22.3 million for the year ended December 31,
2020, primarily due to a $30.1 million one-time non-cash gain recognized on the
existing 25% equity interest in Pantaya upon the step acquisition of the
remaining 75% equity interest in Pantaya on March 31, 2021. The improvement was
also due to improved operating results at Canal 1. For more information, see
Note 3, "Business Combination" and Note 7, "Equity Method Investments" of Notes
to Consolidated Financial Statements, included elsewhere in this Annual Report.

Impairment of Equity Method Investment: In March 2020, we recorded a non-cash
impairment charge of $5.5 million reflecting the write-off of the full valuation
of our investment in REMEZCLA. There were no impairment charges for the year
ended December 31,2021. For more information, see Note 7, "Equity Method
Investments" of Notes to Consolidated Financial Statements, included elsewhere
in this Annual Report.

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Other (expense) income, net: Other expense, net for the year ended December 31,
2021, was $0.1 million due to the write-off of the net book value of programming
rights at the Company for content licensed from Pantaya prior to the Acquisition
Date, which was offset in part by the entry into an omnibus modification
agreement by the Company and Snap Media's minority holder, whereby the 25%
minority holder agreed to waive the remaining consideration due from the Company
in respect of the acquisition of Snap Media and relinquish its non-controlling
interest. Other income, net for the year ended December 31, 2020, was $3.3
million as the Company received proceeds for the reimbursement of expenses
related to a strategic transaction. The expenses incurred were recorded in other
expenses in the accompanying Consolidated Statements of Operations. For more
information, see Note 3, "Business Combination" and Note 12, "Stockholders'
Equity" of Notes to Consolidated Financial Statements, included elsewhere in
this Annual Report.

Income Tax Expense
Income tax expenses for the year ended December 31, 2021, was $5.0 million as
compared to $9.0 million for the year ended December 31, 2020, due to lower
operating income and Puerto Rico tax credits. For more information, see Note 8,
"Income Taxes" of Notes to Consolidated Financial Statements, included elsewhere
in this Annual Report.

Net Income (Loss)

Net income for the year ended December 31, 2021, was $11.0 million, compared to
a loss of $2.1 million for the year ended December 31, 2020, as the current year
period benefitted from a one-time non-cash gain of $30.1 million recognized on
the existing 25% equity interest in Pantaya upon the step acquisition of the
remaining 75% equity interest. For more information, see Note 3, "Business
Combination" of Notes to Consolidated Financial Statements, included elsewhere
in this Annual Report.

Net loss attributable to non-controlling interest

Net loss attributable to non-controlling interest related to the 25% interest in
Snap Media held by minority shareholders and was $0.0 million for the year ended
December 31, 2021, as compared to $0.9 million for the year ended December 31,
2020. On July 15, 2021, the Company obtained the non-controlling 25% interest in
Snap Media that was previously held by minority shareholders, and as a result
there is no longer a non-controlling interest in Snap Media. For more
information, see Note 12, "Stockholders' Equity" of Notes to Consolidated
Financial Statements, included elsewhere in this Annual Report.

Net income (loss) attributable to Hemisphere Media Group, Inc.

Net income attributable to Hemisphere Media Group, Inc. for the year ended
December 31, 2021has been $11.1 millioncompared to a loss of $1.2 million for the year ended December 31, 2020.

CASH AND CAPITAL RESOURCES

Sources and uses of species

Our principal sources of cash are cash on hand, cash flows from operating
activities and capacity under our revolving loan ("Revolving Facility"). At
December 31, 2021, we had $49.5 million of cash on hand and $30.0 million
undrawn and available under our Revolving Facility. Our primary uses of cash
include the production and acquisition of programming, operating costs,
personnel costs, equipment purchases, principal and interest payments on our
outstanding debt and income taxes. Cash may also be used to fund investments,
acquisitions and repurchases of common stock.

On November 18, 2020, the Company announced that its Board of Directors
authorized the repurchase of up to $20 million of the Company's Class A common
stock, par value $0.0001 per share ("Class A common stock"). Under the Company's
stock repurchase program, management was authorized to purchase shares of the
Company's common stock from time to time through open market purchases at
prevailing prices, subject to stock price, business and market conditions and
other factors. The repurchase plan expired on November 19, 2021. As of November
19, 2021, the Company repurchased 0.2 million shares of Class A common stock
under the repurchase program for an aggregate purchase price of $1.7 million,
and the repurchased shares were recorded as treasury stock on the accompanying
Consolidated Balance Sheets.

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Management believes cash on hand, cash flow from operations and availability
under our Revolving Facility will provide sufficient liquidity to meet our
current contractual financial obligations and to fund anticipated working
capital and capital expenditure requirements for existing operations. Our
current financial obligations include maturities of debt, commitments from the
ordinary course of business that require cash payments to vendors and suppliers,
particularly for programming, operating leases and other commitments. However,
we do not expect to generate sufficient cash flow from operations to repay at
maturity the entirety of the then outstanding balances of our debt. As a result,
we will then be dependent upon our ability to access the capital and credit
markets in order to repay or refinance the outstanding balances of our
indebtedness. Failure to raise significant amounts of funding to repay these
obligations at maturity would adversely affect our business. In such a
circumstance, we would need to take other actions including selling assets,
seeking strategic investments from third parties or reducing other discretionary
uses of cash.

Cash Flows

Amounts in thousands                  2021           2020
Cash provided by (used in):
Operating activities               $     4,480    $   55,979
Investing activities                 (130,983)      (10,593)
Financing activities                    41,509       (3,066)

(Decrease) net increase in cash ($84,994) $42,320

Comparison for the year ended December 31, 2021 and December 31, 2020

Operational activities

Cash provided by operating activities is primarily driven by our net income,
adjusted for non-cash items and changes in working capital. Non-cash items
consist primarily of depreciation of property and equipment, amortization of
intangibles, programming amortization, amortization of deferred financing costs,
stock-based compensation expense, deferred taxes, provision for bad debts, and
(gain) loss on equity method investments.

Net cash provided by operating activities for the year ended December 31, 2021,
was $4.5 million, a decrease of $51.5 million, as compared to $56.0 million in
the same period in 2020, due to a decrease in non-cash items of $37.1 million
and a decrease in net working capital of $27.6 million, offset in part by an
improvement in net income of $13.2 million. The decrease in non-cash items is
due to a $39.9 million improvement in gain on equity method investments
primarily due to a $30.1 million one-time gain recognized on the existing 25%
equity interest in Pantaya upon the step acquisition of the remaining 75% equity
interest, an increase in gain from FCC spectrum repack and other of $1.7
million, and decreases in impairment charges totaling $8.3 million, deferred tax
expense of $1.7 million, programming amortization of $1.5 million, provision for
bad debts of $0.8 million, offset in part by increases in depreciation and
amortization of $14.0 million, stock-based compensation of $0.8 million,
amortization of deferred financing and original issue discount of $0.7 million,
and other non-cash acquisition related charges of $1.3 million. The decrease in
net working capital is due to increases in prepaids and other assets of $18.2
million and programming rights of $14.0 million, both primarily due to the
inclusion of Pantaya, and decreases in programming rights payable of $8.2
million, other accrued expenses of $3.8 million, and income taxes payable of
$3.1 million, offset in part by a decrease in accounts receivable of $12.9
million and increases in accounts payable of $6.0 million, other liabilities of
$0.6 million, and due from related parties, net of $0.4 million.

For more information, see Note 3, “Business combinations” and Note 7, “Equity-accounted investments” in the Notes to the Consolidated Financial Statements, included elsewhere in this Annual Report.

Investing activities

Net cash used in investing activities for the year ended December 31, 2021, was
$131.0 million, an increase of $120.4 million as compared to $10.6 million in
the same period in 2020. The increase was primarily due to the net cash paid for
the Pantaya Acquisition of $122.6 million (net of cash acquired) and an increase
in capital expenditures of $1.8 million, offset in part by a decrease in funding
of equity investments of $2.6 million and increased proceeds received from the
FCC related to the spectrum repack of $1.4 million.

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Financing Activities

Net cash provided by financing activities for the year ended December 31, 2021,
was $41.5 million, as compared to net cash used of $3.1 million in the same
period in 2020. The increase is due to net proceeds of $47.4 million received
from incremental borrowing under our Third Amended Term Loan Facility in
connection with the Pantaya Acquisition, offset in part by increases in
repurchases of our Class A common stock of $2.4 million and repayments of
long-term debt of $0.4 million.

Discussion on indebtedness

On February 14, 2017, Hemisphere Media Holdings, LLC ("Holdings") and InterMedia
Español, Inc. (together with Holdings, the "Borrowers"), both wholly owned,
indirect subsidiaries of the Company, amended the Term Loan Facility (the
"Second Amended Term Loan Facility"). The Second Amended Term Loan Facility
provides for a $213.3 million senior secured term loan B facility, and matures
on February 14, 2024. The Second Amended Term Loan Facility bore interest at the
Borrowers' option of either (i) London Inter-bank Offered Rate ("LIBOR") plus a
margin of 3.50% or (ii) an Alternate Base Rate ("ABR") plus a margin of 2.50%.

On March 31, 2021 (the "Closing Date"), the Borrowers amended the Term Loan
Facility, as previously amended (the "Third Amended Term Loan Facility"), for
the borrowing of a new tranche of term loans in the aggregate principal amount
of $50.0 million and matures on February 14, 2024. The Third Amended Term Loan
Facility bears interest at the Borrowers' option of either (i) LIBOR plus a
margin of 3.50% or (ii) an ABR plus a margin of 2.50%. There is no LIBOR floor.
The add-on to the term loan B facility was issued with 4.0% of original issue
discount ("OID").

Additionally, the Third Amended Term Loan Facility provides for a Revolving
Facility allowing for an aggregate principal amount of up to $30.0 million. The
Revolving Facility is secured on a pari passu basis by the collateral securing
the Third Amended Term Loan Facility and will mature on November 15, 2023. The
Revolving Facility will bear interest at the Borrowers' option of either (i)
LIBOR (which will not be less than zero) plus a margin of 2.75% or (ii) or an
ABR plus a margin of 1.75%, in each case, with a 25 basis points ("bps") step-up
at a First Lien Net Leverage Ratio level of 3.50:1.00 and two 25 bps step-downs
at a First Lien Net Leverage Ratio level of 2.50:1.00 and 1.50:1.00. The First
Lien Net Leverage Ratio limits the amount of cash netted against debt to a
maximum amount of $60.0 million. The Borrowers are also required to pay a
quarterly commitment fee on the undrawn balance of the Revolving Facility at
37.5 bps per annum. As of December 31, 2021, the Revolving Facility was undrawn.

The Third Amended Term Loan Facility does not have any maintenance covenants.
The Revolving Facility will have a springing First Lien Net Leverage Ratio of no
greater than 5.00:1.00, tested commencing with the last day of the fiscal
quarter ending June 30, 2021, and the last day of each fiscal quarter
thereafter, solely to the extent that on such day, the aggregate amount of
revolving loans and letter of credit exposure (excluding up to $5.0 million of
undrawn letters of credit and cash collateralized or backstopped letters of
credit) exceeds 35% of the aggregate commitments under the Revolving Facility.

The Third Amended Term Loan Facility requires the Borrowers to make amortization
payments (in quarterly installments) equal to 1.00% per annum with respect to
the Third Amended Term Loan Facility with any remaining amount due at final
maturity. The Third Amended Term Loan Facility principal payments commenced on
June 30, 2021, with a final installment due on February 14, 2024. Voluntary
prepayments are permitted, in whole or in part, subject to certain minimum
prepayment requirements.

Within 90 days after the end of each fiscal year, the Borrowers are required to
make a prepayment of the loan principal in an amount equal to a percentage of
the excess cash flow of the most recently completed fiscal year. Excess cash
flow is generally defined as net income plus depreciation and amortization
expense, less mandatory prepayments of the term loan, income taxes and capital
expenditures, and adjusted for the change in working capital. The percentage of
the excess cash flow used to determine the amount of the prepayment of the loan
declines from 50% to 25%, and again to 0% at lower leverage ratios. Pursuant to
the terms of the Third Amended Term Loan Facility, no excess cash flow payment
will be due in March 2022.

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In accordance with ASC 470 - Debt, the Incremental Facility borrowing was deemed
a modification of the Second Term Loan Facility and as such, an additional $2.0
million of original issue discount ("OID") incurred in connection with the Third
Amended Term Loan Facility was added to the existing OID. As of December 31,
2021, the OID balance was $2.2 million, net of accumulated amortization of $3.3
million and was recorded as a reduction to the principal amount of the long-term
debt outstanding as presented on the accompanying Consolidated Balance Sheets
and will be amortized as a component of interest expense over the term of the
Third Amended Term Loan Facility. Financing costs of $0.6 million incurred in
connection with the Third Amended Term Loan Facility were expensed in accordance
with ASC 470 - Debt and are included in other expenses in the accompanying
Consolidated Statement of Operations at December 31, 2021. In accordance with
ASU 2015-15 Interest-Imputation of Interest (Subtopic 835-30) Presentation and
Subsequent Measurement of Debt Issuance Costs Associated with Line of Credit
Arrangements, deferred financing fees of $0.5 million, net of accumulated
amortization of $2.8 million, are presented as a reduction to the Third Amended
Term Loan Facility outstanding at December 31, 2021 as presented on the
accompanying Consolidated Balance Sheets, and will be amortized as a component
of interest expense over the term of the Third Amended Term Loan Facility. An
additional $0.4 million of deferred costs, net of accumulated amortization of
$0.2 million, incurred on the Revolving Facility in connection with the Third
Amended Term Loan Facility, is recorded to prepaid and other current assets and
other non-current assets in the accompanying Consolidated Balance Sheets as of
December 31, 2021. Amortization of these costs will be straight-line through
maturity on November 15, 2023.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our Consolidated Financial Statements are prepared in accordance with U.S. GAAP,
which requires management to make estimates, judgments and assumptions that
affect the amounts reported in the Consolidated Financial Statements included in
the Annual Report on Form 10-K and accompanying notes. Management considers an
accounting policy to be critical if it is important to our financial condition
and results of operations, and if it requires significant judgment and estimates
on the part of management in its application. The development and selection of
these critical accounting policies have been determined by management and the
related disclosures have been reviewed with the Audit Committee of our Board of
Directors. We consider policies relating to the following matters to be critical
accounting policies:

Revenue Recognition

The Company primarily earns revenue from (i) the distribution of its programming
services through distributors and directly to consumers, (ii) advertising, and
(iii) licensing of its programming. Revenue is recognized when, or as,
performance obligations under the terms of a contract are satisfied, which
generally occurs when, or as, control of the promised products or services is
transferred to customers. Revenue is measured as the amount of consideration the
Company expects to receive in exchange for transferring products or services to
a customer. The Company's revenue recognition policies associated with each
major source of revenue from contracts with customers are described in Note 2,
"Revenue Recognition" of Notes to Consolidated Financial Statements, included
elsewhere in this Annual Report.

Programming rights

The Company acquires, licenses, and produces content, including original
programming ("programming rights"), for exploitation on our Networks, streaming
platform, as well as, to be licensed to third parties. For acquired and licensed
content, the Company capitalizes amounts paid to secure or extend the rights.
For produced content, the Company capitalizes costs associated with the
production, including development costs, direct cost, and production overhead.
In development production costs for projects that will be completed within one
year and after one year are recorded in prepaid and other current assets and
other assets non-current, respectively, in the accompanying Consolidated Balance
Sheets. Once production is complete, the capitalized costs are moved to
programming rights current in the accompanying Consolidated Balance Sheets.

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If management estimates that the unamortized cost of programming rights exceeds
the estimated fair value, an adjustment is recorded to reduce the carrying value
of the programming rights. For the year ended December 31, 2021, management did
not deem it necessary to write-down program rights. For the year ended December
31, 2020, management deemed it necessary to write-down certain program rights of
$0.9 million, which is included in the amortization of programming rights.
Programming rights are generally amortized over the term of the related license
agreements or the number of exhibitions, whichever occurs first. For productions
with intended distribution to third-parties, the Company amortizes the cost,
including any participations and residuals, over the expected ultimate revenue
stream in proportion to the revenues recognized. Programming rights to be
utilized on our Networks or streaming platform within one year are classified as
current assets, while programming rights to be utilized subsequently are
considered non-current. Programming rights payable are classified as current or
noncurrent in accordance with the payment terms of the various agreements.

For more information on Programming Rights and Costs, see Note 1, "Nature of
Business and Significant Accounting Policies" of Notes to Consolidated Financial
Statements, included elsewhere in this Annual Report.

Good will and other intangibles

The Company's goodwill is recorded as a result of the Company's business
combinations using the acquisition method of accounting. Indefinite lived
intangible assets include a broadcast license, trademarks and tradenames. Other
intangible assets include affiliate and customer relationships, programming
rights, brands, and non-compete agreements with estimated useful lives of one to
ten years. Other intangible assets are amortized over their estimated useful
lives using the straight-line method. Costs incurred to renew or extend the term
of recognized intangible assets are capitalized and amortized over the useful
life of the asset.

The Company tests its broadcast license annually for impairment or whenever
events or changes in circumstances indicate that such assets might be impaired.
The impairment test consists of a comparison of the fair value of these assets
with their carrying amounts using a discounted cash flow valuation method,
assuming a hypothetical start-up scenario.

The Company tests its trademarks and tradenames annually for impairment or
whenever events or changes in circumstances indicate that such assets might be
impaired. The test consists of a comparison of the fair value of these assets
with the carrying amounts utilizing an income approach in the form of the
royalty relief method, which measures the cost savings that a business enjoys
since it does not have to pay a royalty rate for the use of a particular domain
name and brand.

The Company tests its goodwill annually for impairment or whenever events or
changes in circumstances indicate that goodwill might be impaired. The goodwill
impairment test compares the fair value of each reporting unit with its carrying
amount, including goodwill. The fair value of the reporting units is determined
utilizing a combination of a discounted cash flow analysis incorporating
variables such as revenue projections, projected operating cash flow margins,
and discount rates, as well as a market-based approach employing comparable
sales analysis.

The valuation assumptions used in the discounted cash flow model reflect
historical performance of the Company and prevailing values in the broadcast and
cable markets. If the fair value exceeds the carrying amount, goodwill is not
considered impaired. If the carrying amount exceeds the fair value, an
impairment loss shall be recognized in an amount equal to that excess.

The Company tests its other finite lived intangible asset for impairment
whenever events or changes in circumstances indicate that such asset or asset
group might be impaired. This analysis is performed by comparing the respective
carrying value of the asset group to the current and expected future cash flows,
on an undiscounted basis, to be generated from such asset group. If such
analysis indicates that the carrying value of this asset group is not
recoverable, the carrying value of such asset group is reduced to fair value.

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In January 2017, the FASB issued Accounting Standards Updates ("ASU") 2017
04-Intangibles-Goodwill and Other (Topic 350) Simplifying the Test for Goodwill
Impairment. The amendments in this Update simplify how an entity is required to
test goodwill for impairment by eliminating step 2 from the goodwill impairment
test. In computing the implied fair value of goodwill under step 2, an entity
had to perform procedures to determine the fair value at the impairment testing
date of its assets and liabilities following the procedure that would be
required in determining the fair value of assets acquired and liabilities
assumed in a business combination. Under amendments in this Update, an entity
would perform its annual, or interim, testing by comparing the fair value of a
reporting unit with its carrying amount. An entity would recognize an impairment
charge for the amount by which the carrying amount exceeds the reporting unit's
fair value, not to exceed the total amount of goodwill allocated to the
reporting unit. The Company adopted this ASU as part of the annual goodwill and
intangible impairment test as of December 31, 2020.

The Company completed its annual impairment analysis and determined that there
were no impairment charges for the year ended December 31, 2021. For the year
ended December 31, 2020, the Company determined that based on the economic
downturn related to the COVID-19 pandemic, the expected timing of recovery, and
the expected growth of the business, the carrying value of the Snap reporting
unit and other finite lived intangible assets, identified in connection with the
acquisition of Snap, exceeded their respective fair values, resulting in an
impairment charge totaling $2.8 million for the year ended December 31, 2020.

For more information on Goodwill and intangible assets, see Note 6, "Goodwill
and Intangible Assets" of Notes to Consolidated Financial Statements, included
elsewhere in this Annual Report.

Income taxes

Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax basis and operating
loss and tax credit carryforwards. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

We record foreign withholding tax, which is withheld by foreign customers from
their remittances to us, on a gross basis as a component of income taxes and
separate from revenue in the accompanying Consolidated Statements of Operations.

We follow the accounting standard on accounting for uncertainty in income taxes,
which addresses the determination of whether tax benefits claimed or expected to
be claimed on a tax return should be recorded in the financial statements. Under
this guidance, we may recognize the tax benefit from an uncertain tax position
only if it is more-likely-than-not that the tax position will be sustained upon
examination by taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the financial statements from such a
position are measured based on the largest benefit that has a greater than 50%
likelihood of being realized upon ultimate settlement. The guidance on
accounting for uncertainty in income taxes also addresses de-recognition,
classification, interest and penalties on income taxes, and accounting in
interim periods. To the extent that interest and penalties are assessed by
taxing authorities on any underpayment of income taxes, such amounts are accrued
and classified as a component of income tax expense.

On January 1, 2021, the Company adopted Financial Accounting Standards Board
("the FASB") ASU 2019-12-Income Taxes (Topic 740): Simplifying the Accounting
for Income Taxes. The ASU simplifies the accounting for income taxes by removing
certain exceptions to the general principles and also simplifies areas such as
franchise taxes, step-up in tax basis of goodwill, separate entity financial
statements, and interim recognition of enactment of tax laws or rate changes.
The adoption of this ASU did not have an impact on our accompanying Consolidated
Financial Statements as of and for the year ended December 31, 2021.

For further information on income taxes, see Note 8, “Income Taxes”, in the Notes to the Consolidated Financial Statements, included elsewhere in this Annual Report.

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Equity-based compensation

We have given equity incentives to certain employees. We account for such equity
incentives in accordance with ASC 718 "Stock Compensation," which requires us to
measure compensation cost for equity settled awards at fair value on the date of
grant and recognize compensation cost in the accompanying Consolidated
Statements of Operations over the requisite service or performance period the
award is expected to vest. Compensation cost is determined using the
Black-Scholes option pricing model.

For more information on Income taxes, see Note 12, "Stockholders' Equity" of
Notes to Consolidated Financial Statements, included elsewhere in this Annual
Report.

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