Note 4: Equity Investment

The Company holds an equity investment in Your Family Entertainment AG ("YFE"), a publicly listed company on the Frankfurt Stock Exchange (ticker symbol "RTV"), headquartered in Germany. YFE is one of Europe's leading independent children's content providers, with a catalog of approximately 150 titles and 3,500 half-hour episodes.

When the Company does not have a controlling financial interest in an entity but has the ability to exert significant influence over its operating and financial policies, the investment is accounted for under the equity method or, if elected, at fair value pursuant to the fair value option under U.S. GAAP. Significant influence is generally presumed to exist when the Company owns between 20% and 50% of the common stock or in-substance common stock of the investee.

At the time of the initial investment in 2021, the Company held a 28.7% ownership interest in YFE and determined that it had significant influence over the entity. Accordingly, the Company elected to account for the investment at fair value under the fair value option. Under this election, the investment is remeasured at fair value at each reporting period, with changes in fair value recorded through earnings.

Subsequent to the initial investment, the Company's ownership interest increased to 44.8% through participation in a public tender offer, bond conversions, and the exercise of subscription rights. The ownership interest was subsequently reduced to approximately 32.7% through a partial disposition of shares in July 2025 and an exchange of shares in September 2025. Throughout this period, management determined that the Company did not obtain a controlling financial interest in YFE, and that significant influence was maintained at all times.

As of March 31, 2026 and December 31, 2025, the Company owned 5,009,005 shares of YFE, representing ownership interests of 32.2% and 32.5%, respectively. The fair value of the investment is determined based on the quoted closing market price of YFE's shares on the Frankfurt Stock Exchange as of each reporting date, remeasured from Euro to U.S. dollars at the period-end exchange rate.

As of March 31, 2026, the fair value of the investment was $2.4 million, recorded within noncurrent assets on the Company's condensed consolidated balance sheet. The net decrease in fair value of $3.1 million for the three months ended March 31, 2026 reflects the combined impact of a decline in YFE's quoted share price and the effect of foreign currency remeasurement from Euro to U.S. dollars. The total change in fair value is recorded within Other Income (Expense), net in the Company's condensed consolidated statements of operations.

Management concluded that the Company continues to exercise significant influence over YFE and therefore continues to account for the investment at fair value under the fair value option.