-
Leaf Group Properties Reach Over 50 Million Average Monthly Unique
Visitors in the U.S. during Q3
-
Q3 Marketplaces Revenue Grows 35% Year-over-Year
-
Q3 Livestrong.com Revenue Grows 28% Year-over-Year
-
Total Q3 Revenue of $33.5 Million
SANTA MONICA, Calif.--(BUSINESS WIRE)--
Leaf Group Ltd. (NYSE: LFGR), a diversified Internet company comprised
of several marketplace and media properties, today reported financial
results for the third quarter ended September 30, 2017.
“Q3 was a very strong quarter for us, with total revenue increasing 19%
year-over-year. Our media businesses continue to demonstrate positive
momentum, with operating contribution up 18% year-over-year,” said Sean
Moriarty, CEO of Leaf Group. “Marketplaces revenue was up 35%
year-over-year, reflecting returns from ongoing investments in the
business.”
|
|
|
Financial Summary
|
|
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
Marketplaces revenue
|
|
$
|
22,493
|
|
|
$
|
16,650
|
|
|
Media revenue
|
|
|
10,967
|
|
|
|
11,409
|
|
|
Total revenue
|
|
$
|
33,460
|
|
|
$
|
28,059
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(6,817
|
)
|
|
$
|
(8,349
|
)
|
|
|
|
|
|
|
|
|
|
EPS - basic and diluted
|
|
$
|
(0.33
|
)
|
|
$
|
(0.41
|
)
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(1)
|
|
$
|
(1,887
|
)
|
|
$
|
(2,157
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
272
|
|
|
$
|
(3,193
|
)
|
|
Free cash flow(1)
|
|
$
|
(1,309
|
)
|
|
$
|
(3,641
|
)
|
|
|
|
|
|
|
|
|
|
(1)
|
|
These non-GAAP financial measures are described below and reconciled
to their most directly comparable GAAP measures in the accompanying
tables.
|
|
|
|
|
Q3 2017 Financial Summary:
Leaf Group is comprised of two segments: Marketplaces and Media.
For the third quarter of 2017:
-
Total revenue increased 19% year-over-year due to a 35% increase in
Marketplaces revenue, partially offset by a 4% decline in Media
revenue.
-
Marketplaces revenue grew 35% year-over-year driven by the acquisition
of Deny Designs, new product introductions and pricing optimization on
Society6.
-
Media revenue declined 4% year-over-year driven primarily by the wind
down of our lower-margin custom content business in Q2 2016 and the
disposition of non-core media properties in prior periods. On a pro
forma basis eliminating the impact of the dispositions of non-core
media properties, Media revenue decreased 2% year-over-year.
-
Adjusted EBITDA was $(1.9) million for the quarter, primarily
reflecting increased marketing expenses and additional headcount
across the Marketplaces segment, partially offset by lower costs in
the Media segment.
-
Cash and cash equivalents was $33.0 million at period end with no debt
outstanding.
Business Highlights:
-
On a consolidated basis, Leaf Group’s properties reached over 50
million average monthly unique visitors in the U.S. during Q3,
including more than 36 million average monthly mobile visitors
(source: Jul – Sep 2017 U.S. comScore).
-
Society6 revenue grew 20% year-over-year in Q3 driven by pricing
optimization and improved returns on marketing investment that
contributed to increased transactions and higher conversion rates.
Society6 has continued to focus on customer acquisition and retention,
with new customer growth of 15% year-over-year and repeat customer
growth of 34% year-over-year in Q3.
-
Saatchi Art, inclusive of The Other Art Fair, saw revenue grow 23%
year-over-year in Q3, driven by a higher commission rate on Saatchi
Art and increased transactions. In September 2017, Saatchi Art
launched Limited by Saatchi Art, a curated selection of
exclusive limited edition prints by emerging artists, complementing
the existing offering of original works.
-
The Media business has substantially completed its strategic shift to
launch category-specific media properties leveraging topics and
content from eHow. The Media business is beginning to see positive
traction from this strategic shift, with total traffic to our premium
sites up 12% year-over-year. Livestrong.com continues to demonstrate
strong revenue and traffic growth, with revenue up 28% in Q3 on a
year-over-year basis, driven by a 19% increase in visits and improved
monetization yields.
Operating Metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
%
|
|
|
|
|
2017
|
|
2016
|
|
Change
|
|
|
Marketplaces Metrics:(1)
|
|
|
|
|
|
|
|
|
|
|
Number of Transactions(2)
|
|
|
380,766
|
|
|
282,960
|
|
35
|
%
|
|
Average Revenue per Transaction(3)
|
|
$
|
58.85
|
|
$
|
58.56
|
|
-
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Media Metrics:(4)
|
|
|
|
|
|
|
|
|
|
|
Visits(5) (in thousands)
|
|
|
693,945
|
|
|
651,545
|
|
7
|
%
|
|
Revenue per Visit (RPV)(6)
|
|
$
|
15.80
|
|
$
|
17.51
|
|
(10)
|
%
|
|
Video Views(7) (in thousands)
|
|
|
195,440
|
|
|
176,445
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Social Metrics (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Social Media Followers - Marketplaces(1)(8)
|
|
|
2,618
|
|
|
1,913
|
|
37
|
%
|
|
Social Media Followers - Media(8)
|
|
|
14,617
|
|
|
12,596
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Marketplaces Metrics and Social Media Followers for prior periods
have been revised to conform to current period presentation to
include The Other Art Fair acquired in July 2016 and Deny Designs
acquired in May 2017.
|
|
|
|
|
|
(2)
|
|
Number of transactions is defined as the total number of
transactions successfully completed by a customer during the
applicable period, excluding certain transactions generated by The
Other Art Fair that relate to the hosting of the art fairs, such as
sales of leased space to artists, sponsorships and tickets.
|
|
|
|
|
|
(3)
|
|
Average revenue per transaction is calculated by dividing total
revenue, excluding certain revenue generated by The Other Art Fair
that relate to the hosting of the art fairs, such as fees paid by
artists for leased space, fees paid for sponsorship opportunities
and fair ticket sales, by the number of transactions initiated in
that period.
|
|
|
|
|
|
(4)
|
|
Media Metrics include visits and revenue generated by non-core media
properties prior to their respective disposition dates and are not
adjusted to be shown on a pro forma basis.
|
|
|
|
|
|
(5)
|
|
Visits are defined as the total number of times users access the
company’s content across (a) one of its owned and operated
properties and/or (b) one of its partners’ properties, to the extent
that the visited partner web pages are hosted by the company. In
each case, breaks of access of at least 30 minutes constitute a
unique visit.
|
|
|
|
|
|
(6)
|
|
RPV is defined as Media revenue per one thousand visits.
|
|
|
|
|
|
(7)
|
|
Video Views are defined as the total number of views of all of the
company’s Media videos on Facebook and YouTube, or on Leaf Group
sites or third party sites via YouTube or any other embedded video
player, during the applicable period. The company includes in this
metric (i) views of videos published by any of the company’s Media
properties, including Livestrong.com, eHow, category-specific sites
and international sites; and (ii) videos viewed on multiple YouTube
channels affiliated with the company’s properties.
|
|
|
|
|
|
(8)
|
|
Social Media Followers are defined as the sum of all Facebook,
Pinterest, Instagram and Twitter followers, as well as all YouTube
subscribers, across the company’s Marketplaces or Media properties,
as applicable, as of the last day of the relevant period. Social
Media Followers includes subscribers for multiple YouTube channels
affiliated with the company’s properties. Individuals are counted
more than once if they follow multiple properties or the same
property on multiple platforms, or if they subscribe to multiple
YouTube channels.
|
|
|
|
|
Conference Call and Webcast Information
Leaf Group will host a corresponding conference call and live webcast
today at 4:30 p.m. Eastern time (1:30 p.m. Pacific time). To access the
conference call, dial 833-287-0803 (U.S./CAN) or 647-689-4462
(International) and reference conference ID 4788128. To participate on
the live call, analysts should dial-in at least 10 minutes prior to the
commencement of the call. A live webcast also will be available on the
Investor Relations section of Leaf Group’s corporate website at http://ir.leafgroup.com
and via replay beginning approximately two hours after the completion of
the call.
Use of Non-GAAP Financial Measures
To supplement its consolidated financial statements, which are prepared
and presented in accordance with generally accepted accounting
principles in the United States of America (“GAAP”), Leaf Group uses
certain non-GAAP financial measures, as described below. These non-GAAP
financial measures are presented to enhance the user’s overall
understanding of Leaf Group’s financial performance and should not be
considered a substitute for, or superior to, the financial information
prepared and presented in accordance with GAAP. The non-GAAP financial
measures presented in this release, together with the GAAP financial
results, are the primary measures used by the company’s management and
board of directors to understand and evaluate the company’s financial
performance and operating trends, including period-to-period
comparisons, because they exclude certain expenses and gains that
management believes are not indicative of the company’s core operating
results. Management also uses these measures to prepare and update the
company’s short and long term financial and operational plans, to
evaluate investment decisions, and in its discussions with investors,
commercial bankers, equity research analysts and other users of the
company’s financial statements. Accordingly, the company believes that
these non-GAAP financial measures provide useful information to
investors and others in understanding and evaluating the company’s
operating results in the same manner as the company’s management and in
comparing operating results across periods and to those of Leaf Group’s
peer companies.
The use of non-GAAP financial measures has certain limitations because
they do not reflect all items of income and expense, or cash flows, that
affect the company’s financial performance and operations. An additional
limitation of non-GAAP financial measures is that they do not have
standardized meanings, and therefore other companies, including peer
companies, may use the same or similarly named measures but exclude or
include different items or use different computations. Management
compensates for these limitations by reconciling these non-GAAP
financial measures to their most comparable GAAP financial measures in
the tables captioned “Reconciliations of Non-GAAP Financial Measures”
included at the end of this release. In addition to the non-GAAP
financial measures presented in this press release, the company is also
providing certain pro forma financial information to reflect the
dispositions of the Cracked business and certain other non-strategic
properties. Investors and others are encouraged to review the company’s
financial information in its entirety and not rely on a single financial
measure.
The company defines Adjusted earnings before interest, taxes,
depreciation and amortization (Adjusted EBITDA) as net income (loss)
excluding interest (income) expense, income tax expense (benefit), and
certain other non-cash or non-recurring items impacting net income
(loss) from time to time, principally comprised of depreciation and
amortization, stock-based compensation and acquisition, disposition and
realignment costs. Management believes that the exclusion of certain
expenses and gains in calculating Adjusted EBITDA provides a useful
measure for period-to-period comparisons of the company’s underlying
core revenue and operating costs that is focused more closely on the
current costs necessary to operate the company’s businesses, and
reflects its ongoing business in a manner that allows for meaningful
analysis of trends. Management also believes that excluding certain
non-cash charges can be useful because the amounts of such expenses is
the result of long-term investment decisions made in previous periods
rather than day-to-day operating decisions.
The company defines Segment Operating Contribution as net income
(loss) excluding corporate or unallocated expenses, interest (income)
expense, income tax expense (benefit), and certain other non-cash or
non-recurring items impacting net income (loss) from time to time,
principally comprised of depreciation and amortization, and stock-based
compensation. Management believes that the exclusion of certain expenses
and gains in calculating Segment Operating Contribution provides a
useful measure for period-to-period comparisons of the segment’s
underlying revenue and operating costs that is focused more closely on
the current costs necessary to operate the segment, and reflects the
segment’s ongoing business in a manner that allows for meaningful
analysis of trends. Management also believes that excluding certain
non-cash charges can be useful because the amounts of such expenses is
the result of long-term investment decisions made in previous periods
rather than day-to-day operating decisions.
The company defines Free Cash Flow as net cash provided by (used
in) operating activities net of cash flows from acquisition, disposition
and realignment activities; capital expenditures to acquire property and
equipment; and purchases of intangible assets. Management believes that
Free Cash Flow provides investors with useful information to measure
operating liquidity because it reflects the company’s underlying cash
flows from recurring operating activities after investing in capital
assets and intangible assets. Free Cash Flow is used by management, and
may also be useful for investors, to assess the company’s ability to
generate cash flow for a variety of strategic opportunities, including
reinvesting in its businesses, pursuing new business opportunities and
potential acquisitions, paying dividends and repurchasing shares.
About Leaf Group
Leaf Group Ltd. (NYSE: LFGR) is a diversified Internet company that
builds platforms across its marketplaces (Society6, Saatchi Art, Deny
Designs and The Other Art Fair) and various media properties (including Livestrong.com,
eHow and Cuteness) to enable communities of creators to reach passionate
audiences in large and growing lifestyle categories. In addition, Leaf
Group’s diverse advertising offerings help brands and publishers find
innovative ways to engage with their customers. For more information
about Leaf Group, visit www.leafgroup.com.
Cautionary Information Regarding Forward-Looking Statements
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The
forward-looking statements set forth in this press release include
statements regarding potential synergies achieved from acquisitions, the
impact of strategic operational changes and our future financial
performance. In addition, statements containing words such as
“guidance,” “may,” “believe,” “anticipate,” “expect,” “intend,” “plan,”
“project,” “projections,” “business outlook,” and “estimate” or similar
expressions constitute forward-looking statements. Actual results may
differ materially from the results predicted, and reported results
should not be considered an indication of future performance. These
forward-looking statements involve risks and uncertainties regarding the
company’s future financial performance, and are based on current
expectations, estimates and projections about the company’s industry,
financial condition, operating performance and results of operations,
including certain assumptions related thereto. Potential risks and
uncertainties that could affect the company’s operating and financial
results are described in Leaf Group’s annual report on Form 10-K for the
fiscal year ending December 31, 2016 filed with the Securities and
Exchange Commission (http://www.sec.gov)
on February 23, 2017, as such risks and uncertainties may be updated
from time to time in Leaf Group’s quarterly reports on Form 10-Q filed
with the Securities and Exchange Commission, including, without
limitation, information under the captions “Risk Factors” and
“Management's Discussion and Analysis of Financial Condition and Results
of Operations.” These risks and uncertainties include, among others: the
company’s ability to successfully drive and increase traffic to its
marketplaces and media properties; the company’s ability to attract new
and repeat customers and artists to its marketplaces and successfully
grow its marketplace businesses; the impact of increasing mobile usage
on the company’s marketplace businesses; changes in the methodologies of
internet search engines, including ongoing algorithmic changes made by
Google, Bing and Yahoo!; the effects of shifting consumption of media
content and online shopping from desktop to mobile devices and/or social
media platforms; the potential impact on advertising based revenue of
lower ad unit rates, a reduction in online advertising spending, a loss
of advertisers, lower advertising yields, increased availability of ad
blocking software, particularly on mobile devices and/or ongoing changes
in ad unit formats; the impact of certain changes made to the business
model for the company’s media properties, including the ability to
successfully launch, manage and grow new vertically focused web
properties; our ability to effectively integrate, manage, operate and
grow our recently acquired Deny Designs marketplace business; the
company’s dependence on material agreements with a specific business
partner for a significant portion of its advertising revenue; the
company’s ability to successfully expand its current lines of business
and grow new lines of business; changes in amortization or depreciation
expense due to a variety of factors; potential write downs, reserves
against or impairment of assets including receivables, goodwill,
intangibles (including media content) or other assets; and the company’s
ability to retain key personnel. From time to time, the company may
consider acquisitions or divestitures that, if consummated, could be
material. Any forward-looking statements regarding financial metrics are
based upon the assumption that no such acquisition or divestiture is
consummated during the relevant periods. If an acquisition or
divestiture were consummated, actual results could differ materially
from any forward-looking statements. The company does not intend to
revise or update the information set forth in this press release, except
as required by law, and may not provide this type of information in the
future.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leaf Group Ltd. and Subsidiaries
|
|
Unaudited Condensed Consolidated Statements of Operations
|
|
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenue
|
$
|
20,908
|
|
|
$
|
15,371
|
|
|
$
|
50,841
|
|
|
$
|
39,840
|
|
|
Service revenue
|
|
12,552
|
|
|
|
12,688
|
|
|
|
38,422
|
|
|
|
39,623
|
|
|
Total revenue
|
|
33,460
|
|
|
|
28,059
|
|
|
|
89,263
|
|
|
|
79,463
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Product costs (exclusive of amortization of intangible assets shown
separately below)(1)
|
|
15,385
|
|
|
|
9,791
|
|
|
|
37,456
|
|
|
|
26,588
|
|
|
Service costs (exclusive of amortization of intangible assets shown
separately below)(1)(2)
|
|
4,993
|
|
|
|
5,370
|
|
|
|
15,881
|
|
|
|
19,887
|
|
|
Sales and marketing(1)(2)
|
|
6,973
|
|
|
|
6,031
|
|
|
|
20,893
|
|
|
|
19,610
|
|
|
Product development(1)(2)
|
|
4,558
|
|
|
|
4,652
|
|
|
|
14,337
|
|
|
|
15,614
|
|
|
General and administrative(1)(2)
|
|
7,056
|
|
|
|
7,498
|
|
|
|
21,933
|
|
|
|
23,450
|
|
|
Amortization of intangible assets
|
|
1,313
|
|
|
|
3,100
|
|
|
|
4,547
|
|
|
|
9,246
|
|
|
Total operating expenses
|
|
40,278
|
|
|
|
36,442
|
|
|
|
115,047
|
|
|
|
114,395
|
|
|
Loss from operations
|
|
(6,818
|
)
|
|
|
(8,383
|
)
|
|
|
(25,784
|
)
|
|
|
(34,932
|
)
|
|
Interest income
|
|
66
|
|
|
|
35
|
|
|
|
148
|
|
|
|
60
|
|
|
Interest expense
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(5
|
)
|
|
|
(2
|
)
|
|
Other (expense) income, net
|
|
(6
|
)
|
|
|
(31
|
)
|
|
|
(9
|
)
|
|
|
39,131
|
|
|
(Loss) income before income taxes
|
|
(6,760
|
)
|
|
|
(8,381
|
)
|
|
|
(25,650
|
)
|
|
|
4,257
|
|
|
Income tax (expense) benefit
|
|
(57
|
)
|
|
|
32
|
|
|
|
(150
|
)
|
|
|
(48
|
)
|
|
Net (loss) income
|
$
|
(6,817
|
)
|
|
$
|
(8,349
|
)
|
|
$
|
(25,800
|
)
|
|
$
|
4,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.33
|
)
|
|
$
|
(0.41
|
)
|
|
$
|
(1.27
|
)
|
|
$
|
0.21
|
|
|
Diluted
|
$
|
(0.33
|
)
|
|
$
|
(0.41
|
)
|
|
$
|
(1.27
|
)
|
|
$
|
0.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
20,745
|
|
|
|
20,236
|
|
|
|
20,363
|
|
|
|
20,279
|
|
|
Diluted
|
|
20,745
|
|
|
|
20,236
|
|
|
|
20,363
|
|
|
|
20,511
|
|
|
__________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Depreciation expense included in the above line items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Product costs
|
$
|
16
|
|
|
$
|
-
|
|
|
$
|
31
|
|
|
$
|
-
|
|
|
Service costs
|
|
725
|
|
|
|
603
|
|
|
|
2,174
|
|
|
|
2,931
|
|
|
Sales and marketing
|
|
9
|
|
|
|
12
|
|
|
|
27
|
|
|
|
38
|
|
|
Product development
|
|
22
|
|
|
|
32
|
|
|
|
68
|
|
|
|
105
|
|
|
General and administrative
|
|
664
|
|
|
|
700
|
|
|
|
1,968
|
|
|
|
2,715
|
|
|
Total depreciation
|
$
|
1,436
|
|
|
$
|
1,347
|
|
|
$
|
4,268
|
|
|
$
|
5,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Stock-based compensation included in the above line
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service costs
|
$
|
155
|
|
|
$
|
142
|
|
|
$
|
453
|
|
|
$
|
1,054
|
|
|
Sales and marketing
|
|
209
|
|
|
|
145
|
|
|
|
586
|
|
|
|
586
|
|
|
Product development
|
|
475
|
|
|
|
290
|
|
|
|
1,352
|
|
|
|
1,206
|
|
|
General and administrative
|
|
1,343
|
|
|
|
1,103
|
|
|
|
4,035
|
|
|
|
3,272
|
|
|
Total stock-based compensation
|
$
|
2,182
|
|
|
$
|
1,680
|
|
|
$
|
6,426
|
|
|
$
|
6,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leaf Group Ltd. and Subsidiaries
|
|
Unaudited Condensed Consolidated Balance Sheets
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
Assets
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
33,039
|
|
|
$
|
50,864
|
|
|
Accounts receivable, net
|
|
|
7,089
|
|
|
|
6,849
|
|
|
Prepaid expenses and other current assets
|
|
|
2,420
|
|
|
|
8,139
|
|
|
Total current assets
|
|
|
42,548
|
|
|
|
65,852
|
|
|
Property and equipment, net
|
|
|
11,833
|
|
|
|
11,503
|
|
|
Intangible assets, net
|
|
|
11,559
|
|
|
|
11,273
|
|
|
Goodwill
|
|
|
17,146
|
|
|
|
11,167
|
|
|
Other assets
|
|
|
1,308
|
|
|
|
1,457
|
|
|
Total assets
|
|
$
|
84,394
|
|
|
$
|
101,252
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
2,710
|
|
|
$
|
2,451
|
|
|
Accrued expenses and other current liabilities
|
|
|
14,764
|
|
|
|
15,017
|
|
|
Deferred revenue
|
|
|
1,971
|
|
|
|
2,180
|
|
|
Total current liabilities
|
|
|
19,445
|
|
|
|
19,648
|
|
|
Deferred tax liability
|
|
|
176
|
|
|
|
108
|
|
|
Other liabilities
|
|
|
3,322
|
|
|
|
1,746
|
|
|
Total liabilities
|
|
|
22,943
|
|
|
|
21,502
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
|
|
|
Common stock
|
|
|
2
|
|
|
|
2
|
|
|
Additional paid-in capital
|
|
|
520,620
|
|
|
|
513,139
|
|
|
Treasury stock
|
|
|
(35,706
|
)
|
|
|
(35,641
|
)
|
|
Accumulated other comprehensive loss
|
|
|
(27
|
)
|
|
|
(112
|
)
|
|
Accumulated deficit
|
|
|
(423,438
|
)
|
|
|
(397,638
|
)
|
|
Total stockholders’ equity
|
|
|
61,451
|
|
|
|
79,750
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
84,394
|
|
|
$
|
101,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leaf Group Ltd. and Subsidiaries
|
|
Unaudited Condensed Consolidated Statements of Cash Flows
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(6,817
|
)
|
|
$
|
(8,349
|
)
|
|
$
|
(25,800
|
)
|
|
$
|
4,209
|
|
|
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
2,749
|
|
|
|
4,447
|
|
|
|
8,815
|
|
|
|
15,035
|
|
|
Deferred income taxes
|
|
|
59
|
|
|
|
(33
|
)
|
|
|
68
|
|
|
|
(33
|
)
|
|
Stock-based compensation
|
|
|
2,182
|
|
|
|
1,680
|
|
|
|
6,426
|
|
|
|
6,118
|
|
|
Gain on disposal of businesses and online properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(39,149
|
)
|
|
Other
|
|
|
4
|
|
|
|
(92
|
)
|
|
|
(44
|
)
|
|
|
10
|
|
|
Change in operating assets and liabilities, net of effect of
acquisitions and disposals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
(96
|
)
|
|
|
113
|
|
|
|
319
|
|
|
|
3,231
|
|
|
Prepaid expenses and other current assets
|
|
|
(194
|
)
|
|
|
(809
|
)
|
|
|
1,021
|
|
|
|
(180
|
)
|
|
Other long-term assets
|
|
|
57
|
|
|
|
65
|
|
|
|
25
|
|
|
|
48
|
|
|
Accounts payable
|
|
|
652
|
|
|
|
(352
|
)
|
|
|
(548
|
)
|
|
|
(372
|
)
|
|
Accrued expenses and other liabilities
|
|
|
1,462
|
|
|
|
(351
|
)
|
|
|
(1,557
|
)
|
|
|
(2,730
|
)
|
|
Deferred revenue
|
|
|
214
|
|
|
|
488
|
|
|
|
(236
|
)
|
|
|
335
|
|
|
Net cash provided by (used in) operating activities
|
|
|
272
|
|
|
|
(3,193
|
)
|
|
|
(11,511
|
)
|
|
|
(13,478
|
)
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(1,480
|
)
|
|
|
(1,204
|
)
|
|
|
(3,718
|
)
|
|
|
(3,743
|
)
|
|
Purchases of intangible assets
|
|
|
(114
|
)
|
|
|
(116
|
)
|
|
|
(235
|
)
|
|
|
(120
|
)
|
|
Cash received from disposal of businesses and online properties, net
of cash disposed
|
|
|
3,900
|
|
|
|
194
|
|
|
|
4,285
|
|
|
|
36,100
|
|
|
Cash paid for acquisitions, net of cash acquired
|
|
|
—
|
|
|
|
(1,413
|
)
|
|
|
(6,304
|
)
|
|
|
(1,413
|
)
|
|
Restricted deposits
|
|
|
—
|
|
|
|
—
|
|
|
|
742
|
|
|
|
136
|
|
|
Other
|
|
|
3
|
|
|
|
30
|
|
|
|
6
|
|
|
|
78
|
|
|
Net cash provided by (used in) investing activities
|
|
|
2,309
|
|
|
|
(2,509
|
)
|
|
|
(5,224
|
)
|
|
|
31,038
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercises of stock options and purchases under ESPP
|
|
|
416
|
|
|
|
135
|
|
|
|
1,941
|
|
|
|
226
|
|
|
Repurchases of common stock
|
|
|
—
|
|
|
|
(3,515
|
)
|
|
|
(65
|
)
|
|
|
(3,515
|
)
|
|
Taxes paid on net share settlements of restricted stock units
|
|
|
(394
|
)
|
|
|
(138
|
)
|
|
|
(2,761
|
)
|
|
|
(1,132
|
)
|
|
Cash paid for acquisition holdback
|
|
|
—
|
|
|
|
—
|
|
|
|
(119
|
)
|
|
|
—
|
|
|
Other
|
|
|
(17
|
)
|
|
|
(15
|
)
|
|
|
(49
|
)
|
|
|
(15
|
)
|
|
Net cash provided by (used in) financing activities
|
|
|
5
|
|
|
|
(3,533
|
)
|
|
|
(1,053
|
)
|
|
|
(4,436
|
)
|
|
Effect of foreign currency on cash and cash equivalents
|
|
|
(17
|
)
|
|
|
—
|
|
|
|
(37
|
)
|
|
|
(2
|
)
|
|
Change in cash and cash equivalents
|
|
|
2,569
|
|
|
|
(9,235
|
)
|
|
|
(17,825
|
)
|
|
|
13,122
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
30,470
|
|
|
|
60,927
|
|
|
|
50,864
|
|
|
|
38,570
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
33,039
|
|
|
$
|
51,692
|
|
|
$
|
33,039
|
|
|
$
|
51,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leaf Group Ltd. and Subsidiaries
|
|
Reconciliations of Non-GAAP Financial Measures
|
|
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(6,817
|
)
|
|
$
|
(8,349
|
)
|
|
$
|
(25,800
|
)
|
|
$
|
4,209
|
|
|
Add (deduct):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
|
57
|
|
|
|
(32
|
)
|
|
|
150
|
|
|
|
48
|
|
|
Interest (income) expense, net
|
|
|
(64
|
)
|
|
|
(33
|
)
|
|
|
(143
|
)
|
|
|
(58
|
)
|
|
Other expense (income), net(1)
|
|
|
6
|
|
|
|
31
|
|
|
|
9
|
|
|
|
(39,131
|
)
|
|
Depreciation and amortization(2)
|
|
|
2,749
|
|
|
|
4,447
|
|
|
|
8,815
|
|
|
|
15,035
|
|
|
Stock-based compensation(3)
|
|
|
2,182
|
|
|
|
1,680
|
|
|
|
6,426
|
|
|
|
6,118
|
|
|
Acquisition, disposition and realignment costs(4)
|
|
|
—
|
|
|
|
99
|
|
|
|
299
|
|
|
|
1,396
|
|
|
Adjusted EBITDA
|
|
$
|
(1,887
|
)
|
|
$
|
(2,157
|
)
|
|
$
|
(10,244
|
)
|
|
$
|
(12,383
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
272
|
|
|
$
|
(3,193
|
)
|
|
$
|
(11,511
|
)
|
|
$
|
(13,478
|
)
|
|
Purchases of property and equipment
|
|
|
(1,480
|
)
|
|
|
(1,204
|
)
|
|
|
(3,718
|
)
|
|
|
(3,743
|
)
|
|
Purchases of intangible assets
|
|
|
(114
|
)
|
|
|
(116
|
)
|
|
|
(235
|
)
|
|
|
(120
|
)
|
|
Acquisition, disposition and realignment cash flows(4)
|
|
|
13
|
|
|
|
872
|
|
|
|
371
|
|
|
|
1,704
|
|
|
Free Cash Flow
|
|
$
|
(1,309
|
)
|
|
$
|
(3,641
|
)
|
|
$
|
(15,093
|
)
|
|
$
|
(15,637
|
)
|
|
(1)
|
|
Primarily consists of income from the disposition of certain
businesses, including Cracked, and non-core media properties.
|
|
|
|
|
|
(2)
|
|
Represents depreciation expense of the company’s long-lived tangible
assets and amortization expense of its finite-lived intangible
assets, including amortization expense related to its investment in
media content assets as included in the company’s GAAP results of
operations.
|
|
|
|
|
|
(3)
|
|
Represents the expense related to stock-based awards granted to
employees, as included in the company’s GAAP results of operations.
|
|
|
|
|
|
(4)
|
|
Represents such items, when applicable, as (a) legal, accounting and
other professional fees directly attributable to acquisition,
disposition or corporate realignment activities and (b) employee
severance and other payments attributable to acquisition,
disposition or corporate realignment activities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leaf Group Ltd. and Subsidiaries
|
|
Reconciliation of Segment Disclosure
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Segment Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketplaces
|
|
$
|
22,493
|
|
|
$
|
16,650
|
|
|
$
|
56,061
|
|
|
$
|
43,521
|
|
|
Media
|
|
|
10,967
|
|
|
|
11,409
|
|
|
|
33,202
|
|
|
|
35,942
|
|
|
Total revenue
|
|
$
|
33,460
|
|
|
$
|
28,059
|
|
|
$
|
89,263
|
|
|
$
|
79,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Operating Contribution:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketplaces(1)
|
|
$
|
(376
|
)
|
|
$
|
793
|
|
|
$
|
(3,523
|
)
|
|
$
|
730
|
|
|
Media(1)
|
|
|
4,779
|
|
|
|
4,053
|
|
|
|
12,792
|
|
|
|
6,857
|
|
|
Add (deduct):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses(2)
|
|
|
(6,290
|
)
|
|
|
(7,102
|
)
|
|
|
(19,812
|
)
|
|
|
(21,366
|
)
|
|
Acquisition, disposition and realignment costs(3)
|
|
|
—
|
|
|
|
99
|
|
|
|
299
|
|
|
|
1,396
|
|
|
Adjusted EBITDA
|
|
$
|
(1,887
|
)
|
|
$
|
(2,157
|
)
|
|
$
|
(10,244
|
)
|
|
$
|
(12,383
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to consolidated pre-tax income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
(1,887
|
)
|
|
$
|
(2,157
|
)
|
|
$
|
(10,244
|
)
|
|
$
|
(12,383
|
)
|
|
Add (deduct):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net
|
|
|
64
|
|
|
|
33
|
|
|
|
143
|
|
|
|
58
|
|
|
Other income (expense), net(4)
|
|
|
(6
|
)
|
|
|
(31
|
)
|
|
|
(9
|
)
|
|
|
39,131
|
|
|
Depreciation and amortization(5)
|
|
|
(2,749
|
)
|
|
|
(4,447
|
)
|
|
|
(8,815
|
)
|
|
|
(15,035
|
)
|
|
Stock-based compensation(6)
|
|
|
(2,182
|
)
|
|
|
(1,680
|
)
|
|
|
(6,426
|
)
|
|
|
(6,118
|
)
|
|
Acquisition, disposition and realignment costs(3)
|
|
|
—
|
|
|
|
(99
|
)
|
|
|
(299
|
)
|
|
|
(1,396
|
)
|
|
(Loss) income before income taxes
|
|
$
|
(6,760
|
)
|
|
$
|
(8,381
|
)
|
|
$
|
(25,650
|
)
|
|
$
|
4,257
|
|
|
(1)
|
|
Segment operating contribution reflects earnings before corporate
and unallocated expenses and also excludes: (a) depreciation
expense; (b) amortization of intangible assets; (c) share-based
compensation expense; (d) interest and other income (expenses); and
(e) income taxes.
|
|
|
|
|
|
(2)
|
|
Corporate expenses include operating expenses that are not directly
attributable to the operating segments, including: corporate
information technology, marketing and general and administrative
support functions and also excludes the following: (a) depreciation
expense; (b) amortization of intangible assets; (c) share-based
compensation expense; (d) interest and other income (expenses); and
(e) income taxes.
|
|
|
|
|
|
(3)
|
|
Represents such items, when applicable, as (a) legal, accounting and
other professional service fees directly attributable to
acquisition, disposition or corporate realignment activities and (b)
employee severance and other payments attributable to acquisition,
disposition or corporate realignment activities.
|
|
|
|
|
|
(4)
|
|
Primarily consists of income from the disposition of certain
businesses, including Cracked, and non-core media properties.
|
|
|
|
|
|
(5)
|
|
Represents depreciation expense of our long-lived tangible assets
and amortization expense of our finite-lived intangible assets,
including amortization expense related to our investment in media
content assets, included in our GAAP results of operations.
|
|
|
|
|
|
(6)
|
|
Represents the expense related to stock-based awards granted to
employees as included in our GAAP results of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leaf Group Ltd. and Subsidiaries
|
|
Reconciliations of Pro Forma Financial Measures
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2017
|
|
Nine months ended September 30, 2017
|
|
|
|
Revenue
|
|
Pro Forma
Adjustments
|
|
Pro Forma
Revenue
|
|
Revenue
|
|
Pro Forma
Adjustments
|
|
Pro Forma
Revenue
|
|
Revenue - Pro Forma:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketplaces
|
|
$
|
22,493
|
|
$
|
—
|
|
|
$
|
22,493
|
|
$
|
56,061
|
|
$
|
—
|
|
|
$
|
56,061
|
|
Media
|
|
|
10,967
|
|
|
—
|
|
|
|
10,967
|
|
|
33,202
|
|
|
—
|
|
|
|
33,202
|
|
Total Revenue
|
|
$
|
33,460
|
|
$
|
—
|
|
|
$
|
33,460
|
|
$
|
89,263
|
|
$
|
—
|
|
|
$
|
89,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2016
|
|
Nine months ended September 30, 2016
|
|
|
|
Revenue
|
|
Pro Forma
Adjustments(1)
|
|
Pro Forma
Revenue
|
|
Revenue
|
|
Pro Forma
Adjustments(1)
|
|
Pro Forma
Revenue
|
|
Marketplaces
|
|
$
|
16,650
|
|
$
|
—
|
|
|
$
|
16,650
|
|
$
|
43,521
|
|
$
|
—
|
|
|
$
|
43,521
|
|
Media
|
|
|
11,409
|
|
|
(170
|
)
|
|
|
11,239
|
|
|
35,942
|
|
|
(2,660
|
)
|
|
|
33,282
|
|
Total Revenue
|
|
$
|
28,059
|
|
$
|
(170
|
)
|
|
$
|
27,889
|
|
$
|
79,463
|
|
$
|
(2,660
|
)
|
|
$
|
76,803
|
|
(1)
|
|
Represents revenue associated with the divested Cracked business and
certain other divested non-strategic properties.
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20171107006580/en/
Source: Leaf Group Ltd.