SANTA MONICA, Calif., Feb. 25, 2021 (GLOBE NEWSWIRE) -- Leaf Group Ltd. (NYSE: LEAF), a diversified consumer internet company, today reported financial results for the fourth quarter and fiscal year ended December 31, 2020.
| Financial Summary | ||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Three months ended | Year ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Segment Revenue: | ||||||||||||||||
| Society6 Group | $ | 43,711 | $ | 22,446 | $ | 138,000 | $ | 73,852 | ||||||||
| Saatchi Art Group | 5,665 | 3,825 | 17,063 | 15,773 | ||||||||||||
| Media Group | 15,597 | 18,828 | 56,998 | 65,331 | ||||||||||||
| Total revenue | $ | 64,973 | $ | 45,099 | $ | 212,061 | $ | 154,956 | ||||||||
| Net loss | $ | (2,673 | ) | $ | (5,305 | ) | $ | (8,860 | ) | $ | (26,838 | ) | ||||
| EPS—basic and diluted | $ | (0.09 | ) | $ | (0.20 | ) | $ | (0.32 | ) | $ | (1.03 | ) | ||||
| Segment Operating Contribution: | ||||||||||||||||
| Society6 Group | $ | 876 | $ | 428 | $ | 8,152 | $ | 310 | ||||||||
| Saatchi Art Group | 172 | (770 | ) | (1,563 | ) | (2,492 | ) | |||||||||
| Media Group | 6,875 | 7,812 | 21,517 | 24,730 | ||||||||||||
| Deduct: | ||||||||||||||||
| Strategic shared services and corporate overhead | (6,196 | ) | (7,682 | ) | (27,075 | ) | (30,025 | ) | ||||||||
| Adjusted EBITDA(1) | $ | 1,727 | $ | (212 | ) | $ | 1,031 | $ | (7,477 | ) | ||||||
| Net cash provided by (used in) operating activities | $ | 4,394 | $ | 4,475 | $ | 11,354 | $ | (4,270 | ) | |||||||
| Free cash flow(1) | $ | 2,288 | $ | 2,642 | $ | 3,830 | $ | (11,180 | ) | |||||||
(1) These non-GAAP financial measures, and reasons for why the Company believes these non-GAAP financial measures are useful, are described below and reconciled to their most directly comparable GAAP measures in the accompanying tables.
Q4 2020 Financial Summary:
Leaf Group is comprised of three reporting segments: Society6 Group, Saatchi Art Group, and Media Group.
For the fourth quarter of 2020:
- Total revenue increased 44% year-over-year from $45.1 million to $65.0 million due to a 95% increase in Society6 Group revenue and a 48% increase in Saatchi Art Group revenue, partially offset by a 17% decrease in Media Group revenue.
- Society6 Group revenue increased 95% year-over-year from $22.4 million to $43.7 million. This increase was primarily attributable to overall Direct-to-Consumer revenue growth of 102%, including 115% growth in the U.S. and 44% growth internationally.
- Saatchi Art Group revenue increased 48% year-over-year from $3.8 million to $5.7 million. This increase was primarily attributable to strength in the Saatchi Art online marketplace with revenue growth of 123% and the recently-launched The Other Art Fair Online Studios, partially offset by the cancellation of its live fairs for the fourth quarter 2020.
- Media Group revenue decreased 17% year-over-year from $18.8 million to $15.6 million. This decrease was primarily attributable to a 37% decrease in visits, partially offset by a 32% increase in RPV. On a pro forma basis after giving effect to the Hearst Transaction, visits decreased by 23% and RPV increased by 7% year-over-year.(1)
- Net loss was $2.7 million for the quarter, an improvement of $2.6 million year-over-year, and Adjusted EBITDA was $1.7 million for the quarter, reflecting an improvement of $1.9 million year-over-year.
- Cash and cash equivalents was $67.1 million at period end with $11.4 million in debt outstanding including $7.1 million from the Paycheck Protection Program and $4.0 million drawn on our revolving credit facility.
- On a consolidated basis, Leaf Group’s properties reached over 53 million monthly unique visitors in the United States in December 2020 (source: December 2020 U.S. comScore).
_________________
(1) On April 24, 2020, Leaf Group entered into an Asset Sale and Services Agreement with Hearst Newspapers (“Hearst”), pursuant to which the Company sold to Hearst a library of content carried on certain websites that had been hosted by the Company on behalf of Hearst for $9.5 million, of which $4.0 million was paid at signing (the “Hearst Transaction”). The balance of $5.5 million was paid on August 21, 2020, upon completion of the migration of the Hearst Content to servers controlled by Hearst. As of April 25, 2020, the Company is no longer including visits to the sites migrated to Hearst in the Hearst Transaction in its media group metrics.
| Unaudited Operating Metrics: | ||||||||||||||||||||||
| Three months ended | Year ended | |||||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||||
| 2020 | 2019 | % Change | 2020 | 2019 | % Change | |||||||||||||||||
| Society6 Group Metrics: | ||||||||||||||||||||||
| Society6 Group Number of Transactions(1) | 761,726 | 408,895 | 86 | % | 2,276,846 | 1,233,155 | 85 | % | ||||||||||||||
| Society6 Group Gross Transaction Value (in thousands)(2) | $ | 50,675 | $ | 24,953 | 103 | % | $ | 158,809 | $ | 83,851 | 89 | % | ||||||||||
| Saatchi Art Group Metrics: | ||||||||||||||||||||||
| Saatchi Art Group Number of Transactions(3) | 9,447 | 9,104 | 4 | % | 32,209 | 30,703 | 5 | % | ||||||||||||||
| Saatchi Art Group Gross Transaction Value (in thousands)(4) | $ | 10,340 | $ | 8,360 | 24 | % | $ | 38,554 | $ | 30,988 | 24 | % | ||||||||||
| Number of Art Fairs(5) | — | 3 | (100 | )% | — | 12 | (100 | )% | ||||||||||||||
| Media Group Metrics:(6) | ||||||||||||||||||||||
| Visits per Google Analytics (in thousands)(7) | 410,285 | 652,418 | (37 | )% | 2,109,411 | 2,847,099 | (26 | )% | ||||||||||||||
| Revenue per Visit (RPV)(8) | $ | 38.02 | $ | 28.86 | 32 | % | $ | 27.02 | $ | 22.95 | 18 | % | ||||||||||
| Pro forma Visits per Google Analytics (in thousands)(7)(9) | 410,285 | 529,566 | (23 | )% | 1,935,138 | 2,261,666 | (14 | )% | ||||||||||||||
| Pro forma Revenue per Visit (RPV)(8)(9) | $ | 38.02 | $ | 35.55 | 7 | % | $ | 29.45 | $ | 28.89 | 2 | % | ||||||||||
(1) Society6 Group number of transactions is defined as the total number of Society6 Group transactions successfully completed by a customer during the applicable period.
(2) Society6 Group gross transaction value is defined as the total dollar value of Society6 Group transactions. Society6 Group gross transaction value is the total amount paid by the customer for a Society6 Group product, which consists of the following elements: the product price, inclusive of the commission payable to the artist, shipping charges, and sales taxes, less any promotional discounts. Gross transaction value does not reflect any subsequent cancellations, refunds or credits and does not represent revenue earned by the Company.
(3) Saatchi Art Group number of transactions is defined as the total number of Saatchi Art Group transactions successfully completed by a customer during the applicable period, excluding certain transactions generated by Saatchi Art’s The Other Art Fair, which include sales of stand space to artists at fairs, sponsorship fees and ticket sales.
(4) Saatchi Art Group gross transaction value is defined as the total dollar value of Saatchi Art Group transactions, excluding the revenue from certain transactions generated by Saatchi Art’s The Other Art Fair, which include sales of stand space to artists at fairs, sponsorship fees and ticket sales. Saatchi Art Group gross transaction value is the total amount paid by the customer for a Saatchi Art Group product, which consists of the following elements: the product price, inclusive of the commission payable to the artist, shipping charges, and sales taxes, less any promotional discounts. Gross transaction value does not reflect any subsequent cancellations, refunds or credits and does not represent revenue earned by the Company.
(5) Number of Art Fairs is defined as in-person art fairs hosted by The Other Art Fair.
(6) Media Group Metrics include visits and revenue generated by OnlyInYourState subsequent to its acquisition in February 2019. From April 25, 2020 onwards, Media Group Metrics exclude visits generated by certain domains no longer under our control as a result of the Hearst Transaction.
(7) Visits per Google Analytics is 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 customers’ properties, to the extent that the visited customer web pages are hosted by the Company. In each case, breaks of access of at least 30 minutes constitute a unique visit. Additionally, a visit is also considered to have ended at midnight or if a user arrives via one campaign, leaves, and then comes back via a different campaign.
(8) RPV is defined as Media Group revenue per one thousand visits.
(9) Pro forma Visits and Pro forma Revenue per Visit exclude visits generated by certain domains no longer under our control as a result of the Hearst Transaction for all periods reported. The number of visits is derived from Google Analytics.
Shareholder Letter and Conference Call Information
Leaf Group’s detailed Shareholder Letter is available at https://ir.leafgroup.com/investor-overview/quarterly-and-annual-results/default.aspx.
Leaf Group will host a corresponding conference call and presentation to answer questions today at 5:00 p.m. Eastern time (2:00 p.m. Pacific time). To access the conference call and presentation, dial 833-502-0482 (U.S./CAN) or 778-560-2575 (International) and reference conference ID 4423559. 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. The accompanying slide presentation will also be posted to our website at https://ir.leafgroup.com/investor-overview/events-and-presentations/.
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. 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, contingent payments to certain key employees/equity holders of acquired businesses and other payments attributable to acquisition, disposition or corporate realignment activities. 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 earnings before corporate or unallocated expenses and also excludes: (a) depreciation expense; (b) amortization of intangible assets; (c) share-based compensation expense; (d) interest and other income (expense); (e) income taxes; and (f) contingent payments to certain key employees/equity holders of acquired businesses. 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 contingent payments to certain key employees/equity holders of acquired businesses; other payments attributable to acquisition, disposition or corporate realignment activities; purchases of 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: LEAF) is a diversified consumer internet company that builds enduring, creator-driven brands that reach passionate audiences in large and growing lifestyle categories, including fitness and wellness (Well+Good, Livestrong.com and MyPlate App), and home, art and design (Saatchi Art, Society6 and Hunker). 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 the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. The forward-looking statements set forth in this press release include, among other things, statements regarding potential synergies achieved from acquisitions, the impact of strategic operational changes and the Company’s 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; could cause actual results or developments to differ materially from those indicated due to a number of factors affecting Leaf Group’s operations, markets, products and services; 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, 2020 filed with the Securities and Exchange Commission (http://www.sec.gov) on February 25, 2021, 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: risks associated with political and economic instability domestically and internationally including those resulting from the COVID-19 pandemic, which have and could lead to fluctuations in the availability of credit, decreased business and consumer confidence and increased unemployment; the Company’s ability to execute its business plan to maintain compliance with the continued listing criteria of the New York Stock Exchange (“NYSE”); changes by the Small Business Administration (“SBA”) or other governmental authorities regarding the Coronavirus Aid, Relief and Economic Security Act of 2020, the SBA’s related Paycheck Protection Program (the “PPP Program”); the Company’s ability to obtain forgiveness of the loan we obtained pursuant to the PPP Program; the Company’s ability to successfully drive and increase traffic to its marketplaces and media properties; changes in the methodologies of internet search engines, including ongoing algorithmic changes made by Google, Bing and Yahoo!; the Company’s ability to attract new and repeat customers and artists to its marketplaces and successfully grow its marketplace businesses; the potential impact on advertising-based revenue from 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 Company’s dependence on various agreements with a specific business partner for a significant portion of its advertising revenue; the effects of shifting consumption of media content and online shopping from desktop to mobile devices and/or social media platforms; the Company’s history of incurring net operating losses; the Company’s ability to obtain capital when desired on favorable terms; potential write downs, reserves against or impairment of assets including receivables, goodwill, intangibles (including media content) or other assets; the Company’s ability to effectively integrate, manage, operate and grow acquired businesses; the Company’s ability to retain key personnel; the Company’s ability to prevent any actual or perceived security breaches; the Company’s ability to expand its business internationally; the Company’s ability to generate long-term value for its stockholders; and ongoing actions taken and any future actions that may be taken by activist stockholders. 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. Any forward-looking statement made by the Company in this press release is based only on information currently available to the Company and speaks only as of the date on which it is made. The Company undertakes no obligation to revise or update any forward-looking information, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise, except as required by law, and may not provide this type of information in the future.
(Tables Follow)
Investor Contacts:
Brian Gephart
Chief Financial Officer
(310) 917-6414
[email protected]
Shawn Milne
Investor Relations
(310) 656-6346
[email protected]
| Leaf Group Ltd. and Subsidiaries | ||||||||
| Consolidated Balance Sheets | ||||||||
| (In thousands) | ||||||||
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 67,080 | $ | 18,106 | ||||
| Accounts receivable, net | 13,135 | 14,402 | ||||||
| Prepaid expenses and other current assets | 4,358 | 2,555 | ||||||
| Total current assets | 84,573 | 35,063 | ||||||
| Property and equipment, net | 14,789 | 13,797 | ||||||
| Operating lease right-of-use assets | 10,266 | 12,645 | ||||||
| Intangible assets, net | 10,784 | 12,589 | ||||||
| Goodwill | 19,295 | 19,465 | ||||||
| Other assets | 1,220 | 1,044 | ||||||
| Total assets | $ | 140,927 | $ | 94,603 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 13,515 | $ | 7,825 | ||||
| Accrued expenses and other current liabilities | 25,876 | 21,291 | ||||||
| Deferred revenue | 3,609 | 2,464 | ||||||
| Debt, current | 7,614 | 4,000 | ||||||
| Total current liabilities | 50,614 | 35,580 | ||||||
| Deferred tax liability | 115 | 63 | ||||||
| Operating lease liabilities | 7,943 | 10,863 | ||||||
| Debt, non-current | 3,762 | — | ||||||
| Other liabilities | 190 | 287 | ||||||
| Total liabilities | 62,624 | 46,793 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Common stock | 4 | 3 | ||||||
| Additional paid-in capital | 601,687 | 562,332 | ||||||
| Treasury stock | (35,706 | ) | (35,706 | ) | ||||
| Accumulated other comprehensive loss | (23 | ) | (20 | ) | ||||
| Accumulated deficit | (487,659 | ) | (478,799 | ) | ||||
| Total stockholders’ equity | 78,303 | 47,810 | ||||||
| Total liabilities and stockholders’ equity | $ | 140,927 | $ | 94,603 | ||||
| Leaf Group Ltd. and Subsidiaries | ||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Three months ended | Year ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Revenue: | ||||||||||||||||
| Product revenue | $ | 45,711 | $ | 22,774 | $ | 143,150 | $ | 75,795 | ||||||||
| Service revenue | 19,262 | 22,325 | 68,911 | 79,161 | ||||||||||||
| Total revenue | 64,973 | 45,099 | 212,061 | 154,956 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Product costs (exclusive of amortization of intangible assets shown separately below)(1) | 36,858 | 17,055 | 109,610 | 57,104 | ||||||||||||
| Service costs (exclusive of amortization of intangible assets shown separately below)(1)(2) | 8,903 | 9,509 | 34,173 | 35,509 | ||||||||||||
| Sales and marketing(1)(2) | 10,423 | 9,221 | 35,122 | 31,719 | ||||||||||||
| Product development(1)(2) | 4,036 | 5,228 | 18,764 | 20,880 | ||||||||||||
| General and administrative(1)(2) | 6,805 | 8,709 | 29,753 | 33,433 | ||||||||||||
| Amortization of intangible assets | 532 | 734 | 2,454 | 3,353 | ||||||||||||
| Total operating expenses | 67,557 | 50,456 | 229,876 | 181,998 | ||||||||||||
| Loss from operations | (2,584 | ) | (5,357 | ) | (17,815 | ) | (27,042 | ) | ||||||||
| Interest income | 1 | 33 | 28 | 265 | ||||||||||||
| Interest expense | (79 | ) | (25 | ) | (371 | ) | (40 | ) | ||||||||
| Other income, net | 36 | 34 | 9,420 | 40 | ||||||||||||
| Loss before income taxes | (2,626 | ) | (5,315 | ) | (8,738 | ) | (26,777 | ) | ||||||||
| Income tax (expense) benefit | (47 | ) | 10 | (122 | ) | (61 | ) | |||||||||
| Net loss | $ | (2,673 | ) | $ | (5,305 | ) | $ | (8,860 | ) | $ | (26,838 | ) | ||||
| Net loss per share—basic and diluted | $ | (0.09 | ) | $ | (0.20 | ) | $ | (0.32 | ) | $ | (1.03 | ) | ||||
| Weighted average number of shares—basic and diluted | 29,040 | 26,233 | 27,305 | 25,960 | ||||||||||||
| __________________ | ||||||||||||||||
| (1) Depreciation expense included in the above line items: | ||||||||||||||||
| Product costs | $ | 468 | $ | 442 | $ | 2,006 | $ | 1,604 | ||||||||
| Service costs | 1,176 | 978 | 4,441 | 3,809 | ||||||||||||
| Sales and marketing | 13 | 10 | 42 | 30 | ||||||||||||
| Product development | 17 | 24 | 59 | 59 | ||||||||||||
| General and administrative | 138 | 183 | 615 | 1,256 | ||||||||||||
| Total depreciation | $ | 1,812 | $ | 1,637 | $ | 7,163 | $ | 6,758 | ||||||||
| (2) Stock-based compensation included in the above line items: | ||||||||||||||||
| Service costs | $ | 236 | $ | 381 | $ | 1,238 | $ | 1,139 | ||||||||
| Sales and marketing | 260 | 323 | 1,288 | 843 | ||||||||||||
| Product development | 554 | 745 | 2,554 | 2,536 | ||||||||||||
| General and administrative | 917 | 1,325 | 4,149 | 4,846 | ||||||||||||
| Total stock-based compensation | $ | 1,967 | $ | 2,774 | $ | 9,229 | $ | 9,364 | ||||||||
| Leaf Group Ltd. and Subsidiaries | ||||||||||||||||
| Consolidated Statements of Cash Flows | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Three months ended December 31, | Year ended December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Cash flows from operating activities | ||||||||||||||||
| Net loss | $ | (2,673 | ) | $ | (5,305 | ) | $ | (8,860 | ) | $ | (26,838 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
| Depreciation and amortization | 2,344 | 2,371 | 9,617 | 10,111 | ||||||||||||
| Non-cash lease expense | 763 | 677 | 2,836 | 2,063 | ||||||||||||
| Deferred income taxes | 29 | (43 | ) | 52 | (23 | ) | ||||||||||
| Stock-based compensation | 1,967 | 2,774 | 9,229 | 9,364 | ||||||||||||
| Gain from sale of asset | — | (24 | ) | — | (24 | ) | ||||||||||
| Gain from sale of business | — | — | (9,300 | ) | — | |||||||||||
| Other | (283 | ) | 55 | 26 | 173 | |||||||||||
| Change in operating assets and liabilities, net of effect of acquisitions and disposals: | ||||||||||||||||
| Accounts receivable, net | 470 | (2,592 | ) | 1,343 | (1,938 | ) | ||||||||||
| Prepaid expenses and other current assets | (682 | ) | 628 | (1,864 | ) | 1,473 | ||||||||||
| Other long-term assets | 57 | 3 | 89 | 112 | ||||||||||||
| Operating lease ROU assets and liabilities | (809 | ) | (832 | ) | (2,955 | ) | (2,527 | ) | ||||||||
| Accounts payable | 3,878 | 4,328 | 5,680 | 6,362 | ||||||||||||
| Accrued expenses and other liabilities | 1,032 | 2,680 | 4,316 | (2,927 | ) | |||||||||||
| Deferred revenue | (1,699 | ) | (245 | ) | 1,145 | 349 | ||||||||||
| Net cash provided by (used in) operating activities | 4,394 | 4,475 | 11,354 | (4,270 | ) | |||||||||||
| Cash flows from investing activities | ||||||||||||||||
| Purchases of property and equipment | (2,106 | ) | (1,830 | ) | (7,361 | ) | (6,997 | ) | ||||||||
| Purchases of intangible assets | — | (3 | ) | (163 | ) | (3 | ) | |||||||||
| Proceeds from sale of assets | — | 24 | — | 24 | ||||||||||||
| Proceeds from sale of business | — | — | 9,500 | — | ||||||||||||
| Cash paid for acquisitions, net of cash acquired | — | — | — | (1,900 | ) | |||||||||||
| Net cash provided by (used in) investing activities | (2,106 | ) | (1,809 | ) | 1,976 | (8,876 | ) | |||||||||
| Cash flows from financing activities | ||||||||||||||||
| Proceeds from promissory note | — | — | 7,144 | — | ||||||||||||
| Borrowings from revolving line of credit | — | 4,000 | — | 4,000 | ||||||||||||
| Proceeds from exercises of stock options and purchases under ESPP | 13 | 35 | 55 | 761 | ||||||||||||
| Net proceeds from issuance of common stock | 32,200 | — | 32,200 | — | ||||||||||||
| Taxes paid on net share settlements of restricted stock units | (374 | ) | (258 | ) | (2,442 | ) | (2,661 | ) | ||||||||
| Cash paid for acquisition holdback | — | — | (36 | ) | (625 | ) | ||||||||||
| Cash paid for contingent consideration liability | — | — | (856 | ) | (934 | ) | ||||||||||
| Cash paid for debt issuance costs | — | (110 | ) | (38 | ) | (110 | ) | |||||||||
| Other | (27 | ) | (16 | ) | (81 | ) | (91 | ) | ||||||||
| Net cash provided by financing activities | 31,812 | 3,651 | 35,946 | 340 | ||||||||||||
| Effect of foreign currency on cash, cash equivalents and restricted cash | (58 | ) | (1 | ) | (38 | ) | (3 | ) | ||||||||
| Change in cash, cash equivalents and restricted cash | 34,042 | 6,316 | 49,238 | (12,809 | ) | |||||||||||
| Cash, cash equivalents and restricted cash, beginning of period | 34,322 | 12,810 | 19,126 | 31,935 | ||||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 68,364 | $ | 19,126 | $ | 68,364 | $ | 19,126 | ||||||||
| Reconciliation of cash, cash equivalents and restricted cash | ||||||||||||||||
| Cash and cash equivalents | $ | 67,080 | $ | 18,106 | $ | 67,080 | $ | 18,106 | ||||||||
| Restricted cash included in other current assets | 136 | 136 | 136 | 136 | ||||||||||||
| Restricted cash included in other long-term assets | 1,148 | 884 | 1,148 | 884 | ||||||||||||
| Total cash, cash equivalents and restricted cash shown in the statement of cash flows | $ | 68,364 | $ | 19,126 | $ | 68,364 | $ | 19,126 | ||||||||
| Leaf Group Ltd. and Subsidiaries | ||||||||||||||||
| Reconciliations of Non-GAAP Financial Measures | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Three months ended December 31, | Year ended December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Adjusted EBITDA: | ||||||||||||||||
| Net loss(1) | $ | (2,673 | ) | $ | (5,305 | ) | $ | (8,860 | ) | $ | (26,838 | ) | ||||
| Add (deduct): | ||||||||||||||||
| Income tax expense (benefit), net | 47 | (10 | ) | 122 | 61 | |||||||||||
| Interest (income) expense, net | 78 | (8 | ) | 343 | (225 | ) | ||||||||||
| Other income, net | (36 | ) | (34 | ) | (9,420 | ) | (40 | ) | ||||||||
| Depreciation and amortization(2) | 2,344 | 2,371 | 9,617 | 10,111 | ||||||||||||
| Stock-based compensation(3) | 1,967 | 2,774 | 9,229 | 9,364 | ||||||||||||
| Acquisition, disposition, realignment and contingent payment costs(4) | — | — | — | 90 | ||||||||||||
| Adjusted EBITDA | $ | 1,727 | $ | (212 | ) | $ | 1,031 | $ | (7,477 | ) | ||||||
| Free Cash Flow: | ||||||||||||||||
| Net cash provided by (used in) operating activities | $ | 4,394 | $ | 4,475 | $ | 11,354 | $ | (4,270 | ) | |||||||
| Purchases of property and equipment | (2,106 | ) | (1,830 | ) | (7,361 | ) | (6,997 | ) | ||||||||
| Purchases of intangibles | — | (3 | ) | (163 | ) | (3 | ) | |||||||||
| Acquisition, disposition, realignment and contingent payments(4) | — | — | — | 90 | ||||||||||||
| Free Cash Flow | $ | 2,288 | $ | 2,642 | $ | 3,830 | $ | (11,180 | ) | |||||||
(1) For the fiscal year ended December 31, 2020, we had $1.5 million in cost savings, which included temporary salary cuts of our executive team and salaried direct workforce (whose salaries were reinstated effective with payroll paid on June 30, 2020) and compensation cuts and deferrals of compensation of our independent directors (whose cash retainer compensation was reinstated, effective July 1, 2020), neither of which is expected to reoccur.
(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 service fees directly attributable to acquisition, disposition or corporate realignment activities, (b) employee severance, (c) contingent payments to certain key employees/equity holders of acquired businesses, and (d) other payments attributable to acquisition, disposition or corporate realignment activities.
| Leaf Group Ltd. and Subsidiaries | ||||||||||||||||
| Reconciliation of Segment Disclosure | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Three months ended December 31, | Year ended December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Segment Revenue: | ||||||||||||||||
| Society6 Group | $ | 43,711 | $ | 22,446 | $ | 138,000 | $ | 73,852 | ||||||||
| Saatchi Art Group | 5,665 | 3,825 | 17,063 | 15,773 | ||||||||||||
| Media Group | 15,597 | 18,828 | 56,998 | 65,331 | ||||||||||||
| Total revenue | $ | 64,973 | $ | 45,099 | $ | 212,061 | $ | 154,956 | ||||||||
| Segment Operating Contribution: | ||||||||||||||||
| Society6 Group(1) | $ | 876 | $ | 428 | $ | 8,152 | $ | 310 | ||||||||
| Saatchi Art Group(1) | 172 | (770 | ) | (1,563 | ) | (2,492 | ) | |||||||||
| Media Group(1) | 6,875 | 7,812 | 21,517 | 24,730 | ||||||||||||
| Deduct: | ||||||||||||||||
| Strategic shared services and corporate overhead(2)(3) | (6,196 | ) | (7,682 | ) | (27,075 | ) | (30,025 | ) | ||||||||
| Acquisition, disposition and realignment costs(4) | — | — | — | — | ||||||||||||
| Adjusted EBITDA | $ | 1,727 | $ | (212 | ) | $ | 1,031 | $ | (7,477 | ) | ||||||
| Reconciliation to consolidated pre-tax income (loss): | ||||||||||||||||
| Adjusted EBITDA | $ | 1,727 | $ | (212 | ) | $ | 1,031 | $ | (7,477 | ) | ||||||
| Add (deduct): | ||||||||||||||||
| Interest income (expense), net | (78 | ) | 8 | (343 | ) | 225 | ||||||||||
| Other income, net | 36 | 34 | 9,420 | 40 | ||||||||||||
| Depreciation and amortization(5) | (2,344 | ) | (2,371 | ) | (9,617 | ) | (10,111 | ) | ||||||||
| Stock-based compensation(6) | (1,967 | ) | (2,774 | ) | (9,229 | ) | (9,364 | ) | ||||||||
| Acquisition, disposition, realignment and contingent payment costs(7) | — | — | — | (90 | ) | |||||||||||
| Income loss before income taxes(8) | $ | (2,626 | ) | $ | (5,315 | ) | $ | (8,738 | ) | $ | (26,777 | ) | ||||
(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 (expense); (e) income taxes; and (f) contingent payments to certain key employees/equity holders of acquired businesses.
(2) Strategic shared services include shared operating expenses that are not directly attributable to the operating segments, including: network operations center, marketing, business development, product development, creative, financial systems, quality assurance, software engineering, and information systems. Corporate overhead includes general and administrative support functions that are not directly attributable to the operating segments, including: executive, accounting, finance, human resources, legal, and facilities. Strategic shared services and corporate overhead 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) Strategic shared services and corporate overhead includes $1.8 million and $1.9 million in strategic shared services costs for the three months ended December 31, 2020 and 2019, respectively, and $4.4 million and $5.8 million in corporate overhead for the three months ended December 31, 2020 and 2019, respectively. Strategic shared services and corporate overhead include $7.8 million and $8.0 million in strategic shared services for the fiscal year ended December 31, 2020 and 2019, respectively, and $19.3 million and $22.0 million in corporate overhead for the fiscal year ended December 31, 2020 and 2019, respectively.
(4) Represents such items, when applicable, as (a) legal, accounting and other professional service fees directly attributable to acquisition, disposition or corporate realignment activities, (b) employee severance, and (c) other payments attributable to acquisition, disposition or corporate realignment activities, excluding contingent payments to certain key employees/equity holders of acquired businesses.
(5) 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, included in the Company’s GAAP results of operations.
(6) Represents the expense related to stock-based awards granted to employees as included in the Company’s GAAP results of operations.
(7) Represents such items, when applicable, as (a) legal, accounting and other professional service fees directly attributable to acquisition, disposition or corporate realignment activities, (b) employee severance, (c) contingent payments to certain key employees/equity holders of acquired businesses, and (d) other payments attributable to acquisition, disposition or corporate realignment activities.
(8) For the fiscal year ended December 31, 2020, we had $1.5 million in cost savings, which included temporary salary cuts of our executive team and salaried direct workforce (whose salaries were reinstated effective with payroll paid on June 30, 2020) and compensation cuts and deferrals of compensation of our independent directors (whose cash retainer compensation was reinstated, effective July 1, 2020), neither of which is expected to reoccur.