Leaf Group Earnings 2020-09-30

Leaf Group Earnings 2020-09-30

LEAF 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-35048

LEAF GROUP LTD.

(Exact name of registrant as specified in its charter)


Delaware		20-4731239
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1655 26th Street Santa Monica, CA		90404
(Address of principal executive offices)		(Zip Code)

(310) 656-6253

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	LEAF	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 26, 2020, there were 27,390,064 shares of the registrant’s common stock, $0.0001 par value, outstanding.

LEAF GROUP LTD.

INDEX TO FORM 10-Q

			Page

Part I	Financial Information
	Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
		Condensed Consolidated Balance Sheets	1
		Condensed Consolidated Statements of Operations	2
		Condensed Consolidated Statements of Comprehensive Income (Loss)	3
		Condensed Consolidated Statements of Stockholders’ Equity	4
		Condensed Consolidated Statements of Cash Flows	6
		Notes to the Condensed Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
	Item 4.	Controls and Procedures	44

Part II	Other Information
	Item 1.	Legal Proceedings	45
	Item 1A.	Risk Factors	45
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
	Item 3.	Defaults Upon Senior Securities	48
	Item 4.	Mine Safety Disclosures	49
	Item 5.	Other Information	49
	Item 6.	Exhibits	49
		Signatures	51

Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Leaf Group Ltd. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)


	September 30,		December 31,
	2020		2019
Assets
Current assets
Cash and cash equivalents	$	33,038	$	18,106
Accounts receivable, net		13,297		14,402
Prepaid expenses and other current assets		3,701		2,555
Total current assets		50,036		35,063
Property and equipment, net		14,333		13,797
Operating lease right-of-use assets		10,726		12,645
Intangible assets, net		11,312		12,589
Goodwill		19,244		19,465
Other assets		1,275		1,044
Total assets	$	106,926	$	94,603

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	9,627	$	7,825
Accrued expenses and other current liabilities		24,462		21,291
Deferred revenue		5,308		2,464
Debt, current		8,407		4,000
Total current liabilities		47,804		35,580
Deferred tax liability		86		63
Operating lease liabilities		8,561		10,863
Debt, non-current		2,979		—
Other liabilities		182		287
Total liabilities		59,612		46,793
Commitments and contingencies (Note 9)
Stockholders’ equity
Common stock, $0.0001 par value. Authorized 100,000 shares; 28,991 and 27,336 shares issued and outstanding at September 30, 2020 and 27,938 and 26,283 shares issued and outstanding at December 31, 2019		3		3
Additional paid-in capital		568,062		562,332
Treasury stock at cost, 1,655 shares at September 30, 2020 and December 31, 2019		(35,706)		(35,706)
Accumulated other comprehensive loss		(59)		(20)
Accumulated deficit		(484,986)		(478,799)
Total stockholders’ equity		47,314		47,810
Total liabilities and stockholders’ equity	$	106,926	$	94,603

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

Leaf Group Ltd. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Revenue:
Product revenue	$	45,135	$	19,611	$	97,439	$	53,021
Service revenue		18,120		20,419		49,649		56,836
Total revenue		63,255		40,030		147,088		109,857
Operating expenses:
Product costs (exclusive of amortization of intangible assets shown separately below)		33,753		14,221		72,752		40,049
Service costs (exclusive of amortization of intangible assets shown separately below)		8,468		9,107		25,270		26,000
Sales and marketing		9,594		7,372		24,699		22,498
Product development		4,967		4,973		14,728		15,652
General and administrative		7,691		8,072		22,948		24,724
Amortization of intangible assets		518		807		1,922		2,619
Total operating expenses		64,991		44,552		162,319		131,542
Loss from operations		(1,736)		(4,522)		(15,231)		(21,685)
Interest income		1		44		27		232
Interest (expense)		(103)		(5)		(292)		(15)
Other income, net		5,537		(6)		9,384		6
Income (loss) before income taxes		3,699		(4,489)		(6,112)		(21,462)
Income tax benefit (expense)		(13)		4		(75)		(71)
Net income (loss)	$	3,686	$	(4,485)	$	(6,187)	$	(21,533)

Net income (loss) per share—basic and diluted
Basic	$	0.14	$	(0.17)	$	(0.23)	$	(0.83)
Diluted	$	0.13	$	(0.17)	$	(0.23)	$	(0.83)

Weighted average number of shares—basic and diluted
Basic		27,016		26,089		26,720		25,868
Diluted		27,954		26,089		26,720		25,868

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

Leaf Group Ltd. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Net income (loss)	$	3,686	$	(4,485)	$	(6,187)	$	(21,533)
Other comprehensive income (loss), net of tax:
Change in foreign currency translation adjustment		28		(40)		(39)		(37)
Comprehensive income (loss)	$	3,714	$	(4,525)	$	(6,226)	$	(21,570)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

Leaf Group Ltd. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


	Nine months ended September 30, 2020
								Accumulated
				Additional				other
				paid-in				comprehensive				Total
	Common stock			capital		Treasury		income		Accumulated		stockholders’
	Shares	Amount		amount		stock		(loss)		deficit		equity
Balance at December 31, 2019	26,283	$	3	$	562,332	$	(35,706)	$	(20)	$	(478,799)	$	47,810
Issuance of stock under employee stock awards and other, net	320		—		6		—		—		—		6
Tax withholdings related to vesting of share-based payments	—		—		(556)		—		—		—		(556)
Stock-based compensation expense	—		—		2,833		—		—		—		2,833
Foreign currency translation adjustment	—		—		—		—		(62)		—		(62)
Net loss	—		—		—		—		—		(10,676)		(10,676)
Balance at March 31, 2020	26,603	$	3	$	564,615	$	(35,706)	$	(82)	$	(489,475)	$	39,355
Issuance of stock under employee stock awards and other, net	212		—		22		—		—		—		22
Tax withholdings related to vesting of share-based payments	—		—		(191)		—		—		—		(191)
Stock-based compensation expense	—		—		2,680		—		—		—		2,680
Foreign currency translation adjustment	—		—		—		—		(5)		—		(5)
Net income	—		—		—		—		—		803		803
Balance at June 30, 2020	26,815	$	3	$	567,126	$	(35,706)	$	(87)	$	(488,672)	$	42,664
Issuance of stock under employee stock awards and other, net	521		—		14		—		—		—		14
Tax withholdings related to vesting of share-based payments	—		—		(1,321)		—		—		—		(1,321)
Stock-based compensation expense	—		—		2,243		—		—		—		2,243
Foreign currency translation adjustment	—		—		—		—		28		—		28
Net income	—		—		—		—		—		3,686		3,686
Balance at September 30, 2020	27,336	$	3	$	568,062	$	(35,706)	$	(59)	$	(484,986)	$	47,314

Table of Contents


	Nine months ended September 30, 2019
								Accumulated
				Additional				other
				paid-in				comprehensive				Total
	Common stock			capital		Treasury		income		Accumulated		stockholders’
	Shares	Amount		amount		stock		(loss)		deficit		equity
Balance at December 31, 2018	25,483	$	3	$	554,403	$	(35,706)	$	(52)	$	(451,961)	$	66,687
Issuance of stock under employee stock awards and other, net	319		—		270		—		—		—		270
Tax withholdings related to vesting of share-based payments	—		—		(1,322)		—		—		—		(1,322)
Stock-based compensation expense	—		—		2,045		—		—		—		2,045
Foreign currency translation adjustment	—		—		—		—		27		—		27
Net loss	—		—		—		—		—		(10,286)		(10,286)
Balance at March 31, 2019	25,802	$	3	$	555,396	$	(35,706)	$	(25)	$	(462,247)	$	57,421
Issuance of stock under employee stock awards and other, net	187		—		175		—		—		—		175
Tax withholdings related to vesting of share-based payments	—		—		(717)		—		—		—		(717)
Stock-based compensation expense	—		—		2,331		—		—		—		2,331
Foreign currency translation adjustment	—		—		—		—		(24)		—		(24)
Net loss	—		—		—		—		—		(6,762)		(6,762)
Balance at June 30, 2019	25,989	$	3	$	557,185	$	(35,706)	$	(49)	$	(469,009)	$	52,424
Issuance of stock under employee stock awards and other, net	161		—		281		—		—		—		281
Tax withholdings related to vesting of share-based payments	—		—		(364)		—		—		—		(364)
Stock-based compensation expense	—		—		2,562		—		—		—		2,562
Foreign currency translation adjustment	—		—		—		—		(40)		—		(40)
Net loss	—		—		—		—		—		(4,485)		(4,485)
Balance at September 30, 2019	26,150	$	3	$	559,664	$	(35,706)	$	(89)	$	(473,494)	$	50,378

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

Table of Contents

Leaf Group Ltd. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Nine months ended September 30,
	2020		2019
Cash flows from operating activities
Net loss	$	(6,187)	$	(21,533)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		7,273		7,740
Non-cash lease expense		2,073		1,386
Deferred income taxes		23		20
Stock-based compensation		7,262		6,590
Gain from sale of asset		(9,300)		—
Other		309		118
Change in operating assets and liabilities, net of effect of acquisitions and disposals:
Accounts receivable, net		873		654
Prepaid expenses and other current assets		(1,182)		845
Other long-term assets		32		109
Operating lease ROU assets and liabilities		(2,146)		(1,695)
Accounts payable		1,802		2,034
Accrued expenses and other liabilities		3,284		(5,607)
Deferred revenue		2,844		594
Net cash provided by (used in) operating activities		6,960		(8,745)
Cash flows from investing activities
Purchases of property and equipment

Price	4.37	EPS	-1
Shares	26	P/E	-5
MCap	114	P/FCF	-13
Net Debt	-13	EBIT	-21
TEV	101	TEV/EBIT	-5
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-10-29
10-Q	2020-06-30	Filed 2020-07-31
10-Q	2020-03-31	Filed 2020-05-11
10-K	2019-12-31	Filed 2020-03-16
10-Q	2019-09-30	Filed 2019-11-07
10-Q	2019-06-30	Filed 2019-08-05
10-Q	2019-03-31	Filed 2019-05-08
10-K	2018-12-31	Filed 2019-03-04
10-Q	2018-09-30	Filed 2018-11-06
10-Q	2018-06-30	Filed 2018-08-02
10-Q	2018-03-31	Filed 2018-05-08
10-K	2017-12-31	Filed 2018-03-01
10-Q	2017-09-30	Filed 2017-11-07
10-Q	2017-06-30	Filed 2017-08-03
10-Q	2017-03-31	Filed 2017-05-04
10-K	2016-12-31	Filed 2017-02-23
10-Q	2016-09-30	Filed 2016-11-07
10-Q	2016-06-30	Filed 2016-08-04
10-Q	2016-03-31	Filed 2016-05-09
10-K	2015-12-31	Filed 2016-03-01
10-Q	2015-09-30	Filed 2015-11-05
10-Q	2015-06-30	Filed 2015-08-06
10-Q	2015-03-31	Filed 2015-05-07
10-K	2014-12-31	Filed 2015-03-16
10-Q	2014-09-30	Filed 2014-11-10
10-Q	2014-06-30	Filed 2014-08-11
10-Q	2014-03-31	Filed 2014-05-12
10-K	2013-12-31	Filed 2014-03-17
10-Q	2013-09-30	Filed 2013-11-12
10-Q	2013-06-30	Filed 2013-08-09
10-Q	2013-03-31	Filed 2013-05-10
10-K	2012-12-31	Filed 2013-03-05
10-Q	2012-09-30	Filed 2012-11-13
10-Q	2012-06-30	Filed 2012-08-10
10-Q	2012-03-31	Filed 2012-05-11
10-K	2011-12-31	Filed 2012-02-24
10-Q	2011-09-30	Filed 2011-11-14
10-Q	2011-06-30	Filed 2011-08-12
10-Q	2011-03-31	Filed 2011-05-09
10-K	2010-12-31	Filed 2011-03-01

8-K	2020-11-20
8-K	2020-11-06
8-K	2020-10-29
8-K	2020-10-28
8-K	2020-10-16
8-K	2020-10-05
8-K	2020-09-21
8-K	2020-08-24
8-K	2020-08-10
8-K	2020-07-30
8-K	2020-07-20
8-K	2020-07-09
8-K	2020-07-07
8-K	2020-07-02
8-K	2020-06-18
8-K	2020-06-01
8-K	2020-05-19
8-K	2020-05-19
8-K	2020-05-18
8-K	2020-05-11
8-K	2020-05-01
8-K	2020-04-24
8-K	2020-04-20
8-K	2020-04-17
8-K	2020-04-10
8-K	2020-04-01
8-K	2020-03-16
8-K	2019-11-07
8-K	2019-11-07
8-K	2019-08-05
8-K	2019-05-21
8-K	2019-05-15
8-K	2019-05-08
8-K	2019-04-13
8-K	2019-03-26
8-K	2019-03-04
8-K	2019-02-14
8-K	2019-01-29
8-K	2018-12-28
8-K	2018-11-06
8-K	2018-08-02
8-K	2018-08-01
8-K	2018-07-25
8-K	2018-06-25
8-K	2018-06-12
8-K	2018-06-05
8-K	2018-05-08
8-K	2018-03-22
8-K	2018-03-01
8-K	2018-03-01
8-K	2018-02-05
8-K	2018-02-05
8-K	2018-01-11

EX-31.1	leaf-20200930xex31d1.htm
EX-31.2	leaf-20200930xex31d2.htm
EX-32.1	leaf-20200930xex32d1.htm
EX-32.2	leaf-20200930xex32d2.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company