May 2018s1.q4cdn.com/725197287/files/doc_financials/2018/Q1/LG_IR_Deck_… · INVESTOR...

INVESTOR PRESENTATION!May 2018!

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Disclaimers

This presentation contains certain forward-looking statements, which statements involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this presentation, including statements regarding the company’s future results of operations and financial position, business strategy, plans and objectives for future operations, are forward-looking statements. Such statements are subject to a number of risks, uncertainties, and assumptions, and investors are cautioned not to place undue reliance on these statements. Actual results could differ materially from those expressed or implied, and reported results should not be considered as an indication of future performance.Risks that contribute to the uncertain nature of the forward-looking statements include, among others, risks associated with 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, and the effect of management changes and business initiatives (including acquisitions), as well as other risks listed or described from time to time in the Company’s filings with the Securities and Exchange Commission, which are incorporated herein by reference. Except as required by law, the Company undertakes no obligation to update any forward-looking statements for any reason after the date of this presentation to conform these statements to actual results or to changes in the Company’s expectations. Non-GAAP Disclosure:This presentation includes reference to Adjusted EBITDA and Operating Contribution, each of which is a non-GAAP measure. These non-GAAP measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP measures used by the company may differ from the non-GAAP measures used by other companies. Reconciliations between GAAP and these non-GAAP measures are included in the appendix to this document. The company considers these non-GAAP financial measures to be important because they provide a useful measure of the operating performance of the Company and are used by the Company’s management for that purpose. A reconciliation of each of Adjusted EBITDA and Operating Contribution to net loss is available in the Appendix to this presentation.

Our Mission

Fitness & WellnessArt & Design

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We build enduring, digital first brands for passionate audiences in large and

growing lifestyle categories!

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Leaf Group: A House of Consumer Digital First Brands

Example Brands

Luxury, Sports and Lifestyle

Lifestyle Categories

Example Brands

Wine and Spirits, Fashion and Goods, Perfumes and Cosmetics, Watches

and Jewelry, Selective Retailing


Example Brands

Jewelry, Watchmaking, Accessories


Example Brands

Art and Design, Fitness and Wellness


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Passion Brands for a Global Audience

Fitness, Mind-Body + Healthy Eating, Nutrition and Weight Loss(1)$1.2T

Home Goods(2)$115B

Total Art Market(3)$57B

LEAF GROUP(4)$135M

1)  GlobalWellnessIns.tute,GlobalWellnessMonitorJanuary20172)  USCensusAdvancedRetailData2017,FurnitureandHomeFurnishingsStores3)  ArtBasel&UBSReport20174)  LeafGroupLTM(LastTwelveMonths)revenue

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Leaf Group at a Glance

(1) Total Unique Monthly Visitors for March 2018 comscore data (2) Sum of the Total Unique Monthly Visitors for each individual property using March 2018 comscore data. (3) Source: Quantcast audience insight data for April 2018 based on traffic

41% Ages 25 – 44(3)

60% Has Kids(3)

66%Female(3)

Fitness & Wellness

34MTotal Monthly Visitors(2)

3MNewsletter Subscribers

10MMyPlate App Downloads

Art & Design

8.2MTotal Monthly Visitors(2)

360KArtists & Creators

6.1MProducts For Sale

54MUnique Monthly Visitors(1)

280Employees

4.2MCumulative Purchasers

To Date

21% HHI Above $100K(3)

62% College or Grad School(3)

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Art & Design at a Glance



56% Ages 25 – 54(3)


46% Ages 25 – 44(3)



6.1MProducts for Sale

57%Female(3)

Art & Design


73%Female(3)


280Employees

4.2MCumulative Purchasers

to Date

Fitness & Wellness





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Serving the consumer’s desire for uniqueness and personalization in the home category!

Home Goods(1) $115B

Home Goods eCommerce(2)$31B

MarketplacesRevenue FY 2017

$84M

(1) US Census Advanced Retail Data 2017, Furniture and Home Furnishings Stores (2) eMarketer July 2017 (3) Metrics provided as of March 31, 2018 based on Leaf Group internal data

75Unique Products(3)

5MUnique, PersonalizedDesigns(3)

289KSellers(3)

$66Average Order Value(3)

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The premier site for original artwork lovers!

Total Art Market(1)$57B

Est. Online Art Market(1)$5B

Giving artists a physical world presence

Target customer earlier in lifecycle

(1)  Art Basel & UBS Report 2017 (2)  Metrics provided as of March 31, 2018, based on Leaf Group internal data

Sex Lessons Marco Battaglini, Costa Rica SOLD for $27,500 on 4/17/2018

$1,200+Average Order Value(2)

176Countries with artistswith works for sale(2)

Grace Michael James Talbot, UK SOLD for $20,750 on 1/1/2018

MarketplacesRevenue FY 2017

$84M





71%Female(3)

Fitness & Wellness

42% Ages 25 – 44(3)

59% Has Kids(3)

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Fitness & Wellness at a Glance

Art & Design



6.1MProducts For Sale


280Employees

4.2MCumulative Purchasers to Date


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Executive Leadership

Sean MoriartyChief Executive Officer!Prior: !•  CEO at Saatchi Art!•  President, CEO at Ticketmaster!•  EVP, Technology at Citysearch!

Brian PikeChief Operating Officer &!Chief Technology Officer!

Adam WergelesEVP & General Counsel!

Prior: !•  CTO at Rubicon Project!•  CTO at Ticketmaster !

Prior: !•  EVP, Business and Legal Affairs, and

General Counsel at Serviz, Inc.!•  Chief Legal Officer at ReachLocal!

Tawn AlbrightEVP, Corporate Development!Prior: !•  CEO and founding partner at

Rockhouse Partners!•  Executive VP for Etix!

Jill AngelEVP, People!Prior: !•  VP Operations at Saatchi Art!•  Team leader at Cocodot, Swirl by

DailyCandy, and GSI Commerce!

!

Dion Camp SandersEVP, Marketplaces!Prior: !•  Vice President, Emerging Businesses

within the Labs Group at Disney!•  Founder and CEO of Pacific Edison!

Jantoon ReigersmanChief Financial Officer!Prior: !•  CFO at Ogin !•  Investor at Goldman Sachs!•  Investment banking at Morgan Stanley!

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Long Term Characteristics of Leaf Group and Our Brands

Deep Leadership and

Management Talent!

Topline growth targeting 20% per year with potential to

accelerate as brands hit scale!

Significant Operating Leverage!

Capital efficient businesses with

outstanding capital allocation practices!

Global, Fast Growing Passion Categories!

Strong Potential for Category Leadership!

Opportunity to be “Lovemark”

Brand!

Market Leader for Product and Service Quality !

FINANCIALS!

Q1'17 Q2'17 Q3'17 Q4'17 Q1'18

Revenue Breakdown per Category

Revenue Breakdown per Financial Segment

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Leaf Group Q1 2018 Financial Snapshot

21.9%Fitness &!Wellness!

63.4%Art & Design!

14.7%Reference Publishing!

62.1%Marketplaces!

37.9%Media!

Q1‘18 Revenue = $33.7M($ in millions)!

Q1'17 Q2'17 Q3'17 Q4'17 Q1'18

$27.2 $28.6

$33.5

$39.7$33.7Revenue

Q1‘18 Adj. EBITDA = ($1.2M)($ in millions)!

$27.2$28.6

$33.5

$39.7$33.7

Adj. EBITDA

$(4.4)

$(1.9)

$(0.4)

$(1.2)

$(3.9)

24% y/y

72% y/y

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Leaf Group Healthy Balance Sheet

(1)  Leaf Group had federal net operating loss (“NOL”) carryforwards of approximately $189.9 million as of December 31, 2017, which expire between 2021 and 2037. !In addition, Leaf Group had state NOL carryforwards of approximately $65.4 million, which expire between 2019 and 2037. As of December 31, 2017, Leaf Group has a full valuation allowance against our net operating loss carryforwards.!

(2)  Includes intangible assets, net, goodwill and other assets.!

Other Current Assets!

Property and Equipment, Net!

Other Long Term Assets(2)!

Total Assets! $ 98.3!

27.7!

12.0!

12.1!

Assets

Accounts Payable, Accrued Expenses, !and Other Current Liabilities !

Deferred Revenue!

Non-current Liabilities!

Stockholders’ Equity!

Total Liabilities and Stockholders’ Equity! $ 98.3!

77.1!

3.5!

1.9!

15.8!

Liabilities and Stockholders’ Equity

As of March 31, 2018 ($ in millions)!

Approximately $190M in Federal and $65M in State NOLs(1)

Cash & Cash Equivalents 46.5

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Media Q1 2018 Financials

(1)  Segment operating contribution reflects earnings before corporate and unallocated expenses and also excludes: (a) depreciation expense; (b) amortization of intangible assets; (c) stock-based compensation expense; (d) interest and other income (expenses); and (e) income taxes. See Appendix for a reconciliation of Operating Contribution, a non-GAAP financial measure, to net loss, the most directly comparable GAAP financial measure. !

Segment Revenue($ in millions)!

Segment Operating Contribution(1)($ in millions)!

$11.4

$10.9 $11.0

$11.7

$12.8

Q1'17 Q2'17 Q3'17 Q4'17 Q1'18

$3.6

$4.4

$4.8

$5.5 $5.5

Q1'17 Q2'17 Q3'17 Q4'17 Q1'18

51% Y/Y

12% y/y

51% y/y

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Media Q1 2018 Operating Metrics


696

708

694 697

772

Q1'17 Q2'17 Q3'17 Q4'17 Q1'18

Visits($ in millions)!

11% y/y

Revenue Per Visit (RPV)($ in millions)!

$16.34

$15.37

$15.80

$16.73

$16.56

Q1'17 Q2'17 Q3'17 Q4'17 Q1'18

1% Y/Y

1% y/y

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Media Advertising Monetization Business Model

GOOGLE ADSENSE≤ $1 CPMs!

THIRD PARTY$3 CPMs!

PROGRAMMATIC$5 CPMs!

DIRECT> $10 CPMs!

Deals entail custom sponsored content, video, high-impact ad units, social media, email, and events = highest CPMs and cost-of-sale!

Leaf Private Marketplace with ad agency or brand who bids directly on our ad inventory enabling access to our targeting capabilities, and ensuring brand safety !

Intermediaries buy ad inventory at the most efficient prices on behalf of brands and agencies!

Our CPMs are higher than most sites because of the intent-driven nature of our traffic(1)!

(1)CPMarebasedonrela.vescale–internaldata

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Marketplaces Q1 2018 Financials($ in millions)!

$28.1!

$1.0!

($0.1)!

$22.6!

Segment Revenue! Segment Operating Contribution(1)!


Q4 2016! Q4 2017!Segment Revenue($ in millions)!

Segment Operating Contribution(1)($ in millions)!

$15.9 $17.7

$22.5

$28.1

$21.0

Q1'17 Q2'17 Q3'17 Q4'17 Q1'18

$(1.4)

$(1.7)

$(0.4)

$1.0

$0.1

Q1'17 Q2'17 Q3'17 Q4'17 Q1'18

32% Y/Y

32% y/y

104% y/y

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Marketplaces Q1 2018 Operating Metrics


268298

381

501

308

Q1'17 Q2'17 Q3'17 Q4'17 Q1'18

15% Y/Y

Number of Transactions(in thousands)!

15% y/y

Gross Transactional Value (GTV)($ in millions)!

$19.7

$22.5

$28.1

$35.1

$26.6

Q1'17 Q2'17 Q3'17 Q4'17 Q1'18

35% Y/Y

35% y/y

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Marketplaces Business Model

Who / Where We Sell To

Business Model Characteristics

How We Generate Revenue

Offering

•  Direct to Consumers

•  Online Only

•  Business to Business (Retailers, Wholesale)

Asset light business model with little inventory, limited capex and negative working capital


•  Business to Business (Retailers, Wholesale)

•  Online and Offline Retailers

•  Recognizes product sales revenue

•  Royalty fee to the artists, included in the COGS

•  Direct to Consumers with Saatchi Online Art Gallery and

•  Hospitality

Unlimited designs created by illustrators, designers and artists

Curated portfolio of products by select number of invited designers and artists

Curated, limited edition art prints commissioned by Saatchi curators


•  Online Art Gallery

•  Service within Marketplace

•  Saatchi Art recognizes revenue as a service

•  Artists directly ship original artwork to customers using Saatchi fulfillment network

One-of-a-kind original artwork

•  Direct to Consumers with tickets and products

•  Direct to Artists

•  Direct to sponsors

•  Revenue as a service for commission earned on artwork sales

•  Ticket sales to attendees

•  Stand sales to the artists

•  Sponsorship for the event

One-of-a-kindOriginal Artwork selected by Fair Directors and Saatchi Curators

THANK YOU!

APPENDIX!

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Reconciliation of Segment Disclosure and Adjusted EBITDA

(1)  Segment operating contribution reflects earnings before corporate and unallocated expenses and also excludes: (a) depreciation expense; (b) amortization of intangible assets; (c) stock-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)

stock-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. !

($ in thousands)

Segment Revenue:Marketplaces $ 13,462 $ 13,409 $ 16,650 $ 22,618 $ 15,876 $ 17,691 $ 22,493 $ 28,065 $ 20,967 Media 13,507 11,026 11,409 11,371 11,362 10,874 10,967 11,662 12,780

Total revenue $ 26,969 $ 24,435 $ 28,059 $ 33,989 $ 27,238 $ 28,565 $ 33,460 $ 39,727 $ 33,747

Segment Operating Contribution: Marketplaces(1) $ 139 $ (202) $ 793 $ (104) $ (1,405) $ (1,743) $ (376) $ 993 $ 61 Media(1) 2,063 741 4,053 3,946 3,615 4,398 4,779 5,456 5,457 Add (deduct):

Corporate expenses(2) (7,432) (6,832) (7,102) (6,479) (6,915) (6,607) (6,290) (6,879) (6,765) Acquisition, disposition and realignment costs (3) 175 1,122 99 — 280 19 — — —

Adjusted EBITDA $ (5,055) $ (5,171) $ (2,157) $ (2,637) $ (4,425) $ (3,933) $ (1,887) $ (430) $ (1,247)

Reconciliation to consolidated pre-tax income (loss):

Adjusted EBITDA $ (5,055) $ (5,171) $ (2,157) $ (2,637) $ (4,425) $ (3,933) $ (1,887) $ (430) $ (1,247) Add (deduct):

Income tax benefit (expense) (11) (69) 32 58 (12) (80) (57) 187 (24) Interest income (expense), net 2 23 33 34 41 38 64 47 17 Other income (expense), net(4) 980 38,182 (31) 1,041 3 (6) (6) (10) (8) Depreciation and amortization(5) (5,731) (4,857) (4,447) (3,055) (3,267) (2,799) (2,749) (2,988) (2,455) Stock-based compensation(6) (1,919) (2,519) (1,680) (1,661) (2,078) (2,166) (2,182) (2,139) (2,208) Acquisition, disposition and realignment costs (3) (175) (1,122) (99) — (280) (19) — — —

Net Loss $ (11,909) $ 24,467 $ (8,349) $ (6,220) $ (10,018) $ (8,965) $ (6,817) $ (5,333) $ (5,925)

Q1' 17Q1' 16 Q2' 16 Q3' 16 Q4' 16 Q2' 17 Q3' 17 Q4' 17 Q1' 18

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Reconciliation of Segment Disclosure and Adjusted EBITDA

(1)  Segment operating contribution reflects earnings before corporate and unallocated expenses and also excludes: (a) depreciation expense; (b) amortization of intangible assets; (c) stock-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)

stock-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. !

($ in thousands)

Segment Revenue:Marketplaces $ 66,139 $ 84,126 Media 47,313 44,864

Total revenue $ 113,452 $ 128,990

Segment Operating Contribution: Marketplaces(1) $ 626 $ (2,530) Media(1) 10,803 18,248 Add (deduct):

Corporate expenses(2) (27,845) (26,691) Acquisition, disposition and realignment costs(3) 1,396 299

Adjusted EBITDA $ (15,020) $ (10,674)

Reconciliation to consolidated pre-tax income (loss):Adjusted EBITDA $ (15,020) $ (10,674) Add (deduct):

Income tax benefit (expense) 10 37 Interest income (expense), net 92 190 Other income (expense), net(4) 40,172 (19) Depreciation and amortization(5) (18,090) (11,803) Stock-based compensation(6) (7,779) (8,565) Acquisition, disposition and realignment costs(3) (1,396) (299)

Net Loss $ (2,011) $ (31,133)

Twelve Months Ended December 31, 2016

Twelve Months Ended December 31, 2017

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