news

Leaf Group Reports Third Quarter Results

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.”

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.

The specific companies identified above do not represent all of Spectrum’s investments, and no assumptions should be made that any investments identified were or will be profitable. View the complete list of our portfolio companies. Spectrum is not responsible for the contents of any third party website linked above, and has not confirmed the accuracy of any information provided therein.