-- Q2 Leaf Group Revenue Grows 4% Year-over-Year to $35.8 Million -- Q2 Marketplaces Revenue Declines 2% Year-over-Year to $19.2 Million -- Q2 Media Revenue Grows 13% Year-over-Year to $16.6 Million

SANTA MONICA, Calif., Aug. 05, 2019 (GLOBE NEWSWIRE) -- Leaf Group Ltd. (NYSE: LEAF), a diversified consumer internet company, today reported financial results for the second quarter ended June 30, 2019.

Financial Summary (In thousands, except per share amounts) (unaudited) --------------------------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, ---------------------- ------------------------ 2019 2018 2019 2018 ---------- ---------- ----------- ----------- Marketplaces revenue $ 19,189 $ 19,655 $ 40,027 $ 40,622 Media revenue 16,600 14,666 29,800 27,446 - ------ - - ------ - - ------- - - ------- - Total revenue $ 35,789 $ 34,321 $ 69,827 $ 68,068 - ------ - - ------ - - ------- - - ------- - Net loss $ (6,762 ) $ (6,293 ) $ (17,048 ) $ (12,218 ) EPS - basic and diluted $ (0.26 ) $ (0.25 ) $ (0.66 ) $ (0.51 ) Adjusted EBITDA(1) $ (1,936 ) $ (614 ) $ (7,565 ) $ (1,861 ) Net cash used in operating activities $ (5,885 ) $ (1,102 ) $ (12,848 ) $ (6,401 ) Free cash flow(1) $ (7,639 ) $ (2,930 ) $ (16,119 ) $ (9,931 ) ------------------------------------- - -------- - -------- - --------- - ---------

These non-GAAP financial measures, and reasons for why the Company believes these non-GAAP financial (1) measures are useful, are described below and reconciled to their most directly comparable GAAP measures in the accompanying tables.

Q2 2019 Financial Summary:

Leaf Group is comprised of two reporting segments: Marketplaces and Media.

For the second quarter of 2019:

-- Total revenue increased 4% year-over-year from $34.3 million to $35.8 million due to a 13% increase in Media revenue, partially offset by a 2% decrease in Marketplaces revenue. -- Marketplaces revenue declined 2% year-over-year from $19.7 million to $19.2 million, reflecting a 10% year-over-year decline in Society6 Group revenue and a 41% increase in Saatchi Art Group revenue year-over-year. -- Media revenue increased 13% year-over-year from $14.7 million to $16.6 million. The increase in Media revenue was attributable to the acquisition of Well+Good in June 2018 and an increase in revenue from our premium sites, including Hunker, partially offset by a decrease in revenue from Livestrong.com. -- Net loss was $(6.8) million for the quarter, declining 7% year-over-year, and Adjusted EBITDA was $ (1.9) million for the quarter, reflecting a decline of $1.3 million year-over-year. -- Cash and cash equivalents was $9.9 million at period end with no debt outstanding. -- On a consolidated basis, Leaf Group’s properties reached over 66 million monthly unique visitors in the U.S. in June 2019 (source: June 2019 U.S. comScore).

Operating Metrics:

Three months ended Six months ended June 30, June 30, ---------------------------- ------------------------------- 2019 2018 % 2019 2018 % Change Change --------- --------- ------ ----------- ----------- ----- Marketplaces Metrics: Number of Transactions(1) 232,124 273,280 (15 )% 529,369 581,215 (9 )% Gross Transaction Value(2) (in thousands) $ 25,048 $ 24,507 2 % $ 52,185 $ 51,099 2 % Media Metrics: Visits per Google Analytics(3) (in thousands) 756,938 770,460 (2 )% 1,458,073 1,556,774 (6 )% Revenue per Visit (RPV)(4) $ 21.93 $ 19.04 15 % $ 20.44 $ 17.63 16 %

Number of transactions is defined as the total number of Marketplaces transactions successfully (1) completed by a customer during the applicable period, excluding certain transactions generated by Saatchi Art’s The Other Art Fair, such as sales of stand space to artists at fairs, sponsorship fees and ticket sales. Gross transaction value is defined as the total dollar value of Marketplaces transactions, excluding the revenue from certain transactions generated by Saatchi Art’s The Other Art Fair, such as sales of stand (2) space to artists at fairs, sponsorship fees and ticket sales. Gross transaction value is the total amount paid by the customer including the total product price inclusive of artist margin, shipping charges, sales taxes, and is net of any promotional discounts. Gross transaction value does not reflect any subsequent cancellations, refunds or credits and does not represent revenue earned by the Company. 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 (3) 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. (4) RPV is defined as Media revenue per one thousand visits.

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 to answer questions today at 5:00 p.m. Eastern time (2:00 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 9757169. 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. 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, digital-first brands that reach passionate audiences in large and growing lifestyle categories, including fitness and wellness (Well+Good, Livestrong.com and MyPlate App), and 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, 2018 filed with the Securities and Exchange Commission ( http://www.sec.gov ) on March 4, 2019, 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; 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 review of strategic alternatives; the Company’s ability to generate long-term value for its stockholders; 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:Jantoon ReigersmanChief Financial Officer(310) 917-6413 IR@leafgroup.com

Shawn MilneInvestor Relations(415) 264-3419 shawn.milne@leafgroup.com

Media Contact:Sharna Daduk(310) 917-6405 sharna.daduk@leafgroup.com

Leaf Group Ltd. and Subsidiaries Unaudited Condensed Consolidated Statements of Operations (In thousands, except per share amounts) Three months ended Six months ended June 30, June 30, ---------------------- ------------------------ 2019 2018 2019 2018 ---------- ---------- ----------- ----------- Revenue: Product revenue $ 15,869 $ 17,192 $ 33,410 $ 35,644 Service revenue 19,920 17,129 36,417 32,424 - ------ - - ------ - - ------- - - ------- - Total revenue 35,789 34,321 69,827 68,068 Operating expenses: Product costs (exclusive of amortization of intangible assets 12,010 12,464 25,828 25,801 shown separately below)(1) Service costs (exclusive of amortization of intangible assets 8,981 6,561 16,893 12,848 shown separately below)(1)(2) Sales and marketing(1)(2) 7,488 7,859 15,126 14,848 Product development(1)(2) 5,110 5,095 10,679 9,805 General and administrative(1)(2) 8,112 7,661 16,652 14,969 Amortization of intangible assets 895 956 1,812 1,982 - ------ - - ------ - - ------- - - ------- - Total operating expenses 42,596 40,596 86,990 80,253 - ------ - - ------ - - ------- - - ------- - Loss from operations (6,807 ) (6,275 ) (17,163 ) (12,185 ) Interest income 66 30 188 48 Interest expense (6 ) (1 ) (10 ) (2 ) Other income (expense), net 19 (25 ) 12 (33 ) - ------ - - ------ - - ------- - - ------- - Loss before income taxes (6,728 ) (6,271 ) (16,973 ) (12,172 ) Income tax expense (34 ) (22 ) (75 ) (46 ) - ------ - - ------ - - ------- - - ------- - Net loss $ (6,762 ) $ (6,293 ) $ (17,048 ) $ (12,218 ) - ------ - - ------ - - ------- - - ------- - Net loss per share - basic and diluted $ (0.26 ) $ (0.25 ) $ (0.66 ) $ (0.51 ) Weighted average number of shares - basic and diluted 25,907 24,854 25,755 23,910 —————————————————— (1) Depreciation expense included in the above line items: Product costs $ 393 $ 213 $ 761 $ 395 Service costs 944 737 1,880 1,391 Sales and marketing 6 8 13 16 Product development 12 18 23 38 General and administrative 412 514 889 1,079 - ------ - - ------ - - ------- - - ------- - Total depreciation $ 1,767 $ 1,490 $ 3,566 $ 2,919 - ------ - - ------ - - ------- - - ------- - (2) Stock-based compensation included in the above line items: Service costs $ 262 $ 177 $ 443 $ 326 Sales and marketing 171 258 251 468 Product development 564 651 1,156 1,159 General and administrative 1,212 1,590 2,280 2,931 - ------ - - ------ - - ------- - - ------- - Total stock-based compensation $ 2,209 $ 2,676 $ 4,130 $ 4,884 - ------ - - ------ - - ------- - - ------- -

Leaf Group Ltd. and Subsidiaries Unaudited Condensed Consolidated Balance Sheets (In thousands) June 30, December 31, 2019 2018 ------------ ------------ Assets Current assets Cash and cash equivalents $ 9,904 $ 31,081 Accounts receivable, net 11,592 12,627 Prepaid expenses and other current assets 3,803 3,932 - -------- - - -------- - Total current assets 25,299 47,640 Property and equipment, net 13,300 13,126 Operating lease right-of-use assets 8,182 — Intangible assets, net 14,122 13,933 Goodwill 19,432 19,435 Other assets 761 988 - -------- - - -------- - Total assets $ 81,096 $ 95,122 - -------- - - -------- - Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 2,190 $ 1,519 Accrued expenses and other current liabilities 15,846 22,149 Deferred revenue 2,640 2,115 - -------- - - -------- - Total current liabilities 20,676 25,783 Deferred tax liability 91 86 Operating lease liabilities 7,643 — Other liabilities 262 2,566 - -------- - - -------- - Total liabilities 28,672 28,435 Commitments and contingencies Stockholders’ equity Common stock 3 3 Additional paid-in capital 557,185 554,403 Treasury stock (35,706 ) (35,706 ) Accumulated other comprehensive loss (49 ) (52 ) Accumulated deficit (469,009 ) (451,961 ) - -------- - - -------- - Total stockholders’ equity 52,424 66,687 - -------- - - -------- - Total liabilities and stockholders’ equity $ 81,096 $ 95,122 - -------- - - -------- -

Leaf Group Ltd. and Subsidiaries Unaudited Condensed Consolidated Statements of Cash Flows (In thousands) Three months ended Six months ended June 30, June 30, ----------------------- ------------------------ 2019 2018 2019 2018 ---------- ----------- ----------- ----------- Cash flows from operating activities Net loss $ (6,762 ) $ (6,293 ) $ (17,048 ) $ (12,218 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,662 2,446 5,378 4,901 Non-cash lease expense 487 — 962 — Deferred income taxes (11 ) (1 ) 5 10 Stock-based compensation 2,209 2,676 4,130 4,884 Other (2 ) (46 ) 21 54 Change in operating assets and liabilities, net of effect of acquisitions and disposals: Accounts receivable, net (753 ) 327 1,014 4 Prepaid expenses and other current assets 62 500 123 21 Other long-term assets 42 24 102 79 Operating lease ROU assets and liabilities (484 ) — (1,280 ) — Accounts payable (1,396 ) (496 ) 485 (883 ) Accrued expenses and other liabilities (1,109 ) 207 (7,265 ) (2,679 ) Deferred revenue (830 ) (446 ) 525 (574 ) - ------ - - ------- - - ------- - - ------- - Net cash used in operating activities (5,885 ) (1,102 ) (12,848 ) (6,401 ) - ------ - - ------- - - ------- - - ------- - Cash flows from investing activities Purchases of property and equipment (1,754 ) (1,828 ) (3,361 ) (3,501 ) Purchases of intangible assets — — — (29 ) Cash paid for acquisitions, net of cash acquired — (10,349 ) (1,900 ) (10,349 ) - ------ - - ------- - ------- - ------- - Net cash used in investing activities (1,754 ) (12,177 ) (5,261 ) (13,879 ) - ------ - - ------- - - ------- - - ------- - Cash flows from financing activities Proceeds from exercises of stock options and purchases 175 481 445 629 under ESPP Proceeds from issuance of common stock — — — 23,367 Taxes paid on net share settlements of restricted stock (717 ) (866 ) (2,039 ) (2,268 ) units Cash paid for acquisition holdback (625 ) — (625 ) — Cash paid for contingent consideration liability (934 ) (905 ) (934 ) (905 ) Other (25 ) (17 ) (55 ) (34 ) - ------ - - ------- - - ------- - - ------- - Net cash (used in) provided by financing activities (2,126 ) (1,307 ) (3,208 ) 20,789 - ------ - - ------- - - ------- - - ------- - Effect of foreign currency on cash, cash equivalents and 4 15 4 (3 ) restricted cash Change in cash, cash equivalents and restricted cash (9,761 ) (14,571 ) (21,313 ) 506 Cash, cash equivalents and restricted cash, beginning of 20,383 47,377 31,935 32,300 period - ------ - - ------- - - ------- - - ------- - Cash, cash equivalents and restricted cash, end of period $ 10,622 $ 32,806 $ 10,622 $ 32,806 - ------ - - ------- - - ------- - - ------- - Reconciliation of cash, cash equivalents and restricted cash Cash and cash equivalents $ 9,904 $ 31,952 $ 9,904 $ 31,952 Restricted cash included in other current assets 136 136 136 136 Restricted cash included in other long-term assets 582 718 582 718 - ------ - - ------- - - ------- - - ------- - Total cash, cash equivalents and restricted cash shown in $ 10,622 $ 32,806 $ 10,622 $ 32,806 the statement of cash flows - ------ - - ------- - - ------- - - ------- -

Leaf Group Ltd. and Subsidiaries Unaudited Reconciliations of Non-GAAP Financial Measures (In thousands) Three months ended Six months ended June June 30, 30, ---------------------- ------------------------ 2019 2018 2019 2018 ---------- ---------- ----------- ----------- Adjusted EBITDA: Net loss $ (6,762 ) $ (6,293 ) $ (17,048 ) $ (12,218 ) Add (deduct): Income tax (benefit) expense 34 22 75 46 Interest (income) expense, net (60 ) (29 ) (178 ) (46 ) Other expense (income), net (19 ) 25 (12 ) 33 Depreciation and amortization(1) 2,662 2,446 5,378 4,901 Stock-based compensation(2) 2,209 2,676 4,130 4,884 Acquisition, disposition, realignment and contingent payment — 539 90 539 costs(3) - ------ - - ------ - - ------- - - ------- - Adjusted EBITDA $ (1,936 ) $ (614 ) $ (7,565 ) $ (1,861 ) - ------ - - ------ - - ------- - - ------- - Free Cash Flow: Net cash used in operating activities $ (5,885 ) $ (1,102 ) $ (12,848 ) $ (6,401 ) Purchases of property and equipment (1,754 ) (1,828 ) (3,361 ) (3,501 ) Purchases of intangible assets — — — (29 ) Acquisition, disposition, realignment and contingent — — 90 — payments(3) - ------ - - ------ - - ------- - - ------- - Free Cash Flow $ (7,639 ) $ (2,930 ) $ (16,119 ) $ (9,931 ) - ------ - - ------ - - ------- - - ------- -

Represents depreciation expense of the Company’s long-lived tangible assets and amortization expense of (1) 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. (2) Represents the expense related to stock-based awards granted to employees, as included in the Company’s GAAP results of operations. Represents such items, when applicable, as (a) legal, accounting and other professional service fees (3) 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 Unaudited Reconciliation of Segment Disclosure (In thousands) Three months ended Six months ended June June 30, 30, ---------------------- ------------------------ 2019 2018 2019 2018 ---------- ---------- ----------- ----------- Segment Revenue: Marketplaces $ 19,189 $ 19,655 $ 40,027 $ 40,622 Media 16,600 14,666 29,800 27,446 - ------ - - ------ - - ------- - - ------- - Total revenue $ 35,789 $ 34,321 $ 69,827 $ 68,068 Segment Operating Contribution: Marketplaces(1) $ (1,344 ) $ (548 ) $ (2,655 ) $ (491 ) Media(1) 6,645 6,219 10,254 11,680 Add (deduct): Corporate expenses(2) (7,237 ) (6,824 ) (15,164 ) (13,589 ) Acquisition, disposition and realignment costs(3) — 539 — 539 - ------ - - ------ - - ------- - - ------- - Adjusted EBITDA $ (1,936 ) $ (614 ) $ (7,565 ) $ (1,861 ) Reconciliation to consolidated pre-tax income (loss): Adjusted EBITDA $ (1,936 ) $ (614 ) $ (7,565 ) $ (1,861 ) Add (deduct): Interest income (expense), net 60 29 178 46 Other income (expense), net 19 (25 ) 12 (33 ) Depreciation and amortization(4) (2,662 ) (2,446 ) (5,378 ) (4,901 ) Stock-based compensation(5) (2,209 ) (2,676 ) (4,130 ) (4,884 ) Acquisition, disposition, realignment and contingent payment — (539 ) (90 ) (539 ) costs(6) - ------ - - ------ - - ------- - - ------- - Loss before income taxes $ (6,728 ) $ (6,271 ) $ (16,973 ) $ (12,172 ) - ------ - - ------ - - ------- - - ------- -

Segment operating contribution reflects earnings before corporate and unallocated expenses and also (1) 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. Corporate expenses include corporate and unallocated operating expenses that are not directly attributable to the operating segments, including: corporate information technology, marketing and (2) 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 (expense); and (e) income taxes. 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 (3) 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. Represents depreciation expense of the Company’s long-lived tangible assets and amortization expense of (4) 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. (5) Represents the expense related to stock-based awards granted to employees as included in the Company’s GAAP results of operations. Represents such items, when applicable, as (a) legal, accounting and other professional service fees (6) 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.

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