LEAF GROUP LTD. As used herein, "
"
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The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes appearing elsewhere in this Quarterly
Report on Form 10-Q and our Annual Report on Form 10-K for the year ended
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). All statements other than statements of historical facts contained in
this Quarterly Report on Form 10-Q, including statements regarding our future
results of operations and financial position, business strategy and plans and
our objectives for future operations, are forward-looking statements. The words
"believe," "may," "will," "estimate," "continue," "anticipate," "intend,"
"expect," "predict," "plan" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements are so
identified. You should not rely upon forward-looking statements as guarantees of
future performance. We have based these forward-looking statements largely on
our current financial results and our current expectations and projections about
future events, including the business risks and financial trends that we believe
may affect our financial condition, results of operations, business strategy,
short-term and long-term business operations and objectives, and financial
needs; risks associated with the Company's ability to obtain the stockholder
approval required to consummate the proposed Merger and the timing of the
closing of the proposed Merger, including the risks that a condition to closing
would not be satisfied within the expected timeframe or at all or that the
closing of the proposed Merger will not occur; the outcome of any legal
proceedings that may be instituted against the parties and others related to the
Merger Agreement; the occurrence of any event, change or other circumstance or
condition that could give rise to the termination of the Merger Agreement;
unanticipated difficulties or expenditures relating to the proposed Merger, the
response of business partners and competitors to the announcement of the
proposed Merger, and/or potential difficulties in employee retention as a result
of the announcement and pendency of the proposed Merger; and the response of
Company stockholders to the Merger Agreement; those related to the COVID-19
pandemic; our ability to execute our business plan to maintain compliance with
the continued listing criteria of the
You should read this Quarterly Report on Form 10-Q and the documents that we
reference in this Quarterly Report on Form 10-Q and have filed with the
Overview
Prior to the third quarter of fiscal 2020, our two reportable segments,
Marketplaces and Media, also represented our two reporting units for goodwill
impairment testing. During the third quarter of fiscal 2020, our Chief Operating
Decision Maker ("CODM") realigned our operational structure into three
reportable segments:
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also represent our three operating segments. We have recast all prior period amounts and segment information to conform to the way our CODM regularly reviews the segment performance.
Through our
Our
Our brands each develop a distinct voice and create content that connects with their consumers across a wide variety of platforms, devices and formats. In order to improve our engagement with consumers, we continually redesign and update our websites; refine our content library; evaluate and adjust ad unit density; and develop new ways of integrating the messages from our advertising partners. Our revenues are driven by growing the number of consumers and increasing the number of visits through improving the user and content experience, fostering genuine connections between our audience and their brands and providing engaging advertising or sponsorship opportunities to our partners.
Revenue
For the three months ended
The revenue generated by our
Impacts of the COVID-19 Pandemic
Since
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year ended
While we believe that the change in purchasing behavior occasioned by the
Pandemic will have an enduring positive impact on e-commerce, there is a
material risk that the coming end of the Pandemic and the termination of
shelter-at-home regulations may cause a slowdown and even potentially a reversal
of the
Recent Developments
On
Key Business Metrics
We regularly review a number of business metrics, including the following key metrics, to evaluate our business, measure the performance of our business model, identify trends impacting our business, determine resource allocations, formulate financial projections and make strategic business decisions. Measures that we believe are the primary indicators of our performance are described below. We believe that the number of transactions, gross transaction value, number of visits and revenue per visit are currently the key metrics for understanding our results of operations.
Society6 Group Metrics
Society6 Group Number of transactions: We define
? the total number of
customer during the applicable period.
Society6 Group Gross transaction value: We define
transaction value as the total dollar value of
? for a
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.
Saatchi Art Group Metrics
Saatchi Art Group Number of transactions: We define
transactions as the total number of
? completed by a customer during the applicable period, excluding certain
transactions generated by Saatchi Art's The Other
of stand space to artists at fairs, sponsorship fees and ticket sales.
Saatchi Art Group Gross transaction value: We define
transaction value as the total dollar value of
excluding the revenue from certain transactions generated by Saatchi Art's The
Other
sponsorship fees and ticket sales.
? the total amount paid by the customer for a
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.
? Number of art fairs: We define the number of art fairs as in-person art fairs
hosted by The Other
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Media Group Metrics
Visits per
total number of times users access our content across (a) one of our owned and
operated properties and/or (b) one of our customers' properties, to the extent
? that the visited customer web pages are hosted by our content services. 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.
? Revenue per visit ("RPV"): We define RPV as
thousand visits.
The following table sets forth our key business metrics for the periods
presented:
Three months ended March 31,
2021 2020 % Change
Society6 Group Metrics(1):
Society6 Group Number of Transactions 493,964 267,735 84 %
Society6 Group Gross Transaction Value (in
thousands) $ 37,215 $ 18,562 100 %
Saatchi Art Group Metrics(1)(2):
Saatchi Art Group Number of Transactions 10,142 5,462 86 %
Saatchi Art Group Gross Transaction Value (in
thousands) $ 11,431 $ 8,074 42 %
Number of Art Fairs 1 - 100 %
Media Group Metrics(1)(3):
Visits per Google Analytics (in thousands) 422,312 653,108 (35) %
Revenue per Visit (RPV) $ 32.89 $ 21.63 52 %
Pro forma Visits per Google Analytics (in
thousands)(4) 422,312 524,816 (20) %
Pro forma Revenue per Visit (RPV)(4) $ 32.89 $ 26.91 22 %
For a discussion of these period-to-period changes in the number of
(1) transactions, gross transaction value, number of visits and RPV, and how they
impacted our financial results, see "Results of Operations" below.
Saatchi Art Group Metrics excludes transactions and the associated revenue
(2) generated by Saatchi Art's The Other
space to artists at art fairs, sponsorship fees and ticket sales.
From April 25, 2020 onwards, Media Group Metrics exclude visits generated by
certain domains no longer under our control as a result of the asset sale
(3) entered into with
Inc. ("Hearst") on April 24, 2020 (the "Hearst Transaction"), as more fully
described in Note 13 to the Condensed Consolidated Financial Statements.
Pro forma Visits and Pro forma Revenue per Visit exclude visits generated by(4) certain domains no longer under our control as a result of the Hearst
Transaction. The number of visits is derived from Google Analytics.
Basis of Presentation
Revenue
Our revenue is primarily derived from products and services sold through our home, art and design marketplaces and from sales of advertising. Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate the transaction price to each performance obligation based on the estimated standalone selling price of the promised good or service. We allocate any arrangement fee or other incentive or promotional offers to each of the elements based on their relative selling prices.
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Our revenue is principally derived from the following products and services:
Product Revenue
For
Product revenue includes e-commerce, wholesale, and shipping revenue.
Product revenue includes e-commerce and shipping revenue for limited and open edition prints.
Product revenue includes revenue from products sold on our online media properties.
Service RevenueSociety6 Group
Service revenue includes advertising revenue generated from advertisements displayed on our website.
Service revenue includes revenue from commissions we receive from facilitating
the sale of original art by artists to customers through Saatchi Art. We also
generate
Advertising Revenue. We generate
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Where we enter into revenue-sharing arrangements with our partners, such as those relating to our advertiser network, we report revenue on a gross or net basis depending on whether we are considered the principal in the transaction. In addition, we consider which party controls the service, including which party is primarily responsible for fulfilling the promise to provide the service. We also consider which party has the latitude to establish the sales prices to advertisers. When we are considered the principal, we report the underlying revenue on a gross basis in our condensed consolidated statements of operations, and record these revenue-sharing payments to our partners in service costs.
Content Sales and Licensing Revenue. We generate revenue from the sale or license of media content, including the creation and distribution of content for third-party brands and publishers. Revenue from the sale or perpetual license of media content is recognized when the control of content is transferred or when the right to use is transferred and the contractual performance obligations have been fulfilled. Revenue from the non-perpetual license of media content is recognized over the period of the license as the right to access content is delivered or when other related performance criteria are fulfilled. In circumstances where we distribute our content on third-party properties and the customer acts as the principal, we recognize revenue on a net basis.
Product Costs
Product costs consist of product manufacturing costs, including both in-house and contracted third-party manufacturing costs, artist payments, personnel costs and credit card and other transaction processing fees.
Service Costs
Service costs consist of payments relating to our internet connection and
co-location charges and other platform operating expenses, including
depreciation of the systems and hardware used to build and operate our content
creation and distribution platform; expenses related to creating, rewriting, or
auditing certain content units; and personnel costs related to in-house
editorial, customer service and information technology. Service costs also
include payments to our partners pursuant to revenue-sharing arrangements where
we are the principal. In addition, service costs include expenses related to art
fairs hosted by Saatchi Art's The Other
Shipping and Handling
Shipping and handling costs charged to customers are recorded in service revenue or product revenue, as applicable. Associated costs are recorded in service costs or product costs.
Sales and Marketing
Sales and marketing expenses consist primarily of sales and marketing personnel costs, sales support, public relations, advertising, marketing and general promotional expenditures. Fluctuations in our sales and marketing expenses are generally the result of our efforts to drive growth in our product and service offerings.
Product Development
Product development expenses consist primarily of expenses incurred in our software engineering, product development and web design activities and related personnel costs. Fluctuations in our product development expenses are generally the result of hiring personnel to support and develop our platforms, including the costs to improve our owned and operated media properties and related mobile applications, as well as the costs to develop future product and service offerings.
General and Administrative
General and administrative expenses consist primarily of personnel costs from our corporate executive, legal, finance, human resources and information technology organizations and facilities-related expenditures, as well as third-party professional service fees and insurance. Professional service fees are largely comprised of outside legal, audit and information technology consulting services.
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Amortization of Intangible Assets
We capitalize certain costs (i) allocated to the purchase price of certain identifiable intangible assets acquired in connection with business combinations and (ii) incurred to develop media content that is determined to have a probable economic benefit. We amortize these costs on a straight-line basis over the related expected useful lives of these assets. We determine the appropriate useful life of intangible assets by performing an analysis of expected cash flows based on our historical experience of intangible assets of similar quality and value. We expect total amortization expense to decrease in the near term due to assets completing their useful lives. Amortization as a percentage of revenue will depend upon a variety of factors, such as the amounts and mix of our investments in content and identifiable intangible assets acquired in business combinations.
Stock-based Compensation
Included in operating expenses are expenses associated with stock-based compensation, which are allocated and included in service costs, sales and marketing, product development and general and administrative expenses. Stock-based compensation expense is largely comprised of costs associated with stock options and restricted stock units granted to employees, directors and non-employees, and expenses relating to our Employee Stock Purchase Plan (the "ESPP"). We record the fair value of these equity-based awards and expenses at their cost ratably over related vesting periods.
Interest Income (Expense), Net
Interest income consists primarily of interest earned on cash balances and money market deposits, which are included in cash and cash equivalents. Interest expense consists of interest on outstanding debt and amortization of debt issuance costs associated with our credit facility.
Other Income (Expense), Net
Other income (expense), net consists primarily of transaction gains and losses on foreign currency-denominated assets and liabilities and gains or losses on sales of businesses. We expect that these gains and losses will vary depending upon movements in underlying currency exchange rates and whether we dispose of any businesses.
Income Tax Expense
Since our inception, we have been subject to income taxes principally in
Income taxes are computed using the asset and liability method, under which deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
We currently believe that based on the available information, it is more likely
than not that our deferred tax assets will not be realized, and accordingly we
have taken a full valuation allowance against all of our
Critical Accounting Policies and Estimates
Our unaudited interim condensed consolidated financial statements are prepared
in accordance with GAAP in
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an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
We believe that the estimates and assumptions associated with our revenue recognition, goodwill, intangible assets acquired in business combinations, and the recoverability of our long-lived assets have the greatest potential impact on our condensed consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates and have discussed these in our 2020 Annual Report. There have been no material changes to our critical accounting policies and estimates since the date of our 2020 Annual Report.
Results of Operations
The following tables set forth our results of operations for the periods presented (in thousands). The period-to-period comparison of financial results is not necessarily indicative of future results.
Three months ended March 31,
2021 2020
Revenue:
Product revenue $ 33,679 $ 16,382
Service revenue 18,198 16,483
Total revenue 51,877 32,865
Operating expenses:
Product costs (exclusive of amortization of
intangible assets shown separately below)(1) 25,370 12,449
Service costs (exclusive of amortization of
intangible assets shown separately below)(1)(2) 9,369 8,977
Sales and marketing(1)(2) 9,380 7,670
Product development(1)(2) 4,829 5,520
General and administrative(1)(2) 8,521 8,084
Amortization of intangible assets 533 733
Total operating expenses 58,002 43,433
Loss from operations (6,125) (10,568)
Interest income 2 23
Interest expense (125) (89)
Other income (expense), net (5) 10
Loss before income taxes (6,253) (10,624)
Income tax (expense) (42) (52)
Net loss $ (6,295) $ (10,676)
(1) Depreciation expense included in the above line
items:
Product costs $ 463 $ 522
Service costs 1,335 1,047
Sales and marketing 11 9
Product development 17 13
General and administrative 126 163
Total depreciation $ 1,952 $ 1,754
(2) Stock-based compensation included in the above
line items:
Service costs $ 226 $ 371
Sales and marketing 207 365
Product development 482 705
General and administrative 837 1,263
Total stock-based compensation $ 1,752 $ 2,704
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As a percentage of revenue:
Three months ended March 31,
2021 2020
Revenue:
Product revenue 64.9 % 49.8 %
Service revenue 35.1 % 50.2 %
Total revenue 100.0 % 100.0 %
Operating expenses:
Product costs (exclusive of amortization of
intangible assets shown separately below) 48.9 % 37.9 %
Service costs (exclusive of amortization of
intangible assets shown separately below) 18.1 % 27.3 %
Sales and marketing 18.1 % 23.3 %
Product development 9.3 % 16.8 %
General and administrative 16.4 % 24.6 %
Amortization of intangible assets 1.0 % 2.3 %
Total operating expenses 111.8 % 132.2 %
Loss from operations (11.8) % (32.2) %
Interest income - % 0.2 %
Interest expense (0.2) % (0.3) %
Other income (expense), net (0.1) % - %
Loss before income taxes (12.1) % (32.3) %
Income tax (expense) (0.1) % (0.2) %
Net loss (12.1) % (32.5) %
Segment results (in thousands):
Three months ended March 31,
2021 2020 % Change
Segment Revenue:
Society6 Group $ 32,878 $ 15,993 106 %
Saatchi Art Group 5,110 2,748 86 %
Media Group 13,889 14,124 (2) %
Total revenue $ 51,877 $ 32,865 58 %
Segment Operating Expenses:
Society6 Group(1) $ 31,139 $ 16,438 89 %
Saatchi Art Group(1) 5,451 4,095 33 %
Media Group(1) 9,065 10,380 (13) %
Add:
Strategic shared services and corporate
overhead(2)(3) 8,110 7,329 11 %
Consolidated operating expenses $ 53,765 $ 38,242 41 %
Segment Operating Contribution:
Society6 Group(4) $ 1,739 $ (445) 491 %
Saatchi Art Group(4) (341) (1,347) 75 %
Media Group(4) 4,824 3,744 29 %
Deduct:
Strategic shared services and corporate overhead(2)(3) (8,110) (7,329) (11) % Acquisition, disposition and realignment costs(5) 1,303 - 100 % Adjusted EBITDA(6) $ (585)$ (5,377) 89 % Segment operating expenses reflects operating expenses that are directly attributable to the operating segment, not including corporate and unallocated expenses, and also excluding the following: (a) depreciation
(1) 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.
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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(2) 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.
Strategic shared services and corporate overhead includes $2.0 million and
$2.1 million in strategic shared services costs for the three months ended
(3)
corporate overhead for the three months ended March 31, 2021 and 2020,
respectively.
Segment operating contribution reflects segment revenue less segment
operating expenses. Operating contribution has certain limitations in that it(4) does not take into account the impact to the statement of operations of
certain expenses and is not directly comparable to similar measures used by
other companies.
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(5) costs attributable to acquisition, disposition or corporate realignment
activities, excluding contingent payments to certain key employees/equity
holders of acquired businesses.
Adjusted EBITDA reflects net loss excluding interest (income) expense, income
tax expense, and certain other non-cash or non-recurring items impacting net(6) 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.
See Note 14 of our Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and "Non-GAAP Financial Measures" below for more information and reconciliation of segment results to consolidated GAAP operating income (loss).
Society6 Group Revenue
Saatchi Art Group Revenue
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Media Group Revenue
Consolidated Costs and Expenses
Operating costs and expenses were as follows (in thousands):
Three months ended March 31,
2021 2020 % Change
Product costs (exclusive of
amortization of intangible assets) $ 25,370 $ 12,449 104 %
Service costs (exclusive of
amortization of intangible assets) 9,369 8,977 4 %
Sales and marketing 9,380 7,670 22 %
Product development 4,829 5,520 (13) %
General and administrative 8,521 8,084 5 %
Amortization of intangible assets 533 733 (27) %
Product Costs
Product costs for the three months ended
Service Costs
Service costs for the three months ended
Sales and Marketing
Sales and marketing expenses for the three months ended
Product Development
Product development expenses for the three months ended
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General and Administrative
General and administrative expenses for the three months ended
Amortization of Intangible Assets
Amortization expense for the three months ended
Interest Income (Expense), Net
Net interest expense for the three months ended
Other Income (Expense), Net
Other income (expense) for the three months ended
Income Tax Expense
Income tax expense for the three months ended
Segment Results
Society6 Group Operating Expenses and Operating Contribution
Saatchi Art Group Operating Expenses and Operating Contribution
Media Group Operating Expenses and Operating Contribution
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million in personnel and related costs, and
Strategic Shared Services and Corporate Overhead
Strategic shared services and corporate overhead for the three months ended
Non-GAAP Financial Measures
To provide investors and others with additional information regarding our financial results, we have disclosed in the table below adjusted earnings before interest, taxes, depreciation and amortization expense, or Adjusted EBITDA. We have provided a reconciliation of this non-GAAP financial measure to net income (loss), the most directly comparable GAAP financial measure. Our Adjusted EBITDA financial measure differs from GAAP net income (loss) in that it excludes interest expense (income), 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.
Adjusted EBITDA is one of the primary measures used by our management and board of directors to understand and evaluate our financial performance and operating trends, including period-to-period comparisons, because it excludes certain expenses and gains that management believes are not indicative of our core operating results. Management believes that the exclusion of these expenses and gains provides a useful measure for period-to-period comparisons of our underlying core revenue and operating costs that is focused more closely on the current costs necessary to operate our businesses and reflects our ongoing business in a manner that allows for meaningful analysis of trends. In addition, management 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. Adjusted EBITDA is also one of the primary measures management uses to prepare and update our short and long term financial and operational plans and to evaluate investment decisions. We also frequently use Adjusted EBITDA in our discussions with investors, commercial bankers, equity research analysts and other users of our financial statements.
Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and in comparing operating results across periods and to those of our peer companies. However, the use of Adjusted EBITDA has certain limitations because it does not reflect all items of income and expense that affect our operations. We compensate for these limitations by reconciling Adjusted EBITDA to net income (loss), the most comparable GAAP financial measure. Further, Adjusted EBITDA does not have a standardized meaning, and therefore other companies, including peer companies, may use the same or similarly named measures but exclude different items or use different computations, so comparability may be limited. Adjusted EBITDA should be considered in addition to, and not as a substitute for, measures prepared in accordance with GAAP. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.
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The following table presents a reconciliation of Adjusted EBITDA for each of the periods presented (in thousands):
Three months ended March 31,
2021 2020
Net loss $ (6,295) $ (10,676)
Add (deduct):
Income tax expense, net 42 52
Interest expense, net 123 66
Other expense (income), net 5 (10)
Depreciation and amortization(1) 2,485 2,487
Stock-based compensation(2) 1,752 2,704
Acquisition, disposition, realignment and contingent payment costs(3)
1,303 -
Adjusted EBITDA $ (585) $ (5,377) Represents depreciation expense of our long-lived tangible assets and (1) 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.
(2) Represents the expense related to stock-based awards granted to employees as
included in our GAAP results of operations.
Represents such items, when applicable, as (a) legal, accounting and otherprofessional service fees directly attributable to acquisition, disposition (3) or corporate realignment activities, (b) employee severance, (c) contingent
payments to certain key employees/equity holders of acquired businesses, and
(d) other costs attributable to acquisition, disposition or corporate
realignment activities.
Liquidity and Capital Resources
As of
Our principal sources of liquidity are our cash and cash equivalents, cash we
generate from our operations and, in recent periods, cash generated from the
issuance of stock and the disposition of businesses and certain non-core media
properties. We currently have a shelf registration statement on file with the
Credit Facility. We entered into a credit facility on
The credit facility contains customary representations and warranties and customary reporting, affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, acquisitions, dispositions, declarations of dividends and stock repurchases. In addition, we are required to maintain the Required Percentage (85%) of our global cash on account with the Lender, provided that such amount may fall below the Required Percentage for a period of time not to exceed 10 consecutive business days each calendar month (but in no event can the amount be less than 75% of our global cash). Furthermore, the credit facility contains customary events of default that include, among others, failure to pay principal, interest or fees when due, failure to comply with the other terms of the credit facility and related agreements, the occurrence of a material adverse change and certain insolvency-related events. The existence of an event of default would allow the Lender to terminate its lending commitments, demand repayment of its loans and otherwise exercise all rights and remedies of a secured creditor.
On
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outstanding principal balance of any borrowings under our credit facility, plus
(ii) our accounts payable owing to artists selling works on our platforms
(Society6 and Saatchi Art). We are required to maintain a Liquidity Ratio of at
least 1.50 to 1.00. The First Amendment also provides for incremental borrowing
flexibility for six months, with aggregate borrowing still capped at
As of
On
Paycheck Protection Program Loan. On
Asset Sale to
We anticipate that existing cash and cash equivalents, and forecasted operating cash flows will be sufficient to fund our operations for at least the next 12 months. However, in order to fund our operations, make potential acquisitions, pursue new business opportunities and invest in our existing businesses, platforms and technologies, we may need to raise additional funds by entering into an additional loan or credit facility, selling certain assets or issuing equity, equity-related or debt securities.
Since our inception, we have used cash and stock to make strategic acquisitions to grow our business. We have also generated cash by disposing of certain businesses. We may make further acquisitions and dispositions in the future.
Under our stock repurchase plan announced in
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Our cash flows from operating activities are significantly affected by our cash-based investments in operations, including working capital, and corporate infrastructure to support our ability to generate revenue and conduct operations. Cash used in investing activities has historically been, and is expected to be, impacted by our ongoing investments in our platforms, products, company infrastructure and equipment.
The following table sets forth our major uses of cash for each of the periods
presented (in thousands):
Three months ended March 31,
2021 2020
Net cash used in operating activities
Cash Flows from Operating Activities
Three months ended
Net cash used in our operating activities during the three months ended
Net cash used in our operating activities during the three months ended
Cash Flows from Investing Activities
Three months ended
Net cash used in investing activities was
Net cash used in investing activities was
Cash Flows from Financing Activities
Three months ended
Net cash used in financing activities was
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Net cash used in financing activities was
Off-Balance Sheet Arrangements
As of
Capital Expenditures
For each of the three months ended
Recent Accounting Pronouncements
See Note 2 of our Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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