Business Segments (Tables)

6 Months Ended

Jun. 30, 2020

Schedule of financial performance of our operating segments and reconciliation to consolidated operating loss

The financial performance of our operating segments and reconciliation to consolidated operating loss is as follows (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Segment Revenue:
Marketplaces
Society6 Group	$	34,665	$	15,203	$	50,658	$	32,201
Saatchi Art Group		3,982		3,986		6,730		7,826
Total Marketplaces		38,647		19,189		57,388		40,027
Media		12,321		16,600		26,445		29,800
Total revenue	$	50,968	$	35,789	$	83,833	$	69,827

Segment Operating Expenses:
Marketplaces⁽¹⁾	$	34,990	$	20,533	$	55,523	$	42,682
Media⁽¹⁾		7,546		9,955		17,926		19,546
Add:
Strategic shared services and corporate overhead⁽²⁾⁽³⁾		6,330		7,237		13,659		15,164
Consolidated operating expenses	$	48,866	$	37,725	$	87,108	$	77,392

Segment Operating Contribution:
Marketplaces⁽⁴⁾	$	3,657	$	(1,344)	$	1,865	$	(2,655)
Media⁽⁴⁾		4,775		6,645		8,519		10,254
Deduct:
Strategic shared services and corporate overhead⁽²⁾⁽³⁾		(6,330)		(7,237)		(13,659)		(15,164)
Acquisition, disposition and realignment costs⁽⁵⁾		—		—		—		—
Adjusted EBITDA⁽⁶⁾	$	2,102	$	(1,936)	$	(3,275)	$	(7,565)

Reconciliation to consolidated pre-tax income (loss):
Adjusted EBITDA⁽⁶⁾	$	2,102	$	(1,936)	$	(3,275)	$	(7,565)
Add (deduct):
Interest income (expense), net		(97)		60		(163)		178
Other income, net		3,837		19		3,847		12
Depreciation and amortization⁽⁷⁾		(2,506)		(2,662)		(4,993)		(5,378)
Stock-based compensation⁽⁸⁾		(2,523)		(2,209)		(5,227)		(4,130)
Acquisition, disposition, realignment and contingent payment costs⁽⁹⁾		—		—		—		(90)
Income (loss) before income taxes⁽¹⁰⁾	$	813	$	(6,728)	$	(9,811)	$	(16,973)

(1)

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 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.

(2)

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 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.

(3)

Strategic shared services and corporate overhead includes $1.8 million and $2.0 million in strategic shared services costs for the three months ended June 30, 2020 and 2019, respectively, and $4.5 million and $5.2 million in corporate overhead for the three months ended June 30, 2020 and 2019, respectively. Strategic shared services and corporate overhead include $3.9 million and $4.1 million in strategic shared services for the six months ended June 30, 2020 and 2019, respectively, and $9.8 million and $11.1 million in corporate overhead for the six months ended June 30, 2020 and 2019, respectively.

(4)

Segment operating contribution reflects segment revenue less segment operating expenses. Operating contribution has certain limitations in that it 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.

(5)

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 payments attributable to acquisition, disposition or corporate realignment activities, excluding contingent payments to certain key employees/equity holders of acquired businesses.

(6)

Adjusted EBITDA reflects 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.

(7)	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.

(8)	Represents the expense related to stock-based awards granted to employees as included in our GAAP results of operations.

(9)

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, (c) contingent payments to certain key employees/equity holders of acquired businesses and (d) other payments attributable to acquisition, disposition or corporate realignment activities.

Summary of Revenue by Geographic Region

Revenue by geographic region, as determined based on the location of our customers or anticipated destination of use, is as follows (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Domestic	$	45,327	$	31,023	$	74,713	$	59,295
International		5,641		4,766		9,120		10,532
Total revenue	$	50,968	$	35,789	$	83,833	$	69,827