PRSS 2017 Annual Report

40 with GAAPand should not be relied upon to the exclusion of GAAP financial measures. You should review our financial statements and publicly-filed reports in their entirety and not rely on any single financial measure. One material limitation associated with the use of cash contribution margin is that it is an incomplete measure of profitability as it does not include all operating expense or non-operating income and expense. Management compensates for these limitations when using this measure by looking at other GAAP measures such as operating income and net income. The following table presents the calculation of cash contribution margin for the periods indicated (in thousands, except for percentages): Year Ended December 31, 2017 2016 (in thousands, except for percentages) Net revenue $ 85,685 100.0% $ 102,208 100.0% Cost of net revenue 52,503 61.3 60,406 59.1 Gross profit 33,182 38.7 41,802 40.9 Non-GAAP adjustments: Add: Stock-based compensation 15 — 49 0.1 Add: Depreciation and amortization 1,571 1.8 1,926 1.9 Less: Variable sales and marketing costs (16,620) (19.4) (16,717) (16.4) Cash contribution margin $ 18,148 21.2% $ 27,060 26.5% Off-balance sheet arrangements We do not have any relationships with unconsolidated entities or financial partnerships such as entities often referred to as structured finance or special purpose entities, whichwould have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not have any undisclosed borrowings or debt, and we have not entered into any synthetic leases. We are, therefore, not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships. Table of Contractual Obligations: Our commitments to make future payments as of December 31, 2017, are summarized as follows: Payments due by period 2018 2019-2020 2021-2022 Thereafter Total (in thousands) Operating lease obligations $ 719 $ 1,493 $ 447 $ — $ 2,659 Minimum royalty obligations 194 119 — — 313 Purchase obligations 1,728 — — — 1,728 Total $ 2,641 $ 1,612 $ 447 $ — $ 4,700 Recent accounting pronouncements In May 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-09, Compensation-Stock Compensation (Topic 718) Scope of Modification Accounting. ASU 2017-09 will clarify and reduce both (i) diversity in practice and (ii) cost and complexity when applying the guidance in Topic 718, to a change to the terms and conditions of a share-based payment award. This guidance will become effective for fiscal years beginning after December 15, 2017 and interimperiods within those fiscal years. Early adoption is permitted. The amendments in thisASU should be applied prospectively to an award modified on or after the adoption date. We do not believe this update will have a material impact on our consolidated financial statements.