XO Group Reports Fourth Quarter and Full Year 2014 Financial Results

Conference Call Monday, March 9th, at 4:30 p.m. ET, Dial-In (877) 201-0168 (ID# 71880269)

- Fourth Quarter Revenue up 13.7% Year Over Year, Full Year Revenue up 7.4% Year Over Year -

- Fourth Quarter GAAP loss per share was ($0.16) -

- Fourth Quarter NON-GAAP earnings per share was $0.06 -

Mar 09, 2015, 16:22 ET from XO Group Inc.

NEW YORK, March 9, 2015 /PRNewswire/ -- XO Group Inc. (the "Company") (NYSE: XOXO, xogroupinc.com), the premier consumer internet and media company dedicated to guiding people through transformative life stages - from getting married, moving in together and having a baby - today reported financial results for the three months and full year ended December 31, 2014.

Total revenue for the fourth quarter of 2014 was $37.1 million, up 13.7% compared to the same period in the prior year. GAAP net loss for the quarter was ($4.0) million or ($0.16) per share. Non-GAAP earnings per share for the quarter was $0.06 compared to $0.02 in the prior year quarter.  The Company's balance sheet at December 31, 2014 reflects cash and cash equivalents of $90.0 million compared to $90.7 million at December 31, 2013. Under the previously announced stock buyback authorization, during the quarter, the Company repurchased shares of its common stock for approximately $1.0 million.

"I want to congratulate our team on successfully focusing our efforts, investing in our mobile and marketplace capabilities, and launching exceptional products, while delivering our best revenue growth rates in years and continuing to deliver positive cash flow," said Mike Steib, Chief Executive Officer.

During the quarter, the Company announced two strategic actions to focus on the Company's core business: the shutdown of its wedding supplies fulfillment operations and the disposition of its Ijie operations in China.  The shutdown of the wedding supplies fulfillment operations is scheduled to be complete by the end of Q1 2015 and the disposition of its Ijie operations was completed in December 2014.

Long-Term Financial Targets

The Company is reiterating its long-term financial targets as previously provided on November 6, 2014.  The Company is targeting double digit revenue growth rates, gross margins of approximately 90-95%, and operating expense growth below revenue growth rates, yielding adjusted EBITDA margins of at least 20%.

XO GROUP INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in Thousands, Except for Per Share Data)

(Unaudited)

Three Months Ended December 31,

2014

2013

Net revenue:

National online advertising

$

8,679

$

6,341

Local online advertising 

15,348

13,793

  Total online advertising

24,027

20,134

Registry services

1,840

1,553

Merchandise

3,064

2,995

Publishing and other

8,125

7,903

Total net revenue

37,056

32,585

Cost of revenue:

Online advertising

433

421

Merchandise

2,808

2,107

Publishing and other

2,591

2,911

Total cost of revenue

5,832

5,439

Gross profit

31,224

27,146

Operating expenses:

Product and content development

9,546

8,761

Sales and marketing

11,724

10,144

General and administrative

6,839

7,242

Asset impairment charges

836

1,430

Depreciation and amortization

1,576

1,484

Total operating expenses

30,521

29,061

Income (loss) from operations

703

 

(1,915)

Income (loss) in equity interests

11

(1,842)

Interest and other income (expense), net

(1,795)

74

Loss before income taxes

(1,081)

(3,683)

Income tax expense (benefit)

2,912

(615)

Net loss

$

(3,993)

$

(3,068)

Net loss per share:

Basic

$

(0.16)

$

(0.12)

Diluted

$

(0.16)

$

(0.12)

Weighted average number of shares used in calculating net loss per share:

Basic

25,363

24,704

Diluted

25,363

24,704

 

 

XO GROUP INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in Thousands, Except for Per Share Data)

(Unaudited)

Twelve Months Ended December 31,

2014

2013

Net revenue:

National online advertising

$

30,456

$

27,216

Local online advertising 

59,093

54,445

  Total online advertising

89,549

81,661

Registry services

9,794

7,926

Merchandise

16,223

18,406

Publishing and other

28,098

25,821

Total net revenue

143,664

133,814

Cost of revenue:

Online advertising

1,770

1,927

Merchandise

10,914

11,296

Publishing and other

8,511

9,178

Total cost of revenue

21,195

22,401

Gross profit

122,469

111,413

Operating expenses:

Product and content development

35,820

29,877

Sales and marketing

44,330

39,718

General and administrative

25,617

23,073

Asset impairment charges

836

1,430

Depreciation and amortization

6,969

4,808

Total operating expenses

113,572

98,906

Income from operations

8,897

 

12,507

Loss in equity interests

(232)

(2,016)

Interest and other income (expense), net

(1,740)

144

Income before income taxes

6,925

10,635

Income tax expense

6,463

4,841

Net income

$

462

$

5,794

Net income per share:

Basic

$

0.02

$

0.24

Diluted

$

0.02

$

0.23

Weighted average number of shares used in calculating net earnings per share:

Basic

25,210

24,620

Diluted

25,589

25,596

 

 

XO GROUP INC.

SELECTED BALANCE SHEET DATA

(Amounts in Thousands)

(Unaudited)

December 31, 2014

December 31, 2013

Cash and cash equivalents

$

89,955

$

90,697

Accounts receivable, net

15,785

11,838

     Total assets

195,699

197,749

     Total liabilities

37,772

41,859

     Total stockholders' equity

157,927

155,890

 

 

XO GROUP INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Amounts in Thousands, Except for Per Share Data)

(Unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

2014

2013

2014

2013

Net income (loss)

$(3,993)

$(3,068)

$462

$5,794

Income tax expense (benefit)

2,912

(615)

6,463

4,841

Depreciation and amortization

1,576

1,484

6,969

4,808

Stock-based compensation expense

1,692

2,145

6,139

6,697

Asset impairment charges

530

1,430

530

1,430

(Income) loss in equity interests

(11)

1,842

232

2,016

Interest and other income, net

(33)

(74)

(88)

(144)

Executive separation and severance charges(a)

733

350

2,087

350

Foreign VAT, interest and penalties(b)

-

930

(592)

930

Exit of Ijie operations(c)

1,828

-

1,828

-

Exit of warehouse operations(d)

572

-

572

-

Adjusted EBITDA

$5,806

$4,424

$24,602

$26,722

Depreciation and amortization

(1,576)

(1,484)

(6,969)

(4,808)

Stock-based compensation expense

(1,692)

(2,145)

(6,139)

(6,697)

Income (loss) in equity interests

11

(1,842)

(232)

(2,016)

Interest and other income, net

33

74

88

144

Impairment of equity interests(e)

-

1,773

-

1,773

Adjusted income before income taxes

2,582

800

11,350

15,118

Adjusted provision for income taxes(f)

1,097

328

4,824

6,198

Adjusted net income

$1,485

$472

$6,526

$8,920

Adjusted net income per diluted share

$0.06

$0.02

$0.26

$0.35

Diluted weighted average number of shares outstanding

25,821

25,647

25,589

25,596

Net cash provided by operating activities

$8,462

$6,889

$20,015

$22,243

Less: Capital expenditures

(1,095)

(1,307)

(5,068)

(5,968)

Free cash flow

$7,367

$5,582

$14,947

$16,275

 

(a)

Costs impacting comparability included in operating expenses on the consolidated statements of operations for the year ended December 31, 2014 include executive separation and other severance charges of approximately $2.1 million, representing (i) separation payments for certain executive officers and (ii) severance charges for the employees in our Los Angeles office. Of the total executive separation and severance charges, $0.4 million was recorded in Product and content development, $0.5 million in Sales and marketing and $1.2 million in General and administrative. Costs impacting comparability for the year ended December 31, 2013 include severance of $0.4 million recorded in General and administrative for a former executive of the Company.

(b)

Included in "General and administrative" expenses on the consolidated statements of operations for the year ended December 31, 2014 are favorable adjustments for foreign value-added tax ("VAT"), interest and penalties of $0.6 million and for the year ended December 31, 2013 an unfavorable adjustment for VAT, interest and penalties of $0.9 million.

(c)

Included in Interest and other income (expense) on the consolidated statements of operations for the three months and year ended December 31, 2014 is a $1.8 million loss on the disposition of the Company's China wedding content and publishing operations.

(d)

Costs impacting comparability included in operating expenses on the consolidated statements of operations for the three months and year ended December 31, 2014 included (i) severance of approximately $0.3 million related to the closure of the Company's merchandising warehouse in Redding, CA and (ii) asset impairment charges of approximately $0.3 million. Of the total severance charges, $26,000 was recorded in Product and content development, $179,000 in Sales and marketing and $60,000 in General and administrative.

(e)

Impairment of equity interest of $1.8 million is included in "Loss in equity interests" on the consolidated statements of operations for the twelve months ended December 31, 2013.

(f)

Adjusted provision for income taxes was calculated using an effective tax rate of 42.5% for 2014 periods and 41.0% for 2013 periods both of which excludes discrete items.

 

 

Supplemental data tables (unaudited)

Local Advertising Metrics (excluding Two Bright Lights)

Q4 2014

Q3 2014

Q2 2014

Q1 2014

Q4 2013

Profile Count

33,414

32,602

31,774

30,857

30,562

Vendor Count

24,764

24,304

23,682

23,064

22,755

Churn Rate(a)

21.7%

22.8%

25.2%

27.0%

27.9%

Avg. Revenue/Vendor(a)

$2,527

$2,517

$2,516

$2,497

$2,474

(a)

calculated on a trailing twelve month basis

Stock Based Compensation

($000s)

Three Months Ended December 31, 2014

Three Months Ended December 31, 2013

Product and Content

$569

$680

Sales and Marketing

468

412

General and Administrative

655

1,053

Total stock-based compensation

$1,692

$2,145

 

($000s)

Twelve Months Ended December 31, 2014

Twelve Months Ended December 31, 2013

Product and Content

$2,020

$2,391

Sales and Marketing

1,533

1,591

General and Administrative

2,586

2,715

Total stock-based compensation

$6,139

$6,697

 

Conference Call and Replay Information

XO Group Inc. will host a conference call with investors at 4:30 p.m. ET on Monday, March 9, 2015, to discuss its fourth quarter and full year 2014 financial results. Participants should dial (877) 201-0168 and use Conference ID# 71880269 at least 10 minutes before the call is scheduled to begin. Participants can also access the live broadcast over the internet on the Investor Relations section of the Company's website, accessible at http://ir.xogroupinc.com. To access the webcast, participants should visit XO Group's website at least 15 minutes prior to the conference call in order to download or install any necessary audio software.

A replay of the webcast will also be archived on the Company's website approximately two hours after the conference call ends.

About XO Group Inc.

XO Group Inc.'s (NYSE: XOXO; xogroupinc.com) mission is to help people navigate and truly enjoy life's biggest moments, together.  Our multi-platform brands guide couples through transformative life stages - from getting married, to moving in together and having a baby - and include The Knot (#1 wedding planning resource), The Bump, (a leading pregnancy and parenting brand), and The Nest (the hip guide to all things home for new couples). The Company is publicly listed on the New York Stock Exchange (XOXO) and is headquartered in New York City.

Forward Looking Statements

This release may contain projections or other forward-looking statements regarding future events or our future financial performance. These statements are only predictions and reflect our current beliefs and expectations. Actual events or results may differ materially from those contained in the projections or forward-looking statements. It is routine for internal projections and expectations to change as the quarter progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which we base our expectations may change prior to the end of the quarter. Although these expectations may change, we will not necessarily inform you if they do. Our policy is to provide expectations not more than once per quarter, and not to update that information until the next quarter. Some of the factors that could cause actual results to differ materially from the forward-looking statements contained herein include, without limitation, (i) our online wedding-related and other websites may fail to generate sufficient revenue to survive over the long term, (ii) we incurred losses for many years following our inception and may incur losses in the future, (iii) we may be unable to adjust spending quickly enough to offset any unexpected revenue shortfall, (iv) sales to sponsors or advertisers may be delayed or cancelled, (v) efforts to launch new technology and features may not generate significant new revenue or may reduce revenue from existing services, (vi) we may be unable to develop solutions that generate revenue from advertising delivered to mobile phones and wireless devices, (vii) the significant fluctuation to which our quarterly revenue and operating results are subject, (viii) the seasonality of the wedding industry, (ix) our e-commerce operations are dependent on Internet search engine rankings, and our ability to influence those rankings is limited, (x) the dependence of our registry services business on third parties, and (xi) other factors detailed in documents we file from time to time with the Securities and Exchange Commission. Forward-looking statements in this release are made pursuant to the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995.

Non-GAAP Financial Measures

This press release includes information about certain financial measures that are not prepared in accordance with generally accepted accounting principles in the United States  ("U.S. GAAP"), including adjusted EBITDA, adjusted net income, adjusted net income per diluted share and free cash flow. These non-GAAP measures have important limitations as analytical tools and should not be considered in isolation or as substitutes for an analysis of our results as reported under U.S. GAAP.  Our use of these terms may vary from the use of similarly-titled measures by others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation.

Management defines its non-GAAP financial measures as follows:

  • Adjusted EBITDA represents GAAP net income (loss) adjusted to exclude, if applicable: (1) income tax expense (benefit), (2) depreciation and amortization, (3) stock-based compensation expense, (4) asset impairment charges, (5) (income) loss in equity interests, (6) interest and other income, net and (7) other items affecting comparability during the period.
  • Adjusted net income represents GAAP net income (loss), adjusted items that impact comparability for incremental or unusual costs incurred in the current period, which may include: (1) asset impairment charges, (2) executive separation and other severance charges and (3) non-recurring foreign taxes, interest and penalties.
  • Adjusted net income per diluted share represents adjusted net income (as defined above), divided by the diluted weighted-average number of shares outstanding for the period.
  • Free cash flow represents GAAP net cash provided by operations, less capital expenditures.

Management believes that these non-GAAP financial measures, when viewed with our results under U.S. GAAP and the accompanying reconciliations, provide useful information about our period-over-period growth and provide additional information that is useful for evaluating our operating performance. However, adjusted EBITDA, adjusted net income, adjusted net income per diluted share and free cash flow are not measures of financial performance under U.S. GAAP and, accordingly, should not be considered substitutes for or superior to net income (loss) and net income (loss) per diluted share and net cash provided by operating activities as indicators of operating performance.

A reconciliation of GAAP to Non-GAAP financial measures is included in this press release.

Contact: Ivan Marmolejos Investor Relations (212) 219-8555 x1004 IR@xogrp.com

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SOURCE XO Group Inc.



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