XO Group Reports Second Quarter 2015 Financial Results

- Second quarter earnings per diluted share were $0.13

- Total revenue excluding merchandise operations increased 7.9% y/y

- Conference Call Thursday, August 6th, at 4:30 p.m. ET, Dial-In (877) 201-0168 (ID# 77028633)

Aug 06, 2015, 16:03 ET from XO Group Inc.

NEW YORK, Aug. 6, 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 ended June 30, 2015.

Total revenue for the second quarter of 2015 was $36.2 million, down 5.6% compared to the same period in the prior year.  Excluding revenue from the Merchandise operations, a business that was exited during the first quarter of 2015, second quarter revenue increased 7.9% compared to the prior year. Net income for the quarter was $3.3 million or $0.13 per diluted share compared to $0.12 in the prior year quarter. The Company's balance sheet at June 30, 2015 reflects cash and cash equivalents of $85.6 million compared to $90.0 million at December 31, 2014. Under the previously announced stock buyback authorization, the Company repurchased shares of its common stock for approximately $2.8 million during the quarter. For the six months ended June 30, 2015, the Company has repurchased $8.8 million of its common stock.

"Through product innovation and focused business execution, we continued the steady growth of our core online advertising businesses while unlocking new transactional revenue streams.  I want to thank the team for continuing to deliver for our users, customers, and shareholders," said Mike Steib, Chief Executive Officer. 

Long-Term Financial Targets

The Company is reiterating its long-term financial targets of 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%. The Company is also reiterating that is does not expect to meet these targets in 2015.

 

XO GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in Thousands, Except for Per Share Data)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

  Net revenue:

    National online advertising

$

8,505

$

7,541

 

$

16,504

 

$

14,451

    Local online advertising

16,220

14,510

32,137

28,949

Online advertising

24,725

22,051

48,641

43,400

Registry and commerce

4,163

3,072

6,457

4,957

Merchandise

4,775

878

8,429

Publishing and other

7,302

8,432

12,816

13,964

Total net revenue

36,190

38,330

68,792

70,750

Cost of revenue:

Online advertising

551

509

905

972

Merchandise

2,907

881

5,273

Publishing and other

2,295

2,626

3,715

4,257

Total cost of revenue

2,846

6,042

5,501

10,502

Gross profit

33,344

32,288

63,291

60,248

Operating expenses:

Product and content development

9,845

8,832

19,399

17,705

Sales and marketing

10,382

10,651

21,004

21,764

General and administrative

6,071

6,324

12,161

13,389

Depreciation and amortization

1,421

1,848

2,666

3,525

Total operating expenses

27,719

27,655

55,230

56,383

Income from operations

5,625

4,633

8,061

3,865

Loss in equity interests

(30))

(115))

(36)

(175))

Interest and other (expense) income, net

(25))

23

(48)

(2)

Income before income taxes

5,570

4,541

7,977

3,688

Income tax expense

2,259

1,494

3,221

1,317

Net income

$

3,311

$

3,047

$

4,756

$

2,371

Net income per share:

Basic

$

0.13

$

0.12

$

0.19

$

0.09

Diluted

$

0.13

$

0.12

$

0.19

$

0.09

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

Basic

25,174

25,220

25,174

25,065

Diluted

25,540

25,498

25,582

25,534

 

XO GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands)

(Unaudited)

June 30, 2015

December 31, 2014

ASSETS

Current assets:

Cash and cash equivalents

$

85,598

$

89,955

Accounts receivable, net

19,375

15,785

Deferred tax assets, net

3,052

3,052

Prepaid expenses and other current assets

3,452

4,696

Total current assets

111,477

113,488

Long-term restricted cash

2,595

2,600

Property and equipment, net

14,354

15,125

Goodwill and intangibles, net

43,489

43,558

Deferred tax assets, net

12,452

13,110

Investments

5,465

5,501

Other assets

96

200

Total assets

$

189,928

$

193,582

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued expenses

$

11,786

$

12,463

Deferred revenue

15,810

16,236

Total current liabilities

27,596

28,699

Deferred rent

4,927

5,167

Other liabilities

1,132

1,790

Total liabilities

33,655

35,656

Stockholders' equity:

Preferred stock

Common stock

264

267

Additional paid-in-capital

171,077

171,951

Accumulated other comprehensive income

35

Accumulated deficit

(15,068)

(14,327)

Total stockholders' equity

156,273

157,926

Total liabilities and stockholders' equity

$

189,928

$

193,582

 

XO GROUP INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Amounts in Thousands, Except for Per Share Data)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

(In Thousands, Except for Per Share Data)

Net income

$

3,311

$

3,047

$

4,756

$

2,371

Income tax expense

2,259

1,494

3,221

1,317

Depreciation and amortization

1,421

1,848

2,666

3,525

Stock-based compensation expense

1,637

1,810

3,117

2,998

Exit of merchandise operations(a)

434

Interest and other expense (income), net

25

(23)

48

2

Loss in equity interests

30

115

36

175

Severance charges(b)

1,354

Adjusted EBITDA

$

8,683

$

8,291

$

14,278

$

11,742

Depreciation and amortization

(1,421)

(1,848)

(2,666)

(3,525)

Stock-based compensation expense

(1,637)

(1,810)

(3,117)

(2,998)

Loss in equity interests

(30)

(115)

(36)

(175)

Interest and other (expense) income, net

(25)

23

(48)

(2)

Adjusted income before income taxes

5,570

4,541

8,411

5,042

Adjusted income tax expense(c)

2,259

1,494

3,398

1,798

Adjusted net income

$

3,311

$

3,047

$

5,013

$

3,244

Adjusted net income per diluted share

$

0.13

$

0.12

$

0.20

$

0.13

Diluted weighted average number of shares outstanding

25,540

25,498

25,582

25,534

Net cash provided by operating activities

$

6,561

$

4,835

$

7,445

$

3,878

Less: Capital expenditures

(801)

(1,638)

(2,036)

(2,644)

Free cash flow

$

5,760

$

3,197

$

5,409

$

1,234

(a) Costs impacting comparability included in operating expenses in the condensed consolidated statements of operations for the six months ended June 30, 2015 included costs related to the closure of our merchandise operations in Redding, CA of (i) severance of approximately $0.2 million recorded in general and administrative and (ii) rent acceleration and other closure costs of $0.2 million recorded in sales and marketing.

(b) Costs impacting comparability included in operating expenses in the condensed consolidated statements of operations for the six months ended June 30, 2014 include severance of approximately $1.4 million, representing (i) severance charges for certain executive officers and (ii) severance charges for the employees in our Los Angeles office ($70,000 in product and content development, $0.5 million in sales and marketing and $0.8 million in general and administrative).

(c)  Adjusted income tax expense was calculated using an effective tax rate of 40.6% and 32.9% for three months ended June 30, 2015 and 2014, respectively, and 40.4% and 35.7% for the six months ended June 30, 2015 and 2014, respectively, excluding discrete items.

 

Supplemental data tables (unaudited)

Local Advertising Metrics (excluding Two Bright Lights)

Q2 2015

Q2 2014

Profile Count

32,812

31,774

Vendor Count

24,619

23,682

Churn Rate(a)

23.6%

25.2%

Avg. Revenue/Vendor(a)

$2,547

$2,516

(a) calculated on a trailing twelve month basis

 

Stock Based Compensation

The Company included total stock-based compensation expense related to all its stock awards in various operating expense categories for the three and six months ended June 30, 2015 and 2014, as follows:

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

(In Thousands)

Product and content development

$

513

$

626

$

1,097

$

1,069

Sales and marketing

353

488

723

727

General and administrative

771

696

1,297

1,202

Total stock-based compensation

$

1,637

$

1,810

$

3,117

$

2,998

 

Conference Call and Replay Information

XO Group Inc. will host a conference call with investors at 4:30 p.m. ET on Thursday, August 6, 2015, to discuss its second quarter 2015 financial results. Participants should dial (877) 201-0168 and use Conference ID# 77028633  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 enjoy life's biggest moments, together. Our family of multi-platform brands guide people through transformative lifestages, from getting married to moving in together and having a baby. Our brands include The Knot, the number one 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 (NYSE: 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 or estimates regarding third parties. These statements are only estimates or predictions and reflect our current beliefs and expectations. Actual events or results may differ materially from those contained in the estimates, 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, mobile and other digital properties 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) efforts to launch new or upgrading existing technology and features may not generate significant new revenue or may reduce revenue from existing services, (v) we may be unable to develop solutions that generate revenue from advertising and other services delivered to mobile phones and wireless devices, (vi) the significant fluctuation to which our quarterly revenue and operating results are subject, (vii) the seasonality of the wedding industry, (viii) our operations are dependent on Internet search engine rankings, and our ability to influence those rankings is limited, (ix) the dependence of our registry and commerce services business on third parties, (x) increased competition in our markets could reduce our market share 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  ("GAAP" or "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) (gain) loss in equity interests, (6) interest and other income (expense), net and (7) other items affecting comparability during the period.
  • Adjusted net income represents GAAP net income (loss), adjusted for items that impact comparability, which may include: (1) asset impairment charges, (2) executive separation and other severance charges, (3) non-recurring taxes, interest and penalties and (4) costs related to exit activities.
  • 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 Director of Investor Relations (212) 219-8555 x1004 IR@xogrp.com

 

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SOURCE XO Group Inc.



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