XO Group Reports Third Quarter 2013 Financial Results - Third Quarter Revenue up 7.0%, led by online advertising; Operating Profit up 60.8%-

Conference Call Thursday, November 7th, at 4:30 p.m. ET, Dial-In (877) 314-9915 (ID# 93559866)

NEW YORK, Nov. 7, 2013 /PRNewswire/ -- XO Group Inc. (NYSE: XOXO, www.xogroupinc.com), the premier media and technology company devoted to weddings, pregnancy, and everything in between, today reported financial results for the three months ended September 30, 2013.

Third Quarter Summary Results

Total revenue for the third quarter was $34.0 million, up 7.0% compared to the prior year.  The results were led by local online advertising revenue and registry service revenue, which grew 9.6% and 35.8%, respectively, year over year.  National online advertising revenue grew 7.0% in the three months ended September 30, 2013 compared to the prior year period.  Publishing and other revenues were up 6.4%, while merchandise revenue was down 8.3% compared to the third quarter last year.

For the quarter ended September 30, 2013, the Company's operating profit was $5.3 million, compared to $3.3 million in the prior year quarter.  The $2.0 million increase in operating profit was primarily due to increased revenue in the online sponsorship and advertising business and lower intangible asset impairment expense, partially offset by increased technology-related investments and increased compensation expense mainly due to higher sales performance. Net income for the quarter was $3.1 million or $0.12 per diluted share, compared to $2.1 million or $0.08 per diluted share in the prior year quarter.

The Company's balance sheet at September 30, 2013 reflects cash and cash equivalents of $86.2 million, up $8.8 million from $77.4 million at December 31, 2012.  The Company has not purchased any shares under the $20 million stock repurchase authorization announced on April 10, 2013.

"We are pleased with the growth of our online advertising and registry businesses, as the combination of investment and execution continues to pay dividends," said Chief Executive Officer, David Liu. "As we enter the last quarter of the year our focus remains on investing in our products and services that enable our brides, newlyweds, and new parents to connect with the relevant life stage marketers and vendors across all platforms."

Recent Developments

  • Local online advertising growth continued in the third quarter, with revenue up 9.6% over the prior year quarter. We had 22,600 vendors at the end of the third quarter, compared to 22,100 at the end of the third quarter last year. The churn rate decreased slightly to 29.4% at the end of September 2013, from 29.8% at the end of the same period last year.  The average annual revenue per vendor was approximately $2,400, up 5.2% year over year (see Supplemental Tables, below).
  • National online advertising revenue increased by 7.0% in the third quarter of this year compared to the corresponding period in 2012. The increase was driven by our pregnancy and parenting website, thebump.com. The Bump continues to attract key new advertisers across all categories.
  • Registry services revenue increased by $0.7 million, up 35.8% in the third quarter of this year compared to the same period last year. Upgrades to the registry platform, which launched in April of this year, continue to drive better conversion rates for our partners.
  • In October 2013, the Company launched a baby registry partnership with Babies"R"Us®. Through this partnership, guests can search for Babies"R"Us registries via our patented search and purchase tool, and The Bump will refer expectant moms to Babies"R"Us for registry creation.
  • Also in October 2013, the Company updated the Wedding LookBook by The Knot app for the iPhone. Brides can use their mobile devices to search for dresses from our extensive database, locate and contact wedding dress salons, and snap and share photos as they try on dresses. The update also includes a new design and social network integration.

Third Quarter and Year-to-Date 2013 Financial Highlights

"Continued strength in our online and registry businesses along with expense management during the first nine months of the year has led to increased profitability and a strong balance sheet. These results are encouraging as we continue to balance near term investments in product and technology in order to maximize long term shareholder value," said Chief Financial Officer, John Mueller.


  • For the three months ended September 30, 2013, the Company's revenue was $34.0 million, up 7.0% compared to revenue of $31.7 million in the third quarter of 2012. Net income for the third quarter was $3.1 million, or $0.12 per diluted share, compared to net income of $2.1 million, or $0.08 per diluted share, for the third quarter ended September 30, 2012.
  • For the nine months ended September 30, 2013, the Company reported revenue of $101.2 million and net income of $8.9 million or $0.35 per diluted share. This compares to revenue of $97.0 million and net income of $5.6 million, or $0.22 per diluted share, in the corresponding period of 2012. Revenue growth year to date was 4.4%, compared to the same period in 2012, while net income was up 58.4% in the first nine months of this year compared to the same period of 2012.
  • Local online advertising revenue was $13.7 million for the quarter ended September 30, 2013, growing 9.6% compared to $12.5 million for the third quarter of 2012. Local online revenue was $40.7 million for the nine months ended September 30, 2013, up 9.8% compared to $37.0 million for the corresponding period in 2012.
  • National online advertising revenue was $6.9 million for the three months ended September 30, 2013, increasing 7.0% compared to the corresponding period in 2012. National online revenue was $20.9 million for the nine months ended September 30, 2013, increasing 6.8% compared to the corresponding period in 2012.  
  • Publishing and other revenues were $5.3 million for the quarter ended September 30, 2013, up 6.4% compared to the same period last year.  Publishing and other revenues were $17.9 million for the nine months ended September 30, 2013, up 4.8% compared to $17.1 million for the corresponding period in 2012.
  • Registry services revenue was $2.8 million for the third quarter of 2013, up 35.8% compared to the same period in 2012. Registry services revenue was $6.4 million for the nine months ended September 30, 2013, up 26.0% compared to $5.1 million for the corresponding period in 2012.
  • Merchandise revenue from the sale of wedding and baby supplies was $5.2 million and $15.4 million for the three and nine months ended September 30, 2013, respectively, compared to $5.7 million and $18.2 million for the corresponding periods in 2012. The declines were mainly due to search engine optimization (SEO) challenges and the impact from increased usage of mobile devices by our users, resulting in lower traffic.
  • Gross profit for the third quarter of 2013 was $28.7 million, up 8.7% year-over-year.  Gross profit margin was 84.5% for the three months ended September 30, 2013, compared to 83.2% for the corresponding period in 2012. In the nine months ended September 30, 2013, gross profit margins approximated 83.2%, compared to 82.5% in the corresponding period in 2012.  The improvement in gross margins year-over-year for third quarter is primarily due to the shift in revenue mix toward online advertising and registry services which are the most profitable businesses, partially offset by lower margins in publishing & other. Please see the supplemental data tables for additional information regarding gross profit margins.
  • Operating expense was $23.5 million and $69.8 million for the three and nine months ended September 30, 2013, respectively, compared to $23.2 million and $70.9 million for the corresponding periods in 2012.  The increase in operating expense for the third quarter was primarily due to increased technology-related investments, specifically additional personnel and software. Also contributing to the increase in operating expense was increased compensation-related expense, mainly due to higher sales performance.  These increases were partially offset by a non-recurring intangible assets impairment charge taken in the third quarter of last year.
  • Stock-based compensation expense was $1.7 million and $4.6 million for the three and nine months ended September 30, 2013, respectively, compared to $2.0 million and $6.4 million for the corresponding periods in 2012. The year-over-year decrease in stock-based compensation was due to a lower estimated accrual for stock-based compensation compared to the prior year and the timing of annual grants.
  • The Company incurred net operating expenses related to Ijie.com of approximately $1.0 million and $3.0 million for the three and nine months ended September 30, 2013, respectively, which was flat compared to the corresponding periods in 2012.
  • Net cash provided by operating activities was $5.9 million for the quarter ended September 30, 2013, while capital expenditures amounted to $1.9 million for the same period. Net cash provided by operating activities was $15.4 million for the nine months ended September 30, 2013, while capital expenditures amounted to $4.7 million for the same period.

Supplemental Data Tables

Local Online Advertising Metrics



3Q2013

2Q2013

1Q2013

4Q2012

3Q2012

Profile Count

30,200

30,200

30,400

29,100

29,700

Vendor Count

22,600

22,600

22,600

22,100

22,100

Churn Rate

29.4%

29.5%

29.8%

30.2%

29.8%

Avg.
Revenue/Vendor

$2,400

$2,400

$2,400

$2,400

$2,300

 

Gross Profit/Margin by Business


Three months ended
September 30,

2013

2013

2012

2012

($000s)

Gross
Profit

Gross
Margin

Gross
Profit

Gross
Margin

Online sponsorship &
advertising

$20,190

97.9%

$18,533

97.7%

Registry services

2,790

100.0%

2,054

100.0%

Merchandise

2,227

42.6%

2,418

42.4%

Publishing & other

3,501

65.7%

3,412

68.2%

Total gross profit

$28,708

84.5%

$26,417

83.2%

 


Stock Based Compensation



Three Months Ended
September 30,

Nine Months Ended
September 30,

($000s)

2013

2012

2013

2012

Product & content development

$536

$658

$1,711

$2,134

Sales & marketing

362

574

1,179

1,987

General & administrative

767

732

1,662

2,313

Total stock-based compensation

$1,665

$1,964

$4,552

$6,434

 

XO GROUP INC.


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(Amounts in Thousands, Except for Per Share Data)








Three Months Ended September 30,




2013

(unaudited)


2012

(unaudited)


Net revenue:






   Online sponsorship and advertising


$

20,620



$

18,973


   Registry services


2,790



2,054


   Merchandise


5,232



5,703


   Publishing and other


5,326



5,004


Total net revenue


33,968



31,734


Cost of revenue:






   Online sponsorship and advertising


430



440


   Merchandise


3,005



3,285


   Publishing and other


1,825



1,592


Total cost of revenue


5,260



5,317









Gross profit


28,708



26,417


Operating expenses:






   Product and content development


7,108



6,768


   Sales and marketing


9,528



9,096


   General and administrative


5,745



5,461


   Long-lived asset impairment charge




958


   Depreciation and amortization


1,075



867


Total operating expenses


23,456



23,150









Income from operations


5,252



3,267


Loss in equity interests


(55)



(19)


Interest and other income, net


41



82


Income before income taxes


5,238



3,330


Provision for income taxes


2,137



1,271


Net income


$

3,101



$

2,059


Net income per share:






   Basic


$

0.13



$

0.08


   Diluted


$

0.12



$

0.08


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






   Basic


24,686



24,285


   Diluted


25,879



24,818


 


 

XO GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in Thousands, Except for Per Share Data)






Nine Months Ended September 30,



2013

(unaudited)


2012

(unaudited)

Net revenue:





   Online sponsorship and advertising


$

61,527



$

56,574


   Registry services


6,373



5,056


   Merchandise


15,411



18,228


   Publishing and other


17,918



17,092


Total net revenue


101,229



96,950


Cost of revenue:





   Online sponsorship and advertising


1,506



1,332


   Merchandise


9,189



10,255


   Publishing and other


6,267



5,359


Total cost of revenue


16,962



16,946









Gross profit


84,267



80,004


Operating expenses:





   Product and content development


21,116



20,234


   Sales and marketing


29,574



30,507


   General and administrative


15,831



16,497


   Long-lived asset impairment charges




958


   Depreciation and amortization


3,324



2,740


Total operating expenses


69,845



70,936









Income from operations


14,422



9,068


Loss in equity interests


(174)



(29)


Interest and other income, net


70



73


Income before income taxes


14,318



9,112


Provision for income taxes


5,456



3,584


Net income


8,862



5,528


Plus: net loss attributable to noncontrolling interest




65


Net income attributable to XO Group Inc.


$

8,862



$

5,593


Net income per share attributable to XO Group Inc. common
stockholders:





   Basic


$

0.36



$

0.23


   Diluted


$

0.35



$

0.22


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





   Basic


24,591



24,762


   Diluted


25,579



25,328


 

XO GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands)








September 30,

 2013


December 31,
2012



(Unaudited)



ASSETS





Current assets:





Cash and cash equivalents


$

86,217



$

77,407


Accounts receivable, net


14,064



14,960


Inventories


2,791



2,222


Deferred production and marketing costs


594



557


Deferred tax assets, current portion


2,883



2,857


Prepaid expenses


3,938



2,311


Other current assets


23



141


Total current assets


110,510



100,455


Long-term restricted cash


2,601



2,599


Property and equipment, net


15,273



13,093


Intangible assets, net


4,820



5,660


Goodwill


38,500



37,750


Deferred tax assets


21,148



21,334


Investment in equity interests


2,222



2,396


Other assets


521



67


Total assets


$

195,595



$

183,354


LIABILITIES AND EQUITY





Current liabilities:





Accounts payable and accrued expenses


$

10,980



$

11,448


Deferred revenue


15,683



14,710


Total current liabilities


26,663



26,158


Deferred tax liabilities


2,825



2,791


Deferred rent


6,096



6,628


Other liabilities


3,429



3,270


Total liabilities


39,013



38,847


Stockholders' equity:







Preferred stock





Common stock


270



259


Additional paid-in-capital


167,332



164,071


Accumulated other comprehensive loss


(156)



(97)


Accumulated deficit


(10,864)



(19,726)


Total stockholders' equity


156,582



144,507


Total liabilities and equity


$

195,595



$

183,354


 

Conference Call and Replay Information

XO Group Inc. will host a conference call with investors at 4:30 p.m. ET on Thursday, November 7, 2013, to discuss its third quarter 2013 financial results. Participants should dial (877) 314-9915 and use Conference ID# 93559866 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. A replay of the call will be available at (855) 859-2056 or (404) 537-3406, conference ID #93559866.

About XO Group Inc.

XO Group Inc. (NYSE: XOXO; http://www.xogroupinc.com) is the premier media and technology company devoted to weddings, pregnancy and everything in between, providing young women with the trusted information, products and advice they need to guide them through the most transformative events of their lives. Our family of premium brands began with the #1 wedding brand, The Knot, and has grown to include WeddingChannel.com, The Nest, The Bump and Ijie.com. XO Group is recognized by the industry for being innovative in all media - from the web to social media and mobile, magazines and books, and video - and our groundbreaking social platforms have ignited passionate communities across the world. XO Group has leveraged its customer loyalty into successful businesses in online sponsorship and advertising, registry services, ecommerce and publishing. The company is publicly listed on the New York Stock Exchange (XOXO) and is headquartered in New York City.

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.

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

SOURCE XO Group Inc.



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