XO Group Reports Third Quarter 2016 Financial Results

- Total revenue increased 5.8% in the third quarter

- Transactions revenue increased 47.7% in the third quarter

- Third quarter GAAP net income per diluted share was $0.07

- Conference Call Wednesday, November 2, 2016 at 4:30 p.m. ET, Dial-In (866) 393-4306 (ID# 3085819)

News provided by

XO Group Inc.

Nov 02, 2016, 04:02 ET

NEW YORK, Nov. 2, 2016 /PRNewswire/ -- XO Group Inc. (the "Company") (NYSE: XOXO, xogroupinc.com), today reported financial results for the three months ended September 30, 2016.

XO Group Inc.
XO Group Inc.

Total revenue for the third quarter of 2016 was $36.7 million, up 5.8% compared to the same period in the prior year. Net income for the quarter was $1.9 million or $0.07 per diluted share compared to diluted earnings per share of $0.11 in the same period in the prior year. The Company's balance sheet at September 30, 2016 reflects cash and cash equivalents of $100.1 million compared to $88.5 million at December 31, 2015. The Company repurchased and retired shares of its common stock for an aggregate price of $1.1 million during the quarter as part of the Company's previously announced repurchase program.

"During the quarter, we delivered strong results in our transaction revenue initiative sand launched key enhancements to our leading local marketplace for wedding professionals and couples. We also welcomed Paul Bascobert, as President of Local Marketplace. Paul has a strong track record of serving local businesses and we're excited for him to be part of our next phase of growth," said Mike Steib, Chief Executive Officer.

Long-Term Financial Targets

The Company's long-term financial targets are double digit revenue growth rates and gross margins of approximately 90-95%, yielding adjusted EBITDA margins of 20%.

XO GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in Thousands, Except for Per Share Data)

(Unaudited)




Three Months Ended
September 30,

 Nine Months Ended
September 30,


2016

2015

2016

2015

Net revenue:







National online advertising

$

8,932

$

8,669

$

27,156

$

25,219

Local online advertising

17,040

16,369

51,871

48,460

        Total online advertising

25,972

25,038

79,027

73,679

Transactions

7,105

4,809

17,740

11,266

Merchandise

—

—

—

878

Publishing and other

3,654

4,859

14,341

17,675

     Total net revenue

36,731

34,706

111,108

103,498

Cost of revenue:







Online advertising

802

683

1,986

1,588

Merchandise

—

—

—

881

Publishing and other

986

1,367

4,168

5,082

     Total cost of revenue

1,788

2,050

6,154

7,551

     Gross profit

34,943

32,656

104,954

95,947

Operating expenses:




















Product and content development

11,729

9,901

33,503

29,300

Sales and marketing

13,098

10,679

36,325

31,683

General and administrative

5,501

5,955

17,531

18,116













Depreciation and amortization

1,580

1,361

4,815

4,027

     Total operating expenses

31,908

27,896

92,174

83,126

     Income from operations

3,035

4,760

12,780

12,821

Loss in equity interests

(29)

(173)

(210)

(209)

Interest and other income/(expense), net

48

(3)

29

(51)













Income before income taxes

3,054

4,584

12,599

12,561

Income tax expense

1,146

1,718

3,901

4,939

Net income

$

1,908

$

2,866

$

8,698

$

7,622









Net income per share:







Basic

$

0.08

$

0.11

$

0.34

$

0.30

Diluted

$

0.07

$

0.11

$

0.34

$

0.30

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







Basic

25,368

25,136

25,341

25,161

Dilutive effect of:







Restricted stock

331

304

318

360

Options

28

9

16

16

Diluted

25,727

25,449

25,675

25,537

XO GROUP INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands, Except for Per Share Data)

(Unaudited)


September 30, 2016

December 31, 2015

ASSETS


Current assets:


Cash and cash equivalents

$

100,070

$

88,509

Accounts receivable, net

18,345

20,475

Prepaid expenses and other current assets

7,643

5,341

Total current assets

126,058

114,325

Long-term restricted cash

1,181

2,598

Property and equipment, net

12,258

13,251

Intangibles assets, net

4,367

4,817

Goodwill

48,678

47,396

Deferred tax assets, net

10,543

11,578

Investments

2,804

2,719

Other assets

242

57

Total assets

$

206,131

$

196,741

LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:


    Accrued compensation and employee benefits

$

5,749

$

6,036

Accounts payable and accrued expenses

7,462

6,127

Deferred revenue

16,643

18,640

Total current liabilities

29,854

30,803

Deferred rent

3,942

4,486

Other liabilities

1,994

1,985

Total liabilities

35,790

37,274

Commitments and contingencies


Stockholders' equity:


Preferred stock, $0.001 par value; 5,000,000 shares authorized and 0
shares issued and outstanding as of September 30, 2016 and December
31, 2015, respectively

—

—

Common stock, $0.01 par value; 100,000,000 shares authorized and
26,475,720 and 26,235,824 shares issued and outstanding at September
30, 2016 and December 31, 2015, respectively

265

264

Additional paid-in-capital

177,275

173,564

Accumulated deficit

(7,199)

(14,361)

Total stockholders' equity

170,341

159,467

Total liabilities and stockholders' equity

$

206,131

$

196,741

XO GROUP INC.

NON-GAAP RECONCILIATION TABLE

For the Three Months Ended September 30, 2016 and 2015

(In Thousands, Except for Per Share Data)

(Unaudited)



Three Months Ended September 30,


2016

2015


As Reported

Adjustments

Non GAAP

As Reported

Adjustments

Non GAAP











Net revenue

$

36,731

$

—

$

36,731

$

34,706

$

—

$

34,706

Cost of revenue

1,788

—

1,788

2,050

—

2,050

Operating expenses









Product and content development

11,729

—

11,729

9,901

—

9,901

Sales and marketing

13,098

—

13,098

10,679

—

10,679

General and administrative

5,501

—

5,501

5,955

—

5,955

Depreciation and amortization

1,580

—

1,580

1,361

—

1,361

Total operating expenses

31,908

—

31,908

27,896

—

27,896











Income from operations

3,035

—

3,035

4,760

—

4,760











Interest and other
income/(expense), net

48

—

48

(173)

—

(173)

Loss in equity interest

(29)

—

(29)

(3)

—

(3)

Income tax expense

1,146


1,146

1,718

—

1,718

Net income

$

1,908

$

—

$

1,908

$

2,866

$

—

$

2,866

Net income per share - diluted

$

0.07

$

—

$

0.07

$

0.11

$

—

$

0.11

Weighted average number of shares
outstanding - diluted

25,727


25,727

25,449


25,449





Three Months Ended September 30,


2016

2015


As Reported

Adjustments

Non GAAP

As Reported

Adjustments

Non GAAP

Income from operations

$

3,035

$

—

$

3,035

$

4,760

$

—

$

4,760

Depreciation and amortization (c)

1,580

—

1,580

1,361

—

1,361

Stock-based compensation (d)

2,157

—

2,157

1,135

—

1,135

Adjusted EBITDA

$

6,772

$

—

$

6,772

$

7,256

$

—

$

7,256













Free Cash Flow Reconciliation





Three Months Ended September 30,


2016

2015

Net cash provided by operating
activities



$

7,455




$

4,114

Less: capital expenditures



(1,061)




(741)

Free cash flow



$

6,394




$

3,373

XO GROUP INC.

NON-GAAP RECONCILIATION TABLE

For the Nine Months Ended September 30, 2016 and 2015

(In Thousands, Except for Per Share Data)

(Unaudited)



Nine Months Ended September 30,


2016

2015


As Reported

Adjustments

Non GAAP

As Reported

Adjustments

Non GAAP











Net revenue

$

111,108

$

—

$

111,108

$

103,498

$

—

$

103,498

Cost of revenue

6,154

—

6,154

7,551

—

7,551

Operating expenses









Product and content development

33,503

—

33,503

29,300

(11)

(a)

29,289

Sales and marketing

36,325

—

36,325

31,683

(265)

(a)

31,418

General and administrative

17,531

—

17,531

18,116

(158)

(a)

17,958

Depreciation and amortization

4,815

—

4,815

4,027

—

4,027

Total operating expenses

92,174

—

92,174

83,126

(434)

82,692











Income from operations

12,780

—

12,780

12,821

434

13,255











Interest and other
income/(expense), net

29

—

29

(209)

—

(209)

Loss in equity interest

(210)

—

(210)

(51)

—

(51)

Income tax expense

3,901

1,128

(b)

5,029

4,939

171

(b)

5,110

Net income

$

8,698

$

(1,128)

$

7,570

$

7,622

$

263

$

7,885

Net income per share - diluted

$

0.34

$

(0.05)

$

0.29

$

0.30

$

0.01

$

0.31

Weighted average number of shares
outstanding - diluted

25,675


25,675

25,161


25,161





Nine Months Ended September 30,


2016

2015


As Reported

Adjustments

Non GAAP

As Reported

Adjustments

Non GAAP

Income from operations

$

12,780

$

—

$

12,780

$

12,821

$

434

$

13,255

Depreciation and amortization (c)

4,815

—

4,815

4,027

—

4,027

Stock-based compensation (d)

5,801

—

5,801

4,252

—

4,252

Adjusted EBITDA

$

23,396

$

—

$

23,396

$

21,100

$

434

$

21,534













Free Cash Flow Reconciliation





Nine Months Ended September 30,


2016

2015

Net cash provided by operating
activities



$

20,088




$

11,559

Less: capital expenditures



(3,047)




(2,777)

Free cash flow



$

17,041




$

8,782

(a)

Costs impacting comparability included in operating expenses in the condensed consolidated statements of operations for the nine months ended September 30, 2015 included costs related to the closure of our merchandise operations in Redding, CA.

(b)

Adjusted income tax expense was calculated using an effective tax rate of  37.5% and 39.9%, respectively, for the three and nine months ended September 30, 2016 and  37.5% and 39.3%, respectively, for the three and nine months ended September 30, 2015.  The effective tax rate for the nine months ended September 30, 2016 and September 30, 2015 excludes discrete items, including a one-time benefit associated with the resolution of an uncertain tax position for a former subsidiary in the 2016 period, as well as a one-time benefit associated with a foreign tax incentive deduction in the 2016 period.

(c)

To eliminate depreciation and amortization expense.

(d)

To eliminate stock-based compensation expense.

XO GROUP INC.

SUPPLEMENTAL DATA TABLES (UNAUDITED)

(Unaudited)

TheKnot.com Local Online
Advertising Metrics

Q3 2016

Q3 2015

Vendor Count(a)

23,959

24,118

Retention Rate(a);(b)

68.6%

74.7%

Avg. Revenue/Vendor(a)

$2,738

$2,582

     (a)      Calculated on a trailing twelve-month basis.

     (b)     Previously disclosed as churn rate. Retention rate calculated as one less churn rate.

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 nine months ended September 30, 2016 and 2015, as follows:

Three Months Ended
September 30,

   Nine Months Ended
September 30,


2016

2015

2016

2015


(Amounts in Thousands)

Product and content development

708

174

1,669

1,271

Sales and marketing

339

289

1,227

1,012

General and administrative

1,110

672

2,905

1,969

Total stock-based compensation

2,157

1,135

5,801

4,252

Conference Call and Replay Information

XO Group Inc. will host a conference call with investors at 4:30 p.m. ET on Wednesday November 2, 2016, to discuss its third quarter 2016 financial results. Participants should dial (866) 393-4306 and use Conference ID# 3085819 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 and marketplace, The Bump, the definitive voice for millennial parents and parents-to-be, and The Nest, the go-to guide for 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 operating results may fluctuate, are difficult to predict and could fall below expectations, (ii) our transactions business is dependent on third party participants, whose lack of performance could adversely affect our results of operations, (iii) our ongoing investment in new businesses and new products, services, and technologies is inherently risky, and could disrupt our ongoing business and/or fail to generate the results we are expecting, (iv) we may be unable to develop solutions that generate revenue from advertising and other services delivered to mobile phones and wireless devices, (v) our businesses could be negatively affected by changes in Internet search engine algorithms, (vi) intense competition in our markets may adversely affect revenue and results of operations, (vii) we may be subject to legal liability associated with providing online services or content, (viii) fraudulent or unlawful activities on our marketplace could harm our business and consumer confidence in our marketplace, (ix) we are subject to payments-related risks, (x) we cannot assure you that our publications will be profitable, 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 U.S. generally accepted accounting principles ("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 income from operations adjusted to exclude, if applicable: (1) depreciation and amortization, (2) stock-based compensation expense, (3) asset impairment charges, and (4) other items affecting comparability during the period.

  • Adjusted net income represents GAAP net income, adjusted for 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, (3) non-recurring foreign 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 and net income 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.

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SOURCE XO Group Inc.