XO Group Reports Second Quarter 2017 Financial Results;

- Total revenue grew 9.1% in the second quarter

- Transactions revenue increased 27% and local online advertising revenue increased 14% in the second quarter

- GAAP EPS were $0.06, non-GAAP EPS were $0.11 in the second quarter

- Company to host Analyst Meeting on September 27, 2017

- Conference Call Monday, July 31, 2017 at 8:00 a.m. ET, Dial-In (877) 201-0168 (ID# 51080589)

News provided by

XO Group Inc.

Jul 31, 2017, 07:30 ET

NEW YORK, July 31, 2017 /PRNewswire/ -- XO Group Inc. (the "Company") (NYSE: XOXO, xogroupinc.com), today reported financial results for the three and six months ended June 30, 2017.

Total revenue for the second quarter of 2017 was $42.2 million, up 9% as compared to the same period in the prior year and the Adjusted EBITDA margin was 19%. GAAP net income for the quarter was $1.4 million or $0.06 per diluted share compared to diluted earnings per share of $0.15 in the same period in the prior year. Non-GAAP net income was $2.7 million or $0.11 per diluted share. The Company's balance sheet at June 30, 2017 reflected cash and cash equivalents of $98.4 million compared to $105.7 million at December 31, 2016. The Company repurchased and retired shares of its common stock for an aggregate price of $8.2 million during the quarter as part of the Company's previously announced repurchase program.

"We continue to develop great products that our couples love while delivering distinct value to our business partners.  I am pleased to report another quarter of robust growth in our transactions business and our highest year-over-year quarterly growth rate in local online since the first quarter of 2016," said Mike Steib, Chief Executive Officer.

XO's Management Team will welcome Analysts and Investors at an Analyst Breakfast and Meeting on September 27th.  More details to come.

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 June 30,

Six Months Ended June 30,


2017

2016

2017

2016

Net revenue:







 National online advertising

$

9,746

$

9,566

$

18,674

$

18,224

 Local online advertising

18,991

16,652

37,425

34,831

     Total online advertising

28,737

26,218

56,099

53,055

 Transactions

8,190

6,431

13,152

10,635

 Publishing and other

5,299

6,059

8,735

10,687

  Total net revenue

42,226

38,708

77,986

74,377

Cost of revenue:







 Online advertising

919

684

1,850

1,299

 Publishing and other

1,867

2,072

2,845

3,182

  Total cost of revenue

2,786

2,756

4,695

4,481

  Gross profit

39,440

35,952

73,291

69,896

Operating expenses:




















 Product and content development

11,914

10,814

23,655

21,659

 Sales and marketing

14,030

11,513

27,531

23,074

 General and administrative

7,961

5,833

15,262

12,183












 Depreciation and amortization

2,011

1,641

3,669

3,235

  Total operating expenses

35,917

29,801

70,117

60,151

  Income from operations

3,524

6,151

3,174

9,745

 Loss in equity interests

(1,054)

(37)

(1,171)

(181)

 Interest and other income / (expense), net

105

(18)

198

(19)

  Income before income taxes

2,575

6,096

2,201

9,545

 Income tax expense

1,134

2,331

448

2,755

Net income

$

1,441

$

3,765

$

1,753

$

6,790









Net income per share:







 Basic

$

0.06

$

0.15

$

0.07

$

0.27

 Diluted

$

0.06

$

0.15

$

0.07

$

0.26

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







Basic

24,958

25,393

25,154

25,328

Dilutive effect of:







Restricted stock

191

260

280

291

Employee Stock Purchase Plan

2

3

2

1

Options

31

21

33

17

Diluted

25,182

25,677

25,469

25,637

XO GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands, Except for Per Share Data)
(Unaudited)





June 30, 2017

December 31, 2016

ASSETS


Current assets:


 Cash and cash equivalents

$

98,391

$

105,703

 Accounts receivable, net

18,548

20,182

 Prepaid expenses and other current assets

8,018

5,247

Total current assets

124,957

131,132

Long-term restricted cash

1,181

1,181

Property and equipment, net

10,912

12,130

Intangibles assets, net

3,738

4,154

Goodwill

48,678

48,678

Deferred tax assets, net

9,757

9,918

Investments

1,514

2,685

Other assets

187

308

Total assets

$

200,924

$

210,186

LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:


     Accrued compensation and employee benefits

$

4,670

$

6,164

   Accounts payable and accrued expenses

7,479

7,515

   Deferred revenue

18,381

16,752

Total current liabilities

30,530

30,431

Deferred rent

3,423

3,720

Other liabilities

1,192

1,485

Total liabilities

35,145

35,636

Commitments and contingencies


Stockholders' equity:


 Preferred stock, $0.001 par value; 5,000,000 shares authorized and zero
 shares issued and outstanding as of June 30, 2017 and December 31,
 2016, respectively

—

—

 Common stock, $0.01 par value; 100,000,000 shares authorized and
 25,697,045 and 26,304,925 shares issued and outstanding at June 30,
 2017 and December 31, 2016, respectively

258

264

 Additional paid-in-capital

177,256

178,959

 Accumulated deficit

(11,735)

(4,673)

Total stockholders' equity

165,779

174,550

Total liabilities and stockholders' equity

$

200,924

$

210,186

XO GROUP INC.
NON-GAAP RECONCILIATION TABLE
For the Three Months Ended June 30, 2017 and 2016
(In Thousands, Except for Per Share Data)
(Unaudited)






Adjusted Net Income Reconciliation


Three Months Ended June 30,


2017

2016


As Reported

Adjustments

Non GAAP

As Reported

Adjustments

Non GAAP












Net revenue

$

42,226

$

—

$

42,226

$

38,708

$

—

$

38,708

Cost of revenue

2,786

—

2,786

2,756

—

2,756

Operating expenses










Product and content development

11,914

—

11,914

10,814

—

10,814

Sales and marketing

14,030

—

14,030

11,513

—

11,513

General and administrative

7,961

200

(a)

7,761

5,833

—

5,833

Depreciation and amortization

2,011

—

2,011

1,641

—

1,641

Total operating expenses

35,916

200

35,716

29,801

—

29,801













Income from operations

3,524

200

3,724

6,151

—

6,151













Interest and other income/(expense), net

105

—

105

(18)

—

(18)

Loss in equity interests

(1,054)

1,032

(a)

(22)

(37)

—

(37)

Income tax expense

1,134

—

1,134

2,331

—

2,331

Net income

$

1,441

$

1,232

$

2,673

$

3,765

$

—

$

3,765

Net income per share - diluted

$

0.06

$

0.05

$

0.11

$

0.15

$

—

$

0.15

Weighted average number of shares
outstanding - diluted

25,182


25,182

25,677


25,677















Adjusted EBITDA Reconciliation


Three Months Ended June 30,


2017

2016

Income from operations



$

3,524




$

6,151

Depreciation and amortization



2,011




1,641

Stock-based compensation



2,142




1,988

Bad debt expense (a)



$

200




—

Adjusted EBITDA



$

7,877




$

9,780















Free Cash Flow Reconciliation


Three Months Ended June 30,


2017

2016

Net cash provided by operating activities



$

3,625




$

7,090

Less: capital expenditures



(911)




(1,264)

Free cash flow



$

2,714




$

5,826

















(a)

Adjusted loss in equity interests excludes the other-than-temporary impairment that reduced the carrying value of our equity investment in Jetaport, Inc. to zero. In addition, adjusted general and administrative operating expenses exclude bad debt expense associated with a loan previously made to Jetaport, Inc.

XO GROUP INC.
NON-GAAP RECONCILIATION TABLE
For the Six Months Ended June 30, 2017 and 2016
(In Thousands, Except for Per Share Data)
(Unaudited)






Adjusted Net Income Reconciliation


Six Months Ended June 30,


2017

2016


As Reported

Adjustments

Non GAAP

As Reported

Adjustments

Non GAAP












Net revenue

$

77,986

$

—

$

77,986

$

74,377

$

—

$

74,377

Cost of revenue

4,695

—

4,695

4,481

—

4,481

Operating expenses










Product and content development

23,655

—

23,655

21,659

—

21,659

Sales and marketing

27,531

—

27,531

23,074

—

23,074

General and administrative

15,262

200

(a)

15,062

12,183

—

12,183

Depreciation and amortization

3,669

—

3,669

3,235

—

3,235

Total operating expenses

70,117

200

69,917

60,151

—

60,151













Income from operations

3,174

200

3,374

9,745

—

9,745













Interest and other income /
(expense), net

198

—

198

(19)

—

(19)

Loss in equity interests

(1,171)

1,032

(a)

(139)

(181)

—

(181)

Income tax expense

448

—

448

2,755

—

2,755

Net income

$

1,753

$

1,232

$

2,985

$

6,790

$

—

$

6,790

Net income per share - diluted

$

0.07

$

0.05

$

0.12

$

0.26

$

—

$

0.26

Weighted average number of shares
outstanding - diluted

25,469


25,469

25,637


25,637















Adjusted EBITDA Reconciliation


Six Months Ended June 30,


2017

2016

Income from operations



$

3,174




$

9,745

Depreciation and amortization



3,669




3,235

Stock-based compensation



4,017




3,644

Bad debt expense (a)



200




—

Adjusted EBITDA



$

11,060




$

16,624















Free Cash Flow Reconciliation


Six Months Ended June 30,


2017

2016

Net cash provided by operating activities



$

9,832




$

12,633

Less: capital expenditures



(2,123)




(1,986)

Free cash flow



$

7,709




$

10,647



(a)

Adjusted loss in equity interests excludes the other-than-temporary impairment that reduced the carrying value of our equity investment in Jetaport, Inc. to zero. In addition, general and administrative operating expenses excludes bad debt expense associated with a loan previously made to Jetaport, Inc.

XO GROUP INC.
SUPPLEMENTAL DATA TABLES (UNAUDITED)
(Unaudited)









TheKnot.com Local Online Advertising Metrics

Q2 2017

Q2 2016

Vendor Count(a)

23,961

24,241

Retention Rate(a)

75.1%

69.7%

Avg. Revenue/Vendor(a)

$2,865

$2,667

Vendor Count at Quarter End

26,124

22,909



(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, 2017 and 2016, as follows:

Three Months Ended June 30,

Six Months Ended June 30,


2017

2016

2017

2016


(Amounts in Thousands)

Product and content development

$

657

$

556

$

1,154

$

961

Sales and marketing

431

438

865

848

General and administrative

1,054

994

1,998

1,835

Total stock-based compensation

$

2,142

$

1,988

$

4,017

$

3,644

Conference Call and Replay Information

XO Group Inc. will host a conference call with investors at 8:00 a.m. ET on Monday, July 31, 2017, to discuss its second quarter 2017 financial results. Participants should dial (877) 201-0168 and use Conference ID# 51080589 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 with The Knot, to moving in together with The Nest, to having a baby with The Bump, and helping bring important celebrations to life with entertainment vendors from GigMasters. 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 business depends on strong brands, and failing to maintain and enhance our brands would hurt our business, (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) if we are unable to continue to develop solutions that generate revenue from advertising and other services delivered to mobile devices, our business could be harmed, (v) we face intense competition in our markets.If we do not continue to innovate and provide products and services that are useful to users, we may not remain competitive, and our revenue and results of operations could be adversely affected, (vi) our businesses could be negatively affected by changes in Internet search engine algorithms and email marketing policies, (vii) our transactions business is dependent on third-party participants, whose lack of performance could adversely affect our results of operations, (viii) fraudulent or unlawful activities on our marketplace could harm our business and consumer confidence in our marketplace, (ix) we may be subject to legal liability associated with providing online services or content, (x) we may be unable to continue to use the domain names that we use in our business, or prevent third parties from acquiring and using domain names that infringe on, are similar to, or otherwise decrease the value of our brand or our trademarks or service marks, 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.

SOURCE XO Group Inc.

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