XOXO 
By 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. $2,400 $2,400 $2,400 $2,400 $2,300
Revenue/Vendor
--------------
Gross Profit/Margin by Business
Three months ended 2013 2013 2012 2012
September 30,
-------------
($000s) Gross Gross Gross Gross
Profit Margin Profit Margin
--- ------ ------ ------ ------
Online sponsorship & $20,190 97.9% $18,533 97.7%
advertising
-----------
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 Nine Months Ended
September 30, 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 2012
(unaudited) (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 2012
(unaudited) (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, December 31,
2012
2013
----
(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 athttp://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.
