XO Group Inc : XO Group Reports First Quarter 2012 Financial Results
05/08/2012| 04:05pm US/Eastern
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--First Quarter Revenue Up 8%, Led by Local Online Up 20%, Gross
Margin Up 275 basis points--
Conference Call Today at 4:30 p.m. ET, Dial-In (855) 454-7961 (ID#
77537872)
XO Group Inc. (NYSE: XOXO, www.xogroupinc.com),
formerly The Knot, Inc., the premier media and technology company
devoted to weddings, pregnancy, and everything in between, today
reported financial results for the three months ended March 31, 2012.
First Quarter Summary Results
Total revenue for the first quarter was $29.8 million, up 8.1% compared
to the prior year. The results were again led by local online
advertising, and publishing and other, which grew 20.1% and 15.9%,
respectively, year over year. National online advertising declined 3.5%.
The e-commerce and registry businesses were also down, 1.7% and 10.2%
year over year, respectively.
For the quarter ended March 31, 2012, gross margin improved by 275 basis
points over the prior year partially due to improvements in the
e-commerce business as it recovered from the inefficiencies related to
back-end system improvements initiated last year. The Company's
operating profit was $0.6 million compared to an operating loss of $1.1
million in the prior year quarter. The $1.7 million increase in
operating profit was due to revenue growth and improved gross margins
across all business lines which were partly offset by an increase in
expenses including compensation, investment in Ijie.com in China, and
rent. Net income for the quarter was $0.4 million or $0.02 per diluted
share, compared to a net loss of $0.7 million or a loss of $0.02 per
diluted share in the prior year quarter.
The Company's balance sheet at March 31, 2012 reflects cash and cash
equivalents of $68.7 million, down $8.7 million from $77.4 million at
December 31, 2011. Cash declined during the first quarter, primarily due
to the repurchase of 1.4 million shares of common stock for $12.7
million and capital expenditures of $0.6 million.
"We entered the year with strong momentum in the local online
advertising business and our magazine business, which continued
throughout the first quarter, although our national online advertising
and e-commerce businesses continue to be challenged. We are working to
drive profitable growth across the Company even as we invest in new
products for our audience and advertisers," said Chief Executive Officer
David Liu.
Recent Developments
Local advertising growth continued in the first quarter as the focused
sales team continued with its mantra - more clients, spending more,
staying longer. The Knot had more than 21,500 vendors at the close of
the first quarter, and the churn rate was 29.3% at the end of March,
down 180 basis points year over year but up slightly from 29.1% at
December 31, 2011. The average annual revenue per vendor was nearly
$2,300 (See Supplemental Tables, below).
We released Bridalicious Boot Camp, our new workout system for brides
last month. Fitness expert Doug Rice and The Knot produced
Bridalicious Boot Camp, a comprehensive fitness solution for brides
that includes 12 workouts as well as a nutritional guide and workout
calendar. In addition, TheKnot.com has updated the 'Getting in Shape'
area of the community boards with additional content, Q&A with Doug,
and an opt-in newsletter with fitness and exercise tips.
National online advertising was challenged in the first quarter as
pullbacks and cancellations in consumer packaged goods and travel
categories were only partially offset by strength in advertising on
The Bump. The Bump network is growing quickly, with over 2 million
unique visitors per month reported by CoreMetrics and strong
engagement with expectant and new moms.
The e-commerce business continues to recover from changes we
implemented to the back office warehouse systems in the first half of
last year, the result of which has been an improvement in gross
margins. Upgrades to the customer facing platform at the end of 2011
are expected to contribute to revenue growth in the long term but are
impacting revenue in the short term.
In the first quarter, XO Group repurchased 1.4 million shares of its
common stock in the open market for an aggregate purchase price of
$12.7 million. Since starting repurchases under the program in the
first quarter of 2011, XO Group has repurchased 8.9 million shares, or
26.0% of shares outstanding at the end of December 31, 2010 (See
Supplemental Tables below).
First Quarter 2012 Financial Highlights
"In the first quarter of 2012, strength in the local online and
publishing businesses coupled with improved gross margins across our
business lines, particularly e-commerce, improved profitability. We are
bullish on XO Group's long term growth and improving operating leverage
and continue to repurchase shares under the current authorization," said
Chief Financial Officer, John Mueller.
For the three months ended March 31, 2012, XO Group reported revenue
of $29.8 million, up 8.1% compared to revenue in the first quarter of
2011. Net income for the first quarter was $0.4 million, or $0.02 per
diluted share, as compared with a net loss of $0.7 million, or $0.02
per diluted share, for the first quarter ended March 31, 2011.
National online advertising revenue was $6.3 million for the three
months ended March 31, 2012, declining 3.5% from $6.6 million for the
corresponding period in 2011.
Local online advertising revenue was $12.2 million for the quarter
ended March 31, 2012, growing 20.1% over $10.2 million for the first
quarter of 2011.
Merchandise revenue from the sale of wedding and baby supplies was
$5.6 million for the three months ended March 31, 2012, as compared to
$5.7 million for the corresponding period in 2011, declining 1.7% year
over year.
Registry commission revenue was $1.0 million in the first quarter of
2012, down from $1.1 million in the same period in 2011. The business
is now comparable year over year because the switch to the current
Macy's affiliate commission agreement happened in 2010.
Gross profit for the first quarter of 2012 was $24.9 million, up 11.8%
year over year, and margin was 83.7% for the three months ended March
31, 2012, compared with 80.9% for the corresponding period in 2011.
Operating expense was $24.3 million for the three months ended March
31, 2012, compared with $23.4 million for the corresponding period in
2011. The $0.9 million increase in operating expense was due to
increased compensation expense partially due to additional personnel
for Ijie.com in China and increased sales performance. Another
contributing factor was higher rent related to the new office space in
New York. In the first quarter, XO Group incurred operating expenses
of approximately $1.0 million for Ijie.com, compared to expenses of
approximately $0.6 million in the first quarter of 2011.
Stock-based compensation expense was $2.6 million for the three months
ended March 31, 2012 as compared to $1.5 million for the corresponding
period in 2011.
Net cash provided by operating activities was $6.1 million for the
quarter ended March 31, 2012, while capital expenditures amounted to
$0.6 million for the same period.
Supplemental Data Tables
Local Online Advertising Metrics
1Q2011
2Q2011
3Q2011
4Q2011
1Q2012
Profile Count
25,100
26,200
26,900
28,400
29,300
Vendor Count
19,100
20,000
20,500
20,900
21,500
Churn Rate
31.5%
29.8%
29.2%
29.1%
29.3%
Avg. Revenue/Vendor
$2,200
$2,200
$2,200
$2,300
$2,300
Gross Profit/Margin by Business
Three months ended March 31,
2012
2012
2011
2011
($000s)
Gross Profit
Gross Margin
Gross Profit
Gross Margin
Online sponsorship & advertising
$18,175
97.8%
$16,204
96.6.%
Registry services
1,014
100.0%
1,129
100.0%
Merchandise
2,551
45.5%
2,337
41.0%
Publishing & other
3,175
69.5%
2,619
66.5%
Total gross profit
$24,915
83.7%
$22,289
80.9%
Stock Based Compensation
Three Months ended March 31,
($000s)
2012
2011
Product & content development
$834
$474
Sales & marketing
880
603
General & administrative
860
439
Total stock-based compensation
$2,574
$1,516
Stock Repurchase Summary Since Inception, Through First Quarter
2012
Percentage of
Common Stock
Outstanding
($000s)
Repurchased
Common Stock
Three Months Ended
Total Cost
(000s shares)
At 12/31/2010
March 31, 2011
$37,670
3,672
10.7%
June 30, 2011
8,744
886
2.7%
September 30, 2011
13,796
1,558
4.5%
December 31, 2011
10,895
1,344
3.9%
March 31, 2012
12,699
1,434
4.2%
Total, Since Inception
$83,804
8,894
26.0%
Remaining amount under current authorization
$6,196
Conference Call and Replay Information
XO Group Inc., formerly The Knot, Inc., will host a conference call with
investors at 4:30 p.m. ET on May 8, 2012, to discuss its first quarter
2012 financial results. Participants should dial (855) 454-7961 and
use Conference ID# 77537872 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 # 77537872.
About XO Group Inc.
XO Group Inc. (NYSE: XOXO; http://www.xogroupinc.com),
formerly The Knot, Inc., 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) our history of losses, (iii)
inability to adjust spending quickly enough to offset any unexpected
revenue shortfall, (iv) delays or cancellations in spending by our
advertisers and sponsors, (v) the significant fluctuation to which our
quarterly revenue and operating results are subject, (vi) the
seasonality of the wedding industry, (vii) the dependence of our
e-commerce sites on search engine rankings and the limits of our search
engine optimization efforts to influence those rankings, (viii) the
dependence of the WeddingChannel.com registry services business on third
parties, and (ix) 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.
XO GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
Three Months Ended March 31,
2012
2011
(Unaudited)
(Unaudited)
Net revenue:
Online sponsorship and advertising
$
18,589
$
16,769
Registry services
1,014
1,129
Merchandise
5,609
5,706
Publishing and other
4,567
3,940
Total net revenue
29,779
27,544
Cost of revenue:
Online sponsorship and advertising
414
565
Merchandise
3,058
3,369
Publishing and other
1,392
1,321
Total cost of revenue
4,864
5,255
Gross profit
24,915
22,289
Operating expenses:
Product and content development
6,592
6,531
Sales and marketing
11,153
10,504
General and administrative
5,634
5,103
Depreciation and amortization
946
1,283
Total operating expenses
24,325
23,421
Income (loss) from operations
590
(1,132
)
Loss in equity interest
-
(104
)
Interest and other income, net
(4
)
(1
)
Income (loss) before income taxes
586
(1,237
)
Provision (benefit) for income taxes
234
(532
)
Net income (loss)
352
(705
)
Plus: net loss attributable to non-controlling interest
45
-
Net income (loss) attributable to the controlling interest
$
397
$
(705
)
Net income (loss) per share attributable to XO Group common
shareholders:
Basic
$
0.02
$
(0.02
)
Diluted
$
0.02
$
(0.02
)
Weighted average number of shares used in calculating net income
(loss) per share
Basic
25,519
31,852
Diluted
26,092
31,852
XO GROUP INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
March 31,
December 31,
2012
2011
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
68,669
$
77,376
Accounts receivable, net
12,676
16,723
Inventories
3,338
3,591
Deferred production and marketing costs
929
1,050
Deferred tax assets, current portion
3,015
3,015
Other current assets
5,543
4,860
Total current assets
94,170
106,615
Long-term restricted cash
2,600
2,599
Property and equipment, net
13,291
13,535
Intangible assets, net
7,102
6,938
Goodwill
38,879
39,089
Deferred tax assets
15,606
15,605
Other assets
85
58
Total assets
$
171,733
$
184,439
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses
$
7,683
$
11,054
Deferred revenue
15,230
13,745
Total current liabilities
22,913
24,799
Deferred tax liabilities
2,666
2,665
Other liabilities
6,544
6,096
Total liabilities
32,123
33,560
Common stock
265
276
Additional paid-in-capital
165,102
172,935
Accumulated deficit
(26,248
)
(22,868
)
Total stockholders' equity
139,119
150,343
Non-controlling interest in subsidiary
491
536
Total equity
139,610
150,879
Total liabilities and stockholders' equity
$
171,733
$
184,439
XO Group Inc. Malindi Davies, 212-219-8555 x1078 Investor
Relations Manager IR@xogrp.com
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