NEW YORK, Nov. 3, 2015 /PRNewswire/ -- XO Group Inc. (the "Company") (NYSE: XOXO, xogroupinc.com), the premier consumer internet and media company dedicated to guiding people through transformative life stages - from getting married, moving in together and having a baby - today reported financial results for the three months ended September 30, 2015.

Total revenue for the third quarter of 2015 was $34.7 million, down 3.2% compared to the same period in the prior year. Excluding revenue from the Merchandise operations, a business that was exited during the first quarter of 2015, third quarter revenue increased 10.6% compared to the prior year. Net income for the quarter was $2.9 million or $0.11 per diluted share compared to earnings per share of $0.08 in the prior year quarter. The Company's balance sheet at September 30, 2015 reflects cash and cash equivalents of $86.3 million compared to $85.6 million at June 30, 2015 and $90.0 million at December 31, 2014. During the third quarter of 2015, the Company made investments in the amount of $2.5 million.

"The team delivered strong quarterly results for our online advertising and transactional businesses, while continuing to execute opportunities that will unlock value for our couples, local wedding professionals, advertising partners and shareholders," said Mike Steib, Chief Executive Officer. "I am also excited to welcome GigMasters to the XO Group family."

"During the quarter, we continued to make progress on our investment goals, while managing to a responsible profitability level. These results are encouraging as we continue to invest in our company in order to drive long-term shareholder value," said Gillian Munson, Chief Financial Officer.

Long-Term Financial Targets

The Company is reiterating its long-term financial targets of double digit revenue growth rates, gross margins of approximately 90-95%, and operating expense growth below revenue growth rates, yielding adjusted EBITDA margins of at least 20%. The Company is also reiterating that is does not expect to meet these targets in 2015.


                                                                                                    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,
                                                                                                                                         --------------------------------   -------------------------------

                                                                                                                                      2015          2014           2015       2014
                                                                                                                                      ----          ----           ----       ----

    Net revenue:

    National online advertising                                                                                                     $8,669        $7,326        $25,219    $21,777

    Local online advertising                                                                                                        16,369        14,796         48,460     43,745
                                                                                                                                    ------        ------         ------     ------

    Online advertising                                                                                                              25,038        22,122         73,679     65,522

    Registry and commerce                                                                                                            4,809         3,430         11,266      8,387

    Merchandise                                                                                                                          -        4,473            878     12,902

    Publishing and other                                                                                                             4,859         5,833         17,675     19,797
                                                                                                                                     -----         -----         ------     ------

    Total net revenue                                                                                                               34,706        35,858        103,498    106,608

    Cost of revenue:

    Online advertising                                                                                                                 683           365          1,588      1,337

    Merchandise                                                                                                                          -        2,833            881      8,106

    Publishing and other                                                                                                             1,367         1,663          5,082      5,920
                                                                                                                                     -----         -----          -----      -----

    Total cost of revenue                                                                                                            2,050         4,861          7,551     15,363

    Gross profit                                                                                                                    32,656        30,997         95,947     91,245

    Operating expenses:

    Product and content development                                                                                                  9,901         8,569         29,300     26,274

    Sales and marketing                                                                                                             10,679        10,842         31,683     32,606

    General and administrative                                                                                                       5,955         5,389         18,116     18,778

    Depreciation and amortization                                                                                                    1,361         1,868          4,027      5,393
                                                                                                                                     -----         -----          -----      -----

    Total operating expenses                                                                                                        27,896        26,668         83,126     83,051

    Income from operations                                                                                                           4,760         4,329         12,821      8,194

    Loss in equity interests                                                                                                         (173)         (68)         (209)     (243)

    Interest and other (expense) income, net                                                                                           (3)           57           (51)        55
                                                                                                                                       ---           ---            ---        ---

    Income before income taxes                                                                                                       4,584         4,318         12,561      8,006

    Income tax expense                                                                                                               1,718         2,234          4,939      3,551

    Net income                                                                                                                      $2,866        $2,084         $7,622     $4,455
                                                                                                                                    ======        ======         ======     ======


    Net income per share:

    Basic                                                                                                                            $0.11         $0.08          $0.30      $0.18
                                                                                                                                     =====         =====          =====      =====

    Diluted                                                                                                                          $0.11         $0.08          $0.30      $0.17
                                                                                                                                     =====         =====          =====      =====

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

    Basic                                                                                                                           25,136        25,351         25,161     25,159
                                                                                                                                    ======        ======         ======     ======

    Diluted                                                                                                                         25,449        25,670         25,537     25,547
                                                                                                                                    ======        ======         ======     ======




                                                                 XO GROUP INC.

                                                     CONDENSED CONSOLIDATED BALANCE SHEETS

                                               (Amounts in Thousands, Except for Per Share Data)

                                                                  (Unaudited)


                                                                            September 30, 2015            December 31, 2014
                                                                            ------------------            -----------------

    ASSETS

    Current assets:

    Cash and cash equivalents                                                                     $86,318                     $89,955

    Accounts receivable, net                                                                       20,084                      15,785

    Deferred tax assets, net                                                                        3,052                       3,052

    Prepaid expenses and other current assets                                                       3,807                       4,696
                                                                                                    -----                       -----

    Total current assets                                                                          113,261                     113,488
                                                                                                  -------                     -------

    Long-term restricted cash                                                                       2,599                       2,600

    Property and equipment, net                                                                    13,791                      15,125

    Goodwill and intangibles, net                                                                  43,435                      43,558

    Deferred tax assets, net                                                                       12,123                      13,110

    Investments                                                                                     7,792                       5,501

    Other assets                                                                                       73                         200
                                                                                                      ---                         ---

    Total assets                                                                                 $193,074                    $193,582
                                                                                                 ========                    ========

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:

    Accounts payable and accrued expenses                                                         $11,618                     $12,463

    Deferred revenue                                                                               15,319                      16,236
                                                                                                   ------                      ------

    Total current liabilities                                                                      26,937                      28,699

    Deferred rent                                                                                   4,674                       5,167

    Other liabilities                                                                               1,218                       1,790
                                                                                                    -----                       -----

    Total liabilities                                                                              32,829                      35,656

    Stockholders' equity:

    Preferred stock

    Common stock                                                                                      264                         267

    Additional paid-in-capital                                                                    172,184                     171,951

    Accumulated other comprehensive income                                                              -                         35

    Accumulated deficit                                                                          (12,203)                   (14,327)
                                                                                                  -------                     -------

    Total stockholders' equity                                                                    160,245                     157,926
                                                                                                  -------                     -------

    Total liabilities and stockholders' equity                                                   $193,074                    $193,582
                                                                                                 ========                    ========


                                                                             XO GROUP INC.

                                                         RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

                                                           (Amounts in Thousands, Except for Per Share Data)

                                                                              (Unaudited)


                                                                         Three Months Ended September 30,                            Nine Months Ended September 30,
                                                                         --------------------------------                          -------------------------------

                                                                                        2015                            2014                              2015             2014
                                                                                        ----                            ----                              ----             ----

    Net income                                                                        $2,866                          $2,084                            $7,622           $4,455

    Income tax expense                                                                 1,718                           2,234                             4,939            3,551

    Depreciation and amortization                                                      1,361                           1,868                             4,027            5,393

    Stock-based compensation expense                                                   1,135                           1,449                             4,252            4,447

    Exit of merchandise operations(a)                                                      -                              -                              434                -

    Interest and other expense

    (income), net                                                                          3                            (57)                               51             (55)

    Loss in equity interests                                                             173                              68                               209              243

    Severance charges(b)                                                                   -                              -                                -           1,354

    Foreign VAT, interest and penalties(c)                                                 -                          (592)                                -           (592)
                                                                                         ---                           ----                               ---            ----

    Adjusted EBITDA                                                                   $7,256                          $7,054                           $21,534          $18,796

    Depreciation and amortization                                                    (1,361)                        (1,868)                          (4,027)         (5,393)

    Stock-based compensation expense                                                 (1,135)                        (1,449)                          (4,252)         (4,447)

    Loss in equity interests                                                           (173)                           (68)                            (209)           (243)

    Interest and other (expense) income, net                                             (3)                             57                              (51)              55
                                                                                         ---                             ---                               ---              ---

    Adjusted income before income taxes                                                4,584                           3,726                            12,995            8,768

    Adjusted income tax expense(d)                                                     1,718                           1,423                             5,110            3,349

    Adjusted net income                                                               $2,866                          $2,303                            $7,885           $5,419


    Adjusted net income per share, diluted                                             $0.11                           $0.09                             $0.31            $0.21
                                                                                       =====                           =====                             =====            =====

                                                                                      25,449                          25,670                            25,537           25,547

    Diluted weighted average number of shared outstanding


    Net cash provided by operating activities                                         $4,114                          $7,675                           $11,559          $11,553

    Less: capital expenditures                                                         (741)                        (1,329)                          (2,777)         (3,973)

    Free cash flow                                                                    $3,373                          $6,346                            $8,782           $7,580
                                                                                      ======                          ======                            ======           ======



                                                                  (a)     Costs impacting comparability included in operating expenses in the condensed
                                                                          consolidated statements of operations for the year ended September 30, 2015 included
                                                                          costs related to the closure of our merchandise operations in Redding, CA of (i)
                                                                          severance of approximately $0.2 million recorded in general and administrative and
                                                                          (ii) rent acceleration and other closure costs of $0.2 million recorded in sales and
                                                                          marketing.


                                                                  (b)     Costs impacting comparability included in operating expenses in the condensed
                                                                          consolidated statements of operations for the year ended September 30, 2014 include
                                                                          severance of approximately $1.4 million, representing (i) severance charges for
                                                                          certain executive officers and (ii) severance charges for the employees in our Los
                                                                          Angeles office ($0.1 million in product and content development, $0.5 million in
                                                                          sales and marketing and $0.8 million in general and administrative).


                                                                  (c)     Included in general and administrative expenses on the condensed consolidated
                                                                          statements of operations for the three and nine months ended September 30, 2014
                                                                          include a favorable adjustment for foreign value-added tax ("VAT"), interest and
                                                                          penalties of $0.6 million.


                                                                  (d)     Adjusted income tax expense was calculated using the annual effective tax rate of
                                                                          37.5% and 38.2% for three months ended September 30, 2015 and 2014, respectively,
                                                                          and 39.3% and 38.2% for the nine months ended September 30, 2015 and 2014,
                                                                          respectively.

XO GROUP INC.
SUPPLEMENTAL DATA TABLES (UNAUDITED)

Local advertising metrics (excluding Two Bright Lights)



                                                                                                                                           Q3 2015        Q3 2014
                                                                                                                                           -------        -------

    Vendor Count                                                                                                                                   25,034         24,304
    ------------                                                                                                                                   ------         ------

    Retention Rate(a)                                                                                                                                 75%           77%
    ----------------                                                                                                                                  ---            ---

    Avg. Revenue/Vendor(b)                                                                                                                         $2,582         $2,517
    ----------------------                                                                                                                         ------         ------


    (a) Calculated on a trailing twelve-month basis. Previously disclosed as churn rate. Retention rate calculated as one less churn rate.

    (b)  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 nine months ended September 30, 2015 and 2014, as follows:



                                    Three Months Ended September 30,               Nine Months Ended September 30,
                                    --------------------------------               -------------------------------

                                               2015                           2014               2015                2014
                                               ----                           ----               ----                ----

                                                                  (In Thousands)







    Product and content development            $174                           $382             $1,271              $1,451

    Sales and marketing                         289                            338              1,012               1,065

    General and administrative                  672                            729              1,969               1,931

    Total stock-based compensation           $1,135                         $1,449             $4,252              $4,447
                                             ======                         ======             ======              ======

Conference Call and Replay Information

XO Group Inc. will host a conference call with investors at 4:30 p.m. ET on Tuesday, November 3, 2015, to discuss its third quarter 2015 financial results. Participants should dial (877) 201-0168 and use Conference ID# 44930458 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, The Bump, a leading pregnancy and parenting brand, and The Nest, the hip guide to all things home for new couples. The Company is publicly listed on the New York Stock Exchange 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 online wedding-related and other websites, mobile and other digital properties 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) efforts to launch new or upgrading existing technology and features may not generate significant new revenue or may reduce revenue from existing services, (v) we may be unable to develop solutions that generate revenue from advertising and other services delivered to mobile phones and wireless devices, (vi) the significant fluctuation to which our quarterly revenue and operating results are subject, (vii) the seasonality of the wedding industry, (viii) our operations are dependent on Internet search engine rankings, and our ability to influence those rankings is limited, (ix) the dependence of our registry and commerce services business on third parties, (x) increased competition in our markets could reduce our market share 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 generally accepted accounting principles in the United States ("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 net income (loss) adjusted to exclude,
        if applicable: (1) income tax expense, (2) depreciation and
        amortization, (3) stock-based compensation expense, (4) asset impairment
        charges, (5) loss in equity interests, (6) interest and other income
        (expense), net and (7) other items affecting comparability during the
        period.
    --  Adjusted net income represents GAAP net income, adjusted for items that
        impact comparability, 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 (loss) and net income (loss) 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.

Contact:

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

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