XOXO 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.
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 Nine Months Ended
September 30, 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 265 264
26,475,720 and 26,235,824 shares issued and outstanding at September
30, 2016 and December 31, 2015, respectively
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 48 - 48 (173) - (173)
income/(expense), net
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 25,727 25,727 25,449 25,449
outstanding - diluted
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 $7,455 $4,114
activities
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 29 - 29 (209) - (209)
income/(expense), net
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 25,675 25,675 25,161 25,161
outstanding - diluted
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 $20,088 $11,559
activities
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 Q3 2016 Q3 2015
Advertising Metrics
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 Nine Months Ended
September 30, 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.
