XO Group Reports Second Quarter 2014 Financial Results - Hawaii News Now - KGMB and KHNL

XO Group Reports Second Quarter 2014 Financial Results

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SOURCE XO Group Inc.

Conference Call Tuesday, August 5th, at 4:30 p.m. ET, Dial-In (844) 824-7422 (ID# 74637798)

-Second Quarter Revenue up 3.6%-

-Earnings Per Share $0.12-

-Adjusted EBITDA of $8.3 Million-

NEW YORK, Aug. 5, 2014 /PRNewswire/ -- XO Group Inc. (NYSE: XOXO, xogroupinc.com), the premier consumer internet and media company devoted to weddings, pregnancy, and everything in between, today reported financial results for the three months ended June 30, 2014.

Total revenue for the second quarter of 2014 was $38.3 million, up 3.6% compared to the same period in the prior year. Net income for the quarter was $3.0 million or $0.12 per share. The Company ended the quarter with $79.4 million in cash, up from $75.5 million at March 31, 2014.

Total operating expenses were $27.7 million and $56.4 million for the three and six months ended June 30, 2014, respectively, compared to $23.6 million and $46.4 million during the corresponding periods in 2013. These increases in operating expenses were driven by new spend attributable to the transformation underway at XO.

"During the second quarter, we delivered solid earnings results on stable revenue growth, driven by our core local and national advertising offerings and a strong quarter for our registry business," said Mike Steib, Chief Executive Officer. "We continue to make significant progress on XO's strategic transformation to accelerate growth and position our Company for the future.  As we work to evolve The Knot into a digital marketplace, we are refocusing on execution, re-investing in our products and our talent pool, and taking a hard look at our asset base.  We believe that with the successful execution of our strategy, we can drive toward our target long-term business model and enhance shareholder value."

"Our Q2 '14 results reflect the strategy we laid out in the beginning of the year, maintaining steady revenue growth while balancing targeted investments in the business to drive innovation that we believe will provide compelling returns over the next several years," said Gillian Munson, Chief Financial Officer.  

Business Outlook

For the full year 2014, the Company continues to expect to deliver single digit total revenue growth and increased year-over-year growth rates of operating expense above its historical run rates.  The additional operating expense related to the strategic initiatives underway at XO is expected to be approximately $15.0 million in 2014.  

Long-Term Financial Targets

Over the long-term, the Company is targeting double digit revenue growth, gross margins of 83-85%, with operating expense growth below revenue growth rates and adjusted EBITDA margins of at least 15-20%. 

 

XO GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in Thousands, Except for Per Share Data)

(Unaudited)




Three Months Ended June 30,



2014



2013

Net revenue:







National online sponsorship and advertising


$

7,541



$

7,368

Local online sponsorship and advertising 


14,510



13,404

  Total online sponsorship and advertising


22,051



20,772

Registry services


2,934



2,409

Merchandise


4,852



6,361

Publishing and other


8,493



7,446

Total net revenue


38,330



36,988

Cost of revenue:







Online sponsorship and advertising


509



581

Merchandise


2,907



3,706

Publishing and other


2,626



2,719

Total cost of revenue


6,042



7,006







Gross profit


32,288



29,982







Operating expenses:





Product and content development


8,832



7,136

Sales and marketing


10,651



10,070

General and administrative


6,324



5,267

Depreciation and amortization


1,848



1,146

Total operating expenses


27,655



23,619







Income from operations


4,633



6,363

Loss in equity interests


(115)



(62)

Interest and other income, net


23



16

Income before income taxes


4,541



6,317

Provision for income taxes


1,494



2,229







Net income


$

3,047



$

4,088

 

Net  income per share:







Basic


$

0.12



$

0.17

Diluted


$

0.12



$

0.16

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







Basic


25,220




24,621

Diluted


25,498




25,594

 

 

XO GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in Thousands, Except for Per Share Data)

(Unaudited)







Six Months Ended June 30,



2014



2013

Net revenue:







National online sponsorship and advertising


$

14,451



$

13,943

Local online sponsorship and advertising 


28,949



26,964

  Total online sponsorship and advertising


43,400



40,907

Registry services


4,665



3,583

Merchandise


8,620



10,179

Publishing and other


14,065



12,592

Total net revenue


70,750



67,261

Cost of revenue:







Online sponsorship and advertising


972



1,076

Merchandise


5,273



6,184

Publishing and other


4,257



4,442

Total cost of revenue


10,502



11,702







Gross profit


60,248



55,559







Operating expenses:






Product and content development


17,705



14,008

Sales and marketing


21,764



20,046

General and administrative


13,389



10,086

Depreciation and amortization


3,525



2,249

Total operating expenses


56,383



46,389







Income from operations


3,865



9,170

Loss in equity interests


(175)



(119)

Interest and other (expense) income, net


(2)



29

Income before income taxes


3,688



9,080

Provision for income taxes


1,317



3,319







Net income


$

2,371



$

5,761

 

Net  income per share:







Basic


$

0.09



$

0.23

Diluted


$

0.09



$

0.23

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








Basic


25,065




24,541

Diluted


25,534




25,426









 

 

XO GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands)














June 30,
2014


December 31,
2013



(Unaudited)



ASSETS





Current assets:





Cash and cash equivalents


$

79,358


$

90,697

Accounts receivable, net


15,569


11,838

Inventories


2,207


2,374

Deferred production and marketing costs


503


475

Deferred tax assets, current portion


2,781


2,782

Prepaid expenses and other current assets


6,546


5,993

Total current assets


106,964


114,159

Long-term restricted cash and investments


3,124


2,599

Property and equipment, net


15,923


15,490

Intangible assets, net


3,857


3,357

Goodwill


42,436


38,500

Deferred tax assets


18,126


21,469

Investment interests


5,558


1,680

Other assets


350


495

Total assets


$

196,338


$

197,749

LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





Accounts payable and accrued expenses                     


$

11,022


$

12,420

Deferred revenue


15,388


14,864

Total current liabilities


26,410


27,284

Deferred tax liabilities


4,288


4,507

Deferred rent


5,553


5,914

Other liabilities


1,809


4,154

Total liabilities


38,060


41,859






Stockholders' equity:





Preferred stock


-


-

Common stock


269


270

Additional paid-in-capital


169,958


169,756

Accumulated other comprehensive loss


(159)


(204)

Accumulated deficit


(11,790)


(13,932)

Total stockholders' equity


158,278


155,890

Total liabilities and stockholders' equity


$

196,338


$

197,749









 

 

XO GROUP INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Amounts in Thousands, Except for Per Share Data)

(Unaudited)











Three Months Ended June 30,


Six Months Ended June 30,


2014


2013


2014


2013





Net income

$3,047


$4,088


$2,371


$5,761

Provision for income taxes

1,494


2,229


1,317


3,319

Depreciation and amortization

1,848


1,146


3,525


2,249

Stock-based compensation expense

1,810


1,583


2,998


2,887

Loss in equity interests

115


62


175


119

Interest and other (income) expense, net

(23)


(16)


2


(29)

Severance charges(a)

-


-


1,354


-

Adjusted EBITDA

$8,291


$9,092


$11,742


$14,306

Depreciation and amortization

(1,848)


(1,146)


(3,525)


(2,249)

Stock-based compensation expense

(1,810)


(1,583)


(2,998)


(2,887)

Loss in equity interests

(115)


(62)


(175)


(119)

Interest and other (income) expense, net

23


16


(2)


29

Adjusted income before income taxes

4,541


6,317


5,042


9,080

Adjusted provision for income taxes(b)

1,494


2,229


1,798


3,587

Adjusted net income

$3,047


$4,088


$3,244


$5,493









Adjusted net income per diluted share

$0.12


$0.16


$0.13


$0.22









Diluted weighted average number of shares outstanding

25,498


25,594


25,534


25,426









Net cash provided by operating activities

$4,835


$9,355


$3,878


$9,566

Less: Capital expenditures

(1,638)


(1,613)


(2,644)


(2,799)

Free cash flow

$3,197


$7,742


$1,234


$6,767











(a)

Incremental costs included in Operating expenses on the condensed consolidated statements of operations for the six months ended June 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 ($70K in Product and content development, $506K in Sales and marketing and $778K in General and administrative).



(b)

Adjusted provision for income taxes was calculated using the annual effective tax rate for each respective period, excluding discrete items.



Supplemental data tables (unaudited)

Local Advertising Metrics  (excluding Two Bright Lights)


Q2 2014

Q1 2014

Q2 2013

Profile Count

31,774

30,857

30,179

Vendor Count

23,682

23,064

22,573

Churn Rate

25.2%

27.0%

29.5%

Avg. Revenue/Vendor

2,516

2,497

2,408

 

Stock Based Compensation

($000s)

Three Months Ended
June 30, 2014

Three Months Ended
June 30, 2013

Product and Content

$626

$619

Sales and Marketing

488

476

General and Administrative

696

488

Total stock-based compensation

$1,810

$1,583

 

XO Group Inc

Conference Call and Replay Information

XO Group Inc. will host a conference call with investors at 4:30 p.m. ET on Tuesday, August 5, 2014, to discuss its second quarter 2014 financial results. Participants should dial (844) 824-7422 and use Conference ID# 74637798 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. A replay of the call will be available at (855) 859-2056 or (404) 537-3406, conference ID #74637798.

About XO Group Inc.

XO Group Inc. (NYSE: XOXO; http://www.xogroupinc.com) is the premier consumer internet and media company devoted to weddings, pregnancy and everything in between, providing young couples 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 The Nest, The Bump and Ijie.com. XO Group is recognized by the industry for being innovative in media - from the web to mobile, magazines, books and video. 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.

Forward Looking Statements

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.

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 ("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 U.S. GAAP net income (loss) adjusted to exclude, if applicable: (1) provision (benefit) for income taxes, (2) depreciation and amortization, (3) stock-based compensation expense, (4) impairment charges and asset write-offs, (5) loss in equity interests, (6) interest and other income, net (7) net loss attributable to non-controlling interest and (8) other incremental charges incurred in the period.
  • Adjusted net income represents U.S. GAAP net income (loss), adjusted for incremental costs incurred in the current period, which may include: (1) impairment charges and asset write-offs, (2) executive severance and (3) non-recurring foreign taxes, interest and penalties.
  • 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 U.S. 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. In addition, free cash flow provides management with useful information for managing the cash needs of our business. 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),Net income (loss) per diluted share and Net cash provided by operating activities as indicators of operating performance.

A reconciliation of U.S. GAAP to Non-GAAP financial measures is included in this press release.

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

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