XO Group Inc. Reports Third Quarter 2012 Financial Results

          XO Group Inc. Reports Third Quarter 2012 Financial Results

Conference Call Today at 4:30 p.m. ET, Dial-In (866) 430-3457 (ID# 58988149)

- Third Quarter Revenue Up 2% Driven by Publishing and Online Advertising -

PR Newswire

NEW YORK, Nov. 8, 2012

NEW YORK, Nov. 8, 2012 /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, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120618/NY26546LOGO )

Third Quarter Summary Results

Total revenue for the third quarter was $31.7 million, up 2.2% compared to the
prior year.  The results were led by publishing and other, local online and
national online which grew 18.2%, 12.5%, and 9.8% respectively, year over
year.  The e-commerce and registry businesses were down, 25.4% and 5.2% year
over year, respectively.

For the quarter ended September 30, 2012, gross margin improved by 370 basis
points over the prior year.  The Company's operating profit was $3.3 million
compared to an operating profit of $1.9 million in the prior year quarter. 
The $1.4 million increase in operating profit was due to revenue growth and
improved gross margins, which were partly offset by an increase in
compensation expenses. Net income for the quarter was $2.1 million or $0.08
per diluted share, compared to net income of $1.3 million or $0.04 per diluted
share in the prior year quarter.

The Company's balance sheet at September 30, 2012 reflects cash and cash
equivalents of $72.7 million, down $4.7 million from $77.4 million at December
31, 2011.  Cash declined during the first nine months of the year, primarily
due to the repurchase of 2.1 million shares of common stock for $18.9 million
which was completed on June 12, 2012 and capital expenditures of $2.0 million,
offset in part by positive cash flow from operations of $18.4 million.

"We are pleased by the continued growth of our local and publishing
businesses, although we acknowledge the challenges in our merchandising
businesses. Heading into the final quarter of the year we are optimistic our
innovative products, high quality content and services will continue to
deliver value to our audience and advertisers," said Chief Executive Officer
David Liu.

Recent Developments

  o Local online advertising growth is still strong, with third quarter
    revenue up 12.5% over the prior year quarter. The Knot had approximately
    22,100 vendors with paid directory listings at the close of the third
    quarter, and the trailing twelve month churn rate was 29.8% at the end of
    September, up 60 basis points year over year.  The average annual revenue
    per vendor was approximately $2,300 (see supplemental data tables, below).
  o National online advertising showed strong growth, with third quarter
    revenues up 9.8% over the prior year quarter. Growth was mainly driven by
    the finance and insurance category, partially offset by declines in the
    travel category.
  o The e-commerce business revenue decline is mainly due to SEO and mobile
    challenges.    However, gross margins improved 190 basis points year over
    year as the business recovers from the disruptions caused by last year's
    implementation of a new back office warehouse system.
  o Registry was down in the third quarter compared to last year as the
    business was impacted by lower sales from our partners.
  o Our product development team continues to introduce a variety of new tools
    and updates to our sites, including The Bump pregnancy calendar,
    personalization tools on ijie.com, and a new real weddings photo gallery,
    among others.
  o In October, the Company announced an exclusive agreement with Men's
    Wearhouse, which will be the tuxedo provider of choice on theknot.com.
    This arrangement will give brides-to-be the opportunity to view and
    interact with Men's Wearhouse brand-name tuxedo merchandise at an early
    stage of the wedding planning process.
  o In September, theknot.com announced The Knot Dream Wedding, the first-ever
    live streamed wedding on TheKnot.com, Facebook, Google+, The Knot YouTube
    channel, MSN Living and other media platforms straight from iconic Citi
    Pond at Bryant Park in New York City on February 14, 2013. The winner will
    receive a wedding with every single element provided by our partners,
    including flight and hotel accommodations for the couple and 20 of their
    lucky friends and family to be provided by Expedia®, the largest online
    travel company in the world.

Third Quarter and Year-to-Date 2012 Financial Highlights

"Nine months into the year we continue to show impressive growth in our local
and publishing businesses as well as continued cost control. We are optimistic
that our strong brands, community, and advertiser relationships put us in a
position to grow profitably over the long term," said Chief Financial Officer
John Mueller. 

  o For the three months ended September 30, 2012, XO Group reported revenue
    of $31.7 million, up 2.2% compared to revenue in the third quarter of
    2011. Net income for the third quarter was $2.1 million, or $0.08 per
    diluted share, as compared with net income of $1.3 million, or $0.04 per
    diluted share, for the quarter ended September 30, 2011.
  o For the nine months ended September 30, 2012, XO Group reported revenue of
    $96.9 million and net income of $5.5 million or $0.22 per diluted share.
    This compares to revenue of $93.3 million and net income of $3.5 million
    or $0.11 per diluted share for the nine months of 2011. Revenue growth
    year to date was 3.9% compared to the same period in 2011, while net
    income was up 59.2% in the first nine months of this year compared to the
    same period of 2011.
  o National online advertising revenue was $6.5 million for the three months
    ended September 30, 2012, up 9.8% from $5.9 million for the corresponding
    period in 2011. National online revenue was $19.5 million for the nine
    months ended September 30, 2012, which was a slight decline compared to
    $19.6 million for the corresponding period in 2011.
  o Local online advertising revenue was $12.5 million for the quarter ended
    September 30, 2012, growing 12.5% from $11.1 million for the third quarter
    of 2011.  Local online revenue was $37.0 million for the nine months ended
    September 30, 2012, up 16.3% compared to $31.9 million for the
    corresponding period in 2011. Please see the attached supplemental data
    tables for additional information regarding the local online business.
  o Merchandise revenue from the sale of wedding and baby supplies was $5.7
    million and $18.2 million for the three and nine months ended September
    30, 2012, respectively, as compared to $7.6 million and $21.4 million for
    the corresponding periods in 2011. Revenue declined 25.4% in the third
    quarter 2012, and 15.0% for the first nine months of the year. The decline
    was mainly due to SEO challenges and user behavioral shifts to mobile
    browsing, as our ecommerce mobile interface is not yet optimized.   
  o Registry commission revenue was $2.1 million in the third quarter of 2012,
    down 5.2% from $2.2 million in the same period in 2011.  Year-to-date
    registry revenue was $5.1 million, down 6.3% compared with $5.4 million in
    2011.
  o Gross profit for the third quarter of 2012 was $26.4 million, up 7.0% year
    over year, and gross margin was 83.2% for the three months ended September
    30, 2012, compared with 79.5% for the corresponding period in 2011. In the
    nine months ended September 30, 2012, gross profit margins were 82.5%,
    compared to 79.2% in the corresponding period in 2011. Please see the
    supplemental data tables for additional information regarding gross profit
    margins.
  o Operating expense was $23.2 million and $70.9 million for the three and
    nine months ended September 30, 2012, respectively, compared with $22.8
    million and $68.1 million for the corresponding period in 2011.  The
    increase in operating expense for the third quarter and year-to-date was
    primarily due to increased employee expenses including higher stock-based
    compensation and increased headcount in Ijie's sales organization, as well
    as the impairment charges discussed below. In the third quarter, XO Group
    incurred operating expenses of approximately $1.2 million for Ijie.com,
    compared to expenses of approximately $1.0 million in the third quarter of
    2011.
  o In the third quarter, the Company recorded impairment charges totaling
    approximately $1.0 million related to the WeddingChannel trade name and
    the tradename of an e-commerce company acquired in May 2009. Impairment
    charges for the trade names resulted from trending of lower overall
    e-commerce sales, as well as lower advertising and registry sales
    attributable to the WeddingChannel trade name. Impairment charges for the
    e-commerce company also resulted from changes in the SEO environment which
    has unfavorably impacted this business.
  o Stock-based compensation expense was $2.0 million and $6.4 million for the
    three and nine months ended September 30, 2012, respectively, as compared
    to $1.3 million and $4.1 million for the corresponding periods in 2011.
    Please see the supplemental data tables for additional information
    regarding stock based compensation.
  o Net cash provided by operating activities was $4.1 million for the quarter
    ended September 30, 2012, while capital expenditures amounted to $0.8
    million for the same period. Net cash provided by operating activities was
    $18.4 million for the nine months ended September 30, 2012, while capital
    expenditures amounted to $2.0 million for the same period.

Supplemental Data Tables

Local Online Advertising Metrics

                    3Q2011 4Q2011 1Q2012 2Q2012 3Q2012
Profile Count       26,900 28,400 29,300 29,700 29,700
Vendor Count        20,500 20,900 21,500 21,800 22,100
Churn Rate          29.2%  29.1%  29.3%  29.7%  29.8%
Avg. Revenue/Vendor $2,200 $2,300 $2,300 $2,300 $2,300

Gross Profit/Margin by Business

Three months ended         2012         2012         2011         2011
September 30,
($000s)                    Gross Profit Gross Margin Gross Profit Gross Margin
Online sponsorship &       $18,533      97.7%        $16,477      96.9%
advertising
Registry services          2,054        100.0%       2,166        100.0%
Merchandise                2,418        42.4%        3,100        40.5%
Publishing & other         3,412        68.2%        2,935        69.3%
Total gross profit         $26,417      83.2%        $24,678      79.5%

Stock Based Compensation

                               Three Months Ended Nine Months Ended

                                September 30,      September 30,
($000s)                        2012      2011     2012     2011
Product & content development  $658      $477     $2,134   $1,423
Sales & marketing              574       375      1,987    1,368
General & administrative       732       423      2,313    1,284
Total stock-based compensation $1,964    $1,275   $6,434   $4,075

Stock Repurchase Summary Since Inception, Through Third Quarter 2012

                                                Percentage of
                                                Outstanding
                                  Common Stock
                                                Common Stock
($000s)                Total Cost Repurchased
                                                At 12/31/2010
Three Months Ended                (000s shares)
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%
June 30, 2012          6,196      675           1.9%
Total, Since Inception $90,000    9,569         27.9%

Conference Call and Replay Information

XO Group Inc. will host a conference call with investors at 4:30 p.m. ET on
November 8, 2012, to discuss its third quarter 2012 financial results.
Participants should dial (866) 430-3457 and use Conference ID# 58988149  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 #
58988149.

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, The Blush 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.

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

 

 

XO GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
                                          Three Months Ended September 30,
                                          2012                 2011
                                          (Unaudited)          (Unaudited)
Net revenue:
     Online sponsorship and advertising   $            18,973  $          
                                                                17,003
     Registry services                    2,054                2,166
     Merchandise                          5,703                7,647
     Publishing and other                 5,004                4,233
     Total net revenue                    31,734               31,049
Cost of revenue:
     Online sponsorship and advertising   440                  526
     Merchandise                          3,285                4,547
     Publishing and other                 1,592                1,298
     Total cost of revenue                5,317                6,371
     Gross profit                         26,417               24,678
Operating expenses:
        Product and content development   6,768                5,827
        Sales and marketing               9,096                9,468
        General and administrative        5,461                5,898
        Long-lived asset impairment       958                  716
    charges
        Depreciation and amortization     867                  892
    Total operating expenses              23,150               22,801
     Income from operations               3,267                1,877
     Loss in equity interest              (19)                 (29)
     Interest and other income, net       82                   423
     Income before income taxes           3,330                2,271
     Provision for income taxes           1,271                1,010
     Net income                           2,059                1,261
     Plus: net loss attributable to       -                    22
    non-controlling interest
     Net income attributable to the       $                    $              
    controlling interest                  2,059                 1,283
Net income per share attributable to XO
Group common shareholders:
    Basic                                 $                    $              
                                          0.08                  0.05
    Diluted                               $                    $              
                                          0.08                  0.04
Weighted average number of shares used
in calculating net income per share
    Basic                                 24,285               28,259
    Diluted                               24,818               28,822

 

XO GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
                                          Nine Months Ended September 30,
                                          2012                 2011
                                          (Unaudited)          (Unaudited)
Net revenue:
     Online sponsorship and advertising   $            56,574  $          
                                                                51,425
     Registry services                    5,056                5,395
     Merchandise                          18,228               21,450
     Publishing and other                 17,092               15,042
     Total net revenue                    96,950               93,312
Cost of revenue:
     Online sponsorship and advertising   1,332                1,651
     Merchandise                          10,255               12,817
     Publishing and other                 5,359                4,923
     Total cost of revenue                16,946               19,391
     Gross profit                         80,004               73,921
Operating expenses:
        Product and content development   20,234               18,662
        Sales and marketing               30,507               29,631
        General and administrative        16,497               15,713
        Long-lived asset impairment       958                  716
    charges
        Depreciation and amortization     2,740                3,417
    Total operating expenses              70,936               68,139
     Income from operations               9,068                5,782
     Loss in equity interest              (29)                 (269)
     Interest and other income , net      73                   516
     Income before income taxes           9,112                6,029
     Provision for income taxes           3,584                2,557
     Net income                           5,528                3,472
     Plus: net loss attributable to       65                   22
    non-controlling interest
     Net income attributable to the       $                    $              
    controlling interest                   5,593                3,494
Net income per share attributable to XO
Group common shareholders:
    Basic                                 $                    $              
                                          0.23                  0.12
    Diluted                               $                    $              
                                          0.22                  0.11
Weighted average number of shares used
in calculating net income per share
    Basic                                 24,762               29,856
    Diluted                               25,328               30,522

 

XO GROUP INC.
 CONSOLIDATED BALANCE SHEETS
 (amounts in thousands)
                                    September 30,           December 31,
                                    2012                   2011
                                    (unaudited)
 ASSETS
 Current assets:
 Cash and cash equivalents          $             72,707   $           77,376
 Accounts receivable, net           13,704                 16,723
 Inventories                        2,416                  3,591
 Deferred production and marketing  830                    1,050
costs
 Deferred tax assets, current       3,015                  3,015
portion
Assets held for sale                1,290                  -
 Other current assets               5,418                  4,860
 Total current assets               99,380                 106,615
 Long-term restricted cash          2,598                  2,599
 Property and equipment, net        12,929                 13,535
 Intangible assets, net             5,931                  6,938
 Goodwill                           37,750                 39,089
 Deferred tax  assets               15,607                 15,605
 Other assets                       523                    58
 Total assets                       $           174,718    $           184,439
 LIABILITIES AND EQUITY
 Current liabilities:
 Accounts payable and accrued       $               7,951  $            
expenses                                                   11,054
 Deferred revenue                   14,919                 13,745
 Total current liabilities          22,870                 24,799
 Deferred tax  liabilities          2,668                  2,665
 Other liabilities                  6,980                  6,096
 Total liabilities                  32,518                 33,560
 Common stock                       259                    276
 Additional paid-in-capital         165,041                172,935
 Accumulated other comprehensive    (91)                   -
loss
 Accumulated deficit                (23,009)               (22,868)
 Total stockholders' equity         142,200                150,343
 Non-controlling interest in        -                      536
subsidiary
  Total equity                      142,200                150,879
 Total liabilities and              $           174,718    $          184,439
stockholders' equity

 

SOURCE XO Group Inc.

Website: http://www.xogroupinc.com