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 oLocal 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). oNational 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. oThe 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. oRegistry was down in the third quarter compared to last year as the business was impacted by lower sales from our partners. oOur 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. oIn 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. oIn 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. oFor 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. oFor 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. oNational 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. oLocal 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. oMerchandise 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. oRegistry 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. oGross 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. oOperating 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. oIn 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. oStock-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. oNet 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
XO Group Inc. Reports Third Quarter 2012 Financial Results
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