XO Group Reports Second Quarter 2013 Financial Results

            XO Group Reports Second Quarter 2013 Financial Results

- Second Quarter Revenue up 4%, led by online advertising, Operating Profit up
22% and EPS up 23%-

Conference Call Tuesday, August 6th, at 4:30 p.m. ET, Dial-In (877) 314-9915
(ID# 25961596)

PR Newswire

NEW YORK, Aug. 6, 2013

NEW YORK, Aug.6, 2013 /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 June 30, 2013.

Second Quarter Summary Results

Total revenue for the second quarter was $37.0 million, up 4.4% compared to
the prior year. The results were led by national and local online advertising
revenue, which grew 9.6% and 9.1%, respectively, year over year. Registry
commission revenue grew 21.2% in the three months ended June 30, 2013 compared
to the prior year period. Publishing and other revenues were down 1.0%, while
merchandise revenue was down 8.0% compared to the second quarter last year.

For the quarter ended June 30, 2013, the Company's operating profit was $6.4
million, compared to $5.2 million in the prior year quarter. The $1.2 million
increase in operating profit was primarily due to increased revenue in the
online sponsorship and advertising business, partially offset by lower gross
margins in ecommerce, and in publishing & other, increased technology-related
investments, and increased depreciation and amortization expense. Net income
for the quarter was $4.1 million or $0.16 per diluted share, compared to $3.1
million or $0.13 per diluted share in the prior year quarter.

The Company's balance sheet at June 30, 2013 reflects cash and cash
equivalents of $82.8 million, up $5.4 million from $77.4 million at December
31, 2012. The Company has not purchased any shares under the $20 million
stock repurchase authorization announced on April 10, 2013.

"We continue to be pleased with the growth of our local online business and
are encouraged by the improvement in our national online business," said Chief
Executive Officer, David Liu. "We are entering the second half of the year
with strong momentum as our teams continuously develop and refine the content
and tools that connect our audience with the information and services they
need during the critical stages of family formation. The recent appointment of
Mike Steib, a proven digital leader, as our President should accelerate our
ambitious plans to increase our reach and share of the lifestages markets."

Recent Developments

  oLocal online advertising growth continued in the second quarter, with
    revenue up 9.1% over the prior year quarter. We had 22,600 vendors at the
    close of the second quarter, compared to 21,800 at the close of the second
    quarter last year. The churn rate decreased slightly to 29.5% at the end
    of June 2013, from 29.7% during the same period last year. The average
    annual revenue per vendor was approximately $2,400, up 4.4% year over year
    (see Supplemental Tables, below).
  oNational online advertising improved this quarter, driven by our pregnancy
    and parenting website, thebump.com. The Bump continues to grow its
    audience and advertiser base, with an 88% increase in unique visitors and
    key new advertisers in the second quarter of 2013, compared to the same
    period last year.
  oRegistry services revenue was up in the second quarter, driven by better
    conversion rates. The improved conversion rates were a result of enhanced
    functionality attributable to the upgrades of the registry platform
    launched in April of this year.
  oIn July 2013, the Company announced the appointment of Michael Steib as
    President. Mr. Steib is an accomplished digital leader, who most recently
    served as CEO of Vente-Privee USA. His previous experience includes a
    proven track record of execution at Google and NBC Universal.
  oAlso in July 2013, the Company announced Michael Zeisser as a new board
    member. Mr. Zeisser brings a wealth of Internet, media and ecommerce
    experience to our board. He was most recently the Senior Vice President of
    Liberty Interactive Corporation (formerly known as Liberty Media
    Corporation). 

Second Quarter and Year-to-Date 2013 Financial Highlights

"Strong results in our online advertising businesses and our registry
business, coupled with continued expense management, have driven profitability
growth in the first half of the year, despite lower gross margins in ecommerce
and publishing." said Chief Financial Officer, John Mueller.

  oFor the three months ended June 30, 2013, the Company's revenue was $37.0
    million, up 4.4% compared to revenue of $35.4 million in the second
    quarter of 2012. Net income for the second quarter was $4.1 million, or
    $0.16 per diluted share, compared to net income of $3.1 million, or $0.13
    per diluted share, for the second quarter ended June 30, 2012.
  oFor the six months ended June 30, 2013, the Company reported revenue of
    $67.3 million and net income of $5.8 million, or $0.23 per diluted share.
    This compares to revenue of $65.2 million and net income of $3.5 million,
    or $0.14 per diluted share, in the first half of 2012. Revenue growth year
    to date was 3.1%, compared to the same period in 2012, while net income
    was up 66% in the first six months of this year compared to the first half
    of 2012.
  oNational online advertising revenue was $7.4 million for the three months
    ended June 30, 2013, increasing 9.6% compared to the corresponding period
    in 2012. National online revenue was $13.9 million for the six months
    ended June 30, 2013, increasing 6.7% compared to the corresponding period
    in 2012. 
  oLocal online advertising revenue was $13.4 million for the quarter ended
    June 30, 2013, growing 9.1% compared to $12.3 million for the second
    quarter of 2012. Local online revenue was $27.0 million for the six months
    ended June 30, 2013, up 9.9% compared to $24.5 million for the
    corresponding period in 2012.
  oPublishing and other revenues were $7.4 million for the second quarter
    ended June 30, 2013, down 1.0% compared to the same period last year.
    Publishing and other revenues were $12.6 million for the six months ended
    June 30, 2013, up 4.2% compared to $12.1 million for the corresponding
    period in 2012. The decline in the second quarter of 2013 was due to
    lower newsstand sales, partially offset by increased advertising revenue.
  oRegistry commission revenue was $2.4 million for the second quarter of
    2013, up 21.2% compared to the same period in 2012.Registry commission
    revenue was $3.6 million for the six months ended June 30, 2013, up 19.4%
    compared to $3.0 million for the corresponding period in 2012.
  oMerchandise revenue from the sale of wedding supplies was $6.4 million and
    $10.2 million for the three and six months ended June 30, 2013,
    respectively, compared to $6.9 million and $12.5 million for the
    corresponding periods in 2012. Revenue declined 8.0% in the second quarter
    of 2013, and 18.7% for the first half of the year. The declines were
    mainly due to SEO challenges and the impact from increased usage of mobile
    devices by our users, resulting in lower traffic and lower conversion
    rates.These declines were partially offset by an increase in average
    order value.
  oGross profit for the second quarter of 2013 was $30.0 million, up 4.6%
    year-over-year. Gross profit margin was 81.1% for the three months ended
    June 30, 2013, compared to 80.9% for the corresponding period in 2012. In
    the six months ended June 30, 2013, gross profit margins approximated
    82.6%, compared to 82.2% in the corresponding period in 2012. The
    improvement in gross margins year-over-year is primarily due to the mix
    shift toward online advertising and registry which are the most profitable
    businesses offset by lower margins in ecommerce and publishing & other.
    Please see the supplemental data tables for additional information
    regarding gross profit margins.
  oOperating expense was $23.6 million and $46.4 million for the three and
    six months ended June 30, 2013, respectively, compared to $23.5 million
    and $47.8 million for the corresponding periods in 2012. The increase in
    operating expense for the second quarter was primarily due to increased
    technology-related investments, specifically additional personnel and
    software. Also contributing to the increase in operating expense was an
    increase in depreciation and amortization expense, which resulted from the
    reclassification of certain indefinite-lived intangible assets to
    definite-lived. These increases were partially offset by decreased
    stock-based compensation expense.
  oStock-based compensation expense was $1.6 million and $2.9 million for the
    three and six months ended June 30, 2013, respectively, compared to $1.9
    million and $4.5 million for the corresponding periods in 2012. The
    year-over-year decrease in stock-based compensation was due to a lower
    estimated accrual for stock-based compensation compared to the prior year,
    as well as the timing of annual grants.
  oThe Company incurred net operating expenses related to Ijie.com of
    approximately $1.0 million and $2.0 million for the three and six months
    ended June 30, 2013, respectively, flat compared to the corresponding
    periods in 2012.
  oNet cash provided by operating activities was $9.4 million for the quarter
    ended June 30, 2013, while capital expenditures amounted to $1.6 million
    for the same period. Net cash provided by operating activities was $9.5
    million for the six months ended June 30, 2013, while capital expenditures
    amounted to $2.8 million for the same period.

Supplemental Data Tables

Local Online Advertising Metrics

                    2Q2013 1Q2013 4Q2012 3Q2012 2Q2012
Profile Count       30,200 30,400 29,100 29,700 29,700
Vendor Count        22,600 22,600 22,100 22,100 21,800
Churn Rate          29.5%  29.8%  30.2%  29.8%  29.7%
Avg. Revenue/Vendor $2,400 $2,400 $2,400 $2,300 $2,300

Gross Profit/Margin by Business

Three months ended June 30,      2013    2013   2012    2012
($000s)                          Gross   Gross  Gross   Gross
                                 Profit  Margin Profit  Margin
Online sponsorship & advertising $20,191 97.2%  $18,534 97.5%
Registry services                2,409   100.0% 1,988   100.0%
Merchandise                      2,655   41.7%  3,004   43.4%
Publishing & other               4,727   63.5%  5,146   68.4%
Total gross profit               $29,982 81.1%  $28,672 80.9%

Stock Based Compensation

                             Three Months Ended June Six Months Ended June 30,
                             30,
($000s)                      2013        2012        2013         2012
Product & content            $619        $651        $1,175       $1,485
development
Sales & marketing            476         531         817          1,411
General & administrative     488         713         895          1,573
Total stock-based            $1,583      $1,895      $2,887       $4,469
compensation

XO GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in Thousands, Except for Per Share Data)
                                                   Three Months Ended June 30,
                                                   2013            2012

                                                   (unaudited)     (unaudited)
Net revenue:
 Online sponsorship and advertising               $   20,772      $   19,012
 Registry services                                2,409           1,988
 Merchandise                                      6,361           6,916
 Publishing and other                             7,446           7,520
Total net revenue                                  36,988          35,436
Cost of revenue:
 Online sponsorship and advertising               581             478
 Merchandise                                      3,706           3,912
 Publishing and other                             2,719           2,374
Total cost of revenue                              7,006           6,764
Gross profit                                       29,982          28,672
Operating expenses:
 Product and content development                  7,136           6,874
 Sales and marketing                              10,070          10,258
 General and administrative                       5,267           5,401
 Depreciation and amortization                    1,146           927
Total operating expenses                           23,619          23,460
Income from operations                             6,363           5,212
Loss in equity interests                           (62)            (10)
Interest and other income (expense), net           16              (5)
Income before income taxes                         6,317           5,197
Provision for income taxes                         2,229           2,079
Net income                                         4,088           3,118
Plus: net loss attributable to noncontrolling      —               20
interest
Net income attributable to XO Group Inc.           $   4,088       $   3,138
Net income per share attributable to XO Group Inc.
 common stockholders:
Basic                                              $   0.17        $   0.13
Diluted                                            $   0.16        $   0.13
Weighted average number of shares used in
 calculating net earnings per share
Basic                                              24,621          24,488
Diluted                                            25,594          25,078



XO GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in Thousands, Except for Per Share Data)
                                                     Six Months Ended June 30,
                                                     2013          2012

                                                     (unaudited)   (unaudited)
Net revenue:
 Online sponsorship and advertising                 $    40,907   $   37,601
Registry services                                  3,583         3,002
Merchandise                                        10,179        12,525
Publishing and other                               12,592        12,087
Total net revenue                                    67,261        65,215
Cost of revenue:
 Online sponsorship and advertising                 1,076         892
 Merchandise                                        6,184         6,970
 Publishing and other                               4,442         3,766
Total cost of revenue                                11,702        11,628
Gross profit                                         55,559        53,587
Operating expenses:
 Product and content development                    14,008        13,466
 Sales and marketing                                20,046        21,411
 General and administrative                         10,086        11,035
 Depreciation and amortization                      2,249         1,873
Total operating expenses                             46,389        47,785
Income from operations                               9,170         5,802
Loss in equity interests                             (119)         (10)
Interest and other income (expense), net             29            (9)
Income before income taxes                           9,080         5,783
Provision for income taxes                           3,319         2,313
Net income                                           5,761         3,470
Plus: net loss attributable to noncontrolling        —             65
interest
Net income attributable to XO Group Inc.             $    5,761    $   3,535
Net income per share attributable to XO Group Inc.
 common stockholders:
Basic                                                $    0.23     $   0.14
Diluted                                              $    0.23     $   0.14
Weighted average number of shares used in
 calculating net earnings per share
Basic                                                24,541        25,004
Diluted                                              25,426        25,585

XO GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands)
                                        June 30,     December 31,
                                                     2012
                                        2013
                                        (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents               $  82,833    $   77,407
Accounts receivable, net                13,715       14,960
Inventories                             3,060        2,222
Deferred production and marketing costs 482          557
Deferred tax assets, current portion    2,883        2,857
Prepaid expenses                        4,333        2,311
Other current assets                    46           141
Total current assets                    107,352      100,455
Long-term restricted cash               2,600        2,599
Property and equipment, net             14,205       13,093
Intangible assets, net                  5,101        5,660
Goodwill                                37,750       37,750
Deferred tax assets                     21,148       21,334
Investment in equity interests          2,277        2,396
Other assets                            146          67
Total assets                            $  190,579   $   183,354
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses   $  11,477    $   11,448
Deferred revenue                        14,927       14,710
Total current liabilities               26,404       26,158
Deferred tax liabilities                2,825        2,791
Deferred rent                           6,277        6,628
Other liabilities                       3,276        3,270
Total liabilities                       38,782       38,847
Stockholders' equity:
Preferred stock                         —            —
Common stock                            269          259
Additional paid-in-capital              165,610      164,071
Accumulated other comprehensive loss    (117)        (97)
Accumulated deficit                     (13,965)     (19,726)
Total stockholders' equity              151,797      144,507
Total liabilities and equity            $  190,579   $   183,354

Conference Call and Replay Information

XO Group Inc. will host a conference call with investors at 4:30 p.m. ET on
Tuesday, August 6, 2013, to discuss its second quarter 2013 financial results.
Participants should dial (877) 314-9915 and use Conference ID# 25961596 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
#25961596.

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 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) 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.

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

SOURCE XO Group Inc.

Website: http://www.xogroupinc.com