NEW YORK, July 31, 2018
/PRNewswire/ -- XO Group Inc. (the "Company") (NYSE: XOXO,
xogroupinc.com), today reported financial results for the three and
six months ended June 30, 2018.
Total revenue for the second quarter of 2018 was $43.2 million, up from $42.1 million during the same period in the prior
year. Net income for the quarter was $5.3
million or $0.20 per diluted
share compared to diluted earnings per share of $0.06 in the same period in the prior year.
Non-GAAP net income per share for the quarter was
$0.19 compared to $0.09 in the same period in the prior year. The
Company's balance sheet at June 30, 2018 reflects cash and
cash equivalents of $116.7 million
compared to $106.1 million at
December 31, 2017.
"This quarter, our local marketplace business delivered strong
results again, our products drove increased engagement between our
couples and business partners, and we continued to invest in the
people and products that will help us capture the significant
opportunity ahead. I'm really proud of the team's work in Q2," 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 in the 20-22% range.
XO GROUP
INC. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (unaudited, in thousands, except for share and
per share data)
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
|
$
|
43,152
|
|
|
$
|
42,101
|
|
|
$
|
81,459
|
|
|
$
|
79,742
|
|
Costs and expenses
(exclusive of depreciation and amortization, shown separately
below):
|
|
|
|
|
|
|
|
|
Cost of
revenue
|
|
2,614
|
|
|
2,789
|
|
|
4,257
|
|
|
4,826
|
|
Product and content
development
|
|
11,796
|
|
|
11,549
|
|
|
22,825
|
|
|
23,006
|
|
Sales and
marketing
|
|
13,098
|
|
|
13,941
|
|
|
25,780
|
|
|
27,564
|
|
General and
administrative
|
|
7,402
|
|
|
8,336
|
|
|
14,232
|
|
|
15,931
|
|
Depreciation and
amortization
|
|
1,676
|
|
|
2,011
|
|
|
3,314
|
|
|
3,669
|
|
Total costs and
expenses
|
|
36,586
|
|
|
38,626
|
|
|
70,408
|
|
|
74,996
|
|
Income from
operations
|
|
6,566
|
|
|
3,475
|
|
|
11,051
|
|
|
4,746
|
|
Loss in equity
interests
|
|
(21)
|
|
|
(1,054)
|
|
|
(43)
|
|
|
(1,171)
|
|
Interest and other
income, net
|
|
209
|
|
|
105
|
|
|
411
|
|
|
198
|
|
Income before income
taxes
|
|
6,754
|
|
|
2,526
|
|
|
11,419
|
|
|
3,773
|
|
Income tax
expense
|
|
1,469
|
|
|
1,115
|
|
|
2,522
|
|
|
1,077
|
|
Net
income
|
|
$
|
5,285
|
|
|
$
|
1,411
|
|
|
$
|
8,897
|
|
|
$
|
2,696
|
|
|
|
|
|
|
|
|
|
|
Net income per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.21
|
|
|
$
|
0.06
|
|
|
$
|
0.35
|
|
|
$
|
0.11
|
|
Diluted
|
|
$
|
0.20
|
|
|
$
|
0.06
|
|
|
$
|
0.35
|
|
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares used in
calculating net earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
25,149
|
|
|
24,958
|
|
|
25,086
|
|
|
25,154
|
|
Dilutive effect
of:
|
|
|
|
|
|
|
|
|
Restricted
stock
|
|
327
|
|
|
191
|
|
|
290
|
|
|
280
|
|
Options
|
|
321
|
|
|
31
|
|
|
192
|
|
|
33
|
|
Employee Stock
Purchase Plan
|
|
9
|
|
|
2
|
|
|
5
|
|
|
2
|
|
Diluted
|
|
25,806
|
|
|
25,182
|
|
|
25,573
|
|
|
25,469
|
|
XO GROUP
INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (unaudited, in thousands, except for share and per
share data)
|
|
|
June 30,
2018
|
|
December 31,
2017
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
116,704
|
|
|
$
|
106,092
|
|
Accounts receivable,
net
|
17,487
|
|
|
17,375
|
|
Prepaid expenses and
other current assets
|
4,706
|
|
|
5,327
|
|
Total current
assets
|
138,897
|
|
|
128,794
|
|
Long-term restricted
cash
|
1,181
|
|
|
1,181
|
|
Property and
equipment, net
|
13,607
|
|
|
11,829
|
|
Intangibles assets,
net
|
3,533
|
|
|
4,019
|
|
Goodwill
|
51,438
|
|
|
51,438
|
|
Deferred tax assets,
net
|
5,466
|
|
|
6,124
|
|
Investments
|
1,399
|
|
|
1,442
|
|
Other
assets
|
501
|
|
|
223
|
|
Total
assets
|
$
|
216,022
|
|
|
$
|
205,050
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accrued compensation
and employee benefits
|
$
|
4,676
|
|
|
$
|
6,611
|
|
Accounts payable and accrued expenses
|
6,343
|
|
|
5,273
|
|
Deferred revenue
|
14,955
|
|
|
13,891
|
|
Total current
liabilities
|
25,974
|
|
|
25,775
|
|
Deferred
rent
|
3,004
|
|
|
3,365
|
|
Other
liabilities
|
1,384
|
|
|
1,776
|
|
Total
liabilities
|
30,362
|
|
|
30,916
|
|
Commitments and
contingencies
|
|
|
|
Stockholders'
equity:
|
|
|
|
Preferred stock,
$0.001 par value; 5,000,000 shares authorized and zero shares
issued and outstanding as of June 30, 2018 and December 31, 2017,
respectively
|
—
|
|
|
—
|
|
Common stock, $0.01
par value; 100,000,000 shares authorized and 25,907,015 and
25,696,796 shares issued and outstanding at June 30, 2018 and
December 31, 2017, respectively
|
260
|
|
|
258
|
|
Additional
paid-in-capital
|
183,321
|
|
|
180,695
|
|
Retained
earnings/(accumulated deficit)
|
2,079
|
|
|
(6,819)
|
|
Total stockholders'
equity
|
185,660
|
|
|
174,134
|
|
Total liabilities and
stockholders' equity
|
$
|
216,022
|
|
|
$
|
205,050
|
|
XO GROUP
INC.
|
|
NON-GAAP
RECONCILIATION TABLE For the Three and Six Months Ended
June 30, 2018 and 2017 (unaudited, in thousands,
except for share and per share data)
|
|
Reconciliation of
GAAP net income to EBITDA, adjusted EBITDA, and adjusted EBITDA
margin:
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
GAAP net
income
|
$
|
5,285
|
|
|
$
|
1,411
|
|
|
$
|
8,897
|
|
|
$
|
2,696
|
|
Income tax
expense
|
1,469
|
|
|
1,115
|
|
|
2,522
|
|
|
1,077
|
|
Interest and other
income, net
|
(209)
|
|
|
(105)
|
|
|
(411)
|
|
|
(198)
|
|
Depreciation and
amortization
|
1,676
|
|
|
2,011
|
|
|
3,314
|
|
|
3,669
|
|
EBITDA
|
8,221
|
|
|
4,432
|
|
|
14,322
|
|
|
7,244
|
|
Loss in equity
interest(a)
|
21
|
|
|
1,054
|
|
|
43
|
|
|
1,171
|
|
Stock-based
compensation
|
2,158
|
|
|
2,143
|
|
|
3,892
|
|
|
4,017
|
|
Bad debt
expense(b)
|
—
|
|
|
200
|
|
|
—
|
|
|
200
|
|
Adjusted
EBITDA
|
$
|
10,400
|
|
|
$
|
7,829
|
|
|
18,257
|
|
|
$
|
12,632
|
|
GAAP net
revenue
|
43,152
|
|
|
42,101
|
|
|
81,459
|
|
|
79,742
|
|
Adjusted EBITDA
margin
|
24.10
|
%
|
|
18.60
|
%
|
|
22.41
|
%
|
|
15.84
|
%
|
|
|
|
|
|
|
|
|
(a) Loss in equity
interest includes an other-than-temporary impairment that reduced
the carrying value of an equity investment to zero.
|
(b) Included in
general and administrative operating expense, related to a loan
previously made to an equity investee.
|
|
|
|
|
|
Reconciliation of
GAAP net income to adjusted net income:
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
GAAP net
income
|
$
|
5,285
|
|
|
$
|
1,411
|
|
|
$
|
8,897
|
|
|
$
|
2,696
|
|
Other-than-temporary
impairment(a)
|
—
|
|
|
1,032
|
|
|
—
|
|
|
1,032
|
|
Bad debt
expense(b)
|
|
—
|
|
|
200
|
|
|
—
|
|
|
200
|
|
Income tax
expense
|
|
1,469
|
|
|
1,115
|
|
|
2,522
|
|
|
1,077
|
|
Adjusted income
before income taxes
|
6,754
|
|
|
3,758
|
|
|
11,419
|
|
|
5,005
|
|
|
|
|
|
|
|
|
|
Adjusted effective
income tax expense rate
|
26
|
%
|
|
40
|
%
|
|
26
|
%
|
|
40
|
%
|
|
|
|
|
|
|
|
|
Adjusted provision
for income tax expense
|
(1,756)
|
|
|
(1,503)
|
|
|
(2,969)
|
|
|
(2,002)
|
|
Adjusted net
income
|
$
|
4,998
|
|
|
$
|
2,255
|
|
|
$
|
8,450
|
|
|
$
|
3,003
|
|
|
|
|
|
|
|
|
|
Adjusted net income
per diluted share
|
$
|
0.19
|
|
|
$
|
0.09
|
|
|
$
|
0.33
|
|
|
$
|
0.12
|
|
Weighted average
number of shares outstanding - diluted
|
25,806
|
|
|
25,182
|
|
|
25,573
|
|
|
25,469
|
|
|
|
|
|
|
|
|
|
(a) Loss in equity
interest includes an other-than-temporary impairment that reduced
the carrying value of an equity investment to zero.
|
(b) Included in
general and administrative operating expense, related to a loan
previously made to an equity investee.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow
reconciliation:
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net cash provided by
operating activities
|
$
|
9,671
|
|
|
$
|
4,797
|
|
|
$
|
16,217
|
|
|
$
|
9,832
|
|
Less: capital
expenditures
|
(1,899)
|
|
|
(911)
|
|
|
(4,684)
|
|
|
(2,123)
|
|
Free cash
flow
|
$
|
7,772
|
|
|
$
|
3,886
|
|
|
$
|
11,533
|
|
|
$
|
7,709
|
|
XO GROUP
INC.
|
|
SUPPLEMENTAL DATA
TABLES (unaudited, in thousands, except for
metrics)
|
|
Revenue by
Category
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Local
marketplace
|
|
$
|
22,318
|
|
|
$
|
18,938
|
|
|
$
|
44,193
|
|
|
$
|
37,557
|
|
Transactions
|
|
9,004
|
|
|
8,158
|
|
|
15,317
|
|
|
13,290
|
|
National online
advertising
|
|
7,105
|
|
|
9,980
|
|
|
13,872
|
|
|
19,981
|
|
Publishing and
other
|
|
4,725
|
|
|
5,025
|
|
|
8,077
|
|
|
8,914
|
|
Total net
revenue
|
|
$
|
43,152
|
|
|
$
|
42,101
|
|
|
$
|
81,459
|
|
|
$
|
79,742
|
|
TheKnot.com Local Marketplace
Metrics
|
|
|
Q2
2018
|
|
Q2
2017
|
Vendor Count at
Quarter end
|
29,128
|
|
|
24,681
|
|
TTM Vendor Count
(a)
|
27,292
|
|
|
22,498
|
|
Retention Rate
(b)
|
77.9
|
%
|
|
77.0
|
%
|
Avg. Revenue/Vendor
(a)
|
$
|
2,952
|
|
|
$
|
3,056
|
|
|
|
|
|
|
|
|
|
(a) Calculated on a trailing twelve-month basis.
(b) Number of canceled vendors on a trailing
twelve-month basis divided by the sum of the beginning vendors plus
trailing twelve-months of additions (churn). The inverse of churn
is retention 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 six months ended June 30, 2018
and 2017, as follows:
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Product and content
development
|
692
|
|
|
657
|
|
|
1,241
|
|
|
1,154
|
|
Sales and
marketing
|
458
|
|
|
431
|
|
|
834
|
|
|
865
|
|
General and
administrative
|
1,008
|
|
|
1,055
|
|
|
1,817
|
|
|
1,998
|
|
Total stock-based
compensation
|
2,158
|
|
|
2,143
|
|
|
3,892
|
|
|
4,017
|
|
Conference Call and Replay Information
XO Group Inc. will host a conference call with investors at
8:00 a.m. ET on Tuesday,
July 31, 2018, to discuss its second quarter 2018 financial
results. Participants should dial (833) 236-5763 and use Conference
ID# 3693679 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 truly enjoy life's biggest moments together.
Our multi-platform brands guide couples through transformative life
stages - from getting married with The Knot, to having a baby with
The Bump, and helping bring important celebrations to life with
entertainment vendors from GigMasters. 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 ability to accurately measure and
monetize the level of offline store level traffic attributable to
an online digital campaign conducted on our sites, (iii) our
business depends on strong brands, and failing to maintain and
enhance our brands would hurt our business, (iv) 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, (v)
if we are unable to continue to develop solutions that generate
revenue from advertising and other services delivered to mobile
devices, our business could be harmed, (vi) our businesses could be
negatively affected by changes in Internet search engine and app
store search algorithms and email marketing policies, (vii) we face
intense competition in our markets. If we do not continue to
innovate and provide products and services that are useful to
users, we may not remain competitive, and our revenue and results
of operations could be adversely affected, (viii) our transactions
business is dependent on third-party participants, whose lack of
performance could adversely affect our results of operations, (ix)
fraudulent or unlawful activities on our marketplace could harm our
business and consumer confidence in our marketplace, (x) we may be
subject to legal liability associated with providing online
services or content, (xi) we may be unable to continue to use the
domain names that we use in our business, or prevent third parties
from acquiring and using domain names that infringe on, are similar
to, or otherwise decrease the value of our brand or our trademarks
or service marks, and (xii) 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
EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net
income, adjusted provision for income taxes, adjusted effective
income tax rate, adjusted net income per diluted share, free cash
flow, gross profit, and gross margin. 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. The Company's use of
these terms may vary from the use of similarly-titled measures by
others in its 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:
- EBITDA represents GAAP net income adjusted to exclude: (1)
interest, (2) tax, and (3) depreciation and amortization.
- Adjusted EBITDA represents GAAP net income adjusted to
exclude, if applicable: (1) interest, (2) tax, (3) depreciation and
amortization, (4) gains or losses from equity method investments,
(5) stock-based compensation expense, (6) asset impairment charges,
and (7) other items affecting comparability during the period.
- Adjusted EBITDA margin represents adjusted EBITDA (as defined
above), divided by total GAAP revenue.
- Adjusted provision for income taxes is calculated by applying
an adjusted effective income tax rate to adjusted income before
income taxes. Adjusted effective income tax rate is based on the
statutory income tax rates in the jurisdictions in which we
operate. The adjusted effective income tax rate also excludes
discrete items that the Company views as unrelated to its
operations during the period, such as the impact of tax windfalls
and shortfalls associated with stock based compensation, as these
items can materially distort its effective income tax rate. The
Company monitors the adjusted effective income tax rate based on
events or trends that could materially impact the rate, including
tax legislation changes and changes in the geographic mix of
revenue and expenses. For the three and six months ended
June 30, 2018, the adjusted effective
income tax rate of 26% excludes the impact of approximately
$0.3 million and $0.5 million of tax windfalls, respectively, as
they are considered to be discrete items. For the three months
ended June 30, 2017, the adjusted
effective income tax rate of 40% excludes the impact of
approximately $0.2 million in tax
shortfalls, offset by an approximately $0.2
million of tax benefits associated with the release of a
previously reserved uncertain tax position, each of which are
considered to be discrete items. For the six months ended
June 30, 2017, the adjusted effective
income tax rate of 40% excludes the impact of approximately
$0.4 million in tax windfalls, which
are considered to be discrete items.
- Adjusted net income represents GAAP net income, adjusted for
items that impact comparability, which may include: (1) asset
impairment charges, (2) executive separation and other severance
charges, (3) use of an adjusted effective income tax rate (as
defined above), (4) costs related to exit activities, and (5) other
items affecting comparability during the period.
- 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.
- Gross profit represents GAAP net revenue less cost of revenue
excluding depreciation and amortization.
- Gross margin is equal to gross profit (as defined above)
divided by GAAP net revenue, expressed as a percentage.
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,
EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted provision
for income taxes, adjusted effective income tax rate, adjusted net
income, adjusted net income per diluted share, free cash flow,
gross profit, and gross margin are not measures of financial
performance under U.S. GAAP and, accordingly, should not be
considered substitutes for or superior to net income, 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, with the exception of gross margin
and gross profit, which are defined above.
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SOURCE XO Group Inc.