NEW YORK--(BUSINESS WIRE)--XO Group Inc. (the “Company”) (NYSE: XOXO, xogroupinc.com), today reported financial results for the three and nine months ended September 30, 2018.
Total revenue for the third quarter of 2018 was $43.1 million, up 6% from $40.6 million reported during the same period in the prior year. Net income for the quarter was $4.3 million or $0.17 per diluted share compared to diluted earnings per share of $0.14 in the same period in the prior year. Non-GAAP adjusted EBITDA for the quarter was $9.8 million or 23% of revenue. Non-GAAP net income per share for the quarter was $0.19 compared to $0.14 in the same period in the prior year. The Company’s balance sheet at September 30, 2018 reflects cash and cash equivalents of $123.0 million compared to $106.1 million at December 31, 2017.
“I want to thank the team for their good work this quarter, during which our growth businesses, Local Marketplace and Transactions, grew 19% year-over-year. We believe our products continue to delight our users and drive increased engagement: The Knot Planner app exceeded more than 1 million installs for the year, already surpassing the total for all of 2017. We are focused on maintaining this strong momentum across our platforms as we finish the year and head into 2019," said Mike Steib, Chief Executive Officer.
Long-Term Financial Targets
XO Group is not providing long-term financial targets due to its announced pending merger with WeddingWire, Inc.
Conference Call Details
In light of the pending merger announced on September 25, 2018, XO Group will not be hosting a conference call to discuss its results for the third quarter of 2018. More information on the Company's third quarter results can be found in XO's Form 10-Q for the three and nine months ended September 30, 2018. More details on the pending transaction can be found on XO Group's investor relations site, ir.xogroupinc.com.
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XO GROUP INC. |
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
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(unaudited, in thousands, except for share and per share data) |
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Three Months Ended |
Nine Months Ended |
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| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||||
| Net revenue | $ | 43,057 | $ | 40,609 | $ | 124,516 | $ | 120,351 | ||||||||||||||||||||
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Costs and expenses (exclusive of depreciation |
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| Cost of revenue | 1,793 | 2,307 | 6,050 | 7,133 | ||||||||||||||||||||||||
| Product and content development | 12,620 | 11,131 | 35,445 | 34,137 | ||||||||||||||||||||||||
| Sales and marketing | 13,187 | 12,197 | 38,967 | 39,761 | ||||||||||||||||||||||||
| General and administrative | 9,075 | 7,809 | 23,307 | 23,740 | ||||||||||||||||||||||||
| Depreciation and amortization | 1,350 | 1,565 | 4,664 | 5,234 | ||||||||||||||||||||||||
| Total costs and expenses | 38,025 | 35,009 | 108,433 | 110,005 | ||||||||||||||||||||||||
| Income from operations | 5,032 | 5,600 | 16,083 | 10,346 | ||||||||||||||||||||||||
| Loss in equity interests | (24 | ) | (33 | ) | (67 | ) | (1,204 | ) | ||||||||||||||||||||
| Interest and other income, net | 246 | 161 | 657 | 359 | ||||||||||||||||||||||||
| Income before income taxes | 5,254 | 5,728 | 16,673 | 9,501 | ||||||||||||||||||||||||
| Income tax expense | 960 | 2,148 | 3,482 | 3,225 | ||||||||||||||||||||||||
| Net income | $ | 4,294 | $ | 3,580 | $ | 13,191 | $ | 6,276 | ||||||||||||||||||||
| Net income per share: | ||||||||||||||||||||||||||||
| Basic | $ | 0.17 | $ | 0.14 | $ | 0.52 | $ | 0.25 | ||||||||||||||||||||
| Diluted | $ | 0.17 | $ | 0.14 | $ | 0.51 | $ | 0.25 | ||||||||||||||||||||
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Weighted average number of shares used |
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| Basic | 25,220 | 24,858 | 25,130 | 25,054 | ||||||||||||||||||||||||
| Dilutive effect of: | ||||||||||||||||||||||||||||
| Restricted stock | 339 | 226 | 306 | 262 | ||||||||||||||||||||||||
| Options | 452 | 40 | 278 | 35 | ||||||||||||||||||||||||
| Employee Stock Purchase Plan | — | — | 3 | 2 | ||||||||||||||||||||||||
| Diluted | 26,011 | 25,124 | 25,717 | 25,353 | ||||||||||||||||||||||||
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XO GROUP INC. |
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CONDENSED CONSOLIDATED BALANCE SHEETS |
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(unaudited, in thousands, except for share and per share data) |
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| September 30, 2018 | December 31, 2017 | ||||||||||||
| ASSETS | |||||||||||||
| Current assets: | |||||||||||||
| Cash and cash equivalents | $ | 123,040 | $ | 106,092 | |||||||||
| Accounts receivable, net | 19,427 | 17,375 | |||||||||||
| Prepaid expenses and other current assets | 4,386 | 5,327 | |||||||||||
| Total current assets | 146,853 | 128,794 | |||||||||||
| Long-term restricted cash | 1,181 | 1,181 | |||||||||||
| Property and equipment, net | 13,803 | 11,829 | |||||||||||
| Intangibles assets, net | 3,293 | 4,019 | |||||||||||
| Goodwill | 51,438 | 51,438 | |||||||||||
| Deferred tax assets, net | 5,137 | 6,124 | |||||||||||
| Investments | 1,625 | 1,442 | |||||||||||
| Other assets | 907 | 223 | |||||||||||
| Total assets | $ | 224,237 | $ | 205,050 | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||
| Current liabilities: | |||||||||||||
| Accrued compensation and employee benefits | $ | 6,912 | $ | 6,611 | |||||||||
| Accounts payable and accrued expenses | 8,044 | 5,273 | |||||||||||
| Deferred revenue | 15,087 | 13,891 | |||||||||||
| Total current liabilities | 30,043 | 25,775 | |||||||||||
| Deferred rent | 2,785 | 3,365 | |||||||||||
| Other liabilities | 802 | 1,776 | |||||||||||
| Total liabilities | 33,630 | 30,916 | |||||||||||
| Commitments and contingencies | |||||||||||||
| Stockholders’ equity: | |||||||||||||
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Preferred stock, $0.001 par value; 5,000,000 shares authorized and |
— | — | |||||||||||
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Common stock, $0.01 par value; 100,000,000 shares authorized |
260 | 258 | |||||||||||
| Additional paid-in-capital | 185,271 | 180,695 | |||||||||||
| Retained earnings/(accumulated deficit) | 5,076 | (6,819 | ) | ||||||||||
| Total stockholders’ equity | 190,607 | 174,134 | |||||||||||
| Total liabilities and stockholders’ equity | $ | 224,237 | $ | 205,050 | |||||||||
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XO GROUP INC. |
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NON-GAAP RECONCILIATION TABLE |
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For the Three and Nine Months Ended September 30, 2018 and 2017 |
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(unaudited, in thousands, except for share and per share data) |
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| Reconciliation of GAAP net income to EBITDA, adjusted EBITDA, and adjusted EBITDA margin: | |||||||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
| GAAP net income | $ | 4,294 | $ | 3,580 | $ | 13,191 | $ | 6,276 | |||||||||||||||||||
| Income tax expense | 960 | 2,148 | 3,482 | 3,225 | |||||||||||||||||||||||
| Interest and other income, net | (246 | ) | (161 | ) | (657 | ) | (359 | ) | |||||||||||||||||||
| Depreciation and amortization | 1,350 | 1,565 | 4,664 | 5,234 | |||||||||||||||||||||||
| EBITDA | 6,358 | 7,132 | 20,680 | 14,376 | |||||||||||||||||||||||
| Loss in equity interest(a) | 24 | 33 | 67 | 1,204 | |||||||||||||||||||||||
| Stock-based compensation | 2,103 | 2,021 | 5,995 | 6,037 | |||||||||||||||||||||||
| Bad debt expense(b) | — | — | — | 200 | |||||||||||||||||||||||
| Deal-related expenses(c) | 1,330 | — | 1,330 | — | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 9,815 | $ | 9,186 | 28,072 | $ | 21,817 | ||||||||||||||||||||
| GAAP net revenue | 43,057 | 40,609 | 124,516 | 120,351 | |||||||||||||||||||||||
| Adjusted EBITDA margin | 22.8 | % | 22.6 | % | 22.5 | % | 18.1 | % | |||||||||||||||||||
| (a) | Loss in equity interest includes an other-than-temporary impairment that reduced the carrying value of an equity investment to zero during the nine months ended September 30, 2017. | |
| (b) | Included in general and administrative expenses, related to a loan previously made to an equity investee in the nine months ended September 30, 2017. | |
| (c) | During Q3 2018, costs associated with the pending merger with WeddingWire, Inc. are included in general and administrative expenses. | |
| Reconciliation of GAAP net income to adjusted net income: | |||||||||||||||||||||||||||
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
| GAAP net income | $ | 4,294 | $ | 3,580 | $ | 13,191 | $ | 6,276 | |||||||||||||||||||
| Other-than-temporary impairment(a) | — | — | — | 1,032 | |||||||||||||||||||||||
| Bad debt expense(b) | $ | — | — | — | 200 | ||||||||||||||||||||||
| Deal-related expenses(c) | $ | 1,330 | — | 1,330 | — | ||||||||||||||||||||||
| Income tax expense | $ | 960 | 2,148 | 3,482 | 3,225 | ||||||||||||||||||||||
| Adjusted income before income taxes | 6,584 | 5,728 | 18,003 | 10,733 | |||||||||||||||||||||||
| Adjusted effective income tax expense rate | 26 | % | 40 | % | 26 | % | 40 | % | |||||||||||||||||||
| Adjusted provision for income tax expense | (1,712 | ) | (2,291 | ) | (4,681 | ) | (4,293 | ) | |||||||||||||||||||
| Adjusted net income | $ | 4,872 | $ | 3,437 | $ | 13,322 | $ | 6,440 | |||||||||||||||||||
| Adjusted net income per diluted share | $ | 0.19 | $ | 0.14 | $ | 0.52 | $ | 0.25 | |||||||||||||||||||
| Weighted average number of shares outstanding - diluted | 26,011 | 25,124 | 25,717 | 25,353 | |||||||||||||||||||||||
| (a) | Loss in equity interest includes an other-than-temporary impairment that reduced the carrying value of an equity investment to zero during the nine months ended September 30, 2017. | |
| (b) | Included in general and administrative expenses, related to a loan previously made to an equity investee in the nine months ended September 30, 2017. | |
| (c) | During Q3 2018, costs associated with the pending merger with WeddingWire, Inc. are included in general and administrative expenses. | |
| Free cash flow reconciliation: | |||||||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
| Net cash provided by operating activities | $ | 8,457 | $ | 7,409 | $ | 24,674 | $ | 17,241 | |||||||||||||||||||
| Less: capital expenditures | (1,567 | ) | (1,440 | ) | (6,251 | ) | (3,563 | ) | |||||||||||||||||||
| Free cash flow | $ | 6,890 | $ | 5,969 | $ | 18,423 | $ | 13,678 | |||||||||||||||||||
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XO GROUP INC. |
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SUPPLEMENTAL DATA TABLES |
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(unaudited, in thousands, except for metrics) |
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Revenue by Category |
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Three Months Ended |
Nine Months Ended |
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| 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
| Local marketplace | $ | 23,383 | $ | 19,851 | $ | 67,576 | $ | 57,408 | |||||||||||||||||||
| Transactions | 9,733 | 7,891 | 25,050 | 21,181 | |||||||||||||||||||||||
| National online advertising | 6,794 | 9,054 | 20,666 | 29,035 | |||||||||||||||||||||||
| Publishing and other | 3,147 | 3,813 | 11,224 | 12,727 | |||||||||||||||||||||||
| Total net revenue | $ | 43,057 | $ | 40,609 | $ | 124,516 | $ | 120,351 | |||||||||||||||||||
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TheKnot.com Local Marketplace Metrics |
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| Q3 2018 | Q3 2017 | ||||||||||||
| Vendor Count at Quarter end | 29,953 | 25,646 | |||||||||||
| TTM Vendor Count (a) | 28,361 | 23,504 | |||||||||||
| Retention Rate (b) | 77.0 | % | 78.6 | % | |||||||||
| Avg. Revenue/Vendor (a) | $ | 2,958 | $ | 3,045 | |||||||||
| (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 nine months ended September 30, 2018 and 2017, as follows:
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Three Months Ended |
Nine Months Ended |
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| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
| Product and content development | 661 | 666 | 1,902 | 1,819 | ||||||||||||||||||
| Sales and marketing | 463 | 423 | 1,297 | 1,288 | ||||||||||||||||||
| General and administrative | 979 | 932 | 2,796 | 2,930 | ||||||||||||||||||
| Total stock-based compensation | 2,103 | 2,021 | 5,995 | 6,037 | ||||||||||||||||||
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, (xii) risks related to the occurrence of any event, change or other circumstance that could give rise to the termination of the Agreement and Plan of Merger, (xiii) the failure to obtain Company stockholder approval of the proposed transaction or required regulatory approvals or the failure to satisfy any of the other conditions to the completion of the proposed transaction, (xiv) the effect of the announcement of the proposed transaction on the ability of the Company to retain and hire key personnel and maintain relationships with its customers, suppliers, vendors, advertisers, distributors, partners and others with whom it does business, or on its operating results and businesses generally, (xv) risks associated with the disruption of management's attention from ongoing business operations due to the proposed transaction, (xvi) the ability to meet expectations regarding the timing and completion of the proposed transaction, (xvii) the potential impact of the consummation of the proposed transaction on the Company's relationships, including with employees, customers, suppliers, vendors, advertisers, distributors, partners and competitors, and (xvii) 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, 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. 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 we view as unrelated to our operations during the period, such as the impact of tax windfalls and shortfalls associated with stock based compensation, changes in our reserves for uncertain tax positions, and non-deductible deal costs related to the Merger, as these items can materially distort our effective income tax rate. We monitor 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 months ended September 30, 2018, the adjusted effective income tax rate of 26% excludes the impact of approximately $0.7 million of tax benefits associated with the release of previously reserved uncertain tax positions, offset by an approximately $0.3 million tax effect of non-deductible deal costs, as these items are considered to be discrete items. For the nine months ended September 30, 2018, the adjusted effective income tax rate of 26% excludes the impact of approximately $0.7 million of tax benefits associated with the release of previously reserved uncertain tax positions as well as approximately $0.6 million in tax windfalls, offset by an approximately $0.3 million tax effect of non-deductible deal costs, as these items are considered to be discrete items. For the three months ended September 30, 2017, the adjusted effective income tax rate of 40% excludes the impact of approximately $0.3 million of tax benefits associated with the release of a previously reserved uncertain tax position, these benefits are considered to be discrete items. For the nine months ended September 30, 2017, the adjusted effective income tax rate of 40% excludes the impact of approximately $0.6 million of tax benefits associated with the release of previously reserved uncertain tax positions as well as approximately $0.4 million in tax windfalls, as each 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.
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, 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, 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.
