XO Group Reports Second Quarter 2017 Financial Results;

NEW YORK, July 31, 2017 /PRNewswire/ -- XO Group Inc. (the "Company") (NYSE: XOXO, xogroupinc.com), today reported financial results for the three and six months ended June 30, 2017.

Total revenue for the second quarter of 2017 was $42.2 million, up 9% as compared to the same period in the prior year and the Adjusted EBITDA margin was 19%. GAAP net income for the quarter was $1.4 million or $0.06 per diluted share compared to diluted earnings per share of $0.15 in the same period in the prior year. Non-GAAP net income was $2.7 million or $0.11 per diluted share. The Company's balance sheet at June 30, 2017 reflected cash and cash equivalents of $98.4 million compared to $105.7 million at December 31, 2016. The Company repurchased and retired shares of its common stock for an aggregate price of $8.2 million during the quarter as part of the Company's previously announced repurchase program.

"We continue to develop great products that our couples love while delivering distinct value to our business partners. I am pleased to report another quarter of robust growth in our transactions business and our highest year-over-year quarterly growth rate in local online since the first quarter of 2016," said Mike Steib, Chief Executive Officer.

XO's Management Team will welcome Analysts and Investors at an Analyst Breakfast and Meeting on September 27th. More details to come.

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 of 20%.


                                                                  XO GROUP INC.
                                                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                (Amounts in Thousands, Except for Per Share Data)
                                                                   (Unaudited)


                                                     Three Months Ended June 30,                   Six Months Ended June 30,

                                                        2017                   2016               2017                   2016
                                                        ----                   ----               ----                   ----

    Net revenue:

     National online advertising                                $9,746                                   $9,566               $18,674  $18,224

     Local online advertising                         18,991                             16,652                       37,425    34,831
                                                      ------                                                         ------    ------

         Total online advertising                     28,737                             26,218                       56,099    53,055

     Transactions                                      8,190                              6,431                       13,152    10,635

     Publishing and other                              5,299                              6,059                        8,735    10,687
                                                       -----                              -----                        -----    ------

      Total net revenue                               42,226                             38,708                       77,986    74,377

    Cost of revenue:

     Online advertising                                  919                                684                        1,850     1,299

     Publishing and other                              1,867                              2,072                        2,845     3,182
                                                       -----                              -----                        -----     -----

      Total cost of revenue                            2,786                              2,756                        4,695     4,481

      Gross profit                                    39,440                             35,952                       73,291    69,896

    Operating expenses:


     Product and content development                  11,914                             10,814                       23,655    21,659

     Sales and marketing                              14,030                             11,513                       27,531    23,074

     General and administrative                        7,961                              5,833                       15,262    12,183


     Depreciation and amortization                     2,011                              1,641                        3,669     3,235
                                                       -----                              -----                        -----     -----

      Total operating expenses                        35,917                             29,801                       70,117    60,151

      Income from operations                           3,524                              6,151                        3,174     9,745

     Loss in equity interests                        (1,054)                              (37)                     (1,171)    (181)

     Interest and other income / (expense), net          105                               (18)                         198      (19)
                                                         ---                                ---                          ---       ---

      Income before income taxes                       2,575                              6,096                        2,201     9,545

     Income tax expense                                1,134                              2,331                          448     2,755
                                                       -----                              -----                          ---     -----

    Net income                                                  $1,441                                   $3,765                $1,753   $6,790
                                                                ======                                   ======                ======   ======


    Net income per share:

     Basic                                                       $0.06                                    $0.15                 $0.07    $0.27
                                                                 =====                                    =====                 =====    =====

     Diluted                                                     $0.06                                    $0.15                 $0.07    $0.26
                                                                 =====                                    =====                 =====    =====

    Weighted average number of shares
    used in calculating net earnings per
    share:

    Basic                                             24,958                             25,393                       25,154    25,328

    Dilutive effect of:

    Restricted stock                                     191                                260                          280       291

    Employee Stock Purchase Plan                           2                                  3                            2         1

    Options                                               31                                 21                           33        17
                                                         ===                                ===                          ===       ===

    Diluted                                           25,182                             25,677                       25,469    25,637
                                                      ======                             ======                       ======    ======


                                                                                               XO GROUP INC.
                                                                                   CONDENSED CONSOLIDATED BALANCE SHEETS
                                                                             (Amounts in Thousands, Except for Per Share Data)
                                                                                                (Unaudited)


                                                                                                                               June 30, 2017          December 31, 2016
                                                                                                                               -------------          -----------------

    ASSETS

    Current assets:

     Cash and cash equivalents                                                                                                                $98,391                     $105,703

     Accounts receivable, net                                                                                                         18,548                       20,182

     Prepaid expenses and other current assets                                                                                         8,018                        5,247
                                                                                                                                       -----                        -----

    Total current assets                                                                                                             124,957                      131,132

    Long-term restricted cash                                                                                                          1,181                        1,181

    Property and equipment, net                                                                                                       10,912                       12,130

    Intangibles assets, net                                                                                                            3,738                        4,154

    Goodwill                                                                                                                          48,678                       48,678

    Deferred tax assets, net                                                                                                           9,757                        9,918

    Investments                                                                                                                        1,514                        2,685

    Other assets                                                                                                                         187                          308
                                                                                                                                         ---                          ---

    Total assets                                                                                                                             $200,924                     $210,186
                                                                                                                                             ========                     ========

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:

         Accrued compensation and employee benefits                                                                                            $4,670                       $6,164

       Accounts payable and accrued expenses                                                                                           7,479                        7,515

       Deferred revenue                                                                                                               18,381                       16,752
                                                                                                                                      ------                       ------

    Total current liabilities                                                                                                         30,530                       30,431

    Deferred rent                                                                                                                      3,423                        3,720

    Other liabilities                                                                                                                  1,192                        1,485
                                                                                                                                       -----                        -----

    Total liabilities                                                                                                                 35,145                       35,636

    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, 2017 and December 31,
     2016, respectively

     Common stock, $0.01 par value; 100,000,000 shares authorized and                                                                    258                          264
     25,697,045 and 26,304,925 shares issued and outstanding at June 30,
     2017 and December 31, 2016, respectively

     Additional paid-in-capital                                                                                                      177,256                      178,959

     Accumulated deficit                                                                                                            (11,735)                     (4,673)
                                                                                                                                     -------                       ------

    Total stockholders' equity                                                                                                       165,779                      174,550
                                                                                                                                     -------                      -------

    Total liabilities and stockholders' equity                                                                                               $200,924                     $210,186
                                                                                                                                             ========                     ========


                                                                                                             XO GROUP INC.
                                                                                                     NON-GAAP RECONCILIATION TABLE
                                                                                           For the Three Months Ended June 30, 2017 and 2016
                                                                                               (In Thousands, Except for Per Share Data)
                                                                                                              (Unaudited)


                                                                                 Adjusted Net Income Reconciliation

                                                                                     Three Months Ended June 30,

                                                                              2017                                                                          2016

                                              As Reported Adjustments        Non GAAP                          As Reported    Adjustments           Non GAAP


    Net revenue                                               $42,226                 $                     -                                         $42,226                             $38,708          $  -  $38,708

    Cost of revenue                                 2,786                  -                                           2,786                             2,756                -                     2,756

    Operating expenses

    Product and content development                11,914                  -                                          11,914                            10,814                -                    10,814

    Sales and marketing                            14,030                  -                                          14,030                            11,513                -                    11,513

    General and administrative                      7,961                200         (a)                                7,761                             5,833                -                     5,833

    Depreciation and amortization                   2,011                  -                                           2,011                             1,641                -                     1,641
                                                    -----                ---                                           -----                             -----              ---                     -----

    Total operating expenses                       35,916                200                                           35,716                            29,801                -                    29,801


    Income from operations                          3,524                200                                            3,724                             6,151                -                     6,151


    Interest and other income/(expense), net          105                  -                                             105                              (18)               -                      (18)

    Loss in equity interests                      (1,054)             1,032         (a)                                 (22)                             (37)               -                      (37)

    Income tax expense                              1,134                  -                                           1,134                             2,331                -                     2,331
                                                    -----                ---                                           -----                             -----              ---                     -----

    Net income                                                 $1,441                                  $1,232                                           $2,673                              $3,765          $  -   $3,765

    Net income per share - diluted                              $0.06                                   $0.05                                            $0.11                               $0.15          $  -    $0.15

    Weighted average number of shares              25,182                                              25,182                                25,677                                25,677
    outstanding - diluted


                                                                                 Adjusted EBITDA Reconciliation

                                                                                   Three Months Ended June 30,

                                                                              2017                                                                          2016

    Income from operations                                                                            $3,524                                                                     $6,151

    Depreciation and amortization                                                2,011                                                                              1,641

    Stock-based compensation                                                     2,142                                                                              1,988

    Bad debt expense (a)                                                                                $200                                                                -
                                                                                                        ----                                                              ---

    Adjusted EBITDA                                                                                   $7,877                                                                     $9,780


                                                                                  Free Cash Flow Reconciliation

                                                                                   Three Months Ended June 30,

                                                                              2017                                                                          2016

    Net cash provided by operating activities                                                         $3,625                                                                     $7,090

    Less: capital expenditures                                                   (911)                                                                           (1,264)
                                                                                  ----                                                                             ------

    Free cash flow                                                                                    $2,714                                                                     $5,826

    (a)              Adjusted loss in equity interests
                     excludes the other-than-
                     temporary impairment that reduced
                     the carrying value of our equity
                     investment in Jetaport, Inc. to
                     zero. In addition, adjusted
                     general and administrative
                     operating expenses exclude bad
                     debt expense associated with a
                     loan previously made to Jetaport,
                     Inc.


                                                                                                             XO GROUP INC.
                                                                                                     NON-GAAP RECONCILIATION TABLE
                                                                                            For the Six Months Ended June 30, 2017 and 2016
                                                                                               (In Thousands, Except for Per Share Data)
                                                                                                              (Unaudited)


                                                                                 Adjusted Net Income Reconciliation

                                                                                      Six Months Ended June 30,

                                                                              2017                                                                         2016

                                              As Reported Adjustments        Non GAAP                          As Reported    Adjustments          Non GAAP


    Net revenue                                               $77,986                 $                     -                                        $77,986                            $74,377           $  -  $74,377

    Cost of revenue                                 4,695                  -                                           4,695                            4,481              -                       4,481

    Operating expenses

    Product and content development                23,655                  -                                          23,655                           21,659              -                      21,659

    Sales and marketing                            27,531                  -                                          27,531                           23,074              -                      23,074

    General and administrative                     15,262                200         (a)                               15,062                           12,183              -                      12,183

    Depreciation and amortization                   3,669                  -                                           3,669                            3,235              -                       3,235
                                                    -----                ---                                           -----                            -----            ---                       -----

    Total operating expenses                       70,117                200                                           69,917                           60,151              -                      60,151


    Income from operations                          3,174                200                                            3,374                            9,745              -                       9,745


    Interest and other income /                       198                  -                                             198                             (19)             -                        (19)
    (expense), net

    Loss in equity interests                      (1,171)             1,032         (a)                                (139)                           (181)             -                       (181)

    Income tax expense                                448                  -                                             448                            2,755              -                       2,755
                                                      ---                ---                                             ---                            -----            ---                       -----

    Net income                                                 $1,753                                  $1,232                                          $2,985                             $6,790           $  -   $6,790

    Net income per share - diluted                              $0.07                                   $0.05                                           $0.12                              $0.26           $  -    $0.26

    Weighted average number of shares              25,469                                              25,469                               25,637                               25,637
    outstanding - diluted


                                                                                 Adjusted EBITDA Reconciliation

                                                                                    Six Months Ended June 30,

                                                                              2017                                                                         2016

    Income from operations                                                                            $3,174                                                                   $9,745

    Depreciation and amortization                                                3,669                                                                             3,235

    Stock-based compensation                                                     4,017                                                                             3,644

    Bad debt expense (a)                                                           200                                                                                 -
                                                                                   ---                                                                               ---

    Adjusted EBITDA                                                                                  $11,060                                                                  $16,624


                                                                                  Free Cash Flow Reconciliation

                                                                                    Six Months Ended June 30,

                                                                              2017                                                                         2016

    Net cash provided by operating activities                                                         $9,832                                                                  $12,633

    Less: capital expenditures                                                 (2,123)                                                                          (1,986)
                                                                                ------

    Free cash flow                                                                                    $7,709                                                                  $10,647


    (a)              Adjusted loss in equity interests
                     excludes the other-than-
                     temporary impairment that reduced
                     the carrying value of our equity
                     investment in Jetaport, Inc. to
                     zero. In addition, general and
                     administrative operating expenses
                     excludes bad debt expense
                     associated with a loan previously
                     made to Jetaport, Inc.


                                        XO GROUP INC.
                             SUPPLEMENTAL DATA TABLES (UNAUDITED)
                                         (Unaudited)




    TheKnot.com Local Online
     Advertising Metrics                               Q2 2017         Q2 2016

    Vendor Count(a)                                             23,961         24,241

    Retention Rate(a)                                            75.1%         69.7%
                                                                  ----           ----

    Avg. Revenue/Vendor(a)                                      $2,865         $2,667
    ----------------------                                      ------         ------

    Vendor Count at Quarter
     End                                                        26,124         22,909
    -----------------------                                     ------         ------

    (a)              Calculated on a trailing
                     twelve-month basis.

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, 2017 and 2016, as follows:


                                    Three Months Ended June 30,                Six Months Ended June 30,

                                        2017                 2016                   2017                 2016
                                        ----                 ----                   ----                 ----

                                                              (Amounts in Thousands)

    Product and content development               $657                                       $556             $1,154    $961

    Sales and marketing                  431                            438                              865      848

    General and administrative         1,054                            994                            1,998    1,835
                                       -----                            ---                            -----    -----

    Total stock-based compensation              $2,142                                     $1,988             $4,017  $3,644

Conference Call and Replay Information

XO Group Inc. will host a conference call with investors at 8:00 a.m. ET on Monday, July 31, 2017, to discuss its second quarter 2017 financial results. Participants should dial (877) 201-0168 and use Conference ID# 51080589 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 moving in together with The Nest, 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 business depends on strong brands, and failing to maintain and enhance our brands would hurt our business, (iii) 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, (iv) 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, (v) 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, (vi) our businesses could be negatively affected by changes in Internet search engine algorithms and email marketing policies, (vii) our transactions business is dependent on third-party participants, whose lack of performance could adversely affect our results of operations, (viii) fraudulent or unlawful activities on our marketplace could harm our business and consumer confidence in our marketplace, (ix) we may be subject to legal liability associated with providing online services or content, (x) 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 (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.

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 adjusted EBITDA, adjusted net income, 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. Our use of these terms may vary from the use of similarly-titled measures by others in our 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:

    --  Adjusted EBITDA represents GAAP income from operations adjusted to
        exclude, if applicable: (1) depreciation and amortization, (2)
        stock-based compensation expense, (3) asset impairment charges, and (4)
        other items affecting comparability during the period.


    --  Adjusted net income represents GAAP net income, adjusted for items that
        impact comparability for incremental or unusual costs incurred in the
        current period, which may include: (1) asset impairment charges, (2)
        executive separation and other severance charges, (3) non-recurring
        foreign taxes, interest and penalties and (4) costs related to exit
        activities.


    --  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, adjusted EBITDA, 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 and 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.

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SOURCE XO Group Inc.