XO Group Reports Fourth Quarter and Full Year 2017 Financial Results
NEW YORK, March 1, 2018 /PRNewswire/ -- XO Group Inc. (the "Company") (NYSE: XOXO, xogroupinc.com), today reported financial results for the three months and full year ended December 31, 2017.
Total revenue for the fourth quarter of 2017 was $42.3 million, up 3% compared to the same period in the prior year. GAAP net income for the quarter was $0.4 million or $0.02 per diluted share compared to $0.13 in the prior year quarter. The Company's Q4 2017 earnings include tax expense of approximately $3.0 million, related to the impact of the U.S. Tax Cuts and Jobs Act of 2017. Excluding this expense, non-GAAP net income for the quarter was $3.5 million or $0.14 per diluted share compared to $0.13 in the prior year quarter. The Company's balance sheet at December 31, 2017 reflects cash and cash equivalents of $106.1 million compared to $105.7 million at December 31, 2016.
"We continue to develop innovative products that help our couples navigate and enjoy life's biggest moments while delivering distinct value to our business partners. In 2017, we delivered strong revenue growth in our transactions and local online businesses alongside record vendor count and retention rates for our local marketplace," said Mike Steib, Chief Executive Officer.
Long-Term Financial Targets
The Company is reiterating its long-term financial targets of double digit revenue growth rates, gross margins of approximately 90-95%, and adjusted EBITDA margins of 20%.
XO GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except for per share data)
(unaudited)
Three months ended December 31, Twelve months ended December 31,
--------------------------------
2017 2016 2017 2016
---- ---- ---- ----
Net revenue:
Local online advertising $20,802 $18,368 $78,358 $70,239
National online advertising 9,913 11,789 37,429 38,945
----- ------ ------ ------
Total online advertising 30,715 30,157 115,787 109,184
Transactions 6,004 5,079 27,106 22,819
Publishing and other 5,614 5,772 17,663 20,113
----- ----- ------ ------
Total net revenue 42,333 41,008 160,556 152,116
Cost of revenue:
Online advertising 1,507 1,563 4,564 3,665
Publishing and other 2,008 1,921 5,960 6,089
----- ----- ----- -----
Total cost of revenue 3,515 3,484 10,524 9,754
Gross profit 38,818 37,524 150,032 142,362
Operating expenses:
Product and content development 11,044 11,094 45,180 43,874
Sales and marketing 13,361 13,945 53,093 49,738
General and administrative 7,056 5,836 30,797 24,494
Depreciation and amortization 1,538 1,563 6,772 6,390
----- ----- ----- -----
Total operating expenses 32,999 32,438 135,842 124,496
Income from operations 5,819 5,086 14,190 17,866
Loss in equity interests (39) (118) (1,243) (328)
Interest and other income, net 253 117 612 146
--- --- --- ---
Income before income taxes 6,033 5,085 13,559 17,684
Income tax expense 5,593 1,663 8,025 5,564
Net income $440 $3,422 $5,534 $12,120
==== ====== ====== =======
Net income per share:
Basic $0.02 $0.14 $0.22 $0.48
===== ===== ===== =====
Diluted $0.02 $0.13 $0.22 $0.47
===== ===== ===== =====
Weighted average number of shares used in calculating net earnings
per share:
Basic 24,986 25,316 25,018 25,314
------
Diluted 25,306 25,698 25,322 25,640
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XO GROUP INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except for per share data)
(unaudited)
December 31,
2017 2016
---- ----
ASSETS
Current assets:
Cash and cash equivalents $106,092 $105,703
Accounts receivable, net of allowance of $2,354 and $1,386 at December 31, 2017 and December 31, 2016, respectively 16,399 20,182
Prepaid expenses and other current assets 5,102 5,247
Total current assets 127,593 131,132
Long-term restricted cash 1,181 1,181
Property and equipment, net 11,829 12,130
Intangible assets, net 4,019 4,154
Goodwill 51,438 48,678
Deferred tax assets, net 6,500 9,918
Investments 1,442 2,685
Other assets 118 308
--- ---
Total assets $204,120 $210,186
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued compensation and employee benefits $6,100 $6,164
Accounts payable and accrued expenses 5,661 7,515
Deferred revenue 14,113 16,752
------ ------
Total current liabilities 25,874 30,431
Deferred rent 3,365 3,720
Other liabilities 1,792 1,485
----- -----
Total liabilities 31,031 35,636
Commitments and contingencies (Note 11)
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized and 0 shares issued and - -
outstanding as of December 31, 2017 and 2016, respectively
Common stock, $0.01 par value; 100,000,000 shares authorized and 25,696,796 and 26,304,925 shares issued and outstanding at December 31, 2017 and 2016, respectively 258 264
Additional paid-in-capital 180,695 178,959
Accumulated deficit (7,864) (4,673)
------ ------
Total stockholders' equity 173,089 174,550
Total liabilities and stockholders' equity $204,120 $210,186
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XO GROUP INC.
NON-GAAP TABLE
For the Years Ended December 31, 2017 and 2016
(amounts in thousands, except for per share data)
(unaudited)
Years Ended December 31,
2017 2016
GAAP Adjustments Non GAAP Results GAAP Adjustments Non GAAP Results
Actual Actual
------ ------
Adjusted Net Income and EPS Reconciliation
Revenue $160,556 $ - $160,556 $152,116 - $152,116
Cost of revenues 10,524 - 10,524 9,754 - 9,754
Operating expenses
Product and content development 45,180 - 45,180 43,874 - 43,874
Sales and marketing 53,093 - 53,093 49,738 - 49,738
General and administrative 30,797 (200) a 30,597 24,494 - 24,494
Depreciation and amortization 6,772 - 6,772 6,390 - 6,390
----- --- ----- ----- -----
Total operating expenses 135,842 (200) 135,642 124,496 - 124,496
Income from operations 14,190 200 14,390 17,866 - 17,866
Interest and other income, net 612 - 612 146 - 146
(Loss)/gain in equity interest (1,243) 1,032 a (211) (328) - (328)
Income tax expense/(benefit) 8,025 (3,030) b 4,995 5,564 5,564
Net income $5,534 $4,262 $9,796 $12,120 $ - $12,120
Amounts per share - diluted 0.22 0.17 0.39 0.47 - 0.47
Weighted average number of shares outstanding
-diluted 25,322 25,322 25,640 25,640
====== ====== ====== ======
Adjusted EBITDA Reconciliation
Operating income $14,190 $200 $14,390 $17,866 $ - $17,866
Depreciation and amortization 6,772 - 6,772 6,390 - 6,390
Stock-based compensation 7,843 - 7,843 8,359 - 8,359
expense
Adjusted EBITDA $28,805 $200 $29,005 $32,615 $ - $32,615
======= ==== ======= ======= === === =======
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.
b. In 2017, income tax expense
includes approximately $3.0
million related primarily to the
revaluation of certain deferred
tax assets in conjunction with the
U.S. Tax Cuts and Jobs act of
2017.
XO GROUP INC.
NON-GAAP TABLE
For the Quarters Ended December 31, 2017 and 2016
(amounts in thousands, except for per share data)
(unaudited)
Quarters Ended December 31,
2017 2016
GAAP Adjustments Non GAAP Results GAAP Adjustments Non GAAP Results
Actual Actual
------ ------
Adjusted Net Income and
EPS Reconciliation
Revenue $42,333 $ - $42,333 $41,008 - $41,008
Cost of revenues 3,515 - 3,515 3,484 - 3,484
Operating expenses - - -
Product and content development 11,044 - 11,044 11,094 - 11,094
Sales and marketing 13,361 - 13,361 13,945 - 13,945
General and administrative 7,056 - 7,056 5,836 - 5,836
Depreciation and amortization 1,538 - 1,538 1,563 - 1,563
----- --- ----- ----- -----
Total operating expenses 32,999 - 32,999 32,438 - 32,438
- -
Income from operations 5,819 - 5,819 5,086 5,086
- -
Interest and other income, net 253 - 253 117 117
Loss in equity interest (39) - (39) (118) - (118)
Income tax expense/(benefit) 5,593 (3,030) a 2,563 1,663 1,663
Net income $440 $3,030 $3,470 $3,422 $ - $3,422
Amounts per share - diluted 0.02 0.12 0.14 0.13 - 0.13
Weighted average number of shares outstanding
-diluted 25,306 25,306 25,698 - 25,698
====== ====== ====== ======
Adjusted EBITDA Reconciliation
Operating income $5,819 $ - $5,819 $5,086 $ - $5,086
Depreciation and amortization 1,538 - 1,538 1,563 - 1,563
Stock-based compensation expense 1,806 - 1,806 2,558 - 2,558
Adjusted EBITDA $9,163 $ - $9,163 $9,207 $ - $9,207
====== === === ====== ====== === === ======
a. In 2017, income tax expense
includes approximately $3.0
million related primarily to the
revaluation of certain deferred
tax assets in conjunction with the
U.S. Tax Cuts and Jobs act of
2017.
XO GROUP INC.
SUPPLEMENTAL DATA TABLES (UNAUDITED)
(amounts in thousands, except for metrics)
(unaudited)
Three months ended December 31, Twelve months ended December 31,
------------------------------- --------------------------------
2017 2016 2017 2016
---- ---- ---- ----
Net cash provided by operating $7,242 $7,302 $24,483 $27,390
activities
Less: capital expenditures (2,006) (1,250) (5,569) (4,297)
Free cash flow $5,236 $6,052 $18,914 $23,093
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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 twelve months ended December 31, 2017 and 2016, as follows:
Three months ended December 31, Twelve months ended December 31,
------------------------------- --------------------------------
2017 2016 2017 2016
---- ---- ---- ----
Product and content development $689 $654 $2,509 $2,324
Sales and marketing 241 831 1,528 2,057
General and administrative 876 1,073 3,806 3,978
Total stock-based compensation $1,806 $2,558 $7,843 $8,359
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TheKnot.com Local Online Advertising Metrics
Q4 2017 Q4 2016
Vendor Count at quarter end 27,252 22,058
TTM Vendor Count(a) 24,748 22,447
Retention Rate(a) 80.2% 63.4%
Avg. Revenue/Vendor(a) $2,995 $2,955
(a) Calculated on an averaged
trailing twelve-month
basis.
Conference Call and Replay Information
XO Group Inc. will host a conference call with investors at 8:00 a.m. ET on Thursday, March 1, 2018, to discuss its fourth quarter and full year 2017 financial results. Participants should dial (833) 236-5763 and use Conference ID# 6377287 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 enjoy life's biggest moments together. Our family of multi-platform brands guide people through transformative lifestages, 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 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 for
items that impact comparability, which may include: (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, which may include: (1) asset impairment charges,
(2) executive separation and other severance charges, (3) impact of U.S.
tax reform and non-recurring foreign taxes, interest and penalties, (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.
-- Adjusted EBITDA margin represents adjusted EBITDA (as defined above),
divided by total GAAP revenue.
-- Free cash flow represents GAAP net cash provided by operations, less
capital expenditures.
-- National online advertising programs include display advertisements.
Revenue from display advertisements is largely generated by sold
impressions (the number of views or displays of a customer's
advertisement, banner, link or other form of content on our online
properties for which we earn revenue). Display advertising revenue per
one thousand sold impressions derives our effective CPM ("eCPM").
-- Through our transactions business, we earn fixed fees, a percentage of
sales, per-unit activity fees, or some combination thereof with respect
to these transactions, which we refer to collectively as our "take
rate."
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 EBITDA margin, Adjusted net income (loss), Adjusted net income (loss) 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 (loss), net income (loss) 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.
