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| 8-K - FORM 8-K - XO GROUP INC. | v371604_8-k.htm |
FOR IMMEDIATE RELEASE
Conference Call Thursday, March 13th, at 4:30 p.m. ET, Dial-In (866) 430-3457 (ID# 2198783)
XO Group Reports Q4 and FY 2013 Financial Results;
Current President Michael Steib Elevated to CEO and Appointed to Board of Directors
Full Year Revenue up 3.6%, led by local online (up 9.1%) and registry services (up 27.2%)
David Liu to remain Chairman, shift focus to XO efforts in China
NEW YORK, March 13, 2014 – XO Group Inc. (NYSE: XOXO, xogroupinc.com), the premier consumer Internet and media company devoted to weddings, pregnancy, and everything in between, today reported financial results for the fourth quarter and year ended December 31, 2013.
XO Group also announced it has named Michael Steib, currently President, as its new Chief Executive Officer and has appointed him to the Board of Directors. Co-Founder David Liu will continue guiding overall Company direction as Chairman of the Board, including intensifying his focus on driving the Company’s business in China.
“Over the last 17 years, we have built some of the top brands in the industry,” said David Liu, Co-Founder and Chairman of XO Group. “The power of those brands to help people make lifestage decisions remains unchanged. However, our consumers now view mobile as their first choice for both content and engagement. Hiring Mike and empowering him to transform our businesses and build on our brands was a key first step. I am confident he has the skills and passion to guide XO Group and lead the industry into a more connected future.”
“Our goal at XO is to build a brand- and mobile-driven marketplace for lifestage decisions,” said Michael Steib, President and Chief Executive Officer, XO Group. “As a result, in late 2013 we began making critical investments in technology and talent in order to give our consumers even greater real-time, on-the-go access to trusted brands and vendors – and to build the back-end systems that make that access more valuable to advertisers and business partners.”
Added Steib: “It’s an honor to lead XO into this next exciting phase of its development.”
Overview of Recent Strategic Initiatives
Since joining the Company, Mr. Steib has worked closely with Mr. Liu to sharpen XO Group’s focus on building out
its network of branded sites, vendors and advertisers so that they can better serve the thousands of individual consumer touchpoints that take place as on-the-go brides, couples and families seek advice and assistance.
On this front, in recent months, the Company hired several new senior-level executives, under the leadership of Mr. Steib, including Gillian Munson as Chief Financial Officer; Jennifer Garrett as EVP, National Enterprise Sales; and Katherine Wu Brady as EVP, E-Commerce and Registry. These appointments stack the leadership team with the skills and expertise necessary to further the Company’s technological transformation.
Also under the direction of Mr. Steib, the Company added significant product and engineering expertise during the quarter focused heavily on mobile development. These strategic investments also resulted in higher product and content expenses, and included management transition expenses, all contributing to year-over-year increases in operating expenses.
“Our results highlight a strategic allocation of our capital towards internal investment that we believe will generate long term opportunities and returns for our company and our shareholders,” said Gillian Munson, Chief Financial Officer.
Full Year 2013 Highlights:
| · | Full year consolidated revenue was $133.8 million, a 3.6% year over year improvement. |
| § | Local online revenue increased 9.1%. |
| § | Registry services revenue increased 27.2% in 2013. |
| · | Gross profit was $111.4 million a 4.6% improvement from the prior year. Gross margin was 83.3% compared to 82.5% for 2012. |
| · | Net income for the full year 2013 was $5.8 million, down 33.0% from the prior year, reflecting the Company’s investment in future growth initiatives. |
| · | Full year diluted earnings per share (EPS) were $0.23, down $0.12 from full year 2012 diluted EPS. |
| · | Adjusted EBITDA for 2013 was $26.7 million, which compares to $25.5 million for full year 2012. |
| · | Cash flow from operations for the full year was $22.2 million. |
| · | Capital expenditures for the full year were $6.0 million. |
| · | Free cash flow for the full year of 2013 was $16.3 million, driving a $13.3 million increase in our overall cash balance to $90.7 million. |
Fourth Quarter 2013 Operating Results:
Total revenue for the fourth quarter of 2013 totaled $32.6 million, an increase of 1.3%, compared with $32.2 million in the fourth quarter of 2012.
| · | Total online advertising revenue was $20.1 million, a 1.2% increase from the comparable quarter in the prior year. Local online advertising grew by 7.1%, while national online advertising was down by 9.6%. |
| · | Registry services revenue increased by 32.1% to $1.6 million for the fourth quarter of 2013. |
| · | E-commerce revenue was $3.0 million, down 4.4% compared to the prior year. |
| · | Publishing and Other revenues were down 0.9% from the prior year due to a decrease in tradeshow revenue, partially offset by increased advertising revenue. |
Consolidated gross profit improved 2.3% year over year to $27.1 million for the fourth quarter primarily due to a mix shift to advertising and registry services revenue.
Operating expenses for the fourth quarter of 2013 were $29.1 million, an increase of 36.1% from the fourth quarter of 2012, driven by increases of $2.8 million in product and content development, $2.8 million in general and administrative expenses and $1.4 million related to impairment of tradenames. The increase in product and content was driven by increased personnel expenses, related to our product and mobile investments. The increase in general and administrative expense was primarily due to executive transition charges and foreign value added tax, interest and penalties.
Ijie.com incurred operating losses of $2.0 million and $5.0 million, respectively, for the three months and twelve months ended December 31, 2013.
Net loss and net loss per share on a GAAP basis for the fourth quarter of 2013 were $3.1 million and ($0.12) respectively, compared to net income of $3.1 million and net income per diluted share of $0.13 for the fourth quarter of 2012. Excluding severance charges related to executive management changes, impairment charges and incremental foreign tax expenses, adjusted net income per diluted share for the fourth quarter of 2013 was $0.02 compared to $0.13 for the fourth quarter of 2012.
Cash and cash equivalents were $90.7 million at the end of 2013, a 17.2% increase compared to 2012.
Capital expenditures for the fourth quarter of 2013 were $1.3 million.
XO GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except for Per Share Data)
(unaudited)
| Three Months Ended December 31, | ||||||||
| 2013 | 2012 | |||||||
| Net revenue: | ||||||||
| National online sponsorship and advertising | $ | 6,341 | $ | 7,017 | ||||
| Local online sponsorship and advertising | 13,793 | 12,884 | ||||||
| Total online sponsorship and advertising | 20,134 | 19,901 | ||||||
| Registry services | 1,553 | 1,175 | ||||||
| Merchandise | 2,995 | 3,131 | ||||||
| Publishing and other | 7,903 | 7,974 | ||||||
| Total net revenue | 32,585 | 32,181 | ||||||
| Cost of revenue: | ||||||||
| Online sponsorship and advertising | 421 | 398 | ||||||
| Merchandise | 2,107 | 2,211 | ||||||
| Publishing and other | 2,911 | 3,047 | ||||||
| Total cost of revenue | 5,439 | 5,656 | ||||||
| Gross profit | 27,146 | 26,525 | ||||||
| Operating expenses: | ||||||||
| Product and content development | 8,761 | 5,996 | ||||||
| Sales and marketing | 10,144 | 9,732 | ||||||
| General and administrative | 7,242 | 4,482 | ||||||
| Long-lived asset impairment charge | 1,430 | __ | ||||||
| Depreciation and amortization | 1,484 | 1,134 | ||||||
| Total operating expenses | 29,061 | 21,344 | ||||||
| (Loss) Income from operations | (1,915 | ) | 5,181 | |||||
| Loss in equity interests | (1,842 | ) | (26 | ) | ||||
| Interest and other income, net | 74 | 41 | ||||||
| (Loss) Income before income taxes | (3,683 | ) | 5,196 | |||||
| (Benefit) Provision for income taxes | (615 | ) | 2,074 | |||||
| Net (loss) income | $ | (3,068 | ) | $ | 3,122 | |||
| Net (loss) income per share: | ||||||||
| Basic | $ | (0.12 | ) | $ | 0.13 | |||
| Diluted | $ | (0.12 | ) | $ | 0.13 | |||
| Weighted average number of shares used in calculating net (loss) income per share: | ||||||||
| Basic | 24,704 | 24,311 | ||||||
| Diluted | 24,704 | 24,892 | ||||||
XO GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except for Per Share Data)
(unaudited)
| Twelve Months Ended December 31, | ||||||||
| 2013 | 2012 | |||||||
| Net revenue: | ||||||||
| National online sponsorship and advertising | $ | 27,216 | $ | 26,561 | ||||
| Local online sponsorship and advertising | 54,445 | 49,914 | ||||||
| Total online sponsorship and advertising | 81,661 | 76,475 | ||||||
| Registry services | 7,926 | 6,231 | ||||||
| Merchandise | 18,406 | 21,359 | ||||||
| Publishing and other | 25,821 | 25,066 | ||||||
| Total net revenue | 133,814 | 129,131 | ||||||
| Cost of revenue: | ||||||||
| Online sponsorship and advertising | 1,927 | 1,741 | ||||||
| Merchandise | 11,296 | 12,454 | ||||||
| Publishing and other | 9,178 | 8,407 | ||||||
| Total cost of revenue | 22,401 | 22,602 | ||||||
| Gross profit | 111,413 | 106,529 | ||||||
| Operating expenses: | ||||||||
| Product and content development | 29,877 | 26,229 | ||||||
| Sales and marketing | 39,718 | 40,239 | ||||||
| General and administrative | 23,073 | 20,980 | ||||||
| Long-lived asset impairment charge | 1,430 | 958 | ||||||
| Depreciation and amortization | 4,808 | 3,874 | ||||||
| Total operating expenses | 98,906 | 92,280 | ||||||
| Income from operations | 12,507 | 14,249 | ||||||
| Loss in equity interests | (2,016 | ) | (55 | ) | ||||
| Interest and other income, net | 144 | 113 | ||||||
| Income before income taxes | 10,635 | 14,307 | ||||||
| Provision for income taxes | 4,841 | 5,658 | ||||||
| Net income | 5,794 | 8,649 | ||||||
| Plus: net loss attributable to noncontrolling interest | — | 65 | ||||||
| Net income attributable to XO Group Inc. | $ | 5,794 | $ | 8,714 | ||||
| Net income per share attributable to XO Group Inc. common stockholders: | ||||||||
| Basic | $ | 0.24 | $ | 0.35 | ||||
| Diluted | $ | 0.23 | $ | 0.35 | ||||
| Weighted average number of shares used in calculating net income per share: | ||||||||
| Basic | 24,620 | 24,649 | ||||||
| Diluted | 25,596 | 25,218 | ||||||
XO GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
(unaudited)
| December 31, | ||||||||
| 2013 | 2012 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 90,697 | $ | 77,407 | ||||
| Accounts receivable, net | 11,838 | 14,960 | ||||||
| Inventories | 2,374 | 2,222 | ||||||
| Deferred production and marketing costs | 475 | 557 | ||||||
| Deferred tax assets, current portion | 2,782 | 2,857 | ||||||
| Prepaid expenses and other current assets | 5,993 | 2,452 | ||||||
| Total current assets | 114,159 | 100,455 | ||||||
| Long-term restricted cash | 2,599 | 2,599 | ||||||
| Property and equipment, net | 15,490 | 13,093 | ||||||
| Intangible assets, net | 3,357 | 5,660 | ||||||
| Goodwill | 38,500 | 37,750 | ||||||
| Deferred tax assets | 21,469 | 21,334 | ||||||
| Investment in equity interests | 1,680 | 2,396 | ||||||
| Other assets | 495 | 67 | ||||||
| Total assets | $ | 197,749 | $ | 183,354 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 12,420 | $ | 11,448 | ||||
| Deferred revenue | 14,864 | 14,710 | ||||||
| Total current liabilities | 27,284 | 26,158 | ||||||
| Deferred tax liabilities | 4,507 | 2,791 | ||||||
| Deferred rent | 5,914 | 6,628 | ||||||
| Other liabilities | 4,154 | 3,270 | ||||||
| Total liabilities | 41,859 | 38,847 | ||||||
| Stockholders’ equity: | ||||||||
| Preferred stock | — | — | ||||||
| Common stock | 270 | 259 | ||||||
| Additional paid-in-capital | 169,756 | 164,071 | ||||||
| Accumulated other comprehensive loss | (204 | ) | (97 | ) | ||||
| Accumulated deficit | (13,932 | ) | (19,726 | ) | ||||
| Total stockholders’ equity | 155,890 | 144,507 | ||||||
| Total liabilities and equity | $ | 197,749 | $ | 183,354 | ||||
| XO GROUP INC. |
| RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES |
| (Amounts in Thousands, Except for Per Share Data) |
| (unaudited) |
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
| Net (loss) income attributable to XO Group Inc. | ($ | 3,068 | ) | $ | 3,122 | $ | 5,794 | $ | 8,714 | |||||||
| (Benefit) Provision for income taxes | (615 | ) | 2,074 | 4,841 | 5,658 | |||||||||||
| Depreciation and amortization | 1,484 | 1,134 | 4,808 | 3,874 | ||||||||||||
| Stock-based compensation expense | 2,145 | (46 | ) | 6,697 | 6,388 | |||||||||||
| Long-lived asset impairment charges | 1,430 | - | 1,430 | 958 | ||||||||||||
| Loss in equity interests | 1,842 | 26 | 2,016 | 55 | ||||||||||||
| Interest and other income, net | (74 | ) | (41 | ) | (144 | ) | (113 | ) | ||||||||
| Net loss attributable to noncontrolling interest | - | - | - | (65 | ) | |||||||||||
| Executive severance charges (a) | 350 | - | 350 | - | ||||||||||||
| Foreign VAT, interest and penalties (b) | 930 | - | 930 | - | ||||||||||||
| Adjusted EBITDA | $ | 4,424 | $ | 6,269 | $ | 26,722 | $ | 25,469 | ||||||||
| Depreciation and amortization | (1,484 | ) | (1,134 | ) | (4,808 | ) | (3,874 | ) | ||||||||
| Stock-based compensation expense | (2,145 | ) | 46 | (6,697 | ) | (6,388 | ) | |||||||||
| Loss in equity interests | (1,842 | ) | (26 | ) | (2,016 | ) | (55 | ) | ||||||||
| Interest and other income, net | 74 | 41 | 144 | 113 | ||||||||||||
| Impairment of equity interest (c) | 1,773 | - | 1,773 | - | ||||||||||||
| Adjusted income before income taxes | 800 | 5,196 | 15,118 | 15,265 | ||||||||||||
| Adjusted provision for income taxes (d) | 328 | 2,052 | 6,198 | 6,030 | ||||||||||||
| Adjusted net income | $ | 472 | $ | 3,144 | $ | 8,920 | $ | 9,235 | ||||||||
| Adjusted net income per diluted share | $ | 0.02 | $ | 0.13 | $ | 0.35 | $ | 0.37 | ||||||||
| Diluted weighted average number of shares outstanding | 25,647 | 24,892 | 25,596 | 25,218 | ||||||||||||
| Net cash provided by operating activities | $ | 6,889 | $ | 6,956 | $ | 22,243 | $ | 25,373 | ||||||||
| Less: Capital expenditures | (1,307 | ) | (822 | ) | (5,968 | ) | (2,831 | ) | ||||||||
| Free cash flow | $ | 5,582 | $ | 6,134 | $ | 16,275 | $ | 22,542 | ||||||||
(a) Incremental costs included in "General and administrative" expenses on the Condensed Consolidated Statements of Operations for the three and twelve months ended December 31, 2013 include severance of $0.35 million, representing the severance for a former executive of the Company.
(b) Incremental costs included in "General and administrative" expenses on the Condensed Consolidated Statements of Operations for the three and twelve months ended December 31, 2013 include foreign VAT, interest and penalties of $0.9 million.
(c) Impairment of an equity interest of $1.8 million is included in "Loss in equity interests" on the Condensed Consolidated Statements of Operations for the three and twelve months ended December 31, 2013.
(d) Adjusted provision for income taxes was calculated using the effective tax rate for each respective year, excluding discrete items.
| XO GROUP INC. |
| SUPPLEMENTAL DATA TABLES |
| (unaudited) |
Local Online Advertising Metrics
| 4Q 2013 | 4Q 2012 | |||||||
| Profile Count | 30,562 | 29,161 | ||||||
| Vendor Count | 22,755 | 22,122 | ||||||
| Churn Rate | 27.9% | 30.2% | ||||||
| Avg. Revenue/Vendor | $ | 2,474 | $ | 2,351 | ||||
Stock Based Compensation
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| ($000s) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
| Product & content development | $ | 680 | $ | (50 | ) | $ | 2,391 | $ | 2,084 | |||||||
| Sales & marketing | 412 | 49 | 1,591 | 2,036 | ||||||||||||
| General & administrative | 1,053 | (45 | ) | 2,715 | 2,268 | |||||||||||
| Total stock-based compensation | $ | 2,145 | $ | (46 | ) | $ | 6,697 | $ | 6,388 | |||||||
Conference Call and Replay Information
XO Group Inc. will host a conference call with investors at 4:30 p.m. ET on Thursday, March 13, 2014, to discuss its fourth quarter 2013 financial results. Participants should dial (866) 430-3457 and use Conference ID# 2198783 at least 10 minutes before the call is scheduled to begin. Participants can also access the live broadcast over the Internet on the Investor Relations section of the Company's website,accessible at http://ir.xogroupinc.com. To access the webcast, participants should visit XO Group's website at least 15 minutes prior to the conference call in order to download or install any necessary audio software.
A replay of the webcast will also be archived on the Company's website approximately two hours after the conference call ends. A replay of the call will be available at (855) 859-2056 or (404) 537-3406, conference ID #2198783.
About XO Group Inc.
XO Group Inc. (NYSE: XOXO; http://www.xogroupinc.com) is the premier consumer Internet and media company devoted to weddings, pregnancy and everything in between, providing young women with the trusted information, products and advice they need to guide them through the most transformative events of their lives. Our family of premium brands began with the #1 wedding brand, The Knot, and has grown to include The Nest, The Bump and Ijie.com. XO Group is recognized by the industry for being innovative in all media - from the web to social media and mobile, magazines and books, and video - and our groundbreaking social platforms have ignited passionate communities across the world. XO Group has leveraged its customer loyalty into successful businesses in online sponsorship and advertising, registry services, ecommerce and publishing. The company is publicly listed on the New York Stock Exchange (XOXO) and is headquartered in New York City.
Forward Looking Statements
This release may contain projections or other forward-looking statements regarding future events or our future financial performance. These statements are only predictions and reflect our current beliefs and expectations. Actual events or results may differ materially from those contained in the projections or forward-looking statements. It is routine for internal projections and expectations to change as the quarter progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which we base our expectations may change prior to the end of the quarter. Although these expectations may change, we will not necessarily inform you if they do. Our policy is to provide expectations not more than once per quarter, and not to update that information until the next quarter. Some of the factors that could cause actual results to differ materially from the forward-looking statements contained herein include, without limitation, (i) our online wedding-related and other websites may fail to generate sufficient revenue to survive over the long term, (ii) we incurred losses for many years following our inception and may incur losses in the future, (iii) we may be unable to adjust spending quickly enough to offset any unexpected revenue shortfall, (iv) sales to sponsors or advertisers may be delayed or cancelled, (v) efforts to launch new technology and features may not generate significant new revenue or may reduce revenue from existing services, (vi) we may be unable to develop solutions that generate revenue from advertising delivered to mobile phones and wireless devices, (vii) the significant fluctuation to which our quarterly revenue and operating results are subject, (viii) the seasonality of the wedding industry, (ix) our e-commerce operations are dependent on Internet search engine rankings, and our ability to influence those rankings is limited, (x) the dependence of our registry services business on third parties, and (xi) other factors detailed in documents we file from time to time with the Securities and Exchange Commission. Forward-looking statements in this release are made pursuant to the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995.
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 net income (loss) adjusted to exclude, if applicable: (1) provision (benefit) for income taxes, (2) depreciation and amortization, (3) stock-based compensation expense, (4) impairment charges and asset write-offs, (5) loss in equity interests, (6) interest and other income, net (7) net loss attributable to non-controlling interest and (8) other incremental charges incurred in the period. |
| · | Adjusted net income represents GAAP net income (loss), adjusted for incremental costs incurred in the current period, which may include: (1) impairment charges and asset write-offs, (2) executive severance and (3) non-recurring foreign taxes, interest and penalties. |
| · | 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. In addition, Free cash flow provides management with useful information for managing the cash needs of our business. 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 (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.
Contact:
Ivan Marmolejos
Investor Relations
(212) 219-8555 x1004
IR@xogrp.com