NEW YORK, Aug. 8, 2012 /PRNewswire/ -- XO Group Inc. (NYSE: XOXO, www.xogroupinc.com), the premier media and technology company devoted to weddings, pregnancy, and everything in between, today reported financial results for the three months ended June 30, 2012.

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Second Quarter Summary Results

Total revenue for the second quarter was $35.4 million, up 2.1% compared to the prior year. The results were again led by local online advertising, and publishing and other, which grew 16.5% and 9.5%, respectively, year over year. National online advertising declined 5.4%. The e-commerce and registry businesses were down, 14.6% and 5.3% year over year, respectively.

For the quarter ended June 30, 2012, gross margin improved by 330 basis points over the prior year with gross margin improvements across each business line. The Company's operating profit was $5.2 million compared to an operating profit of $5.0 million in the prior year quarter. The $0.2 million increase in operating profit was due to revenue growth and improved gross margins which were partly offset by an increase in expenses including compensation, investment in Ijie.com in China, and rent compared to June 2011 quarter results. Net income for the quarter was $3.1 million or $0.13 per diluted share, compared to net income of $2.9 million or $0.10 per diluted share in the prior year quarter.

The Company's balance sheet at June 30, 2012 reflects cash and cash equivalents of $69.5 million, down $7.9 million from $77.4 million at December 31, 2011. Cash declined during the first half of the year, primarily due to the repurchase of 2.1 million shares of common stock for $18.9 million and capital expenditures of $1.2 million, offset in part by positive cash flow from operations of $14.3 million.

"We continue to be encouraged by the sustained growth in our local business even as we are cautious on the national online advertising market. Over the last several months, our product development team has been very busy as we constantly strive towards enhancing the user experience of our sites, imagining new and useful sponsorship opportunities for our advertisers, and ultimately driving growth for XO Group across business lines. As we enter the second half of 2012, we remain cautious on the macroeconomic environment but very positive regarding XO Group's opportunities and positioning for long term growth," said Chief Executive Officer David Liu.

Recent Developments

• Local online advertising growth is still strong, with second quarter revenues up 16.5% over the prior year quarter. Local publishing results continue to show strength as well. The Knot had more than 21,800 vendors with paid directory listings at the close of the second quarter, and the trailing twelve month churn rate was 29.7% at the end of June, down 10 basis points year over year but up slightly from 29.1% at December 31, 2011.  The average annual revenue per vendor was approximately $2,300 (See Supplemental Tables, below).
• National online advertising continued to be challenged in the second quarter as pullbacks and cancellations in consumer packaged goods and retail categories were only partially offset by strong advertising on thebump.com as traffic on that site continues to grow.
• The e-commerce business continues to improve gross margins driven by a recovery from last year's difficult implementation of new back office warehouse systems. Upgrades to the customer facing platform at the end of 2011 are expected to contribute to revenue growth in the long term but are negatively impacting revenue in the short term.
• Registry was down in the second quarter compared to last year as delays in our Gift Registry 360 platform roll out continue to impact the business.
• Our product development team has introduced a variety of new tools and updates to our sites, like a virtual cookbook tool to collect recipes from a bride's friends and family, a Wedding Dress LookBook app for the Kindle Fire, and local premium banners on our mobile site (m.theknot.com), among others.
• In the second quarter, XO Group finished the remainder of its authorized stock repurchase, buying 0.7 million shares of its common stock in the open market for an aggregate purchase price of $6.2 million.  Since starting repurchases under the program in the first quarter of 2011, XO Group has repurchased 9.6 million shares, or 27.9% of shares outstanding at the end of December 31, 2010 (See Supplemental Tables below).

Second Quarter and Year-to-Date 2012 Financial Highlights

"The first half of the year was mixed, with strong local advertising and publishing offset by challenges in national advertising and e-commerce. Improvements in gross margins drove better profitability compared to the first half last year. We are entering the second half of the year hopeful that economic conditions improve but with a continued focus on controlling costs even as we invest in providing our audience and clients with the best products and experiences possible," said Chief Financial Officer John Mueller.

• For the three months ended June 30, 2012, XO Group reported revenue of $35.4 million, up 2.1% compared to revenue in the second quarter of 2011. Net income for the second quarter was $3.1 million, or $0.13 per diluted share, as compared with net income of $2.9 million, or $0.10 per diluted share, for the quarter ended June 30, 2011.
• For the six months ended June 30, 2012, XO Group reported revenue of $65.2 million and net income of $3.5 million or $0.14 per diluted share. This compares to revenue of $62.3 million and net income of $2.2 million or $0.07 per diluted share in the first half of 2011. Revenue growth year to date was 5% compared to the same period in 2011, while net income was up 57% in the first six months of this year compared to the first half of 2011.
• National online advertising revenue was $6.7 million for the three months ended June 30, 2012, declining 5.4% from $7.1 million for the corresponding period in 2011. National online revenue was $13.1 million for the six months ended June 30, 2012, down 4.5% compared to $13.7 million for the corresponding period in 2011.
• Local online advertising revenue was $12.3 million for the quarter ended June 30, 2012, growing 16.5% from $10.6 million for the second quarter of 2011.  Local online revenue was $24.5 million for the six months ended June 30, 2012, up 18.3% compared to $20.7 million for the corresponding period in 2011.
• Merchandise revenue from the sale of wedding and baby supplies was $6.9 million and $12.5 million for the three and six months ended June 30, 2012, respectively, as compared to $8.1 million and $13.8 million for the corresponding periods in 2011. Revenue declined 14.6% in the second quarter 2012, and 9.3% for the first half of the year.
• Registry commission revenue was $2.0 million in the second quarter of 2012, down 5.3% from $2.1 million in the same period in 2011.  Year-to-date registry revenues were $3.0 million, down 7.0% compared with $3.2 million in 2011. The business is now comparable year over year because the switch to the current Macy's affiliate commission agreement happened in 2010.
• Gross profit for the second quarter of 2012 was $28.7 million, up 6.4% year over year, and margin was 80.9% for the three months ended June 30, 2012, compared with 77.6% for the corresponding period in 2011. In the six months ended June 30, 2012, gross profit margins approximated 82.2%, compared to 79.1% in the corresponding period in 2011.
• Operating expense was $23.5 million and $47.8 million for the three and six months ended June 30, 2012, respectively, compared with $21.9 million and $45.3 million for the corresponding period in 2011.  The increase in operating expense was due to incremental expenses associated with increased headcount in the sales organization for Ijie.com.  We also had expenses associated with our e-commerce technology upgrade, primarily in the first quarter of 2012. Another contributing factor was higher rent related to our new office space in New York. In the second quarter, XO Group incurred operating expenses of approximately $1.2 million for Ijie.com, compared to expenses of approximately $0.9 million in the second quarter of 2011.
• Stock-based compensation expense was $1.9 million and $4.5 million for the three and six months ended June 30, 2012, respectively, as compared to $1.3 million and $2.8 million for the corresponding periods in 2011.
• Net cash provided by operating activities was $8.2 million for the quarter ended June 30, 2012, while capital expenditures amounted to $0.6 million for the same period. Net cash provided by operating activities was $14.3 million for the six months ended June 30, 2012, while capital expenditures amounted to $1.2 million for the same period.

Supplemental Data Tables

Local Online Advertising Metrics

Gross Profit/Margin by Business

Stock Based Compensation

Stock Repurchase Summary Since Inception, Through Second Quarter 2012

Conference Call and Replay Information

XO Group Inc. will host a conference call with investors at 4:30 p.m. ET on August 8, 2012, to discuss its second quarter 2012 financial results. Participants should dial (866) 430-3457 and use Conference ID# 16528009 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 # 16528009.

About XO Group Inc.

XO Group Inc. (NYSE: XOXO; http://www.xogroupinc.com) is the premier media and technology 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 WeddingChannel.com, The Nest, The Bump, The Blush 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.

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) our history of losses, (iii) inability to adjust spending quickly enough to offset any unexpected revenue shortfall, (iv) delays or cancellations in spending by our advertisers and sponsors, (v) the significant fluctuation to which our quarterly revenue and operating results are subject, (vi) the seasonality of the wedding industry, (vii) the dependence of our e-commerce sites on search engine rankings and the limits of our search engine optimization efforts to influence those rankings, (viii) the dependence of the WeddingChannel.com registry services business on third parties, and (ix) 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.

CONTACT: Malindi Davies, Investor Relations Manager, +1-212-219-8555 x1078, IR@xogrp.com