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Investor Presentation | November 2015
Safe Harbor This presentation 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 online wedding-related and other websites, mobile and other digital properties 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) efforts to launch new or upgrading existing technology and features may not generate significant new revenue or may reduce revenue from existing services, (v) we may be unable to develop solutions that generate revenue from advertising and other services delivered to mobile phones and wireless devices, (vi) the significant fluctuation to which our quarterly revenue and operating results are subject, (vii) the seasonality of the wedding industry, (viii) our operations are dependent on Internet search engine rankings, and our ability to influence those rankings is limited, (ix) the dependence of our registry and commerce services business on third parties, (x) increased competition in our markets could reduce our market share, 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. This presentation includes certain "Non‐GAAP financial information." A reconciliation of such information to the most directly comparable GAAP data can be found at the end of this presentation. 2 © 2015 XO GROUP INC. ALL RIGHTS RESERVED.
Investment Opportunity Strategic Transformation Underway Solid Financial Foundation • #1 online wedding property; growing baby property • Replenishing audience in an attractive demographic • Strong multi-platform brand built over 18 years • Leader in Attractive Market Evolving our wedding vendor marketplace • Investing in our business and invigorating our product road map • Improving performance with rigorous examination and decisive action • Experienced, focused management team • Diversified revenue streams • Healthy margin capability • Balanced approach to capital allocation 3 © 2015 XO GROUP INC. ALL RIGHTS RESERVED.
XO Group at a Glance Our mission is to help people navigate and truly enjoy life’s biggest moments, together. Our family of multi-platform brands guide couples through transformative life stages, from getting married, to moving in together and having a baby. Online Wedding Property with Growing Visitors Growing Baby Property* Founded in 1996 Employees** 18 years 630 #1 9% of revenue 2014 Revenue (+7% Y/Y) 2014 Adjusted EBITDA 2014 Gross Margin Free cash flow generated over last 3 years $143.7M $24.6M 85.2% $53.8M 4 © 2015 XO GROUP INC. ALL RIGHTS RESERVED. *Bump total revenue for the year ended December, 31 2014 **Number of employees as of 9/30/15
Business Overview 2014 Revenue by Brand** 2014 Revenue $143.7M +7.4% Y/Y Delivering qualified leads to local vendors; foundation for our wedding vendor marketplace • ~25,000 vendors*, ~$2,500 avg* revenue/vendor, ~75% retention* Local Online National Online Brand advertising to endemic and non-endemic advertisers • The Bump national online revenue up 57% year-over-year 2014 Publishing Other Delivering award winning content & ads in local & national markets • The Knot National magazine, regional magazines & The Bump magazine; books Registry Service and Commerce Affiliate partnerships with top online wedding registries • Registry revenue growth 20%+ year-over-year 2014 Merchandise 2014 Revenue by Business Line Connecting our audience to goods and services through our commerce affiliate partners • Exited merchandise fulfilment operations during Q1 2015 5 © 2015 XO GROUP INC. ALL RIGHTS RESERVED. *As of 9/30/15; avg revenue/vendor and retention rate calculated on a trailing 12 month basis **Ijie revenue included as part of The Knot
The Knot: #1 in Weddings Wedding • ~2 million marriages/yr • 11 month average planning cycle • National avg. wedding spend continues to grow: $31,213 for 2014* • $70+ B spent annually 9 months ended September 30, 2015 Unique Visitors Monthly Average (in millions) with Year-Over-Year % Growth * Includes engagement ring but does not include honeymoon 4.3 2.3 1.9 0.7 6 © 2015 XO GROUP INC. ALL RIGHTS RESERVED. 0.6 Does not meet minimum reporting requirements Unique Visitor Source: comScore Multi Platform *United States Census Bureau American Community Survey and The 2014 Knot Market Intelligence’s Annual Real Weddings Survey
The Bump: Growing Baby Platform Baby* +20% Y/Y • ~4 million births/year • $60+ B spend annually on newborns Growing mobile user-base dramatically expands editorial and advertisers’ reach 3.6M 9 month as of September 30, 2015 Avg. Monthly Unique Visitors • 2014 Development team focused on mobile apps (not included by comScore) • New responsive site launched February 2015 7 Unique Visitor Source: comScore Multi Platform; *NCHS National Vital Health Statistics Reports and USDA report- expenditures on children © 2015 XO GROUP INC. ALL RIGHTS RESERVED.
Strategic Transformation to Accelerate Growth 8 © 2015 XO GROUP INC. ALL RIGHTS RESERVED.
The Knot Wedding Vendor Marketplace Assets & Initiatives Engage • New apps: generating high bride/vendor engagement • Relaunched TheKnot.com for mobile first • 5M+ Real Wedding photos tagged to 90,000 local vendors Match • Robust reviews • Couple/vendor engagement up 3X • Comprehensive user data enables personalization efforts • Grew to 250,000+ vendors by adding unpaid listings • ~25,000 paying vendors with extensive profiles • Detailed vendor analytics, helps vendors connect with couples 9 © 2015 XO GROUP INC. ALL RIGHTS RESERVED. Connect * Vendor count as of 9/30/15; Vendor engagement Q3 2014 vs Q3 2015
Wedding Vendor Marketplace Creates Opportunity to Capture Larger Share of… …vendors and total wedding spend ~300K local wedding vendors $70+ billion spent on local wedding services • • XO Group local online revenue accounts for less than 0.1% of total spent on local wedding services. • U.S. small businesses generally spend 5-10% of their total revenue on marketing. A wider range of services plus product enhancements that utilize embedded mobile functionally, we believe, will enable us to capture a larger share of the market. 10 * Vendor count as of 9/30/15 © 2015 XO GROUP INC. ALL RIGHTS RESERVED.
Our Business Strategy Invest in Growth • Local online – transition to local wedding vendor marketplace • The Bump online • Registry and commerce Sustain Positive Momentum • National online (wedding) • Publishing Decisive Action Taken to Address Under-Performing/Non-Core Assets • Ijie - Disposed of in December 2014 • E-Commerce - exited merchandise operations during Q1 2015 Focused on assets with high performance and potential 11 © 2015 XO GROUP INC. ALL RIGHTS RESERVED.
Invigorated Products Mobile first Personalized experience Match & connect with relevant wedding professionals Mobile first Tailored to her pregnancy stage and/or child’s age Seamless integration between web and apps 12 Wedding Lookbook App © 2015 XO GROUP INC. ALL RIGHTS RESERVED. The Bump App
Leadership Team Mike Steib | Chief Executive Officer Gillian Munson | Chief Financial Officer • Appointed CEO of XO Group March 2014; joined July 2013 • CEO at Vente-Privee USA (2011-2013) • Managing Director Emerging Platforms; Google Inc. (2007-2011) • General Manager at NBC Universal • Joined XO Group Nov. 2013 • MD at Allen & Co (2007-2013) • VP Business Development at Symbol Technologies (2003-2007) • Executive Director and Senior Equity Analyst at Morgan Stanley Kristin Savilia | President, Local Marketplace Nic Di Iorio | Chief Technology Officer • Joined XO Group July 2005; EVP of Local Enterprise (2010May 2015) • Chief Technology Officer since February 2008 • Cofounder and CEO of City24/7 LLC from (2006-2008), where he remains a member of the Advisory Board • Chief Technology Officer of Interpublic Group of Companies (IPG) • Executive Director of Bridal & Gift Registry at Linens ’n Things (1999-2005) Brent Tworetzky | EVP, Product Kathy Wu Brady | EVP, E-Commerce & Registry • Joined XO in September 2015 • VP of Product Management at Udacity (October 2013 – April 2015) • Product Leader at Chegg, WebMD, ClassPass and Mint.com • Venture Capitalist at Shasta Ventures • Joined XO in March 2014 • CEO of Vente-Privee USA, where sales doubled in 2013 under her management • Held senior-level positions at AOL in strategy & operations, and at NBC Universal Dhanusha Sivajee | EVP, Marketing Jennifer Garrett | EVP, National Enterprise • • • • • Joined XO Group in February 2014 Joined XO in August 2014 CMO, AOL Brand Group (June 2013-July 2014) VP, Marketing of Bloomberg Mobile (Feb. 2011–June 2013) Director, Affiliate & Advanced Product Marketing of HBO including HBO GO (June 2004-Feb 2011) • Spent 12 years at Viacom Inc., in senior sales roles at Nickelodeon and MTV Networks International 13 © 2015 XO GROUP INC. ALL RIGHTS RESERVED.
Financials 14 © 2015 XO GROUP INC. ALL RIGHTS RESERVED.
Solid Financial Foundation Adj. EBITDA ($MM) Free Cash Flow (FCF) ($MM) 2013 and 2014 FCF y/y decrease driven by an increase in capital 15 expenditures and a lower cash flow from operations – Funding product transformation © 2015 XO GROUP INC. ALL RIGHTS RESERVED.
Long-Term Target Financial Model 2008-2013 FY 2014 Target Model Net revenue y/y growth 5% CAGR 7% Double digit growth Gross Margin % 81.0 % avg. 85.2% 90-95% Adj. EBITDA Margin % 17.5% avg. 17% At least 20% $MM 16 © 2015 XO GROUP INC. ALL RIGHTS RESERVED.
Q3 Update 3 months ended 9/30/15 3 months ended 9/30/14 Revenue $34.7 $35.9 Gross Profit $32.7 $31.0 Margin • Transactional businesses, Registry and Commence, revenue increased 40% y/y Summary Income Statement ($M) 94.1% 86.4% • Total revenue excluding merchandise operations increased 10.6% y/y *Adjusted EBITDA $7.3 $7.1 Net Income $2.9 $2.1 • Gross margin 94% Earnings per Diluted Share $0.11 $0.08 9/30/15 12/31/14 • text • Adjusted EBITDA increased 2.9% y/y Summary Balance Sheet ($M) • Earnings per diluted share rose $0.03 or 38% year over year to $0.11 Cash and cash equivalents $86.3 $90.0 Other current assets 26.9 23.5 • $86.3 million in cash Total Assets 193.1 193.6 --- --- Current Liabilities 26.9 28.7 Total Liabilities 32.8 35.7 $193.1 $193.6 Debt • Used $2.5 million during the third quarter to make investments in Jetaport, Inc. and a vendor services company Total Liabilities and Stockholders’ Equity 17 * Non- GAAP, please see reconciliation at the end of this presentation © 2015 XO GROUP INC. ALL RIGHTS RESERVED.
Capital Allocation Priorities Capital Allocation Areas • Internal investments - In the midst of investment cycle: operating expenses to grow at rates larger than revenue growth rates • Strategic acquisitions and investments - Assets that accelerate marketplace transformation • Opportunistic stock buybacks - $20 million authorization; repurchased $1.6 million during 2014 - Repurchased $8.8 million year-to-date through September 30, 2015 18 © 2015 XO GROUP INC. ALL RIGHTS RESERVED.
Investment Opportunity Strategic Transformation Underway Solid Financial Foundation • #1 online wedding property; growing baby property • Replenishing audience in an attractive demographic • Strong multi-platform brand built over 18 years • Leader in Attractive Market Evolving our wedding vendor marketplace • Investing in our business and invigorating our product road map • Improving performance with rigorous examination and decisive action • Experienced, focused management team • Diversified revenue streams • Healthy margin capability • Balanced approach to capital allocation 19 © 2015 XO GROUP INC. ALL RIGHTS RESERVED.
Questions? Contact firstname.lastname@example.org 20 © 2015 XO GROUP INC. ALL RIGHTS RESERVED.
Quarterly Revenue Break Out, Including Historical Registry and Commerce XO GROUP INC. 2014-Q3 2015 Quarterly Revenue (Amounts in Thousands) (Unaudited) Q1 2014 Q2 2014 Q3 2014 Q4 2014 Total 2014 National online advertising $6,910 $7,541 $7,326 $8,679 $30,456 Local online advertising Q1 2015 Q2 2015 Q3 2015 $7,999 $8,505 $8,669 14,439 14,510 14,796 15,348 59,093 15,917 16,220 16,369 21,349 22,051 22,122 24,027 89,549 23,916 24,725 25,038 Registry and commerce 1,886 3,072 3,430 1,983 10,370 2,294 4,163 4,809 Merchandise 3,653 4,775 4,473 3,006 15,908 878 --- --- Publishing and other 5,532 8,432 5,833 8,040 27,837 5,514 7,302 4,859 $32,420 $38,330 $35,858 $37,056 $143,664 $32,602 $36,190 $34,706 Total Online advertising Total net revenue 21 © 2015 XO GROUP INC. ALL RIGHTS RESERVED.
Supplemental Data (Unaudited) – Local Advertising Metrics (excluding Two Bright Lights) Storefronts(a) Vendor Count Retention Rate(b) Avg. Revenue/Vendor(c) Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014 31,705 32,812 33,308 33,414 32,602 25,034 24,619 25,182 24,764 24,304 74.9% 76.4% 78.9% 78.3% 77.2% $2,582 $2,547 $2,519 $2,527 $2,517 (a) Previously disclosed as Profile Count (b) Calculated on a trailing twelve-month basis. Previously disclosed as churn rate. Retention rate calculated as one less churn rate. (c) Calculated on a trailing twelve-month basis. 22 © 2015 XO GROUP INC. ALL RIGHTS RESERVED.
Reconciliation of GAAP to NON-GAAP Financial Measures: Q3 2015 & YTD 9/30/2015 23 © 2015 XO GROUP INC. ALL RIGHTS RESERVED.
Reconciliation of GAAP to NON-GAAP Financial Measures: 2012-2014 24 © 2015 XO GROUP INC. ALL RIGHTS RESERVED.