Xo 10-Q 3 Nov 16 2016 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Nov. 01, 2016
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q3
Trading Symbol	XOXO
Entity Registrant Name	XO GROUP INC.
Entity Central Index Key	1,062,292
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		26,459,858

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 100,070	$ 88,509
Accounts receivable, net	18,345	20,475
Prepaid expenses and other current assets	7,643	5,341
Total current assets	126,058	114,325
Long-term restricted cash	1,181	2,598
Property and equipment, net	12,258	13,251
Intangibles assets, net	4,367	4,817
Goodwill	48,678	47,396
Deferred tax assets, net	10,543	11,578
Investments	2,804	2,719
Other assets	242	57
Total assets	206,131	196,741
Current liabilities:
Accrued Compensation and employee benefits	5,749	6,036
Accounts payable and accrued expenses	7,462	6,127
Deferred revenue	16,643	18,640
Total current liabilities	29,854	30,803
Deferred rent	3,942	4,486
Other liabilities	1,994	1,985
Total liabilities	35,790	37,274
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized and 0 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively	0	0
Common stock, $0.01 par value; 100,000,000 shares authorized and 26,475,720 and 26,235,824 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively	265	264
Additional paid-in-capital	177,275	173,564
Accumulated deficit	(7,199)	(14,361)
Total stockholders’ equity	170,341	159,467
Total liabilities and stockholders’ equity	$ 206,131	$ 196,741

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Preferred stock, par value (usd per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (shares)	5,000,000	5,000,000
Preferred stock, shares issued (shares)	0	0
Preferred stock, shares outstanding (shares)	0	0
Common stock, par value (usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized (shares)	100,000,000	100,000,000
Common stock, shares issued (shares)	26,475,720	26,235,824
Common stock, shares outstanding (shares)	26,475,720	26,235,824

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Net revenue:
Online advertising	$ 25,972	$ 25,038	$ 79,027	$ 73,679
Transactions	7,105	4,809	17,740	11,266
Merchandise	0	0	0	878
Publishing and other	3,654	4,859	14,341	17,675
Total net revenue	36,731	34,706	111,108	103,498
Cost of revenue:
Online advertising	802	683	1,986	1,588
Merchandise	0	0	0	881
Publishing and other	986	1,367	4,168	5,082
Total cost of revenue	1,788	2,050	6,154	7,551
Gross profit	34,943	32,656	104,954	95,947
Operating expenses:
Product and content development	11,729	9,901	33,503	29,300
Sales and marketing	13,098	10,679	36,325	31,683
General and administrative	5,501	5,955	17,531	18,116
Depreciation and amortization	1,580	1,361	4,815	4,027
Total operating expenses	31,908	27,896	92,174	83,126
Income from operations	3,035	4,760	12,780	12,821
Loss in equity interests	(29)	(173)	(210)	(209)
Interest and other income/(expense), net	48	(3)	29	(51)
Income before income taxes	3,054	4,584	12,599	12,561
Income tax expense	1,146	1,718	3,901	4,939
Net income	$ 1,908	$ 2,866	$ 8,698	$ 7,622
Net income per share:
Basic (usd per share)	$ 0.08	$ 0.11	$ 0.34	$ 0.30
Diluted (usd per share)	$ 0.07	$ 0.11	$ 0.34	$ 0.30
Weighted average number of shares used in calculating net earnings per share:
Basic (shares)	25,368	25,136	25,341	25,161
Diluted (shares)	25,727	25,449	25,675	25,537
Restricted stock
Weighted average number of shares used in calculating net earnings per share:
Dilutive securities included in dilutive shares (shares)	331	304	318	360
Options
Weighted average number of shares used in calculating net earnings per share:
Dilutive securities included in dilutive shares (shares)	28	9	16	16

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 8,698	$ 7,622
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4,815	4,027
Stock-based compensation expense	5,801	4,252
Deferred income taxes	1,035	987
Excess tax benefits from stock-based awards	(494)	(979)
Allowance for doubtful accounts	314	1,527
Other non-cash charges	223	420
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable	1,816	(5,826)
(Increase) decrease in prepaid expenses and other assets, net	(870)	1,740
Decrease in accrued compensation and benefits	(287)	(1,900)
Increase in accounts payable and accrued expenses	1,569	1,134
Decrease in deferred revenue	(1,997)	(917)
Decrease in deferred rent	(544)	(493)
Increase (decrease) in other liabilities, net	9	(35)
Net cash provided by operating activities	20,088	11,559
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(93)	(391)
Additions to capitalized software	(2,954)	(2,386)
Maturity of U.S. Treasury Bills	2,490	2,600
Purchases of US Treasury Bills	(2,490)	(2,595)
Proceeds from the sale of property and equipment	0	185
Payments to Acquire Investments	(295)	(2,500)
Acquisitions	1,359	0
Other investing activities	(200)	(53)
Net cash used in investing activities	(4,901)	(5,140)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock	(2,495)	(8,807)
Proceeds pursuant to employee stock-based compensation plans	880	497
Excess tax benefits from stock-based awards	494	979
Surrender of restricted common stock for income tax purposes	(2,505)	(2,725)
Net cash used in financing activities	(3,626)	(10,056)
Increase (decrease) in cash and cash equivalents	11,561	(3,637)
Cash and cash equivalents at beginning of period	88,509	89,955
Cash and cash equivalents at end of period	100,070	86,318
Income Taxes Paid, Net	$ 2,849	$ 2,420

Organization and Basis of Prese

Organization and Basis of Presentation	9 Months Ended
	Sep. 30, 2016
Accounting Policies [Abstract]
Organization and Basis of Presentation	Organization and Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of XO Group Inc. (“XO Group” or the “Company”) and its wholly-owned subsidiaries. The Condensed Consolidated Financial Statements included in this report have been prepared by the Company pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations. The Company believes that the disclosures are adequate to make the information presented not misleading. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2015 . In the opinion of the Company's management, the accompanying unaudited Condensed Consolidated Financial Statements contain all normal and recurring adjustments necessary to present fairly the consolidated financial condition, results of operations and changes in cash flows of the Company for the interim periods presented. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of results to be expected for the entire calendar year. Certain prior-period financial statement amounts have been reclassified to conform to the current-period presentation. Recently Issued Accounting Pronouncements In January 2016, the FASB issued guidance requiring equity securities to be measured at fair value with changes in fair value recognized through net income and eliminating the cost method for equity securities without readily determinable fair values. The guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods. The Company does not expect this guidance to have a material impact on its consolidated financial statements. In February 2016, FASB issued guidance on operating leases requiring a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, on its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. The guidance is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements. In March 2016, FASB issued guidance on employee share-based payment accounting requiring all tax effects related to share-based payments at settlement or expiration to be recorded through the income statement and be reported as operating activities on the statement of cash flows. Further, under the new guidance, entities are permitted to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards; whereas forfeitures can be estimated, as required today, or recognized when they occur. The guidance is effective for public business entities for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements. In March 2016, FASB issued guidance on equity method accounting eliminating the requirement to restate historical financial statements, as if the equity method had been used during all previous periods, when an existing cost method investment qualifies for use of the equity method. Under the new guidance, at the point an investment qualifies for the equity method, any unrealized gain or loss in accumulated other comprehensive loss may be recognized through earnings. The guidance is effective for public business entities for annual reporting periods beginning after December 15, 2016, with early adoption permitted. The Company does not expect this guidance to have a material impact on its consolidated financial statements. In March 2016, FASB issued guidance on revenue from contracts with customers that 1) clarifies how to implement revenue recognition guidance related to determining whether an entity is a principal or an agent in a revenue transaction and 2) provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods and services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods and services, and expands on related disclosures. The guidance is effective for public business entities for annual reporting periods beginning after December 15, 2017, and early adoption is permitted. The guidance may be applied using one of two methods: retrospective application to each prior reporting period presented, or retrospective application with the cumulative effect of initially applying the update recognized at the date of initial application. The Company has not yet determined its adoption method and is currently evaluating the impact this guidance will have on its consolidated financial statements.

Fair Value Measurements

Fair Value Measurements	9 Months Ended
	Sep. 30, 2016
Fair Value Disclosures [Abstract]
Fair Value Measurements	Fair Value Measurements Cash and cash equivalents and investments consist of the following: September 30, December 31, (In Thousands) Cash and cash equivalents Cash $ 45,149 $ 33,764 Money market funds 54,921 54,745 Total cash and cash equivalents 100,070 88,509 Short-term investments Short-term investments 1,310 — Long-term investments Long-term restricted cash 1,181 2,598 Total cash and cash equivalents and investments $ 102,561 $ 91,107 The inputs to the valuation techniques used to measure fair value are classified into the following categories: Level 1 — Quoted prices in active markets for identical assets or liabilities Level 2 — Quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 — Inputs that are unobservable (for example, cash flow modeling inputs based on assumptions) As of September 30, 2016 , the Company’s cash and cash equivalents of $100.1 million , short-term investments of $1.3 million , and long-term restricted cash of $1.2 million , were measured at fair value using Level 1 inputs. The short-term investments amount is included in “Prepaid expenses and other current assets” on the Condensed Consolidated Balance Sheets as of September 30, 2016. During the nine months ended September 30, 2016 , there were no transfers in or out of the Company’s Level 1 assets. Long-term restricted cash consists of a $1.2 million letter of credit collateralized by U.S. Treasury bills that are restricted as to withdrawal or use under terms of the Company’s New York office lease. Pursuant to the terms of the lease, in the three months ended September 30, 2016, the restricted cash decreased by $1.4 million as this portion of the restriction expired on the fourth anniversary (September 2016) of the lease commencement date.

Acquisition Acquisition

Acquisition Acquisition	9 Months Ended
	Sep. 30, 2016
Business Combinations [Abstract]
Business Combination Disclosure [Text Block]	Acquisition On September 7, 2016 the Company acquired How He Asked LLC, a digital and social media brand for pre-engaged couples, in exchange for consideration of $1.5 million , of which approximately $1.4 million was paid in cash during the quarter. The remaining approximate $0.1 million was retained by the Company as a holdback and accrued as a liability to settle indemnification claims made by the Company and its affiliates, should such claims arise. The holdback period is 12 months, and the balance of the accrual will be released to the seller in September 2017. A portion of the purchase price was allocated to a trade name in the amount of $0.2 million based upon its fair value assessed as of the acquisition date. The trade name value is included in “Intangible Assets, net” on the Condensed Consolidated Balance Sheets as of September 30, 2016. The excess of the purchase price over the fair value of the assets acquired, of approximately $1.3 million , was allocated to goodwill and is expected to be deductible for tax purposes. The goodwill is primarily attributable to the synergies expected to arise after the acquisition.

Stockholders' Equity

Stockholders' Equity	9 Months Ended
	Sep. 30, 2016
Stockholders' Equity Note [Abstract]
Stockholders' Equity	4. Stockholders’ Equity Stock Repurchases During the three and nine months ended September 30, 2016 , the Company repurchased and retired shares totaling $1.1 million and $2.5 million , respectively. During the nine months ended September 30, 2015 , the Company repurchased and retired shares totaling $8.8 million . No shares were repurchased during the three months ended September 30, 2015 . As of September 30, 2016 , $27.0 million is remaining under the Company’s authorized stock repurchase programs. Stock Vestings During the three and nine months ended September 30, 2016 , a total number of 63,684 and 406,723 shares of restricted common stock vested, respectively. During the three and nine months ended September 30, 2015 , a total number of 76,800 and 468,350 shares of restricted common stock vested, respectively. Earnings per Share The calculation of diluted earnings per share excludes a weighted average number of stock options and restricted stock of 665,105 and 4,713 , for the three months ended September 30, 2016 and 593,202 and 11,325 , for the nine months ended September 30, 2016 , because to include them would be antidilutive. The calculation of diluted earnings per share excludes a weighted average number of stock options and restricted stock of 236,195 and 16,543 for the three months ended September 30, 2015 , because to include them would be antidilutive. Stock options and restricted stock of 208,670 and 24,644 were excluded from the calculation of diluted earnings per share for the nine months ended September 30, 2015 because to include them would be antidilutive. The weighted average number of shares issued in connection with the employee stock purchase plan was immaterial in the three and nine month periods ended September 30, 2016 and 2015.

Commitments and Contingencies

Commitments and Contingencies	9 Months Ended
	Sep. 30, 2016
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies The Company has certain obligations relating principally to operating leases and a letter of credit (Note 2). As of September 30, 2016 , the Company also has commitments related to various contracts. As of September 30, 2016 , the Company was engaged in certain legal actions arising in the ordinary course of business and believes that the ultimate outcome of these actions will not have a material effect on its results of operations, financial position or cash flows.

Income Taxes

Income Taxes	9 Months Ended
	Sep. 30, 2016
Income Taxes [Abstract]
Income Tax Disclosure	Income Taxes The Company had an effective tax rate for the three and nine months ended September 30, 2016 of 37.5% and 31.0% , respectively, compared to 37.5% and 39.3% , respectively, for the three and nine months ended September 30, 2015 . The lower effective tax rate for the nine months ended September 30, 2016 was primarily a result of the reversal of a tax liability resulting from the resolution of an uncertain tax position associated with a former subsidiary as well as a one-time benefit associated with a foreign tax incentive deduction. The Company adopted accounting guidance requiring presentation of deferred income tax assets and liabilities as non-current in the Condensed Consolidated Balance Sheets, and offsetting deferred tax liabilities and assets. The Company early adopted this guidance on a prospective basis as of December 31, 2015. Prior periods were not retrospectively adjusted.

Organization and Basis of Pre12

Organization and Basis of Presentation (Policies)	9 Months Ended
	Sep. 30, 2016
Accounting Policies [Abstract]
Recently Issued Accounting Pronouncements	Recently Issued Accounting Pronouncements In January 2016, the FASB issued guidance requiring equity securities to be measured at fair value with changes in fair value recognized through net income and eliminating the cost method for equity securities without readily determinable fair values. The guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods. The Company does not expect this guidance to have a material impact on its consolidated financial statements. In February 2016, FASB issued guidance on operating leases requiring a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, on its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. The guidance is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements. In March 2016, FASB issued guidance on employee share-based payment accounting requiring all tax effects related to share-based payments at settlement or expiration to be recorded through the income statement and be reported as operating activities on the statement of cash flows. Further, under the new guidance, entities are permitted to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards; whereas forfeitures can be estimated, as required today, or recognized when they occur. The guidance is effective for public business entities for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements. In March 2016, FASB issued guidance on equity method accounting eliminating the requirement to restate historical financial statements, as if the equity method had been used during all previous periods, when an existing cost method investment qualifies for use of the equity method. Under the new guidance, at the point an investment qualifies for the equity method, any unrealized gain or loss in accumulated other comprehensive loss may be recognized through earnings. The guidance is effective for public business entities for annual reporting periods beginning after December 15, 2016, with early adoption permitted. The Company does not expect this guidance to have a material impact on its consolidated financial statements. In March 2016, FASB issued guidance on revenue from contracts with customers that 1) clarifies how to implement revenue recognition guidance related to determining whether an entity is a principal or an agent in a revenue transaction and 2) provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods and services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods and services, and expands on related disclosures. The guidance is effective for public business entities for annual reporting periods beginning after December 15, 2017, and early adoption is permitted. The guidance may be applied using one of two methods: retrospective application to each prior reporting period presented, or retrospective application with the cumulative effect of initially applying the update recognized at the date of initial application. The Company has not yet determined its adoption method and is currently evaluating the impact this guidance will have on its consolidated financial statements.

Fair Value Measurements (Tables

Fair Value Measurements (Tables)	9 Months Ended
	Sep. 30, 2016
Fair Value Disclosures [Abstract]
Cash and Cash Equivalents, Restricted Cash and Investments	Cash and cash equivalents and investments consist of the following: September 30, December 31, (In Thousands) Cash and cash equivalents Cash $ 45,149 $ 33,764 Money market funds 54,921 54,745 Total cash and cash equivalents 100,070 88,509 Short-term investments Short-term investments 1,310 — Long-term investments Long-term restricted cash 1,181 2,598 Total cash and cash equivalents and investments $ 102,561 $ 91,107

Fair Value Measurements - Addit

Fair Value Measurements - Additional Information (Details) - USD ($)	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015	Sep. 30, 2015	Dec. 31, 2014
Cash and cash equivalents
Cash	$ 45,149,000	$ 33,764,000
Money market funds	54,921,000	54,745,000
Total cash and cash equivalents	100,070,000	88,509,000	$ 86,318,000	$ 89,955,000
Short-term Investments	1,300,000	0
Long-term investments
Restricted cash, at fair value	1,181,000	2,598,000
Total cash and cash equivalents and investments	102,561,000	$ 91,107,000
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount	0
Decrease in Restricted Cash	1,417,000
Fair Value, Inputs, Level 1
Long-term investments
Restricted cash, at fair value	1,200,000
Cash and cash equivalents, at fair value	$ 100,100,000

Acquisition (Details)

Acquisition (Details) - USD ($) $ in Thousands	Sep. 07, 2016	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Business Acquisition [Line Items]
Goodwill		$ 48,678		$ 47,396
Business Combination, Consideration Transferred	$ 1,500
Acquisitions	1,400	$ 1,359	$ 0
Consideration, Amount of holdback	100
How He Asked [Member]
Business Acquisition [Line Items]
Goodwill	1,300
How He Asked [Member] | Trade Names [Member]
Business Acquisition [Line Items]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill	$ 200

Stockholders' Equity Stock Repu

Stockholders' Equity Stock Repurchases (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Stock Repurchases [Abstract]
Stock Repurchased During Period, Value	$ 1.1	$ 0	$ 2.5	$ 8.8
Stock Repurchase Program, Remaining Authorized Repurchase Amount	$ 27		$ 27

Stockholders' Equity Stock Vest

Stockholders' Equity Stock Vestings (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Stock Vestings [Abstract]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period	63,684	76,800	406,723	468,350

Stockholders' Equity Earnings P

Stockholders' Equity Earnings Per Share (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	665,105	236,195	593,202	208,670
Restricted stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	4,713	16,543	11,325	24,644
Employee Stock Purchase Plan
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		0

Income Taxes - Income Tax Rate

Income Taxes - Income Tax Rate Reconciliation (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Income Taxes [Abstract]
Effective Income Tax Rate Reconciliation, Percent	37.50%	37.50%	31.00%	39.30%