Xoom Slips into Loss in Q2, Revenues Miss Estimates

Xoom Corporation XOOM reported second-quarter 2015 adjusted net loss of 2 cents per share that compared unfavorably with the Zacks Consensus Estimate of earnings of 1 cent and the year-ago earnings of 3 cents. The underperformance mainly stemmed from high expenses.
 

 

Including amortization of acquired intangible assets in the reported quarter and merger-related costs, Xoom's net loss came in at 6 cents per share, which compared unfavorably with a net income of 3 cents in the year-ago quarter.

Operational Updates

Xoom reported revenues of $46.3 million in the quarter, up 16% year over year and within the company-guided range of $46–$48 million. However, the top line missed the Zacks Consensus Estimate of $48 million.

Gross sending volume declined 4% year over year to $1.7 billion, while transactions increased 22% to 3.9 million.

Active customers increased 16% year over year to 1.4 million, while gross additional customers increased 2% in the reported quarter.

Operating expenses increased 38.1% year over year to $35 million on higher marketing, technology and development, customer service and operations, and general and administrative costs.

Adjusted EBITDA decreased 23.5% year over year to $3.9 million. It was also lower than the company guided range of $4–$6 million.

Financial Position

Cash and cash equivalents for Xoom were $81.6 million as of Jun 30, 2015, up 21.4% from the 2014-end level. Total assets came in at $304 million as of Jun 30, 2015, down from $315.7 as of Dec 31, 2014.

Stockholders' equity increased 1.8% from the 2014-end level to $260.4 million as of Jun 30, 2015.

Business Update

During the quarter, Xoom began offering instant deposits in Sri Lanka through its collaboration with Sampath Bank. Also, the company started providing bank deposit services to other banks in Sri Lanka that include Hatton National Bank, Bank of Ceylon, Peoples Bank, Commercial Bank, and more. With its foray into Sri Lanka, Xoom's money transfer service has now expanded to 33 countries worldwide.

Additionally, the company strengthened its operations in Vietnam by adding same-day home delivery, instant cash pickup, and fast bank deposits in its portfolio at Vietnam through the collaboration with Sacombank. Similar deals were also signed subsequent to Jun 30, 2015 with various banks in Austria, Belgium, Greece and Portugal to expand Xoom's operations in these countries.

In July, Xoom launched a new enhancement to its service portfolio – Xoom Mobile Reload – to expand its offerings to customers. This facility will enable customers to send airtime credit online from the U.S. to prepaid mobile phones across 22 countries. As a result, customers will now be able to send money to their loved ones, pay their family's bills and reload their phones instantly even if they are abroad. To facilitate the transfer of prepaid mobile credits, Xoom has partnered with an eminent international airtime remittance provider – TransferTo.

In order to sustain itself post its separation from eBay Inc. EBAY, PayPal entered into a definitive agreement on Jul 1, 2015, to acquire Xoom. The purchase price has been fixed at $25 a share in cash or $890 million. The deal, subject to approval by Xoom shareholders, antitrust regulators and other closing conditions, is expected to close in the fourth quarter of 2015.

Other Financial Transaction Service Providers
 
Alliance Data Systems Corporation ADS and Total System Services, Inc. TSS surpassed their respective Zacks Consensus Estimates in the second quarter.

Zacks Rank

Xoom presently carries a Zacks Rank #3 (Hold).

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