Axiom Analysts Review XO Group's Q2 Earnings

XO Group Inc XOXO reported its 2Q16 results, with the revenue marginally missing expectations, while the EPS was a penny above the consensus expectations and the adjusted EBITDA beat the consensus by 11 percent.

Axiom’s Victor Anthony maintains a Buy rating on the company, with a price target of $21.

Expectations

“Management repurchased shares after pausing for a few quarters, and has continued to repurchase shares in 3Q16 even with the shares at near 52-week highs,” Anthony mentioned.

XO Group maintained its guidance of double-digit revenue growth, with 20 percent EBITDA margins.

However, the analyst expects the transition to a new CRM system, which has been affecting local sales productivity in 2016, to push this target to 2017.

“XO is on pace to book venue transactions in all markets by year-end, and already has 3K venues paying on a commission-per-booking basis,” Anthony stated.

2Q Results

The meaningful EBITDA beat for the quarter was driven by “very high incremental margins.”

The company reported total revenue of $38.7 million, missing the estimate and the consensus, driven by lower than estimated Transactions revenue.

However, Transactions revenue did see robust growth at 54.5 percent year-on-year, driven by the registry business.

Online revenue grew 6 percent year-on -ear, driven by both national and local ad revenues. “Both the Knot and the Bump grew ad revenues in the double digits YoY,” Anthony noted.

XO Group was trading down 4.58 percent to $18.13 at time of writing.

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