Quarterly Report • Aug 11, 2010
Quarterly Report
Open in ViewerOpens in native device viewer
Half Year Report 2010
| Key Figures | H1/2010 | H1/2009 | Q2/2010 | Q2/2009 | Q1/2010 | |
|---|---|---|---|---|---|---|
| Total revenue1) | in € million | 25.86 | 21.54 | 13.26 | 10.79 | 12.60 |
| thereof "Subscriptions" | in € million | 20.59 | 17.38 | 10.51 | 8.92 | 10.07 |
| thereof "e-Recruiting" | in € million | 2.99 | 2.23 | 1.55 | 1.03 | 1.44 |
| thereof "Advertising" | in € million | 1.65 | 1.10 | 0.88 | 0.52 | 0.77 |
| EBITDA | in € million | 7.04 | 5.90 | 3.74 | 2.49 | 3.30 |
| EBITDA-margin | in % | 27 | 27 | 28 | 23 | 26 |
| Result for the period | in € million | 2.60 | 2.18 | 1.35 | 0.49 | 1.26 |
| Free Cash flow | in € million | 11.06 | (7.10) | 3.96 | (1.40) | 7.10 |
| Free Cash flow per share | in € | 2.10 | (1.34) | 0.75 | (0.27) | 1.35 |
| Earnings per share (undiluted) | in € | 0.50 | 0.42 | 0.26 | 0.09 | 0.24 |
| Equity | in € million | 55.95 | 55.07 | 55.95 | 55.07 | 54.31 |
| Net Cash | in € million | 53.93 | 35.85 | 53.93 | 35.85 | 49.96 |
| Member base | in millions | 9.63 | 7.91 | 9.63 | 7.91 | 9.17 |
| thereof paying subscribers | in thousands | 718 | 635 | 718 | 635 | 708 |
| Employees | 305 | 246 | 305 | 246 | 293 |
1) including other operating income
A person with contacts will go far. A person with good contacts will go even further. What was once the province only of select societies is now available to everyone, thanks to the internet. Thanks to XING, the online network for business contacts. Over nine million professionals use the XING global business network to do business, make deals, and further their careers. XING offers custom-tailored networking features and services to help them create their networks and stay in touch. XING hosts about 40 thousand expert groups and assists its members in organizing over 150 thousand networking events every year around the globe. With XING Jobs, the network also features job ads to enable its members to leverage their professional contacts for creating real value.
XING. Powering Relationships.
6 XING share
9 Consolidated interim management report
This half year report for 2010 shows that XING is pursuing strong growth following on from a financial year full of change. A successful first quarter has been followed up in Q2 by the strongest level of member growth experienced over the last 15 months along with the highest quarterly operating result (EBITDA) in the history of the company. In addition, we also increased profitability with H1/2010 revenues of €25.86 million, an increase of 20 percent over the same period last year. During the same period, our EBITDA rose proportionally to revenues, increasing by 19 percent to €7.04 million. XING's operating result of €3.74 million for Q2 was the highest ever in the company's history.
We also managed to increase the number of members worldwide by 460 thousand to 9.63 million as of the end of June, which is excellent considering that Q2 is traditionally a weak performer. This in turn means that we achieved our strongest quarterly growth for the last 15 months, and acquired 880 thousand new members during H1/2010. We also gained 31 thousand new paying Premium Members, taking the overall figure to 718 thousand as of the end of the second quarter.
With regard to our new sources of income, e-Recruiting and Advertising, also achieved key milestones with rapid growth levels experienced within both divisions. As a result, e-Recruiting revenues amounted to €2.99 million in H1/2010, which equates to a 34 percent increase over the same period last year (€2.23 million). Customized ads offered by XING Jobs and access to four million employees in German-speaking countries alone puts XING in a unique position to reach out to and contact valuable potential candidates. The huge benefits provided by XING Jobs can be seen in the increasing number of companies opting to place ads there, thus increasing revenues in this division during Q2. In fact we achieved a 51 percent increase over the same quarter last year, which also helped to drive our already impressive growth rates even further.
Executive Board letter
Our Advertising division even managed to surpass these excellent growth levels with strategic decisions taken at the start of the year and new business models such as Company Profiles producing H1/2010 Advertising revenues of €1.65 million compared to €1.10 million last year. The second quarter alone saw a 68 percent increase compared to the same period last year.
We are very happy with the growth rates we have experienced in both business divisions, which go to show their strategic relevance as sources of income for future financial growth at XING AG.
Overall, the developments seen during H1/2010 provide us with encouragement for H2/2010. As announced, our profitability will continue to increase with every quarter, and we are witnessing huge growth potential in our core markets, i.e., German-speaking countries (Germany, Austria and Switzerland – DACH), Spain, and Turkey.
Thank you for the trust you have vested in us. We're looking forward to a successful second half of the year!
Hamburg, August 2010
Dr. Stefan Gross-Selbeck Ingo Chu CEO CFO XING AG XING AG
CTO CCO XING AG XING AG
Michael Otto Dr. Helmut Becker
| Number of shares | 5,272,447 |
|---|---|
| Type of share | Registered share |
| IPO | December 7, 2006 |
| Trading symbol | O1BC |
| German securities identification number (WKN) | XNG888 |
| ISIN | DE000XNG8888 |
| Bloomberg | O1BC |
| Reuters | OBCGn.DE |
| Market segment | Prime Standard |
| Stock exchanges | Berlin, Bremen, Dusseldorf, Frankfurt, Munich, Stuttgart |
XING share
| Figures of XING shares at a glance | H1/2010 | H1/2009 |
|---|---|---|
| XETRA closing price end of period | 28.00 € | 29.72 € |
| High | 29.87 € | 33.87 € |
| Low | 28.00 € | 29.64 € |
| Market capitalization end of period | €147.6 million | €156.7 million |
| Average trading volume per trading day | 10,173 | 6,158 |
| Ranking in TecDAX | ||
| Based on trading turnover | 36 | 41 |
| Bawed on market capitalization | 36 | 30 |
| Earnings per share (undiluted) | 0.50 € | 0.42 € |
| Free cash flow per share | 2.10 € | -1.34 € |
| XING share vs. indices in % | H1/2010 |
|---|---|
| XING AG | -9 |
| TecDAX | -10 |
| DAX | +10 |
| SDAX | 0 |
for the six-month period from January 1 to June 30, 2010
9 Business and industry development
18 Research and product development
19 Risk report
19 Forecast and opportunity report Consolidated interim financial statements
22 Consolidated income statement
23 Statement of income and accumulated earnings
24 Consolidated balance sheet
26 Consolidated cash flow statement
28 Consolidated statement of movements in shareholder equity
30 Notes to the consolidated interim financial statements
34 Declaration of legal representatives
35 Review report To our shareholders Financial information Service 9
Interim report
for the six-month period from January 1 to June 30, 2010
The global financial crisis presented companies as well as economies worldwide with a new set of challenges. For the first time since World War II, global production levels shrank in 2009, with Germany hit particularly hard due to its intense international export focus. Major reductions, especially in terms of exports, meant that the real gross domestic product of 5 percent in 2009 was the largest drop in the history of the German Federal Republic. There are however signs that the financial markets are recovering and Germany is starting to climb its way out of the global crisis with the German Federal Employment Agency reporting 3.1 million people unemployed in June, a reduction of 257 thousand compared to June last year. This in turn equates to an employment rate of 7.5 percent, which is the same level as that prior to the crisis. The positive development of the German economy has also been confirmed by the Kiel Institute for the World Economy, which is predicting a 2.1 percent rise in the German real gross domestic product for 2010.
The Internet had more than 1.8 billion users worldwide at the start of 2010. As reported by market researcher Comscore, two out of three Internet users now take advantage of social networks, which equates to somewhere in the region of 1.2 billion people. In terms of the activities that Internet users spend most of their time on, social networking holds second place worldwide and actually tops the list in Europe with people spending an average of five hours a month on social networking.
From a technological perspective, social networking technology is increasingly dominating the online world with social networks taking advantage of existing applications. As a result of this trend, XING AG has laid the foundations for partnerships in this area by investing in a high-performance interface infrastructure which includes integrating XING within Microsoft Outlook 2010.
Due to the high pace of innovation on the mobile telephony market as a result of more affordable and increasingly powerful smartphones, new application platforms (iTunes, Google Market, Ovi, Bada, JIL, etc.), and increasingly inexpensive data plans, XING AG predicts rapid growth in terms of mobile Internet usage over the next few years. More than 23 percent of the German population uses a mobile device to surf the net on a regular basis (Sempora Research 2010). Morgan Stanley even predicts that the number of mobile Internet users worldwide will overtake the number of desktop Internet users by 2014. Social networks are one of the driving forces of mobile Internet usage and XING is reacting to this trend by developing and expanding its mobile offering. iPhone owners were the first group to have access to the XING iPhone application back in 2008 with BlackBerry users being able to use our improved BlackBerry application as of March 2010. In June we launched a new version of our XING Mobile portal (mobile.xing.com), and our first XING Android application was launched in August.
As an online social network for business professionals, XING is in direct competition with other business networking platforms in Europe. XING is the clear market leader in German-speaking countries (DACH) with more than 4.1 million members there, meaning that every fourth business professional in major German cities such as Munich or Frankfurt is registered on XING. In addition, XING is also market leader in the key strategic core markets of Spain and Turkey.
With more than 718 thousand Premium Members, the Company has more paying users than any other social network. And XING Premium Members are happy to pay subscription fees because it's a worthwhile investment that provides genuine added value to people's daily working life – whether they're freelancers using the platform to get work orders, sales people organizing sales activities, or recruiters looking for suitable candidates.
In the first six months of financial year 2010, 880 thousand people joined XING, taking the overall member base worldwide to 9.63 million as of the end of June. As a result, XING AG succeeded in improving member growth with 460 thousand new members signing up during Q2, which is traditionally a slow period, compared to the first three months of 2010 (420 thousand new members). With 460 thousand new members in Q2 2010, XING also achieved its highest member growth rate in the last 15 months. Most of these new members were attributable to the core markets consisting of the German-speaking countries (DACH) as well as our two main international markets in Turkey and Spain. In the German-speaking countries alone, the Company increased its market share with 333 thousand people signing up in the first six months of 2010.
In Turkey, 184 thousand people decided to sign up to the country's largest business network during H1/2010, which helped to boost growth rates there, too. With 908 thousand members, XING has been the undisputed market leader in Turkey since it was launched there. Not only is XING enjoying accelerating
To our shareholders Financial information Service 11
in millions Non-Dach Member split Q2/ 2009 Q4/ 2009 7.91 8.31 Q3/ 2009 8.75 10 9 8 7 6 5 4 3 2 1 0 4.52 4.73 5.01 9.63 Q2/ 2010 5.56 4.07 9.17 Q1/ 2010 5.27 3.39 3.58 3.74 3.90 Dach Non-Dach
Interim report
growth rates in Turkey, its targeted marketing measures in Spain have also paid off during the first half of 2010 with 232 thousand people signing up. Thanks to its 1.42 million members in Spain, XING is the country's largest business network.
The Company's accelerating growth levels and market leadership have come about as a result of a strategy implemented due to a change in management and increased resource and marketing budget focusing. The number of Premium Members also increased during H1/2010 with 31 thousand XING members opting for the platform's advanced features. As expected, during Q2, net growth of paying members slowed to a level of 11 thousand (compared to 22 thousand in Q1). The addition of the "Search" and "Status update" features to basic memberships in April 2010 also brought the expected development that fewer people converted from a basic to a Premium Membership. Regardless of this short-term development the management sees further growth potential in the "subscriptions" segment mid to long-term.
During the first half of the year, the Company mainly focused on expanding the XING platform's core features. As part of this move, a number of new features were added to basic memberships while product development was reorganized to further increase the pace and efficiency of development. In line with this, personnel costs during H1/2010 amounted to €9.5 million compared to €7.1 million during the comparative period (i.e., an increase of +34 percent). In addition, marketing costs rose by 45.8 percent from €2.1 million in H1/2009 to €3.1 million in H1/2010. Due to a 20 percent increase in revenues (€25.9 million compared to €21.5 million in the same period last year) and rigorous cost consolidations in other areas (€6.2 million compared to €6.4 million during H1/2009), the EBITDA rose by €1.1 million (an increase of +19.5 percent) to €7.0 million despite additional expansion costs. In terms of services revenues, the EBITDA margin remained largely stable at 27.9 percent vis-à-vis the comparative period (28.0 percent).
Despite further investments in the region of €2.5 million, the scheduled goodwill amortizations of €2.4 million remained at the same level as during H1/2009 (€2.4 million) due to a development-related extension of the XING platform's remaining service life from three to five years. Non-recurring amortizations of €0.3 million were recorded during the previous year.
EBIT therefore amounts to €4.6 million in the first half of 2010, compared to €3.2 million for the same period in the previous year. Taking into consideration the positive net interest income of €0.04 million (first half year of 2009: €0.2 million) and €2 million payable in income tax (first half year of 2009: €1.2 million), this results in consolidated earnings of €2.6 million compared to €2.2 million for the same period in the previous year.
Premium Memberships account for about 80 percent of revenues, again making them XING AG's core business and main source of income and revenue during H1/2010. During this period, the Company achieved Premium Membership revenues of €20.59 million compared to €17.38 million in the first half of 2009, equating to an 18 percent year-on-year increase within XING's core business. The number of Premium Members also increased during H1/2010 with 31 thousand XING members opting for the platform's advanced features. As expected, during Q2, net growth of paying members slowed to a level of 11 thousand (compared to 22 thousand in Q1). The addition of the "Search" and "Status update" features to basic memberships in April 2010 also brought the expected development that fewer people upgraded from a basic to a Premium Membership. Regardless of this short-term development the management sees further growth potential in the "subscriptions" segment mid to long-term. Overall, 718 thousand members took out a Premium Membership as of the end of June in order to take advantage of the additional features to drive their business.
Revenues from e-Recruiting
XING's second-largest business division, e-Recruiting, performed extremely well during the first half of 2010. The Company offers two price models, pay per click and fixed rate, as well as a Recruiter Membership with advanced filters and search features. In this area, XING achieved revenues of €2.99 million during H1/2010, a 34 percent increase over the same period last year. In a quarterly comparison, XING's Q2 2010 revenues of €1.55 million represent a 51 percent increase over Q2 2009 with growth rates set to continue – quite an achievement on a market which the Company considers to have barely grown over the last year.
This development shows that business networks are the first port of call for recruiters when looking for suitable candidates, in particular when it comes to "passive" job-seekers. As the market leader in Germany, Europe's largest economy, XING AG is excellently positioned to significantly increase its revenues in this segment over the coming years.
The latest "Recruiting Trends 2010" study shows just how important XING is when looking for suitable candidates to fill vacant positions. XING came top, even beating Google, in answer to the question "which social networks do recruiters use the most to look for candidates?"
In terms of Advertising, which includes Display Advertising, Enterprise Groups, partnerships (Best Offers), and Company Profiles, XING AG achieved H1/2010 revenues of €1.65 million – an increase of 50 percent. Growth rates within this part of the business have accelerated every quarter with Advertising generating revenues of €0.88 million in Q2 alone – an increase of 68 percent minly supported by the new company profiles as well as strong growth in display advertising. During H1/2010, the Display Advertising team's main priority was to introduce a new marketing strategy. Having been listed in the Informationsgemeinschaft zur Feststellung der Verbreitung von Werbeträgern e.V. (IVW – German Information Association for the Establishment of the Distribution of Advertising Media) (24.2 million visits) and the Arbeitsgemeinschaft Online Forschung (AGOF – Working Group for Online Media Research), XING's excellent range and attractive target group in Germany (3.89 million unique users) have now been made transparent for the advertising market. The newly integrated partnership with the advertising agency has proven to be a great success with eCPMs having tripled since beginning of 2010.
Interim report
On the closing date June 30, 2010, long-term net assets remained unchanged and were valued at €30.1 million (December 31, 2009: €30.1 million). The long-term capital amounted to a 199.8 percent surplus over the long-term net assets (December 31, 2009: 188.2 percent).
On the closing date, the Group's long-term net assets were valued at €88.6 million, which equates to a 9.8 percent increase compared to the value as of December 31, 2009 (€80.7 million). This increase can largely be attributed to an €11 million rise in liquid assets. When compared to the disproportionate increase in income growth of 25.8 percent, XING AG can be seen to have improved its liquidity management. Overall, liquid assets account for 60.9 percent of total assets (December 31, 2009: 53.1 percent).
In the first six months of 2010, XING Group generated cash flow from operating activities of €14.2 million compared to €6.3 million during H1/2009. About €3.5 million of this increase is due to a one-off effect caused by a major reduction in the payout periods of XING AG's credit card acquirers. The improved result and closing-date effects were the main reasons for the increase in operative cash flow.
In the first half of 2010, the cash flow from investing activities amounted to €-3.1 million (comparative period: €-12.3 million). Along with the investments made in IT due to expansions in this area (€0.5 million; €1.7 million during the same period last year), further investments were attributable to developing and modernizing the XING platform (€1.4 million; €1.7 million during the same period last year). Another €0.6 million was invested in expanding office space and setting up workstations for new employees (comparative period: €0.9 million).
In the first half of 2010, the cash flow from financing activities amounted to €0.0 million. During the same period last year, negative cash flow from financing activities amounted to €-1.1 million, and was largely due to buying back shares.
At the end of the period, liquid assets of XING Group amounted to €53.9 million compared to €35.8 million at the end of H1/2009.
With an equity ratio of 63.1 percent as of June 30, 2010 (65.2 percent as of December 31, 2009), XING Group is primarily financed by way of shareholders' equity. This constitutes a sound basis which provides the Company with a high degree of stability even in the event of possible negative developments.
The cash flow margin of 56.3 percent (cash flow from operating activities/service revenues) is running at a very high level. This confirms the intrinsic value of the Company, and permits further investment in future growth.
Over the last seven years, the Internet has evolved into Web 2.0 and social media. But it's not just the technical progress made here that is of primary importance – a shift in perception and use of the Internet within a business environment has also taken place.
Why is it vital that companies understand the continually changing customer behavior surrounding consumption, communication, and information? To what extent do companies really need to get involved? And what's the best way to benefit from this trend?
Nowadays it's considered the norm to use the Internet to find out more about companies and service providers, so practically every company is automatically a part of online discussions, irrespective of whether or not they actually want to be. Businesses have no other choice but to get involved if they don't want to leave it up to others to determine their online image. Companies can create information about products and services centrally, but this doesn't mean that this information is deemed to be important by the customer who would then spread the word. What is growing in importance is business-decisionrelated information originating from people outside of the company, i.e., customers, partners, competitors, or former employees, which needs to be used to the best possible effect. In order to achieve maximum success within social media, clear goals need to be set and pursued, an internal infrastructure needs to be made available, and communication with current and potential customers, critics, and supporters needs to be both open and authentic. Contrary to popular opinion, social media is not a new form of technology; it is a new form of communication offering companies a wide range of opportunities.
Lots of businesses use social media to increase customer loyalty through targeted dialog while systematically optimizing their products based on online feedback. Some companies use social media as a way of having new products tested by customers before their release to allow input from the intended target group to enter the product development cycle. This not only allows customers to identify with the company and its products, it also helps to save costs.
Online tools such as blogs, Twitter, YouTube, and social networks such as XING are both low-cost and effective. On top of this they have a plethora of uses such as helping to systematically create an online reputation, establish experts, and act as a quick and personal communication channel during times of crisis. Either way, a customer's decision is highly dependent on recommendations he or she receives via social networks.
To our shareholders Financial information Service 17
Interim report
XING has long been aware of the opportunities that a social network can offer companies – especially one focusing on business and an affluent, well-educated target group. The first version of our Company Profiles appeared in April 2009, and, from November onwards, companies can customize their profiles by adding text and graphics.
The latest development in this regard was implemented in July 2010 with the release of three different versions of our customized Company Profiles. The BASIC Profile is the first-ever free customizable package for businesses, and now we also offer members with freelance status the opportunity to create a Company Profile after receiving a lot of requests from them asking for the option to present their skills and services by way of a Company Profile and not just their personal profile.
XING's Company Profiles are an excellent addition to a company's own website as it helps to position businesses right in there among their target group. Having a profile helps to increase a company's presence on the XING platform, thus also making it easier to find. Features such as a list of employees and contact persons ensure transparency and authenticity, which are vital in the world of social media.
The function allowing every follower of a company to receive company updates is an excellent way of spreading the word by integrating company updates directly within the recipient's network. The XING Enterprise Groups are another example of customer communication options.
XING Corporate Solutions can be individually combined and their content adapted to partners' needs and preferences. This in turn allows companies to focus on communicating with end customers by using, e.g., XING Best Offers and groups. In light of the attractive target group available on XING, the close links between Company Profiles and XING Jobs make it child's play to use XING as an employer branding tool.
Over the past few months, XING has put a lot of time and effort into making it easy for companies to use social media, to offer them a simple, free of charge introduction into the world of social media, and to offer companies a range of different packages and combinations providing a range of solutions to meet various business needs.
During the first half of 2010, XING AGs long-standing agility in terms of development was channeled into realizing projects across the entire product development chain with further emphasis on expanding SCRUM processes. In order to keep ongoing maintenance and further development agile, we also added the KANBAN method, which in turn helps to ensure the high quality and reliability of the platform. From a product perspective, the first six months of 2010 were defined by an expansion of our Company Profiles and Jobs sections, and our Partner Ecosystem, in conjunction with a focus on increased interaction and growth. The main areas of product development activity included:
In order to ensure optimum platform availability and to develop it even further, XING uses both tried-andtested Perl technology as well as the innovative web development framework Ruby on Rails. In this respect, XING considers itself to be a leading employer and promotes the Rail community through sponsoring and by posting articles. In order to meet the growing number of challenges we expect in future, the product and development team has been expanded with a focus on user interaction specialists.
Interim report
Permanent monitoring and managing of risks is one of the key tasks of a listed company. For this purpose, XING AG has implemented an early risk-detection system required by Section 91 (2) AktG, and continually makes updates and improvements to recognize both opportunities and risks at an early stage. Each individual employee is called on to actively look for and prevent potential damages to the Company. Their task is to immediately remove all risks in their area of responsibility, and to immediately notify the responsible parties of any indications of existing or arising risks. An essential requirement of such a task is knowledge of the risk management system and maximum risk awareness of each individual employee.
Accordingly, employees are familiarized with the risk management system via periodic introductory seminars, and by means of informational materials, and their attention is drawn to the significance of risk management.
Potential risks are continually identified and analyzed. Identified risks are then systematically evaluated as to their probability of occurrence, and the expected potential damage. Risk officers and division heads are regularly asked about the status of existing risks and the identification of new risks.
Since publishing the 2009 Annual Report and the detailed listing of risk factors contained therein, the Company has not documented any additional risks.
XING AG currently generates most of its revenues in Germany, and expects to benefit from the positive economic trend being experienced in all of its business divisions. In line with this, the Company's e-Recruiting division predicts that an increasing number of job ads will be placed and there will be further sales of Recruiter memberships due to companies in Germany hiring more staff again. XING's Corporate Solutions (Company Profiles, Enterprise Groups) and Advertising divisions expect to see a rise in revenues as a result of increasing and shifting advertising budgets to the online sector, with a particular focus on social networks. As an online social network for professional business contacts, XING offers a highly attractive target group similar to that of the Financial Times Deutschland, Handelsblatt etc., with the advantage of having a greater range, as confirmed by the Informationsgemeinschaft zur Feststellung der Verbreitung von Werbeträgern e.V. (IVW – German Information Association for the Establishment of the Distribution of Advertising Media) and the Arbeitsgemeinschaft Online Forschung (AGOF – Working Group for Online Media Research). The "Subscriptions" division, a core part of XING's business, stands to gain from positive economic activity as the Company actively supports businesses in creating new contacts and managing them.
The development of the Internet in the course of the next few years is already foreseeable, and will be characterized by three major trends:
XING AG is in a good position to meet these developments. By focusing on "business networking", it provides central access to those business communities in Europe which are the most active in the opinion of management, and it has thus become an essential tool for professionals in all situations. In the search for new customers, suppliers, a suitable new job or answers to professional questions, XING is thus generating an attractive profile which will continue to drive the company's growth in future.
In the reporting period, XING AG implemented new functionalities on the platform www.xing.com on the one hand and also continued to enhance the newly launched business models on the other. For instance, in the fourth quarter of last year, the company established new services in the field of job marketing, and is thus also able to position itself as a fully fledged and relevant recruiting platform for online job advertising; it is also able to address new target groups and boost revenues and earnings growth in this field by way of a corresponding monetarization strategy. In addition, for specialist personnel managers or decision-makers, the company has also activated a "recuriter membership" which is customized to meet the needs of this target group, and introduced a further source of revenues with the company profiles which were also established in the fourth quarter of 2009. With the innovations and improvements detailed above, the company has a good chance of boosting its growth in the three revenue-generating areas of "Subscriptions", "e-Recruiting" and "Advertising" in the course of the next few years. The fact that XING AG has thus advanced into segments which it had previously not developed and because it is now competing with established players particularly in the field of "e-Recruiting" means that a precise prediction cannot be made at present. However, the benefits of a social network in conjunction with a job portal constitute a clear competitive advantage which can have a positive impact on the future development of revenues and results.
Interim report
XING AG is operating in a very fast-moving and innovative industry. During the past two years, the company has implemented numerous enhancements to its business models, and has thus also broken into new markets. These for instance include the market of online job exchanges, which XING has been operating as a fully-fledged provider since the fourth quarter of 2009. This is the reason why the company expects an improved result in 2010 and 2011, with growth in sales outstripping growth in costs. In its "Subscriptions" segment, the company expects to generate further growth in revenues in the course of the next few years as a result of the continuing process of converting basic members into premium members. With increasing penetration of the market for business professionals, the relative growth of paying members will slow down in the long-term. The company considers that it has established a good position in this respect in order to maintain Group-wide revenue growth particularly with increasing market penetration in the "e-Recruiting" segment. The company expects that "e-Recruiting" will be one of the most rapidly expanding segments in the course of the next few years, whereby the development in this respect will depend much more on current financial and economic conditions; it is not possible at this point to make a reliable prediction of the development in future revenues and results. "Advertising" is also dependent on the economic conditions. In this segment, in addition to traditional advertising revenues, the company also expects to boost its revenues in the course of the next few years by way of implementing new products such as the "Company Profiles" and thus make a higher contribution to the development of results at XING AG. Internal plans and objectives of the company envisage for 2010 and 2011 a significant increase in turnover and EBITDA (excluding non-recurring expenses) on Group level. Examples of special factors to be adjusted are restructuring costs, results of disposals, impairment costs, other non-operating expenses as well as other non-operating income. The special factors are positive or negative effects which occur only once or only rarely and which, in their nature and extent, are unusual and of major significance and thus distort the result from operations.
Notwithstanding the effects of the financial crisis and the resultant more difficult conditions, the financing and liquidity of the Group are again based on a sound footing in 2010 and 2011. The company will continue to further expand its employee base in the course of the next few years, and will recruit approximately 40 new employees in the financial year 2010. There are plans for recruiting further employees in the financial year 2011 depending on the development of the market potential. In addition, XING AG will in future continuously invest in improving the platform in order to further increase the attractiveness and relevance for its members. In line with existing planning, these investments will be financed out of the company's own resources. For 2010 and 2011, annual operating investments are expected to run into single digit millions.
Hamburg, August 11, 2010
for the period from January 1 to June 30, 2010
for the period from January 1 to June 30, 2010
| in € thousand | 01/01/2010 – 06/30/2010 |
01/01/2009 – 06/30/2009 |
04/01/2010 – 06/30/2010 |
04/01/2009 – 06/30/2009 |
|---|---|---|---|---|
| Service revenues | 25,265 | 21,064 | 12,948 | 10,690 |
| Other operating income | 594 | 479 | 313 | 99 |
| Total income | 25,859 | 21,543 | 13,261 | 10,789 |
| Cost of materials | 0 | (20) | 0 | (17) |
| Personnel expenses | (9,690) | (7,065) | (4,746) | (3,764) |
| Marketing expenses | (3,115) | (2,137) | (1,487) | (1,351) |
| Other operating expenses | (6,010) | (6,426) | (3,286) | (3,163) |
| EBITDA | 7,044 | 5,895 | 3,742 | 2,494 |
| Depreciation | (2,442) | (2,725) | (1,208) | (1,630) |
| EBIT | 4,602 | 3,170 | 2,534 | 864 |
| Interest income | 39 | 242 | 19 | 21 |
| Interest expenses | 0 | (38) | 0 | (8) |
| EBT | 4,641 | 3,374 | 2,553 | 877 |
| Taxes on income | (2,038) | (1,198) | (1,207) | (387) |
| Total result for the period | 2,603 | 2,176 | 1,346 | 490 |
| Earnings per share (undiluted) in € | 0.50 | 0.42 | 0.26 | 0.09 |
| Earnings per share (diluted) in € | 0.50 | 0.42 | 0.26 | 0.09 |
for the period from January 1 to June 30, 2010
| in € thousand | 01/01/2010 – 06/30/2010 |
01/01/2009 – 06/30/2009 |
04/01/2010 – 06/30/2010 |
04/01/2009 – 06/30/2009 |
|---|---|---|---|---|
| Total result | 2,603 | 2,176 | 1,346 | 490 |
| Currency translation adjustment | 17 | (62) | 10 | 10 |
| Other result | 17 | (62) | 10 | 10 |
| Total result for the period | 2,620 | 2,114 | 1,356 | 500 |
as of June 30, 2010
| Assets in € thousand | 06/30/2010 | 12/31/2009 |
|---|---|---|
| Non-current assets | ||
| Intangible assets | ||
| Purchased software | 2,872 | 2,952 |
| Self-developed software | 6,925 | 6,354 |
| Goodwill | 13,440 | 13,440 |
| Other intangible assets | 3,978 | 4,592 |
| Property, plant and equipment | ||
| IT hardware and other business equipment | 2,473 | 2,317 |
| Financial assets | ||
| Equity participations | 50 | 50 |
| Other financial assets | 24 | 24 |
| Deferred tax assets | 371 | 346 |
| 30,133 | 30,075 | |
| Current assets Receivables and other assets |
||
| Receivables attributable to services | 3,471 | 6,478 |
| Tax refund assets | 89 | 92 |
| Other assets | 991 | 1,241 |
| Cash and cash equivalents and other current deposits | 53,931 | 42,862 |
| 58,482 | 50,673 | |
| 88,615 | 80,748 |
| 06/30/2010 | 12/31/2009 |
|---|---|
| 5,272 | 5,272 |
| (3,041) | (3,041) |
| 40,586 | 40,586 |
| 3,263 | 2,607 |
| 9,867 | 7,264 |
| 55,947 | 52,688 |
| 2,821 | 2,646 |
| 1,451 | 1,275 |
| 4,272 | 3,921 |
| 657 | 802 |
| 18,123 | 14,958 |
| 4,199 | 2,750 |
| 5,417 | 5,629 |
| 28,396 | 24,139 |
| 88,615 | 80,748 |
for the period from January 1 to June 30, 2010
| in € thousand | 01/01/2010 – 06/30/2010 |
01/01/2009 – 06/30/2009 |
|---|---|---|
| Earnings before taxes | 4,641 | 3,374 |
| Depreciation on capitalized development costs | 822 | 840 |
| Depreciation | 1,620 | 1,885 |
| Personnel expenses stock option program | 639 | 503 |
| Interest income | (39) | (243) |
| Interest received | 39 | 243 |
| Interest expenses | 0 | 39 |
| Interest paid | 0 | (35) |
| Taxes paid/received | (383) | (1,666) |
| Change in receivables and other assets | 3,232 | (2,910) |
| Change in liabilities and other liabilities | 314 | 729 |
| Change in deferred income | 3,341 | 3,586 |
| Cash flow from operating activities | 14,226 | 6,345 |
| Capitalization of self-developed software | (1,393) | (1,739) |
| Purchase of other software | (464) | (1,684) |
| Purchase of other intangible assets | (700) | (3,396) |
| Purchase of property, plant and equipment | (617) | (877) |
| Purchase of consolidation companies (less cash acquired) | 0 | (4,619) |
| Investment in other finacial assets | 0 | (30) |
| Cash flow from investing activities | (3,174) | (12,345) |
Consolidated interim financial statements
| in € thousand | 01/01/2010 – 06/30/2010 |
01/01/2009 – 06/30/2009 |
|---|---|---|
| Transaction cost for issuance of shares | 0 | (36) |
| Share buyback | 0 | (949) |
| Repayment of liabilities from finance leases | 0 | (89) |
| Interest paid | 0 | (3) |
| Cash flow from financing activities | 0 | (1,077) |
| Differences due to currency translation | 17 | 0 |
| Change in cash and cash equivalents | 11,069 | (7,077) |
| Cash and cash equivalents at the beginning of the period | 42,862 | 42,922 |
| Cash and cash equivalents at the end of the period | 53,931 | 35,845 |
for the period from January 1 to June 30, 2010
| in € thousand | Subscribed capital |
Capital reserved |
Treasury stock |
|
|---|---|---|---|---|
| Balance 01/01/2009 | 5,202 | 38,517 | (2,092) | |
| Currency translation | 0 | 0 | 0 | |
| Total income and expense for the period recognized directly in the equity |
0 | 0 | 0 | |
| Net result | 0 | 0 | 0 | |
| Total result for the period | 0 | 0 | 0 | |
| Share buyback | 0 | 0 | (949) | |
| Acquisition of minorities | ||||
| Capital increase to acquire parts of the company | 70 | 1,023 | 0 | |
| Ancillary costs capital increase | 0 | 0 | 0 | |
| Capital increase from share-based payment | [0,7] | 19 | 0 | |
| Addition from stock options program | 0 | 0 | 0 | |
| As of 06/30/2009 | 5,272 | 39,559 | (3,041) | |
| Balance 01/01/2010 | 5,272 | 40,586 | (3,041) | |
| Currency translation | 0 | 0 | 0 | |
| Total income and expense for the period | ||||
| recognised directly in the equity | 0 | 0 | 0 | |
| Net result | 0 | 0 | 0 | |
| Total result for the period | 0 | 0 | 0 | |
| Addition from stock options program | 0 | 0 | 0 | |
| As of 06/30/2010 | 5,272 | 40,586 | (3,041) |
To our shareholders Financial information Service 29
| Shareholders' equity, total |
Minorities | Total | Cumulative profit |
Other reserves |
|---|---|---|---|---|
| 52,328 | (123) | 52,451 | 9,068 | 1,756 |
| (62) | 0 | (62) | 0 | (62) |
| (62) | 0 | (62) | 0 | (62) |
| 2,176 | 0 | 2,176 | 2,176 | 0 |
| 2,114 | 0 | 2,114 | 2,176 | (62) |
| (949) | 0 | (949) | 0 | 0 |
| 123 | (123) | (123) | ||
| 1,093 | 0 | 1,093 | 0 | 0 |
| (36) | 0 | (36) | 0 | (36) |
| 0 | 19 | 0 | 0 | |
| 503 | 0 | 503 | 0 | 503 |
| 55,072 | 0 | 55,072 | 11,121 | 2,161 |
| 52,688 | 0 | 52,688 | 7,264 | 2,607 |
Currency translation 0 0 0 17 0 17 0 17
recognised directly in the equity 0 0 0 17 0 17 0 17 Net result 0 0 0 0 2,603 2,603 0 2,603 Total result for the period 0 0 0 17 2,603 2,620 0 2,620 Addition from stock options program 0 0 0 639 0 639 0 639 As of 06/30/2010 5,272 40,586 (3,041) 3,263 9,867 55,947 0 55,947
for the period from January 1 to June 30, 2010
The consolidated interim financial statements for the first half year ending on June 30, 2010 have been prepared in accordance with the International Financial Reporting Standard for Interim Statements (IAS 34) as applicable in the EU.
The reporting period extends from January 1, 2010, to June 30, 2010. The comparative period presented began on January 1, 2009 and ended on June 30, 2009.
The accounting and financial reporting methods used for these consolidated interim financial statements are in accordance with the methods applied to the Group annual financial statements ending December 31, 2009.
The group of consolidated companies in these consolidated interim financial statements included:
| Equity holding 06/30/2010 in % |
Equity holding 12/31/2009 in % |
Initial consoli dation |
Share holders' equity balance 06/30/2010 in € thousand |
Result H1/2010 in € thousand |
|
|---|---|---|---|---|---|
| XING Hong Kong Ltd., Hong Kong, China | 100 | 100 | 2006 | (168) | (3) |
| openBC Network Technology (Beijing) Co. Ltd., Beijing, China |
100 | 100 | 2006 | (53) | (57) |
| Grupo Galenicom Tecnologías de la Informacíon (eConozco), S.L., Barcelona, Spain |
100 | 100 | 2007 | 0 | (3) |
| XING International Holding GmbH, Hamburg, Germany |
100 | 100 | 2007 | 9.328 | (1) |
| XING Networking, S.L., Barcelona, Spain1) |
100 | 100 | 2007 | (139) | (161) |
| EUDA Uluslararasi Danismanlik ve Bilisim Hizmetleri Limited Sirketi (XING Turkey), Istanbul, Turkey2) |
100 | 100 | 2008 | 117 | 18 |
| XING Switzerland GmbH, Sarnen, Switzerland1) | 100 | 100 | 2008 | 27 | 1 |
| XING Italy S.R.L., Milan, Italy1) | 100 | 100 | 2009 | 39 | 9 |
| XING Insan Kaynaklari Uluslararasi Danismanlik Hizmetleri Ltd. Sti., Istanbul, Turkey2) |
100 | 0 | 2010 | 3 | 0 |
| Socialmedian Inc., Wilmington, Delaware, USA | 100 | 100 | 2009 | 320 | 0 |
1) 100 percent is held indirectly via shares of 100 percent in XING International Holding GmbH, Hamburg, Germany.
2) 99.5 percent of shares are held indirectly via XING International Holding GmbH, Hamburg, Germany, and 0.5 percent are held directly by XING AG.
In the first half of 2010, total expenses recognized for the existing stock option programs and several single commitments amounted to €639 thousand.
A total of 50,000 and 6,800 stock options from the 2009 stock option program were issued to selected employees and Executive Board members respectively on April 28 and April 30, 2010.
The stock option plans were evaluated by Mercer Deutschland GmbH. The expenses for all programs were calculated by means of the same evaluation method.
In the first half of 2010, the Group did not acquire any companies.
In June 2010, XING Insan Kaynaklari Uluslararasi Danismanlik Hizmetleri Ltd. Sti. was founded with equity of TL 5,000. The equity has not yet been paid up.
In January 2009, XING AG purchased New York-based Socialmedian Inc., a leading online news network. The purchase price was made up of cash and shares, and amounted to €2.9 million plus a profit-linked earn-out of up to €2.5 million, payable within the next three years.
On January 13, 2009, XING Italy Srl. was founded in Milan with equity of €25 thousand.
On February 5, 2009, the Group purchased an additional 20 percent of voting rights of EUDA Uluslararasi Danismanlik ve Bilisim Hizmetleri Limited Sirketi (cember.net), in accordance with the purchase contract, for a payment of €2,180 thousand. This purchase had no effect on the consolidation, as cember.net was already fully consolidated.
In January 2009, the Group increased its shares in XING Hong Kong Ltd. from 85 percent to 100 percent, for a payment of €80 thousand. This purchase had no effect on the consolidation, as XING Hong Kong Ltd. was already fully consolidated.
In March 2009, XING AG acquired from epublica the know-how and the assets necessary for the further development of the XING platform for a purchase price of €3.2 million. In this connection, 18 employees of epublica changed to XING AG.
Investments of the Group in self-developed software amounted to €1,393 thousand (comparative period: €1,739 thousand) in the six-month period from January 1, 2010, to June 30, 2010. The item for capitalized self-developed software includes expenses for improvements and developments as well as additional functions and features of the XING website.
In the first half year of 2010, the Group invested €1,081 thousand (comparative period: €2,561 thousand) for the purchase of IT software and hardware as well as other office equipment.
The following table lists the major items contained within the other operating expenses:
| in € thousand | 01/01/2010 – 06/30/2010 |
01/01/2009 – 06/30/2009 |
|---|---|---|
| IT services, management services and services for new markets | 1,896 | 2,384 |
| Legal advice, audit and accounting fees | 808 | 1,241 |
| Office costs | 660 | 432 |
| Payment costs | 675 | 800 |
| Rental/leasing | 435 | 184 |
| Server hosting, management and traffic | 345 | 395 |
| Travel, entertainment and other business expenses | 352 | 354 |
| Other personnel expenses | 197 | 205 |
| Other | 643 | 431 |
| Total | 6,010 | 6,426 |
In contrast to last year, rental/leasing expenses and costs for server hosting, administration, and traffic are listed separately. The figures for last year have been adjusted accordingly. The category "Other" mainly includes payments for office supplies and communications costs as well as the compulsory charge for not employing disabled people (Schwerbehindertenabgabe) and other duties.
XING AG has one reportable segment with the divisions Subscriptions (including revenues from memberships and Enterprise Groups), e-Recruiting, Advertising, and Miscellaneous.
The breakdown of revenues for the reporting period is presented in the following tables:
| in € thousand | 01/01/2010 – 06/30/2010 |
01/01/2009 – 06/30/2009 |
|---|---|---|
| Subscriptions | 20,589 | 17,380 |
| e-Recruiting | 2,990 | 2,229 |
| Advertising | 1,651 | 1,099 |
| Other | 35 | 42 |
| Total | 25,265 | 20,750 |
The business unit "Jobs" was renamed "e-Recruiting". Earnings from returned bank transfers amounting to €153 thousand (comparative period: €314 thousand) were not included under revenues in contrast to the previous year, but rather reported under other operating income. The previous year's figures were adjusted accordingly. Furthermore, revenues from "Groups" amounting to €287 thousand (comparative period: €164 thousand) were reclassified from the Subscription division to Advertising, and revenues from "Best Offers" amounting to €249 thousand (comparative period: €202 thousand) were also reclassified to "Advertising".
| in € thousand | 01/01/2010 – 06/30/2010 |
01/01/2009 – 06/30/2009 |
|---|---|---|
| DACH | 24,390 | 19,742 |
| International | 875 | 1.008 |
| Total | 25,265 | 20,750 |
As there are no considerable changes to long-term assets, these are not listed in the table.
The Group recognized leasing payments of €435 thousand (comparative period: €184 thousand) in the income statement.
In the reporting period, there were no obligations under finance leases. In the comparative period of the previous year, payments attributable to finance leases amounted to €33 thousand within one year and €0 thousand after one year.
In the first half year of 2010, payments of €80 thousand (comparative period: €213 thousand) were made to epublica GmbH, Hamburg.
Furthermore, payments amounting to €90 thousand were made to DLD Media GmbH, which is owned by the Burda Group, Munich
No significant events have occurred since the end of the first of half year of 2010.
Hamburg, August 11, 2010
Dr. Stefan Gross-Selbeck Ingo Chu Dr. Helmut Becker Michael Otto CEO CFO COO CTO XING AG XING AG XING AG XING AG
We declare that, to the best of our knowledge, the consolidated financial statements offer a true and fair view of the net assets, financial position and results of operations of the Group in accordance with applicable accounting principles, and that the Group management report presents the development of business including the business result and the provision of the Group in such a manner that a picture corresponding to the actual circumstances is provided, and that the major opportunities and risks of the probable development of the Group are described.
Hamburg, August 2010
The Executive Board
To Xing AG, Hamburg
We have reviewed the interim condensed consolidated financial statements, comprising the condensed statement of financial position, the condensed income statement, the condensed statement of comprehensive income, the condensed statement of cash flows, the condensed statement of changes in equity and selected explanatory notes, and the interim group management report of XING AG, Hamburg, for the period from 1 January 2010 to 30 June 2010, which are part of the six-monthly financial report pursuant to Sec. 37w WpHG ("Wertpapierhandelsgesetz": German Securities Trading Act). The preparation of the interim condensed consolidated financial statements in accordance with IFRSs on interim financial reporting as adopted by the EU and of the group management report in accordance with the requirements of the WpHG ("Wertpapierhandelsgesetz": German Securities Trading Act) applicable to interim group management reports is the responsibility of the Company's management. Our responsibility is to issue an attestation on the interim condensed consolidated financial statements and the interim group management report based on our review.
We conducted our review of the interim condensed consolidated financial statements and the interim group management report in accordance with German generally accepted standards for the review of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW). Those standards require that we plan and perform the review to obtain a certain level of assurance in our critical appraisal to preclude that the interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IFRSs on interim financial reporting as adopted by the EU and that the interim group management report has not been prepared, in all material respects, in accordance with the applicable provisions of the WpHG. A review is limited primarily to making inquiries of company personnel and applying analytical procedures and thus does not provide the assurance that we would obtain from an audit of financial statements. In accordance with our engagement, we have not performed an audit and, accordingly, we do not express an audit opinion.
Based on our review nothing has come to our attention that causes us to believe that the interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IFRSs on interim financial reporting as adopted by the EU and that the interim group management report has not been prepared, in all material respects, in accordance with the provisions of the WpHG applicable to interim group management reports.
Hamburg, August 11, 2010
Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft
Klimmer Borcherding Wirtschaftsprüfer Wirtschaftsprüfer (German Public Auditor) (German Public Auditor)
| Date | Disposition |
|---|---|
| August 11, 2010 | 2010 Half-year Report |
| November 9, 2010 | Interim Report for Q3/2010 |
This interim financial report is available in German and English. You can find both versions and additional press information on the Internet at: http://corporate.xing.com
For Annual Report, Interim Reports and current Financial information about XING AG please contact:
Patrick Möller Investor Relations Gänsemarkt 43 20354 Hamburg Phone +49 40 41 91 31 – 793 Fax +49 40 41 91 31 – 44
Patrick Möller
Daniela Hinrichs Dr. Felix Menden Christian Burtchen Carsten Ludowig
POWERING RELATIONSHIPS WWW.XING.COM
For press enquiries and current information about XING AG please contact:
Phone +49 40 41 91 31 – 763 Fax +49 40 41 91 31 – 11 [email protected]
Concept & Design HGB Hamburger Geschäftsberichte GmbH & Co. KG
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.