XING AG

Recommendation: Risk: Price Target:

BUY (BUY) MEDIUM (MEDIUM) EUR 60.00 (60.00) 11 May 2011
Great start into 2011; 1Q figures top
Share price (dark) vs. TecDAX
Stock over EUR 50; sentiment very supportive

▪ 1Q11 figures with positive development: The company published

yesterday its 1Q11 report. Overall, the group’s figures were quite
impressive, even in the bottom line. Total revenues in 1Q were at EUR
15.65m, a 24% increase YoY (noted: first-time consolidation of amiando in
‘new verticals’ segment). Even excluding the revenues of amiando (EUR
0.51m) group revenues would have been up 20% YoY. With almost 80%
YoY E-Recruiting performed the biggest growth in 1Q11 (EUR 2.71m vs. Sources: CBS Research AG, Bloomberg
EUR 1.44m in 1Q10). This quarter achievement even exceeded the already Change 2011E 2012E 2013E
high success in 4Q10 in the Recruiting unit (EUR 2.21m). EBITDA of the new old new old new old

group was at EUR 5.62m (EBITDA-margin: 35.9%) and net income totalled Revenues 66.2 65.2 76.0 75.5 88.6 87.8
EBITDA 20.6 20.4 26.1 26.6 31.7 31.2
to EUR 2.70m, corresponding to an EPS of EUR 0.51.
EPS 1.94 1.94 2.66 2.73 3.42 3.41

▪
Internet: www.xing.com Sector: Internet
Short-term outlook: After reviewing the 1Q figures we slightly increased WKN: XNG888 ISIN: DE000XNG8888
Reuters: OBCGn.DE Bloomberg: O1BC GY
our 2Q11E figures. The biggest upside in our updated estimates comes
from the E-Recruiting segment. We were quite impressed by the strong Short company profile:
growth in 1Q11 as we previously expected that this unit will step up to such
XING AG is a Germany-based company and
high levels (> 4Q10) not before 3Q11E due to the ‘negative’ Easter-effect provides a social network for business
professionals.
(lower traffic) in 2Q (otherwise already in 2Q11E). Summing up, we now
forecast E-Recruiting to achieve revenues of EUR 2.74m in 2Q11E (+76.2%
YoY). Total revenues in 2Q11E are now expected to achieve EUR 15.97m. Share data:
However, despite higher revenues in 2Q11, EBITDA-margin should still be
Share price (last closing price): EUR 50.38
at 29.1% (still a slight increase YoY) mostly due to higher marketing Shares outstanding (m): 5.31
expenses and further integration costs of amiando, corresponding to EUR Market capitalisation (EURm): 267.4
Enterprise value (EURm): 204.5
4.65m. On short-term (probably next 2 quarters) the P&L will be burdened
Ø daily trading volume (3m, no. of shares): 14,510
by the next steps on XING’s agenda (new branding campaign in 2Q/3Q,
Website relaunch, and further expansion of sales-force teams) which, Performance data:

however, are expected to be the major growth drivers both on total numbers High 52 weeks (EUR): 50.38
as well as on margins. For FY11E our adjusted model now indicates an Low 52 weeks (EUR): 26.40
EBITDA-margin of 31.1% (1H11E: 32.5% resulting from strong 1Q of Absolute performance (12 months): 89.0%
Relative performance (vs. TecDAX):
35.9%).
1 month: 21.9%
3 months: 23.6%

▪ Favourable stock performance since last update: Comparing the stock

6 months:
12 months:
33.6%
56.4%
performance of XING with comparable tech shares XING’s development
was extremely positive. Regarding the positive trend of the operating Shareholders:
business and the current fortunate market sentiment the upside seems to Burda Digital GmbH: 29.6%
come in at the right time. Ongoing stock and market (social media) Allianz Global Investors: 5.1%
fantasies might lift the share towards our price target already in short-term. Langfrist TGV: 6.5%
Ennismore: 5.2%
We therefore reiterate BUY recommendation with an unchanged PT of EUR
Others: 53.6%
60.00 per share. Freefloat (per definition Deutsche Börse) 65.4%

Y/E 31 Dec, EURm 2008 2009 2010 2011E 2012E 2013E Financial calender:
Total revenues 35.3 45.1 54.3 66.2 76.0 88.6
AGM 26 May 2011
EBITDA 12.2 11.8 16.7 20.6 26.1 31.7 2Q11 report 10 August 2011
EBIT 9.7 0.9 11.5 14.7 19.5 24.5
Net income/loss 7.3 -1.7 7.2 10.3 14.1 18.2
EPS 1.41 -0.32 1.37 1.94 2.66 3.42 Author: Marcus Silbe (Analyst)
EBITDA margin 34.5% 26.3% 30.8% 31.1% 34.3% 35.7%
EBIT margin 27.6% 2.0% 21.2% 22.3% 25.7% 27.7%
Net margin 21.1% -3.8% 13.3% 16.0% 19.0% 20.9% Close Brothers Seydler Research AG
EV/EBITDA 16.8 17.3 12.2 9.9 7.8 6.5 Phone: +49 (0)69 - 977 84 56 0
EV/EBIT 21.0 225.2 17.7 13.9 10.5 8.3 E-Mail: research@cbseydlerresearch.ag
P/E 35.8 n.m. 36.8 25.9 18.9 14.7
www.cbseydlerresearch.ag
Source: XING AG, CBS Research AG
Please notice the information on the preparation of this document, the disclaimer, the advice regarding possible conflicts of interests, and the mandatory information required by § 34b WpHG (Securities Trading Law) at
the end of this document. This financial analysis in accordance with § 34b WpHG is exclusively intended for distribution to individuals that buy or sell financial instruments at their own account or at the account of others
in connection with their trading activities, occupation, or employment.
XING AG

The overall performance in 1Q11 was quite impressing. The company was able to 1Q performance was
beat 4Q10 on almost all levels. Aside from the higher tax expenses, 1Q11 quite impressive
outperformed both 1Q10 and 4Q10 to achieve one of the best quarters of XING’s
history. With the first-time consolidation of amiando in 1Q11 total revenues were up
24.2% YoY to EUR 15.65m (PY: EUR 12.60). Excluding amiando revenues would
have been at EUR 15.14m which still stands for a YoY growth of about 20%.

Subdivided into the two core areas (subscriptions, verticals) all segments managed E-Recruiting segment
to grow in 1Q. In the first quarter the E-Recruiting segment showed a tremendous with strong growth
upside of 88.6% YoY and 23% QoQ. This trend should further continue over the
next quarters (especially on YoY basis). For 2Q11E we predict a flat performance
for E-Recruiting QoQ as this year’s Eastern is in 2Q (in late April) which should
have a negative effect on the traffic on the site, hence, lower overall clicks and
revenues in this segment (as XING offers amongst others a CPC model for
recruiting).

This Easter/2Q-effect will also burden the advertising unit to a large extent in Easter-effect will
2Q11E. In 2012 Easter will be again in 2Q (2013: 1Q; 2014: 2Q) which means that distort 2Q performance
next year the Easter time-shift effect will be nonexistent. However, in 2013 and
2014 the YoY comparison in 1Q and 2Q will again be distorted to a minor extent.

On profit level, 1Q11 was extremely positive with an EBITDA-margin of 35.9% (of Positive performance
total revenues) vs. 26.2% in 1Q10 and 36.4% in 4Q10. On a YoY comparison, on profit level
XING increased EBITDA by over 70% to EUR 5.62m. After taxes, net income came
in at EUR 2.70m, corresponding to a net margin of 17.2% (1Q10: 10.0%). Hence, it
seems quite comprehensible why the share price of XING exceeded the level of
EUR 50.

Quarterly key figures

Source: XING AG, CBS Research AG

After reviewing the 1Q figures we slightly increased our 2Q11E figures. The biggest Increased estimates
upside in our updated estimates comes from the E-Recruiting segment. We were for 2Q11E
quite impressed by the strong growth in 1Q11 as we previously expected that this
unit will step up to such high levels (> 4Q10) not before 3Q11E due to the ‘negative’
Easter-effect (lower traffic) in 2Q (otherwise already in 2Q11E). Summing up, we
now forecast E-Recruiting to achieve revenues of EUR 2.74m in 2Q11E (+76.2%
YoY).

However, despite higher revenues in 2Q11E, EBITDA-margin should come in at Higher marketing
29.1% (still a slight increase YoY) mostly due to higher marketing expenses and expenses in 2Q/3QE
further integration costs of amiando (2Q11E: EUR 4.65m). Net income should be

www.cbseydlerresearch.ag Close Brothers Seydler Research AG | 2

XING AG

therefore come in at EUR 2.29m, implying a net margin of 14.2% (vs. 10.2% in
1Q10). On short-term (probably next 2 quarters) the P&L will be burdened by the
next steps on XING’s agenda (new branding campaign in 2Q/3Q, Website
relaunch, and further expansion of sales-force teams) which are expected to be the
major growth drivers both on total numbers as well as on margins.

The company will experience a faster than usual ramp up of total members in the Branding campaign
near future as an overall effect of the new branding campaign (completely online). with positive effects
However, as the marketing campaign will start not before end of 2QE (or early
3QE) we leave our figures unchanged as a precaution (very conservative
approach, hence upside potential could arise after the marketing campaign).

Currently, the general trend in the social media and the current strong market Current market
momentum (LinkedIn IPO, Facebook-trend, strong shift in recruiting towards sentiment is very
professional networking platforms) as well as the low penetration rate in the field of promising
business networking in the DACH-countries (below 5%) is quite advantageous for a
company like XING. Therefore, a successful branding campaign could/will boost
the growth both on basic as well as on premium memberships.

XING member development

0.84 11.17 12.00
10.75
10.38
9.73 10.05
0.82 9.38 0.815
8.91 0.809 10.00
8.46
0.8
0.782 8.00
0.78
0.759 6.00
0.76
0.745
4.00
0.74 0.733
0.718 2.00
0.72
0.708

0.7 0.00
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11E 3Q11E 4Q11E

Members Premium Members Basic

Source: XING AG, CBS Research AG

www.cbseydlerresearch.ag Close Brothers Seydler Research AG | 3

XING AG

Stock performance and valuation

To show how impressive the stock increase of XING YTD is, we compared the Stock outperformed
share of XING vs. the German TecDAX (XING is a possible TecDAX candidate for two major tech indices
September 2011) and the US Nasdaq100. As seen in the chart, XING by far
outperformed both indices by far. XING soared by over 36% in 2011 whereas the
indices increased by ‘only’ 8% and 6%, respectively.

Rel. stock performance YTD (basis = 100)

140.00
136.35

135.00

130.00

125.00

120.00

115.00

110.00 108.18

105.00
106.70

100.00

95.00

90.00

XING Nasdaq100 TecDAX

Source: Bloomberg, CBS Research AG

We reiterate our BUY recommendation and price target of EUR 60.00 for the time BUY recommendation;
being. This indicates that the share of XING still has an upside potential of almost PT EUR 60.00
20%.

www.cbseydlerresearch.ag Close Brothers Seydler Research AG | 4

XING AG

Source: XING AG, CBS Research AG

www.cbseydlerresearch.ag Close Brothers Seydler Research AG | 5

XING AG

Source: XING AG, CBS Research AG

www.cbseydlerresearch.ag Close Brothers Seydler Research AG | 6

XING AG

Source: XING AG, CBS Research AG

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XING AG

Research

Schillerstrasse 27 - 29
60313 Frankfurt am Main

Phone: +49 (0)69 – 977 8456-0

Roger Peeters +49 (0)69 -977 8456- 12

Member of the Board Roger.Peeters@cbseydlerresearch.ag

Martin Decot +49 (0)69 -977 8456- 13 Kristina Kardum +49 (0)69 -977 8456- 21
Martin.Decot@cbseydlerresearch.ag Kristina.Kardum@cbseydlerresearch.ag

Rabeya Khan +49 (0)69 -977 8456- 10 Igor Kim +49 (0)69 -977 8456- 15
Rabeya.Khan@cbseydlerresearch.ag Igor.Kim@cbseydlerresearch.ag

Ralf Marinoni +49 (0)69 -977 8456- 17 Manuel Martin +49 (0)69 -977 8456- 16
Ralf.Marinoni@cbseydlerresearch.ag Manuel.Martin@cbseydlerresearch.ag

Enid Omerovic +49 (0)69 -977 8456- 19 Felix Parmantier +49 (0)69 -977 8456- 22
Enid.Omerovic@cbseydlerresearch.ag Felix.Parmantier@cbseydlerresearch.ag

Marcus Silbe +49 (0)69 -977 8456- 14 Veysel Taze +49 (0)69 -977 8456- 18
Marcus.Silbe@cbseydlerresearch.ag Veysel.Taze@cbseydlerresearch.ag

Institutional Sales

Schillerstrasse 27 – 29 25 Dowgate Hill

60313 Frankfurt am Main London EC4R 2GA

Phone: +49 (0)69 – 9 20 54-400

Raimar Bock +49 (0)69 -9 20 54-115

Head of Sales Raimar.Bock@cbseydler.com

Henriette Domhardt +49 (0)69 -9 20 54-137 Rüdiger Eich +49 (0)69 -9 20 54-119
(Austria, Germany) Henriette.Domhardt@cbseydler.com (Germany, Switzerland) Ruediger.Eich@cbseydler.com

Uwe Gerhardt +49 (0)69 -9 20 54-168 Klaus Korzilius +49 (0)69 -9 20 54-114
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Stefan Krewinkel +49 (0)69 -9 20 54-118 Markus Laifle +49 (0)69 -9 20 54-120
(Execution, UK) Stefan.Krewinkel@cbseydler.com (Execution) Markus.Laifle@cbseydler.com

Bruno de Lencquesaing +49 (0)69 -9 20 54-116 Christopher Seedorf +49 (0)69 -9 20 54-110
(Benelux, France) Bruno.deLencquesaing@cbseydler.com (Sales-Support) Christopher.Seedorf@cbseydler.com

Janine Theobald +49 (0)69 -9 20 54-116 Bas-Jan Walhof +49 (0)69 -9 20 54-105
(Germany) Janine.Theobald@cbseydler.com (Benelux) Bas-Jan.Walhof@cbseydler.com

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XING AG

Disclaimer and statement according to § 34b German Securities Trading Act

(“Wertpapierhandelsgesetz”) in combination with the provisions on financial analysis
(“Finanzanalyseverordnung” FinAnV)

This report has been prepared independently of the company analysed by Close Brothers Seydler Research AG
and/ or its cooperation partners and the analyst(s) mentioned on the front page (hereafter all are jointly and/or
individually called the ‘author’). None of Close Brothers Seydler Research AG, Close Brothers Seydler Bank AG or
its cooperation partners, the Company or its shareholders has independently verified any of the information given
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Section 34b of the German Securities Trading Act in combination with the FinAnV requires an enterprise preparing
a security analysis to point out possible conflicts of interest with respect to the company that is the subject of the
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Close Brothers Seydler Research AG is a majority owned subsidiary of Close Brothers Seydler Bank AG (hereafter
´CBS´). However, Close Brothers Seydler Research AG (hereafter ´CBSR´) provides its research work
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companies as follows (additional information and disclosures will be made available upon request):

a. CBS holds more than 5% interest in the capital stock of the company that is subject of the analysis.
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financial instruments, which themselves or their issuer is the subject of this financial analysis within the last
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g. CBS has a significant financial interest in relation to the company that is subject of this analysis.

In this report, the following conflicts of interests are given at the time, when the report has been published: d,e

CBS and/or its employees or clients may take positions in, and may make purchases and/ or sales as principal or
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Recommendation System:
Close Brothers Seydler Research AG uses a 3-level absolute share rating system. The ratings pertain to a time
horizon of up to 6 months:

BUY: The expected performance of the share price is above +10%.

HOLD: The expected performance of the share price is between 0% and +10%.
SELL: The expected performance of the share price is below 0%.

Recommendation history over the last 12 months for the company analysed in this report:

Date Recommendation Price at change date Price target

22 February 2011 BUY (Initiating Coverage) EUR 39.54 EUR 60.00

01 March 2011 BUY EUR 40.94 EUR 60.00

01 April 2011 BUY EUR 41.68 EUR 60.00

11 May 2011 BUY EUR 50.38 EUR 60.00

Risk-scaling System:
Close Brothers Seydler Research AG uses a 3-level risk-scaling system. The ratings pertain to a time horizon of up

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XING AG

to 6 months:

LOW: The volatility is expected to be lower than the volatility of the benchmark
MEDIUM: The volatility is expected to be equal to the volatility of the benchmark
HIGH: The volatility is expected to be higher than the volatility of the benchmark

The following valuation methods are used when valuing companies: Multiplier models (price/earnings, price/cash
flow, price/book value, EV/Sales, EV/EBIT, EV/EBITA, EV/EBITDA), peer group comparisons, historical valuation
approaches, discounting models (DCF, DDM), break-up value approaches or asset valuation approaches. The
valuation models are dependent upon macroeconomic measures such as interest, currencies, raw materials and
assumptions concerning the economy. In addition, market moods influence the valuation of companies.
The figures taken from the income statement, the cash flow statement and the balance sheet upon which the
evaluation of companies is based are estimates referring to given dates and therefore subject to risks.
These may change at any time without prior notice.

The opinions and forecasts contained in this report are those of the author alone. Material sources of information
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Handelsblatt, Frankfurter Allgemeine Zeitung, Financial Times), professional publications, published statistics,
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XING AG

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