The Knot Reports Third Quarter Results
biz.yahoo.com
Thursday November 11, 8:30 am ET
Online Advertising Revenue Rose 44%
Company Leverages Brand with Newlywed Site 'The Nest'
Reminder: Conference Call Today at 2:30 dial-in 800-638-7172, ID# 1694519
NEW YORK--(BUSINESS WIRE)--Nov. 11, 2004-- The Knot, Inc. (OTCBB: KNOT.OB, www.theknot.com), one of the world's leading wedding media and services companies, today reported financial results for its third quarter and nine months ended September 30, 2004.
For the third quarter, The Knot reported net revenues rose to $10.7 million from net revenues of $9.7 million in the same period of 2003. The revenue gain reflects a 44% increase in online advertising in both local and national markets. Publishing and other revenues for the period were up 18% primarily reflecting growth in national advertising pages for the 2004 Fall/Winter issue of The Knot Weddings magazine as well as growth of advertising programs in The Knot's local wedding magazines, which are published in 18 major U.S. markets.
"We are experiencing a significant increase of national advertisers as well as growth within our local vendor base" said David Liu, CEO of The Knot. "This trend reflects rising recognition of The Knot's reach to its active membership of over one million couples, representing the largest aggregation of a prime audience that will be spending on their weddings in the coming 12-18 months."
Merchandising revenue continues to under-perform, declining 18% from the prior year. "During the quarter we instituted further cost cutting measures at our Redding, California distribution facility that will begin to take effect in the fourth quarter. Concurrently, we are preparing to test launch our new e-commerce technology platform. Together, we believe these steps will improve our e-commerce performance in 2005," Liu added.
The Knot reported net income for the third quarter of 2004 of $1.0 million, or $0.05 per basic and $0.04 per diluted share. Gross margins rose to 71% from 65% in the prior year's third quarter due to a higher mix of advertising revenues. Total operating expenses for the third quarter, which increased to $6.6 million from $6.2 in the prior year, reflected a non-cash gain of $1.2 million due to the settlement of a previously recorded liability with a distribution partner. In addition, operating expenses for the recent quarter included approximately $985,000 of professional fees related to The Knot's current litigation with WeddingChannel.com, Inc. The Knot reported net income of $202,000 or $0.01 per basic and diluted share in the third quarter of 2003.
Member activity on The Knot increased in the third quarter with 112 million average monthly page views versus 87 million average monthly page views in the year earlier quarter. Today, over 70% of traffic on TheKnot.com is direct without a referring URL, testament to the dominant brand and service offering. As of September 30, 2004, The Knot's cumulative membership was over 5.4 million compared to the approximately 4.4 million in 2003.
For the first nine months of 2004, The Knot reported net revenues of $31.3 million, and net income of $1.1 million or $0.05 per basic and diluted share compared to net revenues of $28.5 million and net income of $778,000 or $0.04 per basic and diluted share in 2003.
In October, the Company launched The Nest and transitioned the substantial base of couples who have wed in the last two years to a new site, www.thenest.com, which focuses exclusively on the needs of newlyweds. "Our focus is maximizing the lifetime value of our membership database," Mr. Liu said. "We have a very loyal and active audience which joins The Knot to prepare for a major event in their lives. Since a substantial proportion of 'Knotties' continue to remain active on our site after their weddings, we see a natural expansion of our business to the newlywed market. We are very encouraged by the early positive feedback from our audience base for this new business which further leverages our membership and operating infrastructure."
THE KNOT'S RECENT HIGHLIGHTS
During the third quarter, The Knot's recognized wedding expert, Editor in Chief Carley Roney, remained in the national broadcast spotlight with several high profile appearances, including a trio of appearances on NBC's TODAY Show annual wedding series. Carley also hosted a 30-city broadcast media tour in October. The media tour generated over 2.2 million viewers.
In August, consistent with the Company's strategy to deliver smart and stylish wedding content to engaged couples wherever and whenever they need it, The Knot entered into a partnership with Comcast Cable to launch the first-ever all-weddings Video-on-Demand service. "The Knot Weddings" service, now available to Comcast cable subscribers nationwide, provides viewers with 24/7 access to over 45 hours of wedding-related programming including real wedding stories from the critically-acclaimed TV series, Real Weddings From The Knot as well as more than 60 exclusive runway fashion shows and special program packages on hot wedding trends. New programs are added to "The Knot Weddings" service each month.
CONFERENCE CALL AND WEBCAST
The Knot will host a conference call with investors at 2:30 p.m., ET on Thursday, November 11, 2004, to discuss its third quarter 2004 financial results. Participants should dial in 800-638-7172 at least 10 minutes before the call is scheduled to begin. Participants can also access the live broadcast over the Internet on the Investor Relations section of The Knot Web site, accessible at theknot.com. To access the Web cast, participants should visit The Knot Web site at least 15 minutes prior to the conference call in order to download or install any necessary audio software.
REPLAY INFORMATION
A replay of the Web cast will also be archived on The Knot Web site approximately 2 hours after the conference call ends for a period of two weeks and will also be available at 800-642-1687 passcode #1694519
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The Knot Inc.
Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2004 2003
----------------------
(Unaudited) (Audited)
Assets
Current assets:
Cash and cash equivalents $22,688 $22,511
Accounts receivable, net 2,917 2,883
Inventories 1,932 1,195
Deferred production and marketing costs 246 318
Other current assets 486 747
----------------------
Total current assets 28,269 27,654
Property and equipment, net 2,089 2,006
Intangible assets, net 8,659 8,734
Other assets 291 313
----------------------
Total assets $39,308 $38,707
======================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $3,702 $5,790
Deferred revenue 5,951 4,891
Current portion of long-term debt 40 40
----------------------
Total current liabilities 9,693 10,721
Long term debt 196 196
Other liabilities 502 490
----------------------
Total liabilities 10,391 11,407
Stockholders' equity:
Common stock 222 217
Additional paid-in-capital 75,055 74,533
Accumulated deficit (46,360) (47,450)
----------------------
Total stockholders' equity 28,917 27,300
----------------------
Total liabilities and stockholders' equity $39,308 $38,707
======================
The Knot Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
--------------------------------------------
2004 2003 2004 2003
--------------------------------------------
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Net revenues:
Sponsorship and
advertising $4,478 $3,117 $12,613 $8,888
Merchandise 3,717 4,520 10,951 13,320
Publishing and other 2,476 2,102 7,769 6,340
--------------------------------------------
Total net revenues 10,671 9,739 31,333 28,548
Cost of revenues 3,081 3,394 9,009 9,628
--------------------------------------------
Gross profit 7,590 6,345 22,324 18,920
Operating expenses:
Product and content
development 1,283 1,112 3,744 3,216
Sales and marketing 2,099 3,020 9,150 8,639
General and administrative 3,074 1,852 7,866 5,618
Non-cash compensation - 1 - 32
Depreciation and
amortization 190 174 589 665
--------------------------------------------
Total operating expenses 6,646 6,159 21,349 18,170
Income from operations 944 186 975 750
Interest and other income,
net 82 21 193 63
--------------------------------------------
Income before income taxes 1,026 207 1,168 813
============================================
Provision for income taxes 21 5 78 35
Net income $1,005 $202 $1,090 $778
============================================
Basic earnings per share $0.05 $0.01 $0.05 $0.04
============================================
Diluted earnings per share $0.04 $0.01 $0.05 $0.04
============================================
Weighted average number of
common shares outstanding
Basic 22,189,580 18,605,468 22,013,776 18,470,638
============================================
Diluted 23,505,692 20,492,003 23,606,535 19,734,658
============================================
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