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Technology Stocks : XO Group Inc
XOXO 34.990.0%Dec 21 3:00 PM EDT

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From: Glenn Petersen11/13/2006 9:44:09 AM
   of 133
The Knot Reports Third Quarter and Nine Month 2006 Financial Results

Monday November 13, 7:30 am ET

Net Income Increases to $3.3 Million on a 41% Revenue Gain

Reminder: Conference Call Today at 2:30 Dial-In 800-638-7172 (ID#8734121)

NEW YORK--(BUSINESS WIRE)--The Knot, Inc. (NASDAQ: KNOT - News, - News), a leading lifestage media company targeting couples planning their weddings and future lives together, today reported financial results for its third quarter and nine months ended September 30, 2006.

WeddingChannel Acquisition

As previously announced, on September 8, 2006, The Knot completed its acquisition of, Inc. The results of operations for WeddingChannel are included in the results of operations for The Knot since that date.

Third Quarter 2006 Results

For the third quarter of 2006, The Knot reported net revenues of $18.5 million, up 41% from net revenues of $13.1 million in the third quarter of 2005. The current period includes revenue contributed from the WeddingChannel operation of approximately $1.5 million. Each of the Knot's revenue streams contributed to the remaining gain of $3.9 million which represented growth of 30% over the prior year. National and local online advertising revenues led the increase, up 35% over the prior year. Merchandising revenue continued to rebound and was ahead by 25% while publishing and other revenue rose by 24%.

"As the clear market leader in the bridal category, we are moving quickly to maximize our platforms for our advertisers who want to directly reach the largest audience of brides and grooms," said Knot CEO David Liu. "We are pleased with the progress we are making in the integration of the WeddingChannel operations. We initially focused on the consolidation of the warehouse and fulfillment functions for the wedding supplies business at our facility in Redding, California. This was completed in September."

The Knot reported net income for the third quarter of 2006 of $3.3 million, or $0.12 per basic and $0.11 per diluted share, up sharply from net income of $722,000 or $0.03 per basic and diluted share in the third quarter of 2005. Total operating expenses in the third quarter of 2006 include approximately $295,000 of amortization of acquired intangibles recorded in connection with the acquisition of WeddingChannel. Total operating expenses in the third quarter of 2005 included approximately $1.5 million in professional fees related to the Company's prior litigation with WeddingChannel.

"During the quarter, we made a further investment to extend our reach in the newlywed space with the launch of the premier issue of The NEST magazine, which we have started publishing on a controlled circulation basis," Mr. Liu said. "The response so far has been enthusiastic, and the November holiday issue has new advertisers on board. Our brand strategy calls for cross platform product extensions, and we are following the same plan that has built a loyal audience for The Knot. The purchasing power of our audience from engagement to first time parents is beginning to attract a wide range of advertisers who want to influence our audience early in the buying cycle," Mr. Liu concluded.

Effective January 1, 2006, The Knot began recording expense associated with employee stock options including rights associated with its Employee Stock Purchase Plan, in accordance with Statement of Financial Accounting Standards No. 123®. The adoption of this standard resulted in a reduction in net income of $111,000 and $383,000 for the three and nine months ended September 30, 2006, respectively, or $0.02 and $0.01 per basic and diluted share. There was no impact on basic and diluted earnings per share for the three months ended September 30, 2006. Total stock-based compensation, including expenses associated with restricted common shares, was $388,000 and $1.1 million for the three and nine months ended September 30, 2006, respectively. Stock-based compensation expense was $24,000 for each of the three and nine months ended September 30, 2005.

For the nine months ended September 30, 2006, The Knot reported net revenues of $51.0 million and net income of $8.8 million, or $0.36 per basic and $0.33 per diluted share, compared to net revenues of $38.6 million and net income of $2.5 million or $0.11 per basic and $0.10 per diluted share in 2005. Professional fees related to the Company's prior litigation with, Inc. were approximately $3.7 million for the nine months in 2005.

Recent Highlights

On September 8, 2006, The Knot completed its acquisition of, Inc. The Knot issued approximately 1.15 million shares of its common stock and paid approximately $61.7 million in cash, which includes an estimated working capital adjustment of $3.8 million, in exchange for all of the capital stock and stock options of WeddingChannel. The Knot funded the cash portion of the purchase price with cash on hand and the net proceeds of its Follow-On Offering of common stock completed on August 15, 2006.

The Company also added three new members to its Board of Directors in September. The new directors are: Eileen Naughton, Regional Sales Director of Google, Ira Carlin, Chairman-International of MAGNA Global Worldwide, and Peter Sachse, Chairman and CEO of These new additions to the Board bring a unique blend of collective experience and leadership in growing media brands, expanding global operations, managing media and marketing initiatives and steering companies through important transitions.

The Nest brand celebrated the launch of the first book directed to its growing newlywed audience, The Nest Newlywed Handbook: An Owner's Manual to Modern Married Life. The first in a series of four with Clarkson Potter, The Nest Newlywed Handbook debuted on October 11th with a six-city media tour featuring editor in chief, Carley Roney. The tour was an overwhelming success producing broadcast publicity in each market with appearances on Good Day Atlanta, Fox 5 Morning News D.C. and PBS "To the Contrary" among others.


The Knot will host a conference call with investors at 2:30 p.m. ET today to discuss its third quarter financial results. Participants should dial in at 800-638-7172 ((ID#8734121) 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

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.


A replay of the webcast will also be archived on The Knot website approximately two hours after the conference call ends for a period of two weeks and will also be available at 800-642-1687 reference # 8734121


The Knot Inc.
Consolidated Balance Sheets
(in thousands)

September 30, December 31,
2006 2005
(Unaudited) (Audited)
------------- ------------
Current assets:
Cash and cash equivalents $ 70,652 $ 17,685
Short-term investments 7,000 11,550
Accounts receivable, net 8,901 4,805
Inventories 1,913 1,622
Deferred production and marketing costs 541 419
Other current assets 1,571 881
------------- ------------
Total current assets 90,578 36,962

Property and equipment, net 10,018 2,987

Intangible assets, net 45,522 205
Goodwill 38,786 8,905
Deferred tax assets 11,860 --
Other assets 506 326
------------- ------------
Total assets $ 197,270 $ 49,385
============= ============

Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 11,162 $ 5,574
Deferred revenue 11,449 7,816
Current portion of long-term debt 47 47
------------- ------------
Total current liabilities 22,658 13,437
Deferred tax liabilities 18,401 --
Long term debt 106 106
Other liabilities 811 505
------------- ------------
Total liabilities 41,976 14,048

Stockholders' equity:
Common stock 310 230
Additional paid-in-capital 188,372 77,550
Deferred compensation -- (221)
Accumulated deficit (33,388) (42,222)
------------- ------------
Total stockholders' equity 155,294 35,337
------------- ------------
Total liabilities and stockholders' equity $ 197,270 $ 49,385
============= ============

Note: Certain amounts as of December 31, 2005 have been reclassified
to conform to the current presentation.

The Knot Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)

Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net revenues:
Online sponsorship
and advertising $ 9,380 $ 6,687 $ 25,533 $ 18,516
Registry services 955 63 1,098 210
Merchandise 4,273 3,275 12,166 10,581
Publishing and
other 3,898 3,092 12,190 9,309
------------ ------------ ------------ ------------
Total net revenues 18,506 13,117 50,987 38,616

Cost of revenues 4,200 3,048 11,388 8,835

Gross profit 14,306 10,069 39,599 29,781

Product and
development 2,170 1,743 5,784 5,197
Sales and
marketing 4,657 3,516 13,740 10,674
General and
administrative 4,233 3,917 10,820 10,891
Depreciation and
amortization 975 341 1,800 901
Total operating
expenses 12,035 9,517 32,144 27,663

Income from
operations 2,271 552 7,455 2,118

Interest and other
income, net 1,082 207 1,745 504

Income before
income taxes $ 3,353 759 $ 9,200 2,622
Provision for
income taxes 90 37 366 151

Net income $ 3,263 $ 722 $ 8,834 $ 2,471

Basic earnings per
share $ 0.12 $ 0.03 $ 0.36 $ 0.11
Diluted earnings
per share $ 0.11 $ 0.03 $ 0.33 $ 0.10

Weighted average
number of common
Basic 27,472,080 22,802,123 24,592,760 22,623,619
Diluted 29,766,300 25,085,676 27,059,012 24,701,236

Note: Certain amounts for the three and nine months ended September
30, 2005 have been reclassified to conform to the current

VMW Corporate & Investor Relations
Vicki Weiner/Sylvia Dresner, 212-616-6161


Source: The Knot, Inc.
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