Untitled Page

08/07/08: The Knot Reports Second Quarter 2008 Financial Results

Technology Upgrades on Track for Completion in 2008

NEW YORK, NY (August 7, 2008) -- The Knot Inc. (NASDAQ: KNOT, www.theknot.com), a leading lifestage media company targeting couples planning their wedding and future life together, today reported financial results for its second quarter and six months ended June 30, 2008.

Second Quarter 2008 Results

For the second quarter ended June 30, 2008, The Knot reported net revenues of $28.7 million compared with net revenues of $28.5 million for the second quarter of 2007. Revenue from national and local online advertising programs increased 8 percent over the prior year’s second quarter, while merchandise revenue from the sale of wedding supplies was up 10 percent. Registry services commissions remained relatively flat compared to 2007. Publishing and other revenues declined by 22 percent in the recent quarter with the majority of the decrease resulting from the timing of the release of The Knot Best of Weddings publication. This magazine was released in the first quarter of this year and published in the second quarter of 2007. Publishing and other revenues declined 7 percent in the first six months of 2008 compared to the first half of 2007.

Net income for the second quarter of 2008 was $2.3 million or $0.07 per basic and diluted share. Net income for the second quarter of 2007 was $4.8 million or $0.15 per basic and diluted share.

“The second quarter proved to be challenging on a number of fronts. Given the weak economic environment and recent revenue results, we’re taking a conservative stance and lowering our guidance for percentage revenue growth for 2008 from mid-teens to 9 to 11 percent.” said David Liu, Chief Executive Officer of The Knot. “We’ve made considerable progress toward completing our platform investments and upgrades. We look forward to successfully concluding this investment cycle, and we expect that the changes we’re implementing today will support sustained long-term growth and profitability for The Knot in the years to come.”

Six-Month Results

For the six months ended June 30, 2008, The Knot reported net revenues of $52.5 million and net income of $2.9 million or $0.09 per basic and $0.08 per diluted share as compared to net revenues of $49.5 million and net income of $6.4 million or $0.21 per basic and $0.19 per diluted share in 2007.

Second Quarter and Year-to-Date 2008 Financial Highlights:

  • National online revenues were $5.4 million and $10.0 million for the three and six months ended June 30, 2008, respectively, compared to $4.9 million and $8.4 million for the corresponding periods in 2007.
  • Local online revenues were $8.0 million and $16.3 million for the three and six months ended June 30, 2008, respectively, as compared to $7.6 million and $14.9 million for the corresponding periods in 2007.
  • Gross profit margins approximated 80 percent for each of the three and six months ended June 30, 2008 and 2007.
  • Operating expenses were $20.1 million and $39.6 million for the three and six months ended June 30, 2008, respectively, as compared to $13.7 million and $26.9 million for corresponding periods in 2007. The Knot currently expects operating expenses to approximate $21.3 million for each of the three-month periods ended September 30 and December 31, 2008.
  • Stock-based compensation expense was $1.1 million and $1.9 million for the three and six months ended June 30, 2008, respectively, as compared to $577,000 and $1.0 million for the corresponding periods in 2007.
  • Net cash provided by operating activities was $13.7 million for the six months ended June 30, 2008 while capital expenditures amounted to $3.6 million.
  • For the six months ended June 30, 2008, The Knot has recorded a temporary impairment charge of $3.1 million with respect to its investments in auction rate securities. The charge was reflected in other comprehensive loss in stockholders’ equity.

Recent Highlights:

  • In April, the company launched a Baby Registry Service, which enables future parents to create and monitor their baby registries through its website for first-time parents, TheBump.com. Through this patented multiregistry search system, gift givers can easily locate and purchase a baby gift off of a registry at a variety of retailers, including Pottery Barn Kids, Right Start, Land of Nod, giggle, and BabyUniverse.com.
  • In May, Carol Koh Evans rejoined The Knot as Chief Operating Officer. Ms. Evans worked at The Knot in corporate development and was instrumental in the execution of the company's successful IPO in December 1999 and the acquisition of Weddingpages, Inc., in 2000. Most recently, she was General Manager for Massive Incorporated, a subsidiary of Microsoft Corporation and leading network for video game advertising, where she directed operations for the past two years.
  • In June, TheKnot.com closed the month with a record-breaking 116,000 new members. This is the highest number of new members for June on record, 13 percent above the site’s past record of 103,000 in June of 2006. 

Conference Call and Replay Information

The Knot will host a conference call with investors at 4:30 p.m., ET, on Thursday, August 7, 2008, to discuss its second quarter 2008 financial results. Participants should dial in (800) 638-7172, reference #57168714, 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 TheKnot.com, accessible at www.theknot.com/investor-relations. To access the webcast, participants should visit TheKnot.com 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 TheKnot.com approximately two hours after the conference call ends for a period of two weeks and will also be available at (800) 642-1687, reference #57168714.

About The Knot Inc.

The Knot Inc. (NASDAQ: KNOT; www.theknot.com), is a leading lifestage media company. The company's flagship brand, The Knot, is the nation's leading wedding resource, reaching well over a million engaged couples each year through the #1 wedding website TheKnot.com. Other products from The Knot include The Knot national and local magazines, The Knot books (published by Random House and Chronicle), and television programming bearing The Knot name (aired on Style Network and Comcast). The company also owns WeddingChannel.com, the most visited wedding gift registry website. The company focuses on the newlywed-to-pregnancy lifestage with The Nest brand, with the popular lifestyle website TheNest.com, a home decor book series with Clarkson Potter, and The Nest magazine. Expecting and new parents are engaged by TheBump.com and local baby services and community site LilaGuide.com, and The Bump and LilaGuide print guides. Also under The Knot Inc. umbrella are WeddingTracker.com; GiftRegistryLocator.com; party-planning site PartySpot.com; and teen-oriented PromSpot.com. The Knot Inc. is based in New York and has several other offices across the country.

This release may contain projections or other forward-looking statements regarding future events or the future financial performance of The Knot. These statements are only predictions and reflect the current beliefs and expectations of The Knot. Actual events or results may differ materially from those contained in the projections or forward-looking statements. It is routine for internal projections and expectations to change as the quarter progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which The Knot bases its expectations may change prior to the end of the quarter. Although these expectations may change, The Knot will not necessarily inform you if they do. The company's policy is to provide its expectations not more than once per quarter, and not to update that information until the next quarter. Some of the factors that could cause actual results to differ materially from the forward-looking statements contained herein include, without limitation, (i) the company's unproven business model, (ii) the company's history of losses, (iii) the significant fluctuation to which the company's quarterly revenues and operating results are subject, (iv) the seasonality of the wedding industry, (v) the dependence of our registry services business on the continued use of WeddingChannel.com by our retail partners and (vi) other factors detailed in documents The Knot files from time to time with the Securities and Exchange Commission. Forward-looking statements in this release are made pursuant to the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995.

Contact:

Vicki Weiner/Sylvia Dresner

VMW Corporate & Investor Relations

212-616-6161

info@vmwcom.com


The Knot, Inc.


Consolidated Balance Sheets


(in thousands)










June 30,


December 31,




2008


2007




(Unaudited)


(Audited)








Current assets:






Cash and cash equivalents


$62,438


$33,127


Short-term investments


--


72,649


Accounts receivable, net


10,327


14,927


Accounts receivable from affiliate


1,134


1,327


Inventories


2,971


1,878


Deferred production and marketing costs


724


483


Deferred tax assets, current portion


3,748


3,388


Other current assets


1,629


1,623


Total current assets


82,971


129,402








Long-term investments


50,900


--


Property and equipment, net


9,301


8,497


Intangible assets, net


29,768


30,953


Goodwill


33,770


32,105


Deferred tax assets


20,304


22,018


Other assets


230


278


Total assets


$227,244


$223,253








Liabilities and stockholders’ equity






Current liabilities:






Accounts payable and accrued expenses


$8,363


$7,616


Deferred revenue


14,786


14,665


Current portion of long-term debt


55


55


Total current liabilities


23,204


22,336


Deferred tax liabilities


13,746


14,178


Other liabilities


424


456


Total liabilities


37,374


36,970








Stockholders’ equity:






Common stock


321


316


Additional paid-in-capital


196,706


192,893


Accumulated deficit


(4,057)


(6,926)


Accumulated other comprehensive loss


(3,100)


--


Total stockholders’ equity


189,870


186,283


Total liabilities and stockholders’ equity


$227,244


$223,253








The Knot, Inc.

Consolidated Statements of Operations

(in thousands, except per share amounts)







Three months ended

Six months ended


June 30,

June 30,


2008

2007

2008

2007


(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Net revenues:





Online sponsorship and advertising

$13,463

$12,521

$26,374

$23,298

Registry Services

3,289

3,356

5,067

5,117

Merchandise

7,133

6,500

11,727

11,130

Publishing and other

4,786

6,109

9,304

9,970

Total net revenues

28,671

28,486

52,472

49,515






Cost of revenues

5,765

5,651

10,236

9,667






Gross profit

22,906

22,835

42,236

39,848






Operating expenses:





Product and content development

5,037

3,306

9,989

6,450

Sales and marketing

7,617

6,447

15,196

12,337

General and administrative

5,213

3,987

10,022

8,072

Depreciation and amortization

2,238

2,198

4,439

4,306

Total operating expenses

20,105

15,938

39,646

31,165






Income from operations

2,801

6,897

2,590

8,683






Interest and other income, net

880

1,236

2083

2,223






Income before income taxes

3,681

8,133

4,673

10,906


1,390

3,373

1,803

4,512

Provision for income taxes






Net income

$2,291

$4,760

$2,870

$6,394






Basic earnings per share

$0.07

$0.15

$ 0.09

$ 0.21

Diluted earnings per share

$0.07

$0.15

$ 0.09

$ 0.19











Weighted average number of common shares outstanding

Basic

31,445,490

30,898,378

31,348,660

30,855,336

Diluted

32,592,425

32,759,935

32,592,375

32,795,590






Note: Certain prior year amounts have been reclassified to conform to the current year’s presentation.