The Knot, Inc. (NASDAQ: KNOT, www.theknot.com), the premier
media company devoted to weddings, nesting and babies, today
reported financial results for the first quarter ended March 31,
2011.
First Quarter Summary Results
Total revenue for the quarter was $27.5 million, flat compared
to the first quarter of 2010. The results were again led by online
advertising as national online advertising grew 18% and local
online advertising was up 15% compared to the first quarter last
year. The increase in both national and local online advertising
was boosted by 15% growth in publishing as both national and local
print publications saw solid gains in advertising. These gains were
mostly offset by the anticipated declines in registry services and
merchandise revenue, which were primarily the result of the change
in the Macy’s relationship announced last January. Revenue in the
first quarter of 2010 included a one-time $1 million termination
fee paid to the Company by Macy’s. Despite flat revenue year over
year, gross profit for the quarter was $22.3 million, up 3% year
over year due to the shift in revenue mix to higher margin online
advertising.
For the quarter ended March 31, 2011, the Company’s operating
loss was $1.1 million compared with an operating loss of $0.2
million in the first quarter of 2010. The net loss for the quarter
was $0.7 million or a net loss of $0.02 per share, compared to a
net loss of $0.1 million and $0.00 per share last year in the first
quarter.
The Company’s balance sheet reflects cash and cash equivalents
of $101.0 million, down $38.6 million from $139.6 million at
December 31, 2010, primarily due to the repurchase of 3.7 million
shares of common stock from Macy’s on February 25, 2011.
“Our multi-platform strategy is yielding strong results in our
profitable national and local advertising businesses as our brands
continue to deliver a targeted audience to our advertisers’
services and products, “said Chief Executive Officer David Liu.
“With a strong start to the year, these businesses are leading the
way as we continue to execute on the long-term opportunities to
serve our advertisers, brides, newlyweds, and first-time
parents.”
Recent Developments
- National online advertising grew
through new and existing advertiser relationships in the first
quarter as the Company sold multi-platform, multi-brand campaigns
to both bridal and non-endemic clients with strength in categories
including retail, travel and consumer packaged goods.
- The local sales team continues to
excel, with both print and online advertising sales up strongly in
the first quarter. At the end of March, The Knot had over 19,000
vendors and the churn rate was reduced to 31.5% from 34.2% at
December 31, 2010. Also, average revenue per vendor was up slightly
in the first quarter.
- The Company’s print publications,
including The Knot national magazine, The Knot local magazines, and
The Bump local magazines gained momentum in the first quarter.
- The Knot’s mobile applications continue
to receive accolades, with The Knot Weddings Magazine for the iPad
app, winning a 2011 Appy Award from MediaPost this quarter. The
Company recently published its third iPad magazine, including an
innovative advertising campaign designed by The Knot and a consumer
packaged goods advertiser. Also, for this season’s Bridal Fashion
week, The Knot streamed fashion shows live on theknot.com TV as
well as over the iPhone.
- The registry services and merchandise
businesses experienced the final full quarter of difficult
comparisons from the transition in the Macy’s relationship and, as
expected, growth in the first quarter was below Company averages.
The Company continues to renew existing retailers on its registry
platform including Kohl’s and the addition of JC Penney Baby.
GiftRegistry360 is seeing good early adoption among brides and
guests after the launch out of beta last quarter.
- On February 28, 2011, The Knot
announced it had repurchased all shares in the Company owned by
Macy’s, Inc. The Knot purchased 3,671,526 shares, representing
approximately 10.7% of the shares outstanding at that time. The
aggregate purchase price was $37.7 million, based on a price of
$10.26 per share, equal to the closing price on February 25, 2011,
the day the purchase agreement was signed. The stock repurchase
transaction did not affect the registry or advertising agreements
between The Knot and Macy’s. The stock repurchase transaction with
Macy’s was made pursuant to the previously announced program under
which the Board of Directors of The Knot had authorized the
repurchase of up to $50 million of the Company’s common stock from
time to time on the open market or in privately negotiated
transactions. This program will continue in effect with
approximately $12.3 million remaining authorized for share
repurchases.
First Quarter 2011 Financial Highlights
“With the difficult Macy’s comparisons behind us, revenue mix
shifting towards higher margin advertising revenue and completion
of our recent accretive share repurchase, the Company is positioned
for improving long term profitability,” said Chief Financial
Officer John Mueller.
- For the first quarter ended March 31,
2011, The Knot reported net revenue of $27.5 million, flat compared
to net revenue in the first quarter of 2010. Net loss for the first
quarter was $0.7 million, or $0.02 per basic and diluted share, as
compared with a net loss of $0.1 million, or $0.00 per basic and
diluted share, for the first quarter ended March 31, 2010.
- National online revenue was $6.6
million for the three months ended March 31, 2011, growing 18% over
the $5.6 million in revenue recorded for the corresponding period
in 2010.
- Local online revenue was $10.2 million
for the quarter ended March 31, 2011, growing 15% over the $8.9
million in revenue recorded for the first quarter of 2010.
- Merchandise revenue was $5.7 million
for the three months ended March 31, 2011, compared with $6.9
million for the corresponding period in 2010. Revenue declined due
to reduced site traffic which was impacted by the change in the
Macy’s relationship as well as by changes in the environment for
search engine optimization.
- Registry commissions revenue was $1.1
million in the first quarter of 2011, compared with $1.7 million in
the same period in 2010.
- Gross profit for the first quarter of
2011 was $22.3 million, up 3% year over year, as margins
approximated 81% for the three months ended March 31, 2011,
compared with 79% for the corresponding periods in 2010.
- Operating expense was $23.4 million for
the three months ended March 31, 2011, compared with $21.8 million
for the corresponding period in 2010. The increase in operating
expense was due to increased headcount in the sales organization
and expenses associated with the e-commerce technology
upgrade.
- Stock-based compensation expense was
$1.5 million for the three months ended March 31, 2011, compared
with $1.1 million for the corresponding period in 2010.
- Net cash provided by operating
activities was $0.7 million for the three months ended March 31,
2011, while capital expenditures amounted to $0.5 million for the
same period.
Conference Call and Replay Information
The Knot will host a conference call with investors at 4:30 p.m.
ET on Thursday, May 5, 2011, to discuss its first quarter 2011
financial results. Participants should dial (866) 430-3457,
Reference #63771414 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
Company’s website, accessible at
www.theknot.com/investor-relations. To access the webcast,
participants should visit The Knot website 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 Company’s
website approximately two hours after the conference call ends. A
replay of the call will be available at (800) 642-1687 or (706)
645-9291, conference ID #63771414.
About The Knot, Inc.
The Knot, Inc. (NASDAQ: KNOT; www.theknot.com), is the premier
media company devoted to weddings, pregnancy, and everything in
between, providing young women with the trusted information,
products and advice they need to guide them through the most
transformative events of their lives. Our family of premium brands
began with the industry’s #1 wedding brand, The Knot, and has grown
to include WeddingChannel.com, The Nest and The Bump. Our
groundbreaking community platforms and incomparable content have
ignited passionate communities across the country. The Knot, Inc.
is recognized by the industry for being innovative in all media --
from the web to social media and mobile, to magazines and books,
television and video. For our advertisers and partners, The Knot,
Inc. offers the consummate opportunity to connect with our devoted
communities as they make the most important decisions of their
lives. Founded in 1996, The Knot, Inc. is made up of four major
revenue categories: online sponsorship and advertising, registry
services, merchandise and publishing. The company is publicly
listed on NASDAQ (KNOT) and is headquartered in New York City.
This release may contain projections or other forward-looking
statements regarding future events or our future financial
performance. These statements are only predictions and reflect our
current beliefs and expectations. 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 we base our expectations may change prior to the
end of the quarter. Although these expectations may change, we will
not necessarily inform you if they do. Our policy is to provide
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) our
online wedding-related and other websites may fail to generate
sufficient revenue to survive over the long term, (ii) our history
of losses, (iii) inability to adjust spending quickly enough to
offset any unexpected revenue shortfall, (iv) delays or
cancellations in spending by our advertisers and sponsors, (v) the
significant fluctuation to which our quarterly revenue and
operating results are subject, (vi) the seasonality of the wedding
industry, (vii) our expectation of a decline in WeddingChannel.com
membership and traffic to the WeddingChannel.com online shop as a
result of the termination of the old Macy’s registry services
agreement, (viii) the dependence of the WeddingChannel.com registry
services business on third parties, and (ix) other factors detailed
in documents we file 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.
The Knot, Inc. Consolidated Statements of
Operations (in thousands, except share and per share
amounts) Three months
ended March 31, 2011 2010 (Unaudited)
(Unaudited) Net revenue: Online sponsorship and advertising
$ 16,769 $ 14,464 Registry services 1,129 1,698 Merchandise 5,706
6,921 Publishing and other 3,940 4,420
Total net revenue 27,544 27,503 Cost of revenue 5,255
5,837 Gross profit 22,289 21,666
Operating expenses: Product and content development 6,531 5,601
Sales and marketing 10,504 9,163 General and administrative 5,103
5,549 Depreciation and amortization 1,283
1,529 Total operating expenses 23,421 21,842 Loss
from operations (1,132 ) (176 ) Loss in equity interest (104
) (115 ) Interest and other income, net (1 ) 82
Loss before income taxes (1,237 ) (209 ) Benefit for
income taxes (532 ) (98 ) Net loss $ (705 ) $
(111 ) Basic loss per share $ (0.02 ) $ (0.00 ) Diluted loss
per share $ (0.02 ) $ (0.00 ) Weighted average number
of common shares outstanding: Basic 31,852,286
32,361,527 Diluted 31,852,286
32,361,527
The Knot, Inc.
Consolidated Balance Sheets (in thousands)
March 31, December 31,
2011 2010 (Unaudited) (Audited)
Current assets: Cash and cash equivalents $ 100,950 $ 139,586
Accounts receivable, net 12,220 11,219 Inventories 4,438 3,735
Deferred production and marketing costs 1,269 1,059 Deferred tax
assets, current portion 2,661 2,660 Other current assets
6,133 5,268 Total current assets 127,671
163,527 Property and equipment, net 5,236 5,642 Intangible
assets, net 8,259 8,609 Goodwill 37,750 37,750 Deferred tax assets
18,779 18,775 Other assets 799 936
Total assets $ 198,494 $ 235,239
Liabilities and stockholders’ equity Current liabilities:
Accounts payable and accrued expenses $ 8,844 $ 10,389 Deferred
revenue 13,876 11,291 Total current
liabilities 22,720 21,680 Deferred tax liabilities 3,090 3,088
Other liabilities 143 95 Total
liabilities 25,953 24,863 Stockholders’ equity: Common stock
316 343 Additional paid-in-capital 191,677 214,050 Accumulated
deficit (19,452 ) (4,017 ) Total stockholders’ equity
172,541 210,376 Total liabilities and
stockholders’ equity $ 198,494 $ 235,239
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