Exhibit 99.1
The Knot Reports Second Quarter and Six Month
2006 Financial Results; Net Income for the Second Quarter Increases to
$3.9 Million on a 31% Revenue Gain; Reminder: Conference Call Today at
2:30 p.m. ET Dial-in 800-638-7172 (ID#3164202)
NEW YORK--(BUSINESS WIRE)--July 27, 2006--The Knot, Inc. (NASDAQ:
KNOT, www.theknot.com), a leading lifestage media company targeting
couples planning their weddings and future lives together, today
reported financial results for its second quarter and six months ended
June 30, 2006.
Second Quarter 2006 Results
For the second quarter ended June 30, 2006, The Knot reported net
revenues of $17.7 million, an increase of 31% from net revenues of
$13.6 million for the second quarter of 2005. All three of the
Company's revenue streams contributed to the gains, led by local and
national online advertising revenue which was up 38% over the prior
year. Publishing and other revenues rose by 30% and merchandise
revenue increased by 20% over the prior year.
"Online advertising and publishing revenues remained strong in the
second quarter of 2006, and we saw an encouraging rebound in our
merchandising revenue," said David Liu, Chief Executive Officer of The
Knot. "The value of our ability to deliver a replenishing audience,
poised to purchase goods and services within a defined time period, is
being recognized by our advertisers with increased spending budgets
and expanded campaigns."
The Knot reported net income for the second quarter of 2006 of
$3.9 million or $0.17 per basic and $0.15 per diluted share as
compared to $1.3 million or $0.06 per basic and $0.05 per diluted
share in 2005. Professional fees related to The Knot's litigation with
WeddingChannel.com, Inc., which were $1.6 million in the second
quarter of 2005, were minimal in the second quarter of 2006. On
January 17, 2006, a stay was entered in connection with this
litigation, for a period of not less than 60 days, upon the joint
request of the parties. The stay has continued to remain in effect.
On June 5, 2006, The Knot and WeddingChannel announced that they
had entered into a definitive merger agreement. As previously
announced, The Knot will, under the terms of the merger agreement, pay
approximately $57.9 million in cash and issue 1,150,000 shares of its
common stock in exchange for all of the capital stock and stock
options of WeddingChannel. On July 20, 2006, The Knot filed a
registration statement with the Securities and Exchange Commission
relating to a proposed offering by The Knot of 3,500,000 newly-issued
shares of common stock and by certain selling stockholders of
4,450,000 shares of common stock. The net proceeds to The Knot from
this offering, which is subject to the registration statement becoming
effective and market conditions, will be used to fund part of the cash
portion of the merger consideration. The shares being offered in the
proposed offering may not be sold nor may offers to buy be accepted
prior to the time the registration statement becomes effective.
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(R). The adoption of this
standard resulted in a reduction in net income of $144,000 and
$272,000 for the three and six months ended June 30, 2006,
respectively, or $0.01 per basic share for each period. There was no
impact on diluted earnings per share for each period. Total
stock-based compensation, including expense associated with restricted
common shares, was $361,000 and $689,000 for the three and six months
ended June 30, 2006, respectively. There was no stock-based
compensation recorded in the three and six months ended June 30, 2005.
Results for the Six Months Ended June 30, 2006
For the six months ended June 30, 2006, The Knot reported net
revenues of $32.5 million and net income of $5.6 million or $0.24 per
basic and $0.22 per diluted share as compared to net revenues of $25.5
million and net income of $1.7 million or $0.08 per basic and $0.07
per diluted share in 2005.
Recent Highlights:
During the second quarter, The Knot made a series of announcements
regarding its strategic extension to offline media of The Nest
lifestyle brand for young marrieds. These included the anticipated
summer launch of THE NEST From The Knot magazine; a distribution deal
with McClatchy-Tribune Information Services (formerly
KnightRidder/Tribune) to distribute editorial content from The Nest;
and a multiple book deal with Clarkson Potter to bring The Nest brand
to bookshelves nationwide. The first book, "The Nest Newlywed
Handbook: An Owner's Manual to Modern Married Life," will be published
in early Fall 2006.
On July 10, 2006, The Knot announced that it had completed a
private placement of 2,750,000 newly-issued shares of common stock at
$18.25 per share to three institutional investors for gross proceeds
of $50.2 million, before placement fees and offering expenses. As
previously announced, these proceeds will be used for general
corporate purposes other than in relation to the WeddingChannel
merger.
On July 25, 2006, The Knot announced that it had acquired "the
lilaguide", a collection of localized pocket-sized,
for-parents-by-parents guidebooks on all-things babies. The
acquisition of "the lilaguide" represents The Knot's first step into
the business of catering to the specific needs of first-time parents.
JULY 25 CONFERENCE CALL AND WEBCAST
The Knot will host a conference call with investors at 2:30 p.m.
ET on Thursday, July 27, 2006, to discuss its second quarter 2006
financial results. Participants should dial in 800-638-7172 (#
3164202) 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
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.
REPLAY INFORMATION
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 #
3164202
About The Knot, Inc.
The Knot, Inc. (NASDAQ: KNOT; www.theknot.com) is a leading
lifestage media and services company. The Company's flagship brand,
The Knot, is the nation's leading wedding resource that reaches over 1
million engaged couples each year through the Web, newsstands,
bookstores, national television and more. Its award-winning website,
TheKnot.com, is the most-trafficked online wedding destination. The
Company also offers a diverse collection of print publications
including national and regional editions of "The Knot Weddings"
magazine, seven books, a popular TV series on The Oxygen Network, a
Video On Demand (VOD) service for Comcast Cable and content
distribution partnerships with MSN and Comcast. The Knot, Inc. has
recently launched several brands targeted before and beyond the
wedding day, including newlywed resource The Nest (www.thenest.com),
teen site PromSpot.com, and online personals site,
GreatBoyfriends.com. The Knot, Inc. is based in New York and has
several other offices across the country.
FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements regarding future
events or the future financial performance of The Knot. These
statements, which are usually accompanied by word such as "may",
will", "could", "intends" and "expects", 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. Some of the factors that
could cause actual results to differ materially from the
forward-looking statements contained herein include, among others, (i)
the risk that the proposed merger may not be approved by the
stockholders of WeddingChannel or that the necessary regulatory
approvals are not obtained, (ii) the risk that other closing
conditions of the merger may not be satisfied, (iii) the risk that the
two companies' businesses will not be integrated successfully and (iv)
the significant costs related to the proposed merger. In addition,
other factors relating solely to The Knot's business could cause
actual events or results to differ materially from the forward-looking
statements contained herein including, among others, (i) The Knot's
unproven business model, (ii) The Knot's history of significant
losses, (iii) the significant fluctuation to which The Knot's
quarterly revenues and operating results are subject, (iv) the risks
and related costs associated with ongoing litigation, (v) the
seasonality of the wedding industry 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.
The Knot Inc.
Consolidated Balance Sheets
(in thousands)
June 30, December 31,
2006 2005
(Unaudited) (Audited)
------------ ------------
Assets
Current assets:
Cash and cash equivalents $24,662 $17,685
Short-term investments 9,600 11,550
Accounts receivable, net 4,783 4,805
Inventories 1,786 1,622
Deferred production and marketing costs 623 419
Other current assets 815 881
------------ ------------
Total current assets 42,269 36,962
Property and equipment, net 4,056 2,987
Intangible assets, net 9,077 9,110
Other assets 1,454 326
------------ ------------
Total assets $56,856 $49,385
============ ============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $5,018 $5,574
Deferred revenue 8,785 7,816
Current portion of long-term debt 47 47
------------ ------------
Total current liabilities 13,850 13,437
Long term debt 106 106
Other liabilities 480 505
------------ ------------
Total liabilities 14,436 14,048
Stockholders' equity:
Common stock 234 230
Additional paid-in-capital 78,837 77,550
Deferred compensation -- (221)
Accumulated deficit (36,651) (42,222)
------------ ------------
Total stockholders' equity 42,420 35,337
------------ ------------
Total liabilities and stockholders' equity $56,856 $49,385
============ ============
The Knot Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
Three months ended Six months ended
June 30, June 30,
------------------------------------------------
2006 2005 2006 2005
------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net revenues:
Sponsorship and
advertising $8,354 $6,054 $16,153 $11,829
Merchandise 4,897 4,067 8,035 7,453
Publishing and other 4,478 3,445 8,292 6,217
------------------------------------------------
Total net revenues 17,729 13,566 32,480 25,499
Cost of revenues 4,058 2,875 7,187 5,787
------------------------------------------------
Gross profit 13,671 10,691 25,293 19,712
Operating expenses:
Product and content
development 1,828 1,774 3,613 3,454
Sales and marketing 4,368 3,530 9,083 7,157
General and
administrative 3,326 3,856 6,588 6,974
Depreciation and
amortization 453 280 825 561
------------------------------------------------
Total operating
expenses 9,975 9,440 20,109 18,146
Income from
operations 3,696 1,251 5,184 1,566
Interest and other
income, net 363 167 663 297
------------------------------------------------
Income before income
taxes $4,059 $1,418 $5,847 $1,863
Provision for income
taxes 173 78 276 114
Net income $3,886 $1,340 $5,571 $1,749
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Basic earnings per
share $0.17 $0.06 $0.24 $0.08
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Diluted earnings per
share $0.15 $0.05 $0.22 $0.07
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Weighted average
number of common
shares outstanding
Basic 23,173,216 22,654,055 23,129,238 22,532,971
================================================
Diluted 25,783,965 24,717,359 25,681,506 24,507,398
================================================
CONTACT: VMW Corporate & Investor Relations
Vicki Weiner/Sylvia Dresner, 212-616-6161
info@vmwcom.com