This summary is based on the third quarter fiscal 2008 earnings call conducted by The Knot Inc. (KNOT) on November 6, 2008.
Management:
Chairman and CEO: David Liu
CFO: John P. Muller
Corporate Communications Officer: Laura Cave
Key Investor Issues:
- Year-to-date net revenues were $79.5 million versus $74.5 million in the year ago period.
- Year-to-date net income dipped to $5.1 million compared with $9.3 million last year.
- The nine months diluted EPS of 16 cents compare negatively with 28 cents in the 2007 period.
Third Quarter Financial Highlights:
John Mueller was named CFO:
- He was formerly CFO of Genius Products Inc.
- Previously he was SVP of Media Investment Banking for Jeffries & Company Inc.
- Kristin Savilia was promoted to SVP of E-Commerce and Registry Services.
The management reported that in recent months the company has experienced softening across some of the revenue streams.
- It was noted that some national advertisers, both current and in the pipeline, began to delay or cancel their third and fourth quarter commitments.
- However, the company is reportedly on pace to record its best year in terms of member enrollment.
Ahead of the full implementation of the new contract entry system, the management launched a new program in the local sales division as a test of the variable pricing strategy.
- In an analysis of the vendors, it was noted that of the total vendor base, over 93% were from primary wedding categories such as reception sites, caterers, photographers.
- Less than 7% of the vendors were from secondary categories like calligraphers, soloists and rehearsal dinner sites.
- The management signed a group of eight sales reps to sell online profiles in secondary categories for the monthly price of $50.
Over the course of the quarter, it became increasingly apparent that reporting vendor count does not always provide the best visibility into local business.
-This is because regional companies often buy into multiple markets to increase their visibility in the territories where they do business.
- The other reason is that a client like a resort may decide to buy profiles in multiple categories like reception and ceremony sites, guest accommodations, rehearsal dinners, spas and fitness.
- Hence while in these two instances the vendors pay for multiple profiles, they’re only counted as one vendor.
- The management also highlighted that over time, the difference between a vendor and profile counts has not been consistent.
- With the addition of a low-cost profile in secondary categories, the company has seen some of its existing vendors buying into additional categories.
- It is anticipated that the vendor count and the actual profile count may begin to diverge.
- Given that company revenue is driven by the number of actual profiles sold, the management is going to begin reporting a profile count instead of the number of vendors.
- At the end of the third quarter, there were 15,875 profiles versus the 14,187 vendors.
- As of October 31 however, the profile count in a single month firmed 2.3% to 16,247 and vendor count grew by 2.8% to 14,579.
Third quarter revenue from online advertising programs for both national clients and local vendors increased by 12.5% to $13.9 million.
- This compares with $12.4 million for the equivalent period in 2007.
- The company had impressive growth in national online advertising which increased 23% to $5.6 million versus third quarter 2007 of $4.5 million.
- For the nine months of 2008 national online revenue was $15.7 million, a 22% increase over the prior year revenue of $12.9 million.
- This growth is composed of gains in both endemic and non-endemic categories which demonstrates the increasing share of bridal marketing budgets and growth in advertising for other life-stage brands.
Local online advertising increased to $8.4 million in the third quarter from $7.9 million in 2007 or about 7%.
- Revenue growth in this segment was primarily due to the continued impact of last summer’s price increase.
- For the nine months of 2008, local online advertising was $24.7 million which represents an 8% gain over 2007.
- During the quarter, the management implemented two new local programs and begun to see progress in the number of new vendors signing up in both primary and secondary categories, particularly in the last half of September.
Merchandise revenue from the sale of wedding supplies was $5.8 million in the third quarter of 2008 compared with $5.3 million last year.
- The Knot Shop posted improved growth in the quarter due to the recent redesign of the shop’s home page.
- The company recently applied a similar redesign to the wedding channel shop and believes this will help to improve contribution from that online store as well.
