This summary is based on the second quarter fiscal 2008 earnings call conducted by The Knot Inc. (KNOT: chart) on August 7, 2008.

Management:

- Chairman and Chief Executive Officer: David Liu
- Chief Financial Officer & Treasurer: Richard Szefc
- Corporate Communications Officer: Laura Cave

Key Investors Issues

- Net revenues remained essentially flat at $28.7 million.
- Net income was $2.3 million or 7 cents a share, down 52% from $4.8 million or 15 cents per share in the prior year.

Half Year Highlights:

- Revenues grew to $52.5 million from $49.5 million a year ago or a similar gain of 6%.
- Net income was $2.9 million or 9 cents per share, down 54.7% from $6.4 million or 21 cents per share in 2007.
- Capital expenditures were $3.6 million.

Second Quarter Highlights

Net revenues of $28.7 million represented only a small increase over second quarter revenues of $28.5 million a year earlier.

- The second quarter of 2007 included over $600,000 of revenue from certain acquired Wedding Channel local accounts which were eliminated over the course of 2007 substantially in the second half of that year.
- In addition the firm published the Best of Weddings magazine in April of last year which contributed over $800,000 in revenue to the second quarter in 2007.
- Revenue from online advertising programs for both national clients and local vendors increased by 8% to $13.5 million.

Local online advertising increased to $8 million from $7.6 million last year driven primarily by price increases.

- The local vendor base decreased to 14,000 as the firm completed the renewal cycle for vendors first being charged with the 30% price increase initiated in June of last year.
- The focus of local sales force has shifted heavily to new account acquisition which will be of increasing importance in driving revenue growth over the last half of the year as the impact of the 2007 price increase continues to diminish.
- With respect to national accounts, online advertising grew to $5.4 million or by 11% compared to 2007 and represented quarterly sequential growth of $760,000 or 16% over the first quarter of this year.

Merchandise revenue and the sale of wedding supplies at retail store members was $7.1 million a 10% increase over last year.

- Revenue through The Knot Shop grew 22% on higher orders as the firm increased its conversion rate of membership base to customers of the online store.
- The small increase in commission revenue earned through the Macy’s relationship was offset by small declines in revenue earned through other registry partners.
- Publishing and other revenue amounted to $4.8 million representing a decrease of $1.3 million from the comparable period last year.

Net income was $2.3 million or 7 cents a share, down 52% from $4.8 million or 15 cents per share in the prior year due to higher operating costs.

- Overall gross profit percentage remained at approximately 80%.
- A slightly higher mix of online advertising and registry commission revenue generally offset lower publishing margins for the national and local magazines primarily driven by the lower revenue.
- Total operating expenses before depreciation and amortization were $17.9 million or 62% of net revenues and represented a sequential quarterly increase of a little over $500,000 or 3%.
- Cash generated through operations was approximately $7.7 million and amounted $13.7 million year-to-date.

Macroeconomic Thoughts:

- The firm has a stronger marketing message in times of economic weakness as audience represents a reliable high spend consumer that has become increasingly difficult for marketers to find.
- Internal studies show that the majority of brides are not pulling back on their wedding budgets nor are they putting off having a wedding because of weak economic conditions.
- However the firm is not immune to the uncertainty that surrounds the advertising industry and has seen a few early cancellations of programs due to budget constraints.

Meanwhile so long as the macro economic conditions do not interfere we the firm expects vendor attrition rate to decelerate between now and the end of the year.

- Most of the local vendors have a significant portion of their business coming from non-bridal clients and events which are more heavily impacted by macro economic pressures and this may reduce the amount of marketing dollars available.
- Thus while there are several positive factors working in its favor the firm recognizes that there is some amount of uncertainty about the online advertising portion of the business moving into the second half of this year.
- The publishing business in general is experiencing a difficult cycle and it has entered a perfect storm.

Print advertising in the magazines represents the most expensive effective CPMs of the advertising inventory mix outside of the targeted emails and gateway ads.

- The print advertising industry as a whole is experiencing enormous pressure from more measurable advertising opportunities presented by the Internet.
- The macro economic conditions have had a negative impact on print advertising budgets as advertisers looking to trim budgets tend to cut commitments in independent magazine titles first.
- Several marketing programs designed to target wedding guests are still in development to be deployed in the third quarter which is later than planned.
- When launched these programs will focus on driving traffic to the multi-registry search application, personal wedding web pages and the charity programs.