x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Delaware
(State
of incorporation)
|
13-3895178
(I.R.S.
Employer Identification Number)
|
Page
Number
|
||
PART
I
|
FINANCIAL
INFORMATION
|
|
Item
1:
|
||
3
|
||
4
|
||
5
|
||
6
|
||
Item
2:
|
16
|
|
Item
3:
|
25
|
|
Item
4:
|
25
|
|
PART
II
|
||
Item
1:
|
25
|
|
Item
1A:
|
25
|
|
Item
2:
|
26
|
|
Item
6:
|
26
|
September
30,
|
December
31,
|
||||||
2007
|
2006
|
||||||
(Unaudited)
|
(Note
1)
|
||||||
ASSETS
|
|
||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
20,564,621
|
$
|
73,633,011
|
|||
Short-term
investments
|
80,840,681
|
7,000,000
|
|||||
Accounts
receivable, net of allowances of $1,519,658 and $707,567 at September
30, 2007 and December 31, 2006, respectively
|
13,386,448
|
9,742,920
|
|||||
Inventories
|
2,240,776
|
1,345,150
|
|||||
Deferred
production and marketing costs
|
551,663
|
584,210
|
|||||
Deferred
tax assets, current portion
|
5,041,274
|
8,369,121
|
|||||
Other
current assets
|
1,489,609
|
1,499,851
|
|||||
Total
current assets
|
124,115,072
|
102,174,263
|
|||||
Property
and equipment, net
|
7,910,751
|
9,375,815
|
|||||
Intangible
assets, net
|
31,891,472
|
34,015,125
|
|||||
Goodwill
|
32,763,029
|
33,853,840
|
|||||
Deferred
tax assets
|
20,682,979
|
24,489,992
|
|||||
Other
assets
|
342,123
|
341,467
|
|||||
Total
assets
|
$
|
217,705,426
|
$
|
204,250,502
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable and accrued expenses
|
$
|
6,775,804
|
$
|
7,661,023
|
|||
Deferred
revenue
|
13,843,346
|
10,497,552
|
|||||
Current
portion of long-term debt
|
50,733
|
50,733
|
|||||
Total
current liabilities
|
20,669,883
|
18,209,308
|
|||||
Deferred
tax liabilities
|
14,156,700
|
15,013,770
|
|||||
Long
term debt
|
55,173
|
55,173
|
|||||
Other
liabilities
|
477,217
|
547,793
|
|||||
Total
liabilities
|
35,358,973
|
33,826,044
|
|||||
Commitments
and contingencies
|
|||||||
Stockholders’
equity:
|
|||||||
Preferred
stock, $0.001 par value; 5,000,000 shares authorized; no shares issued
and
outstanding
|
—
|
—
|
|||||
Common
stock, $0.01 par value; 100,000,000 shares authorized;
31,502,968
shares and 31,129,628 shares issued and outstanding at September
30, 2007
and December 31, 2006, respectively
|
315,030
|
311,297
|
|||||
Additional
paid-in capital
|
191,534,425
|
188,908,678
|
|||||
Accumulated
deficit
|
(9,503,002
|
)
|
(18,795,517
|
)
|
|||
Total
stockholders’ equity
|
182,346,453
|
170,424,458
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
217,705,426
|
$
|
204,250,502
|
Three Months Ended September 30, |
Nine
Months Ended September 30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Net
revenues:
|
|||||||||||||
Online
sponsorship and advertising
|
$
|
12,394,070
|
$
|
9,379,888
|
$
|
35,691,614
|
$
|
25,533,198
|
|||||
Registry
services
|
3,665,755
|
954,965
|
8,782,342
|
1,097,880
|
|||||||||
Merchandise
|
5,316,915
|
4,273,656
|
16,447,195
|
12,165,753
|
|||||||||
Publishing
and other
|
3,632,668
|
3,897,744
|
13,603,111
|
12,189,710
|
|||||||||
Total
net revenues
|
$
|
25,009,408
|
$
|
18,506,253
|
$
|
74,524,262
|
$
|
50,986,541
|
|||||
Cost
of revenues:
|
|||||||||||||
Online
sponsorship and advertising
|
$
|
386,190
|
$
|
320,854
|
$
|
1,163,120
|
$
|
928,621
|
|||||
Registry
services
|
—
|
—
|
—
|
—
|
|||||||||
Merchandise
|
2,446,873
|
2,160,277
|
7,720,728
|
6,048,440
|
|||||||||
Publishing
and other
|
1,561,030
|
1,719,472
|
5,177,081
|
4,410,451
|
|||||||||
Total
cost of revenues
|
$
|
4,394,093
|
$
|
4,200,603
|
$
|
14,060,929
|
$
|
11,387,512
|
|||||
Gross
profit
|
20,615,315
|
14,305,650
|
60,463,333
|
39,599,029
|
|||||||||
Operating
expenses:
|
|||||||||||||
Product
and content development
|
3,486,799
|
2,170,369
|
9,937,098
|
5,784,068
|
|||||||||
Sales
and marketing
|
6,230,330
|
4,657,215
|
18,567,666
|
13,739,820
|
|||||||||
General
and administrative
|
4,399,333
|
4,232,411
|
12,470,968
|
10,820,420
|
|||||||||
Goodwill
impairment
|
495,578
|
—
|
495,578
|
—
|
|||||||||
Depreciation
and amortization
|
2,078,598
|
975,106
|
6,384,499
|
1,799,908
|
|||||||||
Total
operating expenses
|
16,690,638
|
12,035,101
|
47,855,809
|
32,144,216
|
|||||||||
Income
from operations
|
3,924,677
|
2,270,549
|
12,607,524
|
7,454,813
|
|||||||||
Interest
income, net
|
1,272,843
|
1,082,226
|
3,496,047
|
1,745,687
|
|||||||||
Income
before income taxes
|
5,197,520
|
3,352,775
|
16,103,571
|
9,200,500
|
|||||||||
Provision
for income taxes
|
2,299,213
|
90,199
|
6,811,056
|
366,451
|
|||||||||
Net
income
|
$
|
2,898,307
|
$
|
3,262,576
|
$
|
9,292,515
|
$
|
8,834,049
|
|||||
Net
earnings per share—basic
|
$
|
0.09
|
$
|
0.12
|
$
|
0.30
|
$
|
0.36
|
|||||
Net
earnings per share—diluted
|
$
|
0.09
|
$
|
0.11
|
$
|
0.28
|
$
|
0.33
|
|||||
Weighted
average number of common shares outstanding
|
|||||||||||||
Basic
|
31,034,101
|
27,472,080
|
30,915,579
|
24,592,760
|
|||||||||
Diluted
|
32,767,237
|
29,766,300
|
32,786,345
|
27,059,012
|
|
Nine
Months Ended September 30,
|
||||||
2007
|
2006
|
||||||
Operating
activities
|
|||||||
Net
income
|
$
|
9,292,515
|
$
|
8,834,049
|
|||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Depreciation
and amortization
|
3,510,846
|
1,386,619
|
|||||
Amortization
of intangibles
|
2,873,653
|
413,289
|
|||||
Stock-based
compensation
|
1,676,226
|
1,077,270
|
|||||
Deferred
income taxes
|
6,111,790
|
—
|
|||||
Non-cash
services expense
|
—
|
445,833
|
|||||
Reserve
for returns
|
2,503,522
|
2,400,954
|
|||||
Goodwill
impairment
|
495,578
|
—
|
|||||
Allowance
for doubtful accounts
|
421,824
|
123,646
|
|||||
Other
non-cash charges
|
29,723
|
97,937
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
(5,935,383
|
)
|
(2,710,922
|
)
|
|||
Inventories
|
(826,416
|
)
|
(16,814
|
)
|
|||
Deferred
production and marketing costs
|
32,547
|
(121,342
|
)
|
||||
Other
current assets
|
(34,849
|
)
|
(98,806
|
)
|
|||
Other
assets
|
(656
|
)
|
(76,596
|
)
|
|||
Accounts
payable and accrued expenses
|
(1,430,021
|
)
|
(37,969
|
)
|
|||
Deferred
revenue
|
3,362,050
|
1,854,964
|
|||||
Other
liabilities
|
(70,576
|
)
|
56,741
|
||||
Net
cash provided by operating activities.
|
22,012,373
|
13,628,853
|
|||||
Investing
activities
|
|||||||
Purchases
of property and equipment
|
(2,338,775
|
)
|
(3,059,165
|
)
|
|||
Purchases
of short-term investments
|
(126,812,681
|
)
|
(9,300,000
|
)
|
|||
Proceeds
from sales of short-term investments
|
52,972,000
|
13,850,000
|
|||||
Acquisition
of business, net of cash acquired
|
52,410
|
(53,313,362
|
)
|
||||
Net
cash used in investing activities
|
(76,127,046
|
)
|
(51,822,527
|
)
|
|||
Financing
activities
|
|||||||
Financing
costs
|
—
|
(5,285,741
|
)
|
||||
Proceeds
from issuance of common stock
|
423,138
|
95,403,788
|
|||||
Proceeds
from exercise of stock options and warrants
|
932,907
|
1,042,362
|
|||||
Repurchase
of common stock
|
(309,762
|
)
|
—
|
||||
Net
cash provided by financing activities
|
1,046,283
|
91,160,409
|
|||||
(Decrease)
increase in cash and cash equivalents
|
(53,068,390
|
)
|
52,966,735
|
||||
Cash
and cash equivalents at beginning of period
|
73,633,011
|
17,685,067
|
|||||
Cash
and cash equivalents at end of period
|
$
|
20,564,621
|
$
|
70,651,802
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
September
30
|
September
30
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Product
and content development
|
$
|
93,000
|
$
|
62,000
|
$
|
333,000
|
$
|
116,000
|
|||||
Sales
and marketing
|
77,000
|
62,000
|
295,000
|
183,000
|
|||||||||
General
and administrative
|
456,000
|
264,000
|
1,048,000
|
778,000
|
|||||||||
Total
stock-based compensation expense
|
$
|
626,000
|
$
|
388,000
|
$
|
1,676,000
|
$
|
1,077,000
|
Current
assets
|
$
|
19,755,000
|
||
Property
and equipment
|
5,395,000
|
|||
Intangible
assets
|
35,570,000
|
|||
Goodwill
|
22,534,000
|
|||
Deferred
tax assets
|
20,915,000
|
|||
Other
assets
|
22,000
|
|||
Total
assets acquired
|
$
|
104,191,000
|
||
Current
liabilities
|
$
|
6,316,000
|
||
Deferred
tax liabilities
|
14,901,000
|
|||
Total
liabilities acquired
|
21,217,000
|
|||
Total
estimated cost
|
$
|
82,974,000
|
Three
Months Ended
|
Nine
Months Ended
|
||||||
September
30, 2006
|
September
30, 2006
|
||||||
Net
revenues
|
$
|
24,318,817
|
$
|
70,119,910
|
|||
Net
income
|
$
|
2,949,615
|
$
|
8,149,178
|
|||
Net
earnings per share - basic
|
$
|
0.10
|
$
|
0.30
|
|||
Net
earnings per share - diluted
|
$
|
0.09
|
$
|
0.27
|
Current
assets
|
$
|
8,700
|
||
Property
and equipment
|
14,300
|
|||
Tradename
|
83,000
|
|||
Other
intangibles
|
168,000
|
|||
Goodwill
|
1,820,000
|
|||
Total
cost
|
$
|
2,094,000
|
September
30,
|
December
31,
|
||||||
2007
|
2006
|
||||||
Raw
materials
|
$
|
251,010
|
$
|
194,122
|
|||
Finished
goods
|
1,989,766
|
1,151,028
|
|||||
$
|
2,240,776
|
$
|
1,345,150
|
Balance
as of December 31, 2006
|
$
|
33,853,840
|
||
Acquisition
of WeddingChannel.com, Inc. (see Note 3):
|
||||
Adjustments
to purchase price and additional direct transaction costs
|
(375,387
|
)
|
||
Adjustments
to fair value of net assets acquired other than goodwill
|
(219,846
|
)
|
||
Goodwill
impairment
|
(495,578
|
)
|
||
Balance
as of September 30, 2007
|
$
|
32,763,029
|
September
30, 2007
|
December
31, 2006
|
||||||||||||||||||
Gross
Cost
Carrying Amount |
Accumulated
Amortization
|
Net
Cost |
Gross
Cost
Carrying Amount |
Accumulated
Amortization
|
Net
Cost |
||||||||||||||
Indefinite
lived intangibles:
|
|||||||||||||||||||
Tradenames
|
$
|
15,220,000
|
$
|
--
|
$
|
15,220,000
|
$
|
15,220,000
|
$
|
--
|
$
|
15,220,000
|
|||||||
Amortizable
intangibles:
|
|||||||||||||||||||
Customer
and advertiser Relationships
|
5,610,000
|
672,378
|
4,937,622
|
4,940,000
|
175,000
|
4,765,000
|
|||||||||||||
Developed
technology and
patents
|
12,280,000
|
2,613,000
|
9,667,000
|
12,280,000
|
771,000
|
11,509,000
|
|||||||||||||
Trademarks
and Tradenames
|
211,920
|
96,240
|
115,680
|
211,920
|
56,153
|
155,767
|
|||||||||||||
Service
contracts and Other
|
3,328,000
|
1,376,830
|
1,951,170
|
3,248,000
|
882,642
|
2,365,358
|
|||||||||||||
21,429,920
|
4,758,448
|
16,671,472
|
20,679,920
|
1,884,795
|
18,795,125
|
||||||||||||||
Total
|
$
|
36,649,920
|
$
|
4,758,448
|
$
|
31,891,472
|
$
|
35,899,920
|
$
|
1,884,795
|
$
|
34,015,125
|
Customer
and advertiser relationships
|
4
to 10 years
|
Developed
technology and patents
|
5
years
|
Trademarks
and tradenames
|
3
to 5 years
|
Service
contracts and other
|
1
to 7 years
|
September
30,
|
December
31,
|
||||||
2007
|
2006
|
||||||
Accounts
payable
|
$
|
2,039,586
|
$
|
2,156,070
|
|||
Professional
services
|
531,717
|
536,602
|
|||||
Compensation
and related benefits
|
1,431,441
|
1,658,577
|
|||||
Other
accrued expenses
|
2,773,060
|
3,309,774
|
|||||
$
|
6,775,804
|
$
|
7,661,023
|
Note
due in annual installments of $60,000 through October
2008,
|
||||
based
on imputed interest of 8.75%
|
$
|
105,906
|
||
Less
current portion
|
50,733
|
|||
Long
term-debt, excluding current portion
|
$
|
55,173
|
Shares
|
Weighted
Average
Exercise Price |
||||||
Options
outstanding at December 31, 2006
|
1,853,976
|
$
|
2.76
|
||||
Options
granted
|
410,000
|
18.26
|
|||||
Options
exercised
|
(282,916
|
)
|
2.33
|
||||
Options
canceled
|
(5,938
|
)
|
3.36
|
||||
Options
outstanding at September 30, 2007
|
1,975,122
|
$
|
6.04
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||
Range
of exercise price
|
Number
Outstanding
as
of
September
30,
2007
|
Weighted
Average
Remaining
Contractual
Life
(In
Years)
|
Weighted
Average
Exercise
Price
|
Number
Exercisable
as
of
September
30,
2007
|
Weighted
Average
Exercise
Price
|
|||||||||||
$0.42
to $1.03
|
416,509
|
3.34
|
$
|
0.90
|
416,509
|
$
|
0.90
|
|||||||||
$1.37
to $4.10
|
1,060,113
|
5.91
|
3.36
|
1,054,174
|
3.36
|
|||||||||||
$4.80
to $9.00
|
88,500
|
6.36
|
5.61
|
51,693
|
6.04
|
|||||||||||
$18.26
|
410,000
|
9.66
|
18.26
|
--
|
--
|
|||||||||||
1,975,122
|
6.17
|
$
|
6.04
|
1,522,376
|
$
|
2.78
|
Shares
|
Weighted
Average Exercise
Price
|
||||||
Nonvested
options outstanding at December 31, 2006
|
173,447
|
$
|
4.24
|
||||
Granted
|
410,000
|
18.26
|
|||||
Vested
|
(125,641
|
)
|
4.05
|
||||
Canceled
|
(5,060
|
)
|
3.71
|
||||
Nonvested
options outstanding at September 30, 2007
|
452,746
|
$
|
16.99
|
Nine
Months Ended September 30,
|
|||||||
2007
|
2006
|
||||||
Options
|
ESPP
Rights
|
Options
|
ESPP
Rights
|
||||
Weighted
average expected option lives
|
4.0
years
|
0.5
years
|
N/A
|
0.5
years
|
|||
Risk-free
interest rate
|
4.83%
|
4.96%-5.16%
|
N/A
|
4.60%-5.18%
|
|||
Expected
volatility
|
32.1%
|
20.3-29.3%%
|
N/A
|
25.8%-26.8%
|
|||
Dividend
yield
|
0%
|
0%
|
N/A
|
0%
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
September
30
|
September
30
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Product
and content development
|
$
|
93,000
|
$
|
62,000
|
$
|
333,000
|
$
|
116,000
|
|||||
Sales
and marketing
|
77,000
|
62,000
|
295,000
|
183,000
|
|||||||||
General
and administrative
|
456,000
|
264,000
|
1,048,000
|
778,000
|
|||||||||
Total
stock-based compensation expense
|
$
|
626,000
|
$
|
388,000
|
$
|
1,676,000
|
$
|
1,077,000
|
Payments
due by Period
|
||||||||||||||||
Contractual
Obligations
|
Total
|
Less
than 1
year
|
1-3
years
|
3-5
years
|
More
than 5
years
|
|||||||||||
(in
thousands)
|
||||||||||||||||
Long
term debt
|
$
|
106
|
$
|
51
|
$
|
55
|
$
|
—
|
$
|
—
|
||||||
Operating
leases
|
4,303
|
1,288
|
2,006
|
1,009
|
—
|
|||||||||||
Purchase
commitments
|
1,507
|
1,324
|
183
|
—
|
—
|
|||||||||||
Total
|
$
|
5,916
|
$
|
2,663
|
$
|
2,244
|
$
|
1,009
|
$
|
—
|
Period
|
(a)
Total Number of
Shares Purchased |
(b)
Average Price
Paid per Share |
(c)
Total Number
of Shares Purchased as Part of Publicly Announced Plans or Programs |
(d)
Maximum
Number of Shares that May Yet Be Purchased Under the Plans or Programs |
July
1 to July 31, 2007
|
4,997
|
$20.58
|
n/a
|
n/a
|
August
1 to August 31, 2007
|
9,362
|
$20.95
|
n/a
|
n/a
|
September
1 to September 30, 2007
|
507
|
$21.26
|
n/a
|
n/a
|
Total
|
14,866
|
$20.84
|
n/a
|
n/a
|
31.1 | Certification of Chairman and Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1
|
Certification
of Chairman and Executive Officer Pursuant to 18 U.S.C. Section 1350,
As
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.2
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As
Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
Date: November 8, 2007 | THE KNOT, INC. | |
|
|
|
By: | /s/ Richard Szefc | |
Richard Szefc |
||
Chief Financial Officer (Principal Financial Officer | ||
and Duly Authorized Officer) |
31.1 |
Certification
of Chairman and Chief Executive Officer Pursuant to Exchange Act
Rule
13a-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of
2002.
|
31.2 |
Certification
of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a),
As
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
32.1 |
Certification
of Chairman and Chief Executive Officer Pursuant to 18 U.S.C. Section
1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of
2002.
|
32.2 |
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As
Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|