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Good conference call, I thought. Big news is the company has said we will be profitable by Q4. Other news is there is an "agreement in spirit" between the company and the franchisees, they are finalizing it now and will announce it soon. In another part of the cc it was mentioned that the knot sales force is focusing on selling local advertising in non-wedding pages markets, so for now they are avoiding the issue altogether. The company has also renegotiated its salary structure for its wedding pages reps, apparently they now get paid on a percentage of sales (perhaps commission only but I am not sure). Costs will be reduced in Q1, I think I heard 10% but don't quote me on that. Loss is estimated to be (.30-.32) in Q1.

Dot-com advertisers have been reduced to 30-35% of their advertising base, down from 50% in Q3, which is a great step (since dot-coms often go broke and don't pay). Mentioned J.C. Penny has signed on. Old school advertisers are expected to increase even more in Q1. Company is increasing sales force for national ads (note: ads that are "national"--i.e. ads on the knot website that are not targeted to a specific city--can be shown in the weddingpages territories, the lawsuit/mediation is in regard to the city listings section of the website). Through attrition the company has reduced staff by 30 people.

Company expects $36 million revenues in 2001. I thought they said they had launched The Knot in France and Brazil, but perhaps I misunderstood. I know they said H. Stern has pulled out of the Brazil project (which makes sense as the H. Stern guy quit the board of directors). Right now nothing is happening with Brazil, but they indicated they are likely to pursue it down the road.

Company talked about how revenues from the registry should be a major growth area, apparently little or no Q4 revenues came from the registry, they will start to ramp up this quarter. They are planning a Knot branded line of products and are looking to outsource much of that from QVC.

Company classified the wedding market as a $50 billion market, which is a larger number than I have seen (Liu said he has seen as high as $75 billion, and added it is very disaggregated, local based and hard to quantify). A question was asked in regard to the size of the "wedding media market" and Liu responded with an estimate for the wedding magazine market, in the $300-$400 million range.

Overall I was impressed with the conference call. Don't know if we will reach Q4 profitability or not--none of these guys have a track record to speak of--but they seem confident they can do it. It didn't seem to me that they had major plans to reduce costs over the year, rather they seemed to believe that costs will stay pretty much the same, and that profitability will come from expected revenue growth. $36 million certainly seems doable to me. Company expects revenues to decrease slightly in Q1 as that is the weakest quarter for weddingpages. Recession hurts a little but basically this business is pretty strong in all sorts of economic climates.

Wouldn't be surprised if we go up some tomorrow, certainly a lot of good news in that conference call.


Taylor
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