The Knot Q4 2006 Earnings Call Transcript

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The Knot, Inc. (KNOT)

Q4 2006 Earnings Call

February 13, 2007 2:30 pm ET

Executives

Nicole Regan - Investor Relations

David Liu - Chairman of the Board, President and Chief Executive Officer

Richard Szefc - Chief Financial Officer, Treasurer and Secretary

Analysts

Jeetil Patel - Deutsche Bank

Barton Crockett - JP Morgan

Jason Helfstein - CIBC World Markets

Malindi Davies - Susquehanna Financial Group

William Morrison - JMP Securities

Richard Fetyko - Merriman Curhan Ford & Co.

Ursula Moran - Bear Stearns

Presentation

Operator

Good afternoon. My name is Jodie and I will be your conference facilitator. At this time, I would like to welcome everyone to The Knot fourth quarter and year-end 2006 conference call. (Operator Instructions)

At this time, I would like to turn the conference over to Ms. Nicole Regan.

Nicole Regan

Thank you. Good afternoon and welcome to The Knot fourth quarter and year-end 2006 conference call and webcast. During the course of this conference call, comments that we make regarding The Knot that are not historical facts are forward-looking statements and are subject to risks and uncertainties that could cause the actual future event or results to differ materially from these statements. Any such forward-looking statements are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements can be identified by the use of words like may, should, expect, plan, intend and other similar terms. You are cautioned that these forward-looking statements speak only as of today’s date. Our internal projections and beliefs upon which we base our expectations may change but we will not necessarily inform you if they do. The Knot's policy is to provide expectations only once per quarter and not to update that information until next quarter.

The important factors that could cause actual results to differ materially from any forward-looking statement mentioned today include, but are not limited to, our unproven business model and limited operating history, our history of losses, significant fluctuations to which our quarterly revenues and operating results are subject to the risks and related costs associated with ongoing litigation, the seasonality of the wedding industry, and other factors described in documents that we have filed with the Securities and Exchange Commission.

Additionally, if you have not received a copy of today’s press release, the release is now posted on the investor relations section of the company’s website at www.theknot.com. We have allotted up to one hour for today’s conference call, including the question-and-answer session that follows. Please take note the company is operating under the SEC Regulation FD and encourages you to take full advantage of the Q&A section.

At this time, I would like to turn the call over to our Chief Executive Officer, David Liu.

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David Liu

Thank you, Nicole, and good afternoon. I am pleased to welcome everyone to today’s earnings call. Over the past couple of years, as new investors have discovered our company, Rich and I have been asked a couple of questions with increasing frequency. Just exactly how big is the opportunity here? How do you plan to maintain or even perhaps accelerate your current growth rates?

I would like to use my time on this call today to try to address these questions. To understand the opportunity of our business, you not only have to understand the different revenue and operational components of our business, but you also have to understand how the company has evolved over time. A snapshot of the present is a good progress report, but it only shows part of the picture.

So in an effort to put our fourth quarter and year-end financial results in context, I will focus my remarks on three areas. First, I want to remind everyone of the challenges we faced coming in to 2006 and review our major achievements for the year. Second, I will discuss the many initiatives we have been working on that are not readily visible in our financial results, and finally, I will discuss the key challenges, risks and threats we face as a business in the coming year and what we plan to do to address those challenges. So let’s get started.

2006 was a watershed year for The Knot. As some of you may recall, coming into the year we faced a few enormous challenges. While the media side of our business was building momentum, our wedding supply e-commerce business was coming off of two consecutive years of declining sales. We spent the better part of 2005 implementing a new commerce platform, an inventory management system, and a new merchandising strategy. At the same time, we were defending ourselves in a patent lawsuit that was draining both our time and resources.

Finally, Conde Nast was gearing up to relaunch the websites with their three bridal titles under a single consolidated website to attack our online position, intensifying the battle for the attention of the wedding audience online.

But what a difference a year makes.

Our acquisition of Wedding Channel in the third quarter of 2006 was a transformative event. Wedding Channel is the nation’s leading destination for online registry purchases, and the acquisition brought that business into our company. Last year, Wedding Channel handled over $145 million in registry gift purchases for its retail partners, receiving a commission on each transaction. Wedding Channel is a high margin operation, where we have no inventory risk or marketing costs.

With an estimated $13 billion spent annually on wedding gifting in the United States, close to half of that goes to wedding registries. So even with the Wedding Channel’s current position, it represents a huge opportunity for growth.

Additionally, the acquisition of Wedding Channel ended the patent lawsuit. After the acquisition, over 80% of the online wedding media audience comes to our two sites.

Brides.com, despite a noisy relaunch by Conde Nast, remains a distant third in online traffic. According to Hitwise, their traffic in January 2007 was less than half of Wedding Channel’s and less a quarter of The Knot's.

As for the e-commerce challenges, I am pleased to report that they are well behind us. In 2006, we saw dramatic improvement in our e-commerce business as the investment in a new e-commerce platform and the implementation of new merchandising strategies resulted in 20% growth in sales over 2005.

Other accomplishments worth mentioning this past year include another significant, though much smaller acquisition. In the third quarter of 2006, we purchased Lilaguide, a company that publishes 23 regional parenting guides, with ratings and reviews of local vendors, services, and products accumulated from surveys of parents in each local market.

This strategic acquisition positions us to expand our services to benefit both advertisers and first-time parents on a national and local level. Up until yesterday, the sole purpose of the Lilaguide website had been to solicit product and vendor reviews from new parents who are interested in receiving a free Lilaguide book.

Yesterday, we officially relaunched the Lilaguide website. This new website features the over 30,000 user-generated vendor reviews in the Lilaguide database and functions as the local services channel for the soon-to-be launched Nest Baby site. Through the Nest Baby and Lilaguide, we will be providing a unique information resource for a community of first-time parents. We expect to attract local and national advertisers as we build on our very highly trafficked babies on the brain message boards on thenest.com.

With the addition of Nest Baby and Lilaguide, our family of brands will encompass life stage specific information and services from proposal all the way to pregnancy.

When the wedding and honeymoon dates are passed, our Knot members are automatically transferred to the nest. With the addition of the Nest Baby, we will be also capturing the expected date of birth. Like engagement, pregnancy is a time of great anticipation, demanding lots of information and major spending, both before and after the event.

We offer the most comprehensive and cost-effective media package available to advertisers seeking to reach brides to be and newlyweds, including couples planning for parenthood for the first time. It is not hard to understand why advertisers are beginning to realize the value of our loyal audience.

In 2006, we invested in our newlywed brand, thenest.com, with the launch of The Nest magazine. We published two issues of this quarterly publication with a verified circulation of 400,000. As we are self-publishing this magazine, the cost of production and distribution is about $600,000 per issue. The publication is receiving rave reviews and we are attracting top-name advertisers.

We also had our first of a series of books for newlyweds published in 2006, supported by a media tour by Carley Roney, our editor-in-chief, which further strengthened the reach of the brand. We are able to deliver to our advertisers a prime audience right when they are making critical decisions about buying homes, home furnishing, a host of financial services, and household products to start their lives together, products that represent a market of approximately $272 billion annually.

Advertisers seeking to reach newlyweds have far greater ad budgets than endemic wedding industry advertisers. Our universe for The Nest expands to broad categories, including real estate, financial services, and automotive, where advertisers are already spending a growing portion of their budgets online.

Finally, in 2006, we successfully completed one round of financing that netted the company $47.6 million, with an eye towards future acquisitions, and a second round of $42.1 million that was designed to fund a portion of the cash consideration for the Wedding Channel acquisition.

While these were the more visible high profile activities over the past year, there were also a number of initiatives that we were engaged in that were not immediately visible but are critical to our strategy for future growth and are worth highlighting.

From the time we acquired Wedding Channel on September 8, 2006, we began the work of consolidating operations. As I had mentioned in September, we consolidated the Wedding Channel merchandise operation into our Redding facility, and by the end of 2006, we had trained Wedding Channel local sales staff on our back-end systems and are now processing the Wedding Channel contracts through The Knot's contract entry system.

We entered 2007 having achieved the remainder of the cost reduction programs we had planned.

On the national online sales side, we still have some work to do before we can bring these together. Our close examination of the Wedding Channel traffic patterns has shown substantial differences from those on The Knot, and we are now in the process of integrating our ad server technology and making other adjustments to the Wedding Channel site to make it more efficient and effective for advertisers. In the meantime, we continue to work with the national advertisers individually.

From an infrastructure standpoint, we spent the good part of 2006 redesigning The Knot's membership database, which now allows us to better manage the information we receive from the members of The Knot's family of websites. If a woman becomes a member of The Knot as a bridesmaid for a friend’s wedding, gets married herself a few years later, and then plans to have a child, we now have the capability to manage her information as well as the lists and tools she uses in her various roles across our various brands.

Another IT project that was started in early 2006 and launched in December was our new community server. For years, we have cultivated a loyal and active community. Our members spend a great deal of time communicating with each other on our message boards, sharing photos, publishing elaborate profiles and personal wedding web pages.

The new community area allows our members to easily find other members with similar interests and to share ideas through blogs, photo galleries and private messaging. As social networking and user-generated content to revolutionize the way people consumer digital media, our new community platform is one more way The Knot continues to deliver the most comprehensive online content and services available.

In 2006, we began launching niche wedding sites, designed to offer brides deep and specific information on their cultural niche or type of wedding. Chinese weddings and beach weddings launched this past fall. On the production schedule for 2007 are same-sex weddings, African-American weddings, Jewish weddings and destination weddings. These sites provide our users with customized information unavailable on other wedding sites, and they provide advertisers another opportunity to reach specific groups of targeted customers.

Like 2006, the coming year will bring exciting new developments as well as serious challenges. Though we have tremendous reach in our bridal category, we face increasing competition from media companies and retailers locally and nationally. Our new life stage brand and our new initiatives require support infrastructure and execution to make them profitable.

Looking in to 2007, I would like to outline the challenges we face in order to give you a view of the road ahead.

One of the biggest challenges we face in 2007 is with our national advertising sales. In order to fully integrate the inventory on Wedding Channel, we must first complete the redesign of the Wedding Channel site. This delay has allowed advertisers to take a wait and see attitude at a time when they would otherwise be making 2007 ad commitments.

The third and fourth quarters is when much of the media planning for the following year’s advertising takes place. If commitments are not made early, it gets tougher to secure those commitments as the year progresses.

Although we had hoped to fully integrate our national ad programs between The Knot and Wedding Channel last October, it is unlikely we will be marketing those integrated national ad programs before the third quarter of 2007.

Despite the challenges we face on the national advertising front in the near-future, we remain confidence in the value of our brand and in the audience we have cultivated. At the core of our business is our ability to target and communicate with a highly qualified and sought-after consumer at the exact moment they are making major purchase decisions.

In 2007, it is imperative that we invest in the systems that support our media operations. Two years ago, we overhauled e-commerce and last year, we implemented a new membership database and community platform in order to keep pace with the growth of our business. This year, we will be relaunching our content management system in order to support the vast array of multimedia content that is responsible for so much of our audience retention.

While a new content management system will allow us the flexibility to publish and maintain multiple brands and websites efficiently, we are also looking to innovate what and how we sell to our local advertisers. Later this year, we plan to offer more premium ad components and, to better serve our local advertisers; we plan to launch auction-based advertising products and a self-service classified platform.

In order for us to have the flexibility in our ad programs, we will need to redesign the contract entry system that supports our local advertising contracts, which is no small task.

Also in 2007, there is a tremendous amount of work to be done to grow our newest brands. The relaunch of Lilaguide and the redesign of Wedding Channel are only the first steps.

Our goal with Wedding Channel is to reposition the Wedding Channel brand as a distinct brand from The Knot in order to diversify our wedding related content.

With regard to Lilaguide.com, our challenge is to create and grow 23 distinct local online communities of new and expecting parents. This will mean developing editorial content and a sales force to support that effort.

Launching the Nest Baby will also require significant investment of time and resources as we move forward with our mission to complete The Knot family of life stage brands from proposal to pregnancy.

As we move into new territories beyond weddings, we face competition from a whole new universe of companies outside the wedding category. If we conduct business as usual, we will not be in a position to effectively compete with the media brands that currently service the users and advertisers in these subsequent life stage categories.

2007 will be a crucial year that demands an investment in the infrastructure of our operations so we can implement robust systems to manage all the new initiatives we are launching.

As ever, we remain confident in our life stage media strategy, our business model, the quality of our content and the sustainability of our audience.

Due to the nature of life stages, we have a unique advantage in that our supply of consumers is constantly replenished and we incur no marketing costs to keep them coming. The leverage in our business model has always been that we have no customer acquisition costs.

But the challenge of servicing a replenishing audience is that in order for us to remain relevant to a new generation of consumers, we must continuously evolve and innovate with our technology, products, services and business model.

This is something The Knot has excelled at over the last 10 years, and it is the reason why we are number one. But our number one position is not a right. It is a privilege we earn through servicing our audience well every day. The bride who comes to us in 10 years is just graduating high school today.

According to USC’s center for the digital future, we know today this high school graduate does not read newspapers, does not have a landline phone, believes community is the center of her Internet experience, is less interested in television than any previous generation, believes media is a dialog and expects to participate in its creation, uses instant messaging and thinks that e-mail is for her parents.

In 10 years, what will she turn to for advice and help when she accepts that marriage proposal? Will it be the Internet? Will it even be something called a computer? We have always been platform agnostic and as such, we must continue to evolve our business to guarantee our relevance. Our success to date is the result of constant innovation, creative inspiration and many long hours.

We anticipate that the rate of change will only accelerate, and as an organization, our goal is to remain ahead of the curve and we have never been in a better position to realize the potential of our business.

At this point, I would like to turn the call over to our CFO, Richard Szefc, who will cover the details of our financial results.

Richard Szefc

Thank you, David, and good afternoon. For the fourth quarter of 2006, we reported net revenues of $21.7 million, which represented a 70% increase from fourth quarter revenues of $12.8 million a year ago. $5.2 million of this revenue recorded in the quarter was attributable to Wedding Channel, which was acquired in September of this year. The remaining increase of $3.7 million represented a 29% gain over fourth quarter revenues in 2005.

Net income for the fourth quarter of 2006 was $14.6 million, or $0.48 per basic and $0.45 per diluted share, which compares to net income of $1.5 million or $0.06 per basic and diluted share in the fourth quarter last year.

As we indicated in the press release, we recorded a non-cash income tax benefit of approximately $9.4 million related to The Knot's remaining net operating loss carry forwards, which we now believe are more likely than not to be realized.

Also in the fourth quarter, we recorded a gain of approximately $1.2 million resulting from the settlement of a legal action.

Excluding these two items, net income for the fourth quarter of ’06 would have been $4.1 million, or $0.13 per basic and $0.12 per diluted share.

EBITDA for the fourth quarter of 2006, excluding the gain from the settlement but including stock-based compensation, was $4.8 million compared to $1.7 million in 2005.

For 2006 overall, net revenues increased to $72.7 million from $51.4 million in 2005, representing an increase of 41%. The full-year ’06 included revenue from Wedding Channel of approximately $6.7 million. Excluding this amount, gains in each of our revenue streams resulted in an increase of 28% in total revenue over the prior year. Net income was $23.4 million for 2006, or $0.90 per basic, and $0.82 per diluted share, as compared to $4 million or $0.17 per basic and $0.16 per diluted share for calendar year 2005.

Again, these amounts include the non-cash income tax benefit and the gain from the legal settlement noted previously. Excluding these items, net income would have been $12.9 million, or $0.49 per basic and $0.45 per diluted share. Similarly, EBITDA for the full year, inclusive of stock-based compensation, would have been $14.1 million, as compared to $4.7 million in ’05.

Revenue from our online advertising program increased by 51% to $11 million in the fourth quarter, from $7.3 million a year earlier. Revenue from national and local advertising programs increased by 72% and 40% respectively. Excluding the impact of Wedding Channel, these increases were 25% and 27% respectively.

For the full year, online advertising grew to $36.6 million, for an increase of 42%, with national growing 63% and local by 31%. Again, excluding Wedding Channel, these increases were 44% and 27%.

Growth for both the fourth quarter and the year 2006 continued to result from a combination of increased spending by both national accounts and local vendors, and increases in the local vendor base. The Knot's separate local vendor base expanded by approximately 2,000 active clients from December ’05 to December ’06, for a year-over-year increase of 14%. Also, the growth in their average spending ranged from 12% to 13%, generally driven by the impact of price increases.

We have also added roughly 2,600 vendors for the acquisition of Wedding Channel, although to date their average annual spend is substantially lower than the historical spend by The Knot's vendors.

In the fourth quarter, we began to see more of an impact from our most recent local online price increase, which took effect in July, with an estimated weighted average increase of about 20%. Accordingly, the rate of growth year over year in local online revenue for the fourth quarter was a little higher than that achieved in the third quarter of 2006.

However, most of the impact from the price increase will fall into 2007 as we complete the annual renewal cycle of vendor contracts through the first-half of the year. As we indicated on the last call, we believe pricing will continue to be of increasing significance in pacing local online revenue growth from wedding vendors.

Our goal in 2007 is to retain an aggressive pricing strategy supported by a program that will offer local vendors a combined presence on The Knot and Wedding Channel websites. We expect to implement this program late in the second quarter for vendor renewals, and we have just begun implementing this approach for new accounts.

With respect to national accounts, the pace of growth, excluding the impact of Wedding Channel, was slower than earlier quarters in ’06. The surge in our recent growth rate for national online revenue, which we saw through the first nine months of 2006 actually commenced in the fourth quarter of ’05.

This had some impact on the fourth quarter comparisons. However, David also mentioned some of the challenges we face on the national sales front as we attempt to integrate our national ad programs between The Knot and Wedding Channel, and this also impacted our national online growth rate in the fourth quarter of ’06.

Merchandise revenue, which is derived from the sale of wedding supplies at retail to our members, was $2.8 million in the fourth quarter of ’06, a 64% increase over the $1.7 million recorded in the fourth quarter of 2005. Approximately $700,000 of this revenue was sourced through the Wedding Channel store.

Revenue through The Knot Shop alone grew 20% in the fourth quarter. This growth has resulted from increases in the number of members purchasing supplies, as well as in average order size. As we noted earlier, the integration of Wedding Channel supplies business within our Redding facility was achieved very quickly and very smoothly this past September.

For the full year 2006, merchandise revenue amounted to $15 million, a 22% increase over 2005, again with about 20% growth for The Knot Shop.

Registry services revenue, which is a new line item in our P&L in 2006, represents commissions earned from our retail partners. For the fourth quarter of ’06, these commissions amounted to $1.9 million, of which $1.8 million was contributed through Wedding Channel. For the full year ’06, registry services revenue amounted to just over $3 million.

As I noted on the previous earnings call, certain revenue earned from retailers in connection with various special IT projects, which historically was included in registry revenue by Wedding Channel, is now classified as publishing and other revenue. The amount recorded since the acquisition date was $152,000 for the fourth quarter and $234,000 inclusive of September post-acquisition. However, on a pro forma basis for all of ’06, revenue from these projects would have amount to approximately $1.1 million.

Publishing and other revenue for the fourth quarter amounted to approximately $5.9 million as compared to $3.7 million recorded in the comparable period last year. This revenue stream for the fourth quarter of ’06 included approximately $1.1 million of revenue generated from the Wedding Channel trade show held in New York in October.

Excluding this revenue and the IT project fees noted earlier, publishing and other revenue increased from $3.7 million to $4.6 million, or 24%. The majority of this increase was attributed to growth in print advertising revenue from our local publications. This resulted from a combination of increased advertising pages sold and an increase in rates. We also recorded a small amount of advertising revenue from the second issue of The Nest magazine.

As we indicated on the last call, we currently expect revenue from The Nest publication to build slowly through 2007. We believe that the investment in the magazine continues to represent an important element of our long-term strategy for building The Nest brand.

For the full year 2006, publishing and other revenues amounted to $18.1 million. Excluding revenue from Wedding Channel, this represented a 29% gain over ’05 revenue of $13 million. The increase was primarily driven by increases in print advertising from our local and national publications, which collectively grew by 26%.

In addition, in 2006, we delivered three new titles in connection with our current book program, which encompasses both wedding and newlywed-related topics. The related author royalty revenues accounted for most of the remaining percentage increase in the past year.

With respect to margins, our overall gross margin percentage approximated 81% for the fourth quarter and 79% for all of 2006. The margin improvement in the recent quarter resulted from the higher mix of registry services revenue. Merchandise revenues margins also improved to 53% in the fourth quarter due to price increases, new product offerings at higher margins, and reduced promotions.

Publishing and other margins were lower in the fourth quarter due in part to the continuing investment in production costs for The Nest magazine. The Nest production costs were approximately $400,000 each for both issues released in 2006. The cost that David alluded to in his comments for The Nest magazine also included fulfillment costs to deliver copies to our members, which we include in sales and marketing expense.

In addition, publishing and other margins were impacted by the revenue from the October Wedding Channel trade show, for which margins approximated 23%.

Our total operating expenses before depreciation and amortization for the recent quarter were $12.7 million, or approximately 59% of total net revenues. For the comparable quarter last year, operating expenses were $7.7 million after excluding incremental Wedding Channel litigation costs, or 60% of total net revenues. For the full year 2006, operating expenses before depreciation and amortization were $43.1 million, also 59% of total net revenues, compared to $31 million, or again, 60% of total net revenues in 2005, excluding the Wedding Channel litigation costs.

Operating expenses incurred with respect to Wedding Channel have been approximately $4.6 million, including certain transition costs since the acquisition date and $3.6 million in the fourth quarter. We have substantially completed our review of the opportunities for operating efficiencies and cost synergies in connection with the integration of the two companies. We have now identified payroll and payroll related cost savings, as well as reductions in non-payroll sales and marketing and general administration expenses of approximately $6 million.

About half of the quarterly impact of these reductions were reflected in fourth quarter 2006 results. As David indicated, substantially all of these cost reductions were in place at the beginning of 2007.

With respect to the remaining operating expense increase for The Knot in 2006, we recorded stock-based compensation in 2006 totaling $1.5 million; $467,000 in the fourth quarter, the majority of which related to the issuance of restricted common shares. In 2005, we only recorded $60,000 in stock-based compensation. We currently believe that our stock-based compensation will range from $2.3 million to $2.7 million in 2007.

Within general and administrative expenses, we incurred costs aggregating $1.5 million in 2006 related to the development of a formal disaster recovery plan for the company and for consulting and incremental audit costs incurred in connection with work being performed to ensure our compliance with Sarbanes-Oxley.

The majority of the remaining increase relates to additional investments we have made in our national and local sales staff, in part as additional support for the sales efforts related to our new initiatives, including The Nest, additional investments in information technology and editorial staff, as well as fulfillment expenses for The Nest magazine.

The increases in depreciation and amortization expense for the fourth quarter and full year 2006 compared to the corresponding periods in the prior year are due in part to amortization of intangibles and depreciation of property and equipment related to Wedding Channel. These amounts aggregated $1.5 million and $1.9 million in the respective periods.

As indicated earlier, we recorded a gain of approximately $1.2 million in the fourth quarter in connection with the settlement of a legal action. This amount is included in interest and other income.

Also, as noted earlier with respect to the provision for taxes, we reversed the valuation allowance and recorded a non-cash tax benefit of approximately $9.4 million related to the recognition of a deferred tax asset on our balance sheet with respect to The Knot's separate net operating loss carry-forwards for federal and state purposes.

Accordingly, in 2007, our profit and loss statements will reflect the normal tax provision. Our current overall effective tax rate approximates 41%. The valuation allowance may have to be reconsidered in the future if facts and circumstances change, causing a reassessment of the realization of this deferred tax asset.

With respect to the company’s consolidated balance sheet, it should be noted that as of December 31, 2006, we recorded further adjustments to the estimated fair value of the assets acquired and liabilities assumed in connection with the acquisition of Wedding Channel. These adjustments are based in part upon an updated appraisal report. The adjustments include a reduction for values previously determined for intangible assets. In addition, we have reversed the valuation allowance and recorded a deferred tax asset of approximately $14 million with respect to a substantial portion of Wedding Channel's federal net operating loss carry-forwards as of December 31, 2006. The recognition of this deferred tax asset resulted in a reduction to good will.

It should be noted that the use of the Wedding Channel NOLs will be subject to an annual limitation due to restrictions under Section 382 of the internal revenue code pertaining to ownership changes as defined. Accordingly, substantially all of the deferred tax asset recorded with respect to the Wedding Channel NOLs has been classified as a long-term asset.

Also, the overall determination of an annual loss limitation is subject to interpretation and therefore the annual loss limitation is subject to change. In addition, the valuation allowance with respect to the Wedding Channel NOLs, as we have indicated with respect to The Knot’s NOL, may also have to be adjusted in the future if facts and circumstances change, causing a reassessment of the realization of the deferred tax asset.

As of December 31, 2006, our cash, cash equivalents, and short-term investments were a little over $80 million. Cash generated through operations for all of 2006 was approximately $17.7 million. Capital expenditures in the fourth quarter and full year 2006 were $360,000 and $3.4 million respectively. We currently estimate that capital expenditures will range from $2.0 million to $2.5 million in 2007.

That is the financial review for The Knot for the fourth quarter and full year 2006. We will now open the call to questions.

Question-and-Answer Session

Operator

(Operator Instructions)

Your first question comes from Jeetil Patel with Deutsche Bank.

Jeetil Patel - Deutsche Bank

Hey, guys, this is actually [Azeman] for Jeetil. A couple of questions. If you look back at when you acquired Wedding Channel and now you have had the assets for the past four months, you talked about how the national advertising side has proven to be a little bit more challenging. Are there any other areas that were different from the time of when you acquired it versus when you look at it today, either on the positive or on the negative? That is the first question.

Then, the second question, could you also talk about just on the CPM advertising side. Can you help quantify the mix between what is your banner CPMs, rich media CPMs, and video-based CPMs and how that is likely to change going into 2007? Thank you.

David Liu

Sure. We try to keep people pretty up to date with our progress on the integration efforts at Wedding Channel. The things that caught us by surprise were certainly traffic patterns and the low response rates that a lot of their advertising programs were getting on their banner campaign.

So a lot of the focus that we have going into 2007 will be dedicated towards redesigning that site, which we had always planned to do with the launch of our content management system. It just accelerated now that we see that this has direct impact and influence over our ability to package the national ad sales.

I would say the other things that were not necessarily a surprise but definitely presented some challenges were the conditions of the operations of the local sales effort, the record-keeping. Certainly Rich and the financial team had a challenging time, essentially just tracking what had been happening in the company. They were privately held so they were not held to the same guideline that we were.

So those efforts I think were things that we spent a great deal of time on and are pleased to actually have put things in order. Aside from that, I do not think there were any other surprises on the plus or negative side.

Richard Szefc

I think in terms of what we expected to extract from cost reductions, we were able to achieve. Probably from the positive side, we were probably able to do that a little more quickly than we conservatively expected.

David Liu

Then, your CPM question, because we package our national advertising across platforms, whether it be within our broadcast channel or our print magazines or online, our CPMs will range anywhere from $30 to $50. For a very targeted e-mail, that it arrives at a very specific stage, that CPM could be north of $200, so there is a range of CPMs that we charge.

Jeetil Patel - Deutsche Bank

Okay, and then if I may ask just one more question, post the two magazine rollouts for The Nest, can you talk about whether you have seen increased traffic to thenest.com, and what the response has been to advertisers who are on The Nest magazine, whether they now want to also cross-advertise into the online platform? Thank you.

David Liu

Sure. Interestingly enough, we do a surge in traffic when the magazine hits, so clearly the distribution of the magazine will compel people to come back online, which we think is actually a useful tool within the integrated platform approach we have towards servicing our consumers as well as our advertisers.

On the advertising front, unfortunately, advertising is simply not purchased in an integrated fashion, so while we are getting support by the print agencies and print advertisers in these categories that does not often translate into online and vice versa.

We did see a nice increase from the first issue to our second issue in terms of the ad pages sold and the support of the advertisers, and we are now seeing more and more advertisers buying multiple copies of The Nest magazine into 2007. So we are pretty happy with the traction we are beginning to see in that category.

Operator

Your next question comes from Barton Crockett with JP Morgan.

Barton Crockett - JP Morgan

Great, thanks very much for taking the question. Let me see. I wanted to -- you went through a lot. Rich, you went through a lot of numbers and I am not sure I quite caught some important things to me, so I wanted to make sure that I caught these things, to begin with. First off, can you break down the online advertising growth for The Knot on a standalone basis in the quarter, in the fourth quarter, and give me kind of the growth respectively for local and national, and what the year-end merchant numbers were, local merchants for The Knot and the Wedding Channel. That would be the first group.

The second thing is just on registration for the Wedding Channel. What was the year-over-year change in revenues there? I know some things were restated there, so if you could just give us the apples-to-apples year-to-year change, that would be helpful. That is to start off with.

Richard Szefc

Okay, well, in terms of the online advertising program, basically overall they grew from $7.3 million to $11 million last year. That was 51%. If you exclude the impact of Wedding Channel and you break down the growth between national and online, national grew 25% and local grew by 27%.

Barton Crockett - JP Morgan

And the combined would have been?

Richard Szefc

And then on a combined basis, basically roughly two-thirds/one-third, they would have grown about -- about 27% again. That is without Wedding Channel.

Barton Crockett - JP Morgan

Okay. Then, for registry…

Richard Szefc

In fact, let me restate that: basically, without Wedding Channel, in total, the increases were about 44%. I was just giving you the -- national was up 44% and local was 27% for the full year.

Barton Crockett - JP Morgan

Okay, so you gave me 25% for the quarter?

Richard Szefc

That is correct.

Barton Crockett - JP Morgan

Okay, great. Then, the registry revenues?

Richard Szefc

The registry revenues, we derived approximately for the full year, I mean -- and this is pretty much from Wedding Channel, we derived a little over $3 million for the full year, of which --

Barton Crockett - JP Morgan

But what was Wedding Channel growing year to year, because we do not have as much visibility as you guys do here in the fourth quarter trend.

Richard Szefc

Wedding Channel, probably from ’05 to ’06, trending through the nine months would probably be growing at about the 7% or 8% range.

Barton Crockett - JP Morgan

Okay, and that held up in the fourth quarter?

Richard Szefc

In the fourth quarter, yes, it did.

Barton Crockett - JP Morgan

Okay, and looking out to ’07, should that number be accelerating now that we have some benefit here from the Federated mergers starting to roll through?

Richard Szefc

I think what has happened, obviously with the Federated merger with May department stores, I think it has taken them a little time to get some of those operations integrated. So I would think that the impact of the May operation will have more of an effect as we get into 2007 as opposed to what we saw in 2006, and even in the fourth quarter.

Barton Crockett - JP Morgan

Okay, so it sounds reasonable to expect that that growth would accelerate a bit in ’07?

David Liu

The one thing that we actually keep our eye on, and it is actually a subject of discussion even on our board level, is through the store closures that Federated is involved with with many of the May department stores, as well as some of the Macy’s stores themselves. That could dampen that, but it certainly should be accretive to what they were doing the previous year.

Barton Crockett - JP Morgan

Okay, and then, turning back to the online advertising, the growth decelerated for The Knot ex Wedding Channel there in the fourth quarter.

Richard Szefc

For the national accounts.

Barton Crockett - JP Morgan

Particularly on the national side, yes, and --

Richard Szefc

Actually, on the local side, it actually increased a bit. In the third quarter we were up about 25% and that started to move up again in the fourth quarter to about 27%.

Barton Crockett - JP Morgan

Why did that national growth decelerate at The Knot and is there any chance that that’s the beginning of a new trend and things are really kind of stepping down, or was it more like an air pocket and things could pick back up again next year?

David Liu

I think there were three factors. One is with the advertisers that are shared on both The Knot and Wedding Channel, as I said, we did run across a number of them. They kind of said you know what, we want to take a wait-and-see attitude and we are delaying some ad commitments. So there was a drag effect there.

We did also lose two pretty significant advertisers in the fourth quarter. One, which was Zale, who has been going through some financial difficulty on their own, and actually slashed their ad spending, and another was a bridal dress retailer, a national bridal dress retailer that had started to sell advertising to compete with us, so we actually had to raise our rates and essentially walk from that advertising relationship.

That probably added an impact to the slowdown in the fourth quarter.

Richard Szefc

Just to give you, I mentioned about the fourth quarter of ’05, last year, in 2005, our national online advertising grew around 40%, but in the fourth quarter of ’05, it was over 60%. So we began to see this pick-up in the national online advertising actually in the fourth quarter, so that impacted a little bit in terms of the fourth quarter growth comparisons as opposed to what we saw in the first three quarters this year.

Barton Crockett - JP Morgan

So does this feel like something that should accelerate, the growth should pick back up on national as we go through ’07, or --

David Liu

Well, our goal is certainly to accelerate the growth rates. We certainly do not think that the fourth quarter is an acceptable growth rate. It is something that we believe that there are opportunities to build on. When you look at the market share we have of the national advertising being spent in this category, we are still one of the smaller budget allocations for these advertisers. And that, given our reach through both the Wedding Channel and The Knot website, it is just an unacceptable situation.

Barton Crockett - JP Morgan

Okay, and then, switching to the expenses a bit, you guys, David, you spent a long time talking about the challenges and the things you need to invest in, and then Rich, you talked about the synergies, which just sounds like a good story, but the challenges have really been unquantified, so I am left wondering what kind of the net impact is on op-ex below the gross profit line as we look out into ’07. Can you quantify that a little bit more for me, in terms of G&A, sales and marketing, production? What generally we should be thinking about in terms of round numbers or level of change over ’06?

Richard Szefc

We typically do not comment on that. We are obviously going to be making some additional investments like we did in this past year, if you saw the kind of trend we had in the expenses. Our operating expense percentage stayed relatively consistent because of those investments versus the growth in revenue.

I think we certainly would be looking to improve that percentage as we go into 2007. We will also have the benefit, at least in what we saw in the fourth quarter, I indicated that we believe we have cost reductions of about $6 million, and with respect to the Wedding Channel operation, I said about half of that was probably realized in the quarterly results, so call that $3 million out of $6 million savings. That is about $750,000 a quarter. We think there is that level of savings that you see on a quarterly basis going out into 2007, which can offset some of these investments we did. At least that will give you a little bit of parameters around what we are thinking.

Barton Crockett - JP Morgan

Okay, that is somewhat helpful. I will leave it there. Thank you very much.

Operator

Your next question comes from Jason Helfstein with CIBC World Markets.

Jason Helfstein - CIBC World Markets

Hi, thanks, two questions. First, again, just to try to get at your organic growth numbers. I think you were trying to say the old Knot did 29% growth year over year, obviously all the segments.

Richard Szefc

In the fourth quarter, yes.

Jason Helfstein - CIBC World Markets

In the quarter, and then Wedding Channel was up 17%? Is that the correct calculation?

Richard Szefc

No, well, Wedding Channel -- I mean, on a pro forma basis, yes.

Jason Helfstein - CIBC World Markets

On a pro forma, as a base, would you compare --

Richard Szefc

We are talking about registries. Yes, Wedding Channel, if you look at ’05 versus ’06, we were talking about registry before and they were up about 7 or 8. I think overall, if you looked on a pro forma basis, they were up closer to 20%.

Jason Helfstein - CIBC World Markets

What is interesting here, at least with reaction to the stock reacting, it does not look like revenues were that much difference, so 20 against maybe what would have been low 20s expectations and for the old Knot, kind of 29 versus 32. Just specifically, with respect to the merchandising at Wedding Channel, was that a weak point in the quarter, at least with what would have been the old Wedding Channel merchandising business?

Richard Szefc

No, not really. Basically, if you looked at the overall amount of revenue for the year, it is small in terms of 25% of the revenue, but that is because of the seasonality of the business.

In terms of the Wedding Channel merchandise supplies business, no, that was not -- that is about what we expected. I would not call that a weak point.

Jason Helfstein - CIBC World Markets

Then, could you perhaps talk about what was in the product or the delta, perhaps, in the product and content development this quarter versus a year ago? Obviously there was some spending on Lilaguide, development expenses with Wedding Channel, and then these niche wedding sites, is there a way to break down how much of the spending was incremental versus kind of same store, for example, or maintenance versus project is the way to think about it?

Richard Szefc

I would say most of the increase, I mean, you do have some inflation increase, you have payroll increases that you typically have. I would say that the increase breaks down into a couple of categories.

One, we began actually investing heavier in IT resources and editorial and content personnel actually back in 2005, and we began to see the full year impact of that in 2006.

In addition, we also continued additional investments in that staffing. We increased IT staff further and the editorial side. We added editorial staff to support the launch of the new The Nest magazine.

So it primarily was related to investments that we have been making over the last couple of years. One to support our infrastructure on the IT side; two, also to support the editorial and content of some of the new initiatives we are getting into.

Jason Helfstein - CIBC World Markets

So at this point, do we consider that basically kind of a run-rate number, given that The Nest is in there, Lilaguide is in there, spending on the Wedding Channel development is in there?

Richard Szefc

The investment in IT will continue. There is also an investment obviously from the standpoint of the local side for the Lilaguides, for the babies area. So that is an editorial function that will need to be addressed, obviously more intensely as we go through 2007.

David Liu

I think there is also an investment in the launch and redesign phase and some of the resources that were deployed for that will be redirected to help the relaunch of the contract entry system or the auction-based local advertising programs that we are looking to launch later this year.

Jason Helfstein - CIBC World Markets

Okay, so basically, we take that number, we -- I am not asking for guidance, but if that is what we think about, that number is not really going to go down. We kind of multiply it times four and -- basically, you are happy with your level of product and content spending, at least with respect to the fourth quarter and you will reallocate the way you feel you need it to be. Is that a fair assessment?

In other words, people are wondering, does that number go down on a run-rate basis because there were higher one-time costs, or if the answer is well, we may have spent more on perhaps working on Wedding Channel development, you will reallocate those expenses to other types of projects in 2007.

Richard Szefc

I think you are still going to see some investment level going on in 2007. Obviously there is always the standard inflationary cost increases you have that are typical. But there should be still some investment element going through product and content in ’07.

Jason Helfstein - CIBC World Markets

Last question, on the sales side, David, you said you were not terribly happy with the national in the fourth quarter, but overall, do you feel like your staffing levels are appropriate with respect to ad sales? Any forthcoming investment you would expect, new hires, you know, anything to further stimulate that business with adding more sales people or more sales management?

David Liu

No, we are actually pretty well-staffed right now. We may be down one or two heads. That actually was one of the other elements that did create a bit of a challenge in the fourth quarter, because we saw a decent amount of turnover of the Wedding Channel sales force. But we are pretty well staffed now, so we are looking to make some progress in 2007.

Operator

Your next question comes from Malindi Davies with Susquehanna.

Malindi Davies - Susquehanna Financial Group

Good afternoon. First of all, I have a question about the gross margin breakouts for the segments, if you could help me out there. Then, in terms of advertising trends overall, I have three questions. What are you seeing in terms of conversion rates, and are there any trends that you can share with us there? Also, what kind of metrics do you look at to judge monetization? Are there any trends you can share in terms of revenue per page views, or something else that you think is important for us to look at? Third, do you participate in any ad networks, and do you plan to as you implement the new auction and other advertising that you talked about? Thanks.

Richard Szefc

I will deal with the margins. Let me just give you a further breakdown on each of the components. For the fourth quarter, our overall margin was about 81%, and obviously online advertising was very high at 97%. The merchandising side of the business, as I indicated, had improved to about 53%, and we had about a 56% margin in the publishing and other line.

If you compare that to the full year, just to give you the trend in the full year versus the quarter, again, online advertising was again in that 96%, 97%. Merchandising was a little low, about 51%, so we moved up a couple of percentage points in the fourth quarter. On the publishing side for the full year, we were 62%, and as I indicated, in the fourth quarter I mentioned 56%. That was a combination of the investment in The Nest magazine, which for the first nine months, at least, there was one magazine in the third quarter but the first-half of the year didn’t have the investment.

The trade show for Wedding Channel has a very low margin, and that generated about $1.1 million in revenue in the fourth quarter, and that brought that margin down a bit as well.

Malindi Davies - Susquehanna Financial Group

Thank you.

David Liu

To address your media questions, we are a bit of an anomaly when it comes to online advertising. We have the blend between local and national, and so as a result, local is not sold on any CPM at all. They are basically paying to be listed. We have done some analysis to see whether or not a CPC or a CPA or even a CPM model to try to understand what their dollars are being spent on, and every one of those analysis, we come in very high, given the current rates that we are charging, which we actually think are low. But it would yield very high CPC or CPA type dollars, based on the performance that we are driving.

I think one of the advantages we do have is because our audience is so targeted, they are actively looking for wedding planning information. This information usually will trigger a purchase decision. The conversion is extremely high.

One of the other things that is a bit of an anomaly about our media business is on the national side, while we do have banners and there are CPMs and we do have impression guarantees, what is slightly atypical is the fact that we also have these vertically integrated databases, so if you are a dress designer or a honeymoon destination, jewelry manufacturer, you also pay to have your product included into this database. That does not translate into any impression guarantee or any kind of CPM type analysis.

We generally do not fall into the world of online advertisers where if you look at the growth of page views, you can immediately calculate or deduce the potential growth in the revenues. Those two things are less tied in our business model.

Operator

Your next question comes from William Morrison with JMP Securities.

William Morrison - JMP Securities

I guess I will take another run at the quantifying the investment question from earlier. The question I have is that if you look back historically, you typically generated an incremental margin. In other words, the incremental EBITDA from the incremental revenue, in a 40% to 50% range. This past year was an investment year and you did about it looks like close to a 30% incremental margin. Can we assume that ’07 will be similar to ’06? In other words, your overall margins will increase but the incremental margin will be in the range that was consistent with ’06? Then I have a follow-up.

Richard Szefc

Well, I think there are some elements of 2006 that will carry into 2007. Obviously we will continue to have stock-based compensation. I think some of the investments where there is a possibility for improvements, obviously on the G&A side. We had some additional expenses we incurred this year in connection with the first time through Sarbanes-Oxley, and also in connection with the audit costs that were related to the additional audit costs that go along with that.

We also spent quite a bit of money, especially on the consulting side in moving ahead with the disaster recovery program for the company. Some of that work will continue.

While we generally do not give guidance on that kind of information, there are elements of the costs that we have incurred this year that should put us in a little more favorable position next year.

William Morrison - JMP Securities

Then, David, you talked about pricing aggressively while combining, adding value to your advertisers by combining aspects of the Wedding Channel with The Knot. Last year, you raised prices on a weighted average basis of around 20%. You quantified it. Can you quantify for us what kind of a range of price increases we can expect following the second quarter of this year?

Richard Szefc

I think, as I said, we put that 20% price increase in place later this year, and I mentioned that we were obviously putting in a program that would allow vendors to have a program that would put them on both The Knot and Wedding Channel. We think it is an opportunity to have a price increase which will probably be greater than the 20% we had in effect this past year, and it will more likely be impacting the last half of the year. We start to build at this 20% increase this past year kind of builds from July of ’06 through the summer of ’07.

William Morrison - JMP Securities

Okay, and that would be primarily on the local side?

Richard Szefc

It is primarily on the local side, that is correct.

William Morrison - JMP Securities

Okay, and that would be 20% across as we look at a revenue base that includes both The Knot and Wedding Channel, kind of across that whole revenue base?

Richard Szefc

That would be north of 20%. It should be north of 20% because obviously we are in the process of bringing the pricing up a bit on the Wedding Channel side from where it was, as I indicated before. Based on their rates, the average spending was a lot lower just on the Wedding Channel itself. They are going to be also put on that combination program.

William Morrison - JMP Securities

Then, two quick last questions: one, can you give us a sense of the type of growth you expect from publishing in the publishing segment this year? Can you remind me if the Wedding Channel has more than one of these trade shows a year, or is it just in the fourth quarter? Lastly, David, can you give us a sense of, now that you have had the data for a while, what you think the unduplicated reach or unduplicated unique user number is for the two website combined, and what kind of growth that was on a year-over-year basis in the fourth quarter?

David Liu

Sure. Currently, the unduplicated reach, or the duplicated reach of the two sets is about 20%, which remains low. We are getting data from many different sources. I have seen a source that provided us a number that was as low as 4%. I think that is actually faulty, but suffice it to say, it is nowhere near the levels of duplication I had originally thought going into the transaction.

I think the growth rates on both sites in terms of unique visitor traffic has actually been pretty strong. We have just started implementing Google Analytics and we are looking at the source of the traffic and the growth of unique visitor traffic and The Knot and Wedding Channel are both doing pretty well, so we are pretty pleased with this first quarter. Obviously, the January, February, March are the high season when it comes to planning and membership enrolments, so so far, so good.

William Morrison - JMP Securities

So is that, if I look at what you used to report, I think around 2 million users on theknot.com. Should we think of the total now being north of 3.5 million, something like that?

David Liu

Well actually, in January, The Knot alone had in excess of 5 million unique visitors.

Richard Szefc

The publishing side of the business, one thing we have said is that certainly in the early part of ’06, the rest had been more focused on print than online, and we have them probably a little more redirected on the online side since that point. That is one factor earlier on that drove some of the higher print increases in 2006. So with a little bit more emphasis on online, particularly in terms of with the increase and the pricing on the online and the conversion of the Wedding Channel vendors, I think 2007 will be more focused on the online side. You can interpret that, if you wish, to indicate that the growth rates may be a bit smaller on the publishing side.

On the Wedding Channel trade show, they do two a year. The larger one is in October, which generated about $1.1 million in revenue. The other one, the smaller one in April does about 400 and change in revenue.

Operator

Your next question comes from Richard Fetyko with Merriman Curhan Ford & Co.

Richard Fetyko - Merriman Curhan Ford & Co.

Just a question on the baby site, just curious, I believe that your intention is to begin to sell local ad listings to a new category of baby merchandisers or vendors, that is. I was just wondering if you could give us an update on that plan.

David Liu

With the launch of Lilaguide.com yesterday, the goal is to begin to start monetizing the traffic and the community that we will look to build there. Pretty much all the vendors that you see listed in Lilaguide become potential advertisers. So when you go on to Lilaguide.com, you will see that there is 10,000 reviewed, some that have not been reviewed. Our goal is to begin to advertise to them and to their competitors within the market.

Richard Fetyko - Merriman Curhan Ford & Co.

You also had a very popular section on The Nest which related to the baby content. I was wondering if you are going to be also leveraging that, and then, are you going to be leveraging your existing local ad sales force for it?

David Liu

We are definitely going to be leverage the traffic from The Nest. What is about to launch soon is an area called Nest Baby, which really houses the community and the content area for our baby brand. Lilaguide really functions as the local product and vendor guide, so if you look at The Knot, we have the national, the community and then you have the local city guide. Lilaguide is sort of the local city guide of the baby category with Nest Baby being the national and the community side.

From the standpoint of leveraging the local sales force, the one mistake we actually did make last year was we tried to get the local sales force who were selling the wedding vendors to start selling The Nest vendors. We were able to determine pretty quickly that the ones who are dedicated to The Nest had much higher productivity and sold much better, and in fact, the ones where we tried to have them sell both, it actually decelerated their Knot sales.

So our goal this year will be to have a dedicated group that will be selling the baby category.

Richard Szefc

We will probably be starting to populate that group later in the second quarter, so they will begin selling. Obviously we do not expect a huge amount of revenue this year. That will be more for 2008.

Richard Fetyko - Merriman Curhan Ford & Co.

Lastly, this is for Rich, just sort of a housekeeping question. The $0.12 in diluted EPS, or earnings per share that you mentioned, excluding some of the one-time benefits in tax and the litigation, that does not account for the non-cash stock-based expense, right?

Richard Szefc

That is correct.

Richard Fetyko - Merriman Curhan Ford & Co.

Okay, and the same with the $4.8 million in EBITDA, it includes after the stock-based compensation, correct?

Richard Szefc

All the net income figures that I gave you, all of the EBITDA figures, do not contemplate stock-based compensation being treated as a non-cash item, let’s just put it that way.

Richard Fetyko - Merriman Curhan Ford & Co.

It is not being backed out.

Richard Szefc

Yes, right. Exactly.

Richard Fetyko - Merriman Curhan Ford & Co.

Okay, that is very important. Thank you.

Richard Szefc

As I said, there was about $460,000 in stock-based compensation for the fourth quarter and about $1.5 million for the full year.

Richard Fetyko - Merriman Curhan Ford & Co.

Thank you for the clarification.

Operator

Your next question comes from Jason Helfstein with CIBC World Markets.

Jason Helfstein - CIBC World Markets

Thanks, a follow-up. I am just going to be really blunt, and all due respect. Since you guys started the conference call, the stock is down another 5%. I know you have a policy of not giving guidance, but David, it just does not sound like you guys are articulating the bullishness that I think -- I don’t know, a lot of those of us who dug into your company are able to get to, so one, do you think you might reconsider perhaps with the Board your view towards guidance? If not that, at least perhaps, we are pretty far into the first quarter. Maybe give us some color on what are you seeing in the first quarter? Are you seeing any improvement in registry trends, given that you have gotten past integration? What does the advertising environment look like?

You are clearly bullish on the business but somehow, it is not coming across, or at least not to investors. I do not know. I am just trying to help connect the dots here. Thanks.

David Liu

Jason, you are echoing something that I think we have been actively debating on the Board level. There is nothing worse than having a very strong year but still disappointing investors because either they have distorted expectations of the business or do not understand the business well enough.

I think the trading patterns for today indicate that Rich and I have to get out there and be more communicative and certainly be able to provide people as much information as possible.

The issue of giving guidance or some form of guidance has been raised at the board level and it is something we are actively discussing.

Jason Helfstein - CIBC World Markets

Any comment perhaps you could make just on your first quarter trends, general direction without being specific to perhaps the registry of the advertising business?

David Liu

Not at this moment, no.

Jason Helfstein - CIBC World Markets

Okay. Thank you.

Operator

Your next question comes from Ursula Moran with Bear Stearns.

Ursula Moran - Bear Stearns

I guess this is good timing. You mentioned earlier that you had 5 million unique visitors in January, and I apologize, I didn’t get whether that was The Knot alone, Wedding Channel, or some combination.

David Liu

That was just The Knot.

Ursula Moran - Bear Stearns

Okay, that is just The Knot. Did you have anything to say about unique visitors to Wedding Channel or no?

David Liu

Hold on one second. I can pull up a stat. Actually, I do not think I have that stat on me right now.

Ursula Moran - Bear Stearns

Okay, do you have The Knot year-over-year change, if what you are looking at is Knot data? Meaning how does January ’07 compared to January ’06.

David Liu

Hold on one second. January ’06 was about 3.2 million unique visitors on The Knot.

Ursula Moran - Bear Stearns

Thanks.

Operator

At this time, there are no further questions. Are there any closing remarks?

Nicole Regan

Yes. We would like to thank you again for joining us this afternoon. We are looking forward to seeing some of you at the Deutsche Bank conference this Wednesday in Naples, Florida, and later this month at the Ross Capital Partners conference in California and the Jefferies conference in New York.

Our upcoming conference schedule is posted on the investor relations section of our website. If you missed any part of today’s call, you can access the replay of the entire conference call on the investor relations section of the company’s website at www.theknot.com. A telephone replay is available for the next two weeks at 800-642-1687, reference number 7177635.

If you have any additional questions, please do not hesitate to contact us at ir@theknot.com.

Thank you and good-bye.

Operator

This concludes today’s conference call. You may now disconnect.

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