Flat is rarely a good thing at weddings. You want veils to be wavy, not flat. You want best-man toasts to be punchy, not flat. You want the "Just Married" limo to roll away on tires that are fully inflated, not flat.
So why should you be excited to see flat earnings-per-share growth at matrimonial resources hub The Knot
Let's start at the top. Net revenues surged 61% higher to $28.5 million. It's a good start, with gains fueled by a 65% boost in national online advertising and the incremental glow of the bridal registry businesses that are possible after September's acquisition of WeddingChannel.com.
Pre-tax profits nearly doubled to $8.1 million. Margins expanded and there was a huge uptick in interest income after the company completed a secondary offering. Then came the tax bite. The company still had tax loss carryforward a year ago, keeping Uncle Sam's nibble gummy. It now has to shoulder the full taxable burden.
As a result of paying 41% of its pre-tax profits in income taxes, net income clocked in just 22% higher than it did a year earlier. Divide that by a 27% uptick in fully diluted shares outstanding (mostly related to the secondary offering in conjunction with the Wedding Channel purchase), and you take a flamboyant full-circle trip to the same $0.15 per share it earned in the same period of 2006.
Analysts knew about these hurdles. They were looking for the company to earn just $0.10 on a 46% top-line surge. It's a refreshing change to where Wall Street was parked three months ago. The company missed profit targets during the first quarter of 2007. It's the first time that The Knot had disappointed the market, and it's all too easy to fall into the trap again.
It was a productive quarter for the company. It signed an exclusive online bridal registry deal with Macy's
Along came baby
The Knot isn't the only company angling for young mothers. Sites like CNET's
Despite the crowded marketplace, The Knot's expansion strategy makes sense. The company's namesake site attracts 3.2 million unique monthly visitors. It never made sense to let that traffic float away after vows have been exchanged. That is where TheNest.com came in, a site for newlyweds. The company is also angling for customers earlier in the hookup process, by launching or acquiring online dating sites and prom season specialist PromSpot.com.
But these acquisitions are not diluting The Knot as a brand, because the company is running its other generational lifestyle sites under different names. It's the perfect strategy, even if these incremental sites aren't catering to the lucrative wedding planning industry.
Yes, nothing beats caterers, wedding singers, and banquet hall operators paying for a presence on The Knot's localized guides. Lead generators are everywhere, but the truly successful ones like The Knot, Travelzoo
That's the bad kind of flat. The flat veil. The flat reception toast. The flat limo tire. The Knot's earnings per share may have clocked in flat, but there is nothing flat about this fast-growing company.
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Longtime Fool contributor Rick Munarriz got married years before TheKnot.com was around, and he regrets that. He could have had a punctual person working the video camera that day. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy, and it's got threaded cans that clang down the street on wedding days.