Spark Networks® Reports Record Revenue, EBITDAS and Net Income in Third Quarter 2006

  • Quarterly Revenue of $17.5 Million
  • Quarterly Net Income of $2.8 Million; Nine-Month Net Income of $3.9 Million
  • Q3 EBITDAS1 Increases to $4.3 Million vs. $2.6 Million in Q2 ‘06 and $0.6 Million in Q3 ‘05
  • Nine-Month EBITDAS of $10.3 Million

BEVERLY HILLS, Calif., November 7, 2006 – Spark Networks plc (AMEX: LOV), a leading provider of online personals services, today reported third quarter 2006 financial results.

“Since I joined Spark Networks in August 2004, we have worked diligently to stabilize and turnaround the Company, and the financial results speak for themselves. We have successfully restructured the Company with an emphasis on free cash flow growth, and we continue to set new performance records,” stated David Siminoff, Chairman and Chief Executive Officer of Spark Networks. “Our continued focus on high margin affinity groups, product enhancements and accretive acquisitions has been successful thus far.”

Siminoff continued, “During the quarter we expanded on existing marketing initiatives to target new consumers. As part of a continued effort to increase conversion and retention rates, we added new features such as E-cards to our websites as well as redesigned and relaunched CatholicMingle™.com.”

“Moving forward, we plan to build on our current momentum. Our balance sheet, already strong with $15.6 million in cash and marketable securities, continues to grow stronger. Given our current leadership position in several key markets, we believe that tremendous opportunities exist to expand and increase our presence within other targeted communities. In addition, we remain committed to providing the best user experience in order to attract and retain new subscribers.”

Financial Results

Reported revenue for the third quarter of 2006 was $17.5 million, an increase of 4% compared to $16.9 million for the same period in 2005. Revenue for the nine months ended September 30, 2006 was $51.6 million, an increase of 6% compared to $48.9 million for the nine months ended September 30, 2005. The Company noted that strong performance from the Other Businesses segment, including solid performance from BlackSingles.com® and Relationships.com™, was a key contributor to revenue growth in the quarter.

Total operating expenses for the third quarter of 2006 were $8.8 million, a decrease of 25% compared to $11.8 million for the same period in 2005. Operating expenses for the nine months ended September 30, 2006 were $29.4 million, a decrease of 6% compared to $31.2 million for the nine months ended September 30, 2005.

The Company reported net income of $2.8 million, or $0.09 per diluted share, for the third quarter of 2006, compared to a net loss of $2.2 million, or $(0.08) per share, for the same period in 2005. Net income for the nine months ended September 30, 2006 was $3.9 million, or $0.12 per diluted share, compared to a net loss of $1.0 million, or $(0.04) per share, for the same period in 2005.

EBITDAS for the third quarter of 2006 was $4.3 million, an increase of 603% compared to EBITDAS of $612,000 during the same period in 2005. EBITDAS for the nine months ended September 30, 2006 was $10.3 million, an increase of 164% compared to EBITDAS of $3.9 million during the same period in 2005. See the attached Consolidated Statement of Operations for a reconciliation of EBITDA and

Balance Sheet, Cash, Debt

As of September 30, 2006, the Company had cash and marketable securities of $15.6 million compared to $17.3 million at December 31, 2005. Cash and marketable securities, net of debt, was $14.2 million at September 30, 2006, compared to $6.5 million at December 31, 2005. During the first nine months of 2006, the Company paid the final $9.0 million in debt due as a result of the MingleMatch acquisition, as well as $2.0 million with respect to the acquisition of LDSSingles™.

Cash flow from operations during the first nine months of 2006 was $8.3 million, an increase of 388% compared to cash flow from operations of $1.7 million in the first nine months of 2005. The increased operating cash flow was driven by increased revenue combined with a reduction in operating costs, excluding stock compensation. As of September 30, 2006, the Company had accumulated over $50 million of NOLs.

Segment Reporting2

The Company reported third quarter 2006 revenue for its JDate segment of $7.1 million, an increase of 9% compared to $6.5 million in the same period in 2005. JDate revenue for the nine months ended September 30, 2006 was $21.1 million, an increase of 10% compared to $19.2 million for the nine months ended September 30, 2005. The increase in JDate revenue was largely attributable to an increase in average paying subscribers for JDate.

The Company reported third quarter 2006 revenue for its AmericanSingles® segment of $5.3 million, a decrease of 26% compared to $7.2 million in the same period in 2005. AmericanSingles revenue for the nine months ended September 30, 2006 was $17.7 million, a decrease of 21% compared to $22.5 million for the nine months ended September 30, 2005. The decrease in revenue was due to a reduction in the marketing spend for AmericanSingles that was implemented in order to improve the contribution margin from this business.

The Company reported third quarter 2006 revenue for its Other Businesses segment of $5.0 million, an increase of 52% compared to $3.3 million for the same period in 2005. Other Businesses revenue for the nine months ended September 30, 2006 was $12.8 million, an increase of 78% compared to $7.2 million for the nine months ended September 30, 2005. The increase in revenue from the Other Business Segment was partially driven by solid growth from its BlackSingles.com and Relationships.com websites.

Business Metrics

Average Paying Subscribers:

Average paying subscribers for the Company’s JDate segment were 74,753 during the third quarter of 2006, an increase of 9% compared to 68,403 from the same period in 2005. Average paying subscribers for the nine months ended September 30, 2006 were 75,053, an increase of 10% compared to 68,410 for the nine months ended September 30, 2005.

Average paying subscribers for the Company’s AmericanSingles segment were 72,926 during the third quarter of 2006, a decrease of 24% compared to 95,877 from the same period in 2005. Average paying subscribers for the nine months ended September 30, 2006 were 84,410, a decrease of 22% compared to 107,662 for the nine months ended September 30, 2005.

Average paying subscribers for the Company’s Other Businesses segment were 93,180 during the third quarter of 2006, an increase of 89% compared to 49,213 from the same period in 2005. Average paying subscribers for the nine months ended September 30, 2006 were 77,167, an increase of 104% compared to 37,894 for the nine months ended September 30, 2005.

Average paying subscribers for the Company as a whole in the third quarter of 2006 were 240,859, an increase of 13% compared to 213,493 from the same period in 2005. Average paying subscribers for the nine months ended September 30, 2006 were 236,630, an increase of 11% compared to 213,966 for the nine months ended September 30, 2005.

Subscriber Acquisition Cost3 (SAC):

Direct subscriber acquisition cost for the Company’s JDate segment in the third quarter of 2006 was $13.81, a decrease of 13% compared to $15.84 from the same period in 2005. SAC for the nine months ended September 30, 2006 was $13.98, an increase of 9% compared to $12.88 in the nine months ended September 30, 2005.

SAC for the Company’s AmericanSingles segment in the third quarter of 2006 was $39.85, an increase of 1% compared to $39.35 in the same period in 2005. SAC for the nine months ended September 30, 2006 was $38.17, an increase of 10% compared to $34.72 for the nine months ended September 30, 2005.

SAC for the Company’s Other Businesses segment in the third quarter of 2006 was $23.62, a decrease of 16% compared to $28.09 from the same period in 2005. SAC for the nine months ended September 30, 2006 was $30.33, a decrease of 9% compared to $33.23 for the nine months ended September 30, 2005.

SAC for the Company as a whole in the third quarter of 2006 was $24.87, a decrease of 18% compared to $30.23 from the same period last year. SAC for the nine months ended September 30, 2006 was $27.33, a decrease of 4% compared to $28.57 for the nine months ended September 30, 2005. The decrease in SAC for the Company as a whole was due to the increasing share of new subscribers coming from the Company’s Other Businesses segment, where the SAC is lower, combined with a decreasing share of new subscribers as a percentage of total new subscribers coming from AmericanSingles (the Company’s highest SAC property).

Investor Conference Call:

The Company will discuss its financial results during a live teleconference today at 1:30 p.m. Pacific Time and 10:30 p.m. Frankfurt time.

Call Title: Spark Networks Q3 ’06 Financial Results
Toll-Free (United States): +1-888-562-3654
International: + 1-973-582-2703
Confirmation #: 7964972
One-Week Replay
Toll-Free (United States): +1-877-519-4471
International: +1-973-341-3080

The company will also host a webcast of the call which will be accessible on the company’s website in the Investor Relations section under “Featured Events”:

http://www.spark.net/investor.htm

Safe Harbor Statement:

This press release contains forward-looking statements. Any statements in this news release that are not statements of historical fact may be considered to be forward-looking statements. Written words, such as “may,” “will,” “expect,” “believe,”  “anticipate,”  “estimate,”  “intends,” “goal,”  “objective,” “seek,” “attempt,”  or variations of these or similar words, identify forward-looking statements. By their nature, forward-looking statements and forecasts involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the near future. There are a number of factors that could cause actual results and developments to differ materially, including, but not limited to our ability to: attract members; convert members into paying subscribers and retain our paying subscribers; keep pace with rapid technological changes; maintain the strength of our existing brands; and maintain and enhance those brands and our dependence upon the telecommunications infrastructure and our networking hardware and software infrastructure. For a discussion of these and further risks and uncertainties, please see our filings with the Securities and Exchange Commission. We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information that we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C., 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our public filings with the SEC also are available from commercial document retrieval services and at the web site maintained by the SEC at:
http://www.sec.gov.

About Spark Networks plc:

Spark Networks’ American Depository Shares trade on the American Stock Exchange under the symbol “LOV,” and its Global Depositary Shares trade on the Frankfurt Stock Exchange under the symbol “MHJG.” The Spark Networks portfolio of consumer websites includes, among others, JDate.com (www.jdate.com), AmericanSingles.com (www.americansingles.com), BBWPersonalsPlus®.com (www.bbwpersonalsplus.com), BlackSingles.com (www.blacksingles.com), CatholicMingle.com (www.catholicmingle.com), LDSMingle®.com (www.ldsmingle.com), LDSSingles.com (www.ldssingles.com), PrimeSingles™.net (www.primesingles.net), and Relationships.com (www.relationships.com).

For More Information:

Media: Gail Laguna
+ 1 323 836 3000
Email: Media Relations
Investors: Mark Thompson
+ 1 323 836 3000
Email: Investor Relations

1 “EBITDAS” is defined as earnings before interest, taxes, depreciation, amortization and share-based compensation. EBITDAS should not be construed as a substitute for net income (loss) or net cash provided by (used in) operating activities (all as determined in accordance with GAAP) for the purpose of analyzing our operating performance, financial position and cash flows, as EBITDAS is not defined by GAAP. However, the Company regards EBITDAS as a complement to net income and other GAAP financial performance measures, including an indirect measure of operating cash flow. As such, management believes that the investment community finds it to be a useful tool to perform meaningful comparisons of past, present and future operating results and as a means to evaluate the results of core on-going operations.

2 In accordance with Financial Accounting Standard No. 131, the Company’s financial reporting includes detailed data on three separate operating segments. The JDate segment consists of the Company’s JDate.com website and its co-branded websites. The AmericanSingles segment consists of the Company’s AmericanSingles.com website and its co-branded and private label websites. The Other Businesses segment consists of all of the Company’s other websites and businesses.

3 Direct subscriber acquisition cost is defined as total direct marketing costs divided by the number of new paying subscribers during the period. This represents the average cost of acquiring a new paying subscriber during the period.

Download as PDF to view consolidated financial statements