Spark Networks Reports Second Quarter 2008 Financial Results

Revenue – $15.0 Million

Contribution Margin – 73%

Net Income – $1.6 Million

EPS – $0.07

BEVERLY HILLS, Calif., August 7, 2008- Spark Networks, Inc. (AMEX:LOV) today reported financial results for the second quarter and six months ended June 30, 2008.

“Our overall strategy continues to be to strengthen our position in the affinity-based segment of the subscription-driven dating market,” stated Adam Berger, Chairman and Chief Executive Officer of Spark Networks, Inc.

“Over the past five quarters, we’ve been focused on increasing stockholder value and return by growing our Other Affinity Networks segment, maximizing the yield from our Jewish Networks, optimizing our marketing spend, adding an advertising revenue stream, reducing overhead, and prudently allocating capital.”

“This strategy has translated into increased profitability and cash flow in the second quarter. Adjusted EBITDA(1), excluding currency translation adjustments, was $4.4 million or a 29% margin. Cash flow was $4.2 million, a 19% increase over the same period last year, and a 43% sequential increase.”

Second Quarter 2008 Financial Highlights

Revenue for the second quarter of 2008 was $15.0 million, a 10% decrease compared to $16.6 million in the second quarter of 2007, and flat compared to the prior quarter. Revenue for the six months was $30.0 million, a 10% decrease compared to $33.4 million for the same period last year.

Contribution(2) for the second quarter of 2008 was $11.0 million, a 2% decrease compared to $11.2 million for the second quarter of 2007, and flat compared to the prior quarter. Contribution for the six months was $21.9 million, a 3% increase compared to $21.2 million for the same period last year.

Operating expenses for the second quarter of 2008 were $8.0 million, a 15% decrease compared to $9.5 million for the second quarter of 2007, and a 5% decrease compared to $8.5 million for the prior quarter. Second quarter 2007 operating expenses include approximately $687,000 of charges related to our Scheme of Arrangement.  Operating expenses for the six months were $16.5 million, a 22% decrease compared to $21.2 million for the same period last year.  Operating expenses for the six months ending June 30, 2007 include $1.1 million of charges related to the Company’s Scheme of Arrangement.

Net income for the second quarter of 2008 was $1.6 million, or $0.07 per share, compared to $1.9 million, or $0.06 per share for the second quarter of 2007, and $1.6 million or $0.06 per share in the prior quarter. Net income for the six months was $3.2 million, or $0.13 per share, compared to $534,000, or $0.02 per share, for the same period last year.

Adjusted EBITDA for the second quarter of 2008, excluding currency translation adjustments and Scheme of Arrangement costs, was $4.4 million, compared to $4.5 million for the second quarter of 2007, and $4.0 million in the prior quarter.  Adjusted EBITDA, excluding currency translation adjustments, for the six months was $8.4 million, compared to $7.5 million during the same period last year.

Average paying subscribers(3) in the second quarter of 2008 were 190,455, a 13% decrease compared to 219,196 for the second quarter of 2007, and a 1% decrease compared to 192,652 in the prior quarter. Average paying subscribers for the six months were 191,554, a 14% decrease compared to 223,664 for the same period last year.

Segment Reporting(4)

Second quarter 2008 revenue for Jewish Networks was $8.6 million, a 5% increase compared to $8.2 million for the second quarter of 2007, and flat compared to the prior quarter. Jewish Networks revenue for the six months was $17.3 million, a 4% increase compared to $16.6 million for the same period last year.

Second quarter 2008 revenue for General Market Networks was $2.2 million, a 49% decrease compared to $4.3 million for the second quarter of 2007, and a 16% decrease compared to $2.6 million in the prior quarter. General Market Networks revenue for the six months was $4.8 million, a 49% decrease compared to $9.3 million for the same period last year.

Second quarter 2008 revenue for Other Affinity Networks was $3.4 million, a 6% increase compared to $3.2 million for the second quarter of 2007, and a 2% increase compared to the prior quarter. Other Affinity Networks revenue for the six months was $6.8 million, a 5% increase compared to $6.4 million for the same period last year.

Second quarter 2008 revenue for Offline & Other Businesses was $765,000, a 14% decrease compared to $886,000 for the second quarter of 2007, and an 80% increase compared to $426,000 in the prior quarter. Offline & Other Businesses revenue for the six months was $1.2 million, a 7% increase compared to $1.1 million for the same period last year.

Average paying subscribers for Jewish Networks were 91,598 during the second quarter of 2008, a 2% decrease compared to 93,408 for the second quarter of 2007, and a 1% decrease compared to 92,719 in the prior quarter. Average paying subscribers for the six months were 92,159, a 3% decrease compared to 94,687 for the same period last year.

Average paying subscribers for General Market Networks were 33,573 during the second quarter of 2008, a 45% decrease compared to 61,529 for the second quarter of 2007, and a 10% decrease compared to 37,435 in the prior quarter. Average paying subscribers for the six months were 35,504, a 47% decrease compared to 66,985 for the same period last year.

Average paying subscribers for Other Affinity Networks were 63,309 during the second quarter of 2008, a 1% increase compared to 62,450 for the second quarter of 2007, and a 5% increase compared to 60,133 in the prior quarter. Average paying subscribers for the six months were 61,721, a 2% increase compared to 60,781 for the same period last year.

Balance Sheet, Cash, Debt

Cash and marketable securities were $10.8 million at June 30, 2008, compared to $9.0 million at December 31, 2007.

The Company purchased approximately 1.3 million shares during the quarter at an average price of $4.35 per share or approximately $5.6 million. Subsequent to the quarter close, on July 18, 2008, the Company purchased approximately 1.6 million shares at an average price of $3.81 per share or approximately $6.1 million.

Cash flow from operations for the second quarter of 2008 was $4.2 million, an increase of 19% compared to $3.6 million during the second quarter of 2007, and an increase of 43% compared to $2.9 million in the prior quarter. Cash flow from operations for the six months was $7.2 million, an increase of 10% compared to cash flow from operations of $6.5 million in the first half of 2007.

Investor Conference Call

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

Call Title:                                 Spark Networks Q2 ’08 Financial Results

Toll-Free (United States):          +866-862-3927

International:                           +416-340-2216

One-Week Replay

Toll-Free (United States):          +1-800-408-3053

International:                           +1-416-695-5800

Pass Code:                              3259888

In addition, the Company will host a webcast of the call which will be accessible in the Investor Relations section of the Company’s website under “Conference Calls and Presentations” at: 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; develop or acquire new product offerings and successfully implement and expand those offerings; 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; identify and consummate strategic acquisitions and integrate acquired companies or assets; and successfully implement our current long-term growth strategy. 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.

1 “Adjusted EBITDA” is defined as earnings before interest, taxes, depreciation, amortization, share-based compensation and impairment of long-lived assets. Adjusted EBITDA 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 adjusted EBITDA is not defined by GAAP. However, the Company regards adjusted EBITDA 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 “Contribution” is defined as revenue less direct marketing expenses and “Contribution Margin” is defined as Contribution divided by revenue.

3 Paying subscribers are defined as individuals who have paid a monthly fee for access to communication and website features beyond those provided to our members. Average paying subscribers for each month are calculated as the sum of the paying subscribers at the beginning and end of the month, divided by two. Average paying subscribers for periods longer than one month are calculated as the sum of the average paying subscribers for each month, divided by the number of months in such period. In the second quarter of 2008, the Company made a modification to its method of calculating period end subscribers.

4 In accordance with Financial Accounting Standard No. 131, the Company’s financial reporting includes detailed data on four separate operating segments. The Jewish Networks segment consists of the Company’s JDate.com, JDate.co.il and Cupid.co.il® websites and their respective co-branded websites. The General Market Networks segment consists of the Company’s AmericanSingles.com website, its co-branded and private label websites, and Date.co.uk and Date.ca®. The Other Affinity Networks segment consists of all of the Company’s Provo, Utah-based properties which primarily consist of sites targeted towards various religious, ethnic, geographic and special interest groups including BlackSingles.com and ChristianMingle.com. The Company has previously referred to this segment as Affinity Networks.  The Offline & Other Businesses segment consists of revenue generated from offline activities, HurryDate® events and subscriptions and other websites and businesses.

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