Spark Networks(R) Reports Fourth Quarter Financial Results

LOS ANGELES, CA -- (Marketwired) -- 03/05/14 -- Spark Networks, Inc. (NYSE MKT: LOV)

  • Total revenue grew Y/Y for 12th consecutive quarter
  • Total contribution1 grew 16% Y/Y
  • Christian Networks revenue grew Y/Y for 13th consecutive quarter
  • Christian Networks ARPU2 grew Q/Q for first time since Q1 2013

Spark Networks, Inc. (NYSE MKT: LOV), a leader in creating niche-focused brands that build and strengthen the communities they serve, today reported financial results for the fourth quarter and full year ended December 31, 2013.

Financial Highlights

Q4 2012 Q4 2013
Revenue $16.3 Million $17.2 Million
Contribution Margin3 23% 25%
Net Loss $10.5 Million $3.5 Million
Net Loss Per Share $0.51 $0.15

Management Commentary
"2013 marked our third consecutive year of growth as we continued to execute our long-term strategic plan," said Greg Liberman, Spark Networks' Chairman and Chief Executive Officer. "And, unlike the previous two years, in addition to delivering 12% revenue growth, we also demonstrated a meaningful 8% improvement in contribution for the year, punctuated by a 16% increase in Q4 contribution."

"Our dual engines -- the Christian and Jewish Networks segments, anchored by ChristianMingle and JDate -- once again drove our performance. In 2013, Christian Networks grew 27%, generated more than $40 million in revenue and constituted 58% of the company's revenue base. While impressive in a vacuum, that is even more notable given that Christian Networks generated less than $6 million and comprised just 14% of our revenue when we relaunched the business three years ago. And, from a competitive perspective, with nearly 80% awareness, ChristianMingle has clearly become our second iconic brand that sits at the heart of its community."

Financial Results

Revenue in the fourth quarter of 2013 was $17.2 million, an increase of 6% compared to the year ago period. Full year 2013 revenue was $69.4 million, a 12% increase compared to 2012. The Christian Networks segment was the primary driver of that growth.

Contribution in the fourth quarter of 2013 was $4.3 million, an increase of 16% compared to the year ago period. Full year 2013 contribution was $17.3 million, an increase of 8% compared to 2012. A 35% and 21% increase in Christian Networks contribution for the quarter and full year, respectively, drove the gains in total company contribution.

Total cost and expenses in the fourth quarter of 2013 were $20.7 million, an increase of 10% compared to the year ago period. Full year 2013 total cost and expenses were $81.5 million, a 15% increase compared to 2012. Our increased direct marketing investment in the Christian Networks segment, the expansion of our mobile product and media business teams and higher legal fees drove the majority of growth in total cost and expenses for the quarter and the full year.

Net loss in the fourth quarter of 2013 was $3.5 million, or $0.15 per share, compared to a net loss of $10.5 million, or $0.51 per share, in the year ago period. Full year 2013 net loss was $12.4 million, or $0.54 per share, compared to a net loss of $15.0 million, or $0.72 per share, in 2012.

Adjusted EBITDA4 in the fourth quarter of 2013 was a loss of $2.8 million, compared to a loss of $2.0 million in the year-ago period. Full year 2013 Adjusted EBITDA was a loss of $9.1 million, compared to a loss of $6.7 million in 2012.

Total average paying subscribers5 in the fourth quarter of 2013 were 292,760, an increase of 5% compared to the year ago period. Full year 2013 average paying subscribers were 297,696, a 15% increase compared to 2012. The growth in our Christian Networks average paying subscribers drove the total company average paying subscriber increases.

Balance Sheet, Cash, Debt
As of December 31, 2013, the company had cash and cash equivalents of $14.7 million, an increase of 41% from $10.5 million at December 31, 2012. As of December 31, 2013, the company had no outstanding debt.

SPARK NETWORKS, INC. SEGMENT6
RESULTS FROM OPERATIONS
(in thousands except subscriber and ARPU information)
Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q4 '13 v. Q4 '12
Net Revenue
Jewish Networks $ 6,617 $ 6,452 $ 6,460 $ 6,433 $ 6,444 -2.6 %
Christian Networks 8,721 9,908 10,260 10,088 9,989 14.5 %
Other Networks 836 815 775 715 667 -20.2 %
Offline & Other Businesses 97 88 86 125 104 7.2 %
Total Net Revenue $ 16,271 $ 17,263 $ 17,581 $ 17,361 $ 17,204 5.7 %
Direct Mktg. Exp.
Jewish Networks $ 834 $ 751 $ 776 $ 822 $ 991 18.8 %
Christian Networks 11,480 11,722 12,866 11,659 11,769 2.5 %
Other Networks 201 199 152 123 121 -39.8 %
Offline & Other Businesses 69 26 31 30 36 -47.8 %
Total Direct Mktg. Exp. $ 12,584 $ 12,698 $ 13,825 $ 12,634 $ 12,917 2.6 %
Contribution
Jewish Networks $ 5,783 $ 5,701 $ 5,684 $ 5,611 $ 5,453 -5.7 %
Christian Networks (2,759 ) (1,814 ) (2,606 ) (1,571 ) (1,780 ) 35.5 %
Other Networks 635 616 623 592 546 -14.0 %
Offline & Other Businesses 28 62 55 95 68 142.9 %
Total Contribution $ 3,687 $ 4,565 $ 3,756 $ 4,727 $ 4,287 16.3 %
Average Paying Subs.
Jewish Networks 85,736 85,200 84,487 83,732 83,175 -3.0 %
Christian Networks 168,394 186,896 196,598 197,420 192,349 14.2 %
Other Networks 25,130 23,435 21,183 19,073 17,236 -31.4 %
Total Avg. Paying Subs.7 279,260 295,531 302,268 300,225 292,760 4.8 %
ARPU
Jewish Networks $ 24.93 $ 24.86 $ 25.15 $ 25.28 $ 25.34 1.7 %
Christian Networks 16.43 16.84 16.55 16.07 16.14 -1.7 %
Other Networks 10.36 10.84 11.49 12.08 12.44 20.0 %
Total ARPU7 $ 18.49 $ 18.68 $ 18.60 $ 18.38 $ 18.54 0.3 %

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

Toll-Free (United States): 1-877-407-0789
International: 1-201-689-8562

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 at www.spark.net or by clicking http://investor.spark.net.

A replay will begin approximately three hours after completion of the call and run until March 19, 2014.

Replay
Toll-Free (United States): 1-877-870-5176
International: 1-858-384-5517
Passcode: 13574700

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; continue to depend upon the telecommunications infrastructure and our networking hardware and software infrastructure; estimate on-going general and administrative costs, and obtain financing on acceptable terms. 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 current 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, Inc.:
The Spark Networks portfolio of consumer Web sites includes, among others, JDate®.com (www.jdate.com), ChristianMingle®.com (www.christianmingle.com), Spark®.com (www.spark.com), BlackSingles.com® (www.blacksingles.com), and SilverSingles®.com (www.silversingles.com).

1 "Contribution" is defined as revenue, net of credits and credit card chargebacks, less direct marketing.

2 ARPU is defined as average revenue per user per month. Total ARPU excludes results from the company's HurryDate business due to its relative size.

3 "Contribution Margin" is defined as Contribution divided by revenue, net of credits and credit card chargebacks.

4 The company reports Adjusted EBITDA as a supplemental measure to generally accepted accounting principles ("GAAP"). This measure is one of the primary metrics by which we evaluate the performance of our businesses, budget, forecast and compensate management. We believe this measure provides management and investors with a consistent view, period to period, of the core earnings generated from on-going operations and excludes the impact of: (i) non-cash items such as stock-based compensation, asset impairments, non-cash currency translation adjustments related to an inter-company loan and (ii) one-time items that have not occurred in the past two years and are not expected to recur in the next two years. Adjusted EBITDA should not be construed as a substitute for net income (loss) (as determined in accordance with GAAP) for the purpose of analyzing our operating performance or financial position, as Adjusted EBITDA is not defined by GAAP.

"Adjusted EBITDA" is defined as earnings before interest, taxes, depreciation, amortization, stock-based compensation, impairment of long-lived assets, non-cash currency translation adjustments for an inter-company loan and the income (loss) recognized from non-cash assets received in connection with a legal judgment.

5 "Average paying subscribers" are defined as individuals who have paid a monthly fee for access to communication and Web site 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.

6 In accordance with Segment Reporting guidance, 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, JDate.fr, JDate.co.uk and Cupid.co.il Web sites and their respective co-branded Web sites. The Christian Networks segment consists of the company's ChristianMingle.com, ChristianMingle.co.uk, ChristianMingle.com.au, Believe.com, ChristianCards.net, ChristianDating.com, DailyBibleVerse.com and Faith.com Web sites. The Other Networks segment consists of Spark.com and related other general market Web sites as well as other properties which are primarily composed of sites targeted towards various religious, ethnic, geographic and special interest groups. The Offline & Other Businesses segment consists of revenue generated from offline activities and HurryDate events and subscriptions.

7 Total Average Paying Subscribers excludes results from the company's HurryDate business due to its relative size.

SPARK NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31, December 31,
2012 2013
Assets
Current assets:
Cash and cash equivalents $ 10,458 $ 14,723
Restricted cash 1,232 1,296
Accounts receivable 1,510 1,569
Deferred tax asset - current 8 10
Prepaid expenses and other 861 1,787
Total current assets 14,069 19,385
Property and equipment, net 3,133 3,901
Goodwill 8,861 9,305
Intangible assets, net 2,143 2,269
Deferred tax asset - non-current 5 186
Deposits and other assets 153 208
Total assets $ 28,364 $ 32,254
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,093 $ 1,516
Accrued liabilities 5,339 5,761
Deferred revenue 8,128 8,830
Deferred tax liability - current portion 257 526
Total current liabilities 14,817 16,633
Deferred tax liability 1,413 1,781
Other liabilities - non-current 588 1,717
Total liabilities 16,818 20,131
Commitments and contingencies
Stockholders' equity:
Authorized capital stock consists of 100,000,000 shares of Common Stock, $0.001 par value; issued and outstanding: 24,001,937 and 20,945,364 shares at December 31, 2013 and 2012, respectively: 21 24
Additional paid-in-capital 54,857 70,747
Accumulated other comprehensive income 712 776
Accumulated deficit (44,044 ) (56,424 )
Total stockholders' equity 11,546 15,123
Total liabilities and stockholders' equity $ 28,364 $ 35,254
SPARK NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
Three Months Ended December 31, Years Ended December 31,
2012 2013 2011 2012 2013
Revenue $ 16,271 $ 17,204 $ 48,493 $ 61,743 $ 69,409
Cost and expenses:
Cost of revenue (exclusive of depreciation shown separately below) 13,491 13,911 28,955 49,216 55,958
Sales and marketing 1,015 1,629 3,722 3,991 5,601
Customer service 647 765 1,980 2,534 2,902
Technical operations 296 280 1,367 1,363 1,167
Development 797 799 2,710 3,346 3,129
General and administrative 2,237 2,790 8,068 8,787 10,494
Depreciation 431 533 1,320 1,673 1,987
Amortization of intangible assets - 10 370 13 20
Impairment of goodwill, long-lived assets and other assets - - 1,145 - 265
Total cost and expenses 18,914 20,717 49,637 70,923 81,523
Operating loss (2,643 ) (3,513 ) (1,144 ) (9,180 ) (12,114 )
Interest (income) expense and other, net (188 ) (56 ) 162 (238 ) (229 )
Loss before income taxes (2,455 ) (3,457 ) (1,306 ) (8,942 ) (11,885 )
Provision for income taxes 8,083 92 305 6,047 495
Net loss $ (10,538 ) $ (3,549 ) $ (1,611 ) $ (14,989 ) $ (12,380 )
Net loss per share - basic and diluted $ (0.51 ) $ (0.15 ) $ (0.08 ) $ (0.72 ) $ (0.54 )
Weighted average shares outstanding - basic and diluted 20,816 23,938 20,591 20,781 22,795
Stock-based compensation:
(in thousands)
Three Months Ended December 31, Year Ended December 31,
2012 2013 2011 2012 2013
Cost of revenue $ 2 $ - $ 8 $ 8 $ -
Sales and marketing 21 38 80 76 145
Customer service 1 - - 2 -
Technical operations 29 - 119 118 4
Development 11 - 42 42 10
General and administrative 150 153 657 567 608
Reconciliation of Net Loss (Income) to Adjusted EBITDA:
(in thousands)
Three Months Ended December 31, Years Ended
December 31,
2012 2013 2011 2012 2013
Net loss $ (10,538 ) $ (3,549 ) $ (1,611 ) $ (14,989 ) $ (12,380 )
Interest 16 18 102 59 71
Taxes 8,083 92 305 6,047 495
Depreciation 431 533 1,320 1,673 1,987
Amortization - 10 370 13 20
EBITDA (2,008 ) (2,896 ) 486 (7,197 ) (9,807 )
Stock-based compensation 214 191 906 813 767
Impairment of long-lived assets and other assets - - 1,145 - 265
Non-cash currency translation adjustments (201 ) (82 ) 337 (124 ) (297 )
Non-repetitive property possession - - (247 ) (151 ) -
Adjusted EBITDA $ (1,995 ) $ (2,787 ) $ 2,627 $ (6,659 ) $ (9,072 )

For More Information
Investors:
Addo Communications
Laura Bainbridge, Kimberly Esterkin
Email Contact; Email Contact
310-829-5400

Source: Spark Networks, Inc.