Spark Networks SE Reports Second Half And Full Year 2018 Results

BERLIN, April 29, 2019 /PRNewswire/ -- Spark Networks SE (NYSE American: LOV), one of the world's leading online dating platforms, leveraging premium, complementary brands including EliteSingles, eDarling, Jdate, Christian Mingle, JSwipe, SilverSingles, and Attractive World reported its second half and full year 2018 financial results today.

(PRNewsfoto/Spark Networks SE)

"2018 was a strong year for Spark, as we continued to drive profitable growth while investing in new brands," said Jeronimo Folgueira, CEO of Spark Networks.  "2018 was our first full year as a public company, following the close the of the Affinitas / Spark merger in November 2017.  Looking back, I am pleased with our ability to integrate and stabilize the Spark Networks, Inc. operations while also growing our consolidated Revenue, Net Income and Adjusted EBITDA to achieve the 2018 financial guidance we set in August.  As we look ahead, we are excited to add Zoosk to our portfolio of brands and to begin the post-merger integration work that will enable us to achieve the profitability goals we have set for 2020 and beyond."

Financial Results

  • Revenue for the second half of 2018 was €51.5 million, an increase of 18.4% from €43.5 million in the second half of 2017. Revenue for 2018 was €104.6 million, an increase of 22.2% from €85.6 million in 2017. For both the half year and the full year, the increase in Revenue was primarily attributable to the Affinitas / Spark Merger, which closed in November 2017.
  • Net Loss was €2.0 million in the second half of 2018, compared to €3.9 million in the second half of 2017, a reduction of €1.9 million. Net Loss for 2018 was €3.1 million, compared to €5.6 million in 2017, a reduction of €2.5 million. For both the half year and the full year, the reduction in Net Loss was primarily attributable to the Affinitas / Spark Merger, which closed in November 2017.
  • Adjusted EBITDA was €8.5 million in the second half of 2018, compared to €4.2 million in the second half of 2017, an increase of €4.3 million. Adjusted EBITDA for 2018 was €11.0 million, compared to €6.6 million in 2017, an increase of €4.4 million.
  • The Company ended the year with €11.1 million in cash and €12.1 million in debt.

Key Performance Indicators

  • Average Paying Subscribers grew 21.3% to 477.8 thousand in the second half of 2018, compared to 394.0 thousand in the same period of 2017.
  • Monthly Average Net Revenue Per User, or Monthly ARPU, decreased 2.3% to €17.98 in the second half of 2018, compared to €18.41 in the same period of 2017.

Financial Outlook

  • Spark initially adopted IFRS 15, Revenue from Contracts with Customers, in 2018. With the application of IFRS 15, Spark does not recognize revenue following a customer chargeback.
  • The Revenue guidance ranges provided by Spark on August 30, 2018 for the second half of 2018 and full year 2018 of €53.5 to €56.5 million and €106.5 to €109.5 million, respectively, were based on the expectation that Revenue would be recognized gross of chargebacks, and are therefore inconsistent with IFRS 15. Excluding the application of IFRS 15, Revenue for the second half of 2018 and full year 2018 was €54.1 million and €107.2 million, respectively.
  • Given the expected Q3 2019 close of the previously announced merger with Zoosk, Inc., Spark's 2019 outlook is no longer consistent with the preliminary 2019 guidance provided on August 30, 2018.
  • Spark is focused on completing the post-close merger integration work as efficiently as possible, and we believe our efforts will result in at least $50 million of Adjusted EBITDA in 2020.

Key Metrics – Half Year


Six Months Ended


Growth Rates %


12/31/2018


6/30/2018


12/31/2017


2nd Half 2018 vs.


2nd Half 2018


1st Half 2018


2nd Half 2017


1st Half 2018


2nd Half 2017

Revenue

€51.5 Million


€53.0 Million


€43.5 Million


(2.8)%


18.4%

Contribution1

€24.2 Million


€20.4 Million


€17.5 Million


18.6%


38.1%

Net (Loss)/Profit

€(2.0) Million


€(1.1) Million


€(3.9) Million


81.8%


(48.7)%

Adjusted EBITDA2

€8.5 Million


€2.4 Million


€4.2 Million


254.2%


102.4%

Cash Balance

€11.1 Million


€8.1 Million


€8.2 Million


37.0%


35.4%

Total Registrations3

4,791,652


5,352,521


4,329,541


(10.5)%


10.7%

Avg. Paying Subs4

477,817


489,024


393,979


(2.3)%


21.3%

Monthly ARPU5

€ 17.98


€ 18.07


€ 18.41


(0.5)%


(2.3)%

Key Metrics – Full Year





Growth Rates %


2018


2017


2018


2017

Revenue

€104.6 Million


€85.6 Million


22.2%


16.5%

Contribution1

€44.7 Million


€32.2 Million


38.8%


28.1%

Net (Loss)/Profit

€(3.1) Million


€(5.6) Million


(44.6)%


N.M.

Adjusted EBITDA2

€11.0 Million


€6.6 Million


66.7%


12.5%

Cash Balance

€11.1 Million


€8.2 Million


35.4%


1.9%

Total Registrations3

10,144,173


8,451,633


20.0%


22.5%

Avg. Paying Subs4

483,413


379,403


27.4%


19.6%

Monthly ARPU5

€ 18.02


€ 18.81


(4.2)%


(2.6)%

 

SPARK NETWORKS SE

SEGMENT6 RESULTS FROM OPERATIONS    

(Revenue, Direct Marketing and Contribution figures in € thousands)



Six Months Ended


Growth Rates %


12/31/2018


6/30/2018


12/31/2017


2nd Half 2018 vs.


2nd Half 2018


1st Half 2018


2nd Half 2017


1st Half 2018


2nd Half 2017

# of Registrations















North America

2,243,178



2,133,705



1,233,455



5.1

%


81.9

%

International

2,548,474



3,218,816



3,096,086



(20.8)

%


(17.7)

%

Total # of Registrations

4,791,652



5,352,521



4,329,541



(10.5)

%


10.7

%















Average Paying Subscribers














North America

189,533



178,101



97,786



6.4

%


93.8

%

International

288,284



310,923



296,193



(7.3)

%


(2.7)

%

Total Average Paying Subscribers

477,817



489,024



393,979



(2.3)

%


21.3

%















Monthly ARPU














North America

22.45



21.47



22.87



4.6

%


(1.8)

%

International

15.03



16.12



16.94



(6.8)

%


(11.3)

%

Monthly ARPU

17.98



18.07



18.41



(0.5)

%


(2.3)

%














Total Net Revenue













North America

25,531



22,939



13,419



11.3

%


90.3

%

International

26,006



30,075



30,102



(13.5)

%


(13.6)

%

Total Net Revenue

51,537



53,014



43,521



(2.8)

%


18.4

%














Direct Marketing













North America

13,277



14,585



8,585



(9.0)

%


54.7

%

International

14,026



18,000



17,394



(22.1)

%


(19.4)

%

Total Direct Marketing

27,303



32,585



25,979



(16.2)

%


5.1

%














Contribution













North America

12,254



8,354



4,834



46.7

%


153.5

%

International

11,980



12,075



12,708



(0.8)

%


(5.7)

%

Total Contribution

24,234



20,429



17,542



18.6

%


38.1

%


 

SPARK NETWORKS SE

SEGMENT6 RESULTS FROM OPERATIONS

(Revenue, Direct Marketing and Contribution figures in € thousands)



12 Months Ended December 31,


Growth Rates %


2018


2017


2016


2018


2017

# of Registrations










North America

4,376,883



2,289,036



1,616,963



91.2

%


41.6

%

International

5,767,290



6,162,597



5,280,686



(6.4)

%


16.7

%

Total # of Registrations

10,144,173



8,451,633



6,897,649



20.0

%


22.5

%











Average Paying Subscribers










North America

183,794



83,870



46,453



119.1

%


80.5

%

International

299,619



295,533



270,823



1.4

%


9.1

%

Total Average Paying Subscribers

483,413



379,403



317,276



27.4

%


19.6

%











Monthly ARPU










North America

21.98



24.42



28.71



(10.0)

%


(15.0)

%

International

15.60



17.22



17.69



(9.4)

%


(2.7)

%

Monthly ARPU

18.02



18.81



19.30



(4.2)

%


(2.6)

%











Total Net Revenue










North America

48,470



24,574



16,004



97.2

%


53.6

%

International

56,081



61,063



57,487



(8.2)

%


6.2

%

Total Net Revenue

104,551



85,637



73,491



22.2

%


16.5

%











Direct Marketing










North America

27,862



17,980



15,059



55.0

%


19.4

%

International

32,026



35,489



33,311



(9.8)

%


6.5

%

Total Direct Marketing

59,888



53,469



48,370



12.0

%


10.5

%











Contribution










North America

20,608



6,594



944



212.5

%


598.2

%

International

24,055



25,574



24,177



(5.9)

%


5.8

%

Total Contribution

44,663



32,168



25,121



38.8

%


28.1

%

 

SPARK NETWORKS SE

UNAUDITED PRO FORMA FINANCIAL INFORMATION7 

(in € thousands)



Years Ended December 31,


2018


2017

(in € thousands)

(pro forma)


(pro forma)

Revenue

104,840



105,911


Net loss

(2,814)



(3,134)




The following table presents certain selected information and Adjusted EBITDA(2) for the unaudited pro forma periods presented:





Years Ended December 31,


2018


2017

(in € thousands)

(pro forma)


(pro forma)

Net loss

(2,814)



(3,134)


Net finance expenses

958



261


Income tax (benefit) expense

1,147



5,057


Depreciation and amortization

3,565



4,266


Impairment of intangible assets and goodwill

3,324



46


Share-based compensation expense

4,091



1,175


Non-recurring costs

681



943


Adjusted EBITDA

10,952



8,614







Years Ended December 31,


2018


2017

Summary of non-recurring costs

(pro forma)


(pro forma)

Contract liabilities write-offs



943


Restructuring expenses




Transaction and advisory fees

264




Merger integration costs

101




Other employee payments




Severance costs

316




Total adjustments

681



943


Investor Conference Call

The Group will discuss its financial results during a live teleconference today at 4:30 p.m. Eastern time.

Toll-Free (United States):   

1-877-705-6003

Toll-Free (Germany):  

0-800-182-0040

International:     

1-201-493-6725

In addition, the Group will host a webcast of the call which will be accessible in the Investor Relations section of the Group's website at https://investor.spark.net/investor-relations/home.

A replay will begin approximately three hours after completion of the call and run until May 13, 2019.

Replay                        


Toll-Free (United States):    

1-844-512-2921         

International:                         

1-412-317-6671

Passcode:                              

13690219

Safe Harbor Statement:

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, statements involving known and unknown risks, uncertainties, and other factors that may cause Spark Networks' performance or achievements to be materially different from those of any expected future results, performance, or achievements.

Any statements in this press release that are not statements of historical fact may be considered to be forward-looking statements. Words and expressions reflecting optimism, satisfaction, or disappointment with current prospects, as well as words such as "believes," "hopes," "intends," "estimates," "expects," "projects," "plans," "anticipates," and variations thereof, or the use of future tense, identify forward-looking statements, but their absence does not mean that a statement is not forward-looking. Forward-looking statements include, but are not limited to, statements about operating a diverse global platform of premium online dating sites, statements about providing exceptional user experience and driving stockholder value, statements about projected financial results, statements about the company's plans, objectives, expectations and intentions and other statements that are not historical facts. Such forward-looking statements are not guarantees of performance and actual results could differ materially from those contained in such statements. Factors that could cause or contribute to such differences include, but are not limited to: risks related to the degree of competition in the markets in which Spark Networks operates; the ability of Spark Networks to retain and hire key personnel; Spark Networks' ability to continue to control costs and operating expenses; Spark Networks' ability to achieve its intended cost savings; Spark Networks' ability to generate cash from operations, lower-than-expected revenue, credit quality deterioration or a reduction in net earnings; Spark Networks' ability to raise outside capital and to repay debt as it comes due; Spark Networks' ability to introduce new competitive products and the degree of market acceptance of such new products; the timing and market acceptance of new products introduced by Spark Networks' competitors; Spark Networks' ability to identify potential acquisitions; Spark Networks' ability to successfully integrate acquired businesses and the ability of acquired businesses to perform as expected; Spark Networks' ability to maintain strong relationships with branded channel partners; changes in Spark Networks' stock price due to broader stock market movements and the performance of peer group companies; Spark Networks' ability to enforce intellectual property rights and protect their respective intellectual property; general competition and price measures in the market place; general economic conditions; and the other concerns. Additional factors that could cause actual results to differ are discussed under the heading "Risk Factors" and in other sections of the Group's filings with the Securities and Exchange Commission ("SEC"), and in the Group's other current and periodic reports filed or furnished from time to time with the SEC.  All forward-looking statements in this press release are made as of the date hereof, based on information available to the Company as of the date hereof, and the Company assumes no obligation to update any forward-looking statement.

About Spark Networks SE:

Spark Networks SE is a leading global dating company with a portfolio of premium brands designed for singles seeking serious relationships. These brands include EliteSingles, Jdate, Christian Mingle, SilverSingles, eDarling, JSwipe and Attractive World. Formed in 2017 through the merger of Affinitas GmbH and Spark Networks, Inc., the company has a presence in 29 countries worldwide and is publicly listed on the NYSE American exchange under the ticker symbol "LOV."

For More Information           

Investors:
Robert O'Hare
Chief Financial Officer
rohare@spark.net

1 Contribution is defined as revenue, net of refunds and credit card chargebacks, less direct marketing. Direct Marketing is defined as online and offline advertising spend, and is included within Cost of Revenue within the Group's Consolidated Statements of Operations and Comprehensive Loss.

2 Adjusted EBITDA is not a measure defined by IFRS. The most directly comparable IFRS measure for Adjusted EBITDA is our net (loss)/profit for the relevant period. 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 ongoing operations and excludes the impact of items that we do not consider representative of our ongoing operating performance, including: (i) non-cash items such as stock-based compensation, asset impairments, net finance expenses 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 including severance, transaction advisory fees, and merger integration costs, and (iii) discontinued operations. Adjusted EBITDA should not be construed as a substitute for net loss (as determined in accordance with IFRS) for the purpose of analyzing our operating performance or financial position, as Adjusted EBITDA is not defined by IFRS. A reconciliation of the Adjusted EBITDA for the six and twelve months ended December 31, 2018 and December 31, 2017 can be found in the table below.

Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, stock-based compensation, impairment of intangible and long-lived assets, and non-recurring costs.

3 Total registrations are defined as the total number of new members registering to the platforms with their email address. Those include members who enter into premium subscriptions and free memberships.

4 Paying subscribers are defined as individuals who have paid a monthly fee for access to premium services, which include, among others, unlimited communication with other registered users, access to user profile pictures and enhanced search functionality. Average paying subscribers for each month are calculated as the sum of the paying subscribers at the beginning and the 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.

5 Monthly Average Net Revenue Per User, or Monthly ARPU, represents the total net subscriber revenue for the period divided by the number of average paying subscribers for the period, divided by the number of months in the period.

6 In accordance with segment reporting guidance, the Group's financial reporting includes detailed data on two separate operating segments. The North America segment consists of operations in the United States and Canada, and the International segment consists of all other operations except for the United States and Canada.

7 The unaudited pro forma financial information presents the combined results of the Company and Spark as if the Affinitas / Spark Merger had occurred on January 1, 2017. The unaudited pro forma financial information includes adjustments required under the acquisition method of accounting and is presented for informational purposes only. This presentation is not necessarily indicative of the results that would have been achieved had the acquisitions actually occurred on January 1, 2017.

SPARK NETWORKS SE

CONSOLIDATED BALANCE SHEETS  

(in € thousands)




December 31, 2018


December 31, 2017

ASSETS





Non-current assets


44,729


47,148

Intangible assets and goodwill


33,015


35,136

Internally generated software


2,221


3,503

Licenses and domains


209


128

Brands and trademarks


4,894


4,917

Purchased software


23


Intangible assets under development


3,691


1,090

Other intangible assets


1,173


2,314

Goodwill


20,804


23,184

Property, plant and equipment


2,015


2,082

Leasehold improvements


127


186

Other and office equipment


1,884


373

Property, plant and equipment under construction


4


1,523

Other non-current financial assets


24


23

Other non-current non-financial assets


271


Deferred tax assets


9,404


9,907

Current assets


18,133


22,034

Current trade and other receivables


7,004


13,820

Trade receivables


3,042


6,814

Other current financial assets


914


3,156

Other assets


3,048


3,850

Current income tax assets


34


Cash and cash equivalents


11,095


8,214

TOTAL ASSETS


62,862


69,182

SHAREHOLDERS' EQUITY AND LIABILITIES





Shareholders' equity


19,409


19,477

Subscribed capital


1,317


1,317

Capital reserves


49,365


48,877

Share-based payment reserve


4,149


2,747

Accumulated deficit


(36,156)


(32,581)

Accumulated other comprehensive income


734


(883)

Non-current liabilities


9,582


765

Non-current borrowings


8,375


Other non-current provisions


16


17

Other non-current financial liabilities


54


Deferred tax liabilities


1,132


725

Non-current contract liabilities


5


23

Current liabilities


33,871


48,940

Current borrowings


3,750


5,850

Other current provisions


305


1,159

Current trade and other payables


12,863


21,291

Trade payables


10,166


11,489

Other current financial liabilities


878


6,515

Other liabilities


1,819


3,287

Current income tax liabilities


349


286

Current contract liabilities


16,604


20,354

Total liabilities


43,453


49,705

TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES


62,862


69,182









 

SPARK NETWORKS SE

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 

(in € thousands, except per share data)




Six Months Ended December 31,


Years Ended December 31,



2018


2017


2018


2017

Continuing operations









Revenue


51,537



43,521



104,551



85,637


Cost of revenue


(32,140)



(29,737)



(69,490)



(58,776)


Gross profit


19,397



13,784



35,061



26,861


Other income


216



5



240



54


Other operating expenses


(18,788)



(16,930)



(36,299)



(32,030)


Sales and marketing expenses


(2,481)



(2,775)



(4,938)



(5,540)


Customer service expenses


(2,278)



(1,776)



(4,626)



(3,971)


Technical operations and development expenses


(3,821)



(3,664)



(7,195)



(6,428)


General and administrative expenses


(10,208)



(8,715)



(19,540)



(16,091)


Operating profit/(loss)


825



(3,141)



(998)



(5,115)


Interest income and similar income


264



166



478



239


Interest expense and similar charges


(658)



(363)



(1,436)



(782)


Net finance expenses


(394)



(197)



(958)



(543)


Income/(loss) before taxes


431



(3,338)



(1,956)



(5,658)


Income tax benefit (expense)


(2,387)



(532)



(1,147)



84


Loss from continuing operations


(1,956)



(3,870)



(3,103)



(5,574)


Discontinued operations









Loss from discontinued operations, net of tax









Net loss


(1,956)



(3,870)



(3,103)



(5,574)


Other comprehensive income/(loss)


790



(883)



1,617



(883)


Total comprehensive loss


(1,166)



(4,753)



(1,486)



(6,457)


Earnings per share









Basic earnings/(loss) per share (€)


(1.51)



(8.97)



(2.39)



(24.23)


Diluted earnings/(loss) per share (€)


(1.51)



(8.97)



(2.39)



(24.23)


Earnings per share - continuing operations









Basic earnings/(loss) per share (€)


(1.51)



(8.97)



(2.39)



(24.23)


Diluted earnings/(loss) per share (€)


(1.51)



(8.97)



(2.39)



(24.23)











Reconciliation of Net Loss to Adjusted EBITDA:









Net loss


(1,956)



(3,870)



(3,103)



(5,574)


Discontinued operations









Net finance expenses


394



197



958



543


Income tax (benefit) expense


2,387



532



1,147



(84)


Depreciation and amortization


1,928



1,579



3,565



3,084


Impairment of intangible assets and goodwill


3,324





3,324



25


Share-based compensation expense


2,314



112



4,091



488


Non-recurring costs


129



5,685



970



8,123


Adjusted EBITDA(2)


8,520



4,235



10,952



6,605











Summary of non-recurring costs









Contract liabilities write-offs




603



289



603


Restructuring expenses









Transaction and advisory fees




1,660



264



3,995


Merger integration costs


87



2,042



101



2,042


Other employee payments




1,053





1,053


Severance costs


42



327



316



430


Total adjustments


129



5,685



970



8,123


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SOURCE Spark Networks SE