Spark Networks® Reports First Quarter Financial Results
BEVERLY HILLS, CA--(Marketwire - May 10, 2012) - Spark Networks, Inc. (NYSE Amex: LOV)
- Total revenue growth of 33%
- Christian Networks revenue growth of 161%
- Average paying subscribers increase 36% to 241,000
Spark Networks, Inc. (NYSE Amex: LOV), a leading provider of online personals services, today reported financial results for the first quarter ended March 31, 2012.
Q1 2012 Highlights
| Q1 2011 | Q1 2012 | |||||||
| Revenue | $ | 11.0 Million | $ | 14.6 Million | ||||
| Contribution Margin | 54 | % | 25 | % | ||||
| Net Loss | $ | (0.2) Million | $ | (1.7) Million | ||||
| Net Loss Per Share | $ | (0.01 | ) | $ | (0.08 | ) | ||
Management Commentary
"2012 is off to a strong start, as evidenced by the continued acceleration in our revenue and average paying subscriber1 growth," said Greg Liberman, Spark Networks' President and Chief Executive Officer. "Capitalizing on the momentum we built throughout 2011, first quarter revenue and average paying subscriber growth reached new five-year highs, increasing 33% and 36% year-over-year, respectively. Driving that growth is the strength of our Christian Networks segment, which posted a 161% gain in revenue powered by a 163% increase in average paying subscribers."
"The first quarter also marks the unveiling of our new Christian Networks segment. Over 15 years ago, we entered the Jewish dating market with the establishment of JDate.com, widely recognized today as the most successful targeted online dating community ever created. And as you can see from today's numbers, we've successfully leveraged our Jewish Networks experience to build the undisputed leader in the Christian dating space, which has an addressable market we believe is at least 30x that of our Jewish Networks segment."
Q1 2012 Financial Results
Revenue for the first quarter of 2012 was $14.6 million, an increase of 33% compared to $11.0 million for the first quarter of 2011, and an increase of 13% compared to $12.9 million in the prior quarter. Growth from our Christian Networks segment drove the year-over-year and sequential gains.
Contribution2 for the first quarter of 2012 was $3.6 million, a decrease of 39% compared to $5.9 million for the first quarter of 2011, and a 31% decrease compared to $5.2 million in the prior quarter. Our investment in Christian Networks drove the year-over-year and sequential decline in contribution, as we increased direct marketing expenses 185% and 55%, respectively, in this segment.
Total cost and expenses for the first quarter of 2012 were $17.3 million, a 56% increase compared to $11.1 million in the first quarter of 2011, and a 28% increase compared to $13.5 million in the prior quarter. The growth in Christian Networks direct marketing investment accounted for a substantial portion of both the year-over-year and sequential increases in total cost and expenses.
Net loss for the first quarter of 2012 was $1.7 million, or $0.08 per share, compared to a net loss of $184,000 or $0.01 per share, for the first quarter of 2011 and a net loss of $1.1 million or $0.05 per share for the prior quarter.
Adjusted EBITDA3 for the first quarter of 2012 was a loss of $2.1 million, compared to $527,000 for the first quarter of 2011 and $1.0 million in the prior quarter.
Average paying subscribers for the Jewish Networks, Christian Networks and Other Networks segments in the first quarter of 2012 were 240,706, an increase of 36% compared to 177,641 for the first quarter of 2011 and a 13% increase compared to 212,398 for the prior quarter.
Segment Reporting4
During the first quarter of 2012, the Company changed its financial reporting to include data on two newly-defined operating segments, leaving two of the previous operating segments intact. The two new segments are Christian Networks and Other Networks. Christian Networks consists of ChristianMingle.com, ChristianMingle.co.uk, ChristianMingle.com.au and Believe.com. Other Networks 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 composition of our Jewish Networks and Offline and Other Businesses segments remain unchanged.
| SPARK NETWORKS, INC. | ||||||||||||||||||||||||
| SEGMENT RESULTS FROM OPERATIONS | ||||||||||||||||||||||||
| (in thousands except subscriber information) | ||||||||||||||||||||||||
| Q1 2011 | Q2 2011 | Q3 2011 | Q4 2011 | Q1 2012 | Q1 '12 v. Q1 '11 |
|||||||||||||||||||
| Net Revenue | ||||||||||||||||||||||||
| Jewish Networks | $ | 6,899 | $ | 6,731 | $ | 6,724 | $ | 6,700 | $ | 6,580 | -5 | % | ||||||||||||
| Christian Networks | 2,623 | 3,543 | 4,624 | 4,952 | 6,853 | 161 | % | |||||||||||||||||
| Other Networks | 1,331 | 1,272 | 1,218 | 1,104 | 1,031 | -23 | % | |||||||||||||||||
| Offline & Other Businesses | 107 | 449 | 111 | 105 | 91 | -15 | % | |||||||||||||||||
| Total Net Revenue | $ | 10,960 | $ | 11,995 | $ | 12,677 | $ | 12,861 | $ | 14,555 | 33 | % | ||||||||||||
| Direct Marketing Expenses | ||||||||||||||||||||||||
| Jewish Networks | $ | 659 | $ | 865 | $ | 936 | $ | 929 | $ | 801 | 22 | % | ||||||||||||
| Christian Networks | 3,433 | 4,508 | 5,112 | 6,303 | 9,795 | 185 | % | |||||||||||||||||
| Other Networks | 918 | 763 | 432 | 354 | 312 | -66 | % | |||||||||||||||||
| Offline & Other Businesses | 30 | 401 | 32 | 49 | 30 | 0 | % | |||||||||||||||||
| Tot. Direct Mktg. Expenses | $ | 5,040 | $ | 6,537 | $ | 6,512 | $ | 7,635 | $ | 10,938 | 117 | % | ||||||||||||
| Contribution | ||||||||||||||||||||||||
| Jewish Networks | $ | 6,240 | $ | 5,866 | $ | 5,788 | $ | 5,771 | $ | 5,779 | -7 | % | ||||||||||||
| Christian Networks | (810 | ) | (965 | ) | (488 | ) | (1,351 | ) | (2,942 | ) | 263 | % | ||||||||||||
| Other Networks | 413 | 509 | 786 | 750 | 719 | 74 | % | |||||||||||||||||
| Offline & Other Businesses | 77 | 48 | 79 | 56 | 61 | -21 | % | |||||||||||||||||
| Total Contribution | $ | 5,920 | $ | 5,458 | $ | 6,165 | $ | 5,226 | $ | 3,617 | -39 | % | ||||||||||||
| Average Paying Subscribers | ||||||||||||||||||||||||
| Jewish Networks | 91,545 | 90,094 | 88,976 | 87,101 | 86,433 | -6 | % | |||||||||||||||||
| Christian Networks | 47,134 | 62,764 | 81,987 | 93,357 | 124,158 | 163 | % | |||||||||||||||||
| Other Networks | 38,962 | 36,792 | 34,687 | 31,940 | 30,115 | -23 | % | |||||||||||||||||
| Total Avg. Paying Subscribers5 | 177,641 | 189,650 | 205,650 | 212,398 | 240,706 | 36 | % | |||||||||||||||||
| ARPU | ||||||||||||||||||||||||
| Jewish Networks | $ | 24.62 | $ | 24.46 | $ | 24.71 | $ | 25.12 | $ | 24.99 | 1 | % | ||||||||||||
| Christian Networks | 17.87 | 18.08 | 17.64 | 16.44 | 17.35 | -3 | % | |||||||||||||||||
| Other Networks | 11.02 | 10.99 | 11.07 | 10.74 | 10.77 | -2 | % | |||||||||||||||||
| Total ARPU6 | $ | 19.85 | $ | 19.73 | $ | 19.59 | $ | 19.14 | $ | 19.27 | -3 | % | ||||||||||||
Balance Sheet, Cash, Debt
As of March 31, 2012, the Company had cash and cash equivalents of $12.5 million, a decrease of 17% compared to $15.1 million at December 31, 2011. As of March 31, 2012, the Company had no outstanding debt.
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): 1-877-941-2321
International: 1-480-629-9666
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: http://www.spark.net/investor.htm.
A replay will begin approximately three hours after completion of the call and run until May 24, 2012.
Replay
Toll-Free (United States): 1-877-870-5176
International: 1-858-384-5517
Passcode: 4535328
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; obtain financing on acceptable terms; and successfully implement both cost cutting initiatives and 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 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 websites 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 "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.
2 "Contribution" is defined as revenue, net of credits and credit card chargebacks, less direct marketing. "Contribution Margin" is defined as Contribution divided by revenue, net of credits and credit card chargebacks.
3 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, such as the Scheme of Arrangement. 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 inter-company loans and the income (loss) recognized from non-cash assets received in connection with a legal judgment.
4 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 and Believe.com Web sites. The Other Networks segment consists of the Company's Spark.com Web site and other properties which are primarily made up 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.
5 Total Average Paying Subscribers excludes results from the Company's HurryDate business due to its relative size.
6 Total ARPU excludes results from the Company's HurryDate business due to its relative size. ARPU is defined as average revenue per user.
(Consolidated financial statements to follow)
| SPARK NETWORKS, INC. | |||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||
| (in thousands, except share data) | |||||||||||
| December 31, | March 31, | ||||||||||
| 2011 | 2012 | ||||||||||
| Assets | (Unaudited) | ||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 15,106 | $ | 12,517 | |||||||
| Restricted cash | 958 | 1,095 | |||||||||
| Accounts receivable | 1,146 | 1,003 | |||||||||
| Deferred tax asset - current | 44 | 44 | |||||||||
| Prepaid expenses and other | 1,164 | 1,129 | |||||||||
| Total current assets | 18,418 | 15,788 | |||||||||
| Property and equipment, net | 2,839 | 3,025 | |||||||||
| Goodwill | 8,683 | 8,859 | |||||||||
| Intangible assets, net | 1,900 | 1,911 | |||||||||
| Deferred tax asset - non-current | 5,641 | 5,639 | |||||||||
| Deposits and other assets | 455 | 426 | |||||||||
| Total assets | $ | 37,936 | $ | 35,648 | |||||||
| Liabilities and Stockholders' Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 952 | $ | 880 | |||||||
| Accrued liabilities | 4,046 | 2,191 | |||||||||
| Deferred revenue | 5,723 | 6,753 | |||||||||
| Deferred tax liability - current | 203 | 203 | |||||||||
| Total current liabilities | 10,924 | 10,027 | |||||||||
| Deferred tax liability | 1,219 | 1,293 | |||||||||
| Other liabilities non-current | 1,141 | 1,141 | |||||||||
| Total liabilities | 13,284 | 12,461 | |||||||||
| Commitments and contingencies | |||||||||||
| Stockholders' equity: | |||||||||||
| Authorized capital stock consists of 100,000,000 shares of Common Stock, $0.001 par value; issued and outstanding: 20,594,670 shares at December 31, 2011 and 20,596,857 shares at March 31, 2012: | 21 | 21 | |||||||||
| Additional paid-in-capital | 53,014 | 53,224 | |||||||||
| Accumulated other comprehensive income | 672 | 710 | |||||||||
| Accumulated deficit | (29,055 | ) | (30,768 | ) | |||||||
| Total stockholders' equity | 24,652 | 23,187 | |||||||||
| Total liabilities and stockholders' equity | $ | 37,936 | $ | 35,648 | |||||||
| SPARK NETWORKS, INC. | |||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||
| (unaudited, in thousands, except per share data) | |||||||||
| Three Months Ended March 31, |
|||||||||
| 2011 | 2012 | ||||||||
| Revenue | $ | 10,960 | $ | 14,555 | |||||
| Cost and expenses: | |||||||||
| Cost of revenue (exclusive of depreciation shown separately below) | 5,815 | 11,848 | |||||||
| Sales and marketing | 900 | 973 | |||||||
| Customer service | 461 | 613 | |||||||
| Technical operations | 414 | 350 | |||||||
| Development | 745 | 846 | |||||||
| General and administrative | 2,363 | 2,238 | |||||||
| Depreciation | 290 | 403 | |||||||
| Amortization of intangible assets | 98 | 13 | |||||||
| Total cost and expenses | 11,086 | 17,284 | |||||||
| Operating loss | (126 | ) | (2,729 | ) | |||||
| Interest and other (income) expenses, net | (57 | ) | (127 | ) | |||||
| Loss before income taxes | (69 | ) | (2,602 | ) | |||||
| Provision (benefit) for income taxes | 115 | (889 | ) | ||||||
| Net loss | $ | (184 | ) | $ | (1,713 | ) | |||
| Net loss per share - basic and diluted | $ | (0.01 | ) | $ | (0.08 | ) | |||
| Weighted average shares outstanding - basic and diluted | 20,587 | 20,596 | |||||||
| Three Months | ||||||
| Ended March 31, | ||||||
| Stock-Based Compensation | 2011 | 2012 | ||||
| (in thousands) | ||||||
| Cost of revenue | $ | 2 | $ | 2 | ||
| Sales and marketing | 34 | 20 | ||||
| Technical operations | 31 | 30 | ||||
| Development | 12 | 11 | ||||
| General and administrative | 182 | 141 | ||||
Reconciliation of Net Loss to Adjusted EBITDA |
Three Months Ended March 31, |
|||||||
| (in thousands) | 2011 | 2012 | ||||||
| Net loss | $ | (184 | ) | $ | (1,713 | ) | ||
| Interest | 31 | 12 | ||||||
| Taxes | 115 | (889 | ) | |||||
| Depreciation | 290 | 403 | ||||||
| Amortization | 98 | 13 | ||||||
| EBITDA | 350 | (2,174 | ) | |||||
| Stock-based compensation | 261 | 204 | ||||||
| Non-cash currency translation adjustments | (84 | ) | (125 | ) | ||||
| Adjusted EBITDA | $ | 527 | $ | (2,095 | ) | |||
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