Spark Networks(R) Reports Fourth Quarter and Full Year 2012 Financial Results

March 7, 2013

Spark Networks Reports Fourth Quarter and FY 2012 Results.pdf 298.1 KB

BEVERLY HILLS, CA -- (MARKETWIRE) -- 03/07/13 -- Spark Networks, Inc. (NYSE MKT: LOV)

Company-wide 2012 revenue increased 27% to $61.7 million
Christian Networks 2012 revenue increased 101% to $31.6 million
Q4 company-wide average paying subscribers1 grew 31% to 279,000
Q4 Christian Networks average paying subscribers grew 80% to 168,000

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, 2012.

Financial Highlights


	Q4 2012			Full Year 2012
Revenue	$	16.3 Million		$	61.7 Million
Contribution Margin		23	%		26	%
Net Loss	$	(10.5) Million		$	(15.0) Million
Net Loss Per Share	$	(0.51	)	$	(0.72	)

Management Commentary

"I am proud of our 2012 performance, which was punctuated by a fourth quarter that marked our best of the year," said Greg Liberman, Spark Networks' President and Chief Executive Officer. "Revenue increased 27%, fueled by a 32% increase in average paying subscribers. That growth was driven by our category-leading Christian Networks segment, where we doubled both revenue and average paying subscribers. We also strengthened our leadership position in the Jewish Networks segment, anchored by the iconic JDate brand, where we exited 2012 with two consecutive quarters of sequential subscriber growth and our first sequential revenue increase since the fourth quarter of 2010. And, importantly, we did so while maintaining the segment's consistent, nearly 90%, contribution margin."

"Looking ahead, we will continue to focus on strengthening our brands and leadership positions in both the Christian and Jewish Networks segments. And, as pleased as we are with our accomplishments in 2011 and 2012, we are even more excited about the opportunities that lie ahead."

Financial Results

Revenue in the fourth quarter of 2012 was $16.3 million, an increase of 27% compared to the year ago period, and an increase of 3% compared to the prior quarter. Full year 2012 revenue was $61.7 million, also a 27% increase compared to 2011. The Christian Networks segment was the primary driver of that growth.

Contribution2 in the fourth quarter of 2012 was $3.7 million, a decrease of 29% compared to the year ago period, and a decrease of 5% compared to the prior quarter. Full year 2012 contribution was $16.1 million, a 29% decrease compared to 2011. Our increased marketing investment in the Christian Networks segment was responsible for the declines in contribution.

Total cost and expenses in the fourth quarter of 2012 were $18.9 million, an increase of 40% compared to the year ago period, and an increase of 2% compared to the prior quarter. Full year 2012 total cost and expenses were $70.9 million, a 43% increase compared to 2011. Our increased marketing investment in the Christian Networks segment drove the majority of growth in total cost and expenses.

Net loss in the fourth quarter of 2012 was $10.5 million, or $0.51 per share, compared to a net loss of $1.1 million, or $0.05 per share, in the year ago period, and a net loss of $1.7 million, or $0.08 per share, in the prior quarter. Full year 2012 net loss was $15.0 million, or $0.72 per share, compared to a net loss of $1.6 million, or $0.08 per share, in 2011. In the fourth quarter of 2012, the Company recorded an $8.9 million valuation allowance against its deferred tax assets in accordance with guidance described under ASC-740.

Adjusted EBITDA3 in the fourth quarter of 2012 was a loss of $2.0 million, compared to a profit of $1.0 million in the year ago period and a loss of $2.0 million in the prior quarter. Full year 2012 Adjusted EBITDA was a loss of $6.7 million, compared to a profit of $2.6 million in 2011.

Total average paying subscribers in the fourth quarter of 2012 were 279,260, an increase of 31% compared to the year ago period and an increase of 5% compared to the prior quarter. Full year 2012 average paying subscribers were 259,244, a 32% increase compared to 2011. 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, 2012, the Company had cash and cash equivalents of $10.5 million, a decrease of 31% from $15.1 million at December 31, 2011. As of December 31, 2012, the Company had no outstanding debt.

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, Believe.com, ChristianCards.net, ChristianDating.com, DailyBibleVerse.com, and Faith.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.
QUARTERLY SEGMENT RESULTS FROM OPERATIONS
(in thousands except subscriber information)

		Q4 2011			Q1 2012			Q2 2012			Q3 2012			Q4 2012			Q4 '12 vs. Q4 '11

Net Revenue
Jewish Networks		$	6,700		$	6,580		$	6,452		$	6,385		$	6,617		-1.2	%
Christian Networks			4,952			6,853			7,505			8,495			8,721		76.1	%
Other Networks			1,104			1,031			995			903			836		-24.3	%
Offline & Other Businesses			105			91			94			88			97		-7.6	%
	Total Net Revenue	$	12,861		$	14,555		$	15,046		$	15,871		$	16,271		26.5	%

Direct Marketing Expenses
Jewish Networks		$	929		$	801		$	647		$	829		$	834		-10.2	%
Christian Networks			6,303			9,795			9,205			10,920			11,480		82.1	%
Other Networks			354			312			251			213			201		-43.2	%
Offline & Other Businesses			49			30			37			29			69		40.8	%
	Total Direct Mktg. Expenses	$	7,635		$	10,938		$	10,140		$	11,991		$	12,584		64.8	%

Contribution
Jewish Networks		$	5,771		$	5,779		$	5,805		$	5,556		$	5,783		0.2	%
Christian Networks			(1,351	)		(2,942	)		(1,700	)		(2,425	)		(2,759	)	-104.2	%
Other Networks			750			719			744			690			635		-15.3	%
Offline & Other Businesses			56			61			57			59			28		-50.0	%
	Total Contribution	$	5,226		$	3,617		$	4,906		$	3,880		$	3,687		-29.4	%

Average Paying Subscribers
Jewish Networks			87,101			86,433			84,348			84,650			85,736		-1.6	%
Christian Networks			93,357			124,158			137,768			154,747			168,394		80.4	%
Other Networks			31,940			30,115			28,818			26,678			25,130		-21.3	%
	Total Avg. Paying Subscribers5		212,398			240,706			250,934			266,075			279,260		31.5	%

ARPU
Jewish Networks		$	25.12		$	24.99		$	24.77		$	24.61		$	24.93		-0.8	%
Christian Networks			16.44			17.35			17.13			17.26			16.43		-0.1	%
Other Networks			10.74			10.77			10.36			10.61			10.36		-3.6	%
	Total ARPU6	$	19.14		$	19.27		$	18.92		$	18.93		$	18.49		-3.4	%


SPARK NETWORKS, INC.
ANNUAL SEGMENT RESULTS FROM OPERATIONS
(in thousands except subscriber information)

		12 Mos. 2011			12 Mos. 2012			2012 v. 2011

Net Revenue
Jewish Networks		$	27,054		$	26,034		-3.8	%
Christian Networks			15,742			31,574		100.6	%
Other Networks			4,925			3,765		-23.6	%
Offline & Other Businesses			772			370		-52.1	%
	Total Net Revenue	$	48,493		$	61,743		27.3	%

Direct Marketing Expenses
Jewish Networks		$	3,389		$	3,111		-8.2	%
Christian Networks			19,356			41,400		113.9	%
Other Networks			2,467			977		-60.4	%
Offline & Other Businesses			512			165		-67.8	%
	Total Direct Mktg. Expenses	$	25,724		$	45,653		77.5	%

Contribution
Jewish Networks		$	23,665		$	22,923		-3.1	%
Christian Networks			(3,614	)		(9,826	)	-171.9	%
Other Networks			2,458			2,788		13.4	%
Offline & Other Businesses			260			205		-21.2	%
	Total Contribution	$	22,769		$	16,090		-29.3	%

Average Paying Subscribers
Jewish Networks			89,429			85,292		-4.6	%
Christian Networks			71,311			146,267		105.1	%
Other Networks			35,595			27,685		-22.2	%
	Total Avg. Paying Subscribers		196,335			259,244		32.0	%

ARPU
Jewish Networks		$	24.72		$	24.83		0.4	%
Christian Networks			17.38			17.01		-2.1	%
Other Networks			10.96			10.53		-3.9	%
	Total ARPU	$	19.89		$	19.01		-4.4	%

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 21, 2013.

Replay
Toll-Free (United States): 1-877-870-5176
International: 1-858-384-5517
Passcode: 409224

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; 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 "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, 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.

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

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

(Consolidated financial statements to follow)


SPARK NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

				December 31,			December 31,
				2011			2012
Assets
Current assets:
	Cash and cash equivalents			$	15,106		$	10,458
	Restricted cash				958			1,232
	Accounts receivable				1,146			1,510
	Deferred tax asset - current				44			8
	Prepaid expenses and other				1,164			861
		Total current assets			18,418			14,069
Property and equipment, net					2,839			3,133
Goodwill					8,683			8,861
Intangible assets, net					1,900			2,143
Deferred tax asset - non-current					5,641			5
Deposits and other assets					455			153
		Total assets		$	37,936		$	28,364

Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable			$	952		$	1,093
	Accrued liabilities				4,046			5,339
	Deferred revenue				5,723			8,128
	Deferred tax liability - current				203			257
		Total current liabilities			10,924			14,817
Deferred tax liability					1,219			1,413
Other liabilities non-current					1,141			588
		Total liabilities			13,284			16,818
Commitments and contingencies
Stockholders' equity:
Authorized capital stock consists of 100,000,000 shares of Common Stock, $0.001 par value; issued and outstanding: 20,945,364 shares at December 31, 2012 and 20,594,670 shares at December 31, 2011:					21			21
		Additional paid-in-capital			53,014			54,857
		Accumulated other comprehensive income			672			712
		Accumulated deficit			(29,055	)		(44,044	)
		Total stockholders' equity			24,652			11,546
			Total liabilities and stockholders' equity	$	37,936		$	28,364


SPARK NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)

		Three Months Ended December 31,						Years Ended December 31,
		2011			2012			2010			2011			2012

Revenue		$	12,861		$	16,271		$	40,851		$	48,493		$	61,743

Cost and expenses:
	Cost of revenue (exclusive of depreciation shown separately below)		8,420			13,491			13,749			28,955			49,216
	Sales and marketing		1,062			1,015			3,496			3,722			3,991
	Customer service		539			647			1,601			1,980			2,534
	Technical operations		281			296			1,232			1,367			1,363
	Development		643			797			3,092			2,710			3,346
	General and administrative		1,071			2,237			9,782			8,068			8,787
	Depreciation		343			431			962			1,320			1,673
	Amortization of intangible assets		89			-			421			370			13
	Impairment of long-lived assets and other assets		1,100			-			308			1,145			-
Total cost and expenses			13,548			18,914			34,643			49,637			70,923

Operating (loss) income			(687	)		(2,643	)		6,208			(1,144	)		(9,180	)
Interest (income) expense and other, net			144			(188	)		(54	)		162			(238	)
(Loss) income before income taxes			(831	)		(2,455	)		6,262			(1,306	)		(8,942	)
Provision (benefit) for income taxes			277			8,083			2,558			305			6,047
Net (loss) income		$	(1,108	)	$	(10,538	)	$	3,704		$	(1,611	)	$	(14,989	)

Net (loss) income per share--basic and diluted		$	(0.05	)	$	(0.51	)	$	0.18		$	(0.08	)	$	(0.72	)
Weighted average shares outstanding - basic			20,595			20,816			20,586			20,591			20,781
Weighted average shares outstanding -diluted			20,595			20,816			20,590			20,591			20,781


Stock-based compensation:
(in thousands)

	Three Months Ended December 31,				Year Ended December 31,
	2011		2012		2010		2011		2012
Cost of revenue	$	2	$	2	$	11	$	8	$	8
Sales and marketing		15		21		233		80		76
Customer service		-		1		1		-		2
Technical operations		31		29		167		119		118
Development		10		11		54		42		42
General and administrative		125		150		1,044		657		567


Reconciliation of Net Loss (Income) to Adjusted EBITDA: (in thousands)	Three Months Ended December 31,						Years Ended December 31,
	2011			2012			2010			2011			2012

Net (loss) income	$	(1,108	)	$	(10,538	)	$	3,704		$	(1,611	)	$	(14,989	)
Interest		13			16			207			102			59
Taxes		277			8,083			2,558			305			6,047
Depreciation		343			431			962			1,320			1,673
Amortization		89			-			421			370			13
EBITDA		(386	)		(2,008	)		7,852			486			(7,197	)
Stock-based compensation		183			214			1,510			906			813
Impairment of long-lived assets and other assets		1,100			-			308			1,145			-
Non-cash currency translation adjustments		132			(201	)		(269	)		337			(124	)
Non-repetitive property possession		-			-			-			(247	)		(151	)
Adjusted EBITDA	$	1,029		$	(1,995	)	$	9,401		$	2,627		$	(6,659	)

For More Information
Investors:
Addo Communications
Laura Foster, Kimberly Esterkin
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