Spark Networks(R) Reports Fourth Quarter Financial Results

March 5, 2014

Spark Networks Reports Fourth Quarter Financial Results.pdf 286.9 KB

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.