Spark Networks(R) Reports Fourth Quarter Financial Results
- Total contribution1 of
$9.1 million , highest since Q1 2009 - Adjusted EBITDA2 of
$4.1 million , highest since Q3 2008 - Net income of
$3.9 million , highest since Q4 2007
Financial Highlights
Q4 2013 | Q3 2014 | Q4 2014 | |||||
Revenue | $17.2 Million | $15.0 Million | $14.3 Million | ||||
Contribution | $4.3 Million | $9.0 Million | $9.1 Million | ||||
Adjusted EBITDA | $(2.8) Million | $2.5 million | $4.1 million | ||||
Net (Loss) Income | $(3.5) Million | $(1.0) Million | $3.9 Million | ||||
Cash Balance | $14.7 Million | $9.3 Million | $11.7 Million | ||||
Avg. Paying Subs3 | 292,760 | 257,679 | 227,874 | ||||
ARPU | $18.54 | $18.33 | $19.47 | ||||
Financial Results
Revenue in the fourth quarter of 2014 was
Direct marketing expenses in the fourth quarter of 2014 were
Contribution in the fourth quarter of 2014 was
Excluding direct marketing expenses, cost and expenses in the fourth quarter of 2014 were
Net income in the fourth quarter of 2014 was
Adjusted EBITDA in the fourth quarter of 2014 was
Total average paying subscribers in the fourth quarter of 2014 were 227,874, a decrease of 22% compared to the year ago period, and a decrease of 12% from the prior quarter. Christian Networks average paying subscribers were 141,188 in the fourth quarter of 2014, a 27% decrease compared to the year-ago period and a 15% decrease compared to the prior quarter. Jewish Networks average paying subscribers were 73,429, a 12% decrease compared to the year-ago period and a 4% decrease compared to the prior quarter. Other Networks average paying subscribers were 13,257, a 23% decrease compared to the year-ago period and a 7% decrease compared to the prior quarter. For the full year 2014 average paying subscribers were 261,734, a 12% decrease compared to 2013.
Balance Sheet, Cash, Debt
As of
Commentary and Outlook
Chief Executive Officer
"We plan to accomplish this by first investing in our product and technology to become more nimble and provide our members with valuable new features and services. Secondly, we will continue optimizing our marketing, exploring alternative acquisition channels that are unique to our communities, and incorporating deeper data analysis to ensure that we find and retain our members at more profitable levels. Finally, we will be evolving our member service model so that we can better ensure that our ChristianMingle and JDate members succeed in finding their true, long-term partners.
"It is important to note that given the long-tail nature of our business, both a portion of our 2014 second half profitability, and much of the decline in revenue and membership that we have seen and will continue to see for a little while longer, is the result of the historical customer cohorts that were acquired via aggressive and unprofitable marketing strategies. As this wave flattens, we anticipate we will experience our trough subscriber count in the first quarter 2015, in line with previously released guidance. We anticipate trough revenue will occur in the second quarter 2015, with sequential quarterly improvement thereafter."
SPARK NETWORKS, INC. | |||||||||||||||||||||
SEGMENT4 RESULTS FROM OPERATIONS | |||||||||||||||||||||
(in thousands except subscriber and ARPU information) | |||||||||||||||||||||
Q4 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | Q4 '14 v. Q4 '13 |
||||||||||||||||
Net Revenue | |||||||||||||||||||||
Jewish Networks | $ | 6,444 | $ | 6,124 | $ | 5,895 | $ | 5,724 | $ | 5,502 | -14.6 | % | |||||||||
Christian Networks | 9,989 | 9,789 | 9,199 | 8,672 | 8,215 | -17.8 | % | ||||||||||||||
Other Networks | 667 | 610 | 570 | 533 | 504 | -24.4 | % | ||||||||||||||
Offline & Other Businesses | 104 | 93 | 93 | 79 | 43 | -58.7 | % | ||||||||||||||
Total Net Revenue | $ | 17,204 | $ | 16,616 | $ | 15,757 | $ | 15,008 | $ | 14,264 | -17.1 | % | |||||||||
Direct Mktg. Exp. | |||||||||||||||||||||
Jewish Networks | $ | 991 | $ | 1,115 | $ | 693 | $ | 628 | $ | 684 | -31.0 | % | |||||||||
Christian Networks | 11,769 | 10,104 | 7,073 | 5,293 | 4,325 | -63.3 | % | ||||||||||||||
Other Networks | 121 | 142 | 115 | 107 | 116 | -4.1 | % | ||||||||||||||
Offline & Other Businesses | 36 | 25 | 28 | 19 | 4 | -88.9 | % | ||||||||||||||
Total Direct Mktg. Exp. | $ | 12,917 | $ | 11,386 | $ | 7,909 | $ | 6,047 | $ | 5,129 | -60.3 | % | |||||||||
Contribution | |||||||||||||||||||||
Jewish Networks | $ | 5,453 | $ | 5,009 | $ | 5,202 | $ | 5,096 | $ | 4,818 | -11.6 | % | |||||||||
Christian Networks | (1,780 | ) | (315 | ) | 2,126 | 3,379 | 3,890 | NM | |||||||||||||
Other Networks | 546 | 468 | 455 | 426 | 388 | -28.9 | % | ||||||||||||||
Offline & Other Businesses | 68 | 68 | 65 | 60 | 39 | -42.6 | % | ||||||||||||||
Total Contribution | $ | 4,287 | $ | 5,230 | $ | 7,848 | $ | 8,961 | $ | 9,135 | 113.1 | % | |||||||||
Average Paying Subs. | |||||||||||||||||||||
Jewish Networks | 83,175 | 80,395 | 78,856 | 76,481 | 73,429 | -11.7 | % | ||||||||||||||
Christian Networks | 192,349 | 189,251 | 181,062 | 166,908 | 141,188 | -26.6 | % | ||||||||||||||
Other Networks | 17,236 | 16,396 | 15,427 | 14,290 | 13,257 | -23.1 | % | ||||||||||||||
Total Avg. Paying Subs.5 | 292,760 | 286,042 | 275,345 | 257,679 | 227,874 | -22.2 | % | ||||||||||||||
ARPU | |||||||||||||||||||||
Jewish Networks | $ | 25.34 | $ | 24.87 | $ | 24.43 | $ | 24.53 | $ | 24.44 | -3.6 | % | |||||||||
Christian Networks | 16.14 | 16.19 | 15.64 | 16.01 | 17.57 | 8.8 | % | ||||||||||||||
Other Networks | 12.44 | 12.08 | 11.97 | 12.11 | 12.27 | -1.3 | % | ||||||||||||||
Total ARPU6 | $ | 18.54 | $ | 18.40 | $ | 17.95 | $ | 18.33 | $ | 19.47 | 5.0 | % | |||||||||
Distribution of New Subscription Purchases7 | ||||||||||||||||
Q4 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | ||||||||||||
Jewish Networks | ||||||||||||||||
1 month plans | 39.9 | % | 39.5 | % | 40.4 | % | 38.5 | % | 41.4 | % | ||||||
3 month plans | 26.2 | % | 26.7 | % | 23.6 | % | 24.9 | % | 24.3 | % | ||||||
6 month plans | 33.9 | % | 33.8 | % | 36.0 | % | 36.6 | % | 34.3 | % | ||||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||
Christian Networks | ||||||||||||||||
1 month plans | 43.5 | % | 44.4 | % | 44.8 | % | 50.6 | % | 53.7 | % | ||||||
3 month plans | 25.9 | % | 21.7 | % | 18.6 | % | 20.8 | % | 20.7 | % | ||||||
6 month plans | 30.6 | % | 33.9 | % | 36.6 | % | 28.6 | % | 25.6 | % | ||||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||
Other Networks | ||||||||||||||||
1 month plans | 57.5 | % | 57.9 | % | 55.4 | % | 58.6 | % | 59.2 | % | ||||||
3 month plans | 12.8 | % | 13.2 | % | 12.7 | % | 12.2 | % | 11.0 | % | ||||||
6 month plans | 29.7 | % | 28.9 | % | 31.9 | % | 29.2 | % | 29.8 | % | ||||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||
Composition of Average Paying Subscriber Base8 | |||||||||||||||
Q4 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | |||||||||||
Jewish Networks | |||||||||||||||
First Time Subscribers | 24.2 | % | 23.1 | % | 22.4 | % | 21.9 | % | 22.4 | % | |||||
Winback Subscribers | 29.9 | % | 29.3 | % | 29.8 | % | 29.5 | % | 29.2 | % | |||||
Renewal Subscribers | 45.9 | % | 47.6 | % | 47.8 | % | 48.6 | % | 48.4 | % | |||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||
Christian Networks | |||||||||||||||
First Time Subscribers | 52.0 | % | 49.1 | % | 45.8 | % | 42.7 | % | 38.0 | % | |||||
Winback Subscribers | 18.9 | % | 19.3 | % | 19.9 | % | 20.5 | % | 19.7 | % | |||||
Renewal Subscribers | 29.1 | % | 31.6 | % | 34.3 | % | 36.8 | % | 42.3 | % | |||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||
Other Networks | |||||||||||||||
First Time Subscribers | 31.8 | % | 32.1 | % | 32.2 | % | 31.2 | % | 30.6 | % | |||||
Winback Subscribers | 24.2 | % | 23.2 | % | 23.1 | % | 22.6 | % | 21.8 | % | |||||
Renewal Subscribers | 44.0 | % | 44.7 | % | 44.7 | % | 46.2 | % | 47.6 | % | |||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||
Investor Conference Call
The company will discuss its financial results during a live teleconference today at
Toll-Free (
International: 1-201-493-6725
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
Replay
Toll-Free (
International: 1-858-384-5517
Passcode: 13601876
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
About
The
1 "Contribution" is defined as revenue, net of credits and credit card chargebacks, less direct marketing.
2 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 non-recurring proxy contest costs and severance expense.
3 "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.
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 per month. Total ARPU excludes results from the company's HurryDate business due to its relative size.
7 One month plans may also include a small amount of two month plans. Three month plans may include a small amount of four month plans. Six month plans may include a small amount of twelve month plans.
8 Represents the type of subscriber comprising the average paying subscribers in that period. First Time Subscribers are defined as those subscribers that have never purchased a subscription from the company for that reporting segment. Winback Subscribers are defined as those individuals who have purchased a subscription from the company for that reporting segment, allowed their subscription to lapse, and subsequently purchased a subscription from the company for that reporting segment. Renewal Subscribers are defined as those subscribers that have auto-renewed a subscription from the company for that reporting segment.
SPARK NETWORKS, INC. | ||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||
(in thousands, except share data) | ||||||||||
December 31, | December 31, | |||||||||
2013 | 2014 | |||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 14,723 | $ | 11,696 | ||||||
Restricted cash | 1,296 | 1,056 | ||||||||
Accounts receivable | 1,569 | 1,308 | ||||||||
Deferred tax asset - current | 10 | 11 | ||||||||
Prepaid expenses and other | 1,787 | 1,516 | ||||||||
Total current assets | 19,385 | 15,587 | ||||||||
Property and equipment, net | 3,901 | 4,072 | ||||||||
Goodwill | 9,305 | 8,575 | ||||||||
Intangible assets, net | 2,269 | 2,469 | ||||||||
Deferred tax asset - non-current | 186 | 68 | ||||||||
Deposits and other assets | 208 | 234 | ||||||||
Total assets | $ | 35,254 | $ | 31,005 | ||||||
Liabilities and Stockholders' Equity | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 1,516 | $ | 1,300 | ||||||
Accrued liabilities | 5,761 | 3,948 | ||||||||
Deferred revenue | 8,830 | 7,092 | ||||||||
Deferred tax liability - current portion | 526 | 496 | ||||||||
Total current liabilities | 16,633 | 12,836 | ||||||||
Deferred tax liability | 1,781 | 1,607 | ||||||||
Other liabilities | 1,717 | 807 | ||||||||
Total liabilities | 20,131 | 15,250 | ||||||||
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 24,556,182 shares at December 31, 2013 and 2014, respectively: | 24 | 25 | ||||||||
Additional paid-in-capital | 70,747 | 72,522 | ||||||||
Accumulated other comprehensive income | 776 | 759 | ||||||||
Accumulated deficit | (56,424 | ) | (57,551 | ) | ||||||
Total stockholders' equity | 15,123 | 15,755 | ||||||||
Total liabilities and stockholders' equity | $ | 35,254 | $ | 31,005 | ||||||
SPARK NETWORKS, INC. | |||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||
(unaudited, in thousands, except per share data) | |||||||||||||||||||||
Three Months Ended December 31, |
Years Ended December 31, | ||||||||||||||||||||
2013 | 2014 | 2012 | 2013 | 2014 | |||||||||||||||||
Revenue | $ | 17,204 | $ | 14,264 | $ | 61,743 | $ | 69,409 | $ | 61,645 | |||||||||||
Cost and expenses: | |||||||||||||||||||||
Cost of revenue (exclusive of depreciation shown separately below) | 13,911 | 6,087 | 49,216 | 55,958 | 34,321 | ||||||||||||||||
Sales and marketing | 1,629 | 828 | 3,991 | 5,601 | 5,127 | ||||||||||||||||
Customer service | 765 | 749 | 2,534 | 2,902 | 3,038 | ||||||||||||||||
Technical operations | 280 | 213 | 1,363 | 1,167 | 1,130 | ||||||||||||||||
Development | 799 | 801 | 3,346 | 3,129 | 3,446 | ||||||||||||||||
General and administrative | 2,790 | 1,828 | 8,787 | 10,494 | 13,300 | ||||||||||||||||
Depreciation | 533 | 495 | 1,673 | 1,987 | 2,053 | ||||||||||||||||
Amortization of intangible assets | 10 | 10 | 13 | 20 | 40 | ||||||||||||||||
Impairment of goodwill, long-lived assets and other assets | - | 25 | - | 265 | 128 | ||||||||||||||||
Total cost and expenses | 20,717 | 11,036 | 70,923 | 81,523 | 62,583 | ||||||||||||||||
Operating (loss) income | (3,513 | ) | 3,228 | (9,180 | ) | (12,114 | ) | (938 | ) | ||||||||||||
Interest (income) expense and other, net | (56 | ) | 241 | (238 | ) | (229 | ) | 564 | |||||||||||||
(Loss) income before income taxes | (3,457 | ) | 2,987 | (8,942 | ) | (11,885 | ) | (1,502 | ) | ||||||||||||
Provision for income taxes | 92 | (882 | ) | 6,047 | 495 | (375 | ) | ||||||||||||||
Net (loss) income | $ | (3,549 | ) | $ | 3,869 | $ | (14,989 | ) | $ | (12,380 | ) | $ | (1,127 | ) | |||||||
Net (loss) income per share-- basic and diluted | $ | (0.15 | ) | $ | 0.16 | $ | (0.72 | ) | $ | (0.54 | ) | $ | ($0.05 | ) | |||||||
Weighted average shares outstanding - basic | 23,938 | 24,425 | 20,781 | 22,795 | 24,064 | ||||||||||||||||
Weighted average shares outstanding - diluted | 23,938 | 24,634 | 20,781 | 22,795 | 24,064 | ||||||||||||||||
Stock-based compensation: | |||||||||||||||
(in thousands) | |||||||||||||||
Three Months Ended December 31, |
Year Ended December 31, | ||||||||||||||
2013 | 2014 | 2012 | 2013 | 2014 | |||||||||||
Cost of revenue | $ | - | $ | - | $ | 8 | $ | - | $ | 3 | |||||
Sales and marketing | 38 | 11 | 76 | 145 | 110 | ||||||||||
Customer service | - | - | 2 | - | - | ||||||||||
Technical operations | - | - | 118 | 4 | - | ||||||||||
Development | - | - | 42 | 10 | - | ||||||||||
General and administrative | 153 | 322 | 567 | 608 | 833 | ||||||||||
Reconciliation of Net (Loss) Income to Adjusted EBITDA: (in thousands) |
Three Months Ended December 31, |
Years Ended December 31, | ||||||||||||||||||
2013 | 2014 | 2012 | 2013 | 2014 | ||||||||||||||||
Net (loss) income | $ | (3,549 | ) | $ | 3,869 | $ | (14,989 | ) | $ | (12,380 | ) | $ | (1,127 | ) | ||||||
Interest expense | 18 | 12 | 59 | 71 | 48 | |||||||||||||||
Tax provision (benefit) | 92 | (882 | ) | 6,047 | 495 | (375 | ) | |||||||||||||
Depreciation | 533 | 495 | 1,673 | 1,987 | 2,053 | |||||||||||||||
Amortization | 10 | 10 | 13 | 20 | 40 | |||||||||||||||
EBITDA | (2,896 | ) | 3,504 | (7,197 | ) | (9,807 | ) | 639 | ||||||||||||
Stock-based compensation | 191 | 333 | 813 | 767 | 946 | |||||||||||||||
Impairment of long-lived assets and other assets | - | 25 | - | 265 | 128 | |||||||||||||||
Non-cash currency translation adjustments | (82 | ) | 234 | (124 | ) | (297 | ) | 518 | ||||||||||||
Non-recurring proxy and severance | - | - | - | - | 3,308 | |||||||||||||||
Non-repetitive property possession | - | - | (151 | ) | - | - | ||||||||||||||
Adjusted EBITDA | $ | (2,787 | ) | $ | 4,096 | $ | (6,659 | ) | $ | (9,072 | ) | $ | 5,539 | |||||||
Source: