Press Releases

Spark Networks(R) Reports Third Quarter Financial Results

November 13, 2012

Nov 13, 2012 (Marketwire via COMTEX) --Spark Networks, Inc. (NYSE MKT: LOV)

 

  • Total revenue growth of 25%
  • Christian Networks revenue growth of 84%
  • Average paying subscribers1 increase 29% to 266,000

 

Spark Networks, Inc. (NYSE MKT: LOV), a leading provider of online personals services, today reported financial results for the third quarter ended September 30, 2012.

Q3 2012 Highlights

    Q3 2011     Q3 2012  
Revenue   $ 12.7 Million     $ 15.9 Million  
Contribution Margin     49 %     24 %
Net Loss   $ (0.2) Million     $ (1.7) Million  
Net Loss Per Share   $ (0.01 )   $ (0.08 )
                 

Management Commentary

"I am pleased to report that the positive momentum from the first half of the year continued into the third quarter, as we delivered our eighth consecutive quarter of revenue and subscriber growth," said Greg Liberman, Spark Networks' President and Chief Executive Officer. "Revenue increased 25% year-over-year, to $15.9 million, hitting its highest level in nineteen quarters and average paying subscribers grew 29%, to more than 266,000, setting another all-time high. Once again, our Christian Networks segment powered that growth, with an 84% increase in revenue, driven by an 89% jump in average paying subscribers1." 

"In addition to the meaningful growth posted by our Christian Networks segment, we also saw a solid quarter in our Jewish Networks segment, where average paying subscribers grew for the first time since the first quarter of 2011. Throughout the remainder of the year, we will continue to focus on fortifying our iconic position in the Jewish community while we further strengthen and grow our leadership position in the Christian space. And, as we execute against our strategic growth plan, we will share those results with the investment community."

Q3 2012 Financial Results
Revenue was $15.9 million, an increase of 25% compared to $12.7 million in the third quarter of 2011, and an increase of 5% compared to $15.0 million in the prior quarter. Growth from the Christian Networks segment drove the year-over-year and sequential gains.

Contribution2 was $3.9 million, a decrease of 37% compared to $6.2 million in the third quarter of 2011, and a decrease of 21% compared to $4.9 million in the prior quarter. A 114% year-over-year and 19% quarter-over-quarter increase in our Christian Networks direct marketing investment was responsible for the decline in contribution.

Total cost and expenses were $18.5 million, a 45% increase compared to $12.7 million in the third quarter of 2011, and a 14% increase compared to $16.2 million in the prior quarter. Higher Christian Networks direct marketing investments drove the majority of growth in total cost and expenses. 

Net loss was $1.7 million, or $0.08 per share, compared to a net loss of $238,000 or $0.01 per share, in the third quarter of 2011 and a net loss of $1.0 million or $0.05 per share in the prior quarter. 

Adjusted EBITDA3 was a loss of $2.0 million, compared to a profit of $639,000 in the third quarter of 2011 and a loss of $592,000 in the prior quarter. 

Average paying subscribers for the Jewish Networks, Christian Networks and Other Networks segments were 266,075, an increase of 29% compared to 205,650 in the third quarter of 2011 and an increase of 6% compared to 250,934 in 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, 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.  
SEGMENT RESULTS FROM OPERATIONS  
(in thousands except subscriber and ARPU information)  
   
    Q3 2011     Q4 2011     Q1 2012     Q2 2012     Q3 2012     Q3 '12 v.
Q3 '11
 
                                     
Net Revenue                                              
Jewish Networks   $ 6,724     $ 6,700     $ 6,580     $ 6,452     $ 6,385     -5.0 %
Christian Networks     4,624       4,952       6,853       7,505       8,495     83.7 %
Other Networks     1,218       1,104       1,031       995       903     -25.9 %
Offline & Other Businesses     111       105       91       94       88     -20.7 %
  Total Net Revenue   $ 12,677     $ 12,861     $ 14,555     $ 15,046     $ 15,871     25.2 %
                                               
Direct Marketing Expenses                                              
Jewish Networks   $ 936     $ 929     $ 801     $ 647     $ 829     -11.4 %
Christian Networks     5,112       6,303       9,795       9,205       10,920     113.6 %
Other Networks     432       354       312       251       213     -50.7 %
Offline & Other Businesses     32       49       30       37       29     -9.4 %
  Tot. Direct Mktg. Expenses   $ 6,512     $ 7,635     $ 10,938     $ 10,140     $ 11,991     84.1 %
                                               
Contribution                                              
Jewish Networks   $ 5,788     $ 5,771     $ 5,779     $ 5,805     $ 5,556     -4.0 %
Christian Networks     (488 )     (1,351 )     (2,942 )     (1,700 )     (2,425 )   -396.9 %
Other Networks     786       750       719       744       690     -12.2 %
Offline & Other Businesses     79       56       61       57       59     -25.3 %
  Total Contribution   $ 6,165     $ 5,226     $ 3,617     $ 4,906     $ 3,880     -37.1 %
                                               
Average Paying Subscribers                                              
Jewish Networks     88,976       87,101       86,433       84,348       84,650     -4.9 %
Christian Networks     81,987       93,357       124,158       137,768       154,747     88.7 %
Other Networks     34,687       31,940       30,115       28,818       26,678     -23.1 %
Total Avg. Paying Subscribers5     205,650       212,398       240,706       250,934       266,075     29.4 %
                                               
ARPU                                              
Jewish Networks   $ 24.71     $ 25.12     $ 24.99     $ 24.77     $ 24.61     -0.4 %
Christian Networks     17.64       16.44       17.35       17.13       17.26     -2.1 %
Other Networks     11.07       10.74       10.77       10.36       10.61     -4.2 %
  Total ARPU6   $ 19.59     $ 19.14     $ 19.27     $ 18.92     $ 18.93     -3.4 %
                                               

Balance Sheet, Cash, Debt
As of September 30, 2012, the Company had cash and cash equivalents of $11.0 million, a decrease of 27% from $15.1 million at December 31, 2011. As of September 30, 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): 1-877-407-0789
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 November 27, 2012.

Replay
Toll-Free (United States): 1-877-870-5176
International: 1-858-384-5517
Passcode: 401386

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 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 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,     September 30,  
    2011     2012  
Assets                
                 
Current assets:                
  Cash and cash equivalents   $ 15,106     $ 10,974  
  Restricted cash     958       1,175  
  Accounts receivable     1,146       1,418  
  Deferred tax asset - current     44       45  
  Prepaid expenses and other     1,164       1,093  
    Total current assets     18,418       14,705  
Property and equipment, net     2,839       3,138  
Goodwill     8,683       8,576  
Intangible assets, net     1,900       2,142  
Deferred tax asset - non-current     5,641       6,950  
Deposits and other assets     455       155  
    Total assets   $ 37,936     $ 35,666  
                 
Liabilities and Stockholders' Equity                
Current liabilities:                
  Accounts payable   $ 952     $ 549  
  Accrued liabilities     4,046       3,375  
  Deferred revenue     5,723       7,773  
  Deferred tax liability - current     203       203  
    Total current liabilities     10,924       11,900  
Deferred tax liability     1,219       1,312  
Other liabilities non-current     1,141       1,141  
    Total liabilities     13,284       14,353  
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 20,769,471 shares at September 30, 2012:     21       21  
  Additional paid-in-capital     53,014       54,129  
  Accumulated other comprehensive income     672       669  
  Accumulated deficit     (29,055 )     (33,506 )
  Total stockholders' equity     24,652       21,313  
    Total liabilities and stockholders' equity   $ 37,936     $ 35,666  
                 
                 
   
SPARK NETWORKS, INC.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(unaudited, in thousands, except per share data)  
   
    Three Months Ended September 30,     Nine Months Ended 
September 30,
 
    2011     2012     2011     2012  
                         
Revenue   $ 12,677     $ 15,871     $ 35,632     $ 45,472  
                                 
  Cost and expenses:                                
  Cost of revenue (exclusive of depreciation shown separately below)     7,373       12,901       20,535       35,725  
  Sales and marketing     923       1,020       2,660       2,976  
  Customer service     531       652       1,441       1,887  
  Technical operations     336       362       1,086       1,067  
  Development     643       859       2,067       2,549  
  General and administrative     2,435       2,260       6,997       6,550  
  Depreciation     341       426       977       1,242  
  Amortization of intangible assets     90       -       281       13  
  Impairment of long-lived assets and other assets     45       -       45       -  
Total cost and expenses     12,717       18,480       36,089       52,009  
                                 
Operating loss     (40 )     (2,609 )     (457 )     (6,537 )
Interest expense (income) and other, net     120       (36 )     18       (50 )
Loss before income taxes     (160 )     (2,573 )     (475 )     (6,487 )
Provision (benefit) for income taxes     78       (836 )     28       (2,036 )
Net loss   $ (238 )   $ (1,737 )   $ (503 )   $ (4,451 )
                                 
Net loss per share - basic and diluted   $ (0.01 )   $ (0.08 )   $ (0.02 )   $ (0.22 )
Weighted average shares outstanding - basic and diluted     20,595       20,699       20,592       20,683  
                                 
         
Stock-based compensation:        
(in thousands)        
    Three Months Ended   Nine Months Ended
  September 30,  June 30, 
    2011   2012   2011   2012
Cost of revenue   $ 2   $ 2   $ 6   $ 6
Sales and marketing     17     17     65     55
Customer service     -     -     -     1
Technical operations     30     29     88     89
Development     10     10     32     31
General and administrative     124     138     532     417
                         
                         
Reconciliation of Net Loss to Adjusted EBITDA:
(in thousands)
           
    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2011     2012     2011     2012  
                         
Net loss   $ (238 )   $ (1,737 )   $ (503 )   $ (4,451 )
Interest     13       16       89       43  
Taxes     78       (836 )     28       (2,036 )
Depreciation     341       426       977       1,242  
Amortization     90       0       281       13  
EBITDA     284       (2,131 )     872       (5,189 )
Stock-based compensation     183       196       723       599  
Impairment of long-lived assets and other assets     45       0       45       0  
Non-cash currency translation adjustments     374       (42 )     205       77  
Non-repetitive property possession     (247 )     0       (247 )     (151 )
Adjusted EBITDA   $ 639     $ (1,977 )   $ 1,598     $ (4,664 )
For More Information
        Investors:
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        Laura Foster, Kimberly Esterkin
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