Spark Networks(R) Reports Third Quarter Financial Results

November 13, 2013

Spark Networks Q3 2013 Earnings Release Final.pdf 172.6 KB

LOS ANGELES, CA -- (Marketwired) -- 11/13/13 -- Spark Networks, Inc. (NYSE MKT: LOV)

Total revenue grew for 11th consecutive quarter
Total contribution1 grew 22%
Christian Networks revenue grew for 12th consecutive quarter
Jewish Networks revenue grew for second consecutive quarter

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 third quarter ended September 30, 2013.

Q3 2013 Highlights


	Q3 2012			Q3 2013
Revenue	$	15.9 Million		$	17.4 Million
Contribution Margin2		24	%		27	%
Net Loss	$	(1.7) Million		$	(2.6) Million
Net Loss Per Share	$	(0.08	)	$	(0.11	)

Management Commentary

"I am pleased to announce another solid quarter of performance, with revenue increasing for the 11th consecutive quarter," said Greg Liberman, Spark Networks' Chief Executive Officer. "Revenue not only grew overall but, importantly, outpaced the growth of our marketing expense. As a result, despite an increase in marketing expense, company-wide contribution hit its highest level since the first half of 2012.

"Fueling our growth, once again, were the dual engines of our business, the Christian and Jewish Networks segments. In our Christian Networks segment, we posted a 28% increase in subscribers, a 19% increase in revenue and the best contribution performance since 2011. And, at the same time, our Jewish Networks segment continued to show its strength, as we posted another quarter of its customary, near-90% contribution margin and also its second consecutive quarter of revenue growth for the first time in more than five years."

Q3 2013 Financial Results

Revenue was $17.4 million, an increase of 9% compared to $15.9 million in the third quarter of 2012. The Christian Networks segment was the primary driver of that growth.

Contribution was $4.7 million, an increase of 22% compared to $3.9 million in the third quarter of 2012.

Total cost and expenses were $19.9 million, an increase of 7% compared to $18.5 million in the third quarter of 2012. The higher costs primarily reflect a $739,000 increase in Christian Networks direct marketing expenses, reflecting the Company's continued focus on meaningfully growing its subscriber base in this segment.

Net loss was $2.6 million, or $0.11 per share, compared to a net loss of $1.7 million, or $0.08 per share, in the third quarter of 2012.

Adjusted EBITDA3 was a loss of $1.8 million, compared to a loss of $2.0 million in the third quarter of 2012.

Average paying subscribers4 for the Jewish Networks, Christian Networks and Other Networks segments were 300,225, an increase of 13% compared to 266,075 in the third quarter of 2012.

Balance Sheet, Cash, Debt
As of September 30, 2013, the Company had cash and cash equivalents of $17.2 million, an increase of 65% from $10.5 million at December 31, 2012. As of September 30, 2013, the Company had no outstanding debt.


SPARK NETWORKS, INC.
SEGMENT5 RESULTS FROM OPERATIONS
(in thousands except subscriber and ARPU information)

		Q3 2012			Q4 2012			Q1 2013			Q2 2013			Q3 2013			Q3 '13 v. Q3 '12

Net Revenue

Jewish Networks		$	6,385		$	6,617		$	6,452		$	6,460		$	6,433		0.8	%
Christian Networks			8,495			8,721			9,908			10,260			10,088		18.8	%
Other Networks			903			836			815			775			715		-20.8	%
Offline & Other Businesses			88			97			88			86			125		42.0	%
	Total Net Revenue	$	15,871		$	16,271		$	17,263		$	17,581		$	17,361		9.4	%

Direct Mktg. Exp.
Jewish Networks		$	829		$	834		$	751		$	776		$	822		-0.8	%
Christian Networks			10,920			11,480			11,722			12,866			11,659		6.8	%
Other Networks			213			201			199			152			123		-42.3	%
Offline & Other Businesses			29			69			26			31			30		3.4	%
	Total Direct Mktg. Exp.	$	11,991		$	12,584		$	12,698		$	13,825		$	12,634		5.4	%

Contribution
Jewish Networks		$	5,556		$	5,783		$	5,701		$	5,684		$	5,611		1.0	%
Christian Networks			(2,425	)		(2,759	)		(1,814	)		(2,606	)		(1,571	)	35.2	%
Other Networks			690			635			616			623			592		-14.2	%
Offline & Other Businesses			59			28			62			55			95		61.0	%
	Total Contribution	$	3,880		$	3,687		$	4,565		$	3,756		$	4,727		21.8	%

Average Paying Subs.
Jewish Networks			84,650			85,736			85,200			84,487			83,732		-1.1	%
Christian Networks			154,747			168,394			186,896			196,598			197,420		27.6	%
Other Networks			26,678			25,130			23,435			21,183			19,073		-28.5	%
	Total Avg. Paying Subs.6		266,075			279,260			295,531			302,268			300,225		12.8	%

ARPU

Jewish Networks		$	24.61		$	24.93		$	24.86		$	25.15		$	25.28		2.7	%
Christian Networks			17.26			16.43			16.84			16.55			16.07		-6.9	%
Other Networks			10.61			10.36			10.84			11.49			12.08		13.8	%
	Total ARPU7	$	18.93		$	18.49		$	18.68		$	18.60		$	18.38		-2.9	%

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, 2013.

Replay
Toll-Free (United States): 1-877-870-5176
International: 1-858-384-5517
Passcode: 10000578

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 "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. 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.

4 "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.

5 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.

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

7 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.

(Consolidated financial statements to follow)


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

			December 31,			September 30,
			2012			2013
Assets							(unaudited)
Current assets:
	Cash and cash equivalents		$	10,458		$	17,243
	Restricted cash			1,232			1,320
	Accounts receivable			1,510			1,494
	Deferred tax asset, net - current			8			-
	Prepaid expenses and other			861			1,869
		Total current assets		14,069			21,926
Property and equipment, net				3,133			3,969
Goodwill				8,861			9,178
Intangible assets, net				2,143			2,275
Deferred tax asset, net - non-current				5			-
Other assets				153			207
		Total assets	$	28,364		$	37,555

Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable		$	1,093		$	1,343
	Accrued liabilities			5,339			5,173
	Deferred revenue			8,128			9,271
	Deferred tax liability - current			257			239
		Total current liabilities		14,817			16,026
Deferred tax liability - non-current				1,413			1,782
Other liabilities				588			1,649
		Total liabilities		16,818			19,457
Commitments and contingencies
Stockholders' equity:
Authorized capital stock consists of 100,000,000 shares of Common Stock, $0.001 par value; issued and outstanding: 23,881,741 shares at September 30, 2013 and 20,945,364 shares at December 31, 2012:				21			24
	Additional paid-in-capital			54,857			70,192
	Accumulated other comprehensive income			712			757
	Accumulated deficit			(44,044	)		(52,875	)
	Total stockholders' equity			11,546			18,098
		Total liabilities and stockholders' equity	$	28,364		$	37,555




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

		Three Months Ended September 30,						Nine Months Ended September 30,
		2012			2013			2012			2013

Revenue		$	15,871		$	17,361		$	45,472		$	52,205

Cost and expenses:
	Cost of revenue (exclusive of depreciation shown separately below)		12,901			13,620			35,725			42,046
	Sales and marketing		1,020			1,423			2,976			3,972
	Customer service		652			746			1,887			2,136
	Technical operations		362			288			1,067			887
	Development		859			746			2,549			2,331
	General and administrative		2,260			2,496			6,550			7,704
	Depreciation		426			529			1,242			1,454
	Amortization of intangible assets		-			10			13			10
	Impairment of long-lived assets		-			-			-			265
Total cost and expenses			18,480			19,858			52,009			60,805

Operating loss			(2,609	)		(2,497	)		(6,537	)		(8,600	)
Interest (income) expense and other, net			(36	)		(77	)		(50	)		(172	)
Loss before income taxes			(2,573	)		(2,420	)		(6,487	)		(8,428	)
(Benefit) provision for income taxes			(836	)		195			(2,036	)		403
Net loss		$	(1,737	)	$	(2,615	)	$	(4,451	)	$	(8,831	)

Net loss per share--basic and diluted		$	(0.08	)	$	(0.11	)	$	(0.22	)	$	(0.39	)
Weighted average shares outstanding - basic and diluted			20,699			23,753			20,683			22,410




Stock-based compensation:	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2013		2012		2013
Cost of revenue	$	2	$	-	$	6	$	-
Sales and marketing		17		36		55		107
Customer service		-		-		1		-
Technical operations		29		2		89		4
Development		10		3		31		10
General and administrative		138		153		417		455

Reconciliation of Net Loss to Adjusted EBITDA: (in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2013			2012			2013

Net loss	$	(1,737	)	$	(2,615	)	$	(4,451	)	$	(8,831	)
Interest		16			19			43			53
Taxes		(836	)		195			(2,036	)		403
Depreciation		426			529			1,242			1,454
Amortization		-			10			13			10
EBITDA		(2,131	)		(1,862	)		(5,189	)		(6,911	)
Stock-based compensation		196			194			599			576
Impairment of long-lived assets		-			-			-			265
Non-cash currency translation adjustments		(42	)		(99	)		77			(215	)
Non-repetitive property possession		-			-			(151	)		-
Adjusted EBITDA	$	(1,977	)	$	(1,767	)	$	(4,664	)	$	(6,285	)

For More Information
Investors:
Addo Communications
Laura Bainbridge
Email Contact
Kimberly Esterkin
Email Contact
310-829-5400

Source: Spark Networks