Spark Networks(R) Reports Third Quarter Financial Results
Quarterly Highlights
- Both Jewish and Christian Networks show simultaneous subscriber growth for first time since Q1 2013
- Record ChristianMingle contribution margin up 500 basis points year-over-year to 44%
- Highest company contribution margin since Q4 2014 at 62%
- Spark's mobile presence now exceeds over 200,000 monthly active users across five brands
- Acquisition of JSwipe expands offering for Jewish community
- Scheduled re-launch of both JDate and ChristianMingle on pace for Q4 2015
Commentary and Outlook
Chief Executive Officer
"First off we grew our subscriber base for the first time in two years. Both our Jewish and Christian Networks experienced subscriber growth over the course of Q3 of 1.8% and 0.4%, respectively. While this subscriber growth was modest, we are excited that it occurred a quarter ahead of our original guidance, and in a seasonally slow period. We are now in an excellent position to continue our momentum into Q4 and Q1, which have traditionally been our strongest seasonal periods. Most encouraging is that JDate.com, our U.S. property, experienced the highest quarterly subscriber growth since early 2009.
"Our second accomplishment was our record contribution margin on ChristianMingle at 44%. For many years, in an effort to create a sizable network, the Company was acquiring ChristianMingle subscribers at negative incremental margins. Though we halted that practice late last year, our Q3 performance represents the highest incremental acquisition margins ever for the brand during a period of subscriber growth. We continue to be methodical about how and where we invest in marketing and we're becoming much more sophisticated in our communications with our members once they register. We are just starting to hone our capabilities here and expect to be able to drive further improvements as we move forward.
"Our third accomplishment was the launch of a handful of new mobile applications into the market. A year ago the company did not have a single native mobile application and today we have nine apps across five different brands representing over 200,000 monthly active users. The most critical of these launches was our new CrossPaths application. As the leader in the Christian market for dating it is important that we offer a product to millennial Christians seeking others who share their faith and ideas about what dating means. CrossPaths fills a major void in the dating market and we are encouraged by the early adoption we've seen.
"Finally, in early October, we closed a very strategic acquisition for the company, bringing
"We recognize that the online dating industry is highly fragmented and believe that only those firms that achieve scale will survive. Accordingly we are in the early stages of retaining a financial advisor to best position the company to further participate in the ongoing industry consolidation.
"When we started this turn around at the beginning of the year we spoke of a crawl, walk, run strategy. While our 'pace' definitely quickened in Q3, there is still plenty of work to be done. We remain committed to driving revenue and EBITDA growth and continuing to execute against our product improvement roadmap. We've assembled a team that is finding its stride, hitting its goals and finding ways to scale. We've significantly bolstered our product development capabilities and are proving that we can launch innovative and valuable products for our customers. And finally through both organic development and acquisitions we are proving that we can build and grow fantastic brands that serve important market niches. It is a very exciting time for Spark."
Financial Highlights
Q3 2015 | Q2 2015 | Q3 2014 | ||||
Revenue | $11.7 Million | $12.3 Million | $15.0 Million | |||
Contribution1 | $7.3 Million | $6.9 Million | $9.0 Million | |||
Adjusted EBITDA2 | $309 Thousand | $621 Thousand | $2.5 Million | |||
Net(Loss) Income | $(822) Thousand | $(95) Thousand | $(969) Thousand | |||
Cash Balance | $14.4 Million | $14.6 Million | $9.3 Million | |||
Period Ending Subs3 | 197,832 | 196,819 | 243,499 | |||
Avg. Paying Subs3 | 197,109 | 203,895 | 257,679 | |||
ARPU | $19.04 | $19.43 | $18.33 |
Financial Results
Revenue in the third quarter of 2015 was
Direct marketing expenses in the third quarter of 2015 were
Contribution in the third quarter of 2015 was
Excluding direct marketing expenses, cost and expenses in the third quarter of 2015 were
Net loss in the third quarter of 2015 was
Adjusted EBITDA in the third quarter of 2015 was
Liquidity
As of
Acquisition of
On
SPARK NETWORKS, INC. | ||||||||||||||||||||||
SEGMENT4RESULTS FROM OPERATIONS | ||||||||||||||||||||||
(in thousands except subscriber and ARPU information) | ||||||||||||||||||||||
Q3 2015 | Q2 2015 | Q1 2015 | Q4 2014 | Q3 2014 | Q3 '15 v. Q3 '14 | Q3 '15 v. Q2 '15 | ||||||||||||||||
Revenue | ||||||||||||||||||||||
Jewish Networks | $ | 4,613 | $ | 4,846 | $ | 5,180 | $ | 5,502 | $ | 5,724 | -19.4 | % | -4.8 | % | ||||||||
Christian Networks | 6,581 | 6,921 | 7,792 | 8,215 | 8,672 | -24.1 | % | -4.9 | % | |||||||||||||
Other Networks | 466 | 470 | 487 | 504 | 533 | -12.6 | % | -0.9 | % | |||||||||||||
Offline & Other Businesses | 22 | 25 | 27 | 43 | 79 | -72.2 | % | -12.0 | % | |||||||||||||
Total Revenue | $ | 11,682 | $ | 12,262 | $ | 13,486 | $ | 14,264 | $ | 15,008 | -22.2 | % | -4.7 | % | ||||||||
Direct Mktg. Exp. | ||||||||||||||||||||||
Jewish Networks | $ | 619 | $ | 745 | $ | 599 | $ | 684 | $ | 628 | -1.4 | % | -16.9 | % | ||||||||
Christian Networks | 3,664 | 4,450 | 5,338 | 4,325 | 5,293 | -30.8 | % | -17.7 | % | |||||||||||||
Other Networks | 141 | 133 | 115 | 116 | 107 | 31.8 | % | 6.0 | % | |||||||||||||
Offline & Other Businesses | - | - | - | 4 | 19 | NM | NM | |||||||||||||||
Total Direct Mktg. Exp. | $ | 4,424 | $ | 5,328 | $ | 6,052 | $ | 5,129 | $ | 6,047 | -26.8 | % | -17.0 | % | ||||||||
Contribution | ||||||||||||||||||||||
Jewish Networks | $ | 3,994 | $ | 4,101 | $ | 4,581 | $ | 4,818 | $ | 5,096 | -21.6 | % | -2.6 | % | ||||||||
Christian Networks | 2,917 | 2,471 | 2,454 | 3,890 | 3,379 | -13.7 | % | 18.0 | % | |||||||||||||
Other Networks | 325 | 337 | 372 | 388 | 426 | -23.7 | % | -3.6 | % | |||||||||||||
Offline & Other Businesses | 22 | 25 | 27 | 39 | 60 | -63.3 | % | -12.0 | % | |||||||||||||
Total Contribution | $ | 7,258 | $ | 6,934 | $ | 7,434 | $ | 9,135 | $ | 8,961 | -19.0 | % | 4.7 | % | ||||||||
Period Ending Subs | ||||||||||||||||||||||
Jewish Networks | 64,144 | 62,991 | 67,703 | 71,251 | 75,355 | -14.9 | % | 1.8 | % | |||||||||||||
Christian Networks | 122,068 | 121,561 | 129,964 | 131,479 | 154,367 | -20.9 | % | 0.4 | % | |||||||||||||
Other Networks | 11,620 | 12,267 | 12,879 | 12,787 | 13,777 | -15.7 | % | -5.3 | % | |||||||||||||
Total Period Ending Subs. | 197,832 | 196,819 | 210,546 | 215,517 | 243,499 | -18.8 | % | 0.5 | % | |||||||||||||
Average Paying Subs. | ||||||||||||||||||||||
Jewish Networks | 63,538 | 65,087 | 69,632 | 73,429 | 76,481 | -16.9 | % | -2.4 | % | |||||||||||||
Christian Networks | 121,597 | 126,214 | 130,860 | 141,188 | 166,908 | -27.1 | % | -3.7 | % | |||||||||||||
Other Networks | 11,974 | 12,594 | 12,953 | 13,257 | 14,290 | -16.2 | % | -4.9 | % | |||||||||||||
Total Avg. Paying Subs. | 197,109 | 203,895 | 213,445 | 227,874 | 257,679 | -23.5 | % | -3.3 | % | |||||||||||||
ARPU | ||||||||||||||||||||||
Jewish Networks | $ | 23.80 | $ | 24.46 | $ | 24.48 | $ | 24.44 | $ | 24.53 | -3.0 | % | -2.7 | % | ||||||||
Christian Networks | 17.19 | 17.57 | 18.01 | 17.57 | 16.01 | 7.3 | % | -2.2 | % | |||||||||||||
Other Networks | 12.58 | 12.08 | 12.22 | 12.27 | 12.11 | 3.9 | % | 4.1 | % | |||||||||||||
Total ARPU5 | $ | 19.04 | $ | 19.43 | $ | 19.77 | $ | 19.47 | $ | 18.33 | 3.9 | % | -2.0 | % | ||||||||
Distribution of New Subscription Purchases6 | |||||||||||||||
Q3 2015 | Q2 2015 | Q1 2015 | Q4 2014 | Q3 2014 | |||||||||||
Jewish Networks | |||||||||||||||
1 month plans | 35.6 | % | 45.4 | % | 42.7 | % | 41.4 | % | 38.5 | % | |||||
3 month plans | 19.9 | % | 21.8 | % | 25.2 | % | 24.3 | % | 24.9 | % | |||||
6 month plans | 44.5 | % | 32.8 | % | 32.1 | % | 34.3 | % | 36.6 | % | |||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
Christian Networks | |||||||||||||||
1 month plans | 39.6 | % | 54.4 | % | 50.5 | % | 53.7 | % | 50.6 | % | |||||
3 month plans | 18.4 | % | 19.4 | % | 17.8 | % | 20.7 | % | 20.8 | % | |||||
6 month plans | 42.0 | % | 26.2 | % | 31.7 | % | 25.6 | % | 28.6 | % | |||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
Other Networks | |||||||||||||||
1 month plans | 62.0 | % | 58.3 | % | 56.0 | % | 59.2 | % | 58.6 | % | |||||
3 month plans | 11.4 | % | 11.9 | % | 12.2 | % | 11.0 | % | 12.2 | % | |||||
6 month plans | 26.6 | % | 29.8 | % | 31.8 | % | 29.8 | % | 29.2 | % | |||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
Composition of Average Paying Subscriber Base7 | ||||||||||||||
Q3 2015 | Q2 2015 | Q1 2015 | Q4 2014 | Q3 2014 | ||||||||||
Jewish Networks | ||||||||||||||
First Time Subscribers | 21.7 | % | 21.5 | % | 22.4 | % | 22.4 | % | 21.9 | % | ||||
Winback Subscribers | 30.5 | % | 29.1 | % | 28.8 | % | 29.2 | % | 29.5 | % | ||||
Renewal Subscribers | 47.8 | % | 49.4 | % | 48.8 | % | 48.4 | % | 48.6 | % | ||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||
Christian Networks | ||||||||||||||
First Time Subscribers | 39.1 | % | 38.3 | % | 37.1 | % | 38.0 | % | 42.7 | % | ||||
Winback Subscribers | 23.3 | % | 22.6 | % | 20.3 | % | 19.7 | % | 20.5 | % | ||||
Renewal Subscribers | 37.6 | % | 39.1 | % | 42.6 | % | 42.3 | % | 36.8 | % | ||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||
Other Networks | ||||||||||||||
First Time Subscribers | 31.2 | % | 33.2 | % | 20.3 | % | 30.6 | % | 31.2 | % | ||||
Winback Subscribers | 22.0 | % | 21.9 | % | 26.9 | % | 21.8 | % | 22.6 | % | ||||
Renewal Subscribers | 46.8 | % | 44.9 | % | 52.8 | % | 47.6 | % | 46.2 | % | ||||
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: 1-778-327-3988
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: 911030
Safe Harbor Statement:
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including the implementation of the "crawl, walk, run" strategy to stabilize and grow the subscriber base which we have adopted, and our expectation that we will be able to drive further improvements in the business. Any statements in this press 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: successfully implement our strategy to stabilize our subscriber base and grow; avoid significant subscriber declines; attract and retain members; convert members into paying subscribers and retain our paying subscribers; retain and enhance the new marketing team; develop or acquire new product offerings and successfully implement and expand those offerings; keep pace with rapid technological changes, including making the technology stack more nimble; drive use of newly-updated mobile applications; 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. Additional factors that could cause actual results to differ are discussed under the heading "Risk Factors" and in other sections of the Company's 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 non-GAAP 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. A reconciliation of the Adjusted EBITDA for the three and nine months ended
"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, severance and transaction expense.
3 "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. Period ending subscribers for each quarter represent the paying subscriber count as of the last day of the period. 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. The calculation excludes results from the Company's HurryDate business due to its relative size.
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 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.
6 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.
7 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) | ||||||||||
September 30, | December 31, | |||||||||
2015 | 2014 | |||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 14,442 | $ | 11,696 | ||||||
Restricted cash | 823 | 1,056 | ||||||||
Accounts receivable, (net of allowance for doubtful accounts of $99 and $0 at September 30, 2015 and December 31, 2014, respectively) | 1,133 | 1,308 | ||||||||
Deferred tax asset - current | 9 | 11 | ||||||||
Prepaid expenses and other | 766 | 1,516 | ||||||||
Total current assets | 17,173 | 15,587 | ||||||||
Property and equipment, net | 5,346 | 4,072 | ||||||||
Goodwill | 8,522 | 8,575 | ||||||||
Intangible assets, net | 2,439 | 2,469 | ||||||||
Deferred tax asset - non-current | 68 | 68 | ||||||||
Deposits and other assets | 127 | 234 | ||||||||
Total assets | $ | 33,675 | $ | 31,005 | ||||||
Liabilities and Stockholders' Equity | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 1,664 | $ | 1,300 | ||||||
Accrued liabilities | 4,785 | 3,948 | ||||||||
Deferred revenue | 6,307 | 7,092 | ||||||||
Deferred tax liability - current portion | 601 | 496 | ||||||||
Total current liabilities | 13,357 | 12,836 | ||||||||
Deferred tax liability | 1,593 | 1,607 | ||||||||
Other liabilities | 609 | 807 | ||||||||
Total liabilities | 15,559 | 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: 25,260,191 and 24,556,182 shares at September 30, 2015 and December 31, 2014, respectively: | 25 | 25 | ||||||||
Additional paid-in-capital | 75,082 | 72,522 | ||||||||
Accumulated other comprehensive income | 754 | 759 | ||||||||
Accumulated deficit | (57,745 | ) | (57,551 | ) | ||||||
Total stockholders' equity | 18,116 | 15,755 | ||||||||
Total liabilities and stockholders' equity | $ | 33,675 | $ | 31,005 | ||||||
SPARK NETWORKS, INC. | ||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
(unaudited, in thousands, except per share data) | ||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||
Revenue | $ | 11,682 | $ | 15,008 | $ | 37,430 | $ | 47,381 | ||||
Cost and expenses: | ||||||||||||
Cost of revenue (exclusive of depreciation shown separately below) | 5,593 | 7,004 | 19,058 |
28,234 | ||||||||
Sales and marketing | 1,144 | 1,368 | 2,895 | 4,299 | ||||||||
Customer service | 769 | 738 | 2,239 | 2,289 | ||||||||
Technical operations | 210 | 276 | 636 | 917 | ||||||||
Development | 1,053 | 886 | 2,978 | 2,645 | ||||||||
General and administrative | 2,933 | 4,446 | 7,704 | 11,472 | ||||||||
Depreciation | 562 | 518 | 1,607 | 1,558 | ||||||||
Amortization of intangible assets | 10 | 10 | 30 | 30 | ||||||||
Impairment of long-lived assets | 26 | 103 | 132 | 103 | ||||||||
Total cost and expenses | 12,300 | 15,349 | 37,279 | 51,547 | ||||||||
Operating income (loss) | (618) | (341) | 151 | (4,166) | ||||||||
Interest (income) expense and other, net | 191 | 340 | 79 | 323 | ||||||||
Income (loss) before income taxes | (809) | (681) | 72 | (4,489) | ||||||||
Provision for income taxes | 13 | 288 | 266 | 507 | ||||||||
Net income (loss) | (822) | (969) | (194) | (4,996) | ||||||||
Other comprehensive income, net of tax: | ||||||||||||
Foreign currency translation adjustment | 0 | (27) | (5) | (16) | ||||||||
Comprehensive income (loss) | $ | (822) | $ | (996) | $ | (199) | $ | (5,012) | ||||
Net earnings (loss) per share--basic and diluted | $ | (0.03) | $ | (0.04) | $ | (0.01) | $ | (0.21) | ||||
Weighted average shares outstanding - basic and diluted | 25,188 | 24,035 | 24,991 | 23,936 | ||||||||
Stock-based compensation: | |||||||||||
(in thousands) | |||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||
Cost of revenue | $ | - | $ | 3 | $ | - | $ | 3 | |||
Sales and marketing | 11 | 23 | 19 | 99 | |||||||
Development | 5 | - | 8 | - | |||||||
General and administrative | 159 | 259 | 485 | 511 | |||||||
Reconciliation of Net (Loss) Income to Adjusted EBITDA: | |||||||||||||||
(in thousands) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net (loss) income | $ | (822 | ) | $ | (969 | ) | $ | (194 | ) | $ | (4,996 | ) | |||
Interest expense | 15 | 12 | 35 | 36 | |||||||||||
Tax provision (benefit) | 40 | 288 | 237 | 507 | |||||||||||
Depreciation | 561 | 518 | 1,606 | 1,558 | |||||||||||
Amortization | 10 | 10 | 30 | 30 | |||||||||||
EBITDA | (196 | ) | (141 | ) | 1,714 | (2,865 | ) | ||||||||
Stock-based compensation | 175 | 285 | 512 | 613 | |||||||||||
Impairment of long-lived assets | 26 | 103 | 132 | 103 | |||||||||||
Non-cash currency translation adjustments | 175 | 327 | 39 | 284 | |||||||||||
Non-recurring proxy, severance and transaction | 129 | 1,884 | 290 | 3,308 | |||||||||||
Adjusted EBITDA | $ | 309 | $ | 2,458 | $ | 2,687 | $ | $1,443 |
Source: