lov-8k_20170502.htm

 

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 2, 2017

 

Spark Networks, Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware

001-32750

20-8901733

(State or Other Jurisdiction

of Incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

 

 

 

11150 Santa Monica Boulevard, Suite 600

Los Angeles, California

 

90025

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (310) 893-0550

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

X

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


 

Item 2.02

Results of Operations and Financial Condition

On May 2, 2017, Spark Networks, Inc. issued a press release announcing its first quarter 2017 results. The press release is attached hereto as Exhibit 99.1 and the information therein is incorporated herein by reference.

 

Item 9.01

Financial Statements and Exhibits.

(d) Exhibits

 

 

 

 

 

99.1

 

Press Release of Spark Networks, Inc. dated May 2, 2017

 

 

 


 

Exhibit Index

99.1

 

Press Release of Spark Networks, Inc. dated May 2, 2017

 

 

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

SPARK NETWORKS, INC.

 

Date: May 2, 2017

 

 

 

By:

 

/s/ Robert W. O’Hare

 

Name:

 

Robert W. O’Hare

 

Title:

 

Chief Financial Officer

 

 

 

 


 

 

 

 

 

 

Exhibit 99.1

 

SPARK NETWORKS® REPORTS FIRST QUARTER 2017 RESULTS

LOS ANGELES, Calif., May 2, 2017 -- Spark Networks, Inc. (NYSE MKT: LOV) reported first quarter 2017 financial results today.

On May 2, 2017, Spark Networks, Inc. entered into a definitive agreement with Affinitas GmbH (“EliteSingles”), which operates premium online dating platforms EliteSingles, eDarling and Attractive World to combine in a stock-for-stock merger.  

The new public entity is expected to be listed on the NYSE MKT exchange through an American Depositary Receipt.  After completion of the merger, EliteSingles shareholders will own approximately 75% of the combined company and Spark shareholders will own approximately 25%. The transaction has been approved by Spark’s Board of Directors and is expected to close in the fourth quarter of 2017, subject to Spark shareholder approval and the satisfaction of certain other customary closing conditions.  Shareholders, representing approximately 35% of the outstanding Spark shares, have agreed to vote their shares in favor of the transaction.

Spark Networks, Inc. will not conduct a first quarter results conference call; however, Spark and EliteSingles will host a joint conference call at 7:30 AM Pacific time tomorrow, May 3, 2017, to discuss the transaction.

Key Quarterly Metrics

 

Q1 2017

 

Q4 2016

Q1 2016

 

Revenue

$7.3 Million

 

$7.7 Million

$9.9 Million

 

Contribution1

$5.8 Million

 

$7.1 Million

$4.8 Million

 

Net Loss

$(2.1) Million

 

$(3.7) Million

$(3.4) Million

 

Adjusted EBITDA2

$131 Thousand

 

$1.8 Million

$(2.3) Million

 

Cash Balance

$10.8 Million

 

$11.4 Million

$4.1 Million

 

Period Ending Subs3

 

119,540

 

142,372

 

198,238

 

Avg. Paying Subs3

 

130,441

 

150,675

 

199,451

 

ARPU

 

$18.38

 

$16.89

 

$16.12

 

First Quarter 2017 Financial Results

Revenue:  For the first quarter of 2017, total revenue was $7.3 million, a decrease of 26% compared to the year ago period, and a 6% decrease from the prior quarter.  The year over year and sequential decreases were primarily driven by a decrease in average paying subscribers, reflecting reduced direct marketing investment in the Jewish and Christian Networks. These decreases were partially offset by year over year and sequential increases in ARPU of 14% and 9%, respectively.

Contribution:  Contribution was $5.8 million in the quarter, an increase of 21% compared to the year ago period, and an 18% decrease from the prior quarter. Our contribution margin decreased to 80% from 91% in the prior quarter and increased from 49% in the year ago period. Total direct marketing expenses decreased 72% to $1.4 million in the first quarter of 2017 as compared to $5.0 million in the prior year period.

 

 

 


 

Net Loss:  Net Loss was $(2.1) million in the quarter, a $1.3 million improvement versus the year ago period and a $1.6 million improvement from the prior quarter.

Adjusted EBITDA:  For the first quarter of 2017, Adjusted EBITDA was $131,000, an increase of $2.4 million versus the year ago period and a decrease of $(1.6) million from the prior quarter.  The sequential Adjusted EBITDA decline from the prior quarter was partially driven by a $475,000 legal accrual for the settlement of an ongoing legal matter.

Cash:  Cash provided by operating activities in the first quarter was $49,000.  At March 31, 2017, the Company had $10.8 million in cash and cash equivalents, compared to $11.4 million at the end of the prior quarter. At quarter end, the Company had no outstanding debt.

 

 

 


 

SPARK NETWORKS, INC.

SEGMENT4 RESULTS FROM OPERATIONS
(in thousands except subscriber and ARPU information)

 

Q1 2017

 

 

Q4 2016

 

 

Q3 2016

 

 

Q2 2016

 

 

Q1 2016

 

 

Q1 '17 v. Q1 '16

 

 

Q1 '17 v. Q4 '16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jewish Networks

$

3,148

 

 

$

3,136

 

 

$

3,322

 

 

$

3,628

 

 

$

3,995

 

 

 

-21.2

%

 

 

0.4

%

Christian Networks

 

3,813

 

 

 

4,262

 

 

 

4,673

 

 

 

5,044

 

 

 

5,405

 

 

 

-29.5

%

 

 

-10.5

%

Other Networks

 

286

 

 

 

335

 

 

 

385

 

 

 

413

 

 

 

438

 

 

 

-34.7

%

 

 

-14.6

%

Offline & Other Businesses

 

17

 

 

 

10

 

 

 

11

 

 

 

13

 

 

 

21

 

 

 

-19.0

%

 

 

70.0

%

Total Revenue

$

7,264

 

 

$

7,743

 

 

$

8,391

 

 

$

9,098

 

 

$

9,859

 

 

 

-26.3

%

 

 

-6.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct Mktg. Exp.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jewish Networks

$

570

 

 

$

316

 

 

$

420

 

 

$

372

 

 

$

497

 

 

 

14.6

%

 

 

80.4

%

Christian Networks

 

803

 

 

 

316

 

 

 

750

 

 

 

1,001

 

 

 

4,420

 

 

 

-81.8

%

 

 

154.0

%

Other Networks

 

60

 

 

 

41

 

 

 

60

 

 

 

105

 

 

 

120

 

 

 

-50.1

%

 

 

46.5

%

Total Direct Mktg. Exp.

$

1,433

 

 

$

673

 

 

$

1,230

 

 

$

1,478

 

 

$

5,038

 

 

 

-71.6

%

 

 

112.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contribution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jewish Networks

$

2,578

 

 

$

2,820

 

 

$

2,902

 

 

$

3,256

 

 

$

3,497

 

 

 

-26.3

%

 

 

-8.6

%

Christian Networks

 

3,009

 

 

 

3,946

 

 

 

3,923

 

 

 

4,043

 

 

 

985

 

 

 

205.5

%

 

 

-23.7

%

Other Networks

 

227

 

 

 

294

 

 

 

325

 

 

 

308

 

 

 

318

 

 

 

-28.8

%

 

 

-23.0

%

Offline & Other Businesses

 

17

 

 

 

10

 

 

 

11

 

 

 

13

 

 

 

20

 

 

 

-17.5

%

 

 

68.7

%

Total Contribution

$

5,831

 

 

$

7,070

 

 

$

7,161

 

 

$

7,620

 

 

$

4,821

 

 

 

21.0

%

 

 

-17.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period Ending Subs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jewish Networks

 

47,236

 

 

 

51,519

 

 

 

52,952

 

 

 

59,868

 

 

 

63,982

 

 

 

-26.2

%

 

 

-8.3

%

Christian Networks

 

65,146

 

 

 

82,163

 

 

 

95,047

 

 

 

112,895

 

 

 

122,935

 

 

 

-47.0

%

 

 

-20.7

%

Other Networks

 

7,158

 

 

 

8,690

 

 

 

10,234

 

 

 

10,915

 

 

 

11,321

 

 

 

-36.8

%

 

 

-17.6

%

Total Period Ending Subs.

 

119,540

 

 

 

142,372

 

 

 

158,233

 

 

 

183,678

 

 

 

198,238

 

 

 

-39.7

%

 

 

-16.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Paying Subs.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jewish Networks

 

48,823

 

 

 

52,493

 

 

 

57,684

 

 

 

61,732

 

 

 

63,930

 

 

 

-23.6

%

 

 

-7.0

%

Christian Networks

 

73,627

 

 

 

88,774

 

 

 

105,108

 

 

 

117,024

 

 

 

124,180

 

 

 

-40.7

%

 

 

-17.1

%

Other Networks

 

7,991

 

 

 

9,408

 

 

 

10,772

 

 

 

11,182

 

 

 

11,341

 

 

 

-29.5

%

 

 

-15.1

%

Total Avg. Paying Subs.

 

130,441

 

 

 

150,675

 

 

 

173,564

 

 

 

189,938

 

 

 

199,451

 

 

 

-34.6

%

 

 

-13.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ARPU

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jewish Networks

$

18.59

 

 

$

18.58

 

 

$

18.79

 

 

$

19.33

 

 

$

20.46

 

 

 

-9.2

%

 

 

0.1

%

Christian Networks

 

17.22

 

 

 

15.75

 

 

 

14.60

 

 

 

14.09

 

 

 

14.17

 

 

 

21.5

%

 

 

9.3

%

Other Networks

 

11.91

 

 

 

11.55

 

 

 

11.69

 

 

 

12.15

 

 

 

12.52

 

 

 

-4.9

%

 

 

3.1

%

Total ARPU5

$

18.38

 

 

$

16.89

 

 

$

15.81

 

 

$

15.70

 

 

$

16.12

 

 

 

14.0

%

 

 

8.9

%

 

 

 


 

Distribution of New Subscription Purchases6

 

Q1 2017

 

 

Q4 2016

 

 

Q3 2016

 

 

Q2 2016

 

 

Q1 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jewish Networks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 month plans

 

51.6%

 

 

 

45.7%

 

 

 

32.6%

 

 

 

28.2%

 

 

 

26.4%

 

3 month plans

 

19.2%

 

 

 

20.4%

 

 

 

18.4%

 

 

 

19.2%

 

 

 

17.0%

 

6 month plans

 

29.2%

 

 

 

33.9%

 

 

 

49.0%

 

 

 

52.6%

 

 

 

56.6%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Christian Networks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 month plans

 

55.1%

 

 

 

52.7%

 

 

 

36.5%

 

 

 

39.2%

 

 

 

32.9%

 

3 month plans

 

25.0%

 

 

 

27.0%

 

 

 

22.4%

 

 

 

25.7%

 

 

 

20.5%

 

6 month plans

 

19.9%

 

 

 

20.3%

 

 

 

41.1%

 

 

 

35.1%

 

 

 

46.7%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Networks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 month plans

 

55.0%

 

 

 

60.1%

 

 

 

51.1%

 

 

 

52.2%

 

 

 

55.8%

 

3 month plans

 

12.2%

 

 

 

10.5%

 

 

 

9.5%

 

 

 

10.8%

 

 

 

11.6%

 

6 month plans

 

32.8%

 

 

 

29.4%

 

 

 

39.4%

 

 

 

37.1%

 

 

 

32.6%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

Composition of Average Paying Subscriber Base7

 

Q1 2017

 

 

Q4 2016

 

 

Q3 2016

 

 

Q2 2016

 

 

Q1 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jewish Networks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Time Subscribers

 

21.7%

 

 

 

22.0%

 

 

 

23.7%

 

 

 

24.6%

 

 

 

24.7%

 

Winback Subscribers

 

28.1%

 

 

 

33.0%

 

 

 

34.6%

 

 

 

34.0%

 

 

 

32.5%

 

Renewal Subscribers

 

50.2%

 

 

 

44.9%

 

 

 

41.7%

 

 

 

41.4%

 

 

 

42.8%

 

Total

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Christian Networks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Time Subscribers

 

35.2%

 

 

 

37.2%

 

 

 

39.9%

 

 

 

42.0%

 

 

 

43.1%

 

Winback Subscribers

 

21.4%

 

 

 

25.1%

 

 

 

26.4%

 

 

 

26.0%

 

 

 

24.6%

 

Renewal Subscribers

 

43.4%

 

 

 

37.7%

 

 

 

33.7%

 

 

 

32.0%

 

 

 

32.3%

 

Total

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Networks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Time Subscribers

 

28.0%

 

 

 

29.8%

 

 

 

32.7%

 

 

 

33.0%

 

 

 

31.9%

 

Winback Subscribers

 

21.6%

 

 

 

22.2%

 

 

 

22.9%

 

 

 

22.4%

 

 

 

21.7%

 

Renewal Subscribers

 

50.4%

 

 

 

48.0%

 

 

 

44.4%

 

 

 

44.6%

 

 

 

46.4%

 

Total

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

100.0%

 

 

 

 


 

Investor Conference Call

The Company will discuss its transaction with EliteSingles during a live teleconference tomorrow at 7:30 a.m. Pacific time.

 

Toll-Free (United States):   

1-877-705-6003

 

 

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 http://investor.spark.net.

A replay will begin approximately three hours after completion of the call and run until May 17, 2017.

Replay            

 

Toll-Free (United States):

1-844-512-2921

 

 

International:

1-412-317-6671

Passcode:

13660277

Forward-Looking Statements

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause Spark’s or EliteSingles’ or the combined company’s performance or achievements to be materially different from those of any expected future results, performance, or achievements. Forward-looking statements speak only as of the date they are made, and neither Spark nor EliteSingles assumes any duty to update forward-looking statements. We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. Such forward-looking statements include, but are not limited to, statements about the benefits of the business combination transaction involving the Company and EliteSingles, including future financial and operating results, the combined company’s plans, objectives, expectations and intentions and other statements that are not historical facts.  The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: (i) the possibility that the proposed transaction does not close when expected or at all because required regulatory, shareholder or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all; (ii) changes in Spark’s share price before closing, including as a result of the financial performance of EliteSingles prior to closing, or more generally due to broader stock market movements, and the performance of peer group companies; (iii) the risk that the benefits from the transaction may not be fully realized or may take longer to realize than expected, including as a result of changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which Spark and EliteSingles operate; (iv) the ability to promptly and effectively integrate the businesses of Spark and EliteSingles; (v) the reaction to the transaction of the companies’ customers, employees and counterparties; (vi) diversion of management time on merger-related issues; (vii) lower-than-expected revenues, credit quality deterioration or a reduction in net earnings; and (viii) other risks that are described in Spark’s public filings with the SEC. For more information, see the risk factors described in Spark’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and other filings with the SEC.

 

 


 

How to Find Further Information

This communication does not constitute an offer to sell or a solicitation of an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law. This communication is being made in respect of the proposed business combination transaction between the Company and EliteSingles. The proposed transaction will be submitted to the shareholders of the Company for their consideration. In connection with the proposed transaction, the new entity and EliteSingles will file with the SEC a registration statement on Form F-4 that will include the proxy statement of the Company that also constitutes a prospectus of the Company.  After the registration statement has been declared effective by the SEC, a definitive proxy statement/prospectus will be mailed to each Company stockholder entitled to vote at the Company’s stockholder meeting. INVESTORS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND ANY OTHER DOCUMENTS RELATING TO THE TRANSACTION FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors may obtain copies of the proxy statement/prospectus (when available) and all other documents filed with the SEC regarding the proposed transaction, free of charge, at the SEC’s website (http://www.sec.gov). Investors may also obtain these documents, free of charge, from the Company’s website (www.spark.net) under the link “Investor Relations” and then under the tab “SEC Filings” or by directing request to investor@spark.net.

Participants in Solicitation

The Company and its directors, executive officers and other members of management and employees may be deemed to be “participants” in the solicitation of proxies from the Company’s stockholders in connection with the proposed transaction. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of the Company’s stockholders in connection with the proposed transaction and a description of their direct and indirect interest, by security holdings or otherwise, will be set forth in the proxy statement/prospectus filed with the SEC in connection with the proposed transaction. You can find information about the Company’s executive officers and directors in its definitive proxy statement filed with the SEC on March 31, 2017 and in its Annual Report on Form 10-K filed with the SEC on March 22, 2017. You can also obtain free copies of these documents from the Company using the contact information above.

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), JSwipe (www.jswipeapp.com), CROSSPATHS (www.crosspathsapp.com), Spark®.com (www.spark.com), BlackSingles.com® (www.blacksingles.com), and SilverSingles®.com (www.silversingles.com).

For More Information

Investors:

Robert O’Hare

rohare@spark.net

 

 


 

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 months ended March 31, 2017 can be found in the table below.

“Adjusted EBITDA” is defined as earnings before interest, taxes, depreciation, amortization, stock-based compensation, impairment of intangible and long-lived assets, non-cash currency translation adjustments for an inter-company loan and non-recurring legal and acquisition costs.

3 "Paying Subscribers" are defined as individuals who have paid a monthly fee for access to communication and website 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 JDate, JDate.co.il, JDate.fr, JDate.co.uk, Cupid.co.il, and JSwipe. The Christian Networks segment consists of ChristianMingle, CrossPaths, ChristianMingle.co.uk, ChristianMingle.com.au, Believe.com, ChristianCards.net, ChristianDating.com, DailyBibleVerse.com and Faith.com. The Other Networks segment consists of Spark.com and related other general market websites 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 composition of average paying subscribers in the 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.  Figures exclude results from JSwipe and CrossPaths.

 

 


 

SPARK NETWORKS, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

 

 

March 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

10,806

 

 

$

11,360

 

Restricted cash

 

 

415

 

 

 

454

 

Accounts receivable

 

 

406

 

 

 

525

 

Prepaid expenses and other

 

 

1,128

 

 

 

1,408

 

Total current assets

 

 

12,755

 

 

 

13,747

 

Property and equipment, net

 

 

3,356

 

 

 

4,494

 

Goodwill

 

 

10,883

 

 

 

10,523

 

Intangible assets, net

 

 

2,903

 

 

 

2,950

 

Deposits and other assets

 

 

95

 

 

 

103

 

Total assets

 

$

29,992

 

 

$

31,817

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

1,156

 

 

 

819

 

Accrued liabilities

 

 

2,730

 

 

 

2,590

 

Deferred revenue

 

 

3,532

 

 

 

4,005

 

Total current liabilities

 

 

7,418

 

 

 

7,414

 

Deferred tax liability - non-current

 

 

2,202

 

 

 

2,092

 

Other liabilities

 

 

172

 

 

 

246

 

Total liabilities

 

 

9,792

 

 

 

9,752

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

10,000,000 shares of Preferred Stock authorized, $0.001 par value, 450,000 of which are designated as Series C Junior Participating Cumulative Preferred Stock, with no shares of Preferred Stock issued or outstanding

 

 

-

 

 

 

-

 

100,000,000 shares of Common Stock authorized, $0.001 par value, with 32,097,183 and 31,983,545 shares of Common Stock issued and outstanding at March 31, 2017 and December 31, 2016:

 

 

32

 

 

 

32

 

Additional paid-in-capital

 

 

87,358

 

 

 

87,198

 

Accumulated other comprehensive income

 

 

813

 

 

 

713

 

Accumulated deficit

 

 

(68,003

)

 

 

(65,878

)

Total stockholders' equity

 

 

20,200

 

 

 

22,065

 

Total liabilities and stockholders' equity

 

$

29,992

 

 

$

31,817

 

 

 

 


 

SPARK NETWORKS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)

 

Three Months Ended March 31,

 

 

2017

 

 

2016

 

Revenue

$

7,264

 

 

$

9,859

 

Cost and expenses:

 

 

 

 

 

 

 

Cost of revenue (exclusive of depreciation shown separately below)

 

2,354

 

 

 

6,229

 

Sales and marketing

 

650

 

 

 

1,452

 

Customer service

 

635

 

 

 

993

 

Technical operations

 

219

 

 

 

297

 

Development

 

715

 

 

 

1,030

 

General and administrative

 

3,234

 

 

 

2,511

 

Depreciation

 

1,708

 

 

 

712

 

Amortization of intangible assets

 

49

 

 

 

78

 

Impairment of intangible and long-lived assets

 

9

 

 

 

39

 

Total cost and expenses

 

9,573

 

 

 

13,341

 

Operating loss

 

(2,309

)

 

 

(3,482

)

Interest (income) expense and other, net

 

(231

)

 

 

(141

)

Loss before provision for income taxes

 

(2,078

)

 

 

(3,341

)

Income tax provision

 

47

 

 

 

67

 

Net loss

 

(2,125

)

 

 

(3,408

)

Net loss per share - basic and diluted

$

(0.07

)

 

$

(0.13

)

Weighted average shares outstanding - basic and diluted

 

32,003

 

 

 

25,846

 

 

 

 

 

 

 

 

 

Stock-based compensation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

1

 

 

 

28

 

Customer service

 

3

 

 

 

1

 

Technical operations

 

2

 

 

 

21

 

Development

 

(4

)

 

 

5

 

General and administrative

 

158

 

 

 

267

 

Total stock-based compensation

$

160

 

 

$

322

 

 

 

 

 

 

 

 

 

Reconciliation of Net Loss to Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(2,125

)

 

$

(3,408

)

Interest expense

 

22

 

 

 

13

 

Income tax provision

 

47

 

 

 

67

 

Depreciation