SOURCE: SNAP Interactive, Inc.

Snap Interactive, Inc.

August 11, 2016 14:21 ET

Snap Interactive Reports Results for the Quarter Ended June 30, 2016

NEW YORK, NY--(Marketwired - Aug 11, 2016) - Snap Interactive, Inc. ("SNAP," the "Company," "we," "our" or "us") (OTCQB: STVI), a leading online dating provider, today announced financial and operational results for the quarter ended June 30, 2016.

Highlights:

  • Total revenue of $2.6 million for the second quarter of 2016 decreased slightly by $63 thousand compared to the first quarter of 2016;
  • Total revenues decreased 18.0% for the second quarter of 2016 relative to the comparable period in 2015, primarily driven by a decrease in the number of active subscribers, which we believe is the result of a decrease in FirstMet advertising expense of 15.4%;
  • Advertising revenue increased by $42 thousand, or 37.0%, for the second quarter of 2016 when compared with the same period in 2015;
  • Total expenses were reduced by $509 thousand in the second quarter of 2016 as compared to the same period in 2015, a 15% decrease; and
  • Net cash used in operating activities was approximately $239 thousand for the three months ended June 30, 2016, representing a reduction of $155 thousand as compared to the same period in 2015.

Financial Highlights

             
Current quarter versus last year same period   Three Months Ended        
    June 30,     %  
Statement of Operations and Cash Flow Results (unaudited)   2016     2015     Change  
  Subscription revenue   $ 2,459,633     $ 3,075,868     (20.0) %
  Advertising revenue   $ 154,329     $ 112,671     37.0 %
Total revenue   $ 2,613,962     $ 3,188,539     (18.0) %
                       
Sales and marketing expense   $ 1,210,103     $ 1,399,117     (13.5) %
Total expenses   $ 2,917,789     $ 3,426,914     (14.9) %
Net loss   $ (841,133 )   $ (258,986 )   224.8 %
Net cash used in operating activities   $ (239,247 )   $ (393,872 )   (39.3) %
                       
Financial Metrics (unaudited)                      
Bookings   $ 2,368,594     $ 2,918,409     (18.8) %
Adjusted EBITDA (a non-GAAP measure)   $ (131,300 )   $ 73,405     (278.9) %
                 
    June 30,   December 31,
    2016   2015
Balance Sheet Results (unaudited)   (unaudited)    
Cash and cash equivalents   $ 1,561,917   $ 2,131,262
Deferred subscription revenue   $ 1,408,426   $ 1,505,862
             
Financial Metrics (unaudited)            
Active subscribers (at period end)     78,700     98,000
             
Current quarter versus last quarter   Three Months Ended        
    June 30,     March 31,     %  
Statement of Operations and Cash Flow Results (unaudited)   2016     2016     Change  
  Subscription revenue   $ 2,459,633     $ 2,507,148     (1.9) %
  Advertising revenue   $ 154,329     $ 170,119     (9.3) %
Total revenue   $ 2,613,962     $ 2,677,267     (2.4) %
                       
Sales and marketing expense   $ 1,210,103     $ 1,292,164     (6.4) %
Total expenses   $ 2,917,789     $ 3,006,022     (2.9) %
Net loss   $ (841,133 )   $ (1,501,004 )   (44.0) %
Net cash used in operating activities   $ (239,247 )   $ (281,188 )   (14.9) %
                       
Financial Metrics (unaudited)                      
Bookings   $ 2,368,594     $ 2,500,751     (5.3) %
Adjusted EBITDA (a non-GAAP measure)   $ (131,300 )   $ (138,466 )   (5.2) %
                       

Management Commentary 

Growth and New Initiatives

In the second quarter of 2016 we achieved important milestones in growth and new initiatives, including:

  • New Product Kickoff - Initiated development of a new product targeting users over 50 years of age;
  • Foreign Language Translation - Translated all or portions of the FirstMet service into nine additional languages to test opportunities in international markets; and
  • Reengaged Users - Reactivated approximately 647 thousand users from the AYI database via targeted email campaigns.

SNAP's Chief Executive Officer, Alex Harrington, said, "In the second quarter of 2016 we focused on forward-looking strategic initiatives. Most prominently, we kicked-off development on a new product in the Snap portfolio, which we expect to launch commercially in the fourth quarter. This is the cornerstone of our internal growth strategy building upon Snap's large user database. By cross selling users across our product array, we expect to increase the value we derive from each user acquired. We are also excited to announce that the new product will focus on users 50 years and older, which is an age group that has shown one of the fastest adoption rates of dating products in recent years. This niche is also a good fit for Snap's portfolio since FirstMet has long targeted users 35 and older, and therefore users over 50 represent a significant portion of our database."

Mr. Harrington continued, "We have made significant progress on several other initiatives as well. Our foreign language translation efforts have opened up testing in large emerging markets like Brazil and Turkey, and we have also achieved remarkable user adoption in smaller markets such as Greece. Email winback programs continue to build on the momentum that began with the rebranding, with FirstMet successfully reengaging approximately 647 thousand inactive users, up 4.2% from the first quarter of 2016. Mobile usage of FirstMet also continued to represent more than 50% of activity across all platforms, which we believe to be a direct result of the continued focus on mobile product enhancements and emphasis on mobile advertising in our marketing budget."

Liquidity and Cash Flow

  • Cash Balance: We ended the second quarter of 2016 with approximately $1.6 million of cash and cash equivalents on our balance sheet;
  • Expense Reductions: Total expenses were reduced by $0.5 million in the second quarter of 2016 as compared to the same period in 2015, a 15% decrease; and
  • Cash Used in Operating Activities: Net cash used in operating activities was $239 thousand for the three months ended June 30, 2016, representing a reduction of $155 thousand as compared to the same period in 2015.

Mr. Harrington concluded, "Capital efficiency and cost controls continue to be a key focus, and we were pleased to realize a 15% quarterly expense reduction year-over-year. The first half of the year is typically cash and expense intensive, and though the Company consumed $239 thousand of cash from operating activities in the second quarter of 2016, this was an improvement of $155 thousand over the comparable period in 2015. On July 18, 2016, we entered into a term note allowing us to borrow up to $250,000 and borrowed $200,000 thereunder, strengthening our cash and liquidity position. A high priority now is seeking a financial alternative or a strategic business combination to refinance or retire the Company's convertible debt. However, with approximately $1.6 million of cash resources, we believe the Company has sufficient funds to pursue our previously announced new product launch and other growth initiatives in 2016."

IR Contact:
IR@snap-interactive.com 

About Snap Interactive, Inc.

Snap Interactive, Inc. develops, owns and operates dating applications for social networking websites and mobile platforms. The Grade is a patent-pending mobile dating application catering to high-quality singles. SNAP's flagship brand, FirstMet, is a multi-platform online dating site with a large user database of approximately 30 million users.

For more information, please visit http://www.snap-interactive.com.

The contents of our website is not part of this press release, and you should not consider the contents of this website in making an investment decision with respect to our common stock.

Facebook is a registered trademark of Facebook Inc. Apple, iTunes and iPhone are registered trademarks of Apple Inc. and App Store is a registered service mark of Apple Inc. Android and Google Play are registered trademarks of Google Inc. FirstMet and The Grade are trademarks of Snap Interactive, Inc.

Forward-Looking Statements

This press release contains "forward-looking statements." Such statements may be preceded by the words "intends," "may," "will," "plans," "expects," "anticipates," "projects," "predicts," "estimates," "aims," "believes," "hopes," "potential" or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company's control, and cannot be predicted or quantified and consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with general economic, industry and market sector conditions; the Company's ability to meet its current and future debt service obligations; the Company's ability to institute corporate governance standards or achieve compliance with national exchange listing requirements; the Company's future growth and the ability to obtain additional financing to implement the Company's growth strategy; the ability to increase or recognize revenue, decrease expenses and increase the number of active subscribers, new subscription transactions or monthly active users; the ability to enter into new advertising agreements; the ability to diversify new user acquisition channels or improve the conversion of users to paid subscribers; the ability to anticipate and respond to changing user and industry trends and preferences; the intense competition in the online dating marketplace; the ability to release new applications or derive revenue from new applications; and circumstances that could disrupt the functioning of the Company's applications. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company's filings with the Securities and Exchange Commission ("SEC"), including the Company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC's web site at http://www.sec.gov.

All forward-looking statements speak only as of the date on which they are made. The Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement was made, except to the extent required by applicable securities laws.

   
   
SNAP INTERACTIVE, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
   
    June 30,
2016
    December 31,
2015
 
    (unaudited)        
Assets                
Current assets:                
  Cash and cash equivalents   $ 1,561,917     $ 2,131,262  
  Credit card holdback receivable     162,819       165,853  
  Accounts receivable, net of allowances and reserves of $64,853 and $55,468, respectively     188,475       206,547  
  Prepaid expense and other current assets     63,341       108,871  
Total current assets     1,976,552       2,612,533  
Fixed assets and intangible assets, net     328,035       387,617  
Notes receivable     82,452       81,123  
Long term security deposits     279,410       279,410  
Investments     200,000       200,000  
Total assets   $ 2,866,449     $ 3,560,683  
                 
Liabilities and stockholders' deficit                
Current liabilities:                
  Accounts payable   $ 1,287,037     $ 1,065,662  
  Accrued expenses and other current liabilities     169,282       367,018  
  Deferred subscription revenue     1,408,426       1,505,862  
  Convertible note payable, net of discount     2,240,144       -  
Total current liabilities     5,104,889       2,938,542  
Deferred rent, net of current portion     111,193       99,595  
Convertible note payable, net of discount     -       1,636,585  
Derivative liabilities     1,330,000       473,425  
Capital lease obligations, net of current portion     34,495       75,560  
Total liabilities     6,580,577       5,223,707  
Commitments and Contingencies                
Stockholders' deficit:                
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding     -       -  
Common stock, $0.001 par value, 500,000,000 shares authorized, 50,017,826 and 50,007,826 shares issued, respectively, and 39,692,826 and 39,682,826 shares outstanding, respectively     39,693       39,693  
Additional paid-in capital     13,265,441       12,974,409  
Accumulated deficit     (17,019,262 )     (14,677,126 )
Total stockholders' deficit     (3,714,128 )     (1,663,024 )
Total liabilities and stockholders' deficit   $ 2,866,449     $ 3,560,683  
                 
   
   
SNAP INTERACTIVE, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
   
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2016     2015     2016     2015  
Revenues:                                
  Subscription revenue   $ 2,459,633     $ 3,075,868     $ 4,966,781     $ 6,205,178  
  Advertising revenue     154,329       112,671       324,448       169,444  
Total revenues     2,613,962       3,188,539       5,291,229       6,374,622  
Costs and expenses:                                
  Cost of revenue     405,965       430,913       841,623       881,259  
  Sales and marketing expense     1,210,103       1,399,117       2,502,268       3,180,623  
  Product development expense     440,451       541,026       885,999       1,170,801  
  General and administrative expense     861,270       1,055,858       1,693,923       2,363,089  
Total costs and expenses     2,917,789       3,426,914       5,923,813       7,595,772  
Loss from operations     (303,827 )     (238,375 )     (632,584 )     (1,221,150 )
  Interest expense, net     (427,306 )     (430,611 )     (852,977 )     (667,015 )
  Change in fair value of derivative liabilities     (110,000 )     410,000       (856,575 )     410,000  
Loss before provision for income taxes     (841,133 )     (258,986 )     (2,342,136 )     (1,478,165 )
Provision for income taxes     -       -       -       -  
Net loss   $ (841,133 )   $ (258,986 )   $ (2,342,136 )   $ (1,478,165 )
                                 
Net loss per share of common stock:                                
Basic and diluted   $ (0.02 )   $ (0.01 )   $ (0.06 )   $ (0.04 )
Weighted average number of shares of common stock used in calculating net loss per share of common stock:                                
Basic and diluted     39,692,826       39,682,826       39,692,826       39,550,411  

The accompanying notes are an integral part of these condensed consolidated financial statements

   
   
SNAP INTERACTIVE, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
   
    Six Months
Ended June 30,
 
    2016     2015  
Cash flows from operating activities:                
Net loss   $ (2,342,136 )   $ (1,478,165 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     71,784       96,007  
Stock-based compensation expense     291,032       506,455  
Loss on disposal of fixed assets     -       79,628  
Amortization of debt issuance cost     77,917       60,198  
Amortization of debt discount     525,644       397,863  
Change in fair value of derivative liabilities     856,575       (410,000 )
Changes in operating assets and liabilities:                
  Credit card holdback receivable     3,034       419,599  
  Accounts receivable     18,072       (43,213 )
  Security deposits     -       (85,555 )
  Prepaid expenses and other current assets     45,530       (22,210 )
  Accounts payable, accrued expenses and other current liabilities     17,951       (873,646 )
  Deferred rent     11,598       49,027  
  Deferred subscription revenue     (97,436 )     (129,203 )
  Deferred advertising revenue     -       (13,427 )
Net cash used in operating activities     (520,435 )     (1,446,642 )
Cash flows from investing activities:                
Purchase of property and equipment     (12,204 )     (37,007 )
Proceeds from sale of fixed assets     -       6,000  
Issuance to employees of note receivable and accrued interest     (1,329 )     (1,280 )
Notes receivable     -       -  
Net cash used in investing activities     (13,533 )     (32,287 )
Cash flows from financing activities:                
Payments of capital lease obligations     (35,377 )     (30,479 )
(Repayment of) proceeds from promissory notes     -       (400,000 )
Payment of financing costs     -       (314,249 )
Proceeds from issuance of promissory notes     -       3,000,000  
Net cash (used in) provided by financing activities     (35,377 )     2,255,272  
Net increase (decrease) in cash and cash equivalents     (569,345 )     776,343  
Balance of cash and cash equivalents at beginning of period     2,131,262       1,138,385  
Balance of cash and cash equivalents at end of period   $ 1,561,917     $ 1,914,728  
Supplemental disclosure of cash flow information:                
Cash paid in interest and taxes   $ 180,000     $ 90,000  
                 
Non-cash investing and financing activities:                
Compound embedded derivative under the Senior Note and Securities Purchase Agreement recorded as derivative liabilities (See Note 5)   $ -     $ 1,748,000  
Warrants issued under the Advisory Services Agreement as additional consideration for the Senior Note and recorded as derivative liabilities (See Note 5)   $ -     $ 342,000  
Common stock issued under the Advisory Services Agreement as additional consideration for the Senior Note   $ -     $ 30,000  
                 
   
   
SNAP INTERACTIVE, INC.  
RECONCILIATION OF ADJUSTED EBITDA  
(Unaudited)  
   
    Three Months Ended  
June 30,     March 31,  
    2016     2015     2016  
Reconciliation of Net loss to Adjusted EBITDA:                        
Net loss   $ (841,133 )   $ (258,986 )   $ (1,501,004 )
Interest expense (income), net     427,306       430,611       425,674  
Loss on disposal of fixed assets     --       --       --  
Depreciation and amortization expense     35,269       35,188       36,515  
Change in fair value of derivative liabilities     110,000       (410,000 )     746,545  
Stock-based compensation expense     137,258       276,592       153,774  
Adjusted EBITDA (a non-GAAP measure)   $ (131,300 )   $ 73,405     $ (138,466 )
                         
                         

Non-GAAP Financial Measures and Key Metrics

The Company has provided in this release certain non-GAAP financial measures, including Adjusted EBITDA, and other key metrics, including bookings, to supplement the condensed consolidated financial statements, which are prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). The Company defines Adjusted EBITDA as net loss adjusted to exclude interest income (expense), net, depreciation and amortization expense, gain (loss) on change in fair value of derivative liabilities, loss on disposal of fixed assets and stock-based compensation expense. The Company calculates bookings as subscription revenue recognized during the period plus the change in deferred subscription revenue recognized during the period.

Management uses these financial metrics internally in analyzing the Company's financial results to assess operational performance and to determine the Company's future capital requirements. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP. The Company believes that both management and investors benefit from referring to these financial metrics in assessing our performance and when planning, forecasting and analyzing future periods. The Company believes these financial metrics are useful to investors and others to understand and evaluate the Company's operating results and it allows for a more meaningful comparison between the Company's performance and that of competitors.

Some limitations of bookings and Adjusted EBITDA as financial measures include that:

  • Bookings does not reflect that we recognize subscription revenue from subscription fees over the length of the subscription term and subscription revenue from micro-transactions over a two-month period;
  • Adjusted EBITDA does not (i) reflect cash capital expenditure requirements for assets underlying depreciation and amortization expense that may need to be replaced or for new capital expenditures; (ii) the Company's working capital requirements; (iii) consider the potentially dilutive impact of stock-based compensation; (iv) reflect interest expense or interest payments on our outstanding indebtedness; or (v) reflect the change in fair value of warrants; and
  • Other companies, including companies in our industry, may calculate bookings or Adjusted EBITDA differently or choose not to calculate bookings or Adjusted EBITDA at all, which reduces their usefulness as comparative measures.

Because of these limitations, you should consider these financial metrics along with other financial performance measures, including total revenues, subscription revenue, deferred revenue, net income (loss), cash and cash equivalents, restricted cash, net cash used in operating activities and our financial results presented in accordance with GAAP.

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