SOURCE: Spark Networks, Inc.

Spark Networks, Inc.

May 12, 2014 16:01 ET

Spark Networks® Reports First Quarter Financial Results

LOS ANGELES, CA--(Marketwired - May 12, 2014) - Spark Networks, Inc. (NYSE MKT: LOV)

  • Christian Networks contribution improved 83% Y/Y
  • Total contribution1 grew 15% Y/Y
  • Christian Networks advertising revenue grew 28% Y/Y

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 first quarter ended March 31, 2014.

Financial Highlights

             
    Q1 2013     Q1 2014  
Revenue   $ 17.3 Million     $ 16.6 Million  
Contribution Margin2     26 %     31 %
Net Loss   $ 2.9 Million     $ 2.9 Million  
Net Loss Per Share   $ 0.14     $ 0.12  
                 

Management Commentary

"We are pleased with our first quarter results that clearly demonstrate the value being created by the successful execution of our strategic plan. After reaching critical mass in subscribers and building ChristianMingle into the undisputed leader in Christian dating, we are now focused on driving greater efficiencies and profitability," said Greg Liberman, Spark Networks' Chairman and Chief Executive Officer. 

"Our focus on realizing the operating leverage inherent in our business model yielded significant benefits in the first quarter. Company-wide contribution grew 15% to hit its highest mark in nearly three years, largely driven by an 83% improvement in contribution in our Christian Networks business. That improvement was driven by increases in marketing efficiency, growth in our winback and renewal subscriber bases and a 28% increase in Christian Networks' advertising revenue. As we focus on driving further efficiencies in the business, we expect our profitability to continue to improve.

"Additionally, as we focus on high growth opportunities in adjacent markets, we are especially excited about the early success we are seeing in our media business. Not only is it starting to generate cash for us, but the continued expansion of our media-focused assets demonstrates the further potential to leverage our Christian platform to scale beyond dating and into the $4-plus billion Christian commerce market." 

Financial Results

Revenue in the first quarter of 2014 was $16.6 million, a decrease of 4% compared to the year ago period, and a 3% decrease compared to the prior quarter.

Contribution in the first quarter of 2014 was $5.2 million, an increase of 15% compared to the year ago period, and a 22% increase compared to the prior quarter. An 83% and 82% increase in Christian Networks contribution for the year ago and prior quarter periods, respectively, drove the gains in total company contribution.

Total cost and expenses in the first quarter of 2014 were $19.4 million, a decrease of 4% compared to the year ago period, and a decrease of 6% compared to the prior quarter. The decrease in expenditures during the first quarter of 2014 is largely attributed to a reduction in Christian Networks direct marketing expense.

Net loss in the first quarter of 2014 was $2.9 million, or $0.12 per share, compared to a net loss of $2.9 million, or $0.14 per share, in the year ago period and a net loss of $3.5 million or $0.15 per share in the prior quarter.

Adjusted EBITDA3 in the first quarter of 2014 was a loss of $2.1 million, an improvement of 7% compared to the year ago period and a 26% improvement compared to the prior quarter.

Total average paying subscribers4 in the first quarter of 2014 were 286,042, a decrease of 3% compared to the year ago period and a decrease of 2% compared to the prior quarter.

Balance Sheet, Cash, Debt
As of March 31, 2014, the company had cash and cash equivalents of $10.9 million, a decrease of 26% from $14.7 million at December 31, 2013. As of March 31, 2014, the company had no outstanding debt.

   
   
SPARK NETWORKS, INC.  
SEGMENT RESULTS FROM OPERATIONS5  
(in thousands except subscriber and ARPU information)  
   
    Q1 2013     Q2 2013     Q3 2013     Q4 2013     Q1 2014     Q1 '14 v.
Q1 '13
 
                                               
Net Revenue                                              
Jewish Networks   $ 6,452     $ 6,460     $ 6,433     $ 6,444     $ 6,124     -5.1 %
Christian Networks     9,908       10,260       10,088       9,989       9,789     -1.2 %
Other Networks     815       775       715       667       610     -25.2 %
Offline & Other Businesses     88       86       125       104       93     5.7 %
  Total Net Revenue   $ 17,263     $ 17,581     $ 17,361     $ 17,204     $ 16,616     -3.7 %
                                               
Direct Mktg. Exp.                                              
Jewish Networks   $ 751     $ 776     $ 822     $ 991     $ 1,115     48.5 %
Christian Networks     11,722       12,866       11,659       11,769       10,104     -13.8 %
Other Networks     199       152       123       121       142     -28.6 %
Offline & Other Businesses     26       31       30       36       25     -3.8 %
  Total Direct Mktg. Exp.   $ 12,698     $ 13,825     $ 12,634     $ 12,917     $ 11,386     -10.3 %
                                               
Contribution                                              
Jewish Networks   $ 5,701     $ 5,684     $ 5,611     $ 5,453     $ 5,009     -12.1 %
Christian Networks     (1,814 )     (2,606 )     (1,571 )     (1,780 )     (315 )   82.6 %
Other Networks     616       623       592       546       468     -24.0 %
Offline & Other Businesses     62       55       95       68       68     9.7 %
  Total Contribution   $ 4,565     $ 3,756     $ 4,727     $ 4,287     $ 5,230     14.6 %
                                               
Average Paying Subs.                                              
Jewish Networks     85,200       84,487       83,732       83,175       80,395     -5.6 %
Christian Networks     186,896       196,598       197,420       192,349       189,251     1.3 %
Other Networks     23,435       21,183       19,073       17,236       16,396     -30.0 %
  Total Avg. Paying Subs.6     295,531       302,268       300,225       292,760       286,042     -3.2 %
ARPU7                                              
Jewish Networks   $ 24.86     $ 25.15     $ 25.28     $ 25.34     $ 24.87     0.0 %
Christian Networks     16.84       16.55       16.07       16.14       16.19     -3.9 %
Other Networks     10.84       11.49       12.08       12.44       12.08     11.4 %
  Total ARPU7   $ 18.68     $ 18.60     $ 18.38     $ 18.54     $ 18.40     -1.5 %
                                               
   
   
Distribution of New Subscription Purchases8  
                               
    Q1 2013     Q2 2013     Q3 2013     Q4 2013     Q1 2014  
                               
Jewish Networks                              
  1 month plans   40.1 %   42.2 %   40.1 %   39.9 %   39.5 %
  3 month plans   24.8 %   25.0 %   27.3 %   26.2 %   26.7 %
  6 month plans   35.1 %   32.8 %   32.6 %   33.9 %   33.8 %
    100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
                               
Christian Networks                              
  1 month plans   47.0 %   44.9 %   43.6 %   43.5 %   44.4 %
  3 month plans   23.3 %   25.3 %   23.1 %   25.9 %   21.7 %
  6 month plans   29.7 %   29.8 %   33.3 %   30.6 %   33.9 %
    100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
                               
Other Networks                              
  1 month plans   57.8 %   58.5 %   60.8 %   57.5 %   57.9 %
  3 month plans   15.8 %   13.0 %   12.6 %   12.8 %   13.2 %
  6 month plans   26.4 %   28.5 %   26.5 %   29.7 %   28.9 %
    100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
                               
       
       
    Composition of Average Paying Subscriber Base9  
                               
                               
    Q1 2013     Q2 2013     Q3 2013     Q4 2013     Q1 2014  
                               
Jewish Networks                              
First Time Subscribers   25.1 %   24.8 %   25.3 %   24.2 %   23.1 %
Winback Subscribers   31.7 %   31.5 %   30.6 %   29.9 %   29.3 %
Renewal Subscribers   43.2 %   43.7 %   44.1 %   45.9 %   47.6 %
Total   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
                               
Christian Networks                              
First Time Subscribers   55.8 %   55.0 %   53.8 %   52.0 %   49.1 %
Winback Subscribers   18.0 %   18.4 %   18.5 %   18.9 %   19.3 %
Renewal Subscribers   26.2 %   26.6 %   27.7 %   29.1 %   31.6 %
Total   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
                               
Other Networks                              
First Time Subscribers   35.4 %   34.3 %   33.9 %   31.8 %   32.1 %
Winback Subscribers   21.6 %   22.9 %   24.7 %   24.2 %   23.2 %
Renewal Subscribers   43.0 %   42.8 %   41.4 %   44.0 %   44.7 %
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 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 May 26, 2014.

Replay 
Toll-Free (United States): 1-877-870-5176 
International: 1-858-384-5517
Passcode: 13580619

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; 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 "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 in the United States ("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.

8 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.

9 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)  
   
    December 31,     March 31,  
    2013     2014  
Assets         (unaudited)  
Current assets:                
  Cash and cash equivalents   $ 14,723     $ 10,938  
  Restricted cash     1,296       1,279  
  Accounts receivable     1,569       1,263  
  Deferred tax asset - current     10       11  
  Prepaid expenses and other     1,787       1,800  
    Total current assets     19,385       15,291  
Property and equipment, net     3,901       3,949  
Goodwill     9,305       9,274  
Intangible assets, net     2,269       2,259  
Deferred tax asset - non-current     186       157  
Deposits and other assets     208       212  
    Total assets   $ 35,254     $ 31,142  
                 
Liabilities and Stockholders' Equity                
Current liabilities:                
  Accounts payable   $ 1,516     $ 1,969  
  Accrued liabilities     5,761       5,061  
  Deferred revenue     8,830       8,963  
  Deferred tax liability - current portion     526       526  
    Total current liabilities     16,633       16,519  
Deferred tax liability     1,781       1,784  
Other liabilities - non-current     1,717       1,705  
    Total liabilities     20,131       20,008  
Commitments and contingencies                
Stockholders' equity:                
Authorized capital stock consists of 100,000,000 shares of Common Stock, $0.001 par value; issued and outstanding: 23,800,958 and 24,001,937 shares at March 31, 2014 and December 31, 2013, respectively:     24       26  
  Additional paid-in-capital     70,747       69,649  
  Accumulated other comprehensive income     776       775  
  Accumulated deficit     (56,424 )     (59,316 )
  Total stockholders' equity     15,123       11,134  
    Total liabilities and stockholders' equity   $ 35,254     $ 31,142  
                 
   
   
SPARK NETWORKS, INC.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(unaudited, in thousands, except per share data)  
   
    Three Months Ended
March 31,
 
    2013     2014  
                 
Revenue   $ 17,263     $ 16,616  
                 
Cost and expenses:                
  Cost of revenue (exclusive of depreciation shown separately below)     13,657       12,364  
  Sales and marketing     1,262       1,562  
  Customer service     703       788  
  Technical operations     332       341  
  Development     791       859  
  General and administrative     2,934       2,957  
  Depreciation     453       517  
  Amortization of intangible assets     -       10  
Total cost and expenses     20,132       19,398  
                 
Operating loss     (2,869 )     (2,782 )
Interest (income) expense and other, net     (53 )     31  
Loss before income taxes     (2,816 )     (2,813 )
Provision for income taxes     124       79  
Net loss   $ (2,940 )   $ (2,892 )
                 
Net loss per share--basic and diluted   $ (0.14 )   $ (0.12 )
Weighted average shares outstanding - basic and diluted     20,960       23,922  
                 
       
Stock-based compensation:
(in thousands)
  Three Months Ended
March 31,
 
    2013     2014  
Sales and marketing   $ 34     $ 38  
Technical operations     1       -  
Development     4       -  
General and administrative     149       140  
                 
       
Reconciliation of Net Loss to Adjusted EBITDA: (in thousands)   Three Months Ended
March 31,
 
    2013     2014  
                 
Net loss   $ (2,940 )   $ (2,892 )
Interest     15       12  
Taxes     124       79  
Depreciation     453       517  
Amortization     -       10  
EBITDA     (2,348 )     (2,274 )
Stock-based compensation     188       178  
Non-cash currency translation adjustments     (79 )     20  
Adjusted EBITDA   $ (2,239 )   $ (2,076 )
                 

Contact Information

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