SOURCE: Spark Networks, Inc.

Spark Networks, Inc.

March 05, 2014 16:01 ET

Spark Networks® Reports Fourth Quarter Financial Results

LOS ANGELES, CA--(Marketwired - Mar 5, 2014) - Spark Networks, Inc. (NYSE MKT: LOV)

  • Total revenue grew Y/Y for 12th consecutive quarter
  • Total contribution1 grew 16% Y/Y
  • Christian Networks revenue grew Y/Y for 13th consecutive quarter
  • Christian Networks ARPU2 grew Q/Q for first time since Q1 2013

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 fourth quarter and full year ended December 31, 2013.

Financial Highlights

       
  Q4 2012   Q4 2013
Revenue $16.3 Million   $17.2 Million
Contribution Margin3 23%   25%
Net Loss $10.5 Million   $3.5 Million
Net Loss Per Share $0.51   $0.15
       

Management Commentary
"2013 marked our third consecutive year of growth as we continued to execute our long-term strategic plan," said Greg Liberman, Spark Networks' Chairman and Chief Executive Officer. "And, unlike the previous two years, in addition to delivering 12% revenue growth, we also demonstrated a meaningful 8% improvement in contribution for the year, punctuated by a 16% increase in Q4 contribution."

"Our dual engines -- the Christian and Jewish Networks segments, anchored by ChristianMingle and JDate -- once again drove our performance. In 2013, Christian Networks grew 27%, generated more than $40 million in revenue and constituted 58% of the company's revenue base. While impressive in a vacuum, that is even more notable given that Christian Networks generated less than $6 million and comprised just 14% of our revenue when we relaunched the business three years ago. And, from a competitive perspective, with nearly 80% awareness, ChristianMingle has clearly become our second iconic brand that sits at the heart of its community." 

Financial Results

Revenue in the fourth quarter of 2013 was $17.2 million, an increase of 6% compared to the year ago period. Full year 2013 revenue was $69.4 million, a 12% increase compared to 2012. The Christian Networks segment was the primary driver of that growth.

Contribution in the fourth quarter of 2013 was $4.3 million, an increase of 16% compared to the year ago period. Full year 2013 contribution was $17.3 million, an increase of 8% compared to 2012. A 35% and 21% increase in Christian Networks contribution for the quarter and full year, respectively, drove the gains in total company contribution.

Total cost and expenses in the fourth quarter of 2013 were $20.7 million, an increase of 10% compared to the year ago period. Full year 2013 total cost and expenses were $81.5 million, a 15% increase compared to 2012. Our increased direct marketing investment in the Christian Networks segment, the expansion of our mobile product and media business teams and higher legal fees drove the majority of growth in total cost and expenses for the quarter and the full year. 

Net loss in the fourth quarter of 2013 was $3.5 million, or $0.15 per share, compared to a net loss of $10.5 million, or $0.51 per share, in the year ago period. Full year 2013 net loss was $12.4 million, or $0.54 per share, compared to a net loss of $15.0 million, or $0.72 per share, in 2012. 

Adjusted EBITDA4 in the fourth quarter of 2013 was a loss of $2.8 million, compared to a loss of $2.0 million in the year-ago period. Full year 2013 Adjusted EBITDA was a loss of $9.1 million, compared to a loss of $6.7 million in 2012.

Total average paying subscribers5 in the fourth quarter of 2013 were 292,760, an increase of 5% compared to the year ago period. Full year 2013 average paying subscribers were 297,696, a 15% increase compared to 2012. The growth in our Christian Networks average paying subscribers drove the total company average paying subscriber increases.

Balance Sheet, Cash, Debt
As of December 31, 2013, the company had cash and cash equivalents of $14.7 million, an increase of 41% from $10.5 million at December 31, 2012. As of December 31, 2013, the company had no outstanding debt.

   
   
SPARK NETWORKS, INC. SEGMENT6  
RESULTS FROM OPERATIONS  
(in thousands except subscriber and ARPU information)  
   
   
  Q4 2012     Q1 2013     Q2 2013     Q3 2013     Q4 2013     Q4 '13 v. Q4 '12  
                                             
Net Revenue                                            
Jewish Networks $ 6,617     $ 6,452     $ 6,460     $ 6,433     $ 6,444     -2.6 %
Christian Networks   8,721       9,908       10,260       10,088       9,989     14.5 %
Other Networks   836       815       775       715       667     -20.2 %
Offline & Other Businesses   97       88       86       125       104     7.2 %
  Total Net Revenue $ 16,271     $ 17,263     $ 17,581     $ 17,361     $ 17,204     5.7 %
                                             
Direct Mktg. Exp.                                            
Jewish Networks $ 834     $ 751     $ 776     $ 822     $ 991     18.8 %
Christian Networks   11,480       11,722       12,866       11,659       11,769     2.5 %
Other Networks   201       199       152       123       121     -39.8 %
Offline & Other Businesses   69       26       31       30       36     -47.8 %
  Total Direct Mktg. Exp. $ 12,584     $ 12,698     $ 13,825     $ 12,634     $ 12,917     2.6 %
                                             
Contribution                                            
Jewish Networks $ 5,783     $ 5,701     $ 5,684     $ 5,611     $ 5,453     -5.7 %
Christian Networks   (2,759 )     (1,814 )     (2,606 )     (1,571 )     (1,780 )   35.5 %
Other Networks   635       616       623       592       546     -14.0 %
Offline & Other Businesses   28       62       55       95       68     142.9 %
  Total Contribution $ 3,687     $ 4,565     $ 3,756     $ 4,727     $ 4,287     16.3 %
                                             
Average Paying Subs.                                            
Jewish Networks   85,736       85,200       84,487       83,732       83,175     -3.0 %
Christian Networks   168,394       186,896       196,598       197,420       192,349     14.2 %
Other Networks   25,130       23,435       21,183       19,073       17,236     -31.4 %
  Total Avg. Paying Subs.7   279,260       295,531       302,268       300,225       292,760     4.8 %
ARPU                                            
Jewish Networks $ 24.93     $ 24.86     $ 25.15     $ 25.28     $ 25.34     1.7 %
Christian Networks   16.43       16.84       16.55       16.07       16.14     -1.7 %
Other Networks   10.36       10.84       11.49       12.08       12.44     20.0 %
  Total ARPU7 $ 18.49     $ 18.68     $ 18.60     $ 18.38     $ 18.54     0.3 %
                                             

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 March 19, 2014.

Replay 
Toll-Free (United States): 1-877-870-5176 
International: 1-858-384-5517
Passcode: 13574700

Safe Harbor Statement:
This press release contains forward-looking statements. Any statements in this news release that are not statements of historical fact may be considered to be forward-looking statements. Written words, such as "may," "will," "expect," "believe," "anticipate," "estimate," "intends," "goal," "objective," "seek," "attempt," or variations of these or similar words, identify forward-looking statements. By their nature, forward-looking statements and forecasts involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the near future. There are a number of factors that could cause actual results and developments to differ materially, including, but not limited to our ability to: attract members; convert members into paying subscribers and retain our paying subscribers; develop or acquire new product offerings and successfully implement and expand those offerings; keep pace with rapid technological changes; maintain the strength of our existing brands and maintain and enhance those brands; continue to depend upon the telecommunications infrastructure and our networking hardware and software infrastructure; estimate on-going general and administrative costs, and obtain financing on acceptable terms. For a discussion of these and further risks and uncertainties, please see our filings with the Securities and Exchange Commission. We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information that we file at the SEC's public reference room at 100 F Street, N.E., Washington, D.C., 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our public filings with the SEC also are available from commercial document retrieval services and at the Web site maintained by the SEC at http://www.sec.gov.

About Spark Networks, Inc.:
The Spark Networks portfolio of consumer Web sites includes, among others, JDate®.com (www.jdate.com), ChristianMingle®.com (www.christianmingle.com), Spark®.com (www.spark.com), BlackSingles.com® (www.blacksingles.com), and SilverSingles®.com (www.silversingles.com).

1 "Contribution" is defined as revenue, net of credits and credit card chargebacks, less direct marketing.

2 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.

3 "Contribution Margin" is defined as Contribution divided by revenue, net of credits and credit card chargebacks.

4 The company reports Adjusted EBITDA as a supplemental measure to generally accepted accounting principles ("GAAP"). This measure is one of the primary metrics by which we evaluate the performance of our businesses, budget, forecast and compensate management. We believe this measure provides management and investors with a consistent view, period to period, of the core earnings generated from on-going operations and excludes the impact of: (i) non-cash items such as stock-based compensation, asset impairments, non-cash currency translation adjustments related to an inter-company loan and (ii) one-time items that have not occurred in the past two years and are not expected to recur in the next two years. Adjusted EBITDA should not be construed as a substitute for net income (loss) (as determined in accordance with GAAP) for the purpose of analyzing our operating performance or financial position, as Adjusted EBITDA is not defined by GAAP.

"Adjusted EBITDA" is defined as earnings before interest, taxes, depreciation, amortization, stock-based compensation, impairment of long-lived assets, non-cash currency translation adjustments for an inter-company loan and the income (loss) recognized from non-cash assets received in connection with a legal judgment.

5 "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.

6 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.

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

   
   
SPARK NETWORKS, INC.  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share data)  
   
   
  December 31,     December 31,  
  2012     2013  
Assets              
Current assets:              
  Cash and cash equivalents $ 10,458     $ 14,723  
  Restricted cash   1,232       1,296  
  Accounts receivable   1,510       1,569  
  Deferred tax asset - current   8       10  
  Prepaid expenses and other   861       1,787  
    Total current assets   14,069       19,385  
Property and equipment, net   3,133       3,901  
Goodwill   8,861       9,305  
Intangible assets, net   2,143       2,269  
Deferred tax asset - non-current   5       186  
Deposits and other assets   153       208  
  Total assets $ 28,364     $ 32,254  
               
Liabilities and Stockholders' Equity              
Current liabilities:              
  Accounts payable $ 1,093     $ 1,516  
  Accrued liabilities   5,339       5,761  
  Deferred revenue   8,128       8,830  
  Deferred tax liability - current portion   257       526  
    Total current liabilities   14,817       16,633  
Deferred tax liability   1,413       1,781  
Other liabilities - non-current   588       1,717  
    Total liabilities   16,818       20,131  
Commitments and contingencies              
Stockholders' equity:              
Authorized capital stock consists of 100,000,000 shares of Common Stock, $0.001 par value; issued and outstanding: 24,001,937 and 20,945,364 shares at December 31, 2013 and 2012, respectively:   21       24  
  Additional paid-in-capital   54,857       70,747  
  Accumulated other comprehensive income   712       776  
  Accumulated deficit   (44,044 )     (56,424 )
  Total stockholders' equity   11,546       15,123  
    Total liabilities and stockholders' equity $ 28,364     $ 35,254  
   
   
   
SPARK NETWORKS, INC.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(unaudited, in thousands, except per share data)  
   
   
  Three Months Ended December 31,     Years Ended December 31,  
  2012     2013     2011     2012     2013  
                                       
Revenue $ 16,271     $ 17,204     $ 48,493     $ 61,743     $ 69,409  
                                       
Cost and expenses:                                      
  Cost of revenue (exclusive of depreciation shown separately below)   13,491       13,911       28,955       49,216       55,958  
  Sales and marketing   1,015       1,629       3,722       3,991       5,601  
  Customer service   647       765       1,980       2,534       2,902  
  Technical operations   296       280       1,367       1,363       1,167  
  Development   797       799       2,710       3,346       3,129  
  General and administrative   2,237       2,790       8,068       8,787       10,494  
  Depreciation   431       533       1,320       1,673       1,987  
  Amortization of intangible assets   -       10       370       13       20  
  Impairment of goodwill, long-lived assets and other assets   -       -       1,145       -       265  
Total cost and expenses   18,914       20,717       49,637       70,923       81,523  
                                       
Operating loss   (2,643 )     (3,513 )     (1,144 )     (9,180 )     (12,114 )
Interest (income) expense and other, net   (188 )     (56 )     162       (238 )     (229 )
Loss before income taxes   (2,455 )     (3,457 )     (1,306 )     (8,942 )     (11,885 )
                                       
Provision for income taxes   8,083       92       305       6,047       495  
Net loss $ (10,538 )   $ (3,549 )   $ (1,611 )   $ (14,989 )   $ (12,380 )
                                       
Net loss per share - basic and diluted $ (0.51 )   $ (0.15 )   $ (0.08 )   $ (0.72 )   $ (0.54 )
Weighted average shares outstanding - basic and diluted   20,816       23,938       20,591       20,781       22,795  
                                       
                                       
         
Stock-based compensation:        
(in thousands)        
         
    Three Months Ended December 31,   Year Ended December 31,
    2012   2013   2011   2012   2013
Cost of revenue   $ 2   $ -   $ 8   $ 8   $ -
Sales and marketing     21     38     80     76     145
Customer service     1     -     -     2     -
Technical operations     29     -     119     118     4
Development     11     -     42     42     10
General and administrative     150     153     657     567     608
                               
                               
                               
 Reconciliation of Net Loss (Income) to Adjusted EBITDA:
 (in thousands)
  Three Months Ended December 31,     Years Ended
December 31,
 
    2012     2013     2011     2012     2013  
                                         
Net loss   $ (10,538 )   $ (3,549 )   $ (1,611 )   $ (14,989 )   $ (12,380 )
Interest     16       18       102       59       71  
Taxes     8,083       92       305       6,047       495  
Depreciation     431       533       1,320       1,673       1,987  
Amortization     -       10       370       13       20  
EBITDA     (2,008 )   (2,896 )     486       (7,197 )     (9,807 )
Stock-based compensation     214       191       906       813       767  
Impairment of long-lived assets and other assets     -       -       1,145       -       265  
Non-cash currency translation adjustments     (201 )     (82 )     337       (124 )     (297 )
Non-repetitive property possession     -       -       (247 )     (151 )     -  
Adjusted EBITDA   $ (1,995 )   $ (2,787 )   $ 2,627     $ (6,659 )   $ (9,072 )
                                         

Contact Information

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