SOURCE: Spark Networks

Spark Networks

August 08, 2013 16:01 ET

Spark Networks® Reports Second Quarter Financial Results

LOS ANGELES, CA--(Marketwired - Aug 8, 2013) -  Spark Networks, Inc. (NYSE MKT: LOV)

  • Total revenue growth of 17%
  • Christian Networks revenue growth of 37%
  • Jewish Networks revenue grew for second time since 2008
  • 10 consecutive quarters of revenue growth
  • Average paying subscriber1 growth of 20% to 302,000

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 second quarter ended June 30, 2013.

Q2 2013 Highlights

       
  Q2 2012   Q2 2013
Revenue $15.0 Million   $17.6 Million
Contribution Margin2 33%   21%
Net Loss $(1.0) Million   $(3.3) Million
Net Loss Per Share $(0.05)   $(0.15)
       

Management Commentary

"Coming off the best first quarter in our company's history, the second quarter represented another record-breaking one for us," said Greg Liberman, Spark Networks' Chief Executive Officer. "Year-over-year revenue increased for the tenth consecutive quarter, growing 17% to a record $17.6 million and average paying subscribers grew another 20% to exceed the 300,000 threshold for the first time. While our category-leading Christian Networks segment, and its 37% increase in revenue and 43% increase in subscribers, was the biggest driver of that growth, our Jewish Networks segment also played a meaningful role. Jewish Networks' revenue and subscriber bases grew for only the second time since 2008 while maintaining its nearly 90% contribution margin. 

"Immediately after our first quarter earnings call, we embarked on a multi-city roadshow that culminated in a successful follow-on offering. Not only did we raise approximately $12 million of primary proceeds but, with the addition of the secondary shares in the offering, we were also able to increase our liquidity profile post-offering, as reflected by both our increased average daily trading volume and average daily trading value. The follow-on offering also served as a catalyst for expanding our institutional investor base, as we added a number of terrific new stockholders. Going forward, we remain confident in the long-term growth prospects of our business and look forward to further expanding investor awareness of Spark Networks."

Q2 2013 Financial Results

Revenue was $17.6 million, an increase of 17% compared to $15.0 million in the second quarter of 2012. The Christian Networks segment was the primary driver of that growth.

Contribution3 was $3.8 million, a decrease of 23% compared to $4.9 million in the second quarter of 2012. 

Total cost and expenses were $20.8 million, an increase of 28% compared to $16.2 million in the second quarter of 2012. The higher costs primarily reflect a $3.7 million increase in Christian Networks direct marketing expenses, reflecting the company's continued focus on meaningfully growing its subscriber base in this segment.

Net loss was $3.3 million, or $0.15 per share, compared to a net loss of $1.0 million, or $0.05 per share, in the second quarter of 2012. 

Adjusted EBITDA4 was a loss of $2.3 million, compared to a loss of $592,000 in the second quarter of 2012. 

Average paying subscribers for the Jewish Networks, Christian Networks and Other Networks segments were 302,268, an increase of 20% compared to 250,934 in the second quarter of 2012. 

Balance Sheet, Cash, Debt
As of June 30, 2013, the Company had cash and cash equivalents of $18.4 million, an increase of 76% from $10.5 million at December 31, 2012. As of June 30, 2013, the Company had no outstanding debt.

   
   
SPARK NETWORKS, INC.  
SEGMENT5 RESULTS FROM OPERATIONS  
(in thousands except subscriber and ARPU information)  
   
   
    Q2 2012     Q3 2012     Q4 2012     Q1 2013     Q2 2013     Q2 '13 v. Q2 '12  
                                               
Net Revenue                                              
Jewish Networks   $ 6,452     $ 6,385     $ 6,617     $ 6,452     $ 6,460     0.1 %
Christian Networks     7,505       8,495       8,721       9,908       10,260     36.7 %
Other Networks     995       903       836       815       775     -22.1 %
Offline & Other Businesses     94       88       97       88       86     -8.5 %
  Total Net Revenue   $ 15,046     $ 15,871     $ 16,271     $ 17,263     $ 17,581     16.8 %
                                               
Direct Mktg. Exp.                                              
Jewish Networks   $ 647     $ 829     $ 834     $ 751     $ 776     19.9 %
Christian Networks     9,205       10,920       11,480       11,722       12,866     39.8 %
Other Networks     251       213       201       199       152     -39.4 %
Offline & Other Businesses     37       29       69       26       31     -16.2 %
  Total Direct Mktg. Exp.   $ 10,140     $ 11,991     $ 12,584     $ 12,698     $ 13,825     36.3 %
                                               
Contribution                                              
Jewish Networks   $ 5,805     $ 5,556     $ 5,783     $ 5,701     $ 5,684     -2.1 %
Christian Networks     (1,700 )     (2,425 )     (2,759 )     (1,814 )     (2,606 )   -53.3 %
Other Networks     744       690       635       616       623     -16.3 %
Offline & Other Businesses     57       59       28       62       55     -3.5 %
  Total Contribution   $ 4,906     $ 3,880     $ 3,687     $ 4,565     $ 3,756     -23.4 %
                                               
Average Paying Subs.                                              
Jewish Networks     84,348       84,650       85,736       85,200       84,487     0.2 %
Christian Networks     137,768       154,747       168,394       186,896       196,598     42.7 %
Other Networks     28,818       26,678       25,130       23,435       21,183     -26.5 %
  Total Avg. Paying Subs.6     250,934       266,075       279,260       295,531       302,268     20.5 %
                                                 
ARPU                                              
Jewish Networks   $ 24.77     $ 24.61     $ 24.93     $ 24.86     $ 25.15     1.5 %
Christian Networks     17.13       17.26       16.43       16.84       16.55     -3.4 %
Other Networks     10.36       10.61       10.36       10.84       11.49     10.9 %
  Total ARPU7   $ 18.92     $ 18.93     $ 18.49     $ 18.68     $ 18.60     -1.7 %
                                               
                                               
                                               

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 August 22, 2013.

Replay 
Toll-Free (United States): 1-877-870-5176
International: 1-858-384-5517
Passcode: 418527

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 "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.

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

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

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 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.

   
   
(Consolidated financial statements to follow)  
   
SPARK NETWORKS, INC.  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share data)  
   
   
  December 31,     June 30,  
  2012     2013  
Assets           (unaudited)  
Current assets:              
  Cash and cash equivalents $ 10,458     $ 18,407  
  Restricted cash   1,232       1,363  
  Accounts receivable   1,510       1,330  
  Deferred tax asset, net - current   8       10  
  Prepaid expenses and other   861       1,455  
    Total current assets   14,069       22,565  
Property and equipment, net   3,133       3,623  
Goodwill   8,861       9,029  
Intangible assets, net   2,143       2,147  
Deferred tax asset, net - non-current   5       4  
Other assets   153       328  
    Total assets $ 28,364     $ 37,696  
               
Liabilities and Stockholders' Equity              
Current liabilities:              
  Accounts payable $ 1,093     $ 1,263  
  Accrued liabilities   5,339       4,512  
  Deferred revenue   8,128       9,024  
  Deferred tax liability - current   257       257  
    Total current liabilities   14,817       15,056  
Deferred tax liability - non-current   1,413       1,582  
Other liabilities   588       1,438  
    Total liabilities   16,818       18,076  
Commitments and contingencies              
Stockholders' equity:              
Authorized capital stock consists of 100,000,000 shares of Common Stock, $0.001 par value; issued and outstanding: 23,574,416 shares at June 30, 2013 and 20,945,364 shares at December 31, 2012:   21       24  
  Additional paid-in-capital   54,857       69,122  
  Accumulated other comprehensive income   712       734  
  Accumulated deficit   (44,044 )     (50,260 )
  Total stockholders' equity   11,546       19,620  
    Total liabilities and stockholders' equity $ 28,364     $ 37,696  
               
               
               
SPARK NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
 
  Three Months Ended
June 30,
    Six Months Ended
June 30,
  2012     2013     2012     2013
                             
Revenue $ 15,046     $ 17,581     $ 29,601     $ 34,844
                             
Cost and expenses:                            
  Cost of revenue (exclusive of depreciation shown separately below)   10,976       14,770       22,824       28,427
  Sales and marketing   983       1,287       1,956       2,549
  Customer service   622       688       1,235       1,391
  Technical operations   355       267       705       599
  Development   844       793       1,690       1,584
  General and administrative   2,052       2,274       4,290       5,208
  Depreciation   413       472       816       925
  Amortization of intangible assets   -       -       13       -
  Impairment of long-lived assets   -       265       -       265
Total cost and expenses   16,245       20,816       33,529       40,948
                             
Operating loss   (1,199 )     (3,235 )     (3,928 )     (6,104)
Interest expense (income) and other, net   113       (43 )     (14 )     (96)
Loss before income taxes   (1,312 )     (3,192 )     (3,914 )     (6,008)
                             
(Benefit) provision for income taxes   (311 )     84       (1,200 )     208
Net loss $ (1,001 )   $ (3,276 )   $ (2,714 )   $ (6,216)
                             
Net loss per share--basic and diluted $ (0.05 )   $ (0.15 )   $ (0.13 )   $ (0.29)
Weighted average shares outstanding - basic and diluted   20,625       22,485       20,611       21,745
                             
                             
                             
Stock-based compensation: Three Months
Ended June 30,
  Six Months
Ended June 30,
(in thousands)
  2012   2013   2012   2013
Cost of revenue $ 2   $ -   $ 4   $ -
Sales and marketing   18     37     38     71
Customer service   1     -     1     -
Technical operations   30     1     60     2
Development   10     3     21     7
General and administrative   138     153     279     302
                       
                       
                       
Reconciliation of Net Loss to Adjusted EBITDA:
(in thousands)
Three Months
Ended June 30,
    Six Months
 Ended June 30,
 
  2012     2013     2012     2013  
                       
Net loss ($1,001 )   ($3,276 )   ($2,714 )   ($6,216 )
Interest 15     19     27     34  
Taxes (311 )   84     (1,200 )   208  
Depreciation 413     472     816     925  
Amortization -     -     13     -  
EBITDA (884 )   (2,701 )   (3,058 )   (5,049 )
Stock-based compensation 199     194     403     382  
Impairment of long-lived assets -     265     -     265  
Non-cash currency translation adjustments 244     (37 )   119     (116 )
Non-repetitive property possession (151 )   -     (151 )   -  
Adjusted EBITDA ($592 )   ($2,279 )   ($2,687 )   ($4,518 )
                       

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