Q3 2010 Q3 2009
------------ -------------
Revenue $9.9 Million $11.1 Million
Contribution Margin 75% 72%
Net Income $1.2 Million $1.0 Million
Net Income Per Share $0.06 $0.05
"Third quarter revenue from our subscription and online advertising
business grew sequentially for the first time in four years behind a slight
increase in ARPU(1) offset by a slight decrease in Average Paying
Subscribers(2)," said Adam Berger, Spark's Chairman and CEO. "We are pleased
our Jewish Networks segment achieved both ARPU and unit subscriber growth."
Financial Results
Revenue for the third quarter of 2010 was $9.9 million, a decrease of 10%
compared to $11.1 million for the third quarter 2009, and a decrease of 4%
compared to $10.3 million in the prior quarter. Revenue for the first nine
months of 2010 was $30.7 million, a 10% decrease compared to $34.3 million
for the same period last year.
Contribution(3) for the third quarter of 2010 was $7.5 million, a decrease
of 7% compared to $8.0 million for the third quarter of 2009, and a 3%
decrease compared to $7.7 million in the prior quarter. Contribution for
the first nine months of 2010 was $23.3 million, a 9% decrease compared to
$25.4 million for the same period last year.
Total cost and expenses for the third quarter of 2010 were $8.1 million, an
11% decrease compared to $9.1 million in the third quarter of 2009, and a
6% decrease compared to $8.6 million in the prior quarter. Total cost and
expenses for the first nine months of 2010 were $25.7 million, a 12%
decrease compared to $29.2 million for the same period last year.
Net income for the third quarter of 2010 was $1.2 million, or $0.06 per
share, compared to $1.0 million, or $0.05 per share, for the third quarter
of 2009 and $923,000 or $0.04 per share for the prior quarter. Net income
for the first nine months of 2010 was $3.1 million, or $0.15 per share,
compared to $3.2 million or $0.16 per share for the first nine months of
2009.
Adjusted EBITDA(4) for the third quarter of 2010 was $2.4 million, a
decrease of 7% compared to $2.6 million for the third quarter of 2009, and
an increase of 5% compared to $2.3 million in the prior quarter. Adjusted
EBITDA for the first nine months of 2010 was $7.4 million, a 7% decrease
compared to $8.0 million for the same period last year.
Average paying subscribers for the Company, as a whole, in the third
quarter of 2010 were 158,422, a decrease of 4% compared to 165,206 for the
third quarter of 2009 and a 1% decrease compared to 160,239 for the prior
quarter. Average paying subscribers for the first nine months of 2010 were
162,831, a 2% decrease compared to 165,475 for the same period last year.
Segment Reporting(5)
Third quarter 2010 revenue for Jewish Networks was $6.8 million, a decrease
of 4% compared to $7.1 million for the third quarter of 2009 and a 2%
increase compared to $6.7 million for the prior quarter. Jewish Networks
revenue for the first nine months of 2010 was $20.5 million, a 6% decrease
compared to $21.7 million for the same period last year.
Third quarter 2010 revenue for Other Affinity Networks was $2.7 million, a
decrease of 14% compared to $3.2 million for the third quarter of 2009, and
a decrease of 1% compared to $2.8 million in the prior quarter. Other
Affinity Networks revenue for the first nine months of 2010 was $8.5
million, a 13% decrease compared to $9.8 million for the same period last
year.
Third quarter 2010 revenue for General Market Networks was $264,000, a
decrease of 54% compared to $574,000 for the third quarter of 2009, and an
11% decrease compared to $298,000 in the prior quarter. General Market
Networks revenue for the first nine months of 2010 was $932,000, a 58%
decrease compared to $2.2 million for the same period last year.
Third quarter 2010 revenue for Offline & Other Businesses was $142,000, a
decrease of 34% compared to $215,000 for the third quarter of 2009, and a
74% decrease compared to $549,000 in the prior quarter. The year-over-year
lower revenue reflects fewer hosted events while the sequential decline
reflects the absence of a travel offering in the third quarter of 2010.
Offline & Other Businesses revenue for the first nine months of 2010 was
$805,000, a 35% increase compared to $598,000 for the same period last
year.
Average paying subscribers for Jewish Networks were 89,792 during the third
quarter of 2010, an increase of 4% compared to 86,051 for the third quarter
of 2009, and a 1% increase compared to 89,055 for the prior quarter.
Jewish Networks average paying subscribers for the first nine months of
2010 were 90,694, a 7% increase compared to 84,488 for the same period last
year.
Average paying subscribers for Other Affinity Networks were 62,026 during
the third quarter of 2010, a decrease of 7% compared to 66,786 for the
third quarter of 2009 and a 3% decrease compared to 64,083 for the prior
quarter. Other Affinity Networks average paying subscribers for the first
nine months of 2010 were 64,744, a 1% decrease compared to 65,529 for the
same period last year.
Average paying subscribers for General Market Networks were 5,888 during
the third quarter of 2010, a decrease of 49% compared to 11,452 for the
third quarter of 2009, and an 8% decrease compared to 6,434 for the prior
quarter. General Market Networks average paying subscribers for the first
nine months of 2010 were 6,712, a 53% decrease compared to 14,428 for the
same period last year.
Balance Sheet, Cash, Debt
As of September 30, 2010, the Company had cash and cash equivalents of
$12.7 million compared to $6.2 million at December 31, 2009. As of
September 30, 2010, the Company had no outstanding debt.
Investor Conference Call
The Company will discuss its financial results during a live teleconference
tomorrow at 1:30 p.m. Pacific time.
Call Title: Spark Networks Q3 '10 Financial Results Toll-Free (United States): 1-888-765-5570 International: 1-913-312-1477 Passcode: 5753745 Digital Replay through November 25, 2010: Toll-Free (United States): 1-888-203-1112 International: 1-719-457-0820 Passcode: 5753745In addition, the Company will host a webcast of the call which will be accessible in the Investor Relations section of the Company's website under "Conference Calls and Presentations" at: http://www.spark.net/investor.htm. 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 and our dependence 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 special 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 websites includes, among others, JDate®.com (www.jdate.com), Spark®.com (www.spark.com), BlackSingles.com® (www.blacksingles.com), and ChristianMingle®.com (www.christianmingle.com). (1) "ARPU" is defined as average revenue per user. (2) "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. (3) "Contribution" is defined as revenue, net of credits and credit card chargebacks, less direct marketing and "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, such as the Scheme of Arrangement. 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 inter-company loans and the income recognized from 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 General Market Networks segment consists of the Company's Spark.com Web site (formerly known as AmericanSingles.com, Date.co.uk and Date.ca) and its co-branded and private label Web sites. The Other Affinity Networks segment consists of all of the Company's Provo, Utah-based properties which primarily consist of sites targeted at various religious, ethnic, geographic and special interest groups including BlackSingles.com and ChristianMingle.com. The Offline & Other Businesses segment consists of net revenue generated from offline activities, HurryDate events and subscriptions and other Web sites and businesses. (Consolidated financial statements to follow)
SPARK NETWORKS, INC.
BALANCE SHEET
(in thousands, except share data)
September 30, December 31,
------------- -------------
2010 2009
------------- -------------
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 12,704 $ 6,223
Restricted cash 607 681
Accounts receivable 694 684
Deferred tax asset - current 219 221
Prepaid expenses and other 496 853
------------- -------------
Total current assets 14,720 8,662
Property and equipment, net 2,497 2,277
Goodwill 8,945 8,758
Intangible assets, net 3,289 3,586
Deferred tax asset - non-current 4,708 4,707
Deposits and other assets 295 1,866
------------- -------------
Total assets $ 34,454 $ 29,856
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 869 $ 1,415
Accrued liabilities 5,198 4,232
Deferred revenue 3,899 4,244
------------- -------------
Total current liabilities 9,966 9,891
Deferred tax liability 770 663
Other liabilities non-current 997 978
------------- -------------
Total liabilities 11,733 11,532
Commitments and contingencies -- --
Stockholders' equity:
Authorized capital stock consists of
100,000,000 Common Stock, $0.001 par value;
issued and outstanding 20,587,336 at
September 30, 2010 and 20,581,544 shares as
of December 31, 2009, at stated values of: 21 21
Additional paid-in-capital 50,071 48,813
Accumulated other comprehensive income 699 638
Accumulated deficit (28,070) (31,148)
------------- -------------
Total stockholders' equity 22,721 18,324
------------- -------------
Total liabilities and stockholders'
equity $ 34,454 $ 29,856
============= =============
SPARK NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2010 2009 2010 2009
-------- -------- --------- --------
Revenue $ 9,916 $ 11,058 $ 30,742 $ 34,332
Cost and expenses:
Cost of revenue (exclusive of
depreciation shown separately
below) 3,206 3,849 9,747 11,254
Sales & marketing 774 845 2,708 2,603
Customer service 403 450 1,181 1,432
Technical operations 252 342 930 1,128
Development 773 899 2,332 3,221
General and administrative 2,316 2,311 7,641 7,542
Depreciation 242 236 699 637
Amortization of intangible assets 98 127 324 498
Impairment of goodwill,
long-lived assets and other
assets - - 121 880
-------- -------- --------- --------
Total cost and expenses 8,064 9,059 25,683 29,195
Operating income 1,852 1,999 5,059 5,137
Interest expense (income) and
other, net (182) (44) 18 (1,437)
-------- -------- --------- --------
Income before income taxes 2,034 2,043 5,041 6,574
Provision for income taxes 808 1,036 1,963 3,370
-------- -------- --------- --------
Net income $ 1,226 $ 1,007 $ 3,078 $ 3,204
======== ======== ========= ========
Net income per share - basic and
diluted $ 0.06 $ 0.05 $ 0.15 $ 0.16
-------- -------- --------- --------
Weighted average shares outstanding
- basic 20,587 20,582 20,585 20,566
Weighted average shares outstanding
- diluted 20,590 20,582 20,588 20,574
Three Months Nine Months
Ended September Ended September
30, 30,
--------------- ---------------
Stock-Based Compensation 2010 2009 2010 2009
(in thousands) ------- ------- ------- -------
Cost of revenue 3 2 8 12
Sales and marketing 39 44 198 134
Customer service 0 2 1 9
Technical operations 30 37 134 117
Development 14 22 42 84
General and administrative 172 162 857 506
Reconciliation of Net Income to Adjusted EBITDA
Three Months Ended Nine Months Ended
------------------ ------------------
September 30, September 30,
2010 2009 2010 2009
-------- -------- -------- --------
Net income $ 1,226 $ 1,007 $ 3,078 $ 3,204
Interest 54 116 155 309
Taxes 808 1,036 1,963 3,369
Depreciation 242 236 699 637
Amortization 98 127 324 498
-------- -------- -------- --------
EBITDA 2,428 2,522 6,219 8,017
Stock based compensation 258 269 1,240 862
Impairment of goodwill -- -- 121 880
Non-cash currency translation
adjustments (254) (177) (136) (49)
Non-repetitive property possession -- -- -- (1,742)
-------- -------- -------- --------
Adjusted EBITDA $ 2,432 $ 2,614 $ 7,444 $ 7,968
SPARK NETWORKS, INC.
SEGMENT RESULTS FROM OPERATIONS
(in thousands except subscriber information)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Revenue
Jewish Networks $ 6,766 $ 7,074 $ 20,509 $ 21,721
Other Affinity Networks 2,744 3,195 8,496 9,798
General Market Networks 264 574 932 2,215
Offline & Other Businesses 142 215 805 598
--------- --------- --------- ---------
Total Revenue $ 9,916 $ 11,058 $ 30,742 $ 34,332
========= ========= ========= =========
Direct Marketing Expenses
Jewish Networks $ 696 $ 628 $ 1,735 $ 1,787
Other Affinity Networks 1,601 2,188 4,855 6,345
General Market Networks 121 138 407 559
Offline & Other Businesses 39 100 473 197
--------- --------- --------- ---------
Total Direct Marketing
Expenses $ 2,457 $ 3,054 $ 7,470 $ 8,888
========= ========= ========= =========
Contribution
Jewish Networks $ 6,070 $ 6,446 $ 18,774 $ 19,934
Other Affinity Networks 1,143 1,007 3,641 3,453
General Market Networks 143 436 525 1,656
Offline & Other Businesses 103 115 332 401
--------- --------- --------- ---------
Total Contribution $ 7,459 $ 8,004 $ 23,272 $ 25,444
========= ========= ========= =========
Average Paying Subscribers
Jewish Networks 89,792 86,051 90,694 84,488
Other Affinity Networks 62,026 66,786 64,744 65,529
General Market Networks 5,888 11,452 6,712 14,428
Offline & Other Businesses 716 917 681 1,030
--------- --------- --------- ---------
Total Average Paying
Subscribers 158,422 165,206 162,831 165,475
========= ========= ========= =========
Contact Information: For More Information Investors: Brett Zane + 1-323-658-3000 ext. 4001