SOURCE: Spark Networks

Spark Networks

November 13, 2013 16:01 ET

Spark Networks® Reports Third Quarter Financial Results

LOS ANGELES, CA--(Marketwired - Nov 13, 2013) -  Spark Networks, Inc. (NYSE MKT: LOV)

  • Total revenue grew for 11th consecutive quarter
  • Total contribution1 grew 22%
  • Christian Networks revenue grew for 12th consecutive quarter
  • Jewish Networks revenue grew for second consecutive quarter

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 third quarter ended September 30, 2013.

Q3 2013 Highlights

             
    Q3 2012     Q3 2013  
Revenue   $ 15.9 Million     $ 17.4 Million  
Contribution Margin2     24 %     27 %
Net Loss   $ (1.7) Million     $ (2.6) Million  
Net Loss Per Share   $ (0.08 )   $ (0.11 )
                 

Management Commentary

"I am pleased to announce another solid quarter of performance, with revenue increasing for the 11th consecutive quarter," said Greg Liberman, Spark Networks' Chief Executive Officer. "Revenue not only grew overall but, importantly, outpaced the growth of our marketing expense. As a result, despite an increase in marketing expense, company-wide contribution hit its highest level since the first half of 2012.

"Fueling our growth, once again, were the dual engines of our business, the Christian and Jewish Networks segments. In our Christian Networks segment, we posted a 28% increase in subscribers, a 19% increase in revenue and the best contribution performance since 2011. And, at the same time, our Jewish Networks segment continued to show its strength, as we posted another quarter of its customary, near-90% contribution margin and also its second consecutive quarter of revenue growth for the first time in more than five years."

Q3 2013 Financial Results

Revenue was $17.4 million, an increase of 9% compared to $15.9 million in the third quarter of 2012. The Christian Networks segment was the primary driver of that growth.

Contribution was $4.7 million, an increase of 22% compared to $3.9 million in the third quarter of 2012. 

Total cost and expenses were $19.9 million, an increase of 7% compared to $18.5 million in the third quarter of 2012. The higher costs primarily reflect a $739,000 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 $2.6 million, or $0.11 per share, compared to a net loss of $1.7 million, or $0.08 per share, in the third quarter of 2012. 

Adjusted EBITDA3 was a loss of $1.8 million, compared to a loss of $2.0 million in the third quarter of 2012. 

Average paying subscribers4 for the Jewish Networks, Christian Networks and Other Networks segments were 300,225, an increase of 13% compared to 266,075 in the third quarter of 2012. 

Balance Sheet, Cash, Debt
As of September 30, 2013, the Company had cash and cash equivalents of $17.2 million, an increase of 65% from $10.5 million at December 31, 2012. As of September 30, 2013, the Company had no outstanding debt.

   
SPARK NETWORKS, INC.  
SEGMENT5 RESULTS FROM OPERATIONS  
(in thousands except subscriber and ARPU information)  
   
    Q3 2012     Q4 2012     Q1 2013     Q2 2013     Q3 2013   Q3 '13 v. Q3 '12  
                                             
Net Revenue                                            
                                             
Jewish Networks   $ 6,385     $ 6,617     $ 6,452     $ 6,460     $ 6,433   0.8 %
Christian Networks     8,495       8,721       9,908       10,260       10,088   18.8 %
Other Networks     903       836       815       775       715   -20.8 %
Offline & Other Businesses     88       97       88       86       125   42.0 %
  Total Net Revenue   $ 15,871     $ 16,271     $ 17,263     $ 17,581     $ 17,361   9.4 %
                                             
Direct Mktg. Exp.                                            
Jewish Networks   $ 829     $ 834     $ 751     $ 776     $ 822   -0.8 %
Christian Networks     10,920       11,480       11,722       12,866       11,659   6.8 %
Other Networks     213       201       199       152       123   -42.3 %
Offline & Other Businesses     29       69       26       31       30   3.4 %
  Total Direct Mktg. Exp.   $ 11,991     $ 12,584     $ 12,698     $ 13,825     $ 12,634   5.4 %
                                             
Contribution                                            
Jewish Networks   $ 5,556     $ 5,783     $ 5,701     $ 5,684     $ 5,611   1.0 %
Christian Networks     (2,425 )     (2,759 )     (1,814 )     (2,606 )     (1,571 ) 35.2 %
Other Networks     690       635       616       623       592   -14.2 %
Offline & Other Businesses     59       28       62       55       95   61.0 %
  Total Contribution   $ 3,880     $ 3,687     $ 4,565     $ 3,756     $ 4,727   21.8 %
                                             
Average Paying Subs.                                            
Jewish Networks     84,650       85,736       85,200       84,487       83,732   -1.1 %
Christian Networks     154,747       168,394       186,896       196,598       197,420   27.6 %
Other Networks     26,678       25,130       23,435       21,183       19,073   -28.5 %
  Total Avg. Paying Subs.6     266,075       279,260       295,531       302,268       300,225   12.8 %
                                             
ARPU                                            
                                             
Jewish Networks   $ 24.61     $ 24.93     $ 24.86     $ 25.15     $ 25.28   2.7 %
Christian Networks     17.26       16.43       16.84       16.55       16.07   -6.9 %
Other Networks     10.61       10.36       10.84       11.49       12.08   13.8 %
  Total ARPU7   $ 18.93     $ 18.49     $ 18.68     $ 18.60     $ 18.38   -2.9 %
                                               

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 November 27, 2013.

Replay 
Toll-Free (United States): 1-877-870-5176 
International: 1-858-384-5517
Passcode: 10000578

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 "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 ("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.

(Consolidated financial statements to follow)  
   
   
SPARK NETWORKS, INC.  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share data)  
   
    December 31,     September 30,  
    2012     2013  
Assets             (unaudited)  
Current assets:                
  Cash and cash equivalents   $ 10,458     $ 17,243  
  Restricted cash     1,232       1,320  
  Accounts receivable     1,510       1,494  
  Deferred tax asset, net - current     8       -  
  Prepaid expenses and other     861       1,869  
      Total current assets     14,069       21,926  
Property and equipment, net     3,133       3,969  
Goodwill     8,861       9,178  
Intangible assets, net     2,143       2,275  
Deferred tax asset, net - non-current     5       -  
Other assets     153       207  
      Total assets   $ 28,364     $ 37,555  
                 
Liabilities and Stockholders' Equity                
Current liabilities:                
  Accounts payable   $ 1,093     $ 1,343  
  Accrued liabilities     5,339       5,173  
  Deferred revenue     8,128       9,271  
  Deferred tax liability - current     257       239  
      Total current liabilities     14,817       16,026  
Deferred tax liability - non-current     1,413       1,782  
Other liabilities     588       1,649  
      Total liabilities     16,818       19,457  
Commitments and contingencies                
Stockholders' equity:                
Authorized capital stock consists of 100,000,000 shares of Common Stock, $0.001 par value; issued and outstanding: 23,881,741 shares at September 30, 2013 and 20,945,364 shares at December 31, 2012:     21       24  
  Additional paid-in-capital     54,857       70,192  
  Accumulated other comprehensive income     712       757  
  Accumulated deficit     (44,044 )     (52,875 )
  Total stockholders' equity     11,546       18,098  
      Total liabilities and stockholders' equity   $ 28,364     $ 37,555  
   
   
   
SPARK NETWORKS, INC.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(unaudited, in thousands, except per share data)  
   
    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2012     2013     2012     2013  
                                 
Revenue   $ 15,871     $ 17,361     $ 45,472     $ 52,205  
                                 
Cost and expenses:                                
  Cost of revenue (exclusive of depreciation shown separately below)     12,901       13,620       35,725       42,046  
  Sales and marketing     1,020       1,423       2,976       3,972  
  Customer service     652       746       1,887       2,136  
  Technical operations     362       288       1,067       887  
  Development     859       746       2,549       2,331  
  General and administrative     2,260       2,496       6,550       7,704  
  Depreciation     426       529       1,242       1,454  
  Amortization of intangible assets     -       10       13       10  
  Impairment of long-lived assets     -       -       -       265  
Total cost and expenses     18,480       19,858       52,009       60,805  
                                 
Operating loss     (2,609 )     (2,497 )     (6,537 )     (8,600 )
Interest (income) expense and other, net     (36 )     (77 )     (50 )     (172 )
Loss before income taxes     (2,573 )     (2,420 )     (6,487 )     (8,428 )
(Benefit) provision for income taxes     (836 )     195       (2,036 )     403  
Net loss   $ (1,737 )   $ (2,615 )   $ (4,451 )   $ (8,831 )
                                 
Net loss per share--basic and diluted   $ (0.08 )   $ (0.11 )   $ (0.22 )   $ (0.39 )
Weighted average shares outstanding - basic and diluted     20,699       23,753       20,683       22,410  
         
         
         
Stock-based compensation:   Three Months Ended September 30,   Nine Months Ended September 30,
(in thousands)  
    2012   2013   2012   2013
Cost of revenue   $ 2   $ -   $ 6   $ -
Sales and marketing     17     36     55     107
Customer service     -     -     1     -
Technical operations     29     2     89     4
Development     10     3     31     10
General and administrative     138     153     417     455
                         
                         
                         
Reconciliation of Net Loss to Adjusted EBITDA:
(in thousands)
  Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2012     2013     2012     2013  
                                 
Net loss   $ (1,737 )   $ (2,615 )   $ (4,451 )   $ (8,831 )
Interest     16       19       43       53  
Taxes     (836 )     195       (2,036 )     403  
Depreciation     426       529       1,242       1,454  
Amortization     -       10       13       10  
EBITDA     (2,131 )     (1,862 )     (5,189 )     (6,911 )
Stock-based compensation     196       194       599       576  
Impairment of long-lived assets     -       -       -       265  
Non-cash currency translation adjustments     (42 )     (99 )     77       (215 )
Non-repetitive property possession     -       -       (151 )     -  
Adjusted EBITDA   $ (1,977 )   $ (1,767 )   $ (4,664 )   $ (6,285 )
                                 

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