Spark Networks(R) Reports Third Quarter Financial Results

Spark Networks(R) Reports Third Quarter Financial Results 
BEVERLY HILLS, CA -- (Marketwire) -- 11/13/12 --  Spark Networks,
Inc. (NYSE MKT: LOV) 


 
--  Total revenue growth of 25%
--  Christian Networks revenue growth of 84%
--  Average paying subscribers(1)increase 29% to 266,000

  
Spark Networks, Inc. (NYSE MKT: LOV), a leading provider of online
personals services, today reported financial results for the third
quarter ended September 30, 2012. 
Q3 2012 Highlights 


 
                                             Q3 2011            Q3 2012     
                                         ---------------    --------------- 
Revenue                                  $  12.7 Million    $  15.9 Million 
Contribution Margin                                   49%                24%
Net Loss                                 $ (0.2) Million    $ (1.7) Million 
Net Loss Per Share                       $         (0.01)   $         (0.08)

 
Management Commentary 
"I am pleased to report that the positive momentum from the first
half of the year continued into the third quarter, as we delivered
our eighth consecutive quarter of revenue and subscriber growth,"
said Greg Liberman, Spark Networks' President and Chief Executive
Officer. "Revenue increased 25% year-over-year, to $15.9 million,
hitting its highest level in nineteen quarters and average paying
subscribers grew 29%, to more than 266,000, setting another all-time
high. Once again, our Christian Networks segment powered that growth,
with an 84% increase in revenue, driven by an 89% jump in average
paying subscribers(1)."  
"In addition to the meaningful growth posted by our Christian
Networks segment, we also saw a solid quarter in our Jewish Networks
segment, where average paying subscribers grew for the first time
since the first quarter of 2011. Throughout the remainder of the
year, we will continue to focus on fortifying our iconic position in
the Jewish community while we further strengthen and grow our
leadership position in the Christian space. And, as we execute
against our strategic growth plan, we will share those results with
the investment community." 
Q3 2012 Financial Results
 Revenue was $15.9 
million, an increase of
25% compared to $12.7 million in the third quarter of 2011, and an
increase of 5% compared to $15.0 million in the prior quarter. Growth
from the Christian Networks segment drove the year-over-year and
sequential gains. 
Contribution(2) was $3.9 million, a decrease of 37% compared to $6.2
million in the third quarter of 2011, and a decrease of 21% compared
to $4.9 million in the prior quarter. A 114% year-over-year and 19%
quarter-over-quarter increase in our Christian Networks direct
marketing investment was responsible for the decline in contribution. 
Total cost and expenses were $18.5 million, a 45% increase compared
to $12.7 million in the third quarter of 2011, and a 14% increase
compared to $16.2 million in the prior quarter. Higher Christian
Networks direct marketing investments drove the majority of growth in
total cost and expenses.  
Net loss was $1.7 million, or $0.08 per share, compared to a net loss
of $238,000 or $0.01 per share, in the third quarter of 2011 and a
net loss of $1.0 million or $0.05 per share in the prior quarter.  
Adjusted EBITDA(3) was a loss of $2.0 million, compared to a profit
of $639,000 in the third quarter of 2011 and a loss of $592,000 in
the prior quarter.  
Average paying subscribers for the Jewish Networks, Christian
Networks and Other Networks segments were 266,075, an increase of 29%
compared to 205,650 in the third quarter of 2011 and an increase of
6% compared to 250,934 in the prior quarter.  
Segment Reporting(4) 
 During the first quarter of 2012, the Company
changed its financial reporting to include data on two newly-defined
operating segments, leaving two of the previous operating segments
intact. The two new segments are Christian Networks and Other
Networks. Christian Networks consists of ChristianMingle.com,
ChristianMingle.co.uk, ChristianMingle.com.au, Believe.com,
ChristianCards.net, ChristianDating.com DailyBibleVerse.com, and
Faith.com. Other Networks 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 composition of
our Jewish Networks and Offline and Other Businesses segments remain
unchanged.  


 
                                                                            
                            SPARK NETWORKS, INC.                            
                      SEGMENT RESULTS FROM OPERATIONS                       
           (in thousands except subscriber and ARPU information)            
                                                                            
                                                                    Q3 '12  
                                                                      v.    
                  Q3 2011   Q4 2011   Q1 2012   Q2 2012   Q3 2012   Q3 '11  
                 --------  --------  --------  --------  --------  -------- 
                                                                            
Net Revenue                                                                 
Jewish Networks  $  6,724  $  6,700  $  6,580  $  6,452  $  6,385      -5.0%
Christian                                                                   
 Networks           4,624     4,952     6,853     7,505     8,495      83.7%
Other Networks      1,218     1,104     1,031       995       903     -25.9%
Offline & Other                                                             
 Businesses           111       105        91        94        88     -20.7%
                 --------  --------  --------  --------  --------  -------- 
  Total Net                                                                 
   Revenue       $ 12,677  $ 12,861  $ 14,555  $ 15,046  $ 15,871      25.2%
                                                                            
Direct Marketing                                                            
 Expenses                                                                   
Jewish Networks  $    936  $    929  $    801  $    647  $    829     -11.4%
Christian                                                                   
 Networks           5,112     6,303     9,795     9,205    10,920     113.6%
Other Networks        432       354       312       251       213     -50.7%
Offline & Other                                                             
 Businesses            32        49        30        37        29      -9.4%
                 --------  --------  --------  --------  --------  -------- 
  Tot. Direct                                                               
   Mktg.                                                                    
   Expenses      $  6,512  $  7,635  $ 10,938  $ 10,140  $ 11,991      84.1%
                                                                            
Contribution                                                                
Jewish Networks  $  5,788  $  5,771  $  5,779  $  5,805  $  5,556      -4.0%
Christian                                                                   
 Networks            (488)   (1,351)   (2,942)   (1,700)   (2,425)   -396.9%
Other Networks        786       750       719       744       690  
   -12.2%
Offline & Other                                                             
 Businesses            79        56        61        57        59     -25.3%
                 --------  --------  --------  --------  --------  -------- 
  Total                                                                     
   Contribution  $  6,165  $  5,226  $  3,617  $  4,906  $  3,880     -37.1%
                                                                            
Average Paying                                                              
 Subscribers                                                                
Jewish Networks    88,976    87,101    86,433    84,348    84,650      -4.9%
Christian                                                                   
 Networks          81,987    93,357   124,158   137,768   154,747      88.7%
Other Networks     34,687    31,940    30,115    28,818    26,678     -23.1%
                 --------  --------  --------  --------  --------  -------- 
Total Avg.                                                                  
 Paying                                                                     
 Subscribers(5)   205,650   212,398   240,706   250,934   266,075      29.4%
                                                                            
ARPU                                                                        
Jewish Networks  $  24.71  $  25.12  $  24.99  $  24.77  $  24.61      -0.4%
Christian                                                                   
 Networks           17.64     16.44     17.35     17.13     17.26      -2.1%
Other Networks      11.07     10.74     10.77     10.36     10.61      -4.2%
                 --------  --------  --------  --------  --------  -------- 
  Total ARPU(6)  $  19.59  $  19.14  $  19.27  $  18.92  $  18.93      -3.4%

 
Balance Sheet, Cash, Debt
 As of September 30, 2012, the Company had
cash and cash equivalents of $11.0 million, a decrease of 27% from
$15.1 million at December 31, 2011. As of September 30, 2012, the
Company had no outstanding debt.  
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, 2012.  
Replay
 Toll-Free (United
States): 1-877-870-5176
 International: 1-858-384-5517
 Passcode:
401386 
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 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(R).com (www.jdate.com),
ChristianMingle(R).com (www.christianmingle.com), Spark(R).com
(www.spark.com), BlackSingles(R).com (www.blacksingles.com), and
SilverSingles(R).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" is defined as revenue, net of credits and credit
card chargebacks, less direct marketing. "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, 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 (loss) recognized from non-cash
assets received in connection with a legal judgment. 
(4) In accordance with Segment Reporting guidance, the Company's
financial reporting includes detailed data on four separate operating
segments. The Jewish Networks segm
ent 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. 
(5) Total Average Paying Subscribers excludes results from the
Company's HurryDate business due to its relative size. 
(6) Total ARPU excludes results from the Company's HurryDate business
due to its relative size. ARPU is defined as average revenue per
user. 
(Consolidated financial statements to follow) 


 
                                                                            
                            SPARK NETWORKS, INC.                            
                        CONSOLIDATED BALANCE SHEETS                         
                     (in thousands, except share data)                      
                                                                            
                                                December 31,  September 30, 
                                               -------------  ------------- 
                                                    2011           2012     
                                               -------------  ------------- 
Assets                                                                      
                                                                            
Current assets:                                                             
  Cash and cash equivalents                    $      15,106  $      10,974 
  Restricted cash                                        958          1,175 
  Accounts receivable                                  1,146          1,418 
  Deferred tax asset - current                            44             45 
  Prepaid expenses and other                           1,164          1,093 
                                               -------------  ------------- 
    Total current assets                              18,418         14,705 
Property and equipment, net                            2,839          3,138 
Goodwill                                               8,683          8,576 
Intangible assets, net                                 1,900          2,142 
Deferred tax asset - non-current                       5,641          6,950 
Deposits and other assets                                455            155 
                                               -------------  ------------- 
    Total assets                               $      37,936  $      35,666 
                                               =============  ============= 
                                                                            
Liabilities and Stockholders' Equity                                        
Current liabilities:                                                        
  Accounts payable                             $         952  $         549 
  Accrued liabilities                                  4,046          3,375 
  Deferred revenue                                     5,723          7,773 
  Deferred tax liability - current                       203            203 
                                               -------------  ------------- 
    Total current liabilities                         10,924         11,900 
Deferred tax liability                                 1,219          1,312 
Other liabilities non-current                          1,141          1,141 
                                               -------------  ------------- 
    Total liabilities                                 13,284         14,353 
Commitments and contingencies                                               
Stockholders' equity:                                                       
Authorized capital stock consists of                                        
 100,000,000 shares of Common Stock, $0.001                                 
 par value; issued and outstanding: 20,594,670                              
 shares at December 31, 2011 and 20,769,471                                 
 shares at September 30, 2012:                            21             21 
  Additional paid-in-capital                          53,014         54,129 
  Accumulated other comprehensive income                 672            669 
  Accumulated deficit                                (29,055)       (33,506)
                                               -------------  ------------- 
  Total stockholders' equity                          24,652         21,313 
                                               -------------  ------------- 
    Total liabilities and stockholders' equity $      37,936  $      35,666 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                            SPARK NETWORKS, INC.                            
                   CONSOLIDATED STATEMENTS OF OPERATIONS                    
              (unaudited, in thousands, except per share data)              
                                                                            
                                     Three Months Ended  Nine Months Ended  
                                        September 30,       September 30,   
                                     ------------------  ------------------ 
                                       2011      2012      2011      2012   
                                     --------  --------  --------  -------- 
                                                                            
Revenue                              $ 12,677  $ 15,871  $ 35,632  $ 45,472 
                                                                            
  Cost and expenses:                                                        
  Cost of revenue (exclusive of                                             
   depreciation shown separately                                            
   below)                               7,373    12,901    20,535    35,725 
  Sales and marketing                     923     1,020     2,660     2,976 
  Customer service                        531       652     1,441     1,887 
  Technical operations                    336       362     1,086     1,067 
  Development                             643       859     2,067     2,549 
  General and administrative            2,435     2,260     6,997     6,550 
  Depreciation                            341       426       977     1,242 
  Amortization of intangible assets        90         -       281        13 
  Impairment of long-lived assets                                           
   and other assets                        45         -        45         - 
                                     --------  --------  --------  -------- 
Total cost and expenses                12,717    18,480    36,089    52,009 
                                                                            
Operating loss                            (40)   (2,609)     (457)   (6,537)
Interest expense (income) and other,                                        
 net                                      120       (36)       18       (50)
                                     --------  --------  --------  -------- 
Loss before income taxes                 (160)   (2,573)     (475)   (6,487)
Provision (be
nefit) for income taxes       78      (836)       28    (2,036)
                                     --------  --------  --------  -------- 
Net loss                             $   (238) $ (1,737) $   (503) $ (4,451)
                                     ========  ========  ========  ======== 
                                                                            
Net loss per share - basic and                                              
 diluted                             $  (0.01) $  (0.08) $  (0.02) $  (0.22)
                                     ========  ========  ========  ======== 
Weighted average shares outstanding                                         
 - basic and diluted                   20,595    20,699    20,592    20,683 
                                     ========  ========  ========  ======== 
                                                                            
                                                                            
      Stock-based compensation:                                             
           (in thousands)                                                   
                                      Three Months Ended  Nine Months Ended 
                                        September 30,         June 30,      
                                     ------------------- -------------------
                                        2011      2012      2011      2012  
                                     --------- --------- --------- ---------
Cost of revenue                      $       2 $       2 $       6 $       6
Sales and marketing                         17        17        65        55
Customer service                             -         -         -         1
Technical operations                        30        29        88        89
Development                                 10        10        32        31
General and administrative                 124       138       532       417
                                                                            
                                                                            
    Reconciliation of Net Loss to                                           
           Adjusted EBITDA:                                                 
           (in thousands)                                                   
                                     Three Months Ended   Nine Months Ended 
                                        September 30,       September 30,   
                                     ------------------  ------------------ 
                                       2011      2012      2011      2012   
                                     --------  --------  --------  -------- 
                                                                            
Net loss                             $   (238) $ (1,737) $   (503) $ (4,451)
Interest                                   13        16        89        43 
Taxes                                      78      (836)       28    (2,036)
Depreciation                              341       426       977     1,242 
Amortization                               90         0       281        13 
                                     --------  --------  --------  -------- 
EBITDA                                    284    (2,131)      872    (5,189)
Stock-based compensation                  183       196       723       599 
Impairment of long-lived assets and                                         
 other assets                              45         0        45         0 
Non-cash currency translation                                               
 adjustments                              374       (42)      205        77 
Non-repetitive property possession       (247)        0      (247)     (151)
                                     --------  --------  --------  -------- 
Adjusted EBITDA                      $    639  $ (1,977) $  1,598  $ (4,664)
                                     ========  ========  ========  ======== 

  
For More Information
Investors:
Addo Communications
Laura Foster, Kimberly Esterkin
lauraf@addocommunications.com
kimberlye@addocommunications.com
310-829-5400 
 
 
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