Spark Networks(R) Reports Fourth Quarter and Full Year 2012 Financial Results

Marketwired

BEVERLY HILLS, CA--(Marketwire - Mar 7, 2013) - Spark Networks, Inc. (NYSE MKT: LOV)

  • Company-wide 2012 revenue increased 27% to $61.7 million
  • Christian Networks 2012 revenue increased 101% to $31.6 million
  • Q4 company-wide average paying subscribers1 grew 31% to 279,000
  • Q4 Christian Networks average paying subscribers grew 80% to 168,000

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 fourth quarter and full year ended December 31, 2012.

Financial Highlights

             
    Q4 2012     Full Year 2012  
Revenue   $ 16.3 Million     $ 61.7 Million  
Contribution Margin     23 %     26 %
Net Loss   $ (10.5) Million     $ (15.0) Million  
Net Loss Per Share   $ (0.51 )   $ (0.72 )
                 

Management Commentary

"I am proud of our 2012 performance, which was punctuated by a fourth quarter that marked our best of the year," said Greg Liberman, Spark Networks' President and Chief Executive Officer. "Revenue increased 27%, fueled by a 32% increase in average paying subscribers. That growth was driven by our category-leading Christian Networks segment, where we doubled both revenue and average paying subscribers. We also strengthened our leadership position in the Jewish Networks segment, anchored by the iconic JDate brand, where we exited 2012 with two consecutive quarters of sequential subscriber growth and our first sequential revenue increase since the fourth quarter of 2010. And, importantly, we did so while maintaining the segment's consistent, nearly 90%, contribution margin."

"Looking ahead, we will continue to focus on strengthening our brands and leadership positions in both the Christian and Jewish Networks segments. And, as pleased as we are with our accomplishments in 2011 and 2012, we are even more excited about the opportunities that lie ahead."

Financial Results

Revenue in the fourth quarter of 2012 was $16.3 million, an increase of 27% compared to the year ago period, and an increase of 3% compared to the prior quarter. Full year 2012 revenue was $61.7 million, also a 27% increase compared to 2011. The Christian Networks segment was the primary driver of that growth.

Contribution2 in the fourth quarter of 2012 was $3.7 million, a decrease of 29% compared to the year ago period, and a decrease of 5% compared to the prior quarter. Full year 2012 contribution was $16.1 million, a 29% decrease compared to 2011. Our increased marketing investment in the Christian Networks segment was responsible for the declines in contribution.

Total cost and expenses in the fourth quarter of 2012 were $18.9 million, an increase of 40% compared to the year ago period, and an increase of 2% compared to the prior quarter. Full year 2012 total cost and expenses were $70.9 million, a 43% increase compared to 2011. Our increased marketing investment in the Christian Networks segment drove the majority of growth in total cost and expenses. 

Net loss in the fourth quarter of 2012 was $10.5 million, or $0.51 per share, compared to a net loss of $1.1 million, or $0.05 per share, in the year ago period, and a net loss of $1.7 million, or $0.08 per share, in the prior quarter. Full year 2012 net loss was $15.0 million, or $0.72 per share, compared to a net loss of $1.6 million, or $0.08 per share, in 2011. In the fourth quarter of 2012, the Company recorded an $8.9 million valuation allowance against its deferred tax assets in accordance with guidance described under ASC-740. 

Adjusted EBITDA3 in the fourth quarter of 2012 was a loss of $2.0 million, compared to a profit of $1.0 million in the year ago period and a loss of $2.0 million in the prior quarter. Full year 2012 Adjusted EBITDA was a loss of $6.7 million, compared to a profit of $2.6 million in 2011.

Total average paying subscribers in the fourth quarter of 2012 were 279,260, an increase of 31% compared to the year ago period and an increase of 5% compared to the prior quarter. Full year 2012 average paying subscribers were 259,244, a 32% increase compared to 2011. 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, 2012, the Company had cash and cash equivalents of $10.5 million, a decrease of 31% from $15.1 million at December 31, 2011. As of December 31, 2012, the Company had no outstanding debt.

Segment Reporting4
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.  
QUARTERLY SEGMENT RESULTS FROM OPERATIONS  
(in thousands except subscriber information)  
   
    Q4 2011     Q1 2012     Q2 2012     Q3 2012     Q4 2012     Q4 '12
vs.
Q4 '11
 
                                               
Net Revenue                                              
Jewish Networks   $ 6,700     $ 6,580     $ 6,452     $ 6,385     $ 6,617     -1.2 %
Christian Networks     4,952       6,853       7,505       8,495       8,721     76.1 %
Other Networks     1,104       1,031       995       903       836     -24.3 %
Offline & Other Businesses     105       91       94       88       97     -7.6 %
  Total Net Revenue   $ 12,861     $ 14,555     $ 15,046     $ 15,871     $ 16,271     26.5 %
                                               
Direct Marketing Expenses                                              
Jewish Networks   $ 929     $ 801     $ 647     $ 829     $ 834     -10.2 %
Christian Networks     6,303       9,795       9,205       10,920       11,480     82.1 %
Other Networks     354       312       251       213       201     -43.2 %
Offline & Other Businesses     49       30       37       29       69     40.8 %
  Total Direct Mktg. Expenses   $ 7,635     $ 10,938     $ 10,140     $ 11,991     $ 12,584     64.8 %
                                               
Contribution                                              
Jewish Networks   $ 5,771     $ 5,779     $ 5,805     $ 5,556     $ 5,783     0.2 %
Christian Networks     (1,351 )     (2,942 )     (1,700 )     (2,425 )     (2,759 )   -104.2 %
Other Networks     750       719       744       690       635     -15.3 %
Offline & Other Businesses     56       61       57       59       28     -50.0 %
  Total Contribution   $ 5,226     $ 3,617     $ 4,906     $ 3,880     $ 3,687     -29.4 %
                                               
Average Paying Subscribers                                              
Jewish Networks     87,101       86,433       84,348       84,650       85,736     -1.6 %
Christian Networks     93,357       124,158       137,768       154,747       168,394     80.4 %
Other Networks     31,940       30,115       28,818       26,678       25,130     -21.3 %
  Total Avg. Paying Subscribers5     212,398       240,706       250,934       266,075       279,260     31.5 %
                                               
ARPU                                              
Jewish Networks   $ 25.12     $ 24.99     $ 24.77     $ 24.61     $ 24.93     -0.8 %
Christian Networks     16.44       17.35       17.13       17.26       16.43     -0.1 %
Other Networks     10.74       10.77       10.36       10.61       10.36     -3.6 %
  Total ARPU6   $ 19.14     $ 19.27     $ 18.92     $ 18.93     $ 18.49     -3.4 %
                                               
   
SPARK NETWORKS, INC.  
ANNUAL SEGMENT RESULTS FROM OPERATIONS  
(in thousands except subscriber information)  
   
    12 Mos. 2011     12 Mos. 2012     2012 v. 2011  
                       
Net Revenue                      
Jewish Networks   $ 27,054     $ 26,034     -3.8 %
Christian Networks     15,742       31,574     100.6 %
Other Networks     4,925       3,765     -23.6 %
Offline & Other Businesses     772       370     -52.1 %
  Total Net Revenue   $ 48,493     $ 61,743     27.3 %
                       
Direct Marketing Expenses                      
Jewish Networks   $ 3,389     $ 3,111     -8.2 %
Christian Networks     19,356       41,400     113.9 %
Other Networks     2,467       977     -60.4 %
Offline & Other Businesses     512       165     -67.8 %
  Total Direct Mktg. Expenses   $ 25,724     $ 45,653     77.5 %
                       
Contribution                      
Jewish Networks   $ 23,665     $ 22,923     -3.1 %
Christian Networks     (3,614 )     (9,826 )   -171.9 %
Other Networks     2,458       2,788     13.4 %
Offline & Other Businesses     260       205     -21.2 %
  Total Contribution   $ 22,769     $ 16,090     -29.3 %
                       
Average Paying Subscribers                      
Jewish Networks     89,429       85,292     -4.6 %
Christian Networks     71,311       146,267     105.1 %
Other Networks     35,595       27,685     -22.2 %
  Total Avg. Paying Subscribers     196,335       259,244     32.0 %
                       
ARPU                      
Jewish Networks   $ 24.72     $ 24.83     0.4 %
Christian Networks     17.38       17.01     -2.1 %
Other Networks     10.96       10.53     -3.9 %
  Total ARPU   $ 19.89     $ 19.01     -4.4 %
                       

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 21, 2013.

Replay 
Toll-Free (United States): 1-877-870-5176 
International: 1-858-384-5517
Passcode: 409224

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; 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" 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 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.

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

6 ARPU is defined as average revenue per user. 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,     December 31,  
    2011     2012  
Assets                
Current assets:                
  Cash and cash equivalents   $ 15,106     $ 10,458  
  Restricted cash     958       1,232  
  Accounts receivable     1,146       1,510  
  Deferred tax asset - current     44       8  
  Prepaid expenses and other     1,164       861  
    Total current assets     18,418       14,069  
Property and equipment, net     2,839       3,133  
Goodwill     8,683       8,861  
Intangible assets, net     1,900       2,143  
Deferred tax asset - non-current     5,641       5  
Deposits and other assets     455       153  
    Total assets   $ 37,936     $ 28,364  
                 
Liabilities and Stockholders' Equity                
Current liabilities:                
  Accounts payable   $ 952     $ 1,093  
  Accrued liabilities     4,046       5,339  
  Deferred revenue     5,723       8,128  
  Deferred tax liability - current     203       257  
    Total current liabilities     10,924       14,817  
Deferred tax liability     1,219       1,413  
Other liabilities non-current     1,141       588  
    Total liabilities     13,284       16,818  
Commitments and contingencies                
Stockholders' equity:                
Authorized capital stock consists of 100,000,000 shares of Common Stock, $0.001 par value; issued and outstanding: 20,945,364 shares at December 31, 2012 and 20,594,670 shares at December 31, 2011:     21       21  
    Additional paid-in-capital     53,014       54,857  
    Accumulated other comprehensive income     672       712  
    Accumulated deficit     (29,055 )     (44,044 )
    Total stockholders' equity     24,652       11,546  
      Total liabilities and stockholders' equity   $ 37,936     $ 28,364  
                 
   
SPARK NETWORKS, INC.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(unaudited, in thousands, except per share data)  
   
    Three Months Ended
December 31,
    Years Ended December 31,  
    2011     2012     2010     2011     2012  
                                         
Revenue   $ 12,861     $ 16,271     $ 40,851     $ 48,493     $ 61,743  
                                         
Cost and expenses:                                        
  Cost of revenue (exclusive of depreciation shown separately below)     8,420       13,491       13,749       28,955       49,216  
  Sales and marketing     1,062       1,015       3,496       3,722       3,991  
  Customer service     539       647       1,601       1,980       2,534  
  Technical operations     281       296       1,232       1,367       1,363  
  Development     643       797       3,092       2,710       3,346  
  General and administrative     1,071       2,237       9,782       8,068       8,787  
  Depreciation     343       431       962       1,320       1,673  
  Amortization of intangible assets     89       -       421       370       13  
  Impairment of long-lived assets and other assets     1,100       -       308       1,145       -  
Total cost and expenses     13,548       18,914       34,643       49,637       70,923  
                                         
Operating (loss) income     (687 )     (2,643 )     6,208       (1,144 )     (9,180 )
Interest (income) expense and other, net     144       (188 )     (54 )     162       (238 )
(Loss) income before income taxes     (831 )     (2,455 )     6,262       (1,306 )     (8,942 )
Provision (benefit) for income taxes     277       8,083       2,558       305       6,047  
Net (loss) income   $ (1,108 )   $ (10,538 )   $ 3,704     $ (1,611 )   $ (14,989 )
                                         
Net (loss) income per share--basic and diluted   $ (0.05 )   $ (0.51 )   $ 0.18     $ (0.08 )   $ (0.72 )
Weighted average shares outstanding - basic     20,595       20,816       20,586       20,591       20,781  
Weighted average shares outstanding -diluted     20,595       20,816       20,590       20,591       20,781  
                                         
 
Stock-based compensation:
(in thousands)
 
    Three Months Ended
December 31,
  Year Ended December 31,
    2011   2012   2010   2011   2012
Cost of revenue   $ 2   $ 2   $ 11   $ 8   $ 8
Sales and marketing     15     21     233     80     76
Customer service     -     1     1     -     2
Technical operations     31     29     167     119     118
Development     10     11     54     42     42
General and administrative     125     150     1,044     657     567
                               
             
Reconciliation of Net Loss (Income) to Adjusted EBITDA:
(in thousands)
  Three Months Ended
December 31,
    Years Ended
December 31,
 
    2011     2012     2010     2011     2012  
                                         
Net (loss) income   $ (1,108 )   $ (10,538 )   $ 3,704     $ (1,611 )   $ (14,989 )
Interest     13       16       207       102       59  
Taxes     277       8,083       2,558       305       6,047  
Depreciation     343       431       962       1,320       1,673  
Amortization     89       -       421       370       13  
EBITDA     (386 )     (2,008 )     7,852       486       (7,197 )
Stock-based compensation     183       214       1,510       906       813  
Impairment of long-lived assets and other assets     1,100       -       308       1,145       -  
Non-cash currency translation adjustments     132       (201 )     (269 )     337       (124 )
Non-repetitive property possession     -       -       -       (247 )     (151 )
Adjusted EBITDA   $ 1,029     $ (1,995 )   $ 9,401     $ 2,627     $ (6,659 )
                                         
Contact:
For More Information
Investors:
Addo Communications
Laura Foster, Kimberly Esterkin
Email Contact; Email Contact
310-829-5400

Rates

View Comments (0)