Q1 2010 Q1 2009
---------------- ----------------
Revenue $ 10.5 Million $ 12.0 Million
Contribution Margin 77% 76%
Net Income $ 0.9 Million $ 0.3 Million
Net Income Per Share $ 0.05 $ 0.02
"Although we are pleased to have increased average paying subscribers(1)
for the third consecutive quarter overall, and specifically in our Jewish
and Other Affinity Networks segments, it has been at the expense of ARPU(2)
such that subscription revenue has not increased," said Adam Berger,
Spark's Chairman and Chief Executive Officer. "Our key Jewish Networks
business returned to subscriber levels we last saw in the fourth quarter of
2007 which despite the lower ARPU marks a healthier network and reverses
the nearly six quarter slide we saw from the end of 2007 until the third
quarter of 2009."
Berger continued, "The increased subscriber levels in our Other Affinity
and Jewish Networks are attributable to a combination of historical first
quarter seasonality, improved product, and better value pricing."
Financial Results
Revenue for the first quarter of 2010 was $10.5 million, a decrease of 12%
compared to $12.0 million for the first quarter 2009, and a decrease of 5%
compared to the prior quarter.
Contribution(3) for the first quarter of 2010 was $8.1 million, a decrease
of 11% compared to $9.2 million for the first quarter of 2009, and a 3%
increase compared to $7.9 million in the prior quarter.
Operating expenses for the first quarter of 2010 were $9.0 million compared
to $10.8 million for the first quarter of 2009 and $20.2 million in the
prior quarter. The sequential decrease in operating expenses can be
primarily attributed to the $11.1 million asset impairment charge,
reflecting a reduction in the book carrying value of assets under the Other
Affinity Networks segment and the final HurryDate earn-out payment in the
prior quarter.
Net income for the first quarter of 2010 was $929,000, or $0.05 per share,
compared to $311,000, or $0.02 per share, for the first quarter of 2009 and
a net loss of $9.6 million, or $0.46 per share, for the prior quarter.
Adjusted EBITDA(4) for the first quarter of 2010 was $2.7 million, a
decrease of 4% compared to $2.8 million for the first quarter of 2009, and
an increase of 7% compared to $2.5 million in the prior quarter.
Average paying subscribers for the Company, as a whole, in the first
quarter of 2010 were 169,833, an increase of 1% compared to 168,004 for the
first quarter of 2009 and a 1% increase compared to 168,646 for the prior
quarter.
Segment Reporting(5)
First quarter 2010 revenue for Jewish Networks was $7.1 million, a decrease
of 7% compared to $7.6 million for the first quarter of 2009, and flat with
the prior quarter.
First quarter 2010 revenue for General Market Networks was $370,000, a
decrease of 61% compared to $940,000 for the first quarter of 2009, and a
22% decrease compared to $477,000 in the prior quarter. The year-over-year
decrease in revenue for General Market Networks is largely attributable to
a 49% decrease in the marketing spend for the first quarter of 2010
compared to the first quarter of 2009.
First quarter 2010 revenue for Other Affinity Networks was $3.0 million, a
decrease of 10% compared to $3.3 million for the first quarter of 2009, and
flat with the prior quarter.
First quarter 2010 revenue for Offline & Other Businesses was $113,000, a
decrease of 47% compared to $212,000 for the first quarter of 2009, and a
77% decrease compared to $485,000 in the prior quarter. The lower revenue
reflects fewer hosted events in the first quarter of 2010 when compared to
the same period in the prior year and the absence of a large travel
offering when compared to the prior quarter.
Average paying subscribers for Jewish Networks were 93,235 during the first
quarter of 2010, an increase of 10% compared to 84,644 for the first
quarter of 2009, and a 3% increase compared to 90,657 for the prior
quarter.
Average paying subscribers for Other Affinity Networks were 68,124 during
the first quarter of 2010, an increase of 6% compared to 64,393 for the
first quarter of 2009 and a 1% increase compared to 67,725 for the prior
quarter.
Average paying subscribers for General Market Networks were 7,813 during
the first quarter of 2010, a decrease of 56% compared to 17,810 for the
first quarter of 2009, and a 19% decrease compared to 9,594 for the prior
quarter.
Balance Sheet, Cash, Debt
As of March 31, 2010, the Company had cash and cash equivalents of $6.1
million compared to $6.2 million at December 31, 2009. As of March 31,
2010, 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.
Call Title: Spark Networks Q1 '10 Financial Results Toll-Free (United States): 1-888-233-7978 International: 1-913-312-1510 Confirmation #: 9854349 Digital Replay through May 27, 2010: Toll-Free (United States): 1-888-203-1112 International: 1-719-457-0820 Confirmation #: 9854349In 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) "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) "ARPU" is defined as average revenue per user. (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 revenues generated from offline activities, HurryDate events and subscriptions and other Web sites and businesses.
SPARK NETWORKS, INC.
BALANCE SHEET
(in thousands, except share data)
March 31, December 31,
------------ ------------
2010 2009
------------ ------------
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 6,099 $ 6,223
Restricted cash 670 681
Accounts receivable 866 684
Deferred tax asset - current 221 221
Prepaid expenses and other 940 853
------------ ------------
Total current assets 8,796 8,662
Property and equipment, net 2,217 2,277
Goodwill 8,862 8,758
Intangible assets, net 3,466 3,586
Deferred tax asset - non-current 4,707 4,707
Deposits and other assets 1,870 1,866
------------ ------------
Total assets $ 29,918 $ 29,856
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 377 $ 1,415
Accrued liabilities 3,519 4,232
Deferred revenue 4,304 4,244
------------ ------------
Total current liabilities 8,200 9,891
Deferred tax liability 703 663
Other liabilities non-current 997 978
------------ ------------
Total liabilities 9,900 11,532
Commitments and contingencies -- --
Stockholders' equity:
Authorized capital stock consists of
100,000,000 Common Stock, $0.001 par value;
issued and outstanding 20,586,544 at March
31, 2010 and 20,581,544 shares as of
December 31, 2009, at stated values of: 21 21
Additional paid-in-capital 49,540 48,813
Accumulated other comprehensive income 676 638
Accumulated deficit (30,219) (31,148)
------------ ------------
Total stockholders' equity 20,018 18,324
------------ ------------
Total liabilities and stockholders'
equity $ 29,918 $ 29,856
============ ============
SPARK NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
Three Months Ended
March 31,
--------------------
2010 2009
--------- ---------
Revenue $ 10,537 $ 12,032
Cost and expenses:
Cost of revenue (exclusive of depreciation shown
separately below) 3,157 3,655
Sales and marketing 1,083 921
Customer service 396 545
Technical operations 363 393
Development 781 1,267
General and administrative 2,787 2,773
Depreciation 235 206
Amortization of intangible assets other than goodwill 122 184
Impairment of goodwill, long-lived assets and other
assets 121 880
--------- ---------
Total cost and expenses 9,045 10,824
--------- ---------
Operating income 1,492 1,208
Interest (income) and other expenses, net (41) 492
--------- ---------
Income before income taxes 1,533 716
Provision for income taxes 604 405
--------- ---------
Net income $ 929 $ 311
========= =========
Net income per share - basic and diluted $ 0.05 $ 0.02
--------- ---------
Weighted average shares outstanding - basic 20,582 20,548
Weighted average shares outstanding - diluted 20,582 20,563
Prior period amounts have been reclassified to conform to current period
presentation and include stock-based compensation as follows:
Three Months
Ended March 31,
---------------------
Stock-Based Compensation 2010 2009
(in thousands) ---------- ----------
Cost of revenue $ 2 $ 10
Sales and marketing 117 48
Customer service 1 5
Technical operations 73 40
Development 13 41
General and administrative 504 181
Three Months
Reconciliation of Net Income to Adjusted EBITDA Ended March 31,
(in thousands) ---------------------
2010 2009
Net income $ 929 $ 311
Interest 51 68
Taxes 604 405
Depreciation 235 206
Amortization 122 184
--------- ----------
EBITDA 1,941 1,174
Stock-based compensation 710 325
Impairment 121 880
Non-cash currency translation adjustments (74) 422
--------- ----------
Adjusted EBITDA $ 2,698 $ 2,801
SPARK NETWORKS, INC.
SEGMENT RESULTS FROM OPERATIONS
(in thousands except subscriber information)
Three Months Ended
March 31,
-------------------------
2010 2009
------------ ------------
Revenue
Jewish Networks $ 7,080 $ 7,583
Other Affinity Networks 2,974 3,297
General Market Networks 370 940
Offline & Other Businesses 113 212
------------ ------------
Total Revenue $ 10,537 $ 12,032
============ ============
Direct Marketing Expenses
Jewish Networks $ 507 $ 563
Other Affinity Networks 1,714 1,965
General Market Networks 139 273
Offline & Other Businesses 43 49
------------ ------------
Total Direct Marketing Expenses $ 2,403 $ 2,850
============ ============
Contribution
Jewish Networks $ 6,573 $ 7,020
Other Affinity Networks 1,260 1,332
General Market Networks 231 667
Offline & Other Businesses 70 163
------------ ------------
Total Contribution $ 8,134 $ 9,182
============ ============
Average Paying Subscribers
Jewish Networks 93,235 84,644
Other Affinity Networks 68,124 64,393
General Market Networks 7,813 17,810
Offline & Other Businesses 661 1,157
------------ ------------
Total Average Paying Subscribers 169,833 168,004
============ ============
Contact Information: For More Information Investors: Brett Zane + 1-323-658-3000 ext. 4001