Q2 2010 Q2 2009
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Revenue $ 10.3 Million $ 11.2 Million
Contribution Margin 75% 73%
Net Income $ 0.9 Million $ 1.9 Million
Net Income Per Share $ 0.04 $ 0.09
"Average paying subscribers(1) were down sequentially this quarter following
three consecutive quarters of growth. We have experienced this second
quarter seasonal behavior over the past three years; however, our ARPU(2)
has stabilized after nine quarters of sequential decline," said Adam
Berger, Spark's Chairman and CEO. "While we remain committed to finding
opportunities to grow both subscribers and ARPU, we continue to reduce cash
operating costs, despite incurring expenses associated with our Special
Committee."
Financial Results
Revenue for the second quarter of 2010 was $10.3 million, a decrease of 8%
compared to $11.2 million for the second quarter 2009, and a decrease of 2%
compared to $10.5 million in the prior quarter. Revenue for the first six
months of 2010 was $20.8 million, an 11% decrease compared to $23.3 million
for the same period last year.
Contribution(3) for the second quarter of 2010 was $7.7 million, a decrease
of 7% compared to $8.3 million for the second quarter of 2009, and a 6%
decrease compared to $8.1 million in the prior quarter. Contribution for
the first six months of 2010 was $15.8 million, a 9% decrease compared to
$17.4 million for the same period last year.
Total cost and expenses for the second quarter of 2010 were $8.6 million,
an 8% decrease compared to $9.3 million in the second quarter of 2009, and
a 5% decrease compared to $9.0 million in the prior quarter. Total cost
and expenses for the first six months of 2010 were $17.6 million, a 13%
decrease compared to $20.1 million for the same period last year.
Net income for the second quarter of 2010 was $923,000, or $0.04 per share,
compared to $1.9 million, or $0.09 per share, for the second quarter of
2009 and $929,000 or $0.05 per share for the prior quarter. In the second
quarter of 2009, the Company recorded income of approximately $1.7 million
related to the possession of certain real property pursuant to a legal
judgment. Net income for the first six months of 2010 was $1.9 million, or
$0.09 per share, compared to $2.2 million or $0.11 per share for the first
six months of 2009.
Adjusted EBITDA(4) for the second quarter of 2010 was $2.3 million, a
decrease of 9% compared to $2.6 million for the second quarter of 2009, and
a decrease of 14% compared to $2.7 million in the prior quarter. Adjusted
EBITDA for the first six months of 2010 was $5.0 million, a 6% decrease
compared to $5.4 million for the same period last year.
Average paying subscribers for the Company, as a whole, in the second
quarter of 2010 were 160,239, a decrease of 2% compared to 163,217 for the
second quarter of 2009 and a 6% decrease compared to 169,833 for the prior
quarter. Average paying subscribers for the first six months of 2010 were
165,037 compared to 165,610 for the same period last year.
Segment Reporting(5)
Second quarter 2010 revenue for Jewish Networks was $6.7 million, a
decrease of 6% compared to $7.1 million for the second quarter of 2009 and
the prior quarter. Jewish Networks revenue for the first six months of
2010 was $13.7 million, a 6% decrease compared to $14.6 million for the
same period last year.
Second quarter 2010 revenue for Other Affinity Networks was $2.8 million, a
decrease of 16% compared to $3.3 million for the second quarter of 2009,
and a decrease of 7% compared to $3.0 million in the prior quarter. Other
Affinity Networks revenue for the first six months of 2010 was $5.8
million, a 13% decrease compared to $6.6 million for the same period last
year.
Second quarter 2010 revenue for General Market Networks was $298,000, a
decrease of 57% compared to $701,000 for the second quarter of 2009, and a
19% decrease compared to $370,000 in the prior quarter. General Market
Networks revenue for the first six months of 2010 was $668,000, a 59%
decrease compared to $1.6 million for the same period last year.
Second quarter 2010 revenue for Offline & Other Businesses was $549,000, an
increase of 221% compared to $171,000 for the second quarter of 2009, and a
386% increase compared to $113,000 in the prior quarter. The higher
revenue reflects a large travel offering in the second quarter of 2010, and
the absence of a comparable offering in the second quarter of 2009 and the
prior quarter. Offline & Other Businesses revenue for the first six months
of 2010 was $662,000, a 73% increase compared to $383,000 for the same
period last year.
Average paying subscribers for Jewish Networks were 89,055 during the
second quarter of 2010, an increase of 8% compared to 82,769 for the second
quarter of 2009, and a 4% decrease compared to 93,235 for the prior
quarter. Jewish Networks average paying subscribers for the first six
months of 2010 were 91,145, a 9% increase compared to 83,706 for the same
period last year.
Average paying subscribers for Other Affinity Networks were 64,083 during
the second quarter of 2010, a decrease of 2% compared to 65,409 for the
second quarter of 2009 and a 6% decrease compared to 68,124 for the prior
quarter. Other Affinity Networks average paying subscribers for the first
six months of 2010 were 66,104, a 2% increase compared to 64,901 for the
same period last year.
Average paying subscribers for General Market Networks were 6,434 during
the second quarter of 2010, a decrease of 54% compared to 14,022 for the
second quarter of 2009, and an 18% decrease compared to 7,813 for the prior
quarter. General Market Networks average paying subscribers for the first
six months of 2010 were 7,124, a 55% decrease compared to 15,916 for the
same period last year.
Balance Sheet, Cash, Debt
As of June 30, 2010, the Company had cash and cash equivalents of $9.7
million compared to $6.2 million at December 31, 2009. As of June 30,
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 Q2 '10 Financial Results Toll-Free (United States): 1-888-215-6895 International: 1-913-312-0651 Passcode: 4394412 Digital Replay through August 26, 2010: Toll-Free (United States): 1-888-203-1112 International: 1-719-457-0820 Passcode: 4394412In 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 revenue generated from offline activities, HurryDate events and subscriptions and other Web sites and businesses.
SPARK NETWORKS, INC.
BALANCE SHEET
(in thousands, except share data)
June 30, December 31,
------------ ------------
2010 2009
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Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 9,688 $ 6,223
Restricted cash 731 681
Accounts receivable 751 684
Deferred tax asset - current 222 221
Prepaid expenses and other 799 853
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Total current assets 12,191 8,662
Property and equipment, net 2,374 2,277
Goodwill 8,597 8,758
Intangible assets, net 3,385 3,586
Deferred tax asset - non-current 4,708 4,707
Deposits and other assets 311 1,866
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Total assets $ 31,566 $ 29,856
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 642 $ 1,415
Accrued liabilities 4,326 4,232
Deferred revenue 3,769 4,244
------------ ------------
Total current liabilities 8,737 9,891
Deferred tax liability 701 663
Other liabilities non-current 997 978
------------ ------------
Total liabilities 10,435 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 June
30, 2010 and 20,581,544 shares as of
December 31, 2009, at stated values of: 21 21
Additional paid-in-capital 49,813 48,813
Accumulated other comprehensive income 593 638
Accumulated deficit (29,296) (31,148)
------------ ------------
Total stockholders' equity 21,131 18,324
------------ ------------
Total liabilities and stockholders' equity $ 31,566 $ 29,856
============ ============
SPARK NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2010 2009 2010 2009
--------- -------- --------- --------
Revenue $ 10,289 $ 11,242 $ 20,826 $ 23,274
Cost and expenses:
Cost of revenue (exclusive of
depreciation shown separately
below) 3,384 3,755 6,541 7,410
Sales & marketing 851 837 1,934 1,758
Customer service 382 437 778 982
Technical operations 315 393 678 786
Development 778 1,055 1,559 2,322
General and administrative 2,538 2,453 5,325 5,226
Depreciation 222 195 457 401
Amortization of intangible assets 104 187 226 371
Impairment of goodwill, long-lived
assets and other assets - - 121 880
--------- -------- --------- --------
Total cost and expenses 8,574 9,312 17,619 20,136
Operating income 1,715 1,930 3,207 3,138
Interest expense (income) and
other, net 241 (1,885) 200 (1,393)
--------- -------- --------- --------
Income before income taxes 1,474 3,815 3,007 4,531
Provision for income taxes 551 1,928 1,155 2,334
--------- -------- --------- --------
Net income $ 923 $ 1,887 $ 1,852 $ 2,197
========= ======== ========= ========
Net income per share - basic and
diluted $ 0.04 $ 0.09 $ 0.09 $ 0.11
--------- -------- --------- --------
Weighted average shares outstanding
- basic 20,587 20,568 20,584 20,558
Weighted average shares outstanding
- diluted 20,598 20,574 20,587 20,566
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
Stock-Based Compensation 2010 2009 2010 2009
--------- --------- --------- ---------
(in thousands)
Cost of revenue 3 2 4 12
Sales and marketing 42 43 159 91
Customer service - 2 2 7
Technical operations 31 37 105 77
Development 15 21 27 62
General and administrative 181 163 685 344
Reconciliation of Net Income to Adjusted EBITDA
Three Months Ended Six Months Ended
------------------ ------------------
June 30, June 30,
------------------ ------------------
2010 2009 2010 2009
--------- -------- --------- --------
Net income $ 923 $ 1,887 $ 1,852 $ 2,197
Interest 51 124 102 193
Taxes 551 1,928 1,155 2,334
Depreciation 222 195 457 400
Amortization 104 187 226 371
--------- -------- --------- --------
EBITDA 1,851 4,321 3,792 5,495
Stock based compensation 272 268 982 593
Impairment of goodwill -- -- 121 880
Non-cash currency translation
adjustments 192 (294) 118 128
Non-repetitive property possession -- (1,742) -- (1,742)
--------- -------- --------- --------
Adjusted EBITDA $ 2,315 $ 2,553 $ 5,013 $ 5,354
SPARK NETWORKS, INC.
SEGMENT RESULTS FROM OPERATIONS
(in thousands except subscriber information)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Net Revenue
Jewish Networks $ 6,664 $ 7,064 $ 13,744 $ 14,647
Other Affinity Networks 2,778 3,306 5,752 6,603
General Market Networks 298 701 668 1,641
Offline & Other Businesses 549 171 662 383
--------- --------- --------- ---------
Total Net Revenue $ 10,289 $ 11,242 $ 20,826 $ 23,274
========= ========= ========= =========
Direct Marketing Expenses
Jewish Networks $ 532 $ 596 $ 1,039 $ 1,159
Other Affinity Networks 1,541 2,192 3,255 4,157
General Market Networks 147 148 286 421
Offline & Other Businesses 391 48 434 97
--------- --------- --------- ---------
Total Direct Marketing Expenses $ 2,611 $ 2,984 $ 5,014 $ 5,834
========= ========= ========= =========
Contribution
Jewish Networks $ 6,132 $ 6,468 $ 12,705 $ 13,488
Other Affinity Networks 1,237 1,114 2,497 2,446
General Market Networks 151 553 382 1,220
Offline & Other Businesses 158 123 228 286
--------- --------- --------- ---------
Total Contribution $ 7,678 $ 8,258 $ 15,812 $ 17,440
========= ========= ========= =========
Average Paying Subscribers
Jewish Networks 89,055 82,769 91,145 83,706
Other Affinity Networks 64,083 65,409 66,104 64,901
General Market Networks 6,434 14,022 7,124 15,916
Offline & Other Businesses 667 1,017 664 1,087
--------- --------- --------- ---------
Total Average Paying Subscribers 160,239 163,217 165,037 165,610
========= ========= ========= =========
Contact Information: For More Information Investors: Brett Zane + 1-323-658-3000 ext. 4001