SOURCE:
Spark Networks
2008-08-07 15:01:00
Spark Networks(R) Reports Second Quarter 2008 Financial Results
Spark Networks® Reports Second Quarter 2008 Financial Results
Revenue – $15.0 Million; Contribution Margin – 73%; Net Income – $1.6 Million; EPS – $0.07
BEVERLY HILLS, CA–(EMWNews – August 7, 2008) – Spark Networks, Inc. (
reported financial results for the second quarter and six months ended June
30, 2008.
“Our overall strategy continues to be to strengthen our position in the
affinity-based segment of the subscription-driven dating market,” stated
Adam Berger, Chairman and Chief Executive Officer of Spark Networks, Inc.
“Over the past five quarters, we’ve been focused on increasing stockholder
value and return by growing our Other Affinity Networks segment, maximizing
the yield from our Jewish Networks, optimizing our marketing spend, adding
an advertising revenue stream, reducing overhead, and prudently allocating
capital.”
“This strategy has translated into increased profitability and cash flow in
the second quarter. Adjusted EBITDA(1), excluding currency translation
adjustments, was $4.4 million or a 29% margin. Cash flow was $4.2 million,
a 19% increase over the same period last year, and a 43% sequential
increase.”
Second Quarter 2008 Financial Highlights
Revenue for the second quarter of 2008 was $15.0 million, a 10% decrease
compared to $16.6 million in the second quarter of 2007, and flat compared
to the prior quarter. Revenue for the six months was $30.0 million, a 10%
decrease compared to $33.4 million for the same period last year.
Contribution(2) for the second quarter of 2008 was $11.0 million, a 2%
decrease compared to $11.2 million for the second quarter of 2007, and flat
compared to the prior quarter. Contribution for the six months was $21.9
million, a 3% increase compared to $21.2 million for the same period last
year.
Operating expenses for the second quarter of 2008 were $8.0 million, a 15%
decrease compared to $9.5 million for the second quarter of 2007, and a 5%
decrease compared to $8.5 million for the prior quarter. Second quarter
2007 operating expenses include approximately $687,000 of charges related
to our Scheme of Arrangement. Operating expenses for the six months were
$16.5 million, a 22% decrease compared to $21.2 million for the same period
last year. Operating expenses for the six months ending June 30, 2007
include $1.1 million of charges related to the Company’s Scheme of
Arrangement.
Net income for the second quarter of 2008 was $1.6 million, or $0.07 per
share, compared to $1.9 million, or $0.06 per share for the second quarter
of 2007, and $1.6 million or $0.06 per share in the prior quarter. Net
income for the six months was $3.2 million, or $0.13 per share, compared to
$534,000, or $0.02 per share, for the same period last year.
Adjusted EBITDA for the second quarter of 2008, excluding currency
translation adjustments and Scheme of Arrangement costs, was $4.4 million,
compared to $4.5 million for the second quarter of 2007, and $4.0 million
in the prior quarter. Adjusted EBITDA, excluding currency translation
adjustments, for the six months was $8.4 million, compared to $7.5 million
during the same period last year.
Average paying subscribers(3) in the second quarter of 2008 were 190,455, a
13% decrease compared to 219,196 for the second quarter of 2007, and a 1%
decrease compared to 192,652 in the prior quarter. Average paying
subscribers for the six months were 191,554, a 14% decrease compared to
223,664 for the same period last year.
Segment Reporting(4)
Second quarter 2008 revenue for Jewish Networks was $8.6 million, a 5%
increase compared to $8.2 million for the second quarter of 2007, and flat
compared to the prior quarter. Jewish Networks revenue for the six months
was $17.3 million, a 4% increase compared to $16.6 million for the same
period last year.
Second quarter 2008 revenue for General Market Networks was $2.2 million, a
49% decrease compared to $4.3 million for the second quarter of 2007, and a
16% decrease compared to $2.6 million in the prior quarter. General Market
Networks revenue for the six months was $4.8 million, a 49% decrease
compared to $9.3 million for the same period last year.
Second quarter 2008 revenue for Other Affinity Networks was $3.4 million, a
6% increase compared to $3.2 million for the second quarter of 2007, and a
2% increase compared to the prior quarter. Other Affinity Networks revenue
for the six months was $6.8 million, a 5% increase compared to $6.4 million
for the same period last year.
Second quarter 2008 revenue for Offline & Other Businesses was $765,000, a
14% decrease compared to $886,000 for the second quarter of 2007, and an
80% increase compared to $426,000 in the prior quarter. Offline & Other
Businesses revenue for the six months was $1.2 million, a 7% increase
compared to $1.1 million for the same period last year.
Average paying subscribers for Jewish Networks were 91,598 during the
second quarter of 2008, a 2% decrease compared to 93,408 for the second
quarter of 2007, and a 1% decrease compared to 92,719 in the prior quarter.
Average paying subscribers for the six months were 92,159, a 3% decrease
compared to 94,687 for the same period last year.
Average paying subscribers for General Market Networks were 33,573 during
the second quarter of 2008, a 45% decrease compared to 61,529 for the
second quarter of 2007, and a 10% decrease compared to 37,435 in the prior
quarter. Average paying subscribers for the six months were 35,504, a 47%
decrease compared to 66,985 for the same period last year.
Average paying subscribers for Other Affinity Networks were 63,309 during
the second quarter of 2008, a 1% increase compared to 62,450 for the second
quarter of 2007, and a 5% increase compared to 60,133 in the prior quarter.
Average paying subscribers for the six months were 61,721, a 2% increase
compared to 60,781 for the same period last year.
Balance Sheet, Cash, Debt
Cash and marketable securities were $10.8 million at June 30, 2008,
compared to $9.0 million at December 31, 2007.
The Company purchased approximately 1.3 million shares during the quarter
at an average price of $4.35 per share or approximately $5.6
million. Subsequent to the quarter close, on July 18, 2008, the Company
purchased approximately 1.6 million shares at an average price of $3.81 per
share or approximately $6.1 million.
Cash flow from operations for the second quarter of 2008 was $4.2 million,
an increase of 19% compared to $3.6 million during the second quarter of
2007, and an increase of 43% compared to $2.9 million in the prior quarter.
Cash flow from operations for the six months was $7.2 million, an increase
of 10% compared to cash flow from operations of $6.5 million in the first
half of 2007.
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 '08 Financial Results Toll-Free (United States): +866-862-3927 International: +416-340-2216 One-Week Replay Toll-Free (United States): +1-800-408-3053 International: +1-416-695-5800 Pass Code: 3259888
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 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; and successfully implement 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
About Spark Networks, Inc.:
The Spark Networks portfolio of consumer websites includes, among others,
JDate®.com (www.jdate.com), AmericanSingles®.com
(www.americansingles.com), BlackSingles.com® (www.blacksingles.com) and
ChristianMingle®.com.
(1) “Adjusted EBITDA” is defined as earnings before interest, taxes,
depreciation, amortization, share-based compensation and impairment of
long-lived assets. Adjusted EBITDA should not be construed as a substitute
for net income (loss) or net cash provided by (used in) operating
activities (all as determined in accordance with GAAP) for the purpose of
analyzing our operating performance, financial position and cash flows, as
adjusted EBITDA is not defined by GAAP. However, the Company regards
adjusted EBITDA as a complement to net income and other GAAP financial
performance measures, including an indirect measure of operating cash flow.
As such, management believes that the investment community finds it to be a
useful tool to perform meaningful comparisons of past, present and future
operating results and as a means to evaluate the results of core on-going
operations.
(2) “Contribution” is defined as revenue less direct marketing expenses and
“Contribution Margin” is defined as Contribution divided by revenue.
(3) Paying subscribers are defined as individuals who have paid a monthly
fee for access to communication and website 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. In the second
quarter of 2008, the Company made a modification to its method of
calculating period end subscribers.
(4) In accordance with Financial Accounting Standard No. 131, 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 and Cupid.co.il® websites and their respective co-branded
websites. The General Market Networks segment consists of the Company’s
AmericanSingles.com website, its co-branded and private label websites, and
Date.co.uk and Date.ca®. The Other Affinity Networks segment consists of
all of the Company’s Provo, Utah-based properties which primarily consist
of sites targeted towards various religious, ethnic, geographic and special
interest groups including BlackSingles.com and ChristianMingle.com. The
Company has previously referred to this segment as Affinity Networks. The
Offline & Other Businesses segment consists of revenue generated from
offline activities, HurryDate® events and subscriptions and other
websites and businesses.
(Consolidated financial statements to follow)
SPARK NETWORKS, INC.
BALANCE SHEET
(in thousands, except share data)
June 30, December 31,
--------- ---------
2008 2007
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 10,797 $ 8,796
Marketable securities - 200
Restricted cash 992 1,706
Accounts receivable 1,333 1,433
Deferred tax asset - current 11 2,094
Prepaid expenses and other 1,448 1,289
--------- ---------
Total current assets 14,581 15,518
Property and equipment, net 1,367 1,383
Goodwill, net 20,031 18,358
Intangible assets, net 4,630 5,177
Deferred tax asset - long-term 2,941 3,106
Deposits and other assets 420 66
--------- ---------
Total assets $ 43,970 $ 43,608
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 446 $ 1,585
Accrued liabilities 4,570 5,529
Deferred revenue 4,744 4,140
Notes payable and other short-term debt 5,000 21
--------- ---------
Total current liabilities 14,760 11,275
Deferred tax liabilities 770 595
Other non-current liabilities 830 830
--------- ---------
Total liabilities 16,360 12,700
Shares subject to rescission -- 7,480
Commitments and contingencies -- --
Stockholders' equity:
Authorized capital stock consists of 100,000,000
Common Shares, $0.001 par value; issued and
outstanding 24,055,544 and 26,132,789 at June
30, 2008 and December 31, 2007, respectively at
stated values of: 24 26
Additional paid-in-capital 52,918 52,262
Accumulated other comprehensive income 993 672
Accumulated deficit (26,325) (29,532)
--------- ---------
Total stockholders' equity 27,610 23,428
--------- ---------
Total liabilities and stockholders' equity $ 43,970 $ 43,608
========= =========
SPARK NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Net revenues $ 14,987 $ 16,616 $ 30,009 $ 33,436
Direct marketing expenses 4,023 5,444 8,095 12,201
-------- -------- -------- --------
Contribution 10,964 11,172 21,914 21,235
Operating expenses:
Sales & marketing (including
share-based compensation of
$196, $197, $389, and $393) 1,128 865 2,181 1,698
Customer service (including
share-based compensation of
$17, $27, $38, and $53) 581 861 1,212 1,703
Technical operations (including
share-based compensation of
$171, $171, $342, and $309) 1,021 1,180 2,084 2,366
Development (including
share-based compensation of
$159, $145, $318, and $287) 1,110 975 2,331 2,121
General and administrative
(including share-based
compensation of $524, $583,
$1,048, and $1,553) 3,979 5,223 8,155 10,701
Amortization of intangible
assets 222 354 551 698
Impairment of goodwill -- -- -- 1,894
-------- -------- -------- --------
Total operating expenses 8,041 9,458 16,514 21,181
-------- -------- -------- --------
Operating income 2,923 1,714 5,400 54
Interest (income) and other
expenses, net (224) (297) (558) (502)
-------- -------- -------- --------
Income before income taxes 3,147 2,011 5,958 556
Provision for income taxes 1,506 95 2,751 22
-------- -------- -------- --------
Net income $ 1,641 $ 1,916 $ 3,207 $ 534
======== ======== ======== ========
Net income per share - basic $ 0.07 $ 0.06 $ 0.13 $ 0.02
-------- -------- -------- --------
Net income per share - diluted $ 0.07 $ 0.06 $ 0.13 $ 0.02
-------- -------- -------- --------
Weighted average shares outstanding
- basic 24,555 30,677 25,279 30,772
Weighted average shares outstanding
- diluted 24,575 30,904 25,301 30,979
Reconciliation of Net Income Three Months Ended Six Months Ended
to Adjusted EBITDA ------------------ ------------------
June 30, June 30,
2008 2007 2008 2007
Net income $ 1,641 $ 1,916 $ 3,207 $ 534
Interest 39 (220) (9) (446)
Taxes 1,506 95 2,751 22
Depreciation 173 504 413 1,052
Amortization 222 354 552 698
-------- -------- -------- --------
EBITDA 3,581 2,649 6,914 1,860
Share based compensation 1,067 1,123 2,135 2,595
Impairment of goodwill -- -- -- 1,894
-------- -------- -------- --------
Adjusted EBITDA $ 4,648 $ 3,772 $ 9,049 $ 6,349
SPARK NETWORKS, INC.
SEGMENT RESULTS FROM OPERATIONS
(in thousands except subscriber information)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Net Revenues
Jewish Networks $ 8,643 $ 8,239 $ 17,310 $ 16,576
General Market Networks 2,174 4,284 4,750 9,316
Other Affinity Networks 3,405 3,207 6,758 6,436
Offline & Other Businesses 765 886 1,191 1,108
--------- --------- --------- ---------
Total Net Revenues $ 14,987 $ 16,616 $ 30,009 $ 33,436
========= ========= ========= =========
Direct Marketing Expenses
Jewish Networks $ 624 $ 940 $ 1,329 $ 1,929
General Market Networks 962 2,040 2,298 5,678
Other Affinity Networks 1,968 1,918 3,810 3,913
Offline & Other Businesses 469 546 658 681
--------- --------- --------- ---------
Total Direct Marketing Expenses $ 4,023 $ 5,444 $ 8,095 $ 12,201
========= ========= ========= =========
Contribution
Jewish Networks $ 8,019 $ 7,299 $ 15,981 $ 14,647
General Market Networks 1,212 2,244 2,452 3,638
Other Affinity Networks 1,437 1,289 2,948 2,523
Offline & Other Businesses 296 340 533 427
--------- --------- --------- ---------
Total Contribution $ 10,964 $ 11,172 $ 21,914 $ 21,235
========= ========= ========= =========
Average Paying Subscribers*
Jewish Networks 91,598 93,408 92,159 94,687
General Market Networks 33,573 61,529 35,504 66,985
Other Affinity Networks 63,309 62,450 61,721 60,781
Offline & Other Businesses 1,975 1,809 2,170 1,211
--------- --------- --------- ---------
Total Average Paying Subscribers 190,455 219,196 191,554 223,664
========= ========= ========= =========
* In the second quarter of 2008, the Company made a modification to its
method of calculating period end subscribers. Historical data reflects
this modification.
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