Press Release

Spark Networks(R) Reports Third Quarter Financial Results

LOS ANGELES, CA -- (Marketwired) -- 11/13/13 -- Spark Networks, Inc. (NYSE MKT: LOV)

  • Total revenue grew for 11th consecutive quarter
  • Total contribution1 grew 22%
  • Christian Networks revenue grew for 12th consecutive quarter
  • Jewish Networks revenue grew for second consecutive quarter

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 third quarter ended September 30, 2013.

Q3 2013 Highlights

Q3 2012 Q3 2013
Revenue $ 15.9 Million $ 17.4 Million
Contribution Margin2 24 % 27 %
Net Loss $ (1.7) Million $ (2.6) Million
Net Loss Per Share $ (0.08 ) $ (0.11 )

Management Commentary

"I am pleased to announce another solid quarter of performance, with revenue increasing for the 11th consecutive quarter," said Greg Liberman, Spark Networks' Chief Executive Officer. "Revenue not only grew overall but, importantly, outpaced the growth of our marketing expense. As a result, despite an increase in marketing expense, company-wide contribution hit its highest level since the first half of 2012.

"Fueling our growth, once again, were the dual engines of our business, the Christian and Jewish Networks segments. In our Christian Networks segment, we posted a 28% increase in subscribers, a 19% increase in revenue and the best contribution performance since 2011. And, at the same time, our Jewish Networks segment continued to show its strength, as we posted another quarter of its customary, near-90% contribution margin and also its second consecutive quarter of revenue growth for the first time in more than five years."

Q3 2013 Financial Results

Revenue was $17.4 million, an increase of 9% compared to $15.9 million in the third quarter of 2012. The Christian Networks segment was the primary driver of that growth.

Contribution was $4.7 million, an increase of 22% compared to $3.9 million in the third quarter of 2012.

Total cost and expenses were $19.9 million, an increase of 7% compared to $18.5 million in the third quarter of 2012. The higher costs primarily reflect a $739,000 increase in Christian Networks direct marketing expenses, reflecting the Company's continued focus on meaningfully growing its subscriber base in this segment.

Net loss was $2.6 million, or $0.11 per share, compared to a net loss of $1.7 million, or $0.08 per share, in the third quarter of 2012.

Adjusted EBITDA3 was a loss of $1.8 million, compared to a loss of $2.0 million in the third quarter of 2012.

Average paying subscribers4 for the Jewish Networks, Christian Networks and Other Networks segments were 300,225, an increase of 13% compared to 266,075 in the third quarter of 2012.

Balance Sheet, Cash, Debt
As of September 30, 2013, the Company had cash and cash equivalents of $17.2 million, an increase of 65% from $10.5 million at December 31, 2012. As of September 30, 2013, the Company had no outstanding debt.

SPARK NETWORKS, INC.
SEGMENT5 RESULTS FROM OPERATIONS
(in thousands except subscriber and ARPU information)
Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q3 '13 v. Q3 '12
Net Revenue
Jewish Networks $ 6,385 $ 6,617 $ 6,452 $ 6,460 $ 6,433 0.8 %
Christian Networks 8,495 8,721 9,908 10,260 10,088 18.8 %
Other Networks 903 836 815 775 715 -20.8 %
Offline & Other Businesses 88 97 88 86 125 42.0 %
Total Net Revenue $ 15,871 $ 16,271 $ 17,263 $ 17,581 $ 17,361 9.4 %
Direct Mktg. Exp.
Jewish Networks $ 829 $ 834 $ 751 $ 776 $ 822 -0.8 %
Christian Networks 10,920 11,480 11,722 12,866 11,659 6.8 %
Other Networks 213 201 199 152 123 -42.3 %
Offline & Other Businesses 29 69 26 31 30 3.4 %
Total Direct Mktg. Exp. $ 11,991 $ 12,584 $ 12,698 $ 13,825 $ 12,634 5.4 %
Contribution
Jewish Networks $ 5,556 $ 5,783 $ 5,701 $ 5,684 $ 5,611 1.0 %
Christian Networks (2,425 ) (2,759 ) (1,814 ) (2,606 ) (1,571 ) 35.2 %
Other Networks 690 635 616 623 592 -14.2 %
Offline & Other Businesses 59 28 62 55 95 61.0 %
Total Contribution $ 3,880 $ 3,687 $ 4,565 $ 3,756 $ 4,727 21.8 %
Average Paying Subs.
Jewish Networks 84,650 85,736 85,200 84,487 83,732 -1.1 %
Christian Networks 154,747 168,394 186,896 196,598 197,420 27.6 %
Other Networks 26,678 25,130 23,435 21,183 19,073 -28.5 %
Total Avg. Paying Subs.6 266,075 279,260 295,531 302,268 300,225 12.8 %
ARPU
Jewish Networks $ 24.61 $ 24.93 $ 24.86 $ 25.15 $ 25.28 2.7 %
Christian Networks 17.26 16.43 16.84 16.55 16.07 -6.9 %
Other Networks 10.61 10.36 10.84 11.49 12.08 13.8 %
Total ARPU7 $ 18.93 $ 18.49 $ 18.68 $ 18.60 $ 18.38 -2.9 %

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, 2013.

Replay
Toll-Free (United States): 1-877-870-5176
International: 1-858-384-5517
Passcode: 10000578

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; continue to depend upon the telecommunications infrastructure and our networking hardware and software infrastructure; estimate on-going general and administrative costs, 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 "Contribution" is defined as revenue, net of credits and credit card chargebacks, less direct marketing.

2 "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. 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 an inter-company loan and the income (loss) recognized from non-cash assets received in connection with a legal judgment.

4 "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.

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 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.

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

7 ARPU is defined as average revenue per user per month. 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, September 30,
2012 2013
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 10,458 $ 17,243
Restricted cash 1,232 1,320
Accounts receivable 1,510 1,494
Deferred tax asset, net - current 8 -
Prepaid expenses and other 861 1,869
Total current assets 14,069 21,926
Property and equipment, net 3,133 3,969
Goodwill 8,861 9,178
Intangible assets, net 2,143 2,275
Deferred tax asset, net - non-current 5 -
Other assets 153 207
Total assets $ 28,364 $ 37,555
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,093 $ 1,343
Accrued liabilities 5,339 5,173
Deferred revenue 8,128 9,271
Deferred tax liability - current 257 239
Total current liabilities 14,817 16,026
Deferred tax liability - non-current 1,413 1,782
Other liabilities 588 1,649
Total liabilities 16,818 19,457
Commitments and contingencies
Stockholders' equity:
Authorized capital stock consists of 100,000,000 shares of Common Stock, $0.001 par value; issued and outstanding: 23,881,741 shares at September 30, 2013 and 20,945,364 shares at December 31, 2012: 21 24
Additional paid-in-capital 54,857 70,192
Accumulated other comprehensive income 712 757
Accumulated deficit (44,044 ) (52,875 )
Total stockholders' equity 11,546 18,098
Total liabilities and stockholders' equity $ 28,364 $ 37,555
SPARK NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2012 2013 2012 2013
Revenue $ 15,871 $ 17,361 $ 45,472 $ 52,205
Cost and expenses:
Cost of revenue (exclusive of depreciation shown separately below) 12,901 13,620 35,725 42,046
Sales and marketing 1,020 1,423 2,976 3,972
Customer service 652 746 1,887 2,136
Technical operations 362 288 1,067 887
Development 859 746 2,549 2,331
General and administrative 2,260 2,496 6,550 7,704
Depreciation 426 529 1,242 1,454
Amortization of intangible assets - 10 13 10
Impairment of long-lived assets - - - 265
Total cost and expenses 18,480 19,858 52,009 60,805
Operating loss (2,609 ) (2,497 ) (6,537 ) (8,600 )
Interest (income) expense and other, net (36 ) (77 ) (50 ) (172 )
Loss before income taxes (2,573 ) (2,420 ) (6,487 ) (8,428 )
(Benefit) provision for income taxes (836 ) 195 (2,036 ) 403
Net loss $ (1,737 ) $ (2,615 ) $ (4,451 ) $ (8,831 )
Net loss per share--basic and diluted $ (0.08 ) $ (0.11 ) $ (0.22 ) $ (0.39 )
Weighted average shares outstanding - basic and diluted 20,699 23,753 20,683 22,410
Stock-based compensation: Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)
2012 2013 2012 2013
Cost of revenue $ 2 $ - $ 6 $ -
Sales and marketing 17 36 55 107
Customer service - - 1 -
Technical operations 29 2 89 4
Development 10 3 31 10
General and administrative 138 153 417 455
Reconciliation of Net Loss to Adjusted EBITDA:
(in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2012 2013 2012 2013
Net loss $ (1,737 ) $ (2,615 ) $ (4,451 ) $ (8,831 )
Interest 16 19 43 53
Taxes (836 ) 195 (2,036 ) 403
Depreciation 426 529 1,242 1,454
Amortization - 10 13 10
EBITDA (2,131 ) (1,862 ) (5,189 ) (6,911 )
Stock-based compensation 196 194 599 576
Impairment of long-lived assets - - - 265
Non-cash currency translation adjustments (42 ) (99 ) 77 (215 )
Non-repetitive property possession - - (151 ) -
Adjusted EBITDA $ (1,977 ) $ (1,767 ) $ (4,664 ) $ (6,285 )

For More Information
Investors:
Addo Communications
Laura Bainbridge
Email Contact
Kimberly Esterkin
Email Contact
310-829-5400

Source: Spark Networks