Press Release

Spark Networks SE Reports Second Half And Full Year 2018 Results

BERLIN, April 29, 2019 /PRNewswire/ -- Spark Networks SE (NYSE American: LOV), one of the world's leading online dating platforms, leveraging premium, complementary brands including EliteSingles, eDarling, Jdate, Christian Mingle, JSwipe, SilverSingles, and Attractive World reported its second half and full year 2018 financial results today.

(PRNewsfoto/Spark Networks SE)

"2018 was a strong year for Spark, as we continued to drive profitable growth while investing in new brands," said Jeronimo Folgueira, CEO of Spark Networks.  "2018 was our first full year as a public company, following the close the of the Affinitas / Spark merger in November 2017.  Looking back, I am pleased with our ability to integrate and stabilize the Spark Networks, Inc. operations while also growing our consolidated Revenue, Net Income and Adjusted EBITDA to achieve the 2018 financial guidance we set in August.  As we look ahead, we are excited to add Zoosk to our portfolio of brands and to begin the post-merger integration work that will enable us to achieve the profitability goals we have set for 2020 and beyond."

Financial Results

  • Revenue for the second half of 2018 was €51.5 million, an increase of 18.4% from €43.5 million in the second half of 2017. Revenue for 2018 was €104.6 million, an increase of 22.2% from €85.6 million in 2017. For both the half year and the full year, the increase in Revenue was primarily attributable to the Affinitas / Spark Merger, which closed in November 2017.
  • Net Loss was €2.0 million in the second half of 2018, compared to €3.9 million in the second half of 2017, a reduction of €1.9 million. Net Loss for 2018 was €3.1 million, compared to €5.6 million in 2017, a reduction of €2.5 million. For both the half year and the full year, the reduction in Net Loss was primarily attributable to the Affinitas / Spark Merger, which closed in November 2017.
  • Adjusted EBITDA was €8.5 million in the second half of 2018, compared to €4.2 million in the second half of 2017, an increase of €4.3 million. Adjusted EBITDA for 2018 was €11.0 million, compared to €6.6 million in 2017, an increase of €4.4 million.
  • The Company ended the year with €11.1 million in cash and €12.1 million in debt.

Key Performance Indicators

  • Average Paying Subscribers grew 21.3% to 477.8 thousand in the second half of 2018, compared to 394.0 thousand in the same period of 2017.
  • Monthly Average Net Revenue Per User, or Monthly ARPU, decreased 2.3% to €17.98 in the second half of 2018, compared to €18.41 in the same period of 2017.

Financial Outlook

  • Spark initially adopted IFRS 15, Revenue from Contracts with Customers, in 2018. With the application of IFRS 15, Spark does not recognize revenue following a customer chargeback.
  • The Revenue guidance ranges provided by Spark on August 30, 2018 for the second half of 2018 and full year 2018 of €53.5 to €56.5 million and €106.5 to €109.5 million, respectively, were based on the expectation that Revenue would be recognized gross of chargebacks, and are therefore inconsistent with IFRS 15. Excluding the application of IFRS 15, Revenue for the second half of 2018 and full year 2018 was €54.1 million and €107.2 million, respectively.
  • Given the expected Q3 2019 close of the previously announced merger with Zoosk, Inc., Spark's 2019 outlook is no longer consistent with the preliminary 2019 guidance provided on August 30, 2018.
  • Spark is focused on completing the post-close merger integration work as efficiently as possible, and we believe our efforts will result in at least $50 million of Adjusted EBITDA in 2020.

Key Metrics – Half Year

 

Six Months Ended

 

Growth Rates %

 

12/31/2018

 

6/30/2018

 

12/31/2017

 

2nd Half 2018 vs.

 

2nd Half 2018

 

1st Half 2018

 

2nd Half 2017

 

1st Half 2018

 

2nd Half 2017

Revenue

€51.5 Million

 

€53.0 Million

 

€43.5 Million

 

(2.8)%

 

18.4%

Contribution1

€24.2 Million

 

€20.4 Million

 

€17.5 Million

 

18.6%

 

38.1%

Net (Loss)/Profit

€(2.0) Million

 

€(1.1) Million

 

€(3.9) Million

 

81.8%

 

(48.7)%

Adjusted EBITDA2

€8.5 Million

 

€2.4 Million

 

€4.2 Million

 

254.2%

 

102.4%

Cash Balance

€11.1 Million

 

€8.1 Million

 

€8.2 Million

 

37.0%

 

35.4%

Total Registrations3

4,791,652

 

5,352,521

 

4,329,541

 

(10.5)%

 

10.7%

Avg. Paying Subs4

477,817

 

489,024

 

393,979

 

(2.3)%

 

21.3%

Monthly ARPU5

€ 17.98

 

€ 18.07

 

€ 18.41

 

(0.5)%

 

(2.3)%

 

Key Metrics – Full Year

       

Growth Rates %

 

2018

 

2017

 

2018

 

2017

Revenue

€104.6 Million

 

€85.6 Million

 

22.2%

 

16.5%

Contribution1

€44.7 Million

 

€32.2 Million

 

38.8%

 

28.1%

Net (Loss)/Profit

€(3.1) Million

 

€(5.6) Million

 

(44.6)%

 

N.M.

Adjusted EBITDA2

€11.0 Million

 

€6.6 Million

 

66.7%

 

12.5%

Cash Balance

€11.1 Million

 

€8.2 Million

 

35.4%

 

1.9%

Total Registrations3

10,144,173

 

8,451,633

 

20.0%

 

22.5%

Avg. Paying Subs4

483,413

 

379,403

 

27.4%

 

19.6%

Monthly ARPU5

€ 18.02

 

€ 18.81

 

(4.2)%

 

(2.6)%

 

SPARK NETWORKS SE

SEGMENT6 RESULTS FROM OPERATIONS    

(Revenue, Direct Marketing and Contribution figures in € thousands)

 
 

Six Months Ended

 

Growth Rates %

 

12/31/2018

 

6/30/2018

 

12/31/2017

 

2nd Half 2018 vs.

 

2nd Half 2018

 

1st Half 2018

 

2nd Half 2017

 

1st Half 2018

 

2nd Half 2017

# of Registrations

                           

North America

2,243,178

   

2,133,705

   

1,233,455

   

5.1

%

 

81.9

%

International

2,548,474

   

3,218,816

   

3,096,086

   

(20.8)

%

 

(17.7)

%

Total # of Registrations

4,791,652

   

5,352,521

   

4,329,541

   

(10.5)

%

 

10.7

%

                           

Average Paying Subscribers

                         

North America

189,533

   

178,101

   

97,786

   

6.4

%

 

93.8

%

International

288,284

   

310,923

   

296,193

   

(7.3)

%

 

(2.7)

%

Total Average Paying Subscribers

477,817

   

489,024

   

393,979

   

(2.3)

%

 

21.3

%

                           

Monthly ARPU

                         

North America

22.45

   

21.47

   

22.87

   

4.6

%

 

(1.8)

%

International

15.03

   

16.12

   

16.94

   

(6.8)

%

 

(11.3)

%

Monthly ARPU

17.98

   

18.07

   

18.41

   

(0.5)

%

 

(2.3)

%

                         

Total Net Revenue

                       

North America

25,531

   

22,939

   

13,419

   

11.3

%

 

90.3

%

International

26,006

   

30,075

   

30,102

   

(13.5)

%

 

(13.6)

%

Total Net Revenue

51,537

   

53,014

   

43,521

   

(2.8)

%

 

18.4

%

                         

Direct Marketing

                       

North America

13,277

   

14,585

   

8,585

   

(9.0)

%

 

54.7

%

International

14,026

   

18,000

   

17,394

   

(22.1)

%

 

(19.4)

%

Total Direct Marketing

27,303

   

32,585

   

25,979

   

(16.2)

%

 

5.1

%

                         

Contribution

                       

North America

12,254

   

8,354

   

4,834

   

46.7

%

 

153.5

%

International

11,980

   

12,075

   

12,708

   

(0.8)

%

 

(5.7)

%

Total Contribution

24,234

   

20,429

   

17,542

   

18.6

%

 

38.1

%

 

 

SPARK NETWORKS SE

SEGMENT6 RESULTS FROM OPERATIONS

(Revenue, Direct Marketing and Contribution figures in € thousands)

 
 

12 Months Ended December 31,

 

Growth Rates %

 

2018

 

2017

 

2016

 

2018

 

2017

# of Registrations

                 

North America

4,376,883

   

2,289,036

   

1,616,963

   

91.2

%

 

41.6

%

International

5,767,290

   

6,162,597

   

5,280,686

   

(6.4)

%

 

16.7

%

Total # of Registrations

10,144,173

   

8,451,633

   

6,897,649

   

20.0

%

 

22.5

%

                   

Average Paying Subscribers

                 

North America

183,794

   

83,870

   

46,453

   

119.1

%

 

80.5

%

International

299,619

   

295,533

   

270,823

   

1.4

%

 

9.1

%

Total Average Paying Subscribers

483,413

   

379,403

   

317,276

   

27.4

%

 

19.6

%

                   

Monthly ARPU

                 

North America

21.98

   

24.42

   

28.71

   

(10.0)

%

 

(15.0)

%

International

15.60

   

17.22

   

17.69

   

(9.4)

%

 

(2.7)

%

Monthly ARPU

18.02

   

18.81

   

19.30

   

(4.2)

%

 

(2.6)

%

                   

Total Net Revenue

                 

North America

48,470

   

24,574

   

16,004

   

97.2

%

 

53.6

%

International

56,081

   

61,063

   

57,487

   

(8.2)

%

 

6.2

%

Total Net Revenue

104,551

   

85,637

   

73,491

   

22.2

%

 

16.5

%

                   

Direct Marketing

                 

North America

27,862

   

17,980

   

15,059

   

55.0

%

 

19.4

%

International

32,026

   

35,489

   

33,311

   

(9.8)

%

 

6.5

%

Total Direct Marketing

59,888

   

53,469

   

48,370

   

12.0

%

 

10.5

%

                   

Contribution

                 

North America

20,608

   

6,594

   

944

   

212.5

%

 

598.2

%

International

24,055

   

25,574

   

24,177

   

(5.9)

%

 

5.8

%

Total Contribution

44,663

   

32,168

   

25,121

   

38.8

%

 

28.1

%

 

SPARK NETWORKS SE

UNAUDITED PRO FORMA FINANCIAL INFORMATION7 

(in € thousands)

 
 

Years Ended December 31,

 

2018

 

2017

(in € thousands)

(pro forma)

 

(pro forma)

Revenue

104,840

   

105,911

 

Net loss

(2,814)

   

(3,134)

 
 
 

The following table presents certain selected information and Adjusted EBITDA(2) for the unaudited pro forma periods presented:

 
   
 

Years Ended December 31,

 

2018

 

2017

(in € thousands)

(pro forma)

 

(pro forma)

Net loss

(2,814)

   

(3,134)

 

Net finance expenses

958

   

261

 

Income tax (benefit) expense

1,147

   

5,057

 

Depreciation and amortization

3,565

   

4,266

 

Impairment of intangible assets and goodwill

3,324

   

46

 

Share-based compensation expense

4,091

   

1,175

 

Non-recurring costs

681

   

943

 

Adjusted EBITDA

10,952

   

8,614

 
   
   
 

Years Ended December 31,

 

2018

 

2017

Summary of non-recurring costs

(pro forma)

 

(pro forma)

Contract liabilities write-offs

   

943

 

Restructuring expenses

   

 

Transaction and advisory fees

264

   

 

Merger integration costs

101

   

 

Other employee payments

   

 

Severance costs

316

   

 

Total adjustments

681

   

943

 

Investor Conference Call

The Group will discuss its financial results during a live teleconference today at 4:30 p.m. Eastern time.

Toll-Free (United States):   

1-877-705-6003

Toll-Free (Germany):  

0-800-182-0040

International:     

1-201-493-6725

In addition, the Group will host a webcast of the call which will be accessible in the Investor Relations section of the Group's website at https://investor.spark.net/investor-relations/home.

A replay will begin approximately three hours after completion of the call and run until May 13, 2019.

Replay                        

 

Toll-Free (United States):    

1-844-512-2921         

International:                         

1-412-317-6671

Passcode:                              

13690219

Safe Harbor Statement:

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, statements involving known and unknown risks, uncertainties, and other factors that may cause Spark Networks' performance or achievements to be materially different from those of any expected future results, performance, or achievements.

Any statements in this press release that are not statements of historical fact may be considered to be forward-looking statements. Words and expressions reflecting optimism, satisfaction, or disappointment with current prospects, as well as words such as "believes," "hopes," "intends," "estimates," "expects," "projects," "plans," "anticipates," and variations thereof, or the use of future tense, identify forward-looking statements, but their absence does not mean that a statement is not forward-looking. Forward-looking statements include, but are not limited to, statements about operating a diverse global platform of premium online dating sites, statements about providing exceptional user experience and driving stockholder value, statements about projected financial results, statements about the company's plans, objectives, expectations and intentions and other statements that are not historical facts. Such forward-looking statements are not guarantees of performance and actual results could differ materially from those contained in such statements. Factors that could cause or contribute to such differences include, but are not limited to: risks related to the degree of competition in the markets in which Spark Networks operates; the ability of Spark Networks to retain and hire key personnel; Spark Networks' ability to continue to control costs and operating expenses; Spark Networks' ability to achieve its intended cost savings; Spark Networks' ability to generate cash from operations, lower-than-expected revenue, credit quality deterioration or a reduction in net earnings; Spark Networks' ability to raise outside capital and to repay debt as it comes due; Spark Networks' ability to introduce new competitive products and the degree of market acceptance of such new products; the timing and market acceptance of new products introduced by Spark Networks' competitors; Spark Networks' ability to identify potential acquisitions; Spark Networks' ability to successfully integrate acquired businesses and the ability of acquired businesses to perform as expected; Spark Networks' ability to maintain strong relationships with branded channel partners; changes in Spark Networks' stock price due to broader stock market movements and the performance of peer group companies; Spark Networks' ability to enforce intellectual property rights and protect their respective intellectual property; general competition and price measures in the market place; general economic conditions; and the other concerns. Additional factors that could cause actual results to differ are discussed under the heading "Risk Factors" and in other sections of the Group's filings with the Securities and Exchange Commission ("SEC"), and in the Group's other current and periodic reports filed or furnished from time to time with the SEC.  All forward-looking statements in this press release are made as of the date hereof, based on information available to the Company as of the date hereof, and the Company assumes no obligation to update any forward-looking statement.

About Spark Networks SE:

Spark Networks SE is a leading global dating company with a portfolio of premium brands designed for singles seeking serious relationships. These brands include EliteSingles, Jdate, Christian Mingle, SilverSingles, eDarling, JSwipe and Attractive World. Formed in 2017 through the merger of Affinitas GmbH and Spark Networks, Inc., the company has a presence in 29 countries worldwide and is publicly listed on the NYSE American exchange under the ticker symbol "LOV."

For More Information           

Investors:
Robert O'Hare
Chief Financial Officer
rohare@spark.net

1 Contribution is defined as revenue, net of refunds and credit card chargebacks, less direct marketing. Direct Marketing is defined as online and offline advertising spend, and is included within Cost of Revenue within the Group's Consolidated Statements of Operations and Comprehensive Loss.

2 Adjusted EBITDA is not a measure defined by IFRS. The most directly comparable IFRS measure for Adjusted EBITDA is our net (loss)/profit for the relevant period. 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 ongoing operations and excludes the impact of items that we do not consider representative of our ongoing operating performance, including: (i) non-cash items such as stock-based compensation, asset impairments, net finance expenses 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 including severance, transaction advisory fees, and merger integration costs, and (iii) discontinued operations. Adjusted EBITDA should not be construed as a substitute for net loss (as determined in accordance with IFRS) for the purpose of analyzing our operating performance or financial position, as Adjusted EBITDA is not defined by IFRS. A reconciliation of the Adjusted EBITDA for the six and twelve months ended December 31, 2018 and December 31, 2017 can be found in the table below.

Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, stock-based compensation, impairment of intangible and long-lived assets, and non-recurring costs.

3 Total registrations are defined as the total number of new members registering to the platforms with their email address. Those include members who enter into premium subscriptions and free memberships.

4 Paying subscribers are defined as individuals who have paid a monthly fee for access to premium services, which include, among others, unlimited communication with other registered users, access to user profile pictures and enhanced search functionality. Average paying subscribers for each month are calculated as the sum of the paying subscribers at the beginning and the 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 Monthly Average Net Revenue Per User, or Monthly ARPU, represents the total net subscriber revenue for the period divided by the number of average paying subscribers for the period, divided by the number of months in the period.

6 In accordance with segment reporting guidance, the Group's financial reporting includes detailed data on two separate operating segments. The North America segment consists of operations in the United States and Canada, and the International segment consists of all other operations except for the United States and Canada.

7 The unaudited pro forma financial information presents the combined results of the Company and Spark as if the Affinitas / Spark Merger had occurred on January 1, 2017. The unaudited pro forma financial information includes adjustments required under the acquisition method of accounting and is presented for informational purposes only. This presentation is not necessarily indicative of the results that would have been achieved had the acquisitions actually occurred on January 1, 2017.

SPARK NETWORKS SE

CONSOLIDATED BALANCE SHEETS  

(in € thousands)

 
   

December 31, 2018

 

December 31, 2017

ASSETS

       

Non-current assets

 

44,729

 

47,148

Intangible assets and goodwill

 

33,015

 

35,136

Internally generated software

 

2,221

 

3,503

Licenses and domains

 

209

 

128

Brands and trademarks

 

4,894

 

4,917

Purchased software

 

23

 

Intangible assets under development

 

3,691

 

1,090

Other intangible assets

 

1,173

 

2,314

Goodwill

 

20,804

 

23,184

Property, plant and equipment

 

2,015

 

2,082

Leasehold improvements

 

127

 

186

Other and office equipment

 

1,884

 

373

Property, plant and equipment under construction

 

4

 

1,523

Other non-current financial assets

 

24

 

23

Other non-current non-financial assets

 

271

 

Deferred tax assets

 

9,404

 

9,907

Current assets

 

18,133

 

22,034

Current trade and other receivables

 

7,004

 

13,820

Trade receivables

 

3,042

 

6,814

Other current financial assets

 

914

 

3,156

Other assets

 

3,048

 

3,850

Current income tax assets

 

34

 

Cash and cash equivalents

 

11,095

 

8,214

TOTAL ASSETS

 

62,862

 

69,182

SHAREHOLDERS' EQUITY AND LIABILITIES

       

Shareholders' equity

 

19,409

 

19,477

Subscribed capital

 

1,317

 

1,317

Capital reserves

 

49,365

 

48,877

Share-based payment reserve

 

4,149

 

2,747

Accumulated deficit

 

(36,156)

 

(32,581)

Accumulated other comprehensive income

 

734

 

(883)

Non-current liabilities

 

9,582

 

765

Non-current borrowings

 

8,375

 

Other non-current provisions

 

16

 

17

Other non-current financial liabilities

 

54

 

Deferred tax liabilities

 

1,132

 

725

Non-current contract liabilities

 

5

 

23

Current liabilities

 

33,871

 

48,940

Current borrowings

 

3,750

 

5,850

Other current provisions

 

305

 

1,159

Current trade and other payables

 

12,863

 

21,291

Trade payables

 

10,166

 

11,489

Other current financial liabilities

 

878

 

6,515

Other liabilities

 

1,819

 

3,287

Current income tax liabilities

 

349

 

286

Current contract liabilities

 

16,604

 

20,354

Total liabilities

 

43,453

 

49,705

TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES

 

62,862

 

69,182

             
 

 

SPARK NETWORKS SE

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 

(in € thousands, except per share data)

 
   

Six Months Ended December 31,

 

Years Ended December 31,

   

2018

 

2017

 

2018

 

2017

Continuing operations

               

Revenue

 

51,537

   

43,521

   

104,551

   

85,637

 

Cost of revenue

 

(32,140)

   

(29,737)

   

(69,490)

   

(58,776)

 

Gross profit

 

19,397

   

13,784

   

35,061

   

26,861

 

Other income

 

216

   

5

   

240

   

54

 

Other operating expenses

 

(18,788)

   

(16,930)

   

(36,299)

   

(32,030)

 

Sales and marketing expenses

 

(2,481)

   

(2,775)

   

(4,938)

   

(5,540)

 

Customer service expenses

 

(2,278)

   

(1,776)

   

(4,626)

   

(3,971)

 

Technical operations and development expenses

 

(3,821)

   

(3,664)

   

(7,195)

   

(6,428)

 

General and administrative expenses

 

(10,208)

   

(8,715)

   

(19,540)

   

(16,091)

 

Operating profit/(loss)

 

825

   

(3,141)

   

(998)

   

(5,115)

 

Interest income and similar income

 

264

   

166

   

478

   

239

 

Interest expense and similar charges

 

(658)

   

(363)

   

(1,436)

   

(782)

 

Net finance expenses

 

(394)

   

(197)

   

(958)

   

(543)

 

Income/(loss) before taxes

 

431

   

(3,338)

   

(1,956)

   

(5,658)

 

Income tax benefit (expense)

 

(2,387)

   

(532)

   

(1,147)

   

84

 

Loss from continuing operations

 

(1,956)

   

(3,870)

   

(3,103)

   

(5,574)

 

Discontinued operations

               

Loss from discontinued operations, net of tax

 

   

   

   

 

Net loss

 

(1,956)

   

(3,870)

   

(3,103)

   

(5,574)

 

Other comprehensive income/(loss)

 

790

   

(883)

   

1,617

   

(883)

 

Total comprehensive loss

 

(1,166)

   

(4,753)

   

(1,486)

   

(6,457)

 

Earnings per share

               

Basic earnings/(loss) per share (€)

 

(1.51)

   

(8.97)

   

(2.39)

   

(24.23)

 

Diluted earnings/(loss) per share (€)

 

(1.51)

   

(8.97)

   

(2.39)

   

(24.23)

 

Earnings per share - continuing operations

               

Basic earnings/(loss) per share (€)

 

(1.51)

   

(8.97)

   

(2.39)

   

(24.23)

 

Diluted earnings/(loss) per share (€)

 

(1.51)

   

(8.97)

   

(2.39)

   

(24.23)

 
                 

Reconciliation of Net Loss to Adjusted EBITDA:

               

Net loss

 

(1,956)

   

(3,870)

   

(3,103)

   

(5,574)

 

Discontinued operations

 

   

   

   

 

Net finance expenses

 

394

   

197

   

958

   

543

 

Income tax (benefit) expense

 

2,387

   

532

   

1,147

   

(84)

 

Depreciation and amortization

 

1,928

   

1,579

   

3,565

   

3,084

 

Impairment of intangible assets and goodwill

 

3,324

   

   

3,324

   

25

 

Share-based compensation expense

 

2,314

   

112

   

4,091

   

488

 

Non-recurring costs

 

129

   

5,685

   

970

   

8,123

 

Adjusted EBITDA(2)

 

8,520

   

4,235

   

10,952

   

6,605

 
                 

Summary of non-recurring costs

               

Contract liabilities write-offs

 

   

603

   

289

   

603

 

Restructuring expenses

 

   

   

   

 

Transaction and advisory fees

 

   

1,660

   

264

   

3,995

 

Merger integration costs

 

87

   

2,042

   

101

   

2,042

 

Other employee payments

 

   

1,053

   

   

1,053

 

Severance costs

 

42

   

327

   

316

   

430

 

Total adjustments

 

129

   

5,685

   

970

   

8,123

 

 

 

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SOURCE Spark Networks SE