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: 3259888In 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 http://www.sec.gov. 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.
Contact Information: For More Information Investors: Brett Zane + 1-323-658-3000 ext. 4001 Media: Gail Laguna + 1-323-658-3000 ext. 4402