Q4 2008 12 Mos. 2008
-------------------- --------------------
Revenue $ 13.2 Million $ 57.3 Million
Contribution Margin 73% 74%
Net (loss) Income $ (0.2) Million $ 4.8 Million
(Loss) Earnings Per Share $ (0.01) $ 0.20
"2008 was a mixed year for us. We achieved moderate annual revenue
increases in Jewish Networks and Other Affinity Networks, improved
Contribution margins to 74%, cut Operating Expenses by 19%, drove annual
Adjusted EBITDA to record levels at a 28% margin and returned capital to
stockholders by using cash flow to repurchase 21% of the shares outstanding
at the start of 2008," stated Adam Berger, Chairman and Chief Executive
Officer of Spark Networks, Inc.
"However," Berger continued, "we are disappointed with second half trends
and in particular the fourth quarter, as revenue and subscribers decreased
sequentially in each online segment. 2008 revenue, excluding General
Markets, was flat while fourth quarter revenue, excluding General Markets,
declined 3% sequentially. Jewish Networks was flat in 2008 but saw its
third consecutive quarter of declines."
"In the fourth quarter we overhauled the company's largest brand, JDate,
and began a re-launch in early 2009. We will continue to invest in and
enhance the JDate product, adding fresh looks, new tools and relevant
content to meet the needs of the single Jewish community and maintain
JDate's iconic status."
Financial Results
Revenue for the fourth quarter of 2008 was $13.2 million, a decrease of 18%
compared to $16.0 million in the fourth quarter of 2007, and a 6% decrease
compared to $14.0 million for the prior quarter. Revenue for the full year
was $57.3 million, a decrease of 12% compared to $65.2 million for the 12
months ended December 31, 2007.
Contribution(1) for the fourth quarter of 2008 was $9.7 million, a decrease
of 13% compared to $11.2 million for the fourth quarter of 2007, and a 9%
decrease compared to $10.6 million in the prior quarter. Contribution for
the full year decreased 4% to $42.3 million compared to $44.1 million for
2007.
Operating expenses for the fourth quarter of 2008 were $8.5 million, a 12%
decrease compared to $9.6 million for the fourth quarter of 2007, and a 7%
increase compared to $7.9 million in the prior quarter. The sequential
increase in operating expenses can be primarily attributed to the $1.2
million asset impairment charge. Operating expenses for the full year
were $32.9 million, a 19% decrease compared to $40.5 million for last year.
Operating expenses for the full year 2008 and 2007 include a $1.4 and $1.9
million charge, respectively, associated with a reduction in goodwill and
other assets. Additionally, operating expenses for the full year 2007
include approximately $1.9 million of Scheme of Arrangement expense.
Net loss for the fourth quarter of 2008 was $164,000, or $0.01 per share,
compared to net income of $6.6 million, or $0.25 per share, for the fourth
quarter of 2007. A significant portion of the difference in net income can
be attributed to the $1.2 million asset impairment charge reflecting a
reduction in the value of the HurryDate assets and a $5.6 million increase
in the income tax provision. In the fourth quarter of 2007, the Company
released net operating loss valuation allowances, which reduced the tax
provision.
Net income for the full year was $4.8 million, or $0.20 per share, compared
to $9.0 million, or $0.31 per share in 2007. The difference in net income
can be primarily attributed to an $8.9 million increase in the income tax
provision, reflecting the 2007 income tax benefit associated with the
release of net operating loss valuation allowances.
Adjusted EBITDA(2) for the fourth quarter of 2008 was $3.7 million, a
decrease of 3% compared to $3.8 million for the fourth quarter of 2007, and
a decrease of 11% compared to $4.1 million in the prior quarter. Adjusted
EBITDA for the full year was $16.2 million, an increase of 3% compared to
$15.7 million for 2007. See the attached Consolidated Statement of
Operations for a reconciliation of EBITDA and Adjusted EBITDA to net
income.
Average paying subscribers(3) for the Company, as a whole, in the fourth
quarter of 2008 were 177,011, a decrease of 11% compared to 199,153 for the
fourth quarter of 2007. Average paying subscribers for the full year were
186,957, a decrease of 12% compared to 213,498 for last year.
Segment Reporting(4)
Fourth quarter 2008 revenue for Jewish Networks was $8.0 million, a
decrease of 7% compared to $8.6 million for the fourth quarter of 2007, and
a 5% decrease compared to $8.4 million in the prior quarter. Revenue from
Jewish Networks for the full year was $33.7 million compared to $33.6
million for last year.
Fourth quarter 2008 revenue for General Market Networks was $1.3 million, a
decrease of 57% compared to $3.0 million for the fourth quarter of 2007,
and a 25% decrease compared to $1.7 million in the prior quarter. General
Market Networks revenue for the full year was $7.8 million, a decrease of
51% compared to $15.7 million for 2007. The planned decrease in revenue for
General Market Networks is largely attributable to a 59% decrease in the
marketing spend for this segment in 2008 compared to 2007.
Fourth quarter 2008 revenue for Other Affinity Networks was $3.5 million,
which was flat with the fourth quarter of 2007 and the prior quarter.
Other Affinity Networks revenue for the full year was $13.7 million, an
increase of 3% compared to $13.3 million for 2007.
Fourth quarter 2008 revenue for Offline & Other Businesses was $446,000, a
decrease of 54% compared to $965,000 for the fourth quarter of 2007, and an
18% increase compared to $378,000 in the prior quarter. Offline & Other
Businesses revenue for the full year was $2.0 million, a decrease of 22%
compared to $2.6 million for 2007.
Average paying subscribers for Jewish Networks were 87,205 during the
fourth quarter of 2008, a decrease of 7% compared to 94,005 for the fourth
quarter of 2007, and a 5% decrease compared to 91,703 for the prior
quarter. Average paying subscribers for the full year were 90,806, a 4%
decrease compared to 94,246 for 2007.
Average paying subscribers for General Market Networks were 23,094 during
the fourth quarter of 2008, a decrease of 44% compared to 41,552 for the
fourth quarter of 2007, and a 17% decrease compared to 27,814 for the prior
quarter. Average paying subscribers for the full year were 30,486, a
decrease of 46% compared to 56,071 for 2007.
Average paying subscribers for Other Affinity Networks were 65,395 during
the fourth quarter of 2008, an increase of 7% compared to 61,082 for the
fourth quarter of 2007 and a 2% decrease compared to 66,600 for the prior
quarter. Average paying subscribers for the full year were 63,859, an
increase of 4% compared to 61,398 for 2007.
Balance Sheet, Cash, Debt
As of December 31, 2008, the Company had a cash and marketable securities
position of $7.4 million compared to $9.0 million at December 31, 2007.
During the quarter, the Company purchased 1,914,000 shares at an average
price of $3.00 per share or $5.7 million, and for the full year the Company
purchased 5.6 million shares at an average price of $3.70 per share or
$20.8 million. As of December 31, 2008, the Company had 20.5 million
shares outstanding.
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 Q4 '08 Financial Results Toll-Free (United States): 1-877-857-6173 International: 1-719-325-4752 Confirmation #: 4872377 Replay Through March 19th, 2009 Toll-Free (United States): 1-888-203-1112 International: 1-719-457-0820 Confirmation #: 4872377In 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 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 (www.christianmingle.com). (1) "Contribution" is defined as net revenue less direct marketing and "Contribution Margin" is defined as Contribution divided by net revenue. (2) "Adjusted EBITDA" is defined as earnings before interest, taxes, depreciation, amortization, share-based compensation, impairment of long-lived assets, non-cash currency translation adjustments for inter-company loans and Scheme of Arrangement costs. 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. (3) Average 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. (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 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 Offline & Other Businesses segment consists of revenue generated from offline activities, HurryDate events and subscriptions and other websites and businesses.
SPARK NETWORKS, INC.
BALANCE SHEET
(in thousands, except share data)
December 31, December 31,
------------ ------------
2008 2007
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 7,417 $ 8,796
Marketable securities -- 200
Restricted cash 766 1,706
Accounts receivable 1,102 1,433
Deferred tax asset - current 52 2,094
Prepaid expenses and other 1,869 1,289
------------ ------------
Total current assets 11,206 15,518
Property and equipment, net 1,685 1,383
Goodwill, net 17,964 18,358
Intangible assets, net 5,750 5,177
Deferred tax asset - long-term 5,002 3,106
Deposits and other assets 401 66
------------ ------------
Total assets $ 42,008 $ 43,608
============ ============
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 2,260 $ 1,585
Accrued liabilities 4,830 5,529
Deferred revenue 4,093 4,140
Notes payable - current portion 7,750 21
------------ ------------
Total current liabilities 18,933 11,275
Deferred tax liabilities 756 595
Other non-current liabilities 906 830
------------ ------------
Total liabilities 20,595 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 20,541,744 at
December 31, 2008 and 26,132,789 shares as
of December 31, 2007, at stated values of: 21 26
Additional paid-in-capital 45,545 52,262
Accumulated other comprehensive income 591 672
Accumulated deficit (24,744) (29,532)
------------ ------------
Total stockholders’ equity 21,413 23,428
------------ ------------
Total liabilities and stockholders'
equity $ 42,008 $ 43,608
============ ============
SPARK NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
Three Months Ended Years Ended
December 31, December 31,
------------------ -----------------------------
2008 2007 2008 2007 2006
-------- -------- --------- -------- --------
Net revenues $ 13,216 $ 16,014 $ 57,266 $ 65,218 $ 68,853
Direct marketing expenses 3,506 4,818 15,010 21,095 24,574
-------- -------- --------- -------- --------
Contribution 9,710 11,196 42,256 44,123 44,279
Operating expenses (1):
Sales and marketing
(including
share-based
compensation of $135,
$292, $682, $884 and
$620) 973 1,014 4,236 3,626 2,890
Customer service
(including
share-based
compensation of $13,
$38, $65, $117 and
$77) 511 663 2,322 3,103 3,560
Technical operations
(including
share-based
compensation of $91,
$153, $602, $633 and
$434) 892 1,012 3,976 4,416 6,239
Development (including
share-based
compensation of $96,
$100, $553, $534 and
$437) 1,037 1,031 4,513 4,249 4,766
General and
administrative
(including
share-based
compensation of $422,
$981, $1,966, $3,153
and $2,299) 3,696 5,529 15,748 21,848 18,923
Amortization of
intangible assets
other than goodwill 129 328 787 1,356 1,184
Impairment of goodwill
and other assets 1,235 -- 1,354 1,894 114
-------- -------- --------- -------- --------
Total operating expenses 8,473 9,577 32,936 40,492 37,676
-------- -------- --------- -------- --------
Operating income 1,237 1,619 9,320 3,631 6,603
Interest (income) and
other expenses, net 516 (277) 107 (913) (696)
-------- -------- --------- -------- --------
Income before income
taxes 721 1,896 9,213 4,544 7,299
Provision (benefit) for
income taxes 885 (4,701) 4,425 (4,434) 736
-------- -------- --------- -------- --------
Net (loss) income $ (164) $ 6,597 $ 4,788 $ 8,978 $ 6,563
======== ======== ========= ======== ========
Net (loss) income per
share - basic $ (0.01) $ 0.25 $ 0.20 $ 0.31 $ 0.21
-------- -------- --------- -------- --------
Net (loss) income per
share - diluted $ (0.01) $ 0.25 $ 0.20 $ 0.31 $ 0.21
-------- -------- --------- -------- --------
Weighted average shares
outstanding - basic 21,300 26,578 23,637 29,218 30,580
Weighted average shares
outstanding - diluted 21,300 26,601 23,640 29,250 31,248
Reconciliation of Net
Income to Adjusted Three Months Ended Years Ended
EBITDA ------------------ ----------------------------
December 31, December 31,
2008 2007 2008 2007 2006
Net (loss) income $ (164) $ 6,597 $ 4,788 $ 8,978 $ 6,563
Interest 99 (100) 152 (751) (166)
Taxes 885 (4,701) 4,425 (4,434) 736
Depreciation 229 296 867 1,684 2,968
Amortization 129 328 787 1,356 1,184
-------- -------- -------- -------- --------
EBITDA 1,178 2,420 11,019 6,833 11,285
Share-based compensation 757 1,564 3,868 5,321 3,867
Impairment 1,235 -- 1,354 1,894 114
Scheme of Arrangement -- 4 -- 1,897 22
Non-cash currency
translation adjustments 496 (204) (41) (204) --
-------- -------- -------- -------- --------
Adjusted EBITDA $ 3,666 $ 3,784 $ 16,200 $ 15,741 $ 15,288
(1) Prior period amounts have been reclassified to conform to current
period presentation.
SPARK NETWORKS, INC.
SEGMENT RESULTS FROM OPERATIONS (1)
(in thousands except subscriber information)
Three Months Ended Year Ended
December 31, December 31,
------------------- -----------------------------
2008 2007 2008 2007 2006
--------- --------- --------- --------- ---------
Net Revenues
Jewish Networks $ 7,985 $ 8,588 $ 33,740 $ 33,624 $ 32,213
General Market Networks 1,291 2,976 7,762 15,707 25,446
Other Affinity Networks 3,494 3,485 13,749 13,314 9,724
Offline & Other
Businesses 446 965 2,015 2,573 1,470
--------- --------- --------- --------- ---------
Total Net Revenues $ 13,216 $ 16,014 $ 57,266 $ 65,218 $ 68,853
========= ========= ========= ========= =========
Direct Marketing Expenses
Jewish Networks $ 626 $ 574 $ 2,519 $ 3,281 $ 4,544
General Market Networks 520 1,561 3,488 8,462 13,711
Other Affinity Networks 2,054 2,086 7,875 7,828 4,952
Offline & Other
Businesses 306 597 1,128 1,524 1,367
--------- --------- --------- --------- ---------
Total Direct
Marketing Expenses $ 3,506 $ 4,818 $ 15,010 $ 21,095 $ 24,574
========= ========= ========= ========= =========
Contribution
Jewish Networks $ 7,359 $ 8,014 $ 31,221 $ 30,343 $ 27,669
General Market Networks 771 1,415 4,274 7,245 11,735
Other Affinity Networks 1,440 1,399 5,874 5,486 4,772
Offline & Other
Businesses 140 368 887 1,049 103
--------- --------- --------- --------- ---------
Total Contribution $ 9,710 $ 11,196 $ 42,256 $ 44,123 $ 44,279
========= ========= ========= ========= =========
Average Paying
Subscribers
Jewish Networks 87,205 94,005 90,806 94,246 95,168
General Market Networks 23,094 41,552 30,486 56,071 92,041
Other Affinity Networks 65,395 61,082 63,859 61,398 49,438
Offline & Other
Businesses 1,317 2,514 1,806 1,783 --
--------- --------- --------- --------- ---------
Total Average Paying
Subscribers 177,011 199,153 186,957 213,498 236,647
========= ========= ========= ========= =========
(1) Prior period amounts have been reclassified to conform to current
period presentation.
Contact Information: For More Information Investors: Brett Zane + 1-323-658-3000 ext. 4001