Spark Networks(R) Reports Third Quarter Financial Results

LOS ANGELES, CA--(Marketwired - Nov 13, 2013) -  Spark Networks, Inc. (NYSE MKT: LOV)

• Total revenue grew for 11^th consecutive quarter
• Total contribution¹ grew 22%
• Christian Networks revenue grew for 12^th 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 11^th 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	)