Total revenue growth of 33%
  • Christian Networks revenue growth of 161%
  • Average paying subscribers increase 36% to 241,000
  • Spark Networks, Inc. (NYSE Amex: LOV), a leading provider of online....." />
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    Spark Networks(R) Reports First Quarter Financial Results

    (May 10, 2012)

    BEVERLY HILLS, CA -- (Marketwire) -- 05/10/12 -- Spark Networks, Inc. (NYSE Amex: LOV)

    • Total revenue growth of 33%
    • Christian Networks revenue growth of 161%
    • Average paying subscribers increase 36% to 241,000

    Spark Networks, Inc. (NYSE Amex: LOV), a leading provider of online personals services, today reported financial results for the first quarter ended March 31, 2012.

    Q1 2012 Highlights


    Q1 2011 Q1 2012 -------------- -------------- Revenue $ 11.0 Million $ 14.6 Million Contribution Margin 54% 25% Net Loss $(0.2) Million $(1.7) Million Net Loss Per Share $ (0.01) $ (0.08)

    Management Commentary
    "2012 is off to a strong start, as evidenced by the continued acceleration in our revenue and average paying subscriber(1) growth," said Greg Liberman, Spark Networks' President and Chief Executive Officer. "Capitalizing on the momentum we built throughout 2011, first quarter revenue and average paying subscriber growth reached new five-year highs, increasing 33% and 36% year-over-year, respectively. Driving that growth is the strength of our Christian Networks segment, which posted a 161% gain in revenue powered by a 163% increase in average paying subscribers."

    "The first quarter also marks the unveiling of our new Christian Networks segment. Over 15 years ago, we entered the Jewish dating market with the establishment of JDate.com, widely recognized today as the most successful targeted online dating community ever created. And as you can see from today's numbers, we've successfully leveraged our Jewish Networks experience to build the undisputed leader in the Christian dating space, which has an addressable market we believe is at least 30x that of our Jewish Networks segment."

    Q1 2012 Financial Results
    Revenue for the first quarter of 2012 was $14.6 million, an increase of 33% compared to $11.0 million for the first quarter of 2011, and an increase of 13% compared to $12.9 million in the prior quarter. Growth from our Christian Networks segment drove the year-over-year and sequential gains.

    Contribution(2) for the first quarter of 2012 was $3.6 million, a decrease of 39% compared to $5.9 million for the first quarter of 2011, and a 31% decrease compared to $5.2 million in the prior quarter. Our investment in Christian Networks drove the year-over-year and sequential decline in contribution, as we increased direct marketing expenses 185% and 55%, respectively, in this segment.

    Total cost and expenses for the first quarter of 2012 were $17.3 million, a 56% increase compared to $11.1 million in the first quarter of 2011, and a 28% increase compared to $13.5 million in the prior quarter. The growth in Christian Networks direct marketing investment accounted for a substantial portion of both the year-over-year and sequential increases in total cost and expenses.

    Net loss for the first quarter of 2012 was $1.7 million, or $0.08 per share, compared to a net loss of $184,000 or $0.01 per share, for the first quarter of 2011 and a net loss of $1.1 million or $0.05 per share for the prior quarter.

    Adjusted EBITDA(3) for the first quarter of 2012 was a loss of $2.1 million, compared to $527,000 for the first quarter of 2011 and $1.0 million in the prior quarter.

    Average paying subscribers for the Jewish Networks, Christian Networks and Other Networks segments in the first quarter of 2012 were 240,706, an increase of 36% compared to 177,641 for the first quarter of 2011 and a 13% increase compared to 212,398 for the prior quarter.

    Segment Reporting(4)
    During the first quarter of 2012, the Company changed its financial reporting to include data on two newly-defined operating segments, leaving two of the previous operating segments intact. The two new segments are Christian Networks and Other Networks. Christian Networks consists of ChristianMingle.com, ChristianMingle.co.uk, ChristianMingle.com.au and Believe.com. Other Networks 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 composition of our Jewish Networks and Offline and Other Businesses segments remain unchanged.

    SPARK NETWORKS, INC. SEGMENT RESULTS FROM OPERATIONS (in thousands except subscriber information) Q1 '12 v. Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q1 '11 -------- -------- -------- -------- -------- ------- Net Revenue Jewish Networks $ 6,899 $ 6,731 $ 6,724 $ 6,700 $ 6,580 -5% Christian Networks 2,623 3,543 4,624 4,952 6,853 161% Other Networks 1,331 1,272 1,218 1,104 1,031 -23% Offline & Other Businesses 107 449 111 105 91 -15% -------- -------- -------- -------- -------- ------- Total Net Revenue $ 10,960 $ 11,995 $ 12,677 $ 12,861 $ 14,555 33% Direct Marketing Expenses Jewish Networks $ 659 $ 865 $ 936 $ 929 $ 801 22% Christian Networks 3,433 4,508 5,112 6,303 9,795 185% Other Networks 918 763 432 354 312 -66% Offline & Other Businesses 30 401 32 49 30 0% -------- -------- -------- -------- -------- ------- Tot. Direct Mktg. Expenses $ 5,040 $ 6,537 $ 6,512 $ 7,635 $ 10,938 117% Contribution Jewish Networks $ 6,240 $ 5,866 $ 5,788 $ 5,771 $ 5,779 -7% Christian Networks (810) (965) (488) (1,351) (2,942) 263% Other Networks 413 509 786 750 719 74% Offline & Other Businesses 77 48 79 56 61 -21% -------- -------- -------- -------- -------- ------- Total Contribution $ 5,920 $ 5,458 $ 6,165 $ 5,226 $ 3,617 -39% Average Paying Subscribers Jewish Networks 91,545 90,094 88,976 87,101 86,433 -6% Christian Networks 47,134 62,764 81,987 93,357 124,158 163% Other Networks 38,962 36,792 34,687 31,940 30,115 -23% -------- -------- -------- -------- -------- ------- Total Avg. Paying Subscribers(5) 177,641 189,650 205,650 212,398 240,706 36% ARPU Jewish Networks $ 24.62 $ 24.46 $ 24.71 $ 25.12 $ 24.99 1% Christian Networks 17.87 18.08 17.64 16.44 17.35 -3% Other Networks 11.02 10.99 11.07 10.74 10.77 -2% -------- -------- -------- -------- -------- ------- Total ARPU(6) $ 19.85 $ 19.73 $ 19.59 $ 19.14 $ 19.27 -3%

    Balance Sheet, Cash, Debt
    As of March 31, 2012, the Company had cash and cash equivalents of $12.5 million, a decrease of 17% compared to $15.1 million at December 31, 2011. As of March 31, 2012, the Company had no outstanding debt.

    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): 1-877-941-2321
    International: 1-480-629-9666

    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: http://www.spark.net/investor.htm.

    A replay will begin approximately three hours after completion of the call and run until May 24, 2012.

    Replay
    Toll-Free (United States): 1-877-870-5176
    International: 1-858-384-5517
    Passcode: 4535328

    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 both cost cutting initiatives and 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 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 websites 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) "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.

    (2) "Contribution" is defined as revenue, net of credits and credit card chargebacks, less direct marketing. "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, such as the Scheme of Arrangement. 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 inter-company loans and the income (loss) recognized from non-cash assets received in connection with a legal judgment.

    (4) 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 and Believe.com Web sites. The Other Networks segment consists of the Company's Spark.com Web site and other properties which are primarily made up 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.

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

    (6) Total ARPU excludes results from the Company's HurryDate business due to its relative size. ARPU is defined as average revenue per user.

    (Consolidated financial statements to follow)

    SPARK NETWORKS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) December 31, March 31, ------------ ------------ 2011 2012 ------------ ------------ Assets (Unaudited) Current assets: Cash and cash equivalents $ 15,106 $ 12,517 Restricted cash 958 1,095 Accounts receivable 1,146 1,003 Deferred tax asset - current 44 44 Prepaid expenses and other 1,164 1,129 ------------ ------------ Total current assets 18,418 15,788 Property and equipment, net 2,839 3,025 Goodwill 8,683 8,859 Intangible assets, net 1,900 1,911 Deferred tax asset - non-current 5,641 5,639 Deposits and other assets 455 426 ------------ ------------ Total assets $ 37,936 $ 35,648 ============ ============ Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 952 $ 880 Accrued liabilities 4,046 2,191 Deferred revenue 5,723 6,753 Deferred tax liability - current 203 203 ------------ ------------ Total current liabilities 10,924 10,027 Deferred tax liability 1,219 1,293 Other liabilities non-current 1,141 1,141 ------------ ------------ Total liabilities 13,284 12,461 Commitments and contingencies Stockholders' equity: Authorized capital stock consists of 100,000,000 shares of Common Stock, $0.001 par value; issued and outstanding: 20,594,670 shares at December 31, 2011 and 20,596,857 shares at March 31, 2012: 21 21 Additional paid-in-capital 53,014 53,224 Accumulated other comprehensive income 672 710 Accumulated deficit (29,055) (30,768) ------------ ------------ Total stockholders' equity 24,652 23,187 ------------ ------------ Total liabilities and stockholders' equity $ 37,936 $ 35,648 ============ ============ SPARK NETWORKS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except per share data) Three Months Ended March 31, -------------------- 2011 2012 --------- --------- Revenue $ 10,960 $ 14,555 Cost and expenses: Cost of revenue (exclusive of depreciation shown separately below) 5,815 11,848 Sales and marketing 900 973 Customer service 461 613 Technical operations 414 350 Development 745 846 General and administrative 2,363 2,238 Depreciation 290 403 Amortization of intangible assets 98 13 --------- --------- Total cost and expenses 11,086 17,284 --------- --------- Operating loss (126) (2,729) Interest and other (income) expenses, net (57) (127) --------- --------- Loss before income taxes (69) (2,602) Provision (benefit) for income taxes 115 (889) --------- --------- Net loss $ (184) $ (1,713) ========= ========= Net loss per share - basic and diluted $ (0.01) $ (0.08) ========= ========= Weighted average shares outstanding - basic and diluted 20,587 20,596 ========= ========= Three Months Ended March 31, -------------------- Stock-Based Compensation 2011 2012 --------- --------- (in thousands) Cost of revenue $ 2 $ 2 Sales and marketing 34 20 Technical operations 31 30 Development 12 11 General and administrative 182 141 Three Months Reconciliation of Net Loss to Adjusted EBITDA Ended March 31, -------------------- (in thousands) 2011 2012 --------- --------- Net loss $ (184) $ (1,713) Interest 31 12 Taxes 115 (889) Depreciation 290 403 Amortization 98 13 --------- --------- EBITDA 350 (2,174) Stock-based compensation 261 204 Non-cash currency translation adjustments (84) (125) --------- --------- Adjusted EBITDA $ 527 $ (2,095) ========= =========

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


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