- Zoosk Initial Subscribers Grew 5.1% Year Over
Year
- Zoosk Average Subscribers Grew 3.4% Year Over
Year
- Double-Digit Percentage Increases in Conversion Rates
Across All Brands
BERLIN, Nov. 8, 2022
/PRNewswire/ -- Spark Networks SE (NASDAQ: LOV), a leading social
dating platform for meaningful relationships, today reported
financial results for its third quarter ended September 30,
2022.
Eric Eichmann, CEO of Spark
Networks, commented, "We saw initial subscriber growth of 5.1%
year over year and average subscriber growth of 3.4% for our
largest brand Zoosk in the third quarter. Zoosk product
improvements on user profiles, payment flows and trust and safety
led to double-digit increases in conversion rates, higher customer
satisfaction and stronger app store ratings. We are excited to see
our hard work paying off with a second consecutive quarter of Zoosk
subscriber growth since we acquired it three years ago."
Third Quarter 2022 Financial Results
- Revenue was $48.2 million,
compared to $53.3 million in the
third quarter of 2021. On a constant currency basis,(1)
revenue would have been $51.5 million
in the third quarter of 2022.(2)
- Net loss was $10.7 million,
including an $11.8 million non-cash
impairment charge to the Zoosk trade name, compared to a net loss
of $2.7 million in the third quarter
of 2021.
- Adjusted EBITDA(3) increased 66% to $8.3 million, a 17% Adjusted EBITDA margin,
compared to Adjusted EBITDA of $5.0
million, a 9% margin, in the third quarter of
2021.
Please see the table captioned "Reconciliation of Net loss to
Adjusted EBITDA" included at the end of this release for a
reconciliation of Adjusted EBITDA, which is a non-U.S. GAAP
measure, and Adjusted EBITDA margin, which is a non-U.S. GAAP
ratio, to U.S. GAAP.
Third Quarter Business Highlights
- Zoosk Initial Subscriber Growth: Zoosk initial
subscriber registration grew 5.1% year over year.
- Zoosk Subscriber Growth: Zoosk average paying
subscribers grew 3.4% year over year.
- Increased Pricing: Zoosk successfully deployed new
pricing, leading to increased conversion rates and a higher average
price for Zoosk subscriptions year over year.
- Subscription Conversion Rate Improvement: Across all
brands, subscription conversion rates increased 11% year over year
following product improvements and a focus on higher quality
traffic.
- Product Improvements: Several product improvements
on user profiles, payment authorizations and fraud reduction
contributed to improved subscription conversion rates.
- Strategic Review: The company continued its
strategic alternatives review.
Financial Outlook
"We expect total revenue for the year to be down low
double-digits on a percentage basis as compared to 2021, a drop
which we attribute mainly to the negative impact of foreign
exchange rates on our revenue," said David
Clark, Chief Financial Officer of Spark Networks. "On a
constant currency basis, we expect total revenue to be down
single-digits on a percentage basis. On the profitability side, we
expect full year Adjusted EBITDA margins to be in the high
single-digits and fourth quarter Adjusted EBITDA margins to be
approximately 20%."
Investor Conference Call
Spark Networks management will host a conference call and live
webcast for analysts and investors today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) to discuss the Company's
financial results.
To access the live call, dial 1-888-349-0106 (US and
Canada) or +1 412-902-0131
(International) and ask to join the Spark Networks' call.
A live and archived webcast of the conference call will be
accessible on the Investor Relations section of the Company's
website at https://investor.spark.net/investor-relations/home. In
addition, a phone replay will be available approximately two hours
following the end of the call and will remain available for one
week. To access the call replay, dial 1-877-344-7529 (US) or +1
412-317-0088 (International) and enter the replay passcode:
3285585.
About Spark Networks SE
Spark Networks SE (NASDAQ: LOV) is a leading social dating
platform for meaningful relationships focusing on the 40+
demographic and faith-based affiliations. Spark's widening
portfolio of premium and freemium dating apps include Zoosk,
EliteSingles, SilverSingles, Christian
Mingle, Jdate, and JSwipe, among others. Spark is
headquartered in Berlin, Germany,
with offices in New York and
Utah.
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. These
statements include, without limitation, statements regarding
including whether the numbers of initial and average Zoosk
subscribers will continue to grow; whether conversion rates,
customer satisfaction and app store ratings will continue to
increase; whether will continue to make product improvements and
price adjustments as expected and whether those improvements and
adjustments will have the desired results; whether Adjusted EBITDA
will continue to grow; the results, if any, of our strategic
alternatives review; whether we will achieve total revenue and
Adjusted EBITDA margins for the year as expected; and the impact of
the appreciation of the U.S. dollar on our business.
Any statements in this press release that are not statements of
historical fact may be considered to be forward-looking statements.
Written words, such as "believes," "hopes," "intends," "estimates,"
"expects," "projects," "plans," "anticipates," "guides," and
variations thereof, or the use of future tense, 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, the risk that the benefits from the acquisition
of Zoosk, Inc. may not be fully realized or may take longer to
realize than expected; risks related to the degree of competition
in the markets in which Spark Networks operates; risks related to
the ability of Spark Networks to retain and hire key personnel,
operating results and business generally; the timing and market
acceptance of new products introduced by Spark Networks'
competitors; Spark Networks' ability to identify potential
acquisitions; Spark Networks' ability to comply with new and
evolving regulations relating to data protection and data privacy;
general competition and price measures in the market place; risks
related to the duration and severity of COVID-19 and its impact on
Spark Networks' business; and general economic conditions.
Additional factors that could cause actual results to differ are
discussed under the heading "Risk Factors" in Spark Networks' most
recent Annual Report on Form 10-K and in other sections of Spark
Networks' filings with the Securities and Exchange Commission
("SEC"), and in Spark Networks' 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 except as required by law.
For More Information
Investor contact:
MKR Investor Relations, Inc.
Todd Kehrli
lov@mkr-group.com
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are
prepared and presented in accordance with GAAP, we use the
following non-GAAP financial measures: constant currency revenue,
Adjusted EBITDA and Adjusted EBITDA margin. These measures are
derived on the basis of methodologies other than in accordance with
U.S. GAAP. We are not able to provide a reconciliation of our
Adjusted EBITDA margin financial guidance or other non-GAAP
financial guidance to the corresponding GAAP measure without
unreasonable effort because of the uncertainty and variability of
the nature and amount of the non-recurring and other items that are
excluded from such non-GAAP financial measures. Such adjustments in
future periods are generally expected to be similar to the kinds of
charges excluded from such non-GAAP financial measure in prior
periods. The exclusion of these charges and costs in future periods
could have a significant impact on our non-GAAP financial
measures.
1 We provide a constant currency revenue amount to
present a period-to-period comparison of business performance that
excludes the impact of foreign currency fluctuations. We define
non-GAAP constant currency revenue as total revenue excluding
the effect of foreign exchange rate movements. Non-GAAP constant
currency revenue are calculated by translating current quarter
revenues using prior period exchange rates.
2 Revenue includes $2.2
million of virtual currency deferred revenue. During the
quarter ended September 30, 2022, the
Company analyzed its virtual currency deferred revenue balance to
determine the likelihood of redemption. Virtual currency is paid
for upfront and is recorded as deferred revenue until the currency
is redeemed, at which point the Company recognizes the revenue. The
Company's analysis showed a likelihood of redemption of its virtual
currency after 12 months of purchase is remote. Based on this
analysis, during the three months ended September 30, 2022, the Company recognized
$2.2 million of revenue related to
its virtual currency deferred revenue that had been included in the
Company's deferred revenue balance for more than 12 months. Going
forward the Company will continue to analyze its virtual currency
deferred revenue balance and will recognize revenue on a quarterly
basis for all virtual currency that is held for longer than 12
months.
3 Adjusted earnings before interest, taxes,
depreciation and amortization ("Adjusted EBITDA"), a non-U.S. GAAP
financial measure, and Adjusted EBITDA margin, a non-GAAP ratio,
are a few of the primary metrics by which we evaluate the
performance of our business, budget, forecast and compensate
management. We believe these measures provide management and
investors with a consistent view, period to period, of the core
earnings generated from the ongoing operations and allows for
greater transparency with respect to key metrics used by senior
leadership in its financial and operational decision-making. We
define Adjusted EBITDA as net earnings (loss) excluding interest
expense, (gain) loss on foreign currency transactions, income tax
(benefit) expense, depreciation and amortization, asset
impairments, stock-based compensation expense, acquisition related
costs and other costs. We define Adjusted EBITDA margin as Adjusted
EBITDA divided by revenue. Each of Adjusted EBITDA and Adjusted
EBITDA margin has inherent limitations in evaluating the
performance of the Company, and you should not consider these
measures in isolation or as a substitute for analyzing the
Company's results as reported under U.S. GAAP. Some of these
limitations include:
- Adjusted EBITDA and Adjusted EBITDA margin do not reflect the
cash capital expenditures during the measurement period;
- Adjusted EBITDA and Adjusted EBITDA margin do not reflect any
changes in working capital requirements during the measurement
period;
- Adjusted EBITDA and Adjusted EBITDA margin do not reflect the
cash tax payments during the measurement period; and
- Adjusted EBITDA and Adjusted EBITDA margin may be calculated
differently by other companies in our industry, thus limiting its
value as a comparative measure.
Because of these limitations, Adjusted EBITDA and Adjusted
EBITDA margin should be considered in addition to other financial
performance measures, including net income (loss) and our other
U.S. GAAP results. A reconciliation of the Adjusted EBITDA
and Adjusted EBITDA margin for the three and nine months ended
September 30, 2022 and 2021 can be
found in the table below captioned "Reconciliation of Net loss to
Adjusted EBITDA."
Spark Networks
SE
|
Condensed
Consolidated Balance Sheets (Unaudited)
|
(in
thousands)
|
|
|
September 30,
2022
|
|
December 31,
2021
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
12,728
|
|
$
16,141
|
Accounts receivable,
net
|
|
4,792
|
|
6,261
|
Goodwill and intangible
assets
|
|
151,275
|
|
164,113
|
Other assets
|
|
20,222
|
|
23,286
|
Total
assets
|
|
$
189,017
|
|
$
209,801
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
Current portion of
long-term debt
|
|
$
2,364
|
|
$
17,593
|
Accounts
payable
|
|
10,778
|
|
11,474
|
Deferred
revenue
|
|
30,078
|
|
36,973
|
Accrued expenses and
other current liabilities
|
|
19,293
|
|
27,042
|
Long-term debt, net of
current portion
|
|
92,181
|
|
64,531
|
Other
liabilities
|
|
18,500
|
|
19,495
|
Total
liabilities
|
|
173,194
|
|
177,108
|
Total shareholders'
equity
|
|
15,823
|
|
32,693
|
Total liabilities and
shareholders' equity
|
|
$
189,017
|
|
$
209,801
|
Spark Networks
SE
|
Condensed
Consolidated Statements of Operations (Unaudited)
|
(in
thousands)
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Revenue
|
|
$
48,180
|
|
$
53,297
|
|
$
146,122
|
|
$
164,929
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
Cost of revenue,
exclusive of depreciation and amortization
|
|
27,231
|
|
34,804
|
|
97,833
|
|
104,603
|
Other operating costs
and expenses
|
|
26,144
|
|
15,501
|
|
57,279
|
|
83,250
|
Total operating costs
and expenses
|
|
53,375
|
|
50,305
|
|
155,112
|
|
187,853
|
Operating (loss)
income
|
|
(5,195)
|
|
2,992
|
|
(8,990)
|
|
(22,924)
|
Other expense,
net
|
|
(5,970)
|
|
(4,081)
|
|
(18,506)
|
|
(12,485)
|
Loss before income
taxes
|
|
(11,165)
|
|
(1,089)
|
|
(27,496)
|
|
(35,409)
|
Income tax benefit
(expense)
|
|
453
|
|
(1,601)
|
|
552
|
|
(22,812)
|
Net loss
|
|
$
(10,712)
|
|
$
(2,690)
|
|
$
(26,944)
|
|
$
(58,221)
|
Reconciliation of
Net loss to Adjusted EBITDA
(Unaudited):
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
(in
thousands)
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Net loss
|
|
$
(10,712)
|
|
$
(2,690)
|
|
$
(26,944)
|
|
$
(58,221)
|
Net interest
expense
|
|
3,182
|
|
3,110
|
|
12,770
|
|
10,352
|
Loss on foreign
currency transactions
|
|
2,799
|
|
978
|
|
6,007
|
|
2,122
|
Income tax (benefit)
expense
|
|
(453)
|
|
1,601
|
|
(552)
|
|
22,812
|
Depreciation and
amortization
|
|
576
|
|
1,060
|
|
1,756
|
|
5,648
|
Impairment of goodwill
and intangible assets
|
|
11,790
|
|
—
|
|
11,790
|
|
32,086
|
Stock-based
compensation expense
|
|
518
|
|
482
|
|
1,510
|
|
2,098
|
Other
costs(1)
|
|
578
|
|
412
|
|
1,214
|
|
1,822
|
Adjusted
EBITDA
|
|
$
8,278
|
|
$
4,953
|
|
$
7,551
|
|
$
18,719
|
Adjusted EBITDA
margin(2)
|
|
17.2 %
|
|
9.3 %
|
|
5.2 %
|
|
11.3 %
|
|
|
(1)
|
Includes primarily
consulting and advisory fees related to special projects, as well
as non-cash acquisition related expenses,
post-merger integration activities and long-term debt transaction
and advisory fees.
|
(2)
|
We define "Adjusted
EBITDA margin" as Adjusted EBITDA divided by revenue.
|
Spark Networks
SE Condensed Consolidated Statements of Cash Flows
(Unaudited) (in thousands)
|
|
|
|
Nine Months Ended
September 30,
|
|
|
2022
|
|
2021
|
Net loss
|
|
$
(26,944)
|
|
$
(58,221)
|
Adjustments to
reconcile net loss to net cash (used in) provided by operating
activities:
|
|
|
|
|
Non-cash items and
other non-operating charges
|
|
29,090
|
|
69,818
|
Change in operating
assets and liabilities
|
|
(10,423)
|
|
(2,008)
|
Net cash (used in)
provided by operating activities
|
|
(8,277)
|
|
9,589
|
|
|
|
|
|
Capital
expenditures
|
|
(1,982)
|
|
(905)
|
Net cash used in
investing activities
|
|
(1,982)
|
|
(905)
|
|
|
|
|
|
Net cash provided by
(used in) financing activities
|
|
7,336
|
|
(16,766)
|
Effects of exchange
rate fluctuations on cash and cash equivalents and restricted
cash
|
|
(509)
|
|
(453)
|
Net decrease in cash
and cash equivalents and restricted cash
|
|
(3,432)
|
|
(8,535)
|
|
|
|
|
|
Cash and cash
equivalents and restricted cash at beginning of period
|
|
16,279
|
|
21,117
|
Cash and cash
equivalents and restricted cash at end of period
|
|
$
12,847
|
|
$
12,582
|
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SOURCE Spark Networks SE