Entertainment

Spark Networks SE Reports First Quarter 2021 Financial Results

Spark Networks SE Reports First Quarter 2021 Financial Results

Spark Networks SE (NYSE American: LOV), one of the world’s leading online dating platforms leveraging premium

Spark Networks

BERLIN, May 17, 2021 Spark Networks SE (NYSE American: LOV), one of the world’s leading online dating platforms leveraging premium, complementary brands including Zoosk, EliteSingles, SilverSingles, Christian Mingle, Jdate, and JSwipe, today reported first quarter 2021 financial results.

“I am pleased with our first quarter financial results and the progress we are making in establishing Spark as a leader in social dating for meaningful relationships,” said Eric Eichmann, CEO of Spark Networks.  “We are improving the dater’s experience and setting a strong foundation for top line growth.  We are on track to launch livestreaming on Zoosk and complete the rollout of compelling new aesthetics for our top brands in Q3. These innovations, combined with additional future social features should lead to higher user engagement across our properties.”

First Quarter 2021 Financial Results

  • Revenue for the first quarter of 2021 was $56.4 million, a decrease of $1.3 million compared to $57.7 million in the first quarter of 2020. The decrease in Revenue was attributable to the 3.0% decrease in the number of average paying subscribers.
  • Net Loss was $6.5 million in the first quarter of 2021, an increase of $2.7 million compared to Net Loss of $3.8 million in the first quarter of 2020. The increase in Net Loss was primarily driven by a decrease in contribution and an increase in personnel costs.
  • Adjusted EBITDA was $4.8 million in the first quarter of 2021, a decrease of $2.7 million compared to $7.5 million in the first quarter of 2020.
  • The Company ended the quarter with $17.3 million in cash and $96.1 million in debt.

Key Performance Indicators

  • Average Paying Subscribers decreased by 27,837, or 3.0%, to 896,344 in the first quarter of 2021, compared to 924,181 in the same period of 2020.
  • Monthly Average Revenue Per User, or Monthly ARPU, increased to $20.97 in the first quarter of 2021, compared to $20.80 in the same period of 2020.

Financial Outlook

  • Spark’s first quarter 2021 financials remain in-line with its previously stated 2021 guidance of $238 to $244 million and Adjusted EBITDA of $33 to $36 million. The Company anticipates that both Second Quarter revenue and Adjusted EBITDA will increase and are providing revenue guidance of $54$56 million and Adjusted EBITDA of $6 to $7 million.

Key Metrics

(Amounts in $ millions, except Total Registrations, Avg. Paying Subs, and Monthly ARPU)

  

Three Months Ended March 31,

  
  

2021

 

2020

 

% Change

Revenue

 

$

56.4

  

$

57.7

  

(2.2)

%

Contribution1

 

$

26.0

  

$

27.8

  

(6.6)

%

Net loss

 

$

(6.5)

  

$

(3.8)

  

69.9

%

Adjusted EBITDA2

 

$

4.8

  

$

7.5

  

(35.6)

%

Cash Balance

 

$

17.3

  

$

19.3

  

(10.4)

%

Total Registrations3

 

3,607,702

  

3,908,906

  

(7.7)

%

Avg. Paying Subs4

 

896,344

  

924,181

  

(3.0)

%

Monthly ARPU5

 

$

20.97

  

$

20.80

  

0.8

%

Investor Conference Call

Spark Networks will discuss its financial results during a live teleconference today at 10:00 a.m. Eastern time.

Toll-Free (United States):          1-877-705-6003

Toll-Free (Germany):                 0-800-182-0040

International:                              1-201-493-6725

In addition, Spark Networks will host a webcast of the call which will be accessible in the Investor Relations section of the Company’s website at https://investor.spark.net/investor-relations/home

A replay will begin approximately three hours after completion of the call and run until May 31, 2021.

Replay

Toll-Free (United States):          1-844-512-2921

International:                              1-412-317-6671

Passcode:                                  13719604

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 statements regarding Spark Networks’ setting of a strong foundation for topline growth, Spark Networks being on track to launch livestreaming on Zoosk and complete the rollout of compelling new aesthetics for Spark Networks’ top brands in Q3, Spark Networks’ belief that such innovations combined with additional future social features should lead to higher user engagement across Spark Networks’ properties, and Spark Networks’ financial outlook for Second Quarter revenue and Adjusted EBITDA.

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,” 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’ Annual Report on Form 10-K for the year ended December 31, 2020 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.

About Spark Networks SE:

Spark Networks SE is a leading global dating company, listed on the New York Stock Exchange American under the ticker symbol “LOV,” with headquarters in Berlin, Germany, and offices in New York and Utah. The Company’s widening portfolio of premium and freemium dating apps include Zoosk, EliteSingles, SilverSingles, Christian Mingle, Jdate, and JSwipe, among others. Spark Networks SE in its current form is the result of the merger between Affinitas GmbH and Spark Networks, Inc. in 2017 and the addition of Zoosk, Inc. in 2019. Spark has approximately one million monthly paying subscribers globally.

For More Information

Investors:

Christopher Camarra

Vice President of Investor Relations

christopher.camarra@spark.net

1 Contribution is defined as revenue, net of refunds and credit card chargebacks, less direct marketing. Direct Marketing is defined as online and offline advertising spend, and is included within Cost of revenue, exclusive of depreciation and amortization within Spark Networks’ Condensed Consolidated Statements of Operations and Comprehensive Loss.

2 Adjusted EBITDA is one of the primary metrics by which we evaluate the performance of our business, 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 the ongoing operations and excludes the impact of items that we do not consider representative of our ongoing performance. This includes: depreciation and amortization, share-based compensation, asset impairments, gains or losses on foreign currency transactions and net interest expense, acquisition related costs and other costs. Adjusted EBITDA has inherent limitations in evaluating the performance of the Company, including, but not limited to the following: 

  • Adjusted EBITDA does not reflect the cash capital expenditures during the measurement period;
  • Adjusted EBITDA does not reflect any changes in working capital requirements during the measurement period;
  • Adjusted EBITDA does not reflect the cash tax payments during the measurement period;
  • Adjusted EBITDA may be calculated differently by other companies in our industry, thus limiting its value as a comparative measure;

Because of these limitations, Adjusted EBITDA should be considered in addition to other financial performance measures, including net income and our other U.S. GAAP results.  A reconciliation of the Adjusted EBITDA for the three months ended March 31, 2021 and 2020 can be found in the table below.

Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, share-based compensation, impairment of intangible assets and goodwill, and acquisition or other costs.

Statements regarding our expectations as to the second quarter 2021 Adjusted EBITDA do not include certain charges and costs. The adjustments to EBITDA in future periods are generally expected to be similar to the kinds of charges and costs excluded from Adjusted EBITDA in prior periods, including (i) items such as share-based compensation, asset impairments, gains or losses on foreign currency transactions and interest expense, and (ii) items related to acquisitions or other costs that are non-recurring, infrequent, or unusual in nature including transaction and advisory fees, merger integration costs, other employee payments, and severance.  The exclusion of these charges and costs in future periods will have a significant impact on our Adjusted EBITDA. We are not able to provide a reconciliation of our non-GAAP financial guidance to the corresponding GAAP measures without unreasonable effort because of the uncertainty and variability of the nature and amount of these future charges and costs.

3 Total registrations are defined as the total number of new members registering to the platforms with their email address. Those include members who enter into premium subscriptions and free memberships.

4 Paying subscribers are defined as individuals who have paid a monthly fee for access to premium services, which include, among others, unlimited communication with other registered users, access to user profile pictures and enhanced search functionality. Average paying subscribers for each month are calculated as the sum of the paying subscribers at the beginning and the 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 Monthly Average Revenue Per User, or Monthly ARPU, represents the total net subscriber revenue for the period divided by the number of average paying subscribers for the period, divided by the number of months in the period.

Spark Networks SE

Condensed Consolidated Balance Sheets

(in thousands, except share data)

  

March 31, 2021

 

December 31, 2020

Assets

    

Current assets:

    

Cash and cash equivalents

 

$

17,258

  

$

19,267

 

Accounts receivable, net of allowance of $441 and $93, respectively

 

8,613

  

5,507

 

Prepaid expenses

 

5,129

  

4,366

 

Other current assets

 

505

  

2,140

 

Total current assets

 

31,505

  

31,280

 

Property and equipment, net of accumulated depreciation of $6,241 and $6,252,

respectively

 

10,802

  

11,418

 

Goodwill

 

156,552

  

156,582

 

Intangible assets, net of accumulated amortization of $21,043 and $21,768,

respectively

 

57,295

  

58,999

 

Deferred tax assets

 

20,754

  

23,522

 

Other assets

 

8,164

  

8,642

 

Total assets

 

$

285,072

  

$

290,443

 

Liabilities and Shareholders’ Equity

    

Current liabilities:

    

Current portion of long-term debt

 

$

19,373

  

$

19,037

 

Accounts payable

 

12,241

  

11,127

 

Deferred revenue

 

40,017

  

38,304

 

Accrued expenses and other current liabilities

 

26,742

  

28,429

 

Total current liabilities

 

98,373

  

96,897

 

Long-term debt, net of current portion

 

76,701

  

80,109

 

Deferred tax liabilities

 

950

  

993

 

Other liabilities

 

17,259

  

17,541

 

Total liabilities

 

193,283

  

195,540

 

Contingencies (Note 6)

    

Shareholders’ Equity:

    

Common stock, €1.00 nominal value; 2,661,386 shares issued as of March 31,

2021 and December 31, 2020; 2,605,689 shares outstanding as of March 31,

2021 and December 31, 2020

 

3,064

  

3,064

 

Treasury stock, at nominal value; 55,697 shares as of March 31, 2021 and

December 31, 2020

 

(61)

  

(61)

 

Additional paid-in capital

 

221,888

  

220,852

 

Accumulated deficit

 

(138,752)

  

(132,248)

 

Accumulated other comprehensive income

 

5,650

  

3,296

 

Total shareholders’ equity

 

91,789

  

94,903

 

Total liabilities and shareholders’ equity

 

$

285,072

  

$

290,443

 

Spark Networks SE

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

     
  

Three Months Ended March 31,

  

2021

 

2020

Revenue

 

$

56,379

  

$

57,657

 

Operating costs and expenses:

    

Cost of revenue, exclusive of depreciation and amortization

 

36,918

  

36,541

 

Sales and marketing expenses

 

833

  

879

 

Customer service expenses

 

1,770

  

2,040

 

Technical operations and development expenses

 

4,455

  

5,380

 

General and administrative expenses

 

9,093

  

7,184

 

Depreciation and amortization

 

2,290

  

2,321

 

Total operating costs and expenses

 

55,359

  

54,345

 

Operating income

 

1,020

  

3,312

 

Other income (expense):

    

Interest income

 

  

31

 

Interest expense

 

(3,440)

  

(3,376)

 

Loss on foreign currency transactions

 

(1,728)

  

(952)

 

Other income (expense)

 

(16)

  

 

Total other expense

 

(5,184)

  

(4,297)

 

Loss before income taxes

 

(4,164)

  

(985)

 

Income tax expense

 

(2,340)

  

(2,844)

 

Net loss

 

(6,504)

  

(3,829)

 

Other comprehensive income (loss):

    

Foreign currency translation adjustment

 

2,354

  

1,218

 

Comprehensive loss

 

$

(4,150)

  

$

(2,611)

 
     

Loss per share:

    

Basic earnings (loss) per share

 

$

(2.50)

  

$

(1.47)

 

Diluted earnings (loss) per share

 

$

(2.50)

  

$

(1.47)

 
     

Weighted average shares outstanding:

    

Basic

 

2,605,689

  

2,605,689

 

Diluted

 

2,605,689

  

2,605,689

 

Reconciliation of Net Loss to Adjusted EBITDA:

  
  

Three Months Ended March 31,

(in thousands)

 

2021

 

2020

Net loss

 

$

(6,504)

$

(3,829)

Net interest expense

 

3,440

3,345

Loss on foreign currency transactions

 

1,728

952

Income tax expense

 

2,340

2,844

Depreciation and amortization

 

2,290

2,321

Stock-based compensation expense

 

1,036

910

Acquisition related costs(1)

 

791

Other costs(2)

 

472

128

Adjusted EBITDA

 

$

4,802

$

7,462

 

(1) Acquisition related costs primarily consist of transaction costs, including legal, consulting,

advisory fees, and severance and retention costs.

(2) Includes primarily consulting and advisory fees related to special projects, as well as

post-merger integration activities and long-term debt transaction and advisory fees.

Spark Networks SE

Condensed Consolidated Statements of Cash Flows

(in thousands)

      

Three Months Ended March 31,

      

2021

 

2020

Net loss

     

$

(6,504)

  

$

(3,829)

 

Adjustments to reconcile net loss to cash used in operating activities:

        

Depreciation and amortization

     

2,290

  

2,321

 

Unrealized loss on foreign currency transactions

     

340

  

13

 

Stock-based compensation expense

     

1,036

  

910

 

Amortization of debt issuance costs and accretion of debt discounts

     

916

  

795

 

Deferred tax expense

     

2,340

  

2,844

 

Provision for credit losses

     

95

  

31

 

Non-cash lease expense

     

470

  

475

 

Change in operating assets and liabilities:

        

Accounts receivable

     

(3,328)

  

(3,589)

 

Prepaid expenses and other current assets

     

(2,095)

  

(737)

 

Other assets

     

(33)

  

35

 

Accounts payable, accrued expenses, and other current liabilities

     

1,533

  

(3,300)

 

Other liabilities

     

(93)

  

(472)

 

Deferred revenue

     

2,646

  

191

 

Net cash used in operating activities

     

(387)

  

(4,312)

 

Capital expenditures

     

(423)

  

(197)

 

Acquisitions of businesses, net of cash acquired

     

  

(513)

 

Net cash used in investing activities

     

(423)

  

(710)

 

Repayment of bank loans

     

(3,163)

  

(2,984)

 

Payments directly related to loan facility

     

(523)

  

 

Net cash used in financing activities

     

(3,686)

  

(2,984)

 
         

Net change in cash and cash equivalents and restricted cash

     

(4,496)

  

(8,006)

 

Effects of exchange rate fluctuations on cash and cash equivalents and

restricted cash

     

781

  

354

 

Net decrease in cash and cash equivalents and restricted cash

     

(3,715)

  

(7,652)

 

Cash and cash equivalents and restricted cash at beginning of period

     

21,117

  

17,457

 

Cash and cash equivalents and restricted cash at end of period

     

17,402

  

9,805

 
         

Supplemental disclosure of cash flow information:

        

Cash paid for interest

     

2,497

  

2,892

 
         

Reconciliation of cash, cash equivalents, and restricted cash to the

condensed consolidated balance sheets

 

Mar-21

 

Dec-20

 

Mar-20

 

Dec-19

Cash and cash equivalents

 

$

17,258

  

$

19,267

  

$

9,659

  

$

17,207

 

Restricted cash included in other current assets

 

144

  

1,850

  

146

  

250

 

Total cash and cash equivalents and restricted cash as shown on the

consolidated statements of cash flows

 

$

17,402

  

$

21,117

  

$

9,805

  

$

17,457

 
 

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Spark Networks SE Reports First Quarter 2021 Financial Results

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