SPARK NET : SPARK NETWORKS ANNOUNCES Second quarter 2011 FINANCIAL RESULTS,

08/11/2011 | 04:35pm

SPARK NETWORKS® REPORTS SECOND QUARTER 2011 FINANCIAL RESULTS

BEVERLY HILLS, Calif., August 11, 2011 -- Spark Networks, Inc. (NYSE AMEX: LOV), a leading provider of online personals services, today reported financial results for the second quarter ended June 30, 2011.

Q2 2011 Q2 2010

Revenue	$12.0 Million		$10.3 Million
Contribution Margin	46%		75%
Net Income (loss)	$(0.1) Million		$0.9 Million
Net Income (loss) Per Share	$(0.00)		$0.04

“I am pleased to report a 9% sequential increase in our overall revenue, marking our third consecutive quarter of sequential revenue growth and our largest quarter over quarter revenue growth in nearly six years. In the fourth quarter last year and the first quarter this year, we grew sequential revenue 2% and 8%, respectively,” said Greg Liberman, Spark’s President and Chief Executive Officer. “The momentum in our Other Affinity Networks segment continued in the second quarter with revenue, average paying subscribers1 and ARPU2 sequentially increasing by rates of 24%, 17% and 5%, respectively, with each metric reaching its all-time high.

Liberman continued, “Not only did Other Affinity Networks’ average paying subscriber count hit its own record levels but hit another major milestone as, for the first time in our history, average paying subscribers in Other Affinity Networks exceeded those in our Jewish Networks segment.”

Financial Results

Revenue for the second quarter of 2011 was $12.0 million, an increase of 17% compared to $10.3 million for the second quarter 2010, and an increase of 9% compared to $11.0 million in the prior quarter.

Contribution3 for the second quarter of 2011 was $5.5 million, a decrease of 29% compared to $7.7 million for the second quarter of 2010, and an 8% decrease compared to $5.9 million in the prior quarter.

Total cost and expenses for the second quarter of 2011 were $12.3 million, a 43% increase compared to $8.6 million for the second quarter of 2010 and an 11% increase compared to $11.1 million in the prior quarter. The increase for both comparative periods is primarily attributable to increased direct marketing expense.

Net loss for the second quarter of 2011 was $81,000, or a net loss of $0.00 per share, compared to net income of $923,000, or $0.04 per share, for the second quarter of

2010 and net loss of $184,000 or $0.01 per share for the prior quarter.

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Adjusted EBITDA4 for the second quarter of 2011 was $432,000, a decrease of 81% compared to $2.3 million for the second quarter of 2010, and a decrease of 18% compared to $527,000 in the prior quarter. The decrease in the second quarter of

2011 is primarily attributable to increased direct marketing expense.

Average paying subscribers for the Company, as a whole, in the second quarter of

2011 were 190,160, an increase of 19% compared to 160,239 for the second quarter of 2010 and an increase of 7% compared to 178,292 for the prior quarter.

Segment Reporting5

Second quarter 2011 revenue for Jewish Networks was $6.73 million, an increase of

1% compared to $6.66 million for the second quarter of 2010 and a decrease of 2%

compared to $6.90 million in the prior quarter.

Second quarter 2011 revenue for Other Affinity Networks was $4.7 million, an increase of 68% compared to $2.8 million for the second quarter of 2010, and an increase of 24% compared to $3.8 million in the prior quarter.

Second quarter 2011 revenue for General Market Networks was $154,000, a decrease of 48% compared to $298,000 for the second quarter of 2010, and a decrease of 19% compared to $190,000 in the prior quarter.

Second quarter 2011 revenue for Offline & Other Businesses was $449,000, a decrease of 18% compared to $549,000 for the second quarter of 2010, and an increase of 320% compared to $107,000 in the prior quarter. The higher sequential revenue reflects a travel offering in the second quarter of 2011 and the comparative absence of a similar offering in the prior quarter.

Average paying subscribers for Jewish Networks were 90,094 during the second quarter of 2011, an increase of 1% compared to 89,055 for the second quarter of

2010, and a decrease of 2% compared to 91,545 for the prior quarter.

Average paying subscribers for Other Affinity Networks were 96,071 during the second quarter of 2011, an increase of 50% compared to 64,083 for the second quarter of

2010 and an increase of 17% compared to 81,889 for the prior quarter.

Average paying subscribers for General Market Networks were 3,485 during the second quarter of 2011, a decrease of 46% compared to 6,434 for the second quarter of 2010, and a decrease of 17% compared to 4,207 for the prior quarter.

Balance Sheet, Cash, Debt

As of June 30, 2011 and December 31, 2010, the Company had cash and cash equivalents of $13.2 million and $13.9 million, respectively. As of June 30, 2011, the Company had no outstanding debt.

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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 Q2 ’11 Financial Results

Toll-Free (United States): 1-800-347-6109

International: 1-913-312-0844

Confirmation #: 2502048

Digital Replay through August 25, 2011:

Toll-Free (United States): 1-888-203-1112

International: 1-719-457-0820

Confirmation #: 2502048

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 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 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 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.

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About Spark Networks, Inc.:

The Spark Networks portfolio of consumer websites includes, among others, JDate®.com (www.jdate.com), Spark®.com (www.spark.com), BlackSingles.com® (www.blacksingles.com), ChristianMingle®.com (www.christianmingle.com) and SilverSingles®.com (www.silversingles.com).

For More Information

Investors: Brett Zane

+ 1-323-658-3000 ext. 4001 bzane@spark.net

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 “ARPU” is defined as average revenue per user.

3 “Contribution” is defined as revenue, net of credits and credit card chargebacks, less direct marketing and

“Contribution Margin” is defined as Contribution divided by revenue, net of credits and credit card chargebacks.

4 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 recognized from assets received in connection with a legal judgment.

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 General Market Networks segment consists of the Company’s Spark.com Web site (formerly known as AmericanSingles.com, Date.co.uk and Date.ca) and its co-branded and private label Web sites. The Other Affinity Networks segment consists of all of the Company’s Provo, Utah-based properties which primarily consist of sites targeted at various religious, ethnic, geographic and special interest groups including BlackSingles.com, ChristianMingle.com and SilverSingles.com. The Offline & Other Businesses segment consists of net revenue generated from offline activities, HurryDate events and subscriptions and other Web sites and businesses.

(Consolidated financial statements to follow)

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SPARK NETWORKS, INC.

BALANCE SHEET

(in thousands, except share data)

	June 30,		December 31,
	2011		2010
Assets	(Unaudited)
Current assets: Cash and cash equivalents...................................	$ 13,196		$ 13,901
Restricted cash ..................................................	903		996
Accounts receivable ...........................................	799		847
Deferred tax asset – current ...............................	45		43
Prepaid expenses and other .................................	1,389		911
Total current assets .........................................	16,332		16,698
Property and equipment, net ..................................	2,685		2,520
Goodwill ..............................................................	9,417		9,156
Intangible assets, net ............................................	2,858		3,017
Deferred tax asset – non-current ............................	4,882		4,882
Deposits and other assets ......................................	336		295

Total assets .................................................. $ 36,510 $ 36,568

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable ............................................... $ 740 $ 1,371

Accrued liabilities ............................................... 2,942 3,635

Deferred revenue............................................... 5,135 4,331

Total current liabilities ....................................... 8,817 9,337

Deferred tax liability.............................................. 919 825

Other liabilities non-current.................................... 1,036 1,036

Total liabilities .................................................. 10,772 11,198

Commitments and contingencies............................. Stockholders’ equity:

Authorized capital stock consists of 100,000,000

Common Stock, $0.001 par value; issued and outstanding 20,594,643 and 20,587,336 at June

30, 2011 and December 31, 2010, respectively, at stated values of: ..............................................	22		21
Additional paid-in-capital ..................................	52,577		52,020
Accumulated other comprehensive income…........	848		773
Accumulated deficit ..........................................	(27,709)		(27,444)
Total stockholders’ equity .................................	25,738		25,370
Total liabilities and stockholders’ equity .........	$ 36,510		$ 36,568

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SPARK NETWORKS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except per share data)

Three Months Ended

June 30,

Six Months Ended

June 30,

2011 2010 2011 2010

Revenue................................................................. $ 11,995 $ 10,289 $ 22,955 $ 20,826

Cost and expenses:

Cost of revenue (exclusive of depreciation shown

separately below) ................................................ 7,347 3,384 13,162 6,541

Sales & marketing ............................................... 837 851 1,737 1,934

Customer service ................................................. 449 382 910 778

Technical operations ............................................. 336 315 750 678

Development ....................................................... 679 778 1,424 1,559

General and administrative.................................... 2,199 2,538 4,562 5,325

Depreciation ........................................................ 346 222 636 457

Amortization of intangible assets ............................ 93 104 191 226

Impairment of goodwill, long-lived assets and other

assets ................................................................. - - - 121

Total cost and expenses ........................................... 12,286 8,574 23,372 17,619

Operating (loss) income ........................................... (291) 1,715 (417) 3,207

Interest expense (income) and other, net................... (45) 241 (102) 200

(Loss) income before income taxes............................ (246) 1,474 (315) 3,007

(Benefit) provision for income taxes .......................... (165) 551 (50) 1,155

Net (loss) income .................................................... $ (81) $ 923 $ (265) $ 1,852

Net (loss) income per share – basic and diluted .......... $ (0.00) $ 0.04 $ (0.01) $ 0.09

Weighted average shares outstanding – basic............. 20,589 20,587 20,588 20,584

Weighted average shares outstanding – diluted .......... 20,589 20,598 20,588 20,587

Three Months Six Months

Ended June 30, Ended June 30,

Stock-Based Compensation 2011201020112010

(in thousands)

Cost of revenue $ 2 $ 3 $ 4 $ 4

Sales and marketing 14 42 48 159

Customer service - - - 2

Technical operations 27 31 58 105

Development 10 15 22 27

General and administrative 226 181 408 685

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Three Months Ended

June 30,

Six Months Ended

June 30,

2011 2010 2011 2010

Net income $ (81) $ 923 $ (265) $ 1,852

Interest 45 51 76 102

Taxes (165) 551 (50) 1,155

Depreciation 346 222 636 457

Amortization 93 104 191 226

EBITDA 238 1,851 588 3,792

Stock based compensation 279 272 540 982

Impairment of goodwill - - - 121

Non-cash currency translation adjustments (85) 192 (169) 118

Adjusted EBITDA $ 432 $ 2,315 $ 959 $ 5,013

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SPARK NETWORKS, INC. SEGMENT RESULTS FROM OPERATIONS

(in thousands except subscriber information)

Three Months Ended Six Months Ended

June 30, June 30,

2011 2010 2011 2010

Revenue

Jewish Networks .................................	$ 6,731		$ 6,664		$ 13,630		$ 13,744
Other Affinity Networks .......................	4,661		2,778		8,425		5,752
General Market Networks.....................	154		298		344		668
Offline & Other Businesses ...................	449		549		556		662
Total Revenue ...............................	$ 11,995		$ 10,289		$ 22,955		$ 20,826

Direct Marketing Expenses

Jewish Networks .................................	$ 865	$ 532		$ 1,524		$ 1,039
Other Affinity Networks .......................	5,254	1,541		9,293		3,255
General Market Networks.....................	17	147		329		286
Offline & Other Businesses ...................	401	391		431		434
Total Direct Marketing Expenses	$ 6,537	$ 2,611		$ 11,577		$ 5,014

Contribution Jewish Networks .................................	$ 5,866		$ 6,132		$12,106		$12,705
Other Affinity Networks .......................	(593)		1,237		(868)		2,497
General Market Networks.....................	137		151		15		382
Offline & Other Businesses ...................	48		158		125		228
Total Contribution	$ 5,458		$ 7,678		$ 11,378		$ 15,812

Average Paying Subscribers

Jewish Networks .................................	90,094		89,055		90,820		91,145
Other Affinity Networks .......................	96,071		64,083		88,980		66,104
General Market Networks.....................	3,485		6,434		3,846		7,124
Offline & Other Businesses ...................	510		667		580		664
Total Average Paying Subscribers ....	190,160		160,239		184,226		165,037

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