BERLIN, Aug. 14,
2023 /PRNewswire/ -- Spark Networks SE (NASDAQ: LOV)
(the "Company"), a leading social dating platform for meaningful
relationships, today reported financial results for its second
quarter ended June 30, 2023.
Colleen Birdnow Brown, Interim
CEO of Spark Networks, said: "As we have previously reported,
Spark has embarked on a transformational plan intended to drive the
Company forward with revenue growth as well as improved margins,
Adjusted EBITDA and cash flow. Teaming with a leading performance
marketing agency, our first step in that plan was to completely
reevaluate the ways in which we spend our marketing dollars. As a
result, we reduced our user acquisition spend during the quarter by
43% as compared to the second quarter of 2022. In addition, we also
reduced our operating expenses during the quarter by 16% year over
year, primarily by reducing headcount and renegotiating vendor
spend. With these cost reductions, we increased Adjusted EBITDA by
$8.9 million compared to the second
quarter of 2022. We note, however, that while we made immediate
gains in Adjusted EBITDA, we also saw a negative impact on
subscription rates, which were down 21% compared to the second
quarter of 2022. We attribute this primarily to our reduced
marketing spend. Moving forward, we expect to identify more
profitable ways to increase our marketing spend in order to improve
subscription rates and drive future revenue, and we are already
seeing promising results from our new outsourced performance
marketing initiative.
"As part of the next phase of the transformation plan, we look
to partner with a major managed service provider and outsource a
significant portion of our technology and operations. Through this
plan, we believe we can materially improve our product and
technology stack while at the same time delivering long-term cost
savings, revenue growth and improved operating margins. We expect
to complete our outsourcing by the first quarter of 2024, resulting
in a dramatically reduced employee headcount. In addition, we
expect to continue to implement the initiatives in our plan over
the next 18 months."
Second Quarter 2023 Financial Results
- Revenue was $41.2 million,
compared to $48.0 million in the
second quarter of 2022.
- Net loss was $26.9 million,
compared to $8.8 million in the
second quarter of 2022.
- Adjusted EBITDA(3) was $7.2
million, or a 17.5% Adjusted EBITDA margin, compared to
$(1.7) million, or a (3.6)% Adjusted
EBITDA margin, in the second quarter of 2022.
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.
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 1-833-816-1417 (US and
Canada) or +1 412-317-0510
(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:
8925104.
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 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
whether we will execute our transformation plan as expected;
whether our transformational plan will drive the Company forward
with growth as well as improved margins, Adjusted EBITDA and cash
flow; whether we will identify more profitable ways to increase our
marketing spend in order to improve subscription rates and drive
future revenue; whether we will continue to see promising results
from our new outsourced performance marketing initiative; whether
we will work with a managed service provider and outsource a
significant portion of our technology and other operations as
expected; whether we will improve our product and technology stack
as expected, while at the same time achieving long-term cost
savings, revenue growth and improved operating margins; whether we
will complete our outsourcing by the first quarter of 2024 and
whether it will result in a dramatically reduced employee
headcount; and whether we will continue to implement the
initiatives in our plan over the next 18 months as expected.
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, 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 comply with new and
evolving regulations relating to data protection and data privacy;
general competition and price measures in the market place; 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 for the three and six months ended
June 30, 2023 includes virtual
currency deferred revenue of $0.3 million and $0.6 million. 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 and six months ended June
30, 2023, the Company recognized revenue of $0.3 million and $0.6 million 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 six months ended
June 30, 2023 and 2022 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)
|
|
|
June 30,
2023
|
|
December 31,
2022
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
5,683
|
|
$
11,438
|
Accounts receivable,
net
|
|
5,473
|
|
5,154
|
Goodwill and intangible
assets
|
|
109,013
|
|
132,575
|
Other assets
|
|
14,617
|
|
15,210
|
Total
assets
|
|
134,786
|
|
$
164,377
|
Liabilities and
Shareholders' Deficit
|
|
|
|
|
Debt
|
|
$
94,197
|
|
$
94,817
|
Accounts
payable
|
|
7,142
|
|
6,487
|
Deferred
revenue
|
|
27,401
|
|
28,085
|
Accrued expenses and
other current liabilities
|
|
27,611
|
|
24,247
|
Other
liabilities
|
|
17,065
|
|
17,527
|
Total
liabilities
|
|
173,416
|
|
171,163
|
Total shareholders'
deficit
|
|
(38,630)
|
|
(6,786)
|
Total
liabilities and shareholders' deficit
|
|
$
134,786
|
|
$
164,377
|
Spark Networks
SE
|
Condensed
Consolidated Statements of Operations (Unaudited)
|
(in
thousands)
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Revenue
|
|
$
41,202
|
|
$
48,035
|
|
$
82,541
|
|
$
97,942
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
Cost of revenue,
exclusive of
depreciation and amortization
|
|
22,790
|
|
36,356
|
|
50,082
|
|
70,602
|
Other operating costs
and expenses
|
|
41,392
|
|
15,097
|
|
56,616
|
|
31,135
|
Total operating costs
and expenses
|
|
64,182
|
|
51,453
|
|
106,698
|
|
101,737
|
Operating
loss
|
|
(22,980)
|
|
(3,418)
|
|
(24,157)
|
|
(3,795)
|
Other expense,
net
|
|
(3,998)
|
|
(5,150)
|
|
(7,135)
|
|
(12,536)
|
Loss before income
taxes
|
|
(26,978)
|
|
(8,568)
|
|
(31,292)
|
|
(16,331)
|
Income tax benefit
(expense)
|
|
52
|
|
(193)
|
|
7
|
|
99
|
Net loss
|
|
$
(26,926)
|
|
$
(8,761)
|
|
$
(31,285)
|
|
$
(16,232)
|
Reconciliation of
Net loss to Adjusted EBITDA
(Unaudited):
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(in
thousands)
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net
loss
|
|
$
(26,926)
|
|
$
(8,761)
|
|
$
(31,285)
|
|
$
(16,232)
|
Interest
expense
|
|
4,058
|
|
2,706
|
|
7,875
|
|
9,588
|
(Gain) loss on foreign
currency
transactions
|
|
216
|
|
2,441
|
|
(464)
|
|
3,208
|
Income tax (benefit)
expense
|
|
(52)
|
|
193
|
|
(7)
|
|
(99)
|
Depreciation and
amortization
|
|
625
|
|
577
|
|
1,243
|
|
1,180
|
Impairment of
intangible assets
|
|
21,847
|
|
—
|
|
22,947
|
|
—
|
Stock-based
compensation expense
|
|
251
|
|
490
|
|
424
|
|
992
|
Other
costs(1)
|
|
7,172
|
|
614
|
|
8,823
|
|
636
|
Adjusted
EBITDA
|
|
$
7,191
|
|
$
(1,740)
|
|
$
9,556
|
|
$
(727)
|
Adjusted EBITDA
margin(2)
|
|
17.5 %
|
|
(3.6) %
|
|
11.6 %
|
|
(0.7) %
|
|
(1) Includes consulting and advisory
fees related to special projects, CFO severance fees, and retention
bonuses
|
(2) We
define "Adjusted EBITDA margin" as Adjusted EBITDA divided by
revenue.
|
Spark Networks
SE Condensed Consolidated Statements of Cash Flows
(Unaudited) (in thousands)
|
|
|
|
Six Months Ended
June 30,
|
|
|
2023
|
|
2022
|
Net loss
|
|
$
(31,285)
|
|
$
(16,232)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
Non-cash items and
other non-operating charges
|
|
26,819
|
|
12,536
|
Change in operating
assets and liabilities
|
|
1,796
|
|
(6,999)
|
Net cash used in
operating activities
|
|
(2,670)
|
|
(10,695)
|
Capital
expenditures
|
|
(1,393)
|
|
(1,268)
|
Net cash used in
investing activities
|
|
(1,393)
|
|
(1,268)
|
Net cash (used in)
provided by financing activities
|
|
(1,250)
|
|
7,774
|
Effects of exchange
rate fluctuations on cash and cash equivalents and restricted
cash
|
|
(439)
|
|
(613)
|
Net decrease in cash
and cash equivalents and restricted cash
|
|
(5,752)
|
|
(4,802)
|
|
|
|
|
|
Cash and cash
equivalents and restricted cash at beginning of period
|
|
11,569
|
|
16,279
|
Cash and cash
equivalents and restricted cash at end of period
|
|
$
5,817
|
|
$
11,477
|
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SOURCE Spark Networks SE