- Company Focused on Improving Profitability through
Expense Reduction
- Company Continues Strategic Review Process
- Chelsea Grayson to Serve
as Permanent CEO
BERLIN, March 30,
2023 /PRNewswire/ -- Spark Networks SE (NASDAQ: LOV)
("the Company"), a leading social dating platform for meaningful
relationships, today reported financial results for its fourth
quarter and full year ended December 31, 2022.
![(PRNewsfoto/Spark Networks SE) (PRNewsfoto/Spark Networks SE)](https://mma.prnewswire.com/media/680237/Spark_Networks_Logo.jpg)
Chelsea Grayson, CEO of Spark
Networks, said, "I am pleased to announce that I have accepted
the board's request to serve as Spark's permanent CEO. During the
strategic review, what has become clear is that Spark is far more
than just Zoosk. While Zoosk holds strategic value as a large mass
market dating site, we also have a base of quality affinity brands
(including EliteSingles, SilverSingles, eDarling, Christian Mingle and Jdate) to invest in other
than just Zoosk, which are in demand by a large global paying
subscriber base. Our non-Zoosk business is close to 50% of total
revenue and several of our non-Zoosk brands have some of the best
returns on capital in our portfolio. Going forward, we have
identified several areas where we believe the Company can
substantially increase cost efficiency and solidify around a lower
revenue base with a well-diversified collection of key meaningful
brands, with the goal of substantially improving Adjusted EBITDA
margins. Fundamentally, improving profitability is our highest
priority. We are targeting at least a 50% increase in Adjusted
EBITDA in 2023 or $28.0 million in
Adjusted EBITDA. Going forward, we plan to accelerate our debt
paydown with additional free cash flow. Our long-term goal is to
achieve and sustain 25-30% plus Adjusted EBITDA margins consistent
with industry averages."
We believe the foregoing can be achieved if we can execute the
following initiatives:
- Solidify around a diversified core of key meaningful brands and
achieve a trough revenue base in 2023.
- Reallocate capital into more profitable marketing channels and
diversify away from affiliate to direct and social channels.
- Reallocate our marketing budget across our highest ROI
yields.
- Improve product functionality across the portfolio to improve
retention and engagement.
- Use our approximately $250
million in combined net operating losses (NOLs) to minimize
taxable income.
Ms. Grayson added, "We believe the best way to build and sustain
shareholder value is to target higher annual Adjusted EBITDA
margins by right-sizing our cost structure, investing in our brands
that have the highest ROI, reallocating capital to customer
acquisition channels with the highest returns and strengthening our
defined and diverse brands. We aim to substantially deleverage as
we move forward and run a simpler, more profitable business
model."
Fourth Quarter 2022 Financial Results
- Revenue was $41.6 million,
compared to $52.0 million in the
fourth quarter of 2021. On a constant currency basis,(1)
revenue would have been $43.7 million
in the fourth quarter of 2022.(2)
- Net loss was $17.2 million,
compared to $9.9 million in the
fourth quarter of 2021.
- Adjusted EBITDA(3) was $11.0
million, or a 26% adjusted EBITDA margin, compared to
$14.3 million, or a 28% adjusted
EBITDA margin, in the fourth quarter of 2021.
Full Year 2022 Financial Results
- Revenue was $187.8 million,
compared to $216.9 million in 2021.
On a constant currency basis,(1) revenue would have been
$197.1 million in
2022.(2)
- Net loss was $44.2 million,
compared to $68.2 million in
2021.
- Adjusted EBITDA(3) was $18.5
million, or a 10% Adjusted EBITDA margin, compared to
$33.0 million, or a 15% adjusted
EBITDA margin, in 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.
Strategic Alternatives Review Update:
The company continues its strategic alternatives review.
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:
1409046.
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 invest in our non-Zoosk brands as anticipated;
whether we substantially increase cost efficiency and solidify
around a lower revenue base with a well-diversified collection of
key meaningful brands; whether we will substantially improve
Adjusted EBITDA margins; whether we will improve profitability;
whether we will achieve a 40% increase in Adjusted EBITDA in 2023
or $26 million in Adjusted EBITDA;
whether we will accelerate our debt paydown with additional free
cash flow; whether we will achieve and sustain 25-30%-plus Adjusted
EBITDA margins in the long-term; whether we will solidify around a
diversified core of key meaningful brands and achieve a trough
revenue base in 2023, reallocate capital into more profitable
marketing channels and diversify away from affiliate to direct and
social channels, reallocate our marketing budget across our highest
ROI yields, improve product functionality across the portfolio to
improve retention and engagement, use our approximately
$250 million in combined net
operating losses to minimize taxable income, and, if we accomplish
these initiatives, whether they will lead to achieving the other
goals stated above; whether targeting higher annual Adjusted EBITDA
margins by right-sizing our cost structure, whether we will
successfully build and sustain shareholder value by targeting
higher annual Adjusted EBITDA margins by right-sizing our cost
structure, investing in our brands that have the highest ROI,
reallocating capital to customer acquisition channels with the
highest returns and strengthening our defined and diverse brands;
whether we will substantially deleverage as we move forward and run
a simpler, more profitable business model; and the results, if any,
of our strategic alternatives review.
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; 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 for the three months and year ended
December 31, 2022 includes virtual
currency deferred revenue of $0.3
million and $2.5 million,
respectively. 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 and year ended December 31, 2022, the Company recognized revenue
of $0.3 million and $2.5 million, respectively, 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 months and year ended
December 31, 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
|
(in thousands)
|
|
|
|
December 31, 2022
|
|
December 31, 2021
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
11,438
|
|
$
16,141
|
Accounts receivable,
net
|
|
5,154
|
|
6,261
|
Goodwill and intangible
assets
|
|
132,575
|
|
164,113
|
Other assets
|
|
15,210
|
|
23,286
|
Total
assets
|
|
$
164,377
|
|
$
209,801
|
Liabilities and Shareholders' (Deficit)
Equity
|
|
|
|
|
Current portion of
long-term debt
|
|
$
94,817
|
|
$
17,593
|
Accounts
payable
|
|
6,487
|
|
11,474
|
Deferred
revenue
|
|
28,085
|
|
36,973
|
Accrued expenses and
other current liabilities
|
|
24,247
|
|
27,042
|
Long-term debt, net of
current portion
|
|
—
|
|
64,531
|
Other
liabilities
|
|
17,527
|
|
19,495
|
Total
liabilities
|
|
171,163
|
|
177,108
|
Total shareholders'
(deficit) equity
|
|
(6,786)
|
|
32,693
|
Total liabilities and
shareholders' (deficit) equity
|
|
$
164,377
|
|
$
209,801
|
Spark Networks SE
|
Condensed Consolidated Statements of
Operations
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Revenue
|
|
$
41,641
|
|
$
51,976
|
|
$
187,763
|
|
$
216,905
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
Cost of revenue,
exclusive of
depreciation and amortization
|
|
20,074
|
|
27,371
|
|
117,907
|
|
131,974
|
Other operating costs
and expenses
|
|
31,913
|
|
35,701
|
|
89,192
|
|
118,951
|
Total operating costs
and expenses
|
|
51,987
|
|
63,072
|
|
207,099
|
|
250,925
|
Operating
loss
|
|
(10,346)
|
|
(11,096)
|
|
(19,336)
|
|
(34,020)
|
Other income (expense),
net
|
|
644
|
|
(3,252)
|
|
(17,862)
|
|
(15,737)
|
Loss before income
taxes
|
|
(9,702)
|
|
(14,348)
|
|
(37,198)
|
|
(49,757)
|
Income tax (expense)
benefit
|
|
(7,544)
|
|
4,414
|
|
(6,992)
|
|
(18,398)
|
Net loss
|
|
$
(17,246)
|
|
$
(9,934)
|
|
$
(44,190)
|
|
$
(68,155)
|
Reconciliation of Net loss to Adjusted EBITDA
(Unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
(in thousands)
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Net loss
|
|
$
(17,246)
|
|
$
(9,934)
|
|
$
(44,190)
|
|
$
(68,155)
|
Net interest
expense
|
|
3,607
|
|
3,101
|
|
16,377
|
|
13,453
|
(Gain) loss on foreign
currency
transactions
|
|
(3,976)
|
|
796
|
|
2,031
|
|
2,918
|
Income tax expense
(benefit)
|
|
7,544
|
|
(4,414)
|
|
6,992
|
|
18,398
|
Depreciation and
amortization
|
|
631
|
|
945
|
|
2,387
|
|
6,593
|
Impairment of goodwill,
intangible
assets, and capitalized software
|
|
18,479
|
|
20,864
|
|
30,269
|
|
52,950
|
Stock-based
compensation expense
|
|
26
|
|
627
|
|
1,536
|
|
2,725
|
Other
costs(1)
|
|
1,932
|
|
2,333
|
|
3,146
|
|
4,155
|
Adjusted
EBITDA
|
|
$
10,997
|
|
$
14,318
|
|
$
18,548
|
|
$
33,037
|
Adjusted EBITDA
margin(2)
|
|
26.4 %
|
|
27.5 %
|
|
9.9 %
|
|
15.2 %
|
|
(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
|
(in thousands)
|
|
|
|
Year Ended December 31,
|
|
|
2022
|
|
2021
|
Net loss
|
|
$
(44,190)
|
|
$
(68,155)
|
Adjustments to
reconcile net loss to net cash (used in) provided by operating
activities:
|
|
|
|
|
Non-cash items and
other non-operating charges
|
|
51,533
|
|
86,998
|
Change in operating
assets and liabilities
|
|
(16,914)
|
|
(2,180)
|
Net cash (used in)
provided by operating activities
|
|
(9,571)
|
|
16,663
|
Capital
expenditures
|
|
(2,502)
|
|
(1,086)
|
Net cash used in
investing activities
|
|
(2,502)
|
|
(1,086)
|
|
|
|
|
|
Net cash provided by
(used in) financing activities
|
|
7,524
|
|
(19,920)
|
Effects of exchange
rate fluctuations on cash and cash equivalents and restricted
cash
|
|
(161)
|
|
(495)
|
Net decrease in cash
and cash equivalents and restricted cash
|
|
(4,710)
|
|
(4,838)
|
|
|
|
|
|
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
|
|
$
11,569
|
|
$
16,279
|
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SOURCE Spark Networks SE