American Singles subscribers continue to decline while “other businesses” grow. Subscriber acquisition costs up almost 50% at JDate and 37% at American Singles due in part to new SAC metrics. I’ll leave it to you to dig into the details.
– Record EBITDAS1 Profit of $3.4 Million in Q1 ‘06
– Cash Flow from Operations Totals $4.3 Million
– Cash and Marketable Securities of $15.8 Million
– Company Launches Relationships.comâ„¢ for Christian Singles
BEVERLY HILLS, Calif., April 27, 2006 – Spark Networks plc (AMEX: LOV), a leading provider of online personals services, today reported first quarter 2006 financial results.
Highlights
“During our traditionally strong first quarter, we reached a significant milestone, reporting EBITDAS profit of $3.4 million, our highest EBITDAS performance to date,� stated David Siminoff, President and Chief Executive Officer of Spark Networks. “In addition, we closed the quarter with a strong balance sheet, having paid down an additional $5 million of debt from our MingleMatch acquisition last year, leaving our cash and marketable securities position at $15.8 million.�
JDate® continued to deliver steady growth with revenue and average paying subscribers increasing 8% and 13%, respectively, over the same period last year.
Also during the first quarter, the Company redesigned and rebranded its Christian community as Relationships.com (www.relationships.com). Already the most-visited online community for Christian singles2, the new Relationships.com brand better represents today’s Christian singles and provides a unique online community created for Christian singles looking to make new friends or find life-long partners who share similar values, traditions and beliefs.
Financial Results
Reported revenue for the first quarter of 2006 was $16.8 million, an increase of 2% compared to $16.5 million over the same period in 2005. The increase is largely a result of the Company’s acquisition of MingleMatch in the second quarter of 2005. The first quarter is typically a strong quarter for the Company, and the first quarter of 2005 was particularly strong given the carry-over effect of significant marketing expenditures for AmericanSingles® in the last half of 2004. Since the last half of 2004, the Company has reduced spending for AmericanSingles in order to lower overall customer acquisition costs for AmericanSingles, thus improving its contribution margin. “I am especially proud that we were able to show increases in both revenue and EBITDAS against the difficult benchmark of first quarter 2005,� said Siminoff.
Total operating expenses for the first quarter of 2006 were $10.2 million, an increase of 10% compared to $9.3 million in the same period in 2005. The increase in operating expenses was primarily attributable to share-based compensation expense of approximately $1.4 million as a result of the Company’s adoption of the Statement of Financial Accounting Standards No. 123 (R) (“SFAS 123 (R)�) in the third quarter of 2005. Periods prior to the third quarter of 2005 do not contain any expense for share options in accordance with SFAS 123(R). Even including operating expenses related to its MingleMatch subsidiary, which the Company acquired in the second quarter of 2005, total operating expenses for the first quarter of 2006 would actually have been lower than those in the first quarter of 2005 absent the SFAS 123 (R) share-based compensation expense.
The Company reported net income of $710,000, or $0.02 per share, for the first quarter of 2006, compared to net income of $2.0 million, or $0.08 per share, for the same period in 2005. Due to the Company’s implementation of SFAS 123 (R), the net income for the quarter ended March 31, 2006 includes compensation expense related to share options of $1.4 million. Excluding share-based compensation, the Company would have reported a profit of $2.1 million, or $0.07 per share3, for the quarter.
EBITDAS (EBITDA adjusted to remove share-based compensation expense) for the first quarter of 2006 was $3.4 million, and increase of 10% compared to EBITDAS of $3.1 million during the same period in 2005. See the attached Consolidated Statement of Operations for a reconciliation of EBITDA and EBITDAS to net income.
Balance Sheet, Cash, Debt
As of March 31, 2006, the Company had a cash and marketable securities position of $15.8 million, compared to $17.3 million at December 31, 2005. As of March 31, 2006, the Company had remaining payments in respect of the purchase of MingleMatch of $4.0 million, which are due in May 2006, and has accumulated over $50.0 million of NOLs. Cash flow from operations during the first quarter was $4.3 million driven by an increase in multi-month subscription sales, where cash is received up front and service is provided over the life of the subscription.
Segment Reporting4
The Company reported first quarter 2006 revenue for its JDate segment of $7.0 million, an increase of 8% compared to $6.5 million in the same period in 2005.
The Company reported first quarter 2006 revenue for its AmericanSingles segment of $6.3 million, a decrease of 22% compared to $8.1 million in the same period in 2005. The decrease in revenues for AmericanSingles is largely attributable to a 34% decrease in the AmericanSingles marketing spend in the last half of 2005 compared to the last half of 2004. “Online marketing spend tends to have a lagging impact so that spending in prior periods affects revenues in subsequent periods. That lag effect is consistent with impact of the higher marketing expenses we incurred in late 2004 compared to last year and the resulting impact upon AmericanSingles revenue in the first quarters of 2005 and 2006,� stated Siminoff.
The Company reported first quarter 2006 revenue for its Other Businesses segment of $3.5 million, an increase of 75% compared to $2.0 million in the same period in 2005. The increase in revenue was primarily driven by the acquisition of MingleMatch in the second quarter of 2005, and strong growth from the websites associated with the acquisition.
Business Metrics
Average paying subscribers for the Company’s JDate segment were 79,500 during the first quarter of 2006, an increase of 13% compared to 70,400 from the same period in 2005. “We believe the increase in average paying subscribers is a result of focused marketing efforts that we’ve designed to both increase awareness and enhance the reputation of the JDate brand,� stated Siminoff.
Average paying subscribers for the Company’s AmericanSingles segment were 98,800 during the first quarter of 2006, a decrease of 19% compared to 121,600 from the same period in 2005.
Average paying subscribers for the Company’s Other Businesses segment were 66,000 during the first quarter of 2006, an increase of 116% compared to 30,600 from the same period in 2005.
Average paying subscribers for the Company, as a whole, in the first quarter of 2006 were approximately 244,300, an increase of 10% compared to 222,600 from the same period in 2005.
Direct subscriber acquisition cost5 (SAC) for the Company’s JDate segment in the first quarter of 2006 was $13.20, an increase of 47% compared to $9.01 from the same period in 2005. When comparing JDate SAC in the first quarter to that in the same period in 2005, it is important to consider that SAC metrics for JDate now reflect a wider mix of offline initiatives focused on continuing to build the JDate brand.
SAC for the Company’s AmericanSingles segment in the first quarter of 2006 was $35.19, an increase of 37% compared to $25.61 in the same period in 2005. The increase in SAC for AmericanSingles is the result of the previously discussed significant cuts in marketing spending in the first quarter of 2005 compared to the last half of 2004. The carry-over effect in the first quarter of 2005 of increased subscriptions from previous marketing, combined with reduced marketing expense, made for an atypically low SAC in the first quarter of 2005. Since the first quarter of 2005, the Company has slightly increased marketing spending for AmericanSingles.
SAC for the Company’s Other Businesses segment in the first quarter of 2006 was $24.68, a decrease of 47% compared to $46.97 from the same period in 2005. The significant decrease in SAC for the Other Businesses segment is due to the addition of the 20+ affinity-focused websites that were acquired with MingleMatch and the lower customer acquisition cost the Company encounters with regard to JDate and its other affinity-focused websites.
SAC for the Company as a whole in the first quarter of 2006 was $26.11, an increase of 10% compared to $23.84 from the same period last year.
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