lov-ex991

In the news release, "Spark Networks^® Reports Second Quarter 2017 Results," issued August 7, 2017 by Spark Networks, Inc. (NYSE American: LOV), we are advised by the company that, due to a production error, the previously furnished press release contained incorrect information for ARPU metrics within the tables presenting Segment Results From Operations and Key Quarterly Metrics. This press release corrects ARPU metrics within these tables.

LOS ANGELES, CA / ACCESSWIRE / August 8, 2017 -- Spark Networks, Inc. (NYSE American: LOV) today reported results for the second quarter of 2017.

“With our recent relaunch of JDate on our new technology platform we reached a major strategic milestone, and are well on our way toward completing the launch of Christian Mingle later this quarter,” said Danny Rosenthal, Chief Executive Officer of Spark Networks. “We expect that the release of the new platform will quickly translate into operational cost savings and increased marketing efficiency and effectiveness.

“In Q2, we saw our second consecutive quarter of revenue stability within the Jewish Networks. These results, when combined with our new platform, position us to make the data-driven marketing investments necessary to drive future growth and value creation.”

As previously announced on May 2, 2017, Spark Networks, Inc. entered into a definitive agreement with Affinitas GmbH (“EliteSingles”), which operates premium online dating platforms EliteSingles, eDarling and Attractive World to combine in a stock-for-stock merger. Spark continues to expect the transaction to close in the fourth quarter of 2017, subject to Spark shareholder approval and the satisfaction of certain other customary closing conditions.

In light of the pending merger, Spark will not host a conference call to review its second quarter 2017 results.

Revenue: For the second quarter of 2017, total revenue was $6.6 million, a decrease of 27% compared to the year ago period, and a 9% decrease from the prior quarter. The year over year and sequential decreases were primarily driven by a decrease in average paying subscribers, reflecting reduced direct marketing investment in the Jewish and Christian Networks. These decreases were partially offset by year over year and sequential increases in ARPU of 22% and 4%, respectively.

Contribution: Contribution was $6.0 million in the quarter, a decrease of 22% compared to the year ago period, and a 2% increase from the prior quarter. Our contribution margin increased to 90% from 80% in the prior quarter and increased from 84% in the year ago period. Total direct marketing expenses decreased 53% to $690,000 in the second quarter of 2017 as compared to $1.5 million in the prior year period.

Net Loss: Net Loss was $(2.5) million in the quarter, compared to Net Income of $329,000 in the year ago period and a Net Loss of $(2.1) million in the prior quarter.

Adjusted EBITDA: For the second quarter of 2017, Adjusted EBITDA was $1.2 million, a decrease of $(283,000) versus the year ago period and an increase of $1.0 million from the prior quarter.

Cash: Cash used in operating activities in the second quarter was $440,000. At June 30, 2017, the Company had $9.8 million in cash and cash equivalents, compared to $10.8 million at the end of the prior quarter. At quarter end, the Company had no outstanding debt.

SEGMENT⁴ RESULTS FROM OPERATIONS
(in thousands except subscriber and ARPU information)

	Q2 2017			Q1 2017		Q4 2016		Q3 2016		Q2 2016		Q2 '17 v. Q2 '16			Q2 '17 v. Q1 '17

Revenue
Jewish Networks	$	3,137		$	3,148	$	3,136	$	3,322	$	3,628		-13.5	%		-0.4	%
Christian Networks		3,371			3,813		4,262		4,673		5,044		-33.2	%		-11.6	%
Other Networks		134			286		335		385		413		-67.6	%		-53.2	%
Offline & Other Businesses		(2	)		17		10		11		13		-115.7	%		-111.8	%
Total Revenue	$	6,640		$	7,264	$	7,743	$	8,391	$	9,098		-27.0	%		-8.6	%

Direct Mktg. Exp.
Jewish Networks	$	259		$	570	$	316	$	420	$	372		-30.4	%		-54.6	%
Christian Networks		405			803		316		750		1,001		-59.5	%		-49.6	%
Other Networks		26			60		41		60		105		-75.2	%		-56.7	%
Total Direct Mktg. Exp.	$	690		$	1,433	$	673	$	1,230	$	1,478		-53.3	%		-51.8	%

Contribution
Jewish Networks	$	2,878		$	2,578	$	2,820	$	2,902	$	3,256		-11.6	%		11.6	%
Christian Networks		2,966			3,009		3,946		3,923		4,043		-26.6	%		-1.4	%
Other Networks		108			227		294		325		308		-64.9	%		-52.3	%
Offline & Other Businesses		(2	)		17		10		11		13		-119.7	%		-114.8	%
Total Contribution	$	5,950		$	5,831	$	7,070	$	7,161	$	7,620		-21.9	%		2.0	%

Period Ending Subs
Jewish Networks		47,487			47,236		51,519		52,952		59,868		-20.7	%		0.5	%
Christian Networks		57,947			65,146		82,163		95,047		112,895		-48.7	%		-11.1	%
Other Networks		5,937			7,158		8,690		10,234		10,915		-45.6	%		-17.1	%
Total Period Ending Subs.		111,371			119,540		142,372		158,233		183,678		-39.4	%		-6.8	%

Average Paying Subs.
Jewish Networks		47,278			48,823		52,493		57,684		61,732		-23.4	%		-3.2	%
Christian Networks		60,972			73,627		88,774		105,108		117,024		-47.9	%		-17.2	%
Other Networks		6,675			7,991		9,408		10,772		11,182		-40.3	%		-16.5	%
Total Avg. Paying Subs.		114,925			130,441		150,675		173,564		189,938		-39.5	%		-11.9	%

ARPU
Jewish Networks	$	21.80		$	21.07	$	19.68	$	18.79	$	19.33		12.8	%		3.5	%
Christian Networks		18.43			17.23		15.74		14.60		14.09		30.8	%		7.0	%
Other Networks		6.54			11.91		11.55		11.69		12.15		-46.2	%		-45.1	%
Total ARPU⁵	$	19.12		$	18.34	$	16.85	$	15.81	$	15.70		21.8	%		4.3	%

	Q2 2017		Q1 2017		Q4 2016		Q3 2016		Q2 2016

Jewish Networks
1 month plans		54.7%		51.6%		45.7%		32.6%		28.2%
3 month plans		19.5%		19.2%		20.4%		18.4%		19.2%
6 month plans		25.8%		29.2%		33.9%		49.0%		52.6%
		100.0%		100.0%		100.0%		100.0%		100.0%

Christian Networks
1 month plans		58.2%		55.1%		52.7%		36.5%		39.2%
3 month plans		24.8%		25.0%		27.0%		22.4%		25.7%
6 month plans		17.0%		19.9%		20.3%		41.1%		35.1%
		100.0%		100.0%		100.0%		100.0%		100.0%

Other Networks
1 month plans		57.4%		55.0%		60.1%		51.1%		52.2%
3 month plans		11.3%		12.2%		10.5%		9.5%		10.8%
6 month plans		31.3%		32.8%		29.4%		39.4%		37.1%
		100.0%		100.0%		100.0%		100.0%		100.0%

	Q2 2017		Q1 2017		Q4 2016		Q3 2016		Q2 2016

Jewish Networks
First Time Subscribers		21.2%		21.7%		22.0%		23.7%		24.6%
Winback Subscribers		25.8%		28.1%		33.0%		34.6%		34.0%
Renewal Subscribers		53.0%		50.2%		44.9%		41.7%		41.4%
Total		100.0%		100.0%		100.0%		100.0%		100.0%

Christian Networks
First Time Subscribers		32.7%		35.2%		37.2%		39.9%		42.0%
Winback Subscribers		21.0%		21.4%		25.1%		26.4%		26.0%
Renewal Subscribers		46.3%		43.4%		37.7%		33.7%		32.0%
Total		100.0%		100.0%		100.0%		100.0%		100.0%

Other Networks
First Time Subscribers		27.0%		28.0%		29.8%		32.7%		33.0%
Winback Subscribers		22.6%		21.6%		22.2%		22.9%		22.4%
Renewal Subscribers		50.4%		50.4%		48.0%		44.4%		44.6%
Total		100.0%		100.0%		100.0%		100.0%		100.0%

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause Spark’s or EliteSingles’ or the combined company’s performance or achievements to be materially different from those of any expected future results, performance, or achievements. Forward-looking statements speak only as of the date they are made, and neither Spark nor EliteSingles assumes any duty to update forward-looking statements. We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. Such forward-looking statements include, but are not limited to, statements about the expected completion of the launch of Christin Mingle and the Company’s transition roadmap, statements about the Company’s positioning to make investments to drive future growth and value creation, statements about the anticipated timing of the closing of the Company’s pending business combination transaction with EliteSingles, statements about the expected benefits of such business combination transaction, including future financial and operating results, the combined company’s plans, objectives, expectations and intentions and other statements that are not historical facts. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: (i) the possibility that the proposed transaction does not close when expected or at all because required regulatory, shareholder or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all; (ii) changes in Spark’s share price before closing, including as a result of the financial performance of EliteSingles prior to closing, or more generally due to broader stock market movements, and the performance of peer group companies; (iii) the risk that the benefits from the transaction may not be fully realized or may take longer to realize than expected, including as a result of changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which Spark and EliteSingles operate; (iv) the ability to promptly and effectively integrate the businesses of Spark and EliteSingles; (v) the reaction to the transaction of the companies’ customers, employees and counterparties; (vi) diversion of management time on merger-related issues; (vii) lower-than-expected revenues, credit quality deterioration or a reduction in net earnings; and (viii) other risks that are described in Spark’s public filings with the SEC. For more information, see the risk factors described in Spark’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and other filings with the SEC.

This communication does not constitute an offer to sell or a solicitation of an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law. This communication is being made in respect of the proposed business combination transaction between the Company and EliteSingles. The proposed transaction will be submitted to the shareholders of the Company for their consideration. In connection with the proposed transaction, the new entity and EliteSingles will file with the SEC a registration statement on Form F-4 that will include the proxy statement of the Company that also constitutes a prospectus of the Company. After the registration statement has been declared effective by the SEC, a definitive proxy statement/prospectus will be mailed to each Company stockholder entitled to vote at the Company’s stockholder meeting. INVESTORS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND ANY OTHER DOCUMENTS RELATING TO THE TRANSACTION FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors may obtain copies of the proxy statement/prospectus (when available) and all other documents filed with the SEC regarding the proposed transaction, free of charge, at the SEC’s website (http://www.sec.gov). Investors may also obtain these documents, free of charge, from the Company’s website (www.spark.net) under the link “Investor Relations” and then under the tab “SEC Filings” or by directing request to investor@spark.net.

The Company and its directors, executive officers and other members of management and employees may be deemed to be “participants” in the solicitation of proxies from the Company’s stockholders in connection with the proposed transaction. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of the Company’s stockholders in connection with the proposed transaction and a description of their direct and indirect interest, by security holdings or otherwise, will be set forth in the proxy statement/prospectus filed with the SEC in connection with the proposed transaction. You can find information about the Company’s executive officers and directors in its definitive proxy statement filed with the SEC on March 31, 2017 and in its Annual Report on Form 10-K filed with the SEC on March 22, 2017. You can also obtain free copies of these documents from the Company using the contact information above.

The Spark Networks portfolio of consumer Web sites includes, among others, JDate®.com (www.jdate.com), ChristianMingle®.com (www.christianmingle.com), JSwipe (www.jswipeapp.com), CROSSPATHS (www.crosspathsapp.com), LDSSingles (www.ldssingles.com), BlackSingles.com® (www.blacksingles.com), and SilverSingles®.com (www.silversingles.com).

¹ “Contribution” is defined as revenue, net of credits and credit card chargebacks, less direct marketing.

² The Company reports Adjusted EBITDA as a supplemental measure to generally accepted accounting principles ("GAAP"). This non-GAAP 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. 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. A reconciliation of the Adjusted EBITDA for the three and six months ended June 30, 2017 can be found in the table below.

“Adjusted EBITDA” is defined as earnings before interest, taxes, depreciation, amortization, stock-based compensation, impairment of intangible and long-lived assets, non-cash currency translation adjustments for an inter-company loan and non-recurring legal and acquisition costs.

³"Paying Subscribers" are defined as individuals who have paid a monthly fee for access to communication and website features beyond those provided to our members. Period ending subscribers for each quarter represent the paying subscriber count as of the last day of the period. 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.The calculation excludes results from the Company’s HurryDate business due to its relative size.

⁴ 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 JDate, JDate.co.il, JDate.fr, JDate.co.uk, and JSwipe. The Christian Networks segment consists of ChristianMingle, CrossPaths, ChristianMingle.co.uk, ChristianMingle.com.au, Believe.com, and Faith.com. The Other Networks segment consists of LDSSingles.com and related other general market websites as well as other properties which are primarily composed of sites targeted towards various religious, ethnic, geographic and special interest groups. The Offline & Other Businesses segment consists of revenue generated from offline activities and HurryDate events and subscriptions.

⁵ ARPU is defined as average revenue per user per month. Total ARPU excludes results from the Company’s HurryDate business due to its relative size.

⁶ One month plans may also include a small amount of two month plans. Three month plans may include a small amount of four month plans. Six month plans may include a small amount of twelve month plans.

⁷ Represents the composition of average paying subscribers in the period. First Time Subscribers are defined as those subscribers that have never purchased a subscription from the Company for that reporting segment. Winback Subscribers are defined as those individuals who have purchased a subscription from the Company for that reporting segment, allowed their subscription to lapse, and subsequently purchased a subscription from the Company for that reporting segment. Renewal Subscribers are defined as those subscribers that have auto-renewed a subscription from the Company for that reporting segment. Figures exclude results from JSwipe and CrossPaths.

	June 30,			December 31,
	2017			2016
Assets
Current assets:
Cash and cash equivalents	$	9,808		$	11,360
Restricted cash		380			454
Accounts receivable		438			525
Prepaid expenses and other		540			1,408
Total current assets		11,166			13,747
Property and equipment, net		2,221			4,494
Goodwill		11,136			10,523
Intangible assets, net		2,840			2,950
Deposits and other assets		90			103
Total assets	$	27,453		$	31,817
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	1,158		$	819
Accrued liabilities		2,858			2,590
Deferred revenue		3,143			4,005
Total current liabilities		7,159			7,414
Deferred tax liability - non-current		2,274			2,092
Other liabilities		98			246
Total liabilities		9,531			9,752
Commitments and Contingencies
Stockholders' equity:
10,000,000 shares of Preferred Stock authorized, $0.001 par value, 450,000 of which are designated as Series C Junior Participating Cumulative Preferred Stock, with no shares of Preferred Stock issued or outstanding		-			-
100,000,000 shares of Common Stock authorized, $0.001 par value, with 32,176,023 and 31,983,545 shares of Common Stock issued and outstanding at June 30, 2017 and December 31, 2016:		32			32
Additional paid-in-capital		87,543			87,198
Accumulated other comprehensive income		869			713
Accumulated deficit		(70,522	)		(65,878	)
Total stockholders' equity		17,922			22,065
Total liabilities and stockholders' equity	$	27,453		$	31,817

CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Revenue	$	6,640		$	9,098		$	13,904		$	18,957
Cost and expenses:
Cost of revenue (exclusive of depreciation shown separately below)		1,684			2,653			4,038			8,882
Sales and marketing		561			1,380			1,211			2,832
Customer service		586			840			1,221			1,833
Technical operations		280			305			499			602
Development		904			1,180			1,619			2,210
General and administrative		3,664			2,004			6,898			4,515
Depreciation		1,666			746			3,374			1,458
Amortization of intangible assets		49			78			98			156
Impairment of intangible and long-lived assets		15			52			24			91
Total cost and expenses		9,409			9,238			18,982			22,579
Operating loss		(2,769	)		(140	)		(5,078	)		(3,622	)
Interest (income) expense and other, net		(111	)		114			(342	)		(27	)
Loss before income tax benefit		(2,658	)		(254	)		(4,736	)		(3,595	)
Income tax benefit		(139	)		(583	)		(92	)		(516	)
Net (loss) income		(2,519	)		329			(4,644	)		(3,079	)
Net (loss) earnings per share - basic and diluted	$	(0.08	)	$	0.01		$	(0.14	)	$	(0.12	)
Weighted average shares outstanding - basic		32,098			25,908			32,051			25,885
Weighted average shares outstanding - diluted		32,098			25,975			32,051			25,885

Stock-based compensation:

Sales and marketing	$	15		$	67		$	16		$	95
Customer service		2			4			5			4
Technical operations		2			24			4			44
Development		16			7			12			12
General and administrative		150			242			308			511
Total stock-based compensation	$	185		$	344		$	345		$	666

Reconciliation of Net (Loss) Income to Adjusted EBITDA:

Net (loss) income	$	(2,519	)	$	329		$	(4,644	)	$	(3,079	)
Interest expense		56			19			78			33
Income tax benefit		(139	)		(583	)		(92	)		(516	)
Depreciation		1,666			746			3,374			1,458
Impairment of intangible and long-lived assets		15			52			24			91
Amortization of intangible assets		49			78			98			156
Non-cash currency translation adjustments		(170	)		90			(423	)		(64	)
Stock-based compensation		185			344			345			666
Non-recurring legal and acquisition costs		2,016			367			2,530			431
Adjusted EBITDA	$	1,159		$	1,442		$	1,290		$	(824	)

	Q2 2017		Q1 2017		Q2 2016
Revenue	$6.6 Million		$7.3 Million		$9.1 Million
Contribution¹	$6.0 Million		$5.8 Million		$7.6 Million
Net Loss	$(2.5) Million		$(2.1) Million		$329 Thousand
Adjusted EBITDA²	$1.2 Million		$131 Thousand		$1.4 Million
Cash Balance	$9.8 Million		$10.8 Million		$3.1 Million
Period Ending Subs³		111,371		119,540		183,678
Avg. Paying Subs³		114,925		130,441		189,938
ARPU		$19.12		$18.38		$15.70