Q3 2021 Spark Networks SE Earnings Call
Please standby.
Welcome to the spark networks third quarter 2021 earnings Conference call Today's conference is being recorded.
At this tell me to turn the conference over to Mr. Jee Hyun Kim. Please go ahead Sir.
Thank you operator, good afternoon, and welcome to Spark Networks' fiscal 2021 third quarter earnings Conference call.
With me on today's call are spark CEO, Eric Eichmann and CFO David Clark.
Before I turn the call over to Eric I'd like to cover a few quick items. This afternoon spark issued a press release announcing its fiscal 2021 in the third quarter financial results.
The release is available on the company's website at spark Dot net on the Investor Relations Page also this call is being recorded.
<unk> for playback on the Investor Relations section of Sparks website.
I'd like to remind everyone listening today that any comments made on this call may contain forward looking information or projections regarding future results or that we.
We caution you that such statements are in fact predictions that are subject to risks and uncertainties that could cause actual events or results to differ materially.
Our statements or projections.
Additional risks uncertainties and factors that could cause actual events or results to differ materially from these forward looking statements may be found in the company's filings with the SEC.
Undertakes no obligation to update or revise any forward looking statements with that I will now turn the call over to Eric Eichmann CEO of Spark networks. Eric. Please go ahead.
Thank you Joanne.
Afternoon, everyone and welcome to our fiscal 2021 third quarter earnings conference call. Thank you for joining us today jumping right.
We are excited about the future of spark.
Today, we are a leader in social gaming platform for meaningful relationship focusing on the 40 plus demographic.
Faith affiliation each segment of the online dating market happens to be one.
Growing segments of the market and provides <unk> with.
Significant opportunities for growth or top five properties that address equal relationship segment of the online dating market are used.
We're singles Elite single Christian Mingle and J D.
Four of the five silver shingles shingles, Christian mingle and JJ are focused on more specific segment within the meaningful relationships market.
We're seeing growth in the lead tables are aimed at an older demographic that's growing rapidly while Christian mingle and Jay date are targeting meaningful relationships.
Affiliations.
Four brands make up nearly 50% of our total revenue and it has to be done.
Revenue and subscribers collectively year over year for the five.
For the past five quarters with strong leading brands and limited competition in growing market segments. We are confident we can continue to grow these brands revenue in the future.
Yes sure.
And largest brand target a broader swath of the meaningful relationships category with more than 4 million monthly active singles using the platform worldwide Watson.
Watson.
Right.
On its unique approach to online dating youth usage insights from that membership base and behavioral matchmaking.
Providing users with highly accurate and tailored patches.
One of the top grossing dating app.
In the Apple App store.
Recently, we have focused on upgrading the product and user XP <unk>.
Including seeking issues with broadband users enhancing user access and optimizing our pricing.
We are in a much better place.
Okay.
Without <unk>.
Yeah.
Hum.
We have also.
<unk> new offerings that we believe drive higher engagement and the increase in subscribers. One of those features is used a lot of new live streaming service that we introduced last quarter on our iOS and Android apps.
We're seeing good signs distraction as the number of <unk> users has doubled since last quarter.
While these changes have taken time to implement we have reduced <unk> revenue decline and in the third quarter, we saw organic registrations growth for the first time since we have on that in fact is this organic graphic grew 50% sequentially and.
Its conversion improved over 10%.
This means we are converting better and without the extra direct marketing expense, leading to a more attractive customer acquisition costs.
In the fourth quarter.
The launch of new virtual Beijing travel experiences.
Luke Great days we.
We believe this creates will drive an increase in user engagement and subscriber.
First of its kind offering will allow subscribers go on interactive virtual date.
Exciting destinations such as Aspen, Naples, and kill them with new locations coming in 'twenty to 'twenty two.
We are confident that the improvements we're making to use will result in a return to subscriber and revenue growth.
As we look ahead, we're laying the groundwork to start investing in brand marketing for all of our brands.
We brought on Bridget alone.
Our new VP of global brands in September and she and her team are putting in place the infrastructure to enhance our brands value proposition expand or social marketing initiatives.
Greece or brands marketing spend.
I am excited to have Bridget onboard and look forward to her and her team's contributions.
In conclusion, both parts of the spark business today are addressing fast growing segments of the online bidding market, representing an over $2 $7 billion addressable market.
We have the resources to drive sustainable growth going forward strong brand.
Unique in improving user experiences and 100 million plus.
Marketing budget to drive higher awareness engagement and subscribers.
Part of our business includes four brands that make up nearly half of our business and are collectively growing revenue and subscribers. We plan to continue to invest marketing dollars and product resources.
These brands share in the market.
The second part disease, which is also addressing the fast growing meaningful market segment as well as the emerging category of social discovery.
We are currently in a turnaround effort and are confident in our strategy and execution will return to revenue and subscriber growth.
Sequential quarterly growth of organic registrations and an increase in conversion rate our positive results in a clear sign of the turnaround work.
With that let me turn the call over to David who will take you through our financials in more detail.
Well take any questions you may have.
Thank you Eric and good afternoon, everyone.
Revenue for the third quarter of 2021 was $53 3 million compared to $68 million in the third quarter of 2020.
Four of our five largest brands singles singles Christian Mingle.
We grew revenue, 3% during the quarter and represented.
Okay.
The decrease in total revenue during the quarter is directly attributable to the increase the number of average paying subscribers specifically driven cancers.
Also had a tighter.
Usually advertising market for customer acquisition in the third quarter likely due to increased spending post pandemic.
Yeah.
Adjusted EBITDA was $5 million in the third quarter of 2021 compared to $7 $6 million in the third quarter of 2012.
The year over year decrease was primarily due to the Zeus revenue to current clients and our increased product investments.
Marketing contribution for the third quarter of 2021 was $25 3 million compared to $29 3 million. During the same three months period of 2020.
Two 5% decrease was a direct result of the <unk> revenue decline.
Turning to our key performance indicators for the quarter average paying subscribers decreased to 865752 in the third quarter of 2021.
952700 for the same period of 2020.
Sparks monthly average revenue per user our monthly or.
Increased slightly to $20 52 in the third quarter of 2021 compared to $21 27 in the same period of 2020.
Net loss was $2 7 million in the third quarter of 2021 compared to a loss of 100000 in the third quarter 2020.
This increase in net loss was driven primarily by an increase in loss from foreign exchange rates year over year for.
For the third quarter, our operating income increased to 100000 year over year to $3 million shift.
Shifting to the balance sheet. The company ended the third quarter with $12 $4 million in cash and outstanding debt of $84 $7 million.
We continue to improve our balance sheet, having reduced.
Our debt by nearly $14 $4 million is beginning of the year, including a $3 million reduction in the third quarter.
As I stated on the last call one of my primary objectives is to explore debt refinancing opportunities, which will allow us to invest more in growing our business and our share of the SaaS growing market share.
The guidance, we are reiterating our expected annual revenues between $219 million and $223 million and adjusted EBITDA in the range of $27 million to $30 million and that equates to EBITDA per share of $1 <unk> to one <unk>.
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Our subscription business, we have high visibility into our revenue and adjusted EBITDA for the remainder of 2021 and for the fourth quarter, We will expect both revenue and adjusted EBITDA growth sequentially.
In conclusion, we believe spark represents a very attractive investment opportunity with upside potential given its positioning with strong brands and a large and growing market.
And with that we're happy to take your questions operator.
Thank you if you'd like to ask a question. Please signal by press Star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off Tobias treat dry equipment again press star one to ask a question, we'll pause for a moment so everyone an opportunity to see no questions.
Yes.
And we'll take our first question, Dave from Raj Sharma with B Riley.
Hi, good afternoon, Thanks for taking my question.
Could you expand a little bit.
On the non Zeus.
Year on year.
And.
It has come down from the last quarter.
What are your sort of the kind of trends you are seeing relative to the others.
Other sites out there.
Yeah, Hi, Raj. Thank you very much for the question gets to hear your voice.
Yeah, So we had a little bit.
Decrease in terms of revenue growth that we saw from those brands.
That is attributable to.
Q3 advertising market.
Even though we.
We can't tell exactly what we're hearing.
That was due to a lot of advertisers that were not allowed to or where it didn't make sense to advertise in Q3 last year.
All of the Lockdowns are.
Starting to advertise this year in Q3 and that made it a.
Be tighter normally Q3.
He's a he's an advertising market opens up and this year. It just didn't open up.
Yes.
We expected.
Oh got it and then on the Zeus side.
Last call you had talked about.
Such a discovery.
The live streaming efforts.
In Q2, but you're saying that you're seeing a quarter over quarter, a pick up in the revenue and the organic revenue growth.
Still see an overall or do you still expect an overall.
Pick up in the first half or the first quarter.
Could you talk about that please.
Yeah of course, so so two things one to five which we launched at the end.
Q2, and I think it was a slow start but what we've seen and we mentioned on the call is that we've seen an acceleration of users.
<unk> does this life experience so that's encouraging.
So we.
We are watching it.
To engage with their users.
That product and we feel quite excited about that.
Last quarter, so that's one.
The organic growth, we saw a pick up as we mentioned of organic growth for Zeus. So that's people coming.
In general not just to the squad.
So while the cigarette per cent decrease inorganic growth.
Thank you though.
On an a b tests you know exactly.
What drove that we think there was a couple of things that drove it. Obviously you know we have more exciting things to talk about when it comes to this.
But he also did quite a bit of work in terms of providing access to users.
The decrease in fraud.
Yeah.
It contributes to the organic growth.
The only thing I want to make sure.
Raj is that the organic growth is actually users not yet revenue.
And then.
And then you mentioned, sorry, I forgot to ask.
U S.
We still expect I think.
I can pick up the first half are you still expecting that is that still on track. Yes, yes. We did so just like we said in the last quarter, we expected we.
We would see.
We're a subscription business so.
Indicators of lead indicator.
Uh huh.
The subscribers and the number of revenue that we get from initial sees what we call it and we still expect that to be.
In Q1 next year in that.
Opt in growth.
First half next year.
Got it and then lastly.
With all the talk and the actions.
Ooh and Apple App store fees.
Those have much of an impact on you guys.
Yeah. So let me I'll answer the first part of the question and then I'll get David also talk a little bit about this but so what what Google and Apple have sac.
Decreasing fees on the Apple store for products that make less than $1 million.
<unk>.
We make more than that so it doesn't really apply directly to us. However, however.
Yes.
It's.
Two small perspective, so obviously that could lead to something that apply more broadly so that would be.
Interesting for us.
Yes right.
Yes.
Yes, because they are at least right now Raj Rai.
One at a rate of around $10 million a year. So if they were to take further steps and raise that threshold it could be meaningful savings for us, but right now we don't qualify.
Okay.
Got it okay. Thank you I'll take your questions.
Yeah.
Thank you.
The next question will come from Austin <unk> with Canaccord.
Hi, I wanted to ask about Zeus Clive monetization.
Is there any of that factored into your Q4 outlook and what's the overall behavior of your users.
Are they sending gifts to use extreme virus or are they still mostly on you know your your partner streamers whats kind of that behavior like.
Great. Thank you Austin is good to hear you.
Just lie.
I had mentioned the new product for our users and what generally happens is that you need to get engagement going in and once people are familiar with the experience in Paraguay.
They start looking into different so there's a bit of a delay between the engagement revenue. However, what we see that.
Hum.
But our buying on Zeus gifts.
Sort of show some of the similar behavior that we get from the broader mid groups.
Experience.
Number.
Super users are super gift.
Appearing on overtime, they end up sort of becoming a big part of our revenue stream. We expect that this as we were making improvement.
In this case is.
Getting more users engaged as we mentioned we doubled the number of users engaged and that experience that.
The revenues will continue to follow all of that obviously included in India.
Forecast for guidance that we provide in the future.
Got it that's helpful. And then last question can you speak a little bit about any.
Competition, you're starting to see in the sort of niche or religious dating landscape.
Yeah. So you know I think not surprisingly to some of the other big accurate remember were were four big actors and there hasn't been really new people entering that represents a significant change in the competitive landscape. So it's really continues to be matched as obviously a lot of properties and they're the ones.
We find investing a bit more in these area.
So when you think about.
Matt see upward in some of their properties.
Competition remains limited to a couple of players so.
We still think dynamics in those markets are great and as the market has mature those segments have become more important and are growing faster.
Market.
Got it thanks very much.
As a reminder press star one if you have a question, we'll pause for a moment.
And at this time there are no further questions and that will conclude today's call. Thank you for your participation you may now disconnect.
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