e424b3
Filed Pursuant to Rule 424(b)(3)
File Number 333-123228
PROSPECTUS SUPPLEMENT NO. 1
to Prospectus declared
effective on April 17, 2006
(Registration No. 333-123228)
SPARK NETWORKS PLC
This Prospectus Supplement No. 1 supplements our Prospectus dated April 17, 2006. The selling
shareholders identified in the Prospectus are offering ordinary shares in the form of American
Depositary Shares, or ADSs. Each ADS represents the right to receive one ordinary share. We will
not receive any proceeds from the sale of the shares by the selling shareholders, except for funds
received from the exercise of warrants and options held by selling shareholders, if and when
exercised.
You should read this Prospectus Supplement No. 1 together with the Prospectus.
This Prospectus Supplement No. 1 includes certain information from a press release issued on April
27, 2006 announcing our first quarter 2006 financial results.
Our ADSs are listed on the American Stock Exchange under the trading symbol LOV.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus Supplement No. 1 is April 27, 2006
SPARK NETWORKS REPORTS FIRST QUARTER 2006 FINANCIAL RESULTS
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.
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 Companys
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.
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 Companys 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
Companys 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
share1, for the quarter.
EBITDAS2 (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.
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
singles3, the new Relationships.com brand better represents todays 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.
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.
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 Companys 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.
Average paying subscribers for the Companys 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 Companys 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 Companys 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 Companys 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 Companys 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.
Safe Harbor Statement:
This press release contains forward-looking statements. Any statements in this news release that
are not statements of historical fact may be considered to be forward-looking statements. Written
words such as may, will, expect, believe, anticipate, estimate, intends, goal,
objective, seek, attempt, or variations of these or similar words, 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: our ability to attract members; convert
members into paying subscribers and retain our paying subscribers; keep pace with rapid
technological changes; maintain the strength of our existing brands; and maintain and enhance those
brands and our dependence upon the telecommunications infrastructure and our networking hardware
and software infrastructure. For a discussion of those and further risks and uncertainties, please
see our filings with the Securities and Exchange Commission. We file annual, quarterly and special
reports, proxy statements and other information with the SEC. You may read and copy any reports,
statements or other information that we file at the SECs public reference room at 100 F Street,
N.E., Washington, D.C., 20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. Our public filings with the SEC also are available from commercial document
retrieval services and at the web site maintained by the SEC at http://www.sec.gov.
About Spark Networks plc:
Spark Networks American Depository Shares trade on the American Stock Exchange under the symbol
LOV, and its Global Depositary Shares trade on the Frankfurt Stock Exchange under the symbol
MHJG. The Spark Networks portfolio of consumer websites includes, among others, JDate.com
(www.jdate.com), AmericanSingles.com (www.americansingles.com), BlackSinglesConnection.com
(www.blacksinglesconnection.com), LDSMingle (www.ldsmingle.com) and Relationships.com
(www.relationships.com).
1 Share-based compensation is a non-cash charge recorded in the Companys income
statements. The Company believes that the non-GAAP financial measures that exclude share-based
compensation from net income (loss) provide useful information to management and investors
regarding how the expenses associated with the application of SFAS 123 (R) are reflected on the
statements of operations and facilitate comparisons to the Companys historical operating results.
The Companys management uses this information internally for reviewing the financial results,
forecasting and budgeting.
2 EBITDAS is defined as earnings before interest, taxes, depreciation, amortization
and share-based compensation. EBITDAS should not be construed as a substitute for net income (loss)
or net cash provided by (used in) operating activities (all as determined in accordance with GAAP)
for the purpose of analyzing our operating performance, financial position and cash flows, as
EBITDAS is not defined by GAAP. However, the Company regards EBITDAS as a complement to net income
and other GAAP financial performance measures, including an indirect measure of operating cash
flow. As such, management believes that the investment community finds it to be a useful tool to
perform meaningful comparisons of past, present and future operating results and as a means to
evaluate the results of core on-going operations.
3 An analysis of comScore Media Metrix data for the three months ended March 31, 2006,
revealed that Relationships.com (formerlyChristianMingle.com) attracted more unique visitors than
any other Christian online personals service in the United States, making it the most-visited
Christian online personals service in the U.S.
4 In accordance with Financial Accounting Standard No. 131, the Companys financial
reporting includes detailed data on three separate operating segments. The JDate segment consists
of the Companys JDate.com website and its co-branded websites. The AmericanSingles segment
consists of the Companys AmericanSingles.com website and its co-branded and private label
websites. The Other Businesses segment consists of all of the Companys other websites and
businesses and gives effect to the MingleMatch acquisition on May 19, 2005.
5 Direct subscriber acquisition cost is defined as total direct marketing costs divided
by the number of new paying subscribers during the period. This represents the average cost of
acquiring a new paying subscriber during the period.
SPARK NETWORKS PLC
(formerly known as MatchNet plc)
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
Assets |
|
(unaudited) |
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
15,640 |
|
|
$ |
17,096 |
|
Marketable securities |
|
|
193 |
|
|
|
196 |
|
Restricted cash |
|
|
1,998 |
|
|
|
1,085 |
|
Accounts receivable, net of allowance of $13
for March 31, 2006 and December 31, 2005 |
|
|
475 |
|
|
|
932 |
|
Prepaid expenses and other |
|
|
1,294 |
|
|
|
1,493 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
19,600 |
|
|
|
20,802 |
|
Property and equipment, net |
|
|
4,064 |
|
|
|
4,453 |
|
Goodwill, net |
|
|
17,277 |
|
|
|
17,344 |
|
Intangible assets, net |
|
|
4,683 |
|
|
|
4,627 |
|
|
|
|
|
|
|
|
|
|
Investment in noncontrolled affiliate |
|
|
1,092 |
|
|
|
1,099 |
|
Deposits and other assets |
|
|
460 |
|
|
|
295 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
47,176 |
|
|
$ |
48,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
2,383 |
|
|
$ |
2,267 |
|
Accrued liabilities |
|
|
4,268 |
|
|
|
3,632 |
|
Deferred revenue |
|
|
5,676 |
|
|
|
4,991 |
|
Notes
payable current portion |
|
|
4,697 |
|
|
|
9,930 |
|
Current portion of obligations under capital leases |
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
17,063 |
|
|
|
20,820 |
|
Deferred tax liabilities |
|
|
1,746 |
|
|
|
1,717 |
|
Notes
payable long term |
|
|
900 |
|
|
|
900 |
|
Obligations under capital leases |
|
|
92 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
19,801 |
|
|
|
23,437 |
|
Shares subject to rescission |
|
|
6,089 |
|
|
|
6,089 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Shareholders equity: |
|
|
|
|
|
|
|
|
Authorized capital £800,000 divided into
80,000,000 ordinary shares of 1p each; issued and
outstanding 30,296,396 shares as of March 31, 2006
and 30,241,496 shares as of December 31, 2005, at
a stated value of: |
|
|
488 |
|
|
|
487 |
|
Additional paid-in-capital |
|
|
65,547 |
|
|
|
64,064 |
|
Accumulated
other comprehensive (loss) |
|
|
(386 |
) |
|
|
(302 |
) |
Notes receivable from employees |
|
|
|
|
|
|
(82 |
) |
Accumulated deficit |
|
|
(44,363 |
) |
|
|
(45,073 |
) |
|
|
|
|
|
|
|
Total shareholders equity |
|
|
21,286 |
|
|
|
19,094 |
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
47,176 |
|
|
$ |
48,620 |
|
|
|
|
|
|
|
|
-6-
SPARK NETWORKS PLC
(formerly known as MatchNet plc)
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March |
|
|
|
31, |
|
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
16,805 |
|
|
$ |
16,526 |
|
Direct marketing expenses |
|
|
5,657 |
|
|
|
5,228 |
|
|
|
|
|
|
|
|
Contribution margin |
|
|
11,148 |
|
|
|
11,298 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Indirect marketing (including share-based compensation of $13 and
$0) |
|
|
366 |
|
|
|
265 |
|
Customer service (including share-based compensation of $23 and $0) |
|
|
908 |
|
|
|
577 |
|
Technical operations (including share-based compensation of $174
and $0) |
|
|
2,230 |
|
|
|
1,402 |
|
Product development(including share-based compensation of $118 and
$0) |
|
|
845 |
|
|
|
830 |
|
General and administrative (including share-based compensation of
$1,043 and $87) |
|
|
5,632 |
|
|
|
6,079 |
|
Amortization of intangible assets other than goodwill |
|
|
239 |
|
|
|
110 |
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
10,220 |
|
|
|
9,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
928 |
|
|
|
2,035 |
|
|
|
|
|
|
|
|
|
|
Interest (income), loss and other expenses, net |
|
|
39 |
|
|
|
(24 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
889 |
|
|
|
2,059 |
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes |
|
|
179 |
|
|
|
72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
710 |
|
|
$ |
1,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
per share basic |
|
$ |
0.02 |
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
Net income
per share diluted |
|
$ |
0.02 |
|
|
$ |
0.07 |
|
|
|
|
|
|
|
|
Weighted
average shares outstanding basic |
|
|
30,266 |
|
|
|
25,117 |
|
Weighted
average shares outstanding diluted |
|
|
31,258 |
|
|
|
29,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March |
|
|
|
31, |
|
|
|
2006 |
|
|
2005 |
|
EBITDA |
|
|
|
|
|
|
|
|
Net income |
|
$ |
710 |
|
|
$ |
1,987 |
|
Interest |
|
|
70 |
|
|
|
(24 |
) |
Taxes |
|
|
179 |
|
|
|
72 |
|
Depreciation |
|
|
817 |
|
|
|
848 |
|
Amortization |
|
|
239 |
|
|
|
110 |
|
|
|
|
|
|
|
|
EBITDA |
|
|
2,015 |
|
|
|
2,993 |
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
1,371 |
|
|
|
87 |
|
|
|
|
|
|
|
|
EBITDAS |
|
$ |
3,386 |
|
|
$ |
3,080 |
|
|
|
|
|
|
|
|
-7-
SPARK NETWORKS PLC
(formerly known as MatchNet plc)
SEGMENT RESULTS FROM OPERATIONS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
Net Revenues |
|
|
|
|
|
|
|
|
JDate |
|
$ |
6,996 |
|
|
$ |
6,468 |
|
AmericanSingles |
|
|
6,343 |
|
|
|
8,097 |
|
Other Businesses |
|
|
3,467 |
|
|
|
1,961 |
|
|
|
|
|
|
|
|
Total net revenues |
|
$ |
16,806 |
|
|
$ |
16,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Marketing Expenses |
|
|
|
|
|
|
|
|
JDate |
|
$ |
796 |
|
|
$ |
503 |
|
AmericanSingles |
|
|
3,360 |
|
|
|
3,258 |
|
Other Businesses |
|
|
1,502 |
|
|
|
1,467 |
|
|
|
|
|
|
|
|
Total direct marketing expenses |
|
$ |
5,658 |
|
|
$ |
5,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution Margin |
|
|
|
|
|
|
|
|
JDate |
|
$ |
6,200 |
|
|
$ |
5,965 |
|
AmericanSingles |
|
|
2,983 |
|
|
|
4,839 |
|
Other Businesses |
|
|
1,965 |
|
|
|
494 |
|
|
|
|
|
|
|
|
Total contribution margin |
|
$ |
11,148 |
|
|
$ |
11,298 |
|
|
|
|
|
|
|
|
-8-
SPARK NETWORKS PLC
(formerly known as MatchNet plc)
SEGMENT METRICS
(For the Period)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
Average Paying Subscribers (Thousands) |
|
|
|
|
|
|
|
|
JDate |
|
|
79.5 |
|
|
|
70.4 |
|
AmericanSingles |
|
|
98.8 |
|
|
|
121.6 |
|
Other Businesses |
|
|
66.0 |
|
|
|
30.6 |
|
|
|
|
|
|
|
|
Total |
|
|
244.3 |
|
|
|
222.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Monthly Net Revenue Per Paying
Subscriber |
|
|
|
|
|
|
|
|
JDate |
|
$ |
29.33 |
|
|
$ |
30.61 |
|
AmericanSingles |
|
|
21.40 |
|
|
|
22.19 |
|
Other Businesses |
|
|
17.52 |
|
|
|
18.33 |
|
Total |
|
|
22.93 |
|
|
|
24.32 |
|
|
|
|
|
|
|
|
|
|
Direct Subscriber Acquisition Cost |
|
|
|
|
|
|
|
|
JDate |
|
$ |
13.20 |
|
|
$ |
9.01 |
|
AmericanSingles |
|
|
35.19 |
|
|
|
25.61 |
|
Other Businesses |
|
|
24.68 |
|
|
|
46.97 |
|
Total |
|
|
26.11 |
|
|
|
23.84 |
|
|
|
|
|
|
|
|
|
|
Monthly Subscriber Churn |
|
|
|
|
|
|
|
|
JDate |
|
|
24.5 |
% |
|
|
26.0 |
% |
AmericanSingles |
|
|
30.1 |
% |
|
|
35.8 |
% |
Other Businesses |
|
|
27.1 |
% |
|
|
28.6 |
% |
Total |
|
|
27.5 |
% |
|
|
31.7 |
% |
We define our key business metrics as follows:
|
|
Average paying subscribers: 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. 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. |
|
|
|
Average monthly net revenue per paying subscriber: Average monthly net revenue per
paying subscriber represents the total net subscriber revenue for the |
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|
|
period divided by the number of average paying subscribers for the period, divided by
the number of months in the period. |
|
|
|
Direct subscriber acquisition cost: Direct subscriber acquisition cost is defined
as total direct marketing costs divided by the number of new paying subscribers during
the period. This represents the average cost of acquiring a new paying subscriber
during the period. |
|
|
|
Monthly subscriber churn: Monthly subscriber churn represents the ratio, expressed
as a percentage, of (i) the number of paying subscriber cancellations during the period
divided by the number of average paying subscribers during the period and (ii) the
number of months in the period. |
# # # #
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