Thank you, Operator. Thank you, everyone, for joining us on this call.

On the call with me is Chief Executive Officer, Eric Eichmann. Earlier today, we published our first quarter 2021 financial results, which can be found on our Investor Relations section of our company’s website at www.spark.net.

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 events. 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 from our statements or projections.

Additional risks, uncertainties, and factors that cause actual events or results to differ materially from these forward-looking statements may be found in the company’s filings with the SEC. Following our prepared remarks, management will conduct a brief question-and-answer session.

This call is being recorded and will be available for playback on the Investor Relations section of our website. With that being said, I’d now like to turn the call over to Mr.

Eric Eichmann, CEO of Spark Networks. Eric, please go ahead.

Thank you, Chris. And thank you all for joining us on the call today.

I’m excited to talk to you today as it is our first quarterly earnings report as a domestic filer. We are now reporting on a quarterly basis, providing investors with increased transparency on our business performance and allowing us to more actively build a diversified shareholder base.

We have updated our investor presentation, highlighting Spark’s large opportunities for future growth. We will be unveiling this presentation later this week at our first of several institutional investor conferences.

The updated presentation will also be available on our website. As COVID restrictions continue to relax, more singles are starting to date offline.

Social distancing and lockdowns have accelerate the adoption of new online social interactions and many of these will continue to be part of everyday life. One area that shows a great deal of staying power is social discovery.

For those of you that don’t know, social discovery is where people leverage online activities, social media and other communication platforms to forge new relationships with people and expand their social networks. In the context of dating, activities, such as gaming or video streaming, allow users to connect in an informal way without the added stress of a real date.

The social discovery market has tremendous potential, with some analysts projecting that the market could eventually reach twice the size of the entire online dating market. Our stated goal is to be the leader in social dating for meaningful relationships, augmenting our user experiences with social discovery features is a primary objective for 2021.

Earlier this year, we announced that we would deliver live streaming video to our largest brand Zoosk via an agreement with The ParshipMeet Group. We are on track to launch this functionality in early Q3.

Live streaming should help Zoosk expanding its user base, improve engagement and increase revenue. We’re also working on adding social discovery features to our other key brands SilverSingles, EliteSingles and Christian Mingle.

Another area of focus is enhancing our core brands products. We are expanding safety features, revitalizing our brands with compelling new designs, implementing a stronger CRM strategy and improving matchmaking algorithms.

We believe that these updates will enrich the user experience, and ultimately, increase engagement and customer satisfaction. We now have half of our users experiencing these new designs on Zoosk and EliteSingles, and user feedback is positive.

We expect to fully roll these out to our audiences in Q2. Lastly, we are focused on delivering organic growth.

Our target market is meaningful relationships mostly focused on the 40 plus demographic and faith-based interest. These segments are growing at 7% faster than the overall market.

We expect Zoosk our largest brand with approximately 50% of revenues to start growing organically by the end of the year. EliteSingles, SilverSingles and Christian Mingle are next three largest brands should continue to grow organically this year.

Now, turning to our financials, revenue for the first quarter of 2021 was $56.4 million, a decrease of $1.3 million, compared to $57.7 million in the first quarter of 2020. The decrease in revenue was attributable to the 3% decrease in the number of average paying subscribers, specifically driven by Zoosk.

Our three largest legacy brands, SilverSingles, EliteSingles, and Christian Mingle collectively grew by low double-digit in the North American market. Adjusted EBITDA was $4.8 million in the first quarter of 2021, a decrease of $2.7 million, compared to the $7.5 million in the first quarter of 2020.

The year-over-year decrease is mainly due to the revenue decrease stated above, a decline in non-priority markets such as Eastern Europe and headcount increases and G&A product in pay areas. Marketing contribution for the first quarter 2021 was $26 million, compared to $27.8 million during the same three-month period in 2020.

The 6.6% decrease is the direct result of our revenue decline and impact from non-priority geographies. Turning to our key performance indicators, average paying subscribers decreased by 27,837 or 3% to 896,344 in the first quarter of 2021, compared to 924,181 in the same period of 2020.

Spark’s monthly average revenue per user or monthly ARPU increased slightly to reach $20.97 in the first quarter of 2021, compared to $20.8 in the same period of 2020. Net cash used in operating activities was $0.4 million during the first quarter of 2021, compared to $4.3 million during the same period 2020, a decrease of $3.9 million.

This change is attributable to an increase in accounts payable and an increase in deferred revenue. Net loss was $6.5 million in the first quarter of 2021, an increase of $2.7 million, compared to net loss of $3.8 million in the first quarter of 2020.

The increase in net loss was primarily driven by a decrease in contribution and increases in G&A, tech and product personnel expenses. Shifting to the balance sheet, the company ended the quarter with $17.3 million in cash and $96.1 million in debt.

As of March 31, 2021, we are reporting equity of $91.8 million, compared to about $94.9 million as of December 31, 2020. As of March 31, 2021, the company’s long-term debt position stands at $101.8 million [ph].

These figures are in line with our expectations and we are reiterating our previously stated 2021 guidance of $238 million to $244 million in revenues and adjusted EBITDA of $33 million to $36 million. As for the second quarter 2021, we anticipate revenue in the $54 million to $56 million range and adjusted EBITDA of $6 million to $7 million.

Finally, just one quick note to mention that while we are not making any announcements today, we are making good progress in our CFO search. I am pleased with the business current trajectory.

We are making good progress towards becoming the leaders in social dating for meaningful relationships. We are adding social features to our user experience and making significant product improvements to our platform.

We have a large opportunity in the fast growing 40 plus and faith-based relationships segments, which combined with our strong brands and product improvement should allow us to grow for years to come. This concludes our prepared remarks.

Now let me turn the call over to the Operator to take your questions. Operator?

Hi. Thanks for taking my questions.

The first one is on new social features. Can you give a little bit more detail on the features that you expect to be implemented in the remaining part of the year on the non-Zoosk core brands?

Okay. Well, thank you, Austin.

Appreciate the question. So, as you know, on Zoosk, we are launching and we are expecting Q3 if things going as -- expected to launch live streaming.

So we’re excited about that. And without sort of providing any particular expectation on the other brands, some of the things that we’re looking at are things like gaming, content, Christian content for Christian Mingle, potentially virtual tours that we would offer for people to either date or you meet people could be a good date.

There are other things that are also possible, like a movie night that could be out there. And again, these things are things that we’re looking for third-party partners to work with to augment the features that we have on our brand.

So we’re excited because there’s actually quite a bit of companies out there that are interested in sort of being able to reach daters, single people to drive some of these activities. So it’s going to be a combination of these things and we’ll prioritize as we go throughout the year.

Got it. Given that your focus is on the 40 plus age group, faith-based, how does Zoosk fit into that portfolio longer term?

And can you maybe talk through what Zoosk current demographic snapshot is?

Yeah. So it’s great question.

So Zoosk actually fits very well into that. Zoosk is about meaningful sort of serious relationships.

The average age and there’s a broad sort of range and when we say, 40 plus, we don’t mean that, there can be somebody that’s 27 that might be interested in being our properties. So we have an average age of about 42 on Zoosk.

So it fits well that demographic that we’re talking about. And it’s also all about sort of finding a relationship long-term, right?

And so that’s one of the things that makes a difference. Zoosk is about sort of fun environment, when you find sort of real people and that’s one of the promises we’re delivering on.

And the integration of live streaming talks very well to the fun part of Zoosk, which is something we hear from our users, when we ask them, what does Zoosk mean for you. So it’s very much within the definition of 40 plus.

Okay. Thanks for taking my questions.

Yeah. Thank you.

Hi, Eric.

Hi, Kara.

So there is better visibility with now the first quarter behind us and 2Q guidance. Can you just provide a little bit more detail around the thoughts behind the second half of the year that get you to the full year guidance?

Yeah. So appreciate that question.

Obviously, look, we -- look, when we thought about this year and we’ve talked, obviously or guidance for the year, this is a guidance that shows year-over-year increase in our revenues. And a big part of that comes from the work that we’ve been doing sort of last year and the work that we’re doing this year around improving our products and improving or marketing those things starts coming in in Q1 and Q2, and so more of that impact sort of comes out in Q3 and Q4.

And that’s why when you -- if you do the numbers and I don’t have the exact numbers in front of me, but if you take the guidance that we have for Q2 plus the results from Q1, we have a bit of an acceleration for Q3 and Q4, and that’s expected. We -- so note, there’s no change in expectations from our part.

We’re going to launch live streaming that has a revenue stream associated with it. We’re launching -- as I mentioned, in the script, we’re launching the new designs, which we’ve seen very good results with.

We’re continuing to improve and optimize our properties with a new CRM strategy, with funnel and price optimization, a lot of those things are worked now that we expect to have an impact in Q3 and Q4. And so that’s why in part we do see a bit of an acceleration towards the end of the year and a lot of those improvements come on in Zoosk.

So we announced and we reiterating today that we expect Zoosk to by the end of the year be growing organically, which as you know, is one of the main reason why we still have a bit of a decrease on our topline this quarter versus last year. So that makes sense.

Yeah. And just to follow-up on that on one point, the live streaming revenue associated that…

Yeah

… expect to be associated with it. First is, I guess, like, what does that ramp up, like is this meaningful contributions and what are you drawing from other experiences, people have added this in terms of how that ramp?

Yeah. So Zoosk of all of our brands, like if you think about our brands are mostly about subscription revenues and Zoosk is the one that has more pay as you go revenue.

So we expect that live streaming would be a good sort of element. We might actually increase engagement and we might lead also to higher subscription revenue.

But we haven’t accounted for that at this point, though, our expectation is that we will, obviously, a large part of our revenue base for Zoosk, but a meaningful one, in terms of sort of providing a difference in terms of topline. So but beyond the revenue, which of course, is important, what we’re hoping to have as we sort of start deploying a lot of these social discovery features is really making our platforms a lot more engaged.

There’s always going to be something going on at Zoosk. So whereas in the past, you might come to Zoosk because we’re prompting you because you found a match, now you can come at any time, because there’s something going on.

There’s live streaming going on and you can meet people in the sort of comedy club type environment with live streaming. So, there’s expectation on revenue, but importantly, there’s also expectations on engagement and sort of what people will do on Zoosk and how much the platform will improve in terms of customer satisfaction and engagement.

And on the topic of engagement, can you just talk a little bit further about kind of trends and engagement that you’ve seen as certain markets have reopened and just how that might be affecting, I guess, the willingness to pay? There are…

Yeah.

… many ways that, say, to meet people coming back.

Yeah. It’s interesting, because we -- so we thought about this.

We always thought that it was going to be a sort of a neutral effect when things opened up, and as you know, 70% or above 50% of our revenues are in the U.S. So in the U.S.

has opened up more than meet, sort of other geographies, you hear from the travel operators, but they’re seeing sort of levels that are back to the 2020 levels and so that’s good. And the positives for us, look, I -- singles can now date offline, which ultimately, they want to do, right?

They don’t want to spend all their time online not to meet the person of their dreams offline and have a date. And so that’s good, because it pushes people to say, okay, now I’m fully in, I want to meet people and so that’s a positive.

The probably the negative is people are spending less time in front of their computers, right? They have the ability to go outside and enjoy the sun and meet people that they’ve seen online.

So I think those two things are neutralizing each other, if you will. And so from what we’ve seen, there’s not a sort of significant impact one way or the other from the opening.

I think there’s pluses and minuses and they’re sort of cancelling each other out.

Got it. And then the last one for me is just on ad pricing, whether or not you’re seeing any increases and if that is affecting contribution margins or if there’s any participation for that?

Yeah. We’ve seen a little bit of an increase in the CPM and the CPC, but no, I wouldn’t say that that’s driving the business.

As we sort of move forward we’re making improvements constantly to our marketing mix and even though there’s a little bit of pressure there. And I would say, there’s a bit of pressure because of ad prices, but obviously, there’s also sort of an increase from other people in the market sort of being a bit more aggressive from an ad perspective.

And so that has created a pressure for us, but I would say that that’s very significant either in terms of the performance of the business. So it’s one factor, but not a big factor.

Great. Thanks [Technical Difficulty]

Thank you

Good day, Eric. Thank you very much for taking my questions.

My questions are all around balance sheet and liquidity dynamics. When we last talked around the last quarterly results release for 2000 year end, pardon me, 2020 year end, you always indicated that you were expecting sort of EBITDA guidance conversion on the $33 million to $36 million of EBITDA guidance that you are reaffirming today to convert into free cash flow at about a 70% to 75% rate, which should have been -- which would be comfortable in terms of covering the current portion of long-term debt.

In your reaffirming the $33 million to $36 million of EBITDA guidance, say, do you see anything different in terms of the ability to cover the current portion of long-term debt for this year from internally generated cash over the balance of 2021? And then a couple follow ups?

Yeah. So the short answer is, no.

We feel comfortable that with the current guidance of $33 million to $36 million we’re able to meet our obligations to our debt holders. And as I mentioned, we’re very much in line with our expectations now.

Okay. Great.

And then, so you foresee then, you are not going out and trying to sort of restructure the terms of any of the current debt, given, obviously, what’s occurred with COVID, you feel very comfortable in terms of being able to meet the existing debt schedule for the balance of this year.

Yeah.

Okay. And then the final thing around balance sheet and liquid dynamics is when we last talked to, you aspire to, obviously, as growth would return later this year, topline and bottomline to pursue a restructuring of the debt overall either through the capital markets or the bank market or a combination thereof.

Is that still amid to do list for this year or is that very much dependent on the rate at which growth will return in the second half? Thank you.

All right. Thank you for that question.

Look, I think, in general, if there are better terms for or debt out there is something that we obviously are interested in. It is not a big priority right now, in particular, I’m hoping and I mentioned that we’re making good progress on the CFO search and I’m hoping that will sort of conclude successfully soon.

And I think when that person comes in, I think, it becomes a bigger sort of thing for us that we can look at. I do think that it’s important to start delivering on the business growth, as we’ve said, and we’ve stabilized the business last year, as you saw, we’re very close in terms of revenues versus Q1 last year.

And so the trend is -- the momentum is very positive and so we feel very good. And the expectation is that once we saw that momentum secure and see that moment for a couple of quarters, we’ll be in a better position to go out to debt markets and find potentially a new deal.

So something -- now I wouldn’t say that that’s something in the next couple quarters that we would be focused on. But after that -- of course, if there’s an opportunity, we would always look at it.

But after that, it’s something that certainly will continue to be something we’ll look at.

Some more late 2021 or late 2022 to do list that, is that fair?

Unless somebody comes in and proposes something we can’t produce. So -- but yeah…

Fair enough.

That’s what I would say.

Thank you very much.

Yeah.

Good morning. Thanks.

This is Jonathon Fite. Thanks, Eric, for taking my call.

Just had a quick follow up on the last balance sheet question, can you remind me of any kind of key EBITDA or cash flow covenants associated with the debt position?

Yeah. Absolutely.

Jonathon, there were two -- there is net leverage covenant, which is the net debt over EBITDA last 12 months. EBITDA and the -- I think, don’t quote me on this, but the terms are public.

I think there we’re trying to get to this quarter $275 or something like that. So that’s the levels that we need to meet.

And then there’s a liquidity covenant that’s part of the debt schedule. So those are the two.

Okay. Does that liquidity covenants imply that draining the existing cash to meet the current portion of long-term debt really is an option you really need, going back to the previous question you really need to support that current portion of long-term debt at a free cash flow for the year?

Yeah. So we have -- obviously, we have debt terms that sort of have us pay interest on the debt, which I think comes from the cash, of course.

But in addition to that, we also have a cash flow that happens when we sort of go beyond a certain amount in terms of the cash holdings of the company.

Okay.

And repaying of debt, of course, yeah.

Sure. And then going back to some of the product enhancements, you talked about and partially…

Yeah.

… rolled out some of the Zoosk users, right? When we look at things like the Carousel feature, that’s very image heavy and -- but when you look at some of the smart pics feature that’s more text heavy with very, very small graphics, kind of comparison to either your Carousel feature or some of the features that match or bumble with those types of things.

So I was just wondering if you can describe a little bit more some of the product enhancements that are being rolled out to be more aligned with the broader competition?

Yeah. So a couple of things.

So what you see now in the U.S., about 50% of the audience, the Zoosk audience is seeing the new design. It’s a much cleaner design, much more contemporary in our presentation, the company presentation, you see the before and after big difference, very exciting.

And so that should lead not just to a -- remember when your singles, how you present yourself on the site, it’s a bit what’s your dress or what you’re wearing and so that’s an important component and so, we’re very excited about that and we expect that the new design just based on it looking feels sort of lead to better engagement from our users. But in addition to that obviously there is simplified, responsive design that leads to also sort of better interaction from our user.

So that’s one big change that hopefully, by the end of Q2, we will have fully made and we, like, I mentioned in the call, the scripts that we have seen very good -- we have gotten very good user feedback on it. Live streaming is another area that we’re focusing on.

So that’s a -- that’s going to be…

Right.

…. on Zoosk.

And then, I would say, beyond the Carousel and some of the things that are basic functionality that you can actually improve, we’re also making a number of improvements on our CRM strategy and the matchmaking algorithm. So what’s most relevant in terms of who do we match against whom and we’re looking at that deeply and we think also there’s quite a bit of CRM improvements that we can make.

And think of CRM improvements, as you know, there’s an ecosystem where if somebody gets matched up or if you receive a message, you communicate with folks out there, it’s a way of telling them, hey, there’s something active right now in the platform for you that’s very relevant to you. So come back or sort of come and check and come and chat, come and sort of see the matches that we’ve had for you.

There we’ve been sort of I think it’s been something that we haven’t looked at in detail, as we acquired Zoosk and it’s something that we’re starting to look. So we’re excited about that also.

And then, I would say, the last thing I mentioned, matchmaking algorithms, is just there’s a number of ways that we look at this in terms of sort of how we match people up and there’s a couple of ideas that we have there that we’re excited about without going of course into the details as they are proprietary and when they want to sort of take the competition on these things, so yeah.

And so you said the investor presentation will be updated as some of that information up there. Is that correct?

Yes. So the -- and Chris, I think, it will, for sure be on our site, starting Wednesday might be there, earlier.

So but we -- Chris, I don’t know if you have the answer to that?

Yeah.

Chris are you on the line?

Yeah. It…

Yeah.

Yes. It’s been updated and we’ll get it up there this week.

Also we’re presenting at a conference. So it will be up on our website and will be unveiled to investors middle of this week.

Okay. Great.

And then as far as the Zoosk functionality updates for the remaining users that do not have that just get pushed out through an app update, so when they launch the app, they’re kind of prompted to update the app to the app store and then the new functionality gets deployed…

Yeah.

… or how does that get rolled out?

Correct. That’s the normal sort of app updates that would happen to the app store.

So it -- for most people now it’s automatic, because they have it on automatic updates, right? So…

Yeah.

… it happens overnight and that kind of stuff. Yeah.

Very good. Thanks.

Yeah.

Yeah.

Yeah. You’re welcome.