Spark Networks SE

Good day and welcome to the Spark Network's first quarter fiscal 2022 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Todd Curley of MKR Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon and welcome to Spark Network's Fiscal 2022 First Quarter Earnings Conference Call. With me on today's call are Spark's CEO, Eric Eichmann, and Chief Financial Officer, David Clark. Before I turn the call over to Eric, I'd like to cover a few quick items. This afternoon, Spark Networks issued a press release announcing its fiscal 2022 first quarter financial results. This release is available on the company's website at spark.net. Additionally, this call is being broadcast live over the Internet for all interested parties, and the webcast will be archived on the investor relations page of the company's website. I want to remind everyone that on today's call, management will discuss certain factors that are likely to influence the business going forward. Any factors discussed today that are not historical facts, particularly comments regarding our long-term prospects and market opportunities, should be considered forward-looking statements. These forward-looking statements may include comments about the company's plans and expectations of future performance. Forward-looking statements are subject to a number of risks and uncertainties which could cause actual results to differ materially. We encourage all of our listeners to review our SEC filings, including our most recent 10-K and 10-Q, for a complete description of these risks. Our statements on this call are made as of today, May 9, 2022, and the company undertakes no obligation to revise or update publicly any of the forward-looking statements contained herein, whether as a result of new information, future events, changes in expectations, or otherwise. Additionally, throughout this call, we'll be discussing certain non-GAAP financial measures. Today's earnings release and the related current report on Form 8K describe the differences between our non-GAAP and GAAP reporting and present the reconciliation between the two for the periods reported in the release. With that said, I'll now turn the call over to Eric Eichmann, CEO of Spark Networks. Eric, please go ahead.

Thank you, Todd, and good afternoon, everyone. I want to start by providing more color around the well-developed roadmap of strategies and investments that we have put in place to drive revenue growth and ultimately shareholder value in 2022 and beyond. Spark is a leader in social dating for meaningful relationships, targeting the 40 plus demographic and people with religious affiliations. We estimate the worldwide online dating market for meaningful relationships to be about $2.3 billion. growing at over 6% a year. We capture about 30% of this market in the US with our strong portfolio of brands, which includes Zoosk, Elite Singles, Silver Singles, Christian Mingle, and JDate. We are focused on five core markets, US, Canada, UK, France, and Australia, representing over 90% of our revenues, with the US being our biggest focus with approximately two-thirds of total revenues. At the end of the first quarter, we completed the refinancing of our debt facility with MGG, that for the first time in my tenure, positions us to drive revenue growth for both ZUSC and SPARC as a whole. Given the fact that we didn't complete the refinancing of the debt agreement until the end of the quarter, the first quarter results we are reporting today are not indicative of the growth opportunity we have ahead of us. Spark is the fourth largest online subscription-based dating company across North America and Europe by revenue. And with our scale and our new debt facility in place, we now have the financial flexibility to execute on our plan to return to revenue growth. In fact, when we look at our metrics from April, which takes into account the start of our ramped-up marketing spend, we are seeing growth indicators across our key brands. Some of these include new subscriber growth for Zoosk, our largest property, grew 15% year-over-year in April. This is the leading growth indicator for our platform. Increases in profitable marketing spend made possible by our new debt agreement are driving this growth. Also, Zoosk subscribers coming from win-backs and renewals grew 15% from the first week to the last week of April. Win-backs and renewals are dependent on the overall past subscriber base, and such are a lagging growth indicator. We are seeing good momentum on both, which over time should translate into accelerated momentum for billings. Female engagement, a leading indicator of a healthier and more productive dating platform, is growing on Zoosk, which we attribute to product improvements put in place in Q4 last year and Q1 this year. An updating matching algorithm and a revamped first-time user experience have driven the following year-over-year increases. A 14% increase in female paid subscriber conversions, a 14% increase in positive response rates to matches, a 9% increase in female daily active users, and a 4.5% increase in female first-day retention. We also saw higher conversion and lower chargebacks in the quarter because of our payment optimization efforts, which include migrating to a more strategic payment partnership with Adiant. Abandoned cart and more targeted CRM campaigns have also driven higher conversions. We plan to accelerate this growth momentum with further marketing and product investments. Thanks to our new debt agreement, we have an opportunity to meaningfully increase our 2022 direct marketing spend compared to 2021 and at similar levels of efficiency. We believe this increase in direct marketing spend will result in mid to high single-digit revenue growth in 2022 and position us for even stronger revenue growth in 2023 and beyond. Some of these marketing investments include increasing spend in proven and scalable channels that we have cut in 2021 due to debt covenants under our old debt facility, including affiliate marketing, paid search, and media buying, investing in new channels such as TikTok, native, and display. We expect these to provide significantly higher reach for our brands at attractive returns. Finally, targeting the majority of these increased spend in the U.S. or largest and most attractive online dating market. We are also continuing to focus on high return product initiatives specifically improving ZUSC profiles to drive higher engagement in the first seven days of registration, enhancing our search and matching algorithms across all brands, driving higher engagement and ultimately billings, and simplifying our technology infrastructure by moving our primary brands from three platforms to two. We plan to collapse most of our non-ZUSC platforms into one, allowing us to upgrade our ability and speed to drive innovation and improvements across all platforms. Finally, we are also revamping all our mobile apps. We believe this represents a significant future growth opportunity for Spark as we look to capture our fair share of mobile app revenue. All these product initiatives, in concert with our increased marketing spend, are fueling the growth we saw in April and give us confidence in our ability to grow revenue in 2022 and beyond. We believe the investment in talent, product technology, and marketing in 2022, as well as our position in the market, will allow us to capture the significant market opportunity we have in front of us and return the company to total revenue growth in 2022. With that, I'll ask David Clark, our Chief Financial Officer, to add more color around our financial performance for the quarter. David?