Spark Networks SE

Good day and welcome to Spark Network's second quarter 2022 financial results conference call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. You may register to ask a question at any time by pressing the star and one keys on your touchtone phone. You may withdraw yourself from the queue by pressing star two. Please note this event is being recorded. I would now like to turn the conference over to Todd Curley of MKR Investor Relations.

Thank you, operator. Good morning and welcome to Spark Network's fiscal 2022 second quarter earnings conference call. With me on today's call are Spark 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 morning, Spark Networks issued a press release announcing its fiscal 2022 earnings second 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, including comments regarding our review of strategic alternatives. 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 report, and 10-Q for a complete description of these risks. Our statements on this call are being made as of today, August 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 GAAP and non-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 Spartan Networks. Eric, please go ahead.

Thank you, Todd, and good morning, everyone. Before we begin our earnings commentary, I want to remind everyone that on June 1st, we announced that we had initiated a comprehensive review of strategic alternatives for the company. At this time, the review is still ongoing. While there are no material updates to share right now, I know that everyone is eager to understand the status. What we can say is that our board has been highly engaged with the company's external financial, legal, and strategic advisors to identify and assess a range of alternatives to enhance Spark's value and market position. We'll have more to say on our strategic process as we conclude the review, and we hope to be able to update you with our progress in the near future. This work has reinforced our view that we participate in a large and dynamic market and that Spark is uniquely positioned to capitalize on the opportunities ahead. Spark is the fourth largest online subscription-based dating company across North America and Europe by revenue. and he's 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 U.S. with our strong portfolio of brands, which includes Zoosk, Elite Singles, Silver Singles, Christian Mingle, and Day-Date. Now let me start by reviewing our second quarter results, and then I'll provide more color around the strategies and investments we have put in place to drive revenue growth and ultimately shareholder value in the future. Overall, our second quarter revenue was impacted by foreign exchange headwinds as the U.S. dollar strengthened against all major currencies, in particular European currencies, where we generate over a third of our revenues. On a constant currency basis, our second quarter revenue would have been $50.3 million. During the quarter, we began scaling our user acquisition spend and saw 17% year-over-year new subscriber growth for Zoosk, which gives us confidence in our ability to return Zoosk, the largest brand, to revenue growth. We also made good progress on improving the Zoosk user experience, which we believe will drive increased adoptions and renewals. Specifically, during the quarter, we developed stronger user profiles to drive greater interaction and personality representation, resulting in higher profile completion from our users. We also updated Zoosk's matching algorithm, positively impacting both engagement and subscriptions. Finally, we optimized Zoosk's payment flow and started testing new prices across packages. During the quarter, we saw an increase in fraud on our Silver Singles and Elite Singles platforms, which we believe led to lower performance versus our expectations. We addressed the root cause of the increase and, as a result, have seen improvements in user engagement. We will continue to work to reduce fraud even further in the third quarter. Overall, our product team is focused on improving engagement, increasing conversion metrics, and strengthening safety and security on our platform. We are working to simplify our technology infrastructure by moving our primary brand from three platforms to two. While we have made good progress in our plan, we prioritize some of our resources to focus on safety, delaying our transition to H1 next year. Lastly, we are progressing well in revamping all of our mobile apps and expect that we will launch new apps for Elite, Singles, and Zoosk by the end of the year. We believe this represents a significant future opportunity for Spark as we look to capture our fair share of mobile app revenue. On the marketing front, we began expanding our user acquisition activities during the second quarter. We've added new affiliate partners and restarted TV and radio ads with positive results. Once we were able to ramp up user acquisition, we saw solid results, including a 17% year-on-year increase in new subscribers and a 19% increase in organic traffic during the quarter on our used platform. We expected these continued investments to drive increased revenue and improved profitability. In Q3, we intend to continue to test additional social and content channels, including TikTok, native advertising, and newsletters. We also expect that we will benefit from the potential decline in advertising rates in the next few months. Finally, given the more challenging US and European economic outlook, we are looking to contain costs and further prioritize investments for the second half of the year. In summary, we continue to make progress on getting Zoosk back to growth. We anticipate our product and user acquisition efforts combined with our subscriber growth momentum in 2022 to lead to strong growth in 2023. With that, I'll ask David Clark, our Chief Financial Officer, to add more color around our financial performance for the quarter. David?