Spark Networks SE

Good afternoon and welcome to the SPARC Network's second quarter 2023 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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 SPARC Network's Fiscal 2023 Second Quarter Earnings Conference Call. With me on today's call are SPARC's Interim CEO, Colleen Burdout-Brown, and Chief Financial Officer, Kristi Gudjun. Before I turn the call over to Colleen, I'd like to cover a few quick items. Today, after the close of the market, SPARC Networks issued a press release announcing its Fiscal 2023 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. 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, August 14th, 2023, 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. SPARC's earnings release and the related current report on Form 8-K describe the differences between its non-GAAP and GAAP reporting. and presents the reconciliation between the two for the periods reported in the release. With that said, I now turn the call over to Colleen Bernal-Brown, interim CEO of Spark Networks. Colleen, please go ahead.

Thank you, Todd, and good afternoon, everyone. Thanks for joining us today. Let me start by saying that this is a critical time in the company's history. We have embarked on a bold transformation plan intended to return the company to competitive levels, With this plan, we expect to achieve sustainable annual revenue of $160 million for this year and drive growth from that point forward. We also believe that with the reduced expenses we are implementing, we can achieve adjusted EBITDA margins of 20% to 30% in coming years. The first step in the plan was to outsource our performance marketing. We began our implementation in June, and already we are seeing promising results. We have improved the data analytics that we are using to inform our decisions and to direct our ad spend to what we feel are our high potential brands in terms of profitability, including elite singles and silver singles. We are rolling out the full funnel marketing approach and are introducing new channels to our marketing mix. We feel that with this initiative, we are adding expertise, scalability, and stability, all while reducing our headcount. As we have previously discussed, we expect these efforts will result in the reduction of approximately 40 full-time marketing employees, or roughly $7 million in headcount costs, and yield $10 to $20 million in incremental annual revenue by the end of 2024 as compared to our current run rate. We are also in the process of onboarding an IT-managed service provider, which we expect to be a multi-year commitment. With this initiative, we plan to outsource a significant portion of our technology engineering, maintenance functions, and cybersecurity. This not only offers prospective cost savings over the long term, but also allows us to access a more robust and modern technology stack, which we expect will allow us to operate a larger and much more efficient scale and dramatically improve our products and user experience. By outsourcing these functions, we are targeting strategic areas where we can get the best expertise while streamlining our internal operations. We understand the significance of these changes and the inherent complexities involved. Over the next 18 months, we plan on continuing to implement the initiatives that our transformation plan encompasses, which includes reducing our headcount from nearly 220 to 60. Associated with these reductions are significant restructuring costs, which we expect will require external funding. However, by the end of 2025, we hope to have positioned the company for consistent and sustainable growth. In conclusion, our journey is mapped out and the early signs are promising. We believe the best way to increase the value of the company is significantly transform our operations and right-side our cost structure while reallocating capital to customer acquisition channels with the highest returns and investing in our brands with the highest return on investment. Additionally, we believe these efforts will ultimately yield a simpler, more profitable business, and our work here will be a testament to Spark's resilience, innovation, and growth. And with that, I will turn the call over to Christy. Christy?