SUNNYVALE, Calif., Nov. 14, 2011 /PRNewswire/ — FriendFinder Networks Inc. (Nasdaq: FFN), a leading Internet and technology company providing services in the rapidly expanding markets of social networking, social commerce and web-based video sharing, today announced financial results for the third quarter and nine months ended September 30, 2011.
Third Quarter Ended September 30, 2011 Highlights:
Live Interactive Video revenue increased 5.3% year-over-year to $20.7 million
Entertainment revenue increased 7.2% year-over-year to $5.6 million
Completed acquisition of JigoCity and PerfectMatch.com
Nine Months Ended September 30, 2011 Highlights:
Income from operations increased 4.1% year-over-year to $52.4 million
Adjusted EBITDA increased 1.8% year over year to $74.4 million
Repaid $80.2 million in outstanding debt since December 31, 2010, including $7.3 million in November 2011
“While we achieved certain business objectives, we are not satisfied with our overall performance in the third quarter. Europe remains a challenge where we have experienced lower user conversion rates and transaction acceptance rates. We continue to address this issue by experimenting with alternate payments processors, varied affiliate payment terms and alternative payment mechanisms, including SMS payments for consumers that are visiting our sites and wish to convert to paying memberships,” commented FriendFinder Networks Chief Executive Officer, Marc Bell. “To enable us to operate more efficiently and effectively, we recently reorganized our operations into 14 business units, including casual dating, social commerce, alternative lifestyles, gaming and interactive video, each responsible for its own financial performance and each responsible for contributing to FriendFinder Networks’ overall revenue growth going forward. We believe that designated business units will help us better deploy technology and drive revenue in business units that have traditionally lacked focused attention and dedicated resources.”
Mr. Bell further stated, “Even though the quarter was challenging, we remain excited by our future growth prospects. Our live interactive video business continues to perform well, increasing revenue over 5% year over year. In Europe, we have begun to see an increase in registrations and in South America revenue continues to grow as a result of increased marketing efforts and the introduction of alternative payment methods. In September, we announced the acquisition of JigoCity which we believe will help us monetize more of our internet traffic in emerging market countries, including Asia-Pacific and South America. JigoCity works similarly to other group-buying platforms but uniquely has the ability to plug into FriendFinder Networks’ existing web traffic and take advantage of our vast user database. JigoCity grew its gross revenue 187% in the third quarter when compared to the second quarter and we believe it has the ability to be a valuable growth driver of our business in years to come.”
Third Quarter Financial Results
Revenue for the third quarter of 2011 was $82.7 million. Revenue was impacted by a decrease in traffic and a decline in new subscribers and renewal orders primarily in European markets. Social networking revenue was offset by an increase in live interactive video.
Gross profit for the third quarter of 2011 was $54.8 million. Gross profit was impacted by the inclusion of $0.8 million of cost of goods sold from our social commerce websites and an increase of $0.9 million related to higher production costs incurred in our video entertainment business.
Income from operations for the third quarter of 2011 was $14.7 million. Income from operations was impacted by a lower gross margin and an increase in product development, selling and marketing, and general and administrative spending. The increase in these expenses was primarily due to an increase in headcount across the Company as it develops its business units and general and administrative expenses related to stock compensation expense.
Net loss for the third quarter of 2011 was ($5.4 million), or ($0.18) per share.
Adjusted EBITDA for the third quarter of 2011 was $20.3 million.
Nine Month Financial Results
Revenue for the nine months ended September 30, 2011 was $249.7 million.
Gross profit for the nine months ended September 30, 2011 was $169.8 million.
Income from operations for the nine months ended September 30, 2011 was $52.4 million.
Net loss for the nine months ended September 30, 2011 was ($20.9 million), or ($1.02) per share.
Adjusted EBITDA for the nine months ended September 30, 2011 was $74.4 million.
Balance Sheet, Cash and Debt
As of September 30, 2011, the Company had cash and cash equivalents of $28.2 million, compared to $42.0 million at December 31, 2010. As of November 14, 2011, the Company had outstanding principal debt of $491.8 million. On November 4, 2011, the Company paid down $7.3 million of New First Lien Notes and Cash Pay Second Lien Notes. Free Cash Flow per Share was $0.36 and $1.99 for the three and nine months ended September 30, 2011, respectively.
Conference Call Information
Management will host a conference call to discuss the results at 8:30 AM ET on Tuesday, November 15, 2011. Participants should call (888) 389-5988 (United States/Canada) or (719) 325-2497 (International).
A telephonic replay will be available for anyone unable to participate in the live call. To access the replay, call (877) 870-5176 (United States/Canada) or (858) 384-5517 (International) and enter confirmation code 5226473. The recording will be available from 11:30 AM ET on Tuesday, November 15, 2011 through Tuesday, November 29, 2011 at 11:59 PM ET.
Non-GAAP Financial Measures
Management believes that certain non-GAAP financial measures of earnings before deducting net interest expense, income taxes, depreciation and amortization, or EBITDA, and Adjusted EBITDA are helpful financial measures as investors, analysts and others frequently use EBITDA and Adjusted EBITDA in the evaluation of other companies in FriendFinder Networks Inc.’s industry. For example, these measures eliminate one-time adjustments made for accounting purposes in connection with the Company’s Various acquisition in order to provide information that is directly comparable to its historical and current financial statements. For more information regarding the Company’s acquisition of Various, please refer to the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Our History.” in the Form 10-Q for the third quarter ended September 30, 2011 and the initial public offering Prospectus filed with the Securities and Exchange Commission on November 14, 2011 and May 11, 2011, respectively.
These non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in FriendFinder Networks Inc.’s industry, as other companies in FriendFinder Networks Inc.’s industry may calculate such financial measures differently, particularly as it relates to nonrecurring, unusual items. The Company’s non-GAAP financial measures of EBITDA, Adjusted EBITDA and Free Cash Flow per Common Share are not measurements of financial performance under GAAP and should not be considered as alternatives to cash flow from operating activities or as measures of liquidity or as alternatives to net income or as indications of operating performance or any other measure of performance derived in accordance with GAAP.
Management derived EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2011 and 2010 using the adjustments shown in the attached table. Free Cash Flow per Common Share was derived by subtracting capital expenditures and cash interest from Adjusted EBITDA and dividing the result by the weighted average shares outstanding for the period.