Cover Page
Cover Page - shares | 3 Months Ended | |
Mar. 31, 2021 | May 07, 2021 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2021 | |
Document Transition Report | false | |
Entity File Number | 001-38252 | |
Entity Registrant Name | Spark Networks SE | |
Document Fiscal Period Focus | Q1 | |
Entity Incorporation, State or Country Code | 2M | |
Entity Address, Address Line One | Kohlfurter Straße 41/43 | |
Entity Address, City or Town | Berlin | |
Entity Address, Country | DE | |
Entity Address, Postal Zip Code | 10999 | |
Country Region | +49 | |
City Area Code | 30 | |
Local Phone Number | 868000 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 2,605,689 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2021 | |
Entity Central Index Key | 0001705338 | |
Current Fiscal Year End Date | --12-31 | |
ADR | ||
Document Information [Line Items] | ||
Title of 12(b) Security | American Depository Shares each representing one-tenth of an ordinary share | |
Trading Symbol | LOV | |
Security Exchange Name | NYSE | |
Common Stock | ||
Document Information [Line Items] | ||
Title of 12(b) Security | Ordinary shares, €1.00 nominal value per share* | |
Trading Symbol | LOV | |
Security Exchange Name | NYSE |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 17,258 | $ 19,267 |
Accounts receivable, net of allowance of $441 and $93, respectively | 8,613 | 5,507 |
Prepaid expenses | 5,129 | 4,366 |
Other current assets | 505 | 2,140 |
Total current assets | 31,505 | 31,280 |
Property and equipment, net of accumulated depreciation of $6,241 and $6,252, respectively | 10,802 | 11,418 |
Goodwill | 156,552 | 156,582 |
Intangible assets, net of accumulated amortization of $21,043 and $21,768, respectively | 57,295 | 58,999 |
Deferred tax assets | 20,754 | 23,522 |
Other assets | 8,164 | 8,642 |
Total assets | 285,072 | 290,443 |
Current liabilities: | ||
Current portion of long-term debt | 19,373 | 19,037 |
Accounts payable | 12,241 | 11,127 |
Deferred revenue | 40,017 | 38,304 |
Accrued expenses and other current liabilities | 26,742 | 28,429 |
Total current liabilities | 98,373 | 96,897 |
Long-term debt, net of current portion | 76,701 | 80,109 |
Deferred tax liabilities | 950 | 993 |
Other liabilities | 17,259 | 17,541 |
Total liabilities | 193,283 | 195,540 |
Contingencies (Note 6) | ||
Shareholders' Equity: | ||
Common stock, €1.00 nominal value; 2,661,386 shares issued as of March 31, 2021 and December 31, 2020; 2,605,689 shares outstanding as of March 31, 2021 and December 31, 2020 | 3,064 | 3,064 |
Treasury stock, at nominal value; 55,697 shares as of March 31, 2021 and December 31, 2020 | (61) | (61) |
Additional paid-in capital | 221,888 | 220,852 |
Accumulated deficit | (138,752) | (132,248) |
Accumulated other comprehensive income | 5,650 | 3,296 |
Total shareholders' equity | 91,789 | 94,903 |
Total liabilities and shareholders' equity | $ 285,072 | $ 290,443 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) $ in Thousands | Mar. 31, 2021USD ($)shares | Mar. 31, 2021€ / shares | Dec. 31, 2020USD ($)shares | Dec. 31, 2020€ / shares |
Assets | ||||
Property, plant and equipment, accumulated depreciation | $ | $ (6,241) | $ (6,252) | ||
Intangible assets, accumulated amortization | $ | (21,043) | (21,768) | ||
Accounts receivable, allowance | $ | $ 441 | $ 93 | ||
Shareholders' Equity: | ||||
Common stock, nominal value (in Euro per share) | € / shares | € 1,000 | € 1,000 | ||
Common stock, issued (in shares) | shares | 2,661,386 | 2,661,386 | ||
Common stock, outstanding (in shares) | shares | 2,605,689 | 2,605,689 | ||
Treasury stock, shares (in shares) | shares | 55,697 | 55,697 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Statement [Abstract] | ||
Revenue | $ 56,379 | $ 57,657 |
Operating costs and expenses: | ||
Cost of revenue, exclusive of depreciation and amortization | 36,918 | 36,541 |
Sales and marketing expenses | 833 | 879 |
Customer service expenses | 1,770 | 2,040 |
Technical operations and development expenses | 4,455 | 5,380 |
General and administrative expenses | 9,093 | 7,184 |
Depreciation and amortization | 2,290 | 2,321 |
Total operating costs and expenses | 55,359 | 54,345 |
Operating income | 1,020 | 3,312 |
Other income (expense): | ||
Interest income | 0 | 31 |
Interest expense | (3,440) | (3,376) |
Loss on foreign currency transactions | (1,728) | (952) |
Other income (expense) | (16) | 0 |
Total other expense | (5,184) | (4,297) |
Loss before income taxes | (4,164) | (985) |
Income tax expense | (2,340) | (2,844) |
Net loss | (6,504) | (3,829) |
Other comprehensive income (loss): | ||
Foreign currency translation adjustments | 2,354 | 1,218 |
Comprehensive loss | $ (4,150) | $ (2,611) |
Loss per share: | ||
Basic earnings (loss) per share (in USD per share) | $ (2.50) | $ (1.47) |
Diluted earnings (loss) per share (in USD per share) | $ (2.50) | $ (1.47) |
Weighted average shares outstanding: | ||
Basic (in shares) | 2,605,689 | 2,605,689 |
Diluted (in shares) | 2,605,689 | 2,605,689 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands | Total | Common Stock | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income |
Beginning of period (in shares) at Dec. 31, 2019 | 2,661,386 | (55,697) | ||||
Beginning of period at Dec. 31, 2019 | $ 141,186 | $ 3,064 | $ (61) | $ 216,072 | $ (85,640) | $ 7,751 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Stock-based compensation | 910 | 910 | ||||
Net loss | (3,829) | (3,829) | ||||
Foreign currency translation adjustments | 1,218 | 1,218 | ||||
End of period (in shares) at Mar. 31, 2020 | 2,661,386 | (55,697) | ||||
End of period at Mar. 31, 2020 | $ 139,485 | $ 3,064 | $ (61) | 216,982 | (89,469) | 8,969 |
Beginning of period (in shares) at Dec. 31, 2020 | 2,605,689 | 2,661,386 | (55,697) | |||
Beginning of period at Dec. 31, 2020 | $ 94,903 | $ 3,064 | $ (61) | 220,852 | (132,248) | 3,296 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Stock-based compensation | 1,036 | 1,036 | ||||
Net loss | (6,504) | (6,504) | ||||
Foreign currency translation adjustments | $ 2,354 | 2,354 | ||||
End of period (in shares) at Mar. 31, 2021 | 2,605,689 | 2,661,386 | (55,697) | |||
End of period at Mar. 31, 2021 | $ 91,789 | $ 3,064 | $ (61) | $ 221,888 | $ (138,752) | $ 5,650 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Net cash provided by operating activities | ||
Net loss | $ (6,504) | $ (3,829) |
Adjustments to reconcile net loss to cash used in operating activities: | ||
Depreciation and amortization | 2,290 | 2,321 |
Unrealized loss on foreign currency transactions | 340 | 13 |
Stock-based compensation expense | 1,036 | 910 |
Amortization of debt issuance costs and accretion of debt discounts | 916 | 795 |
Deferred tax expense | 2,340 | 2,844 |
Provision for credit losses | 95 | 31 |
Non-cash lease expense | 470 | 475 |
Change in operating assets and liabilities: | ||
Accounts receivable | (3,328) | (3,589) |
Prepaid expenses and other current assets | (2,095) | (737) |
Other assets | (33) | 35 |
Accounts payable, accrued expenses, and other current liabilities | 1,533 | (3,300) |
Other liabilities | (93) | (472) |
Deferred revenue | 2,646 | 191 |
Net cash used in operating activities | (387) | (4,312) |
Net cash used in investing activities | ||
Capital expenditures | (423) | (197) |
Acquisitions of businesses, net of cash acquired | 0 | (513) |
Net cash used in investing activities | (423) | (710) |
Net cash (used in) provided by financing activities | ||
Repayment of bank loans | (3,163) | (2,984) |
Payments directly related to loan facility | (523) | 0 |
Net cash used in financing activities | (3,686) | (2,984) |
Net change in cash and cash equivalents and restricted cash | (4,496) | (8,006) |
Effects of exchange rate fluctuations on cash and cash equivalents and restricted cash | 781 | 354 |
Net decrease in cash and cash equivalents and restricted cash | (3,715) | (7,652) |
Cash and cash equivalents and restricted cash at beginning of period | 21,117 | 17,457 |
Cash and cash equivalents and restricted cash at end of period | 17,402 | 9,805 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 2,497 | 2,892 |
Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets | ||
Total cash and cash equivalents and restricted cash as shown on the consolidated statements of cash flows | $ 21,117 | $ 9,805 |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Summary of Significant Accounting Policies | Basis of Presentation and Summary of Significant Accounting Policies Description of Business Spark Networks SE (“Spark Networks” or the "Company”) is domiciled in Germany and is a leading global operator of premium online dating sites and mobile applications. The Company targets the 40+ age demographic and religious minded singles looking for serious relationships in North America and other international markets. The Company operates a portfolio of premium and freemium brands including Zoosk, EliteSingles, SilverSingles, Christian Mingle, Jdate, and JSwipe, among others. The Company’s brands are tailored to quality dating with real users looking for love and companionship in a safe and comfortable environment. Basis of Presentation and Consolidation The Company prepares its consolidated financial statements in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") and applicable rules and regulations of the Securities and Exchange Commission (“SEC”), regarding interim financial reporting. The condensed consolidated financial statements include the accounts of the parent company and all of its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in management’s opinion, all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of the Company's balance sheets, statement of operations and comprehensive loss, statement of shareholders' equity and statement of cash flows for the periods presented. Interim results are not necessarily indicative of the results that may be expected for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2020. Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Significant estimates and assumptions are required in the determination of: revenue reserves, deferred tax asset valuation allowances, unrecognized tax benefits, accounting for business combinations, classification and measurement of virtual stock option plans, and annual impairment testing of goodwill and indefinite-lived intangible assets. The Company evaluates its estimates and judgements on an ongoing basis based on historical experience, expectations of future events and various other factors that we believe to be reasonable under the circumstances and revises them when necessary. Actual results may differ from the original or revised estimates. Recently Adopted Accounting Pronouncements In December 2019, the Financial Accounting Standard Board ("FASB") issued Accounting Standard Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improved consistent application of and simplify the accounting for other areas of Topic 740 by clarifying and amending existing guidance. The Company adopted the standard in the first quarter of 2021 and it did not have a material impact to the financial statements. |
Revenue
Revenue | 3 Months Ended |
Mar. 31, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Revenue | RevenueFor the three months ended March 31, 2021 and 2020, revenue was as follows: Three Months Ended March 31, (in thousands) 2021 2020 Subscription revenue $ 54,546 $ 55,717 Virtual currency revenue 1,096 1,224 Advertising revenue 737 716 Total Revenue $ 56,379 $ 57,657 Revenue disaggregated by geography, based on the billing address of our customers, consists of the following: Three Months Ended March 31, (in thousands) 2021 2020 United States $ 36,550 $ 38,174 Germany 333 456 Rest of world 19,496 19,027 Total Revenue $ 56,379 $ 57,657 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes For the quarter ended March 31, 2021 and 2020, the Company recorded income tax expense of $2.3 million and $2.8 million, respectively, which reflects an effective tax rate of 112.5% and 104.9%, respectively. The increase in the quarter ended March 31, 2021 was primarily driven by change in valuation allowance related to California net operating losses. During the first quarter 2021, the Company assessed whether any change in valuation allowances was required based on the continued change in the economic environment and the expected changes in the Company's financial projections for 2021. For the three months ended March 31, 2021, the Company, on its U.S. state deferred tax asset, recorded a discrete income tax expense of $1.6 million related to application of a valuation allowance on the California net operating losses, which are estimated to expire based on updated forecasts. For both Germany and Israel, no changes were noted as of March 31, 2021 to any valuation allowance assessments. The Company had a valuation allowance against certain U.S, Israel and German deferred tax assets as of both March 31, 2021 and December 31, 2020. The Company evaluates on a quarterly basis whether the deferred tax assets are realizable which requires significant judgment. The Company considers all available positive and negative evidence, including historical operating performance and expectations of future operating performance. We intend to continue maintaining a valuation allowance on certain U.S. Federal and state, Israel and German deferred tax assets until there is sufficient evidence to support reversal of all or some portion of these allowances. Additionally, based on our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that within the next 12 months, as changes in forecasts occur, additional valuation allowance on deferred tax assets may be needed. The exact timing and amount of the valuation allowance are subject to change on the basis of the level of profitability that we are able to actually achieve. The Company will continue to monitor expected 2021 projections and their potential impact on the Company’s assessment regarding the recoverability of their deferred tax asset balances. As of March 31, 2021 and December 31, 2020, the Company has $4.7 million and $4.6 million of unrecognized tax benefits, respectively, all of which would impact the effective tax rate if recognized. As of March 31, 2021 and December 31, 2020, the Company has recognized $0.4 million of interest and penalties for both periods related to unrecognized tax benefits, all of which would impact the effective tax rate if recognized. The Company’s policy is to classify interest and penalties on underpayment of income taxes as a component of income tax expense. As a matter of course, the Company may be audited by Germany, U.S. Federal and State, Israel, France, the U.K. and other foreign tax authorities within which it operates. From time to time, these audits may result in proposed assessments. The Company was notified during 2020 that the Israeli tax authorities were auditing Spark Networks Ltd. for the tax years 2015-2019. There is minimal activity in the entity and while we do not expect adverse findings, any adverse finding could result in a reduction of the net operating loss carryforward which has a full valuation allowance against it. Recently the Company was notified that German tax authorities are auditing Spark SE for the tax years 2017-2018, as well as Spark GmbH for the tax years 2016-2018. At this point, there is no indication of any uncertainty with respect to German tax returns. Based on the current status of Germany, U.S. federal, state, local and other foreign audits, the Company does not expect the amount of unrecognized tax benefits to significantly decrease in the next 12 months as a result of settlements of tax audits and/or the expiration of statutes of limitations. |
Accrued Expenses and Other Liab
Accrued Expenses and Other Liabilities | 3 Months Ended |
Mar. 31, 2021 | |
Payables and Accruals [Abstract] | |
Accrued Expenses and Other Liabilities | Accrued Expenses and Other Liabilities Accrued expenses and other current liabilities consist of the following as of March 31, 2021 and December 31, 2020: (in thousands) March 31, 2021 December 31, 2020 Accrued advertising 8,762 8,691 Accrued employee compensation and benefits 2,624 2,085 Accrued professional fees 1,285 1,819 Accrued service providers 2,004 2,433 Accrued value-added, sales, and other non-income-based taxes 7,667 8,897 Current portion of income tax payable 1,472 1,536 Current portion of lease liabilities 1,849 1,932 Other 1,079 1,036 Accrued expenses and other current liabilities $ 26,742 $ 28,429 Other liabilities consist of the following as of March 31, 2021 and December 31, 2020: (in thousands) March 31, 2021 December 31, 2020 Deferred payment to Zoosk's shareholders $ 10,662 $ 10,373 Lease liabilities, less current portion 4,091 4,650 Sublease security deposit 1,038 1,038 Other 1,468 1,480 Other liabilities $ 17,259 $ 17,541 |
Long-term Debt
Long-term Debt | 3 Months Ended |
Mar. 31, 2021 | |
Debt Disclosure [Abstract] | |
Long-term Debt | Long-term Debt On July 1, 2019, in connection with the acquisition of Zoosk, Spark Networks entered into a Loan Agreement with Zoosk, Spark Networks, Inc., the subsidiary guarantors, the lenders party thereto, and Blue Torch Finance LLC (“Blue Torch”), as administrative agent and collateral agent (the "Senior Secured Facilities Agreement") that provides for a four-year $125.0 million Senior Secured Facility. The Senior Secured Facilities Agreement provides for a term loan facility in an aggregate amount equal to $120.0 million (the “Term Loan Facility”) and a revolving credit facility in an aggregate amount equal to $5.0 million (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Facilities”). Borrowings under the Facilities bear interest at a rate equal to either LIBOR plus an applicable margin of 8.0% per annum or the Base Rate with an applicable margin of 7.0% per annum. Term Loan Facility On December 2, 2020, the Company entered into the Second Amendment to Loan Agreement (the "Second Amendment"), which established an additional $6.0 million of term loan commitment to its existing Term Loan Facility. The additional borrowing was applied to pay the quarterly Term Loan Facility principal and interest payments on December 31, 2020 and March 31, 2021. The Second Amendment was accounted for as a modification of debt, and as such, the third-party costs incurred in connection with the Second Amendment of approximately $1.3 million were expensed as incurred. The debt issuance costs of $1.3 million that were paid directly to the lender at the closing date were capitalized and will be amortized using the effective interest method over the term of the loan. The effective interest rate on the modified loan is 11.3%. The Second Amendment requires repayment of the principal amount of $150 thousand quarterly, beginning on March 31, 2021, in addition to the $3.0 million quarterly principal repayment of the original Term Loan Facility and the interest. On March 5, 2021, the Company entered into a Limited Waiver under Loan Agreement with the Administrative Agent and the lenders pursuant to which certain defaults under the Loan Agreement were waived. In consideration of the waiver, the Company agreed to pay the Administrative Agent, for the ratable benefit of the lenders, a fee of $0.5 million upon the execution of the Limited Waiver under Loan Agreement, plus $0.3 million paid in kind by capitalizing such amount into the principal balance under the Loan Agreement. The aggregated fees were capitalized and will be amortized using the effective interest rate of 11.8%. As of March 31, 2021, the aggregated outstanding principal balance of the existing Term Loan Facility and the Second Amendment is $101.8 million, and the amortized cost basis of the Term Loan Facility is $96.1 million. Revolving Credit Facility The $5.0 million Revolving Credit Facility has a commitment fee of 0.75% per annum on the unutilized commitments thereunder payable on the Maturity Date. As the Revolving Credit Facility is not expected to be drawn down, transaction costs and upfront fees totaling $0.3 million related to the Revolving Credit Facility were deferred and are being amortized over the term of the agreement. There were no outstanding borrowings under the Revolving Credit Facility as of March 31, 2021. Covenants The Facilities contain a number of covenants that, among other things, restrict, subject to certain exceptions, the Company's ability and the ability of its subsidiaries to: incur additional indebtedness, create liens, engage in mergers or consolidations, sell or transfer assets, pay dividends and distributions and make share repurchases, make certain acquisitions, engage in certain transactions with affiliates, and change lines of business. In addition, the Facilities, as revised by the Second Amendment, require the following financial covenants to be maintained: (i) a fixed charge coverage ratio of no less than 1.10 for the first four quarters of the loan, 1.25 for the second two quarters of the loan, and between 1.20 and 0.80 for the remaining life of the loan, (ii) a net leverage ratio of no greater than 3.00 for the first quarter of the loan, declining steadily from 2.60 to 1.75 for the quarters ended December 31, 2020 through the maturity date of the loan, and (iii) a minimum liquidity threshold of $10.0 million at the end of each month following the closing date of the loan, consisting of available cash funds and availability under the Revolving Credit Facility. The Facilities also contain certain customary affirmative covenants and events of default, including a change of control. The Company is in compliance with all of its financial covenants as of March 31, 2021 and December 31, 2020. |
Contingencies
Contingencies | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Contingencies The Company is involved in lawsuits, claims and proceedings incident to the ordinary course of business and establishes reserves for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Management has also identified certain other legal matters where the Company believes an unfavorable outcome is not probable and, therefore, no reserve is established. Any claims against the Company, whether meritorious or not, could result in costly litigation, require significant amounts of management time and result in the diversion of significant operational resources. The results of these lawsuits, claims and proceedings cannot be predicted with certainty. However, we believe that the ultimate resolution of these current matters will not have a material adverse effect on our liquidity, results of operations or the financial condition of the Company. Cybersecurity Matters On July 22, 2020, a putative class action was filed against Spark Networks SE and Zoosk in the U.S. District Court for the Northern District of California by individuals claiming to be Zoosk users whose information was affected by the 2020 security incident disclosed by Zoosk. The complaint, as subsequently amended, asserts that by reason of the Zoosk security incident Spark and Zoosk violated the California Consumer Privacy Act (CCPA) and other statutory and common-law obligations. Based on these assertions, the complaint seeks statutory damages, compensatory damages, punitive damages, attorneys’ fees, and injunctive relief. On December 14, 2020, plaintiffs voluntarily withdrew their statutory damage claims under the CCPA. On January 30, 2021, the district court granted in part, and denied in part, Zoosk’s motion to dismiss the remainder of the complaint for failure to state a claim and held in abeyance the Company's motion to dismiss itself on jurisdictional grounds and for failure to state a claim. The court granted plaintiffs limited jurisdictional discovery as to the Company and has allowed a common-law claim to go forward as to Zoosk. Zoosk has answered the portion of the complaint that asserts the one remaining common-law claim by denying its material allegations and asserting a number of affirmative defenses. The case is currently stayed at least through June 12, 2021 pending resolution of pandemic-related challenges in completing the jurisdictional discovery. Assuming the stay is lifted on June 12, the case is scheduled for trial commencing September 12, 2022. Separately, a group of lawyers that is different from those who filed the putative class action filed 77 separate arbitration demands against Zoosk in the Judicial Arbitration and Mediation Services, Inc. ("JAMS") arbitration forum. Zoosk has objected that neither JAMS nor any arbitrator appointed by JAMS has authority to arbitrate any of these claims. JAMS has nonetheless determined to commence arbitration proceedings in regard to one of the 77 arbitration claims filed to date and has initiated the process of appointing an arbitrator for that one claim. Elite Connexion v. Spark Networks Services GmbH On September 20, 2018, Elite Connexion filed a cease and desist order and damage claim in France against Spark Networks Services GmbH ("Spark GmbH"), alleging that Spark GmbH bid on search engine terms which violated an agreement between the parties. In Elite Connexion's claim, which was amended in September 2019, Elite Connection claimed damages for loss of profit, legal fees, and court fees. The parties agreed in principle to a settlement in September 2020 subject to negotiation of the settlement agreement. The parties continue to negotiate the terms of the settlement agreement as of March 31, 2021, and the Company recorded an accrual for the loss contingency in relation to a potential settlement of these matters. Trademarks Trademarks are an important element in running online dating websites and mobile applications. Given the large number of markets and brands, the Company deals with claims against its trademarks from time to time. As of March 31, 2021, there are several ongoing national cases which affect trademarks within Germany, Finland, Ireland, France, Sweden, the United Kingdom, Poland and Benelux. The Company vigorously defends against each of the above legal proceedings. Following a favorable 2020 decision of the Court of Justice of the European Union, the Company is exploring options to settle certain national trademark disputes in Europe. In the United States, the Company's use of certain intellectual property is challenged from time to time by third parties. The Company has additional legal claims and may encounter future legal claims in the normal course of business. The Company intends to defend vigorously against each of the above legal proceedings. At this time, management does not believe the above matters, either individually or in the aggregate, will have a material adverse effect on the Company’s results of operations or financial condition and believes the recorded legal provisions as of March 31, 2021 are adequate with respect to the probable and estimable liabilities. However, no assurance can be given that these matters will be resolved in our favor. |
Financial Instruments and Fair
Financial Instruments and Fair Value Measurements | 3 Months Ended |
Mar. 31, 2021 | |
Fair Value Disclosures [Abstract] | |
Financial Instruments and Fair Value Measurements | Financial Instruments and Fair Value Measurements The Company records long-term debt at carrying value less unamortized discount and unamortized fees as it is not required to be carried at fair value on a recurring basis. The fair value of long-term debt was determined using observable inputs (Level 2). The valuation considers the present value of expected future repayments, discounted using a market interest rate equal to the interest margin on the borrowings and variable interest rate. The following table presents the carrying values and the estimated fair values of long-term debt as of March 31, 2021 and December 31, 2020: March 31, 2021 December 31, 2020 (in thousands) Carrying Value Fair Value Carrying Value Fair Value Long-term debt, including current portion (1) $ 96,074 $ 104,431 $ 99,146 $ 107,504 (1) At March 31, 2021 and December 31, 2020, the carrying value of long-term debt is net of unamortized original issue discount and debt issuance costs of $5.7 million and $5.5 million, respectively. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events Appointment of principal financial officer and principal accounting officer On May 10, 2021, the Administrative Board of Directors of the Company appointed Yoon Um, the Company’s Global Controller, as the Company’s principal financial officer and principal accounting officer. There is no arrangement or understanding between Ms. Um and any other person pursuant to which she was selected as an officer of the Company, and there is no family relationship between Ms. Um and any of the Company’s other directors or executive officers. |
Basis of Presentation and Sum_2
Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Consolidation | Basis of Presentation and Consolidation The Company prepares its consolidated financial statements in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") and applicable rules and regulations of the Securities and Exchange Commission (“SEC”), regarding interim financial reporting. The condensed consolidated financial statements include the accounts of the parent company and all of its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in management’s opinion, all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of the Company's balance sheets, statement of operations and comprehensive loss, statement of shareholders' equity and statement of cash flows for the periods presented. Interim results are not necessarily indicative of the results that may be expected for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2020. |
Use of Estimates | Use of EstimatesThe preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Significant estimates and assumptions are required in the determination of: revenue reserves, deferred tax asset valuation allowances, unrecognized tax benefits, accounting for business combinations, classification and measurement of virtual stock option plans, and annual impairment testing of goodwill and indefinite-lived intangible assets. The Company evaluates its estimates and judgements on an ongoing basis based on historical experience, expectations of future events and various other factors that we believe to be reasonable under the circumstances and revises them when necessary. Actual results may differ from the original or revised estimates. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In December 2019, the Financial Accounting Standard Board ("FASB") issued Accounting Standard Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improved consistent application of and simplify the accounting for other areas of Topic 740 by clarifying and amending existing guidance. The Company adopted the standard in the first quarter of 2021 and it did not have a material impact to the financial statements. |
Revenue (Tables)
Revenue (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of Revenue | For the three months ended March 31, 2021 and 2020, revenue was as follows: Three Months Ended March 31, (in thousands) 2021 2020 Subscription revenue $ 54,546 $ 55,717 Virtual currency revenue 1,096 1,224 Advertising revenue 737 716 Total Revenue $ 56,379 $ 57,657 |
Revenue from External Customers by Geographic Areas | Revenue disaggregated by geography, based on the billing address of our customers, consists of the following: Three Months Ended March 31, (in thousands) 2021 2020 United States $ 36,550 $ 38,174 Germany 333 456 Rest of world 19,496 19,027 Total Revenue $ 56,379 $ 57,657 |
Accrued Expenses and Other Li_2
Accrued Expenses and Other Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Payables and Accruals [Abstract] | |
Accrued Expenses and Other Current Liabilities | Accrued expenses and other current liabilities consist of the following as of March 31, 2021 and December 31, 2020: (in thousands) March 31, 2021 December 31, 2020 Accrued advertising 8,762 8,691 Accrued employee compensation and benefits 2,624 2,085 Accrued professional fees 1,285 1,819 Accrued service providers 2,004 2,433 Accrued value-added, sales, and other non-income-based taxes 7,667 8,897 Current portion of income tax payable 1,472 1,536 Current portion of lease liabilities 1,849 1,932 Other 1,079 1,036 Accrued expenses and other current liabilities $ 26,742 $ 28,429 |
Other Liabilities | Other liabilities consist of the following as of March 31, 2021 and December 31, 2020: (in thousands) March 31, 2021 December 31, 2020 Deferred payment to Zoosk's shareholders $ 10,662 $ 10,373 Lease liabilities, less current portion 4,091 4,650 Sublease security deposit 1,038 1,038 Other 1,468 1,480 Other liabilities $ 17,259 $ 17,541 |
Financial Instruments and Fai_2
Financial Instruments and Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Fair Value Disclosures [Abstract] | |
Schedule of Carrying Values and Estimated Fair Values of Debt Instruments | The following table presents the carrying values and the estimated fair values of long-term debt as of March 31, 2021 and December 31, 2020: March 31, 2021 December 31, 2020 (in thousands) Carrying Value Fair Value Carrying Value Fair Value Long-term debt, including current portion (1) $ 96,074 $ 104,431 $ 99,146 $ 107,504 (1) At March 31, 2021 and December 31, 2020, the carrying value of long-term debt is net of unamortized original issue discount and debt issuance costs of $5.7 million and $5.5 million, respectively. |
Revenue - Disaggregation (Detai
Revenue - Disaggregation (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 56,379 | $ 57,657 |
Subscription revenue | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 54,546 | 55,717 |
Virtual currency revenue | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 1,096 | 1,224 |
Advertising revenue | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 737 | $ 716 |
Revenue - Geographical (Details
Revenue - Geographical (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 56,379 | $ 57,657 |
United States | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 36,550 | 38,174 |
Germany | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 333 | 456 |
Rest of world | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 19,496 | $ 19,027 |
Revenue - Narrative (Details)
Revenue - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |||
Deferred revenue | $ 40,017 | $ 38,304 | |
Revenue recognized from prior deferred revenue balances | $ 28,800 | $ 28,100 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |||
Income tax expense (benefit) | $ 2,340 | $ 2,844 | |
Federal statutory income tax rate, percent | 112.50% | 104.90% | |
Deferred state income tax expense (benefit) | $ 1,600 | ||
Unrecognized tax benefits | 4,700 | $ 4,600 | |
Unrecognized tax benefits, income tax penalties and interest accrued | $ 400 | $ 400 |
Accrued Expenses and Other Li_3
Accrued Expenses and Other Liabilities - Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Payables and Accruals [Abstract] | ||
Accrued advertising | $ 8,762 | $ 8,691 |
Accrued employee compensation and benefits | 2,624 | 2,085 |
Accrued professional fees | 1,285 | 1,819 |
Accrued service providers | 2,004 | 2,433 |
Accrued value-added, sales, and other non-income-based taxes | 7,667 | 8,897 |
Current portion of income tax payable | 1,472 | 1,536 |
Current portion of lease liabilities | 1,849 | 1,932 |
Other | 1,079 | 1,036 |
Accrued expenses and other current liabilities | $ 26,742 | $ 28,429 |
Accrued Expenses and Other Li_4
Accrued Expenses and Other Liabilities - Other Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Payables and Accruals [Abstract] | ||
Deferred payment to Zoosk's shareholders | $ 10,662 | $ 10,373 |
Lease liabilities, less current portion | 4,091 | 4,650 |
Sublease security deposit | 1,038 | 1,038 |
Other | 1,468 | 1,480 |
Other liabilities | $ 17,259 | $ 17,541 |
Long-term Debt - Narrative (Det
Long-term Debt - Narrative (Details) $ in Thousands | Dec. 02, 2020USD ($) | Jul. 01, 2019USD ($) | Mar. 31, 2021USD ($) | Mar. 31, 2020USD ($) | Mar. 05, 2021USD ($) |
Debt Instrument [Line Items] | |||||
Payments of debt issuance costs | $ 523 | $ 0 | |||
Covenant, leverage ratio, maximum | 3 | ||||
Liquidity threshold, minimum | $ 10,000 | ||||
First Four Quarters | |||||
Debt Instrument [Line Items] | |||||
Covenant, fixed charge, interest coverage ratio, minimum | 1.10 | ||||
Second Two Quarters | |||||
Debt Instrument [Line Items] | |||||
Covenant, fixed charge, interest coverage ratio, minimum | 1.25 | ||||
Remaining Life | |||||
Debt Instrument [Line Items] | |||||
Covenant, fixed charge, interest coverage ratio, minimum | 0.80 | ||||
Covenant, fixed charge, interest coverage ratio, maximum | 1.20 | ||||
Covenant, leverage ratio, maximum | 2.60 | ||||
Covenant, leverage ratio, minimum | 1.75 | ||||
Senior Secured Facilities Agreement | Revolving Credit Facility | |||||
Debt Instrument [Line Items] | |||||
Commitment fee percentage | 0.75% | ||||
Debt fee amount | $ 300 | ||||
Limited Waiver Agreement | |||||
Debt Instrument [Line Items] | |||||
Debt fee amount | $ 500 | ||||
Payment in kind, increase to principal amount | $ 300 | ||||
Secured Debt | Senior Secured Facilities Agreement | |||||
Debt Instrument [Line Items] | |||||
Debt term | 4 years | ||||
Face amount | $ 125,000 | ||||
Secured Debt | Senior Secured Facilities Agreement | LIBOR | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable rate | 8.00% | ||||
Secured Debt | Senior Secured Facilities Agreement | Base Rate | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable rate | 7.00% | ||||
Secured Debt | Senior Secured Facilities Agreement | Revolving Credit Facility | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | $ 5,000 | ||||
Secured Debt | Senior Secured Facilities Agreement | Term Loan Facility | |||||
Debt Instrument [Line Items] | |||||
Face amount | $ 120,000 | ||||
Effective interest rate | 11.80% | ||||
Outstanding principal | $ 101,800 | ||||
Amortization of debt issuance costs | 96,100 | ||||
Secured Debt | Senior Secured Facilities Agreement | Term Loan Facility, Original | |||||
Debt Instrument [Line Items] | |||||
Periodic payment | 3,000 | ||||
Secured Debt | Senior Secured Facilities Agreement | Term Loan Facility, Second Amendment | |||||
Debt Instrument [Line Items] | |||||
Face amount | $ 6,000 | ||||
Debt modification expenses | 1,300 | ||||
Payments of debt issuance costs | $ 1,300 | ||||
Effective interest rate | 11.30% | ||||
Periodic payment, principal | $ 150 |
Contingencies (Details)
Contingencies (Details) | Jul. 22, 2020arbitrationDemand |
Commitments and Contingencies Disclosure [Abstract] | |
Number of Arbitration Demands | 77 |
Financial Instruments and Fai_3
Financial Instruments and Fair Value Measurements (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Unamortized discount and debt issuance costs | $ 5,700 | $ 5,500 |
Level 2 | Carrying Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt, including current portion | 96,074 | 99,146 |
Level 2 | Fair Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt, including current portion | $ 104,431 | $ 107,504 |
Uncategorized Items - lov-20210
Label | Element | Value |
Restricted Cash and Cash Equivalents | us-gaap_RestrictedCashAndCashEquivalents | $ 1,850,000 |
Restricted Cash and Cash Equivalents | us-gaap_RestrictedCashAndCashEquivalents | 144,000 |
Restricted Cash and Cash Equivalents | us-gaap_RestrictedCashAndCashEquivalents | 250,000 |
Restricted Cash and Cash Equivalents | us-gaap_RestrictedCashAndCashEquivalents | $ 146,000 |