Penny Stock News: FriendFinder Networks Inc. Reports Financial Results for Second Quarter 2013

SUNNYVALE, Calif., Aug. 14, 2013 /PRNewswire/ — FriendFinder Networks Inc. (OTCQB: FFNT) (the “Company”), a leading internet and technology company providing services to the rapidly expanding markets of social networking and web-based video sharing, today announced financial results for the second quarter ended June 30, 2013.

“We continued to execute on our strategic plan to support our flagship brands and improve marketing efficiencies during the second quarter.  By focusing on our top brands and reducing investments in lower margin affiliate and advertising activity, we have been able to improve our bottom line and reach higher quality users.  These efforts, in part, helped increase EBITDA to $ 18.4 million during the quarter and attract a more valuable, long-term user that will allow us to build a strong core of recurring revenues going forward,” said Anthony Previte, Chief Executive Officer of FriendFinder Networks.  “Additionally, our Live Interactive business continues its impressive streak and achieved its 14th consecutive quarter of year-over-year revenue growth with an increase of 4.0% to $ 24.1 million.”

Mr. Previte continued, “In parallel to our efforts to improve operational efficiency, we continue to work with our advisors and lenders to refinance our long-term debt.  We remain confident in our ability to achieve a successful resolution in this matter.”

“Finally, as we announced on August 7, 2013, following our delisting from the Nasdaq, we now trade on the OTCQB Marketplace under the ticker “FFNT”.  We will continue to comply with all SEC reporting obligations under applicable securities laws,” concluded Mr. Previte.

Second Quarter Financial Results

Revenue for the second quarter of 2013 was $ 69.0 million.  Quarterly revenue was negatively impacted by a decrease in affiliate based traffic resulting in lower internet revenue in part due to the Company’s strategic decision to eliminate lower margin co-brands and place a greater focus on its more profitable flagship brands.

Gross profit in the second quarter of 2013 was $ 46.8 million.

Income from operations for the second quarter of 2013 was $ 16.9 million.

Net loss for the second quarter of 2013 was ($ 10.3) million, or ($ 0.32) per share.

Adjusted EBITDA for the second quarter of 2013 was $ 18.4 million

Balance Sheet, Cash and Debt

As of June 30, 2013, the Company had unrestricted cash and cash equivalents of $ 38.6 million, compared to $ 31.8 million at March 31, 2013.  As of June 30, 2013, the Company had outstanding principal debt of $ 544.1 million.  Free Cash Flow per Share was $ 0.27 for the second quarter ended June 30, 2013.

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-K for the year ended December 31, 2012.

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 months and six months ended June 30, 2013 and 2012 using the adjustments shown in the attached reconciliation 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.

SAFE HARBOR

This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995.  Actual results may differ from expectations, estimates and projections and, consequently, you should not rely on these forward looking statements as predictions of future events.  Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements.  These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results.

Additional information concerning these and other risk factors is contained in the Company’s most recent filings with the SEC, including its Form 10-K for the year ended December 31, 2012.  All subsequent written and oral forward-looking statements concerning the Company are expressly qualified in their entirety by the cautionary statements above and subject to such risk factors discussed in the Company’s recent SEC filings.  The Company cautions readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made.  The Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in their expectations or any change in events, conditions or circumstances on which any such statement is based.

ABOUT FRIENDFINDER NETWORKS INC.

FriendFinder Networks Inc. (www.FFN.com) is an internet-based social networking and technology company operating several of the most heavily visited websites in the world, including AdultFriendFinder.com, Amigos.com, AsiaFriendFinder.com, Cams.com, FriendFinder.com, BigChurch.com and SeniorFriendFinder.com. FriendFinder Networks Inc. also produces and distributes original pictorial and video content and engages in brand licensing.

Investor Contact for FriendFinder Networks Inc.
Jeffrey Goldberger / Rob Fink
KCSA Strategic Communications
212.896.1249 / 212.896.1206 or jgoldberger@kcsa.com / rfink@kcsa.com

Media Contact for FriendFinder Networks Inc.
Lindsay Trivento
Director, Corporate Communications     
561.912.7010 or ltrivento@ffn.com 

 

FRIENDFINDER NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

 







June 30, 2013

Unaudited



December 31,
2012


ASSETS







Current assets:







Cash


$

38,633



$

16,839


Restricted cash



8,977




10,064


Accounts receivable, less allowance for doubtful accounts of $ 992 and $ 1,284,

      respectively



8,621




12,323


Inventories



537




763


Prepaid expenses



3,969




3,436


Deferred tax asset



1,844




1,844


      Total current assets



62,581




45,269


Film costs, net



3,217




3,627


Property and equipment, net



4,461




5,120


Goodwill



328,061




328,061


Domain names



56,614




56,614


Trademarks



5,643




5,643


Other intangible assets, net



160




330


Unamortized debt costs, net



2,997




6,179


Other assets



1,567




1,310




$

465,301



$

452,153


LIABILITIES









Current liabilities:









Long-term debt in default, which matures on September 30, 2013 and April 30, 2014,

 net of unamortized discount of $ 13,214 and $ 20,851, respectively



530,900




500,920


Accounts payable



4,057




5,040


Accrued expenses and other liabilities



69,669




62,227


Deferred revenue



31,702




34,741


      Total current liabilities



636,328




602,928


Deferred tax liability



25,639




25,639


      Total liabilities



661,967




628,567


Contingencies (Note 14)


















STOCKHOLDERS’ DEFICIENCY









Preferred stock, $ 0.001 par value — authorized 22,500,000 shares; issued and outstanding

no shares in 2013 and 2012







Common stock, $ 0.001 par value — authorized 125,000,000 shares









Common stock voting — authorized 112,500,000 shares, issued and outstanding

      32,827,761 shares at June 30, 2013 and 32,572,761 shares at December 31, 2012



33




32


Series B common stock non-voting – authorized 12,500,000 shares, issued and

      outstanding no shares in 2013 and 2012









Capital in excess of par value



135,221




134,759


Accumulated deficit



(331,920)




(311,205)


Total stockholders’ deficiency



(196,666)




(176,414)




$

465,301



$

452,153


 

 

FRIENDFINDER NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

 



Three Months Ended

June 30,


Six Months Ended

June 30,



2013


2012


2013


2012

Net revenue









Service

$

64,101

$

76,177

$

131,524

$

152,021

Product


4,866


4,908


9,842


10,068

Total


68,967


81,085


141,366


162,089

Cost of revenue









Service


19,296


24,187


40,376


52,763

Product


2,896


3,901


6,305


7,950

Total


22,192


28,088


46,681


60,713

Gross profit


46,775


52,997


94,685


101,376

Operating expenses:









Product development


2,347


3,955


4,627


8,301

Selling and marketing


7,279


9,559


14,501


18,656

General and administrative


19,439


22,131


41,323


44,314

Amortization of acquired intangibles and software


84


3,633


170


7,413

Depreciation and other amortization


771


794


1,471


1,561

Total operating expenses


29,920


40,072


62,092


80,245

Income from operations


16,855


12,925


32,593


21,131

Interest expense


(27,021)


(21,259)


(53,442)


(42,148)

Other finance expenses





(500)

Interest related to VAT liability not charged to customers


(62)


(370)


(293)


(742)

Foreign exchange (loss) gain, including amounts related to VAT 

   liability not charged to customers


(283)


1,883


241


1,001

Change in fair value of acquisition related contingent

       consideration



18



1,400

Other non-operating expenses net


(3)


(642)


(4)


(654)

Loss from continuing operations

$

(10,514)

$

(7,445)

$

(20,905)

$

(20,512)

Income (loss) from discontinued operations


190


(3,090)


190


(11,545)

Net loss

$

(10,324)

$

(10,535)

$

(20,715)

$

(32,057)

Loss per common share — basic and diluted:









Continuing operations

$

(0.33)

$

(0.24)

$

(0.66)

$

(0.65)

Discontinued operations


0.01


(0.10)


0.01


(0.37)

Net loss

$

(0.32)

$

(0.34)

$

(0.65)

$

(1.02)

Weighted average shares outstanding — basic and diluted:


31,942


31,505


31,879


31,505

 

Reconciliation of GAAP Net Loss to EBITDA and Adjusted EBITDA





Unaudited





Three Months
Ended June 30,


Six Months
Ended June 30,



2013


2012


2013


2012





(in thousands)



GAAP net loss

$

(10,324)

$

(10,535)

$

(20,715)

$

(32,057)

Add: Interest expense


27,021


21,259


53,442


42,148

Add:  Other finance expenses





500

Add: Amortization of acquired intangible assets and software


84


3,633


170


7,413

Add: Depreciation and other amortization


771


794


1,471


1,561

EBITDA

$

17,552

$

15,151

$

34,368

$

19,565

Subtract/Add: (Gain)/Loss related to VAT liability not charged to customers


345


(1,513)


52


(259)

Add:  Severance Expense


14


3


37


427

Subtract/Add:  Discontinued Operations


(190)


3,090


(190)


11,545

Add: Stock Compensation Expense


226


234


463


456

Subtract:  Change in fair value of acquisition related contingent consideration



(18)



(1,400)

Add: Write off of Brazil related receivables


440



1,576


Adjusted EBITDA

$

18,387

$

16,947

$

36,306

$

30,334

 

Internet Segment Historical Operating Data

The following table presents certain key business metrics for our adult websites, general audience websites and live interactive video websites for the three and six months ended June 30, 2012 and 2013.



Three Months



Six Months


Ended June 30,

Ended June 30,



2013



2012



2013



2012


Adult Websites













New members


6,708,721



8,696,463



13,492,230



18,204,140


Beginning subscribers


704,185



840,984



724,445



827,728


New subscribers


334,526



393,263



675,163



827,306


Terminations


387,510



439,567



748,407



860,354


Ending subscribers


651,201



794,680



651,201



794,680


Conversion of members to subscribers


5.0

%


4.5

%


5.0

%


4.5

%

Churn


19.1

%


17.9

%


18.1

%


17.7

%

ARPU

$

18.94


$

20.61


$

19.68


$

20.93


CPGA

$

40.34


$

46.57


$

41.88


$

49.22


Average lifetime net revenue per subscriber

$

59.04


$

68.46


$

66.64


$

69.19


Net revenue (in millions)

$

38.5


$

50.6


$

81.2


$

101.9


Affiliate commission expense (in millions)

$

9.2


$

14.1


$

20.0


$

31.9


Ad buy expense (in millions)

$

4.3


$

4.9


$

8.3


$

9.6


Subscriber acquisition costs (in millions)

$

13.5


$

18.9


$

28.3


$

41.5















General Audience Websites













New members


850,304



1,095,069



1,794,260



2,122,401


Beginning subscribers


31,156



43,275



33,137



44,519


New subscribers


11,241



22,730



24,858



46,778


Terminations


14,233



27,394



29,831



52,686


Ending subscribers


28,164



38,611



28,164



38,611


Conversion of members to subscribers


1.3

%


2.1

%


1.4

%


2.2

%

Churn


16.0

%


22.3

%


19.9

%


21.1

%

ARPU

$

12.14


$

15.11


$

13.12


$

15.58


CPGA

$

26.92


$

54.83


$

27.7


$

47.19


Average lifetime net revenue per subscriber

$

49


$

12.91


$

38.31


$

26.54


Net revenue (in millions)

$

1.1


$

1.9


$

2.2


$

3.9


Affiliate commission expense (in millions)

$

0.2


$

0.2



0.4



0.6


Ad buy expense (in millions)

$

0.1


$

1.1



0.3



1.6


Subscriber acquisition costs (in millions)

$

0.3


$

1.2



0.7



2.2















Live Interactive Video Websites













Total minutes


8,620,464



9,451,332



17,423,772



18,904,146


Average revenue per minute

$

2.79


$

2.45


$

2.74


$

2.39


Net revenue (in millions)

$

24.1


$

23.2


$

47.7


$

45.1


 

SOURCE FriendFinder Networks Inc.


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