FriendFinder Networks Inc. Reports Financial Results For Second Quarter 2012

SUNNYVALE, Calif., Aug. 14, 2012 /PRNewswire/ -- FriendFinder Networks Inc. (NasdaqGM: FFN) ("the Company"), a leading internet and technology company providing services in the rapidly expanding markets of social networking and web-based video sharing, today announced financial results for the second quarter and six months ended June 30, 2012.  

"We remain focused on our growth strategy and continue to undertake the necessary steps to optimize our business, which includes retaining greater control of our cost structure and maximizing our brand equity.  We have therefore shifted a majority of our focus to supporting our most successful, dominant revenue-generating properties.  As part of this effort, we have begun the process of closing nearly 5,000 co-branded websites, which we expect to be fully completed by the end of the year," said Anthony Previte, Chief Executive Officer of FriendFinder Networks.  "It has become clear that our primary brands, which account for a majority of our revenue, are more manageable, profitable and ultimately offer the greatest opportunity for growth going forward.  As a result, we have shifted the focus of our affiliate network strategy to support further development of these primary brands.  In parallel to this effort, we have consolidated our internal business units to realign our focus.  These changes have resulted in a substantial increase in Adjusted EBITDA relative to the first quarter 2012 and stronger recognizable synergies between our business units."

"Our Live Interactive segment remains a strong and positive contributor to our business, attaining its tenth consecutive quarter of year over year revenue growth.  Additionally, we have started to experience some positive traction in Europe.  For the first time in six quarters, we saw a slight dollar increase in European revenue over the previous sequential quarter; it is significant to note that this increase was despite the weakening value of the Euro versus the dollar over the past quarter.  This improvement indicates that our geographic price testing in different European regions has started to bear fruit, and we expect this revenue growth to continue as renewal cycles kick in. We anticipate that geographic price testing and other initiatives, when combined with our focus on brand equity and customer acquisition, will lead to improvements to both the top and bottom lines." 

Mr. Previte continued, "We also continue to move forward with our customer acquisition strategy, which we believe will drive long-term subscriber growth.  While our effort remains ROI positive, in the second quarter, certain campaigns did not meet our expectations and were quickly discontinued.  We are working diligently to refine our advertising spend in an effort to increase new subscriber activity and maximize results.  We remain confident this strategy will prove beneficial over the long term and we will continue to ramp up these efforts."  

Mr. Previte concluded, "Finally, in keeping with the strategy to focus on the parts of our business that have the most potential to drive shareholder value, earlier this month we sold the JigoCity operations back to one of its original owners."

Second Quarter Financial Results

Revenue for the second quarter of 2012 was $81.1 million.  Revenue was negatively impacted by less than expected new subscriber growth but was positively impacted by the Live Interactive Video segment's continued growth.

Gross profit for the second quarter of 2012 was $53.0 million. Gross profit was negatively impacted by increased affiliate spending, as we continue to focus on our primary brands.

Income from operations for the second quarter of 2012 was $12.9 million. Income from operations was negatively impacted by reduced revenues and increased subscriber acquisition costs.  However, income from operations was positively impacted by reduced general and administrative spending stemming from the Company's previously announced cost cutting initiatives.

Loss from continuing operations for the second quarter of 2012 was ($7.4 million), or ($0.24) per share. The loss from discontinued operations, which resulted from the closure of all JigoCity operations, was ($3.1 million) or ($0.10) per share.

Adjusted EBITDA for the second quarter of 2012 was $16.9 million.  

Six Month Financial Results:

Revenue for the six months ended June 30, 2012 was $162.1 million.

Gross profit for the six months ended June 30, 2012 was $101.4 million.

Income from operations for the six months ended June 30, 2012 was $21.1 million.

Loss from continuing operations for the six months ended June 30, 2012 was ($20.5 million), or ($0.65) per share.  The loss from discontinued operations was ($11.5 million) or ($0.37) per share.

Adjusted EBITDA for the six months ended June 30, 2012 was $30.3 million.

Balance Sheet, Cash and Debt

As of June 30, 2012, the Company had cash and cash equivalents of $12.8 million, compared to $14.6 million at March 31, 2012.  As of June 30, 2012, the Company had outstanding principal debt of $510.7 million.  On August 4, 2012, the Company paid down $6.3 million of New First Lien Notes and Cash Pay Second Lien Notes. Free Cash Flow per Share was $0.26 for the second quarter ended June 30, 2012.

As indicated previously, First Lien bondholders agreed in March to modify certain covenants under the indentures governing such debt.  Last week, FriendFinder Networks obtained an extension of a waiver from the Non-Cash Pay Second Lien Note bondholders from compliance with certain covenants under the indenture governing such debt for a period of 90 days through November 14, 2012.  During this period, the Company will work with the Second Lien bondholders towards modifying their indenture.

In August, FriendFinder Networks sold JigoCity to one of its original owners for nominal cash consideration.  As part of this transaction, certain warrants to purchase Company stock previously granted to these original owners were cancelled and the Company agreed to reimburse the purchaser for third party payables and other business expenses for a one year period.

Conference Call Information

Management will host a conference call to discuss the results at 4:30 PM EDT on Tuesday, August 14, 2012.  Participants should call 888-259-8724 (United States/Canada) or 913-312-1500 (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 9266477.  The replay will be available on August 14, 2012 at 7:30 PM EDT through Tuesday, August 28, 2012 at 11:59 PM EDT.

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, 2011.

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 six months ended June 30, 2012 and 2011 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, 2011.  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  
212.896.1206 or [email protected] / [email protected]

Media Contact for FriendFinder Networks Inc. 
Lindsay Trivento  
Director, Corporate Communications       
561.912.7010 or [email protected] 

SOURCE FriendFinder Networks Inc.