Good day, and welcome to the Spark Networks First Quarter Fiscal 2022 Financial Results Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Todd Kehrli of MKR Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and welcome to Spark Networks Fiscal 2022 First Quarter Earnings Conference Call. With me on today's call are Spark's CEO, Eric Eichmann; and Chief Financial Officer, David Clark. Before I turn the call over to Eric, I'd like to cover a few quick items. This afternoon, Spark Networks issued a press release announcing its fiscal 2022 first 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, May 9, 2022, 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. Today's earnings release and the related current report on Form 8-K describe the differences between our non-GAAP and GAAP reporting and present the reconciliation between the 2 for the periods reported in the release. With that said, I'll now turn the call over to Eric Eichmann, CEO of Spark Networks. Eric, please go ahead.

Thank you, Todd, and good afternoon, everyone. I want to start by providing more color around the well-developed road map of strategies and investments that we have put in place to drive revenue growth and ultimately, shareholder value in 2022 and beyond. Spark is a leader in social dating for meaningful relationships, targeting the 40-plus demographic and people with religious affiliations. We estimate the worldwide online dating market for meaningful relationships to be about $2.3 billion, growing at over 6% a year. We capture about 30% of this market in the U.S. with our strong portfolio of brands, which includes Zoosk, EliteSingles, SilverSingles, Christian Mingle and JDate. We are focused on 5 core markets

U.S., Canada, U.K., France and Australia, representing over 90% of our revenues, with the U.S. being our biggest focus with approximately 2/3 of total revenues. At the end of the first quarter, we completed the refinancing of our debt facility with MGG that for the first time in my tenure, positions us to drive revenue growth for both Zoosk and Spark as a whole. Given the fact that we didn't complete the refinancing of the debt agreement until the end of the quarter, the first quarter results we are reporting today are not indicative of the growth opportunity we have ahead of us. Spark is the fourth largest online subscription-based dating company across North America and Europe by revenue. And with our scale and our new debt facility in place, we now have the financial flexibility to execute on our plan to return to revenue growth. In fact, when we look at our metrics from April, which takes into account the start of our ramp-up marketing spend, we are seeing growth indicators across our key brands. Some of these include new subscriber growth for Zoosk, our largest property, grew 15% year-over-year in April. This is the leading growth indicator for our platform. Increases in profitable marketing spend made possible by our new debt agreement are driving this growth. Also, Zoosk subscribers coming from win backs and renewals grew 15% from the first week to the last week of April. Win backs and renewals are dependent on the overall past subscriber base, and as such, our lagging growth indicator. We are seeing good momentum on both, which over time should translate into accelerated momentum for billings. Female engagement, a leading indicator of a healthier and more productive dating platform, is growing on Zoosk, which we attribute to product improvements put in place in Q4 last year and Q1 this year. An updating matching algorithm and a revamped first-time user experience have driven the following year-over-year increases

a 14% increase in female paid subscriber conversions; a 14% increase in positive response rates to matches; a 9% increase in female daily active users and a 4.5% increase in female first day retention. We also saw higher conversion and lower charge backs in the quarter because of our payment optimization efforts, which include migrating to a more strategic payment partnership with Adient. Abandoned cart and more targeted CRM campaigns have also driven higher conversions. We plan to accelerate this growth momentum with further marketing and product investments. Thanks to our new debt agreement, we have an opportunity to meaningfully increase our 2022 direct marketing spend compared to 2021, and at similar levels of efficiency. We believe this increase in direct marketing spend will result in mid high single-digit revenue growth in 2022 and position us for even stronger revenue growth in 2023 and beyond. Some of these marketing investments include

increasing spend in proven and scalable channels that we had cut in 2021 due to debt covenants under our old debt facility, including affiliate marketing, paid search and media buying, investing in new channels such as TikTok, native and display. We expect this to provide significantly higher reach for our brands at attractive returns. Finally, targeting the majority of these increased spend in the U.S., our largest and most attractive online dating market. We are also continuing to focus on high-return product initiatives, specifically improving Zoosk profiles to drive higher engagement in the first 7 days of registration, enhancing or search and matching algorithms across all brands, driving higher engagement and ultimately billings, and simplifying our technology infrastructure by moving our primary brands from 3 platforms to 2. We plan to collapse most of our non-Zoosk platforms into one, allowing us to upgrade our ability and speed to drive innovation and improvements across all platforms. Finally, we are also revamping all our mobile apps. We believe this represents a significant future growth opportunity for Spark as we look to capture our fair share of mobile app revenue. All these product initiatives in concert with our increased marketing spend are fueling the growth we saw in April and give us confidence in our ability to grow revenue in 2022 and beyond. We believe the investment in talent, product technology and marketing in 2022 as well as our position in the market will allow us to capture the significant market opportunity we have in front of us and return the company to total revenue growth in 2020. With that, I'll ask David Clark, our Chief Financial Officer, to add more color around our financial performance for the quarter. David?

Thank you, Eric, and good afternoon, everyone. Revenue for the first quarter of 2022 was $52.4 million compared to $56.4 million in the first quarter of 2021. On a constant currency basis, that number would have been $54.6 million, down only 3% year-over-year. We attribute the decrease in total revenue during the first quarter to the decrease in Zoosk revenue resulting from continued lower marketing spend in last year's quarter and this year's first quarter before our refinancing. Adjusted EBITDA was $3.5 million in the first quarter compared to $5.1 million in the first quarter of 2021. The year-over-year decrease for the first quarter was primarily due to the Zoosk revenue decline and our increased product investment during the quarter. For the quarter, average paying subscribers decreased 839,000 compared to 896,000 in the same period of 2021. We attribute this decrease primarily to the constraints on marketing spend in the calendar year. Spark's monthly average revenue per user or monthly ARPU decreased slightly to $20.81 in the first quarter of 2022 compared to $20.97 in the same period of 2021. The decline in ARPU was a result of emphasizing longer duration subscriptions through price incentives. Net loss was $5.3 million in the first quarter of 2022 compared to a net loss of $6.5 million in the first quarter of 2021. Shifting to the balance sheet. The company ended the quarter with $13 million in cash and a GAAP debt balance of $94.3 million or net debt of $81.3 million. During the quarter, we were able to successfully refinance our existing debt facility to better fund our growth initiatives in 2022. Under the new $100 million debt facility with MGG Investment Group, we have extended our maturity dates and improved our covenant flexibility, which should allow us to invest in growing our business in 2022 and beyond. In fact, as Eric mentioned, we increased our direct marketing spend following the close of the refinancing. And for the month of April, we saw positive leading indicators of growth from this increased investment as new subscribers in Zoosk in April grew 15% year-over-year. We also saw billings, which include win-backs and renewals grow across Zoosk and non-Zoosk brands in April. Turning to guidance. We have put in place a well-developed road map and strategies through investments to drive revenue growth with ultimately shareholder value in 2022 and beyond. With our new debt facility in place, we now have the financial flexibility to execute on this plan. Accordingly, for the full year of 2022, we expect to return to mid- to high single-digit total revenue growth year-over-year. And with that, we're happy to take your questions. Operator?

[Operator Instructions]. And the first question will be from Raj Sharma with B. Riley.

Could you talk a little bit about your initiatives on sort of live streaming, social discovery, how those are, and some of the other things that you're doing to push up subscriber growth and engagement?

Raj, thank you very much for the question. So maybe first, on the subscriber growth that we're seeing, which is very exciting for us. As you know, Zoosk has been a declining property since we acquired it, and we are now, thanks to a lot of the things that we're doing around improving the product and also the improvement from our debt facility, we're able to spend more profitably, something that we have not done over the last couple of years, we actually had decreased marketing. So marketing is helping. We have a number of opportunities to spend profitably at similar levels of efficiency that we've had to drive subscribers, and we're seeing that. We're seeing really good momentum on that end. And then also, we talked a bit about the product initiatives, and in the discussion of it, we talked about female engagement metrics. They're the most important that we look at on the platform. We have response rates that are going up by 14%, and that's very positive. That means that the -- not only are we getting more people into the platform where the platform is actually getting people more engaged. We have a couple of initiatives that we've talked about in the prior quarters. One, obviously, Zoosk Live! and the other one -- and they're both social dating initiatives we're trying to get people to sort of do things more socially on the platform. We continue to get great feedback on Zoosk Great Dates or virtual dates to exciting destinations. We actually launched Paris, if you remember, on Valentine's Day and have lodged a couple of destinations. Since then, people that go through the experience love the experience. We're getting a lot of good feedback. And as we get more engagement into the platform, obviously, what we're hoping to do is get more people into that experience. We're also using that as a calling card for Zoosk in our advertising, and people are reacting well, that's building differentiation on Zoosk versus other platforms, and this is something that no other dating platform has out there.

Great. And then are you able to control churn further. I know that there was quite a bit of talk last year about the ability to sort of extend the amount of time that some factors are on the site, if you could talk about that, sort of keeping them [indiscernible].

Yes. So one of -- a couple of comments on this. One of the things that we started doing, I think it was Q1, Q2 last year, is providing incentives to get people in particular on this, we have sort of done a lot of these optimizations on the other brands previously. But on Zoosk, getting people that were sort of renewing or subscribing for 1, 2 months to subscribe to 6 months. And that's great because obviously, we get more billings upfront and we get people to stay longer. And that has been quite successful. It's had -- since revenues are recognized over time, even though we get the money upfront, that's been one of the impacts that we had in terms of revenue recognition, but at the same time, we've gotten a lot of people to commit to longer periods. And so that's been a very good and healthy driver for us. In addition to that, some of the initiatives that we talked about in terms of engagement on the platform are having its effect. So one of the key things that we look at is what we call the first-time user experience. Within that call at the beginning is where we have the most churn. And that's where we want to make sure that people, as they go in, they find matches that work for them, matches that they want to talk to, matches that are active. And a big part of revamping our matching algorithm is getting them in touch with those folks. And the most critical audience or folks that we have on our platform are females, and that's what we're seeing these engagement metrics going up. We are also doing a number of things from a sort of optimization perspective on other fronts. One, we talked about the payment optimization and being able to using Adient, which is the preferred sort of payment mechanism being able to increase conversion, reduce charge backs, which is great. And then finally, we've also switched to Brace as a CRM system, which is giving us a lot more flexibility in terms of targeting in automating a lot of our CRM campaigns, and that's driving more engagement, but it's also helping us drive more revenues or billings with sort of revenue campaigns there. So all of those things are coming into place. On churn, we've improved it mostly because the first-time user experience has improved. The rest of it hasn't changed dramatically, but it's been an improvement overall.

Got it. And then just lastly, I know you've indicated revenue growth mid- to high single digits, is there any sort of guidance on the direct marketing costs and/or EBITDA line? I know last year, you used to guide to that. Do you think the -- how much higher would the direct marketing cost be from last year?

Yes. David, do you want to talk a bit about that?

Sure. Yes. So we indicated on the last call that we expect to spend probably in the range of $110 million. With the refinancing, we're going to reevaluate that. And we want to have that flexibility because, as you know, in period, we can spend money that actually will be accretive over time, but it may not show up as revenue or EBITDA because of our revenue recognition. So we fully expect to be covenant compliant and actually put cash up on the balance sheet, even at a potentially higher spend, and we're evaluating that right now.

Correct. Okay. So...

But I think just to reiterate what David said, I think we're -- so we want to remain flexible, and that's in part why we remain a bit muted on the EBITDA. But the opportunity that we see is increasing or marketing at similar or better efficiency levels. And so that does have a very positive effect on billings. It has a very positive effect on subscribers, but it doesn't sort of immediately within the year translate into revenue or EBITDA.

[Operator Instructions]. And ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Eric Eichmann for any closing remarks.

Thank you, operator. One update before we conclude on the Investor Relations front, we will be attending 2 investor conferences in May. Next Wednesday, we will be participating in the Sidoti May Microcap Virtual Investor Conference. And the following week, I believe it's on Wednesday, we will be attending the 17th annual medium Technology and Media Conference in person that's in New York. We will be hosting one-on-one investor meetings at both of these conferences. With that, I want to thank everyone for your interest in Spark Networks and for joining our call. We look forward to updating you on our continued progress in the future. Have a great day.

Thank you, sir. Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.