EX-99.1 2 exh99_01.htm Exhibit 99.1

Exhibit 99.1

FOR RELEASE IMMEDIATE RELEASE


FRIENDFINDER NETWORKS INC. REPORTS FINANCIAL RESULTS FOR

FOURTH QUARTER AND YEAR END 2012


- Live Interactive Records 12th Consecutive Quarter of Year-Over-Year Growth

- Member to Subscriber Conversions Increase 15% Year-Over-Year

- Company Continues to Work With its Advisors and Lenders to Achieve a Refinancing of its Debt


(Sunnyvale, CA – April 1, 2013) FriendFinder Networks Inc. (NasdaqGM: FFN) (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 fourth quarter and year ended December 31, 2012.


“FriendFinder Networks continues to focus resources to support and grow our flagship brands, which are our most profitable properties, and represent the greatest promise over the long-term.  Our success in becoming more efficient with our marketing spend has resulted in improved operating margins and an increase in conversion of members to subscribers.  For example, our conversion of members to subscribers increased 15% year-over-year,” said Anthony Previte, Chief Executive Officer of FriendFinder Networks. “Additionally, we were able to achieve $21.9 million in Adjusted EBITDA for the quarter and $74.7 million for the full year, in line with our previous guidance.  Going forward, in the near term we anticipate that we will remain at approximately the same run rate we achieved during the second half of the year for Adjusted EBITDA and that additional operational adjustments will allow us to attract higher credit-quality customers, resulting in a more stable, revenue base and increasing levels of EBITDA.”  


“We continue to experience pockets of success throughout our operations.  Our Live Interactive segment, which currently represents 29% of total revenues, up from 25% last year, extended its streak of consecutive quarters of year-over-year revenue growth to twelve in the fourth quarter.  We have also experienced additional operational success as a result of our recent consolidation of our General Audience and Mobile segments.  As mobile increasingly represents a larger component of casual dating, we expect to continue to gain traction in this segment.  In fact, over 30% of Adult Dating members and 20% of Live Interactive members registered via mobile devices.”

  

“Finally, on February 4, 2013, we entered into an extension on the forbearance agreements with approximately 94% of the holders of our 14% Senior Secured Notes due 2013 and 100% of the holders of our Cash Pay Secured Notes due 2013.  We continue to work closely with our advisors, CRT Capital Group, and our lenders in order to refinance our debt and remain confident in our ability to achieve a successful refinancing.”


Fourth Quarter Financial Results


Revenue for the fourth quarter of 2012 was $74.5 million.  Revenue was negatively impacted by a decrease in affiliate based traffic and lower resulting internet revenue as the Company continues to eliminate lower margin co-brands.


Gross profit for the fourth quarter of 2012 was $51.9 million. Gross profit was negatively impacted by the reduced revenue offset partially by reduced affiliate expense.


Income from operations for the fourth quarter of 2012 was $17.4 million.


Net loss for the fourth quarter of 2012 was ($9.6) million, or ($0.30) per share.


Adjusted EBITDA for the fourth quarter of 2012 was $21.9 million.  


Full Year Financial Results:


Revenue for the year ended December 31, 2012 was $314.4 million.









Gross profit for the year ended December 31, 2012 was $205.4 million.


Income from operations for the year ended December 31, 2012 was $55.1 million.


Loss from continuing operations was ($35.8) million and loss from discontinued operations was ($13.6) million.


Net Loss for the year ended December 31, 2012 was ($49.4) million, or ($1.57) per share.


Adjusted EBITDA for the year ended December 31, 2012 was $74.7 million.


Balance Sheet, Cash and Debt


As of December 31, 2012, the Company had unrestricted cash and cash equivalents of $16.8 million, compared to $14.6 million at September 30, 2012.  As of December 31, 2012, the Company had outstanding principal debt of $521.8 million.  Free Cash Flow per Share was $0.21 for the fourth quarter ended December 31, 2012.


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 full year ended December 31, 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, 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.




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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 jgoldberger@kcsa.com / rfink@kcsa.com



Media Contact for FriendFinder Networks Inc.

Lindsay Trivento

Director, Corporate Communications

561.912.7010 or ltrivento@ffn.com  



# # #



3





FRIENDFINDER NETWORKS INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)


 

 

December 31,

 

 

2012

 

2011

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash

$

16,839

$

23,364

Restricted cash

 

10,064

 

11,177

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

and $1,155, respectively

 

12,323

 

8,939

Inventories

 

763

 

822

Prepaid expenses

 

3,436

 

5,645

Deferred tax asset

 

1,844

 

4,405

Total current assets

 

45,269

 

54,352

Film costs, net

 

3,627

 

4,105

Property and equipment, net

 

5,120

 

7,830

Goodwill

 

328,061

 

332.292

Domain names

 

56,614

 

56,093

Trademarks

 

5,643

 

6,613

Other intangible assets, net

 

330

 

16,920

Unamortized debt costs, net

 

6,179

 

11,754

Other assets

 

1,310

 

3,405

 

$

452,153

$

493,364

LIABILITIES

 

 

 

 

Current liabilities:

 

 

 

 

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

April 30, 2014 and in 2011, current installment of long term debt, net

of unamortized discount of $20,851 and $260, respectively

 

500,920

 

8,270

Accounts payable

 

5,040

 

11,324

Accrued expenses and other liabilities

 

62,227

 

68,930

Deferred revenue

 

34,741

 

42,299

Total current liabilities

 

602,928

 

130,823

Deferred tax liability

 

25,639

 

28,310

Long-term debt, net of unamortized discount of $34,170

 

 

462,515

Total liabilities

 

628,567

 

621,648

Commitments and contingencies (Notes Q and R)

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ DEFICIENCY

 

 

 

 

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

issued and outstanding no shares in 2012 or 2011.

 

 

 

 

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

in 2012 and 2011

 

 

 

 

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

outstanding 32,572,761 shares in 2012 and 31,219,644 in 2011.

 

32

 

31

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

issued and outstanding no shares in 2012 or 2011.

 

 

 

 

Capital in excess of par value

 

134,759

 

133,734

Accumulated deficit

 

(311,205)

 

(261,764)

Accumulated other comprehensive loss

 

— 

 

(285)

Total stockholders’ deficiency

 

(176,414)

 

(128,284)

 

$

452,153

$

493,364




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FRIENDFINDER NETWORKS INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


 

 

Year Ended December 31,

 

 

2012

 

2011

 

2010

Net revenue

 

 

 

 

 

 

Service

$

295,241

$

310,512

$

324,211

Product

 

19,138

 

19,924

 

21,786

Total

 

314,379

 

330,436

 

345,997

Cost of revenue

 

 

 

 

 

 

Service

 

94,225

 

92,996

 

97,959

Product

 

14,717

 

15,067

 

12,531

Total

 

108,942

 

108,063

 

110,490

Gross profit

 

205,437

 

222,373

 

235,507

Operating expenses:

 

 

 

 

 

 

Product Development

 

15,070

 

16,885

 

12,834

Selling and marketing

 

31,324

 

30,444

 

37,258

General and administrative

 

85,927

 

87,347

 

79,855

Amortization of acquired intangibles and software

 

13,855

 

15,759

 

24,461

Depreciation and other amortization

 

3,160

 

3,998

 

4,704

Impairment of other intangible assets

 

970

 

2,600

 

4,660

Total operating expenses

 

150,306

 

157,033

 

163,772

Income from operations

 

55,131

 

65,340

 

71,735

Interest expense, net of interest income

 

(89,243)

 

(85,989)

 

(88,508)

Other finance expenses

 

(500)

 

 

(4,562)

Interest related to VAT liability not charged to customers

 

(1,660)

 

(1,808)

 

(2,293)

Net loss on extinguishment and modification of debt

 

 

(7,312)

 

(7,457)

Foreign exchange (loss) gain, including amounts related to VAT liability not charged to customers

 

(958)

 

(498)

 

610

Change in fair value of acquisition related contingent consideration

 

1,400

 

(920)

 

Gain on liability related to warrants

 

 

391

 

38

Other non-operating expenses, net

 

(59)

 

(3,530)

 

(13,202)

Loss from continuing operations before income tax benefit

 

(35,889)

 

(34,326)

 

(43,639)

Income tax benefit

 

(71)

 

(6,472)

 

(486)

Loss from continuing operations

 

(35,818)

 

(27,854)

 

(43,153)

Loss from discontinued operations

 

(13,623)

 

(3,289)

 

Net loss

$

(49,441)

$

(31,143)

$

(43,153)

Net loss per common share – basic and diluted:

 

 

 

 

 

 

Continuing operations

 

(1.14)

 

(1.15)

 

(3.14)

Discontinued operations

 

(0.43)

 

(0.13)

 

Net loss

$

(1.57)

$

(1.28)

$

(3.14)

Weighted average shares outstanding — basic and diluted

 

31,560

 

24,249

 

13,735




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Reconciliation of GAAP Net Loss to EBITDA and Adjusted EBITDA

(IN THOUSANDS)


 

 

Consolidated Data

 

 

Quarter Ended

December 31,

 

Year Ended

December 31,

 

 

2012

 

2011

 

2012

 

2011

 

 

(in thousands)

GAAP net loss

$

(9,638)

$

(10,205)

$

(49,441)

$

(31,143)

Add: Interest expense, net

 

25,040

 

20,892

 

89,243

 

85,989

(Subtract): Income tax benefit

 

(71)

 

(930)

 

 

(6,472)

Add: Amortization of acquired intangible assets and software

 

2,735

 

4,293

 

13,855

 

15,759

Add: Depreciation and other amortization

 

799

 

730

 

3,160

 

3,998

EBITDA

$

18,865

$

14,780

$

56,817

$

68,131

 

 

 

 

 

 

 

 

 

Add: Impairment of other intangible assets

$

970

$

2,600

$

970

$

2,600

Add: Broadstream arbitration provision

 

 

 

 

7,050

Add: Loss related to VAT liability not charged to customers and foreign exchange gains/(losses)

 

1,681

 

(626)

 

2,618

 

2,306

Add: Net Loss on extinguishment and modification of debt

 

 

 

 

7,312

Add: Discontinued operations

 

 

 

13,623

 

3,289

Add: Other finance expenses

 

--

 

 

500

 

Add: Stock compensation expense

 

338

 

1,183

 

1,141

 

3,737

Add:  Severance costs

 

93

 

 

527

 

388

(Subtract)Add: Change in Acquisition related contingent consideration

 

--

 

920

 

(1,400)

 

920

Adjusted EBITDA

$

21,947

$

18,857

$

74,725

$

95,733




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Internet Segment Historical Operating Data


 

For the Year Ended December 31,

 

 

 

 

 

2012

 

2011

 

2010

 

 

 

 

 

 

 

Adult Websites

 

 

 

 

 

 

New Members

 

33,043,853

 

38,657,203

 

40,130,064

 

 

 

 

 

 

 

Beginning Subscribers

 

827,728

 

950,705

 

940,444

New Subscribers

 

1,568,567

 

1,595,736

 

1,804,669

Terminations

 

1,672,575

 

1,718,713

 

1,794,408

Ending Subscribers

 

723,720

 

827,728

 

950,705

 

 

 

 

 

 

 

Conversion of Members to Subscribers

 

4.7%

 

4.1%

 

4.5%

Churn

 

18.0%

 

16.1%

 

15.8%

ARPU

$

21.16

$

20.21

$

20.36

CPGA

$

45.00

$

44.02

$

47.41

Average Lifetime Net Revenue per Subscriber

$

72.77

$

81.45

$

81.34

Net Revenue (in millions)

$

197.0

$

215.6

$

231.4

 

 

 

 

 

 

 

Affiliate Commission Expense (in millions)

$

54.1

$

54.6

$

59.1

Ad Buy Expense (in millions)

$

16.5

$

15.6

$

26.5

Subscriber Acquisition Costs (in millions)

$

70.6

$

70.2

$

85.6

 

 

 

 

 

 

 

General Audience Websites

 

 

 

 

 

 

New Members

 

3,737,796

 

6,294,789

 

9,312,953

 

 

 

 

 

 

 

Beginning Subscribers

 

44,519

 

53,194

 

57,426

New Subscribers

 

80,144

 

98,105

 

114,688

Terminations

 

91,526

 

106,780

 

118,920

Ending Subscribers

 

33,137

 

44,519

 

53,194

 

 

 

 

 

 

 

Conversion of Members to Subscribers

 

2.1%

 

1.6%

 

1.2%

Churn

 

19.6%

 

18.2%

 

17.9%

ARPU

$

13.20

$

19.42

$

20.72

CPGA

$

36.60

$

27.96

$

29.27

Average Lifetime Net Revenue per Subscriber

$

30.59

$

78.67

$

86.37

Net Revenue (in millions)

$

6.2

$

11.4

$

13.8

 

 

 

 

 

 

 

Affiliate Commission Expense (in millions)

$

0.9

$

1.8

$

2.8

Ad Buy Expense (in millions)

$

2.0

$

1.0

$

0.5

Subscriber Acquisition Costs (in millions)

$

2.9

$

2.7

$

3.4

 

 

 

 

 

 

 

Live Interactive Video Websites

 

 

 

 

 

 

Total Minutes

 

36,681,368

 

34,922,953

 

35,459,839

Average Revenue per Minute

$

2.47

$

2.34

$

2.15

Net Revenue (in millions)

$

90.5

$

81.6

$

76.3

 

 

 

 

 

 

 




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