muscleman Posted May 23, 2013 Share Posted May 23, 2013 Recently Whitney Tilson's presentation mentioned this stock as the next NFLX, so I took a look into its 10k. I don't like it, and I am suspicious if this one could succeed at all, but I think maybe some of you understand it better than I do. They did a good job with JDate, and it is a mature cash cow. From its 10k, the average revenue minus direct expenses for JDate is about 22M. Whitney said this along is worth the 180M market cap. However, I do not agree with that. From that table, it shows there is 25m unallocated expenses, so in a worst case scenario, all the other sites fail, JDate along is insufficient to cover even the unallocated expenses, so I don't think we can say JDate along is worth the current market cap. (check out the 10k's 10. Segment Information) The next reason is that ChristianMingle is less likely to achieve the same success as JDate. Let's look at the link below, and you will see that their site is not even in the top 5. I think the largest network will continue to have the strongest moat, and the barrier of entry is very high. http://www.consumer-rankings.com/dating/christiandating/ I think bulls will argue that ChristianMingle will continue to use the cash from JDate to grow its business, and eventually maybe they will have a comparable network as the above 5. But I don't agree with this because JDate along's cash flow cannot even support all of the unallocated expenses. They have about 10M cash to burn through, and I don't think it will last more than two years before they have an liquidity issue. What can they do then? Link to comment Share on other sites More sharing options...
muscleman Posted May 23, 2013 Author Share Posted May 23, 2013 http://www.google.com/trends/explore?q=christianmingle.com#q=christianmingle.com%2C%20eharmony.com&cmpt=q http://www.google.com/trends/explore?q=christianmingle.com#q=christianmingle.com%2C%20%20perfectmatch.com&cmpt=q Also: http://www.google.com/trends/explore?q=christianmingle.com#q=christianmingle.com%2C%20%20catholicmatch.com&cmpt=q Additionally relevant: alexa.com, compete.com This is interesting to watch. But I am more concerned about is when they stop the cash burn for ChristianMingle, can they monetize the site? Link to comment Share on other sites More sharing options...
MYDemaray Posted May 24, 2013 Share Posted May 24, 2013 Most of my Christian friends looking for a serious dating service go to eHarmony...They were the first mover in that niche...years ago. Even if Christian Mingle can disrupt them, it begs the question...do you want to own a business that can be so easily disrupted? Link to comment Share on other sites More sharing options...
muscleman Posted May 24, 2013 Author Share Posted May 24, 2013 Most of my Christian friends looking for a serious dating service go to eHarmony...They were the first mover in that niche...years ago. Even if Christian Mingle can disrupt them, it begs the question...do you want to own a business that can be so easily disrupted? Also Peter Lynch's axiom scares me away: "Any company that is called the next XXXX will never work out." Whitney called LOV the next NFLX, so that probably draws the conclusion. :) Link to comment Share on other sites More sharing options...
GregS Posted May 31, 2013 Share Posted May 31, 2013 I was really intrigued by Tilson's presentation. I live in an area of California with lots of Christians and we have been bombarded by TV ads for Christian Mingle for the last year or so, so I was well aware of the brand but not the company. If they had success creating a niche website with JDate, it seemed like Spark could repeat the process with a much larger market. But I think MYDemaray's points about eHarmony are spot on. I think the potential market is large and there probably is room for more than one player, but the big question on Spark's profitability is can they leverage their marketing costs. It's going to be hard if they are constantly fighting for share against a bigger, more established player. As for scuttlebutt, check out the link below. Click through for the detailed comments, which were particularly interesting regarding Christian Mingle. http://www.singleroots.com/best-christian-dating-sites/ Link to comment Share on other sites More sharing options...
jawn619 Posted May 29, 2015 Share Posted May 29, 2015 I took a position into this today. Taking a look at their segments Jewish Networks is at a $20M run rate for revs and $18M of contribution profit. (a margin of over 85%!) Christian Networks is at a $24M run rate for revs and maybe $10M in contribution profit (margin of less than 50%) They have about $25M a year in unallocated operating expenses and its unclear how much of is required to run the business and how much a strategic buyer could cut out. On the high end, assuming they can stay at this rate with no decline and a large percentage of the unallocated operating expenses can be cut out by a buyer like IACI, I get a value of around $8.50 On the low end, If christian mingle is worth nothing and J-Date profits were cut in HALF I get a value of $2.75. The company has $0.40 in cash that could probably be taken out of the business. Other thoughts/questions How much of those unallocated expenses can be cut out? The J-Date franchise at first glance is insane. 90% contribution margins and I can't think of any other competitors that could start a Jewish dating network that could rival it. I've talked to a few friends who have used it and swear by it/love it. On most dating sites, as in life, girls have all the power/ability to select and are bombarded with literally 1000s of messages. While this is probably true on J-Date, my friend who is a Jewish male said he had more ability to choose on J-Date than on other sites like tinder and okcupid because a lot of the girls on J-Date are actively interested in a "nice jewish boy". Does J-Date have captive customers? would tinder and other apps steal customers? Revenues have been declining and is it because users and going to tinder/match/other free apps? Does the dating business suck in general? If someone finds success/dates someone seriously they pretty much leave and never return. I think the industry is a growing one but that doesn't mean much if J-Date or Christian mingle don't have competitive advantages. Christian Mingle brand is clearly not as strong from the lower contribution margins. I haven't done much research on it and any feedback is appreciated Link to comment Share on other sites More sharing options...
Gamecock-YT Posted May 29, 2015 Share Posted May 29, 2015 I noticed Lloyd Miller keeps buying it and it really doesn't fit in his normal pattern of companies. Link to comment Share on other sites More sharing options...
jawn619 Posted May 29, 2015 Share Posted May 29, 2015 I noticed Lloyd Miller keeps buying it and it really doesn't fit in his normal pattern of companies. Yeah I noticed that too. He owns 10% of the company now. What is his normal pattern for companies? He's pretty mixed looking at some of his holdings... High growth stocks and deep value... he seems to do it all. Link to comment Share on other sites More sharing options...
Gamecock-YT Posted May 29, 2015 Share Posted May 29, 2015 I noticed Lloyd Miller keeps buying it and it really doesn't fit in his normal pattern of companies. Yeah I noticed that too. He owns 10% of the company now. What is his normal pattern for companies? He's pretty mixed looking at some of his holdings... High growth stocks and deep value... he seems to do it all. You are right, he does mix it up. The vast majority I've researched are cash boxes with little insider ownership. He'll usually go activist and try to get special dividends. This and Cosi are the two big ones that have gone against the grain. Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted May 30, 2015 Share Posted May 30, 2015 Very interesting company that doesn't seem as profitable as you'd think. They do seem like they were able to increase prices between 2013 and 14' since revenue decreased at a slower rate than the more drastic decrease in APS (subscribers). Is there reason to think that APS will reverse trend from the across-the-board decline in 2014? How are others looking at the decrease in COGs? It says it was due to a decrease in marketing for the Christian Networks so are you assuming they will wind down Christian Mingle? Also, why did G&A increase so sharply if operations are shrinking? Is anyone concerned with all the litigation? Link to comment Share on other sites More sharing options...
jawn619 Posted May 30, 2015 Share Posted May 30, 2015 Very interesting company that doesn't seem as profitable as you'd think. They do seem like they were able to increase prices between 2013 and 14' since revenue decreased at a slower rate than the more drastic decrease in APS (subscribers). Is there reason to think that APS will reverse trend from the across-the-board decline in 2014? How are others looking at the decrease in COGs? It says it was due to a decrease in marketing for the Christian Networks so are you assuming they will wind down Christian Mingle? Also, why did G&A increase so sharply if operations are shrinking? Is anyone concerned with all the litigation? Schwab, Yeah I would have to say the toughest but probably the most important question is the one you asked about declining users at J-Date. The only way I've thought about that is what is the competitive advantage of J-Date vs other dating sites? When I look at the competitive advantage I ask two questions via Pat Dorsey from his discussion of moats. Does it reduce the customers search costs and does it increase the customer's willingness to pay? J-date seems to be a check on both ends. Dating services usually spread through word of mouth and If I were a single Jewish customer looking for these services going with J-Date lowers my search costs compared to testing out plentyoffish/match.com/other sites. Their ability to raise prices is a little less clear because of the reasons you mentioned. As for the Christian mingle brand, I don't think they'll wind it down because it's still profitable. The dating industry is growing as a whole but again it's unclear how strong the J-Date brand/moat is. The problem with Christian Mingle is that in the past was that they spent unwisely for growth. Basically every dollar in direct marking expenses didn't even equal a dollar in sales and you see that as they decrease spending this past quarter in direct marketing expense by 50% but top line rev decreased by only 20-25%. Also I would say that at first glance the company looks less profitable than it actually is because all the unallocated expenses. Ebay has a similar situation where they had the marketplace segment, the payments segment, and the corporate segment which just drained cash. Link to comment Share on other sites More sharing options...
jawn619 Posted March 4, 2016 Share Posted March 4, 2016 We have exited our stake in LOV. J-Date's continued decline in revenues were a big worry, as well as the lack of end user growth in its end market. Also competition from many free apps will probably siphon users and profits away from Spark. Management have been great with their turnaround efforts, but we don't see much upside from here unless the company gets sold to IAC. Link to comment Share on other sites More sharing options...
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