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    Stock Alert for FriendFinder Networks Inc. (FFN)

    FriendFinder Networks Inc. (FFN) is an Internet-based social networking and technology company operating several of the most heavily visited Web sites in the world, including AdultFriendFinder.com, Amigos.com, AsiaFriendFinder.com, Cams.com, FriendFinder.com, BigChurch.com and SeniorFriendFinder.com. Through a recent acquisition, the Company expanded into the social commerce market and now owns and operates JigoCity Web sites in more than five countries, providing members high quality, daily deals that are relevant to their individual lifestyles. FFN also produces and distributes original pictorial and video content and engages in brand licensing.

    Share Statistics (30-Jan-12)   FY

    2009

    FY

    2010

    %

    Chg

    Q3

    2010

    Q3

    2011

    %

    Chg

    Symbol FFN Revenue, $Mn 327.69 346.00 5.6% 84.62 82.74 -2.2%
    Current price $1.06 Gross marg. 72.0% 68.1% -5.4% 66.7% 66.3% -0.6%
    52wk Range: $0.51-$10.01 Oper. margin 18.6% 17.8%
    Avg Vol (3m): 157,710 Net margin -12.6% -12.5% -0.8% -5.8% -6.5% 12.1%
    Market Cap. 33.09M              
    Shares Outstanding 31.22M EPS, $ -1.27 -1.32 3.9% -0.36 -0.17 -52.8%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    Shares of FFN have gained 32.8% in the last five days and 41.3% in the last month; though the stock dropped 74.0% in the last six months to date.

    FFN on Monday jumped 19.1% to close the session at $1.06, stretching gains into a second day.  Over 3.53 million shares traded hands during the session, versus the 10-day average volume of over 241 K.  The stock has a 52-week high of $10.01 and a low of $0.51. FFN is currently above its 50-day moving average of $0.72 and below its 200-day moving average of $2.10

    The Boca Raton, Fla.-based Internet and technology company last week announced  a cost reduction initiative aimed at more closely aligning its cost structure with its new business model.

    The Company said the cost reduction initiative includes the consolidation of its offices globally to fewer locations and relocating a number of operations to its main facility in Sunnyvale. In connection with this consolidation, there have been changes to the Company’s workforce across multiple locations.

    In the first quarter of fiscal 2012, the Company expects to record a total charge of about $500 K attributable mainly to workforce changes, consisting primarily of cash expenditures for separation related benefits. The Company expects these cash expenditures will be paid through May 2012.

    “We are confident these actions will enable our individual business units to operate more efficiently, and therefore, in a more cost-effective manner as we focus on growing our revenues,” commented Marc Bell, CEO of FFN.

    As a result of these actions, the Company is expected to trim its operating expenses by $10 million per year.

    Source: http://www.ffn.com/category/public-relations/

    Financial Summary

    FFN reported revenue of $82.7 million for the third quarter of 2011. The Company said its revenue was impacted by a decrease in traffic and a decline in new subscribers and renewal orders primarily in European markets. Social networking revenue was offset by an increase in live interactive video.

    The Company realized income from operations of $14.7 million for the quarter, impacted by a lower gross margin and an increase in product development, selling and marketing, and general and administrative spending. The increase in these expenses was primarily due to an increase in headcount across the Company as it develops its business units and general and administrative expenses related to stock compensation expense.

    FFN posted a net loss of $5.4 million, or $0.18 per share, for the quarter.  Adjusted EBITDA came in at $20.3 million.

    As of September 30, 2011, the Company had cash and cash equivalents of $28.2 million, compared to $42.0 million at December 31, 2010. As of November 14, 2011, the Company had outstanding principal debt of $491.8 million. On November 4, 2011, the Company paid down $7.3 million of New First Lien Notes and Cash Pay Second Lien Notes. Free Cash Flow per Share was $0.36 and $1.99 for the three and nine months ended September 30, 2011, respectively.

    Source: http://www.ffn.com/press/friendfinder-networks-inc-reports-financial-results-for-third-quarter-2011/

    Financial Strength (30-Jan-2012)

    Company

    Industry

    Sector

    S&P 500

    Quick Ratio (MRQ) 0.38 0.68 1.11 0.65
    Current Ratio (MRQ) 0.39 2.97 2.74 1.01
    LT Debt to Equity (MRQ) 11.79 13.35 96.40
    Total Debt to Equity (MRQ) 19.13 23.10 135.57
    Interest Coverage (TTM) 1.25 1.97 27.39

    Source: Reuters.com, SEC Filings.

    Technical Analysis

    Source: http://stockcharts.com

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Jan30-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    Renren Inc. RENN 6.35 2.51B n/a n/a 21.27 14.18
    Linkedin Corp. LNKD 75.00 7.34B 241.94 131.58 14.28 8.91
    Quepasa Corp. QPSA 4.99 171.03M n/a n/a 4.49 3.54
    Groupon Inc. GRPN 19.63 12.62B n/a 65.43 7.94 5.54
    Internet Software & Services Median       30.56 n/a 1.77 n/a
    FriendFinder Networks Inc. FFN 1.06 32.78M 0.60 0.58 0.10 0.10

    Source: Thomson Financial

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