FriendFinder Reports Lower Revenue as It Cuts Co-Branded Sites

SUNNYVALE, Calif. — FriendFinder Networks Inc. today reported a net loss of $7.7 million in its third quarter as it saw revenue shrink in the same quarter to $77.7 million compared to $82.7 million in the same period last year.

FriendFinder said its revenue in the quarter was negatively impacted by a decrease in affiliate-based traffic and lower-resulting Internet revenue as the company continues to eliminate 5,000 "lower margin" co-branded websites.

Anthony Previte, FriendFinder's CEO, said in a conference call that by eliminating the co-branded sites the company is able to refocus "efforts on more effectively supporting our dominant revenue-generating properties." FriendFinder announced it was cutting 5,000 co-branded white label sites in August.

"Reflective of these efforts was a 7.5 percent quarter-over-quarter and a 6.2 percent year-over-year improvement in average revenue per user within the adult segment during the third quarter," Previte said.

But the company ended with less subscribers in the past quarter — 763,000 — compared with the third-quarter subscription number last year — 850,000.

The company also said that its bottom line also was financially impacted by $1 million in fines imposed by Visa USA during the quarter.

Previte said the company is appealing the fines and has launched a campaign to effectively scrub more transactions.

FriendFinder also disclosed that last week it retained CRT Capital Group LLC as its financial advisor to help explore opportunities to refinance our long-term debt. The company said it didn't make a payment due Nov. 5 relative to loans from principal lenders, but 80 percent of lenders said they would forebear agreements.

"These agreements recognize the strengthening of our business and signal the continued support of our senior lenders," Previte said. "We will continue to pay interest during the refinancing phase." 

Previte said the company is close to launch a new interactive TV product in Europe "that we are very excited about" and that it plans to aggressively monetize social media initiatives. He also said that the flagship Penthouse brand will soon release an API that should help stimulate growth.

FriendFinder Networks Inc. operates AdultFriendFinder.com, Amigos.com, AsiaFriendFinder.com, Cams.com, FriendFinder. com, BigChurch.com and SeniorFriendFinder.com. FriendFinder Networks Inc. also owns Penthouse magazine and its video production line. It also engages in brand licensing.