United Online Reports First Quarter Results


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        Content & Media Grows to 51% of All Pay Accounts and 34% of Total Revenues
    Record Quarterly Growth of 265,000 Content & Media Pay Accounts
    Strong Growth in Advertising Revenues

WOODLAND HILLS, Calif., May 1, 2007 (PRIME NEWSWIRE) -- United Online, Inc. (Nasdaq:UNTD), a leading provider of consumer Internet and media services, today reported financial results for its first quarter ended March 31, 2007.

"United Online delivered an impressive first quarter, which was particularly strong for our growing Content & Media segment that now represents 34% of total revenues and 51% of total pay accounts," commented Mark R. Goldston, chairman and chief executive officer. "Eclipsing the 50% threshold in our pay account mix is another important milestone in our Content & Media diversification strategy that began in 2004. Importantly, our Communications segment continued to generate strong adjusted OIBDA, enabling us to invest significantly in the Content & Media segment while continuing to return cash to shareholders."

Summary Results:

The following table summarizes key financial results for the first quarter ended March 31, 2007:

 

                            (in millions, except per share
                                   and account figures)
  Financial Highlights        Q1 2007     Q1 2006     % Change
  ---------------------       -------     -------     --------
  Content & Media revenues     $44.2        $27.0        64%
  Communications revenues       85.7        100.3       -15%
                              ------       ------
  Consolidated revenues       $129.9       $127.3         2%
                              ======       ======
  GAAP operating income        $22.1        $20.6         8%
  Adjusted OIBDA(1)            $34.4        $34.6        -1%
  GAAP net income              $13.0        $12.7         3%
  GAAP net income per
   diluted share               $0.19        $0.20        -5%

  Adjusted net income(2)       $18.5        $18.1         2%
  Adjusted net income per
  diluted share(2)             $0.27        $0.27         --
  Change in total
   pay accounts(3)          +130,000      +84,000
 
  * Advertising revenues were $33.5 million, an increase of 107%
    versus the year-ago quarter.
  * Content & Media revenue growth reflects a combination of
    organic growth and the impact of the April 2006 acquisition
    of MyPoints.
  * GAAP net income was $0.19 per diluted share, versus $0.20 per
    diluted share in the prior year quarter, which included a positive
    $0.02 adjustment from the cumulative effect of change in accounting
    principle.
  * The slight decline in adjusted OIBDA reflects increased
    investment in the Content & Media growth opportunity,
    including investment in sales and marketing initiatives.
  * Pay accounts and active accounts totaled 5.0 million and
    20.1 million, respectively, at March 31, 2007.

"Our continued investment in Content & Media enabled United Online to deliver improved results," Goldston continued. "We added 265,000 Content & Media pay accounts during the first quarter, representing record performance for segment organic growth. The large increase in pay accounts is primarily attributable to the success of several new features introduced during the past few months. We were also pleased that Content & Media revenues grew on a sequential basis in the first quarter, despite the period being seasonally slower for advertising sales relative to the fourth-quarter holiday period."

Cash Flow, Balance Sheet and Dividend Highlights:

 
  * United Online generated $25.2 million in cash flows from
    operations and $20.3 million in free cash flow(4) during the
    first quarter of 2007.
  * Cash balances at March 31, 2007 increased to $168.0 million
    from $162.4 million at December 31, 2006, including cash,
    cash equivalents and short-term investments.
  * During the first quarter of 2007, the company paid $13.7
    million in dividends and repurchased $2.7 million in common
    stock (to satisfy tax withholding on vested restricted stock
    units).
  * As announced separately today, the company's Board of
    Directors has declared a regular quarterly cash dividend of
    $0.20 for the ninth consecutive quarter. The record date of
    the dividend is May 14, 2007, and the dividend is payable on
    May 31, 2007.

First Quarter 2007 Segment Results:

Content & Media:

 

                            (in millions, except percentages)
                                                       %
  Financial Highlights       Q1 2007     Q1 2006     Change
  --------------------       -------     -------     ------
  Billable services
   revenues                   $ 23.4      $ 20.5       14%
  Advertising revenues          20.8         6.5      221%
                             -------     -------
  Segment revenues             $44.2      $ 27.0       64%
                             =======      ======
  % of consolidated             34.0%       21.2%
   revenues
  Segment income from
   operations                  $ 5.8       $ 6.3       -8%
  Segment adjusted
   OIBDA(1)                    $ 5.8       $ 6.3       -8%
    as % of segment
     revenues(1)                13.1%       23.3%
  * Content & Media pay accounts increased by 265,000 during the
    first quarter to 2.5 million. The segment represented 50.6%
    of total pay accounts at March 31, 2007.
  * The decline in segment adjusted OIBDA primarily reflects
    increased investment spending, particularly in sales and
    marketing initiatives.

Communications:

 

                          (in millions, except percentages)
                                                      %
  Financial Highlights     Q1 2007      Q1 2006     Change
  --------------------     -------      -------     ------
  Billable services
   revenues                $ 73.0       $ 90.7        -20%
  Advertising revenues       12.7          9.7         31%
                           ------       ------
  Segment revenues         $ 85.7       $100.3        -15%
                           ======       ======
  % of consolidated
   revenues                  66.0%       78.8%
 Segment income from
  operations               $ 32.8       $33.5         -2%
 Segment adjusted
  OIBDA(1)                 $ 32.8       $33.5         -2%
   as % of segment
    revenues(1)              38.3%       33.4%
  * Communications pay accounts declined by 135,000 to 2.5 million,
    and represented  49.4% of total pay accounts at March 31, 2007.
  * The increase in segment adjusted OIBDA as a percentage of
    segment revenues reflects the company's focus on managing
    the Communications segment for profitability and cash flow.

Other:

 

  * Other reconciling items (unallocated corporate expenses) to
    arrive at consolidated adjusted OIBDA(1) were ($4.2) million,
    versus ($5.1) million in the year-ago quarter.

United Online President and Chief Financial Officer Charles S. Hilliard commented, "The combination of Content & Media diversification and financial discipline enabled us to deliver solid profitability as we manage our maturing Communications segment. We are also pleased with our strong cash flow, as consolidated free cash flow more than doubled from the year-ago quarter."

"With our outstanding Q1 performance," Hilliard continued, "we are increasing our 2007 operating income and adjusted OIBDA guidance and initiating formal revenue guidance for the year."

Business Outlook:

The following forward-looking information includes certain projections made by management as of the date of this press release. United Online does not intend to revise or update this information and may not provide this type of information in the future. Due to a variety of factors, actual results may differ significantly from those projected. Factors include, without limitation, the factors referenced later in this announcement under the caption "Cautionary Information Regarding Forward-Looking Statements." These and other factors are discussed in more detail in the company's filings with the Securities and Exchange Commission. In addition, the stock-based compensation and weighted average diluted shares projections are based on estimated equity grants for 2007, and actual grants could vary significantly from those currently estimated.

Below is the company's guidance for the June 2007 quarter and the year ending December 31, 2007 (in millions):

 

                                                        Prior 2007
                      Q2 2007            2007             Estimate
                  ---------------   ---------------   -------------
                                                           (See
  Revenues        $128.0 - $132.0   $510.0 - $520.0     Footnote 5)

  Operating
   income           $18.8 - $20.8    $86.2 - $90.2     $78.5 - $83.5
     Depreciation        4.6             18.5              21.0
     Amortization        3.2             12.8              19.0
     Stock-based
      compensation       6.4             24.5              21.0
     Restructuring
     charges             1.0              1.0               1.5
                  ---------------   ----------------   ----------------
  Adjusted 
   OIBDA(1)        $34.0 - $36.0    $143.0 - $147.0    $141.0 - $146.0
                   =============    ===============    ===============
  Weighted average
   diluted
   shares           70.0 - 71.0       70.5 - 71.5        70.0 - 71.0
                   =============    ===============    =============== 

(1) Adjusted operating income before depreciation and amortization (adjusted OIBDA) is defined by the company as operating income before depreciation; amortization; stock-based compensation; restructuring charges; and impairment of goodwill, intangible assets and long-lived assets. Management believes that because adjusted OIBDA excludes (1) certain non-cash expenses (such as depreciation, amortization, stock-based compensation and impairment of goodwill, intangible assets and long-lived assets); and (2) expenses that are not reflective of the company's core operating results over time, this measure provides investors with additional useful information to measure the company's performance, particularly with respect to changes in performance from period to period. Management uses adjusted OIBDA to measure the company's performance. The company's board of directors uses this measure in determining certain compensation incentives for certain members of the company's management. Adjusted OIBDA is not determined in accordance with accounting principles generally accepted in the United States of America (GAAP) and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. A limitation associated with the use of adjusted OIBDA is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the company's business. Management evaluates the costs of such tangible and intangible assets through other financial measures such as capital expenditures and purchase accounting. An additional limitation associated with this measure is that it does not include stock-based compensation expenses related to the company's workforce. Management compensates for this limitation by providing supplemental information about stock compensation expense on the face of the consolidated statements of operations. A further limitation associated with the use of this measure is that it does not reflect the costs of restructuring charges and impairment charges. Management compensates for this limitation by providing information about restructuring charges and impairment charges. Management does not believe any of these limitations are material, particularly when such measure is disclosed with its most comparable GAAP financial measure, operating income. A reconciliation to operating income is provided in the accompanying tables.

Adjusted OIBDA for each of the company's segments is defined by the company as segment income from operations as set forth in the company's Form 10-Ks and Form 10-Qs before restructuring charges and impairment of goodwill, intangible assets and long-lived assets. Management believes that because segment adjusted OIBDA and segment adjusted OIBDA as a percentage of such segment's revenues exclude certain non-cash expenses and expenses that are not reflective of the segment's core operating results over time, these measures provide investors with additional useful information to measure the company's segment performance, particularly with respect to changes in performance from period to period. Segment adjusted OIBDA and segment adjusted OIBDA as a percentage of such segment's revenues are not determined in accordance with GAAP and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. A limitation associated with the use of these measures is that they do not reflect the costs of restructuring charges and impairment charges related to an operating segment. Management compensates for this limitation by providing information about restructuring charges and impairment charges by segment. Management does not believe this limitation is material, particularly when such measure is disclosed with its most comparable GAAP financial measure, segment income from operations. A reconciliation to segment income from operations is provided in the accompanying tables.

(2) Adjusted net income is defined by the company as net income before the after-tax effect of amortization of intangible assets; stock-based compensation; restructuring charges; impairment of goodwill, intangible assets and long-lived assets; and the cumulative effect of a change in accounting principle as a result of the adoption of FAS 123R, and the re-measurement of certain deferred tax assets. Management believes that adjusted net income and adjusted net income per diluted share provide investors with additional useful information to measure the company's financial performance, particularly from period to period, because these measures are exclusive of (1) certain non-cash expenses (such as amortization, stock-based compensation and impairment of goodwill, intangible assets and long-lived assets) and (2) expenses that are not reflective of the company's core results over time. Management also uses adjusted net income and adjusted net income per diluted share for this purpose. Adjusted net income and adjusted net income per diluted share are not determined in accordance with accounting principles generally accepted in the United States of America (GAAP) and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. The limitations of adjusted net income and adjusted net income per diluted share are that, similar to adjusted OIBDA, they do not include certain costs, and the terms adjusted net income and adjusted net income per diluted share do not have standardized meanings. Therefore, other companies may use the same or similarly named measures but exclude different items or use different computations, which may not provide investors a comparable view of the company's performance in relation to other companies in the same industry. Management compensates for this limitation by presenting the most comparable GAAP measure, net income and net income per diluted share, directly ahead of adjusted net income and adjusted net income per diluted share in this earnings release and by providing a reconciliation that shows and describes the adjustments made. Management does not believe these limitations are material, particularly when such measures are disclosed with the most comparable GAAP financial measure, net income and net income per diluted share. A reconciliation to net income is provided in the accompanying tables.

(3) A pay account represents a unique billing relationship with a customer who subscribes to one or more of the company's services. A pay account does not equate to a unique subscriber since one subscriber could have several pay accounts. Active accounts are defined as all free access, VoIP, social-networking and email users that logged on to our services at least once during the preceding 31 days, together with all pay accounts. Additionally, active accounts include the number of free Web sites that received at least one unique visitor within the preceding 90 days; the number of free photo-sharing users that logged on to the service at least once within the preceding 90 days; and the number of MyPoints members who earned points or spent points within the preceding 90 days.

(4) Free cash flow is defined by the company as net cash provided by operating activities, less capital expenditures and including the excess tax benefits from stock-based compensation and cash paid for restructuring charges. Management believes that this measure of free cash flow provides investors with additional useful information to measure operating liquidity because it reflects the company's operating cash flows after investing in capital assets. This measure is used by management, and may also be useful for investors, to assess the company's ability to pay its quarterly dividend, repay debt obligations, generate cash flow for a variety of strategic opportunities, including reinvestment in the business, and effect potential acquisitions and share repurchases. Free cash flow is not determined in accordance with accounting principles generally accepted in the United States of America (GAAP) and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. The limitation of free cash flow is that it does not represent the total increase or decrease in cash during the period. Management does not believe that this is a material limitation, particularly when such measure is disclosed with its most comparable GAAP financial measure, net cash provided by operating activities. A reconciliation to net cash provided by operating activities is provided in the accompanying tables.

(5) The company previously provided guidance of "a slight to moderate decline in total revenues for fiscal year 2007 when compared to total revenues for fiscal year 2006."

Conference Call

United Online will host a conference call today at 2:00 p.m. PDT (5:00 p.m. EDT) to discuss its quarterly results. A live Web cast of the call can be accessed through the Investors section of the company's Web site at http://www.unitedonline.com/. A recording of the call will be available on the site for seven days.

About United Online

United Online, Inc. (Nasdaq:UNTD) is a leading provider of consumer Internet and media services. The company's Content & Media services include social networking (Classmates) and online loyalty marketing (MyPoints). Its Communications services include Internet access (NetZero, Juno) and email. United Online is headquartered in Woodland Hills, CA, with offices in New York, NY; Fort Lee, NJ; Renton, WA; San Francisco, CA; Schaumburg, IL; Orem, UT; Erlangen, Germany; and Hyderabad, India. For more information about United Online, please visit http://www.unitedonline.com/.

Cautionary Information Regarding Forward-Looking Statements

This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, as amended. Statements containing words such as "guidance," "may," "believe," "will," "expect," "project," "projections," "business outlook" and "estimate" or similar expressions constitute forward-looking statements. These statements include, without limitation, expectations regarding future financial performance; weighted average diluted shares; depreciation and amortization; stock-based compensation and restructuring charges. Any such forward-looking statements are not guarantees of future performance or results, and involve risks and uncertainties that may cause actual performance and results to differ materially from those predicted and reported results should not be considered an indication of future performance. Potential risks and uncertainties include, among others: the effect of competition, including adoption of broadband services and changes in the company's pricing or competitors' pricing, and the use of promotional offers to acquire or retain subscribers; the company's inability to retain its existing subscribers and the rate at which new subscribers sign up for the company's services; changes in pay accounts and the mix of pay accounts; the effects of changes in marketing expenditures or shifts in marketing expenditures to support existing and new products and services; the effects of seasonality; changes in Internet usage; changes in the projected number of weighted average diluted shares due to the issuance of stock, restricted stock units and stock options, stock repurchases, fluctuations in the company's stock price or other factors; changes in stock-based compensation; changes in the projected amortization and depreciation figures due to capital spending or other factors; potential impairment of goodwill and intangibles; that the company will incur additional restructuring charges or currently anticipated restructuring charges will be greater than anticipated; risks associated with the commercialization of new services; changes in tax laws, the company's business or other factors that would impact anticipated tax benefits; changes in usage by subscribers, additional telecommunications costs or other factors negatively impacting the company's cost of revenue; changes in active accounts; the company's inability to maintain, renew, or enter into new agreements with telecommunications providers on attractive terms; the company's ability to successfully integrate acquisitions; problems associated with the company's billing systems; the company's inability to retain key customers and key personnel; technological problems or developments; risks associated with litigation; and governmental regulation. From time to time, the company considers acquisitions or divestitures that, if consummated, could be material. Forward-looking statements regarding financial metrics are based upon the assumption that no such acquisition or divestiture is consummated during the relevant periods. If an acquisition or divestiture were consummated, actual results could differ materially from any forward-looking statements. More information about potential factors that could affect the company's business and financial results is included in the company's annual and quarterly reports filed with the Securities and Exchange Commission (http://www.sec.gov/), including, without limitation, information under the captions "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors."

 
                            UNITED ONLINE, INC.
            Unaudited Consolidated Statements of Operations
                 (in thousands, except per share amounts)
                                           ---------------------------
                                             Quarter Ended March 31,
                                           ---------------------------
                                              2007             2006
                                           ---------        ----------
 Revenues                                  $ 129,851        $ 127,332
 Operating expenses:                                         
     Cost of revenues(a)                      29,247           29,890
     Sales and marketing(a)                   46,025           43,419
     Product development(a)                   13,471           12,816
     General and administrative(a)            15,489           16,246
     Amortization of intangible          
      assets                                   3,495            4,389
                                           ---------        ---------
        Total operating expenses             107,727          106,760
                                           ---------        ---------
                                                            
 Operating income                             22,124           20,572
                                                             
 Interest and other income, net                1,700            1,716
 Interest expense                               (360)          (1,716)
                                            ---------       ---------
                                                             
 Income before income taxes                   23,464           20,572
                                                             
     Provision for income taxes               10,436            8,921
                                            ---------       ---------
                                                             
 Income before cumulative effect         
  of change in accounting principle           13,028           11,651
 Cumulative effect of change in          
  accounting principle, net of tax                --            1,041
                                                             
                                            ---------       ---------
 Net income                                 $  13,028       $  12,692
                                            =========       =========
                                                             
 Basic net income per share                                  
     Income before cumulative effect     
      of change in accounting            
      principle                             $    0.20       $    0.19
     Cumulative effect of change         
      in accounting principle, net       
       of tax                                     --             0.01
                                            ---------       ---------
 Basic net income per share                 $    0.20       $    0.20
                                            =========       =========
                                                             
 Diluted net income per share                                
     Income before cumulative effect     
      of change in accounting            
      principle                             $    0.19       $    0.18
     Cumulative effect of change in      
      accounting principle, net of tax            --             0.02
                                            ---------       ---------
 Diluted net income per share               $    0.19       $    0.20
                                            =========       =========
                                                             
 Shares used to calculate basic net      
  income per share                             65,627          62,511
                                            =========       =========
 Shares used to calculate diluted        
  net income per share                         68,080          64,889
                                            =========       =========
 Shares outstanding at end of period           66,420          63,527
                                            =========       =========
                                                             
 (a)  Stock-based compensation was       
       allocated as follows:                 
                                                             
 Cost of revenues                           $     194       $     237
 Sales and marketing                              892             944
 Product development                            1,245           1,466
 General and administrative                     1,716           2,322
                                            ---------       ---------
    Total stock-based compensation          $   4,047       $   4,969
                                            =========       =========
 
                              UNITED ONLINE, INC.
                   Reconciliation of Non-GAAP Financial Data
                                (in thousands)
 
                                              Quarter Ended March 31,
                                           ---------------------------
                                              2007              2006
                                           ----------        ---------
 Adjusted Operating Income Before 
  Depreciation and Amortization(1)
 Operating income                            $ 22,124         $ 20,572
  Depreciation                                  4,745            4,707
  Amortization                                  3,495            4,389
                                            ---------        ---------
 Operating income before depreciation    
  and amortization                             30,364           29,668
  Stock-based compensation                      4,047            4,969
                                            ---------        ---------
 Adjusted operating income before        
  depreciation and amortization              $ 34,411         $ 34,637
                                            =========        =========
                                                             

 Reconciliation of Segment Income from Operations to Adjusted OIBDA(1)
                                   
                                              Quarter Ended March 31,
                                           ---------------------------
                                              2007              2006
                                           ----------        ---------
 Content & Media:  
 Segment income from operations               $ 5,765          $ 6,294
  Restructuring charges                           --               --
  Impairment of goodwill, intangible      
   assets and long-lived assets                   --               --
                                            ---------        ---------
 Adjusted operating income before        
  depreciation and amortization               $ 5,765          $ 6,294
                                           ==========        =========
                                                             
 Communications:                                             
 Segment income from operations              $ 32,834         $ 33,468
  Restructuring charges                           --               --
  Impairment of goodwill, intangible      
   assets and long-lived assets                   --               --
                                            ---------        ---------
 Adjusted operating income before        
  depreciation and amortization              $ 32,834         $ 33,468
                                            =========        =========

 
                            UNITED ONLINE, INC.
              Reconciliation of Net Income to Adjusted Net Income(2)
                   (in thousands, except per share amounts)

                                              Quarter Ended March 31,
                                            --------------------------
                                              2007              2006
                                            --------         ---------
 Net income                                 $ 13,028         $ 12,692
 Add (deduct):                                              
  Stock-based compensation                     4,047            4,969
  Amortization of intangible assets            3,495            4,389
  Cumulative effect of change in 
   accounting principle                          --            (1,041)
                                            --------         --------
                                              20,570           21,009
                                                            
 Income tax effect of adjusting entries       (2,049)          (2,923)
                                            --------         --------
 Adjusted net income                        $ 18,521         $ 18,086
                                            ========         ========
                                                            
 Adjusted basic net income per share          $ 0.28           $ 0.29
                                            ========         ========
 Adjusted net income per diluted share        $ 0.27           $ 0.27
                                            ========         ========
                                                            
 Shares used to calculate adjusted 
  basic net income per share                  65,627           62,511
                                            ========         ========
 Shares used to calculate adjusted net
  income per diluted share(a)                 69,089           65,817
                                            ========         ========
                                                              
 ----------------------------------------------------------------------
 (a) Includes the adjustment of shares used to calculate net income per
 diluted share resulting from the elimination of stock-based compensation.

 
                          UNITED ONLINE, INC.
             Unaudited Condensed Consolidated Balance Sheets
                           (in thousands)
                                             March 31,     December 31,
                                               2007            2006
                                            ----------     -----------
 ASSETS
   Cash, cash equivalents and 
    short-term investments                   $ 168,011      $ 162,362
   Accounts receivable, net                     30,739         32,226
   Deferred tax assets, net                     71,747         71,360
   Property and equipment, net                  35,339         34,296
   Goodwill and intangible assets, net         183,180        186,671
   Other assets                                 17,164         16,104
                                             ---------      ---------
      Total assets                           $ 506,180      $ 503,019
                                             =========      =========
                                                          
 LIABILITIES AND STOCKHOLDERS' EQUITY                     
   Accounts payable                           $ 37,806       $ 36,550
   Accrued liabilities                          30,016         39,547
   Member redemption liability                  21,182         19,989
   Deferred revenue                             61,593         56,348
   Capital leases                                   26             30
   Other liabilities                             4,782          3,589
                                             ---------      ---------
      Total liabilities                        155,405        156,053
                                             ---------      ---------
                                                          
   Stockholders' equity                        350,775        346,966
                                                          
                                             ---------      ---------
     Total liabilities and stockholders'                  
       equity                                $ 506,180      $ 503,019
                                             =========      =========
 

 
                          UNITED ONLINE, INC.
         Unaudited Condensed Consolidated Statements of Cash Flows
                             (in thousands)
                                             -------------------------
                                              Quarter Ended March 31,
                                             -------------------------
                                               2007             2006
                                             --------         --------
 CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                  $ 13,028         $ 12,692
 Adjustments to reconcile net income to 
  net cash provided by operating 
  activities:
   Depreciation, amortization and 
    stock-based compensation                   12,287           14,065
   Deferred taxes and other                      (192)           1,135
   Tax benefits from stock-based 
    compensation                                1,169            1,873
   Excess tax benefits from stock-based 
    compensation                                 (868)          (1,414)
   Cumulative effect of change in 
    accounting principle, net of tax              --            (1,041)
   Change in operating assets and 
    liabilities (excluding the effects of
    acquisitions):
      Accounts receivable                       1,486            1,394
      Other assets                             (1,060)            (730)
      Accounts payable and accrued 
       liabilities                             (7,028)         (15,541)
      Member redemption liability               1,193               -- 
      Deferred revenue                          5,246            1,846
      Other liabilities                           (55)             (40)
                                             ---------        ---------
        Net cash provided by operating 
         activities                            25,206           14,239
                                             ---------        ---------
 CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment          (5,797)          (7,061)
  Purchases of rights, patents and 
   trademarks                                      --             (509)
  Purchases of short-term investments         (79,491)        (124,121)
  Proceeds from maturities and sales of
   short-term investments                      71,040          115,320
  Cash paid for acquisitions, net of 
   cash acquired                                   --          (10,990)
  Proceeds from sales of assets, net               14              --
                                             ---------        ---------
       Net cash used for investing 
        activities                            (14,234)         (27,361)
                                             ---------        ---------
 CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on term loan                           --           (54,209)
  Payments on capital leases                       (4)             (50)
  Proceeds from exercises of stock 
   options                                      1,883            2,622
  Repurchases of common stock                  (2,657)          (1,643)
  Payments for dividends                      (13,727)         (12,868)
  Excess tax benefits from stock-based 
   compensation                                   868            1,414
                                             ---------        ---------
       Net cash used for financing 
        activities                            (13,637)         (64,734)
                                             ---------        ---------
  Effect of exchange rate changes on 
   cash and cash equivalents                       (2)              28
 Change in cash and cash equivalents           (2,667)         (77,828)
 Cash and cash equivalents, beginning
  of period                                    19,252          100,397
                                             ---------        ---------
 Cash and cash equivalents, end of 
  period                                     $ 16,585         $ 22,569
                                             =========        =========

 
                           UNITED ONLINE, INC.
               Reconciliation of Non-GAAP Financial Data
                             (in thousands)

                                              Quarter Ended March 31,
                                            --------------------------
                                              2007              2006
                                            --------          --------
 Free Cash Flow(4)
 Net cash provided by operating 
  activities                                $ 25,206          $ 14,239
 Add (deduct):                                                
  Capital expenditures                        (5,797)           (7,061)
  Excess tax benefits from stock-based                         
   compensation(a)                               868             1,414
                                            ---------         --------
 Free cash flow                             $ 20,277           $ 8,592
                                            =========         ========
                                                               
 ---------------------------------------------------------------------
 (a) In accordance with FAS 123R, certain tax benefits from exercised
 stock options that were previously reflected in the operating section
 of the statement of cash flows are now  presented in the financing
 section.
                    
                               UNITED ONLINE, INC.
                 Supplemental Schedule of Segment Information
                               (in thousands)

                               Quarter Ended March 31, 2007
                   ---------------------------------------------------
                    Content                   Unallocated
                       &         Communi-      Corporate 
                     Media       cations       Expenses          Total
                   --------      --------      --------       --------
 Billable 
  services          $23,354      $ 72,966      $     --       $ 96,320
 Advertising         20,821        12,710            --         33,531
                    -------      --------      --------       --------
  Total                                                    
   revenues          44,175        85,676            --        129,851
                    -------      --------      --------       --------
                                                           
 Operating                                                 
  expenses:                                                
  Cost of                                                  
   revenue           10,102        18,951           194         29,247
  Sales and                                                
   marketing         21,007        24,126           892         46,025
  Product                                                  
   development        4,373         7,853         1,245         13,471
  General and                                              
   administrative     5,102         4,464         5,923         15,489
  Amortization                                             
   of 
   intangible                                           
   assets             3,280           215            --          3,495
                    -------      --------      --------       --------
   Total                                                   
    operating                                              
    expenses         43,864        55,609         8,254        107,727
                    -------      --------      --------       --------
                                                           
 Operating                                                 
  income                                                   
  (loss)                311        30,067        (8,254)        22,124
                    -------      --------      --------       --------
                                                           
  Depreciation        2,174         2,552            19          4,745
  Amortization        3,280           215            --          3,495
                    -------      --------      --------       --------
 Operating                                                 
  income                                                   
  before                                                   
  depreciation                                             
  and                                                      
  amortization        5,765        32,834        (8,235)        30,364
  Stock-based                                              
   compensation          --            --         4,047          4,047
                    -------      --------      --------       --------
 Adjusted                                                  
  operating                                                
  income                                                   
  before                                                   
  depreciation                                             
  and                                                      
  amortization      $ 5,765      $ 32,834      $ (4,188)      $ 34,411
                    =======      ========      ========       ========
                                                           

                              Quarter Ended March 31, 2006
                   ---------------------------------------------------
                    Content                   Unallocated
                       &         Communi-      Corporate 
                     Media       cations       Expenses          Total
                   --------      --------      --------       --------
 Billable                                                  
  services          $20,497      $ 90,659      $     --       $111,156
 Advertising          6,493         9,683            --         16,176
                    -------      --------      --------       --------
  Total                                                    
   revenues          26,990       100,342            --        127,332
                    -------      --------      --------       --------
                                                           
 Operating                                                 
  expenses:                                                
  Cost of                                                  
   revenue            4,072        25,581           237         29,890
  Sales and                                                
   marketing         12,133        30,342           944         43,419
  Product                                                  
   development        2,722         8,628         1,466         12,816
  General and                                              
   administrative     3,639         5,160         7,447         16,246
  Amortization                                             
   of                                                      
   intangible                                              
   assets             3,705           684            --          4,389
                    -------      --------      --------       --------
   Total                                                   
    operating                                              
    expenses         26,271        70,395        10,094        106,760
                    -------      --------      --------       --------
                                                           
 Operating                                                 
  income                                                   
  (loss)                719        29,947       (10,094)        20,572
                    -------      --------      --------       --------
                                                           
  Depreciation        1,870         2,837            --          4,707
  Amortization        3,705           684            --          4,389
                    -------      --------      --------       --------
 Operating                                                 
  income                                                   
  before                                                   
  depreciation                                             
  and                                                      
  amortization        6,294        33,468       (10,094)        29,668
  Stock-based                                              
   compensation          --            --         4,969          4,969
                    -------      --------      --------       --------
 Adjusted                                                  
  operating                                                
  income                                                   
  before                                                   
  depreciation                                             
  and                                                      
  amortization      $ 6,294      $ 33,468      $ (5,125)      $ 34,637
                    =======      ========      ========       ========
                                                           
 
                           UNITED ONLINE, INC.
     Selected Quarterly Historical Financial Data and Key Metrics(a)

                                                                    
                   Mar 31,    Dec 31,    Sep 30,    Jun 30,    Mar 31,
                    2007       2006       2006       2006       2006
                  --------   --------   --------   --------   --------
 Revenues
 (in thousands):
 Content & 
  Media           $ 44,175   $ 43,592   $ 37,483   $ 38,652   $ 26,990
 Commun-
  ications          85,676     87,194     92,153     96,248    100,342
                  --------   --------   --------   --------   --------
  Total           $129,851   $130,786   $129,636   $134,900   $127,332
                  ========   ========   ========   ========   ========
 Net income
 (in thousands)   $ 13,028   $  4,559   $ 13,436   $ 11,585   $ 12,692
 Net income
  per diluted
  share           $   0.19   $   0.07   $   0.20   $   0.18   $   0.20
 Pay
  accounts(3)
  (in thousands)     4,984      4,854      4,912      4,996      5,093
 Active
  accounts(3)
 (in millions)        20.1       20.1       20.8       20.7       18.7
 Number of
  employees
  at end of
  period             1,008      1,006      1,023      1,016        912
 ---------------------------------------------------------------------
 (a) More information on the financial results for these quarters 
     can be found in the company's filings with the Securities and 
     Exchange Commission.

                              UNITED ONLINE, INC.
                          Analysis of Pay Accounts (3)
                                (in thousands)
                  Mar 31,    Dec 31,    Sep 30,    Jun 30,    Mar 31,
                    2007       2006       2006       2006       2006
                  --------   --------   --------   --------   --------
 Content &
  Media(a)
  Social
   networking        2,433      2,169      2,079      2,029      1,945
  Other                 87         86         85         81         76
                  --------   --------   --------   --------   --------
   Total             2,520      2,255      2,164      2,110      2,021
                  --------   --------   --------   --------   --------
 Communi-
  cations(b)
  Access             2,158      2,282      2,425      2,556      2,751
  Other                306        317        323        330        321
                  --------   --------   --------   --------   --------
   Total             2,464      2,599      2,748      2,886      3,072
                  --------   --------   --------   --------   --------
    Total pay
      accounts(3)    4,984      4,854      4,912      4,996      5,093
                  ========   ========   ========   ========   ========

 ---------------------------------------------------------------------
 (a) Content & Media includes social networking, Web hosting and photo
     sharing.
 (b) Communications includes Internet access, VoIP, premium content,
     premium email and security suite.

CONTACT: United Online, Inc.
         Press:
         Scott Matulis
         (818) 287-3388
         Liz Gengl
         (818) 287-3076
         pr@untd.com
         Investors:
         Erik Randerson, CFA
         (818) 287-3350
         investor@untd.com


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