United Online

United Online Reports Second Quarter Results

Total Revenues of $242.7 Million, Operating Income of $29.8 Million and Adjusted OIBDA of $52.7 Million in Q2 2010
Debt Repayments of $29.7 Million in Q2 2010, Including $14.7 Million to Retire United Online $60 Million Credit Facility Two Years Ahead of Scheduled Maturity
Introduced High School Yearbooks Initiative on Classmates.com, the First Phase of a Planned Site Relaunch That Will Feature a Wide Range of Nostalgic Third-Party Content

WOODLAND HILLS, Calif., Aug 04, 2010 (BUSINESS WIRE) -- United Online, Inc. (Nasdaq: UNTD), a leading provider of consumer products and services over the Internet, today reported financial results for its second quarter ended June 30, 2010.

"Our operating discipline enabled United Online to achieve second quarter operating income and adjusted OIBDA results that were above our guidance range, despite revenues that slightly trailed our guidance range for the quarter," commented Mark R. Goldston, Chairman, President and Chief Executive Officer of United Online. "Highlights in our FTD segment include a 13% year-over-year increase in U.S. consumer orders during the 14 days leading up to Mother's Day and an impressive 27% year-over-year increase in consumer orders fulfilled by our domestic network of FTD florists during the quarter. Our commitment to aggressively promote the florist-designed arrangements among our product offerings underscores our continuing efforts to support FTD florists and further increase the value of membership in the FTD network."

"As expected, year-over-year financial comparisons in our Classmates Media segment remained challenging in the quarter due to the decrease in post-transaction marketing revenues and the impact on revenues resulting from promotions offering discounted pricing for an introductory term," Goldston added. "During the quarter we launched a compelling new feature on Classmates.com that enables paying subscribers to enjoy unlimited viewing of high school yearbooks available on the Web site. The launch of digitized high school yearbooks is the first step in our planned transition of the business from a social networking company into a premier nostalgia content company on the Internet. We expect the current features of Classmates.com to continue to exist within the new nostalgia Web site as we seek to broaden and deepen the amount of third-party content we offer to our members based upon a specific decade, year and content category of their choice."

Summary Results for Second Quarter Ended June 30, 2010:

The following table summarizes key financial results for the second quarter ended June 30, 2010:

	(in millions, except per share and percentage figures)
Financial Highlights	Q2 2010			Q2 2009			% Change
FTD revenues	$	152.7		$	149.2		2	%
Classmates Media revenues		48.8			58.2		(16	%)
Communications revenues		42.0			54.1		(22	%)
Intersegment eliminations		(0.8	)		(0.7	)	N/A
Consolidated revenues	$	242.7		$	260.8		(7	%)

GAAP operating income	$	29.8		$	43.1		(31	%)

Adjusted OIBDA⁽¹⁾	$	52.7		$	68.5		(23	%)

GAAP net income applicable to common stockholders	$	13.1		$	17.7		(26	%)
GAAP diluted net income per common share	$	0.15		$	0.21		(29	%)

Adjusted net income applicable to common stockholders⁽²⁾	$	23.9		$	31.4		(24	%)
Adjusted diluted net income per common share⁽²⁾	$	0.27		$	0.37		(27	%)

Consolidated revenues were $242.7 million, a decrease of 7% versus the year-ago quarter.
Adjusted OIBDA⁽¹⁾ was $52.7 million, a decrease of 23% versus the year-ago quarter.
The decrease in the company's post-transaction marketing revenues reduced, by approximately $6.9 million, the amount of consolidated revenues, operating income and adjusted OIBDA generated in the quarter when compared to the year-ago quarter.
GAAP diluted net income per common share was $0.15, versus $0.21 in the year-ago quarter.
Adjusted diluted net income per common share⁽²⁾ was $0.27, versus $0.37 in the year-ago quarter.

Scott H. Ray, Executive Vice President and Chief Financial Officer, commented, "We made $29.7 million in debt repayments during the quarter as part of our ongoing efforts to deleverage the balance sheet. At June 30, 2010, our balance sheet remained strong and included nearly $95 million in cash and cash equivalents."

Cash Flows, Balance Sheet and Dividend Highlights:

Cash flows from operating activities and free cash flow⁽³⁾ for the quarter ended June 30, 2010 were $24.8 million and $17.4 million, a decrease of 24% and 33%, respectively, versus the year-ago quarter.
For the six months ended June 30, 2010, cash flows from operating activities and free cash flow were $76.3 million and $65.3 million, unchanged and an increase of 3%, respectively, versus the year-ago comparable period.
Cash and cash equivalents at June 30, 2010 decreased by $26.0 million to $94.9 million from $120.9 million at March 31, 2010. The decrease in cash was primarily a result of $29.7 million in debt repayments during the quarter.
Total debt, net of discounts, at June 30, 2010 was $276.6 million, a decrease of $28.6 million from $305.1 million at March 31, 2010.
Net debt at June 30, 2010 was $181.6 million, a decrease of $2.6 million from $184.2 million at March 31, 2010. The company defines net debt as total debt, net of discounts, less cash and cash equivalents.
The company paid $9.4 million in cash dividends during the quarter.
The company's Board of Directors recently declared a quarterly cash dividend of $0.10 per share that is payable on August 31, 2010 to stockholders of record on August 14, 2010.

Segment Results for Second Quarter Ended June 30, 2010:

FTD:

	(in millions, except percentages)								% Change @
Financial Highlights	Q2 2010			Q2 2009			% Change		Constant Currency
Products revenues	$	122.0		$	114.6		6	%
Services revenues		30.5			32.4		(6	%)
Advertising revenues		0.2			2.3		(93	%)
Segment revenues	$	152.7		$	149.2		2	%	3	%

Segment income from operations	$	17.6		$	23.9		(26	%)
Segment adjusted OIBDA⁽¹⁾	$	19.9		$	26.2		(24	%)
as a % of segment revenues⁽¹⁾		13.0	%		17.5	%

									% Change @
Metrics Highlights	Q2 2010			Q2 2009			% Change		Constant Currency
Consumer orders⁽⁴⁾(in thousands)		1,851			1,711		8	%
Average order value⁽⁴⁾	$	58.76		$	59.78		(2	%)	(1	%)
British Pound / U.S. Dollar exchange rate (average)		1.49			1.55		(4	%)

Segment revenues were $152.7 million, an increase of 2% versus the year-ago quarter. Excluding the unfavorable impact from foreign currency exchange rates, segment revenues increased 3% versus the year-ago quarter.
Segment adjusted OIBDA⁽¹⁾ was $19.9 million, a decrease of 24% versus the year-ago quarter. The decrease primarily reflects the decrease in the segment's post-transaction marketing revenues, increased spending during the 2010 quarter on advertising campaigns to promote the FTD and Interflora brands, and changes in the mix of consumer orders derived from various marketing channels that resulted in an increased level of product discounts in the 2010 quarter.
The decrease in the segment's post-transaction marketing revenues reduced, by approximately $2.3 million, the amount of segment revenues, segment income from operations and segment adjusted OIBDA generated in the quarter when compared to the year-ago quarter.
Consumer orders⁽⁴⁾ were 1.9 million, an increase of 8% versus the year-ago quarter.
Average order value⁽⁴⁾("AOV") was $58.76, a 2% decrease versus an AOV of $59.78 in the year-ago quarter. Excluding the unfavorable impact from foreign currency exchange rates, AOV decreased 1% versus the year-ago quarter.

Classmates Media:

	(in millions, except percentages)
Financial Highlights	Q2 2010			Q2 2009			% Change
Services revenues	$	33.2		$	38.7		(14	%)
Advertising revenues		15.6			19.4		(20	%)
Segment revenues	$	48.8		$	58.2		(16	%)

Segment income from operations	$	11.0		$	14.1		(22	%)
Segment adjusted OIBDA⁽¹⁾	$	14.1		$	17.9		(21	%)
*as a % of segment revenues*⁽¹⁾		*28.9*	%		*30.8*	%

	(in thousands, except percentages)
Metrics Highlights	Q2 2010			Q2 2009			% Change
Segment pay accounts⁽⁵⁾		4,982			4,621		8	%
Net quarterly growth (decline) in segment pay accounts⁽⁵⁾		(6	)		58		N/A
Segment active accounts⁽⁵⁾		16,100			16,400		(2	%)
ARPU	$	2.22		$	2.81		(21	%)

Segment revenues were $48.8 million, a decrease of 16% versus the year-ago quarter. The decrease primarily reflects the decrease in the segment's post-transaction marketing revenues as well as a decline in average revenue per pay account ("ARPU") that more than offset the year-over-year increase in segment pay accounts.
Segment adjusted OIBDA was $14.1 million, a decrease of 21% versus the year-ago quarter.
The decrease in the segment's post-transaction marketing revenues reduced, by approximately $4.6 million, the amount of segment revenues, segment income from operations and segment adjusted OIBDA generated in the quarter when compared to the year-ago quarter.
Segment pay accounts⁽⁵⁾at June 30, 2010 were 5.0 million, an increase of 8% versus 4.6 million at June 30, 2009 and a slight decrease of 6,000 pay accounts versus March 31, 2010.

Communications:

	(in millions, except percentages)
Financial Highlights	Q2 2010			Q2 2009			% Change
Services revenues	$	35.3		$	45.7		(23	%)
Advertising revenues		6.8			8.5		(20	%)
Segment revenues	$	42.0		$	54.1		(22	%)

Segment income from operations	$	16.3		$	20.3		(20	%)
Segment adjusted OIBDA⁽¹⁾	$	18.8		$	24.5		(23	%)
*as a % of segment revenues*⁽¹⁾		*44.6*	%		*45.3*	%

	(in thousands, except percentages)
Metrics Highlights	Q2 2010			Q2 2009			% Change
Segment pay accounts⁽⁵⁾		1,180			1,532		(23	%)
ARPU	$	9.57		$	9.55		--

Segment revenues were $42.0 million, a decrease of 22% versus the year-ago quarter, primarily due to a continuing decline in segment pay accounts.
Segment adjusted OIBDA was $18.8 million, a decrease of 23% versus the year-ago quarter.
Segment pay accounts at June 30, 2010 were 1.2 million, a decrease of 23% versus 1.5 million at June 30, 2009.

Business Outlook:

The following forward-looking information includes certain projections made by management as of the date of this press release. The company does not intend to revise or update this information, except as required by law, 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.

Third-Quarter 2010 Guidance:

Third-Quarter 2010 (in millions)		Guidance
Revenues		$185.0 - $191.0
Adjusted OIBDA⁽¹⁾		$38.0 - $43.0


Third-Quarter 2010 (in millions) Supplemental Information		Guidance
Net interest expense		$5.2
Shares used to calculated diluted net income per common share		88.1
Shares used to calculated adjusted diluted net income per common share⁽²⁾		88.2

The table below reconciles the company's guidance for operating income, a GAAP measure, to adjusted OIBDA.

Third-Quarter 2010 (in millions)		Guidance
GAAP Operating Income		$16.1 -- $21.1
Depreciation		6.8
Amortization of intangible assets		8.1
Stock-based compensation		7.0
Adjusted OIBDA⁽¹⁾		$38.0 -- $43.0

Investor Conference Call on August 4, 2010 at 5:00 p.m. ET (2:00 p.m. PT):

United Online will host a conference call on August 4, 2010 at 5:00 p.m. ET (2:00 p.m. PT) to discuss its second quarter 2010 results. To participate, please dial 877-874-1589 (or 719-325-4870 outside of the U.S.) and provide the confirmation code, 8492532. A live webcast of the call, along with a presentation containing financial highlights for the second quarter ended June 30, 2010, can also be accessed through the "investors" section of the company's Web site located at www.unitedonline.com. The presentation and a replay of the broadcast will be available on the Web site for seven days, or by dialing 888-203-1112 (or 719-457-0820 outside of the U.S.) and the confirmation code, 8492532.

Non-GAAP Measures:

In evaluating the company's performance, management uses one or more of the following measures that are not determined in accordance with accounting principles generally accepted in the United States of America ("GAAP"): adjusted OIBDA, adjusted net income and free cash flow. These measures are adjusted to exclude certain non-cash expenses such as depreciation, amortization, stock-based compensation, and impairment of goodwill, intangible assets and long-lived assets. In addition, these measures are adjusted to exclude the items discussed below because such items are either operating expenses which would not otherwise have been incurred by the company in the normal course of the company's business operations or are not reflective of the company's core results over time. These items may include recurring as well as non-recurring items. These adjustments should not be construed as an inference that all of these adjustments or costs are unusual, infrequent or non-recurring.

Restructuring Charges - Restructuring charges consist primarily of severance expense, facility closure and relocation costs. In order to provide meaningful comparisons, the company believes that it is appropriate to adjust for such charges because they are not reflective of the company's core results and may vary significantly based on the timing and magnitude of the company's rationalization activities.

Litigation or Dispute Settlement Charges or Gains - These charges or gains include estimated losses for which we have established a reserve, as well as actual settlements, judgments, fines, penalties, assessments or other resolutions against or in favor of the company related to litigation, arbitration, investigations, disputes or similar matters. In order to provide meaningful comparisons, the company believes that it is appropriate to adjust for such charges as well as gains because they are not reflective of the company's core results.

Transaction-Related Costs - The company excludes certain expense items resulting from actual or proposed transactions such as business combinations, mergers, acquisitions and financing transactions, including (i) compensation expenses and (ii) expenses for advisors and representatives such as investment bankers, consultants, attorneys and accounting firms. The compensation expenses may include transition and integration costs such as retention bonuses and acquisition-related milestone payments to acquired employees. Although certain of these charges may be recurring given the company's regular evaluation of such proposed transactions, in order to provide meaningful comparisons, the company believes that it is appropriate to adjust for such charges because they are not reflective of the company's core results and tend to vary in frequency and magnitude.

During the first quarter of 2010, in connection with the updated guidance issued by the Securities and Exchange Commission ("SEC") in January 2010, the company updated its definitions of non-GAAP measures to modify the definition of restructuring charges and to include litigation or dispute settlement charges or gains and transaction-related costs. Such changes were made on a prospective basis and prior periods have not been adjusted. Comparable charges for the quarter and six months ended June 30, 2009 were not material.

Definitions of Non-GAAP Measures:

(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; litigation or dispute settlement charges or gains; transaction-related costs; and impairment of goodwill, intangible assets and long-lived assets. The company's definition of adjusted OIBDA has been modified from time to time. Management believes that because adjusted OIBDA excludes (i) certain non-cash expenses (such as depreciation, amortization, stock-based compensation, and impairment of goodwill, intangible assets and long-lived assets) and (ii) expenses that are not reflective of the company's core operating results over time (such as restructuring charges, litigation or dispute settlement charges or gains, and transaction-related costs), this measure provides investors with additional useful information to measure the company's financial 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 has used this measure as a basis in determining certain compensation incentives for certain members of the company's management. Adjusted OIBDA is 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 adjusted OIBDA is that it does not reflect the periodic costs of certain 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 activities such as evaluations of 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 a summary of stock-based compensation expenses within the accompanying tables and in the footnotes accompanying its financial statements. A further limitation associated with the use of this measure is that it does not reflect the costs of restructuring charges, litigation or dispute settlement charges or gains, transaction-related costs, and the impairment of goodwill, intangible assets and long-lived assets. Management compensates for this limitation by providing supplemental information about such charges, gains and costs within its financial press releases and SEC filings, when applicable. An additional limitation associated with the use of this measure is that the term "adjusted OIBDA" does not have a standardized meaning. Therefore, other companies may use the same or a similarly named measure 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. Management compensates for this limitation by presenting the most comparable GAAP measure, operating income, directly ahead of adjusted OIBDA within its financial press releases and by providing a reconciliation that shows and describes the adjustments made. A reconciliation to operating income is provided in the accompanying tables. In addition, many of the adjustments to our GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.

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 Forms 10-K and Forms 10-Q, before stock-based compensation, restructuring charges, litigation or dispute settlement charges or gains, transaction-related costs, and the impairment of goodwill, intangible assets and long-lived assets. The company's definition of adjusted OIBDA for each of the company's segments has been modified from time to time. Management believes that because segment adjusted OIBDA and segment adjusted OIBDA as a percentage of segment revenues exclude (1) certain non-cash expenses (such as stock-based compensation, and the impairment of goodwill, intangible assets and long-lived assets); and (2) expenses that are not reflective of the segment's core operating results over time (such as restructuring charges, litigation or dispute settlement charges or gains, and transaction-related costs), these measures provide investors with additional useful information to evaluate the company's segment financial performance, particularly with respect to changes in performance from period to period. Segment adjusted OIBDA and segment adjusted OIBDA as a percentage of segment 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 these measures is that they do not include stock-based compensation expenses related to the company's workforce. Management compensates for this limitation by providing a summary of stock-based compensation expenses within the accompanying tables and in the footnotes accompanying its financial statements. A further limitation associated with the use of these measures is that they do not reflect the costs of restructuring charges, litigation or dispute settlement charges or gains, transaction-related costs, and impairment charges related to an operating segment. Management compensates for this limitation by providing supplemental information about such charges, gains and costs by segment within its financial press releases and SEC filings, when applicable. A reconciliation to segment income from operations, its most comparable GAAP measure, is provided in the accompanying tables.

(2) Adjusted net income is defined by the company as net income before the after-tax effect of: stock-based compensation; amortization of intangible assets; impairment of goodwill, intangible assets and long-lived assets; restructuring charges; litigation or dispute settlement charges or gains; transaction-related costs; and the re-measurement of certain deferred tax assets. Adjusted diluted net income per common share includes the adjustment for shares resulting from the elimination of stock-based compensation. Management believes that adjusted net income and adjusted diluted net income per common share provide investors with additional useful information to measure the company's financial performance, particularly with respect to changes in performance from period to period, because these measures are exclusive of (i) certain non-cash expenses (such as stock-based compensation, amortization of intangible assets, and the impairment of goodwill, intangible assets and long-lived assets) and (ii) expenses that are not reflective of the company's core results over time (such as restructuring charges, litigation or dispute settlement charges or gains, and transaction-related costs). Management also uses adjusted net income and adjusted diluted net income per common share for this purpose. Adjusted net income and adjusted diluted net income per common share 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. The limitations of adjusted net income and adjusted diluted net income per common share are that, similar to adjusted OIBDA, they do not include certain costs, and the terms "adjusted net income" and "adjusted diluted net income per common 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. Management compensates for this limitation by presenting the most comparable GAAP measures, net income and diluted net income per common share, directly ahead of adjusted net income and adjusted diluted net income per common share within its financial press releases and by providing a reconciliation of adjusted net income that shows and describes the adjustments made. A reconciliation of adjusted net income to net income, its most comparable GAAP measure, is provided in the accompanying tables.

(3) Free cash flow is defined by the company as net cash provided by operating activities, less capital expenditures and cash received for litigation or dispute settlement gains, and plus the excess tax benefits from equity awards, cash paid for restructuring charges, cash paid for litigation or dispute settlement charges, and cash paid for transaction-related costs. Management believes that 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 and prior to cash paid for restructuring charges, cash paid or received for litigation or dispute settlement charges or gains, and cash paid for transaction-related costs. It also fully reflects the tax benefits realized by the company from stock-based compensation. 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 GAAP and should be considered in addition to, not as a substitute for or superior to, measures determined in accordance with GAAP. A limitation of free cash flow is that it does not represent the total increase or decrease in cash during the period. An additional limitation associated with the use of this measure is that the term "free cash flow" does not have a standardized meaning. Therefore, other companies may use the same or a similarly named measure 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. Management compensates for this limitation by presenting the most comparable GAAP measure, net cash provided by operating activities, directly ahead of free cash flow within its financial press releases and by providing a reconciliation that shows and describes the adjustments made. A reconciliation to net cash provided by operating activities is provided in the accompanying tables.

(4) Consumer orders are orders delivered during the period that originated in the U.S. and Canada, primarily from the www.ftd.com Web site and the 1-800-SEND-FTD telephone number, and in the U.K. and the Republic of Ireland, primarily from the www.interflora.co.uk and www.interflora.ie Web sites and various telephone numbers. Orders originating with a florist or other retail location for delivery to consumers are not included.

Average order value represents the average U.S. Dollar amount received for consumer orders delivered during a period. This average U.S. Dollar amount is determined after translating the local currency amounts received for orders delivered in the U.K. and the Republic of Ireland into U.S. Dollars. Average order value includes merchandise revenue and shipping and service fees paid by the consumer, less certain discounts and certain refunds.

(5) A pay account is defined as a member who has subscribed to, and paid for, our Classmates Media or Communications services, and whose subscription has not terminated or expired. A pay account does not equate to a unique subscriber since one subscriber could have several pay accounts. At any point in time, our pay account base includes a number of accounts receiving a free period of service as either a promotion or retention tool and a number of accounts that have notified us that they are terminating their service but whose service remains in effect.

Classmates Media segment active accounts are defined as the sum of all social networking pay accounts as of the date presented; the monthly average for the period of all free social networking accounts who have visited the company's domestic or international social networking Web sites (excluding The Names Database) at least once during the period; and the monthly average for the period of all online loyalty marketing members who have earned or redeemed points during such period. Communications segment active accounts include all Communications segment pay accounts as of the date presented combined with the number of free Internet access and email accounts that logged on to the company's services at least once during the preceding 31 days.

About United Online^(R):

United Online, Inc. (Nasdaq: UNTD) is a leading provider of consumer products and services over the Internet, where the company's brands have attracted a large online audience that includes more than 60 million registered consumer accounts. The company's floral and related offerings include products and services for consumers and retail florists, as well as for other retail locations offering floral products and services, in the U.S., Canada, the United Kingdom, and the Republic of Ireland. The floral business utilizes the highly recognized FTD (www.ftd.com) and Interflora (www.interflora.co.uk) brands, both supported by the Mercury Man logo that is displayed in approximately 40,000 retail floral shops worldwide. The company's Classmates Media services include online social networking (www.classmates.com) and online loyalty marketing (www.mypoints.com) in North America. Classmates Media also operates online social networking Web sites in a number of European countries. The company's Communications services include value-priced Internet access and email provided by NetZero (www.netzero.com) and Juno (www.juno.com).

Headquartered in Woodland Hills, CA, United Online operates through a global network of locations in the U.S., the United Kingdom, Germany, and India. More information about United Online is available on the company's Web site located at: 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, based on our current expectations, estimates and projections about our operations, industry, financial condition, performance, results of operations, and liquidity. Statements containing words such as "may," "believe," "anticipate," "expect," "intend," "plan," "project," "projections," "business outlook," "estimate," or similar expressions constitute forward-looking statements. These forward-looking statements include, but are not limited to, statements about future financial performance; revenues; operating expenses; operating income; capital expenditures; depreciation and amortization; stock-based compensation; and planned business initiatives, products, services and features. Potential factors that could cause actual results to differ materially from those in the forward-looking statements include, among others: the severity and duration of current economic conditions; the company's inability to maintain or increase its advertising revenues; risks associated with the commercialization of new services or features; risks associated with litigation and governmental regulations or investigations, including reviews of post-transaction sales practices; the company's inability to retain or grow its free and pay accounts and the members of the floral network; the effect of competition; changes in marketing conditions and laws; changes in the online advertising market; financial market risk resulting from fluctuations in foreign currency exchange rates, particularly the British Pound and Euro; the effects of seasonality; the company's inability to enforce or defend its ownership and use of intellectual property; changes in stock-based compensation due to future equity issuances or other reasons; changes in amortization or depreciation due to a variety of factors; potential write down, reserve against or impairment of assets including receivables, goodwill, intangible assets or other assets; changes in tax laws, the company's business or other factors that would impact anticipated tax benefits; the company's inability to achieve the expected benefits of its reductions-in-force or any other cost-reduction initiatives; that the company will incur restructuring and related charges; problems associated with the company's operations, systems or technologies; the company's inability to retain key customers, vendors and personnel; changes in the floral industry; the impact of, and restrictions associated with, the company's indebtedness; as well as the risk factors disclosed in the company's filings 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." Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as the date hereof. 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. Reported results should not be considered an indication of future performance. Except as required by law, the company undertakes no obligation to publicly release the results of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

UNITED ONLINE, INC.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)

	Quarter Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009

Revenues:
Services	$	120,715		$	146,200		$	247,953		$	296,582
Products		121,971			114,589			246,458			227,854
Total revenues		242,686			260,789			494,411			524,436
Operating expenses:
Cost of revenues-services^(a)		24,667			27,963			50,680			57,605
Cost of revenues-products^(a)		90,228			80,486			185,413			165,178
Sales and marketing^(a)		49,013			53,675			99,143			109,438
Technology and development^(a)		13,646			16,796			27,995			33,937
General and administrative^(a)		27,259			30,107			58,243			60,521
Amortization of intangible assets		8,115			8,648			16,278			17,239
Restructuring charges		(78	)		-			991			-
Total operating expenses		212,850			217,675			438,743			443,918

Operating income		29,836			43,114			55,668			80,518

Interest income		412			338			877			686
Interest expense		(6,314	)		(8,804	)		(13,463	)		(17,005	)
Other income, net		53			93			135			131

Income before income taxes		23,987			34,741			43,217			64,330
Provision for income taxes		10,030			15,474			18,039			28,010
Net income	$	13,957		$	19,267		$	25,178		$	36,320
Income allocated to participating securities		(859	)		(1,580	)		(1,590	)		(2,215	)
Net income applicable to common stockholders	$	13,098		$	17,687		$	23,588		$	34,105

Basic net income per common share	$	0.15		$	0.21		$	0.27		$	0.41
Shares used to calculate basic net income per common share		87,021			83,502			86,393			83,038
Diluted net income per common share	$	0.15		$	0.21		$	0.27		$	0.41
Shares used to calculate diluted net income per common share		87,782			83,875			87,167			83,359

Shares outstanding at end of period		87,270			83,769			87,270			83,769

(a) Stock-based compensation was allocated as follows:
Cost of revenues-services	$	133		$	271		$	314		$	527
Cost of revenues-products		11			-			30			-
Sales and marketing		986			1,451			2,203			2,699
Technology and development		855			1,318			1,828			2,511
General and administrative		4,376			7,206			9,846			13,875
Total stock-based compensation	$	6,361		$	10,246		$	14,221		$	19,612

UNITED ONLINE, INC.
Unaudited Reconciliations of Non-GAAP Financial Measures
(in thousands)

Unaudited Reconciliation of Operating Income to Adjusted OIBDA⁽¹⁾

	Quarter Ended June 30,					Six Months Ended June 30,
	2010			2009		2010			2009
Operating income	$	29,836		$	43,114	$	55,668		$	80,518
Depreciation		6,897			6,540		13,564			12,632
Amortization of intangible assets		8,118			8,648		16,281			17,239
Operating income before depreciation and amortization		44,851			58,302		85,513			110,389
Stock-based compensation		6,361			10,246		14,221			19,612
Restructuring charges		(78	)		-		991			-
Litigation or dispute settlement charges		1,600			-		1,967			-
Transaction-related costs		9			-		1,989			-
Adjusted OIBDA	$	52,743		$	68,548	$	104,681		$	130,001


Unaudited Reconciliation of Segment Income from Operations to Segment Adjusted OIBDA⁽¹⁾

	Quarter Ended June 30,					Six Months Ended June 30,
	2010			2009		2010			2009
FTD:
Segment income from operations	$	17,576		$	23,909	$	31,622		$	43,139
Stock-based compensation		1,653			2,243		3,875			4,053
Restructuring charges		13			-		1,082			-
Litigation or dispute settlement charges		640			-		640			-
Transaction-related costs		-			-		659			-
Segment adjusted OIBDA	$	19,882		$	26,152	$	37,878		$	47,192

Classmates Media:
Segment income from operations	$	10,959		$	14,123	$	21,054		$	26,278
Stock-based compensation		2,268			3,766		4,315			7,430
Restructuring charges		(91	)		-		(91	)		-
Litigation or dispute settlement charges		960			-		1,327			-
Transaction-related costs		4			-		663			-
Segment adjusted OIBDA	$	14,100		$	17,889	$	27,268		$	33,708

Communications:
Segment income from operations	$	16,316		$	20,270	$	32,837		$	40,972
Stock-based compensation		2,440			4,237		6,031			8,129
Transaction-related costs		5			-		667			-
Segment adjusted OIBDA	$	18,761		$	24,507	$	39,535		$	49,101

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

	Quarter Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009


Net income	$	13,957		$	19,267		$	25,178		$	36,320
Income allocated to participating securities		(859	)		(1,580	)		(1,590	)		(2,580	)
Net income applicable to common stockholders		13,098			17,687			23,588			33,740

Adjustments:
Stock-based compensation		6,361			10,246			14,221			19,612
Amortization of intangible assets		8,118			8,648			16,281			17,239
Restructuring charges		(78	)		-			991			-
Litigation or dispute settlement charges		1,350			-			1,717			-
Transaction-related costs		9			-			1,989			-
		28,858			36,581			58,787			70,591

Income tax effect of adjusting entries		(4,949	)		(5,224	)		(10,731	)		(10,447	)
Adjusted net income applicable to common stockholders	$	23,909		$	31,357		$	48,056		$	60,144

GAAP net income per common share:
Basic net income per common share	$	0.15		$	0.21		$	0.27		$	0.41
Shares used to calculate basic net income per common share		87,021			83,502			86,393			83,038
Diluted net income per common share	$	0.15		$	0.21		$	0.27		$	0.41
Shares used to calculate diluted net income per common share		87,782			83,875			87,167			83,359

Adjusted net income per common share:
Adjusted basic net income per common share	$	0.27		$	0.38		$	0.56		$	0.72
Shares used to calculate adjusted basic net income per common share		87,021			83,502			86,393			83,038
Adjusted diluted net income per common share	$	0.27		$	0.37		$	0.55		$	0.72
Shares used to calculate adjusted diluted net income per common share		87,849			84,186			87,302			83,671

UNITED ONLINE, INC.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)

	June 30, 2010		December 31, 2009

ASSETS
Cash and cash equivalents	$	94,929	$	115,509
Accounts receivable, net		41,933		55,874
Deferred tax assets, net		14,887		15,797
Property and equipment, net		63,347		63,547
Goodwill and intangible assets, net		726,211		756,671
Other assets		34,976		42,536
Total assets	$	976,283	$	1,049,934

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	68,324	$	71,668
Accrued liabilities		40,740		50,428
Member redemption liability		23,997		25,755
Deferred revenue		74,059		77,634
Debt, net of discounts		276,564		328,946
Deferred tax liabilities, net		39,950		44,788
Other liabilities		18,129		18,064
Total liabilities		541,763		617,283

Stockholders' equity		434,520		432,651

Total liabilities and stockholders' equity	$	976,283	$	1,049,934

UNITED ONLINE, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)

	Quarter Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	13,957		$	19,267		$	25,178		$	36,320

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and stock-based compensation		21,376			25,434			44,066			49,483
Provision for doubtful accounts receivable		1,310			1,715			2,545			2,876
Accretion of discounts and amortization of debt issue costs		1,293			1,809			2,720			2,822
Deferred taxes and other		(2,405	)		(3,201	)		(2,729	)		(5,219	)
Tax benefits (shortfalls) from equity awards		11			(1,134	)		(98	)		(1,626	)
Excess tax (benefits) shortfalls from equity awards		(23	)		214			(349	)		(13	)
Change in operating assets and liabilities:
Accounts receivable		4,758			4,046			10,667			6,849
Other assets		805			(2,013	)		6,850			7,846
Accounts payable and accrued liabilities		(13,171	)		(12,021	)		(10,240	)		(24,028	)
Member redemption liability		(733	)		(110	)		(1,759	)		(1,160	)
Deferred revenue		(2,348	)		(1,681	)		(984	)		1,795
Other liabilities		(28	)		150			422			109
Net cash provided by operating activities		24,802			32,475			76,289			76,054

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(8,984	)		(6,085	)		(14,146	)		(12,432	)
Purchases of rights, content and intellectual property		(1,170	)		-			(1,170	)		-
Proceeds from sales of assets, net		49			14			49			14
Net cash used for investing activities		(10,105	)		(6,071	)		(15,267	)		(12,418	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on term loans		(29,737	)		(28,040	)		(54,819	)		(33,478	)
Proceeds from exercises of stock options		7			16			11			125
Proceeds from employee stock purchase plan		2,612			2,490			2,612			2,490
Repurchases of common stock		(648	)		(763	)		(6,695	)		(3,374	)

Dividends and dividend equivalents paid on outstanding shares and restricted stock units		(9,354	)		(9,145	)		(18,462	)		(17,915	)
Excess tax benefits (shortfalls) from equity awards		23			(214	)		349			13
Net cash used for financing activities		(37,097	)		(35,656	)		(77,004	)		(52,139	)

Effect of foreign currency exchange rate changes on cash and cash equivalents		(3,594	)		1,923			(4,598	)		1,411

Change in cash and cash equivalents		(25,994	)		(7,329	)		(20,580	)		12,908
Cash and cash equivalents, beginning of period		120,923			124,751			115,509			104,514
Cash and cash equivalents, end of period	$	94,929		$	117,422		$	94,929		$	117,422

UNITED ONLINE, INC.
Unaudited Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow⁽³⁾
(in thousands)


	Quarter Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Net cash provided by operating activities	$	24,802		$	32,475		$	76,289		$	76,054
Adjustments:
Capital expenditures		(8,984	)		(6,085	)		(14,146	)		(12,432	)
Excess tax benefits (shortfalls) from equity awards		23			(214	)		349			13
Cash paid for restructuring charges		807			-			859			-
Cash received for litigation or dispute settlement charges		(83	)		-			(83	)		-
Cash paid for transaction-related costs		884			-			1,994			-
Free cash flow	$	17,449		$	26,176		$	65,262		$	63,635

UNITED ONLINE, INC.
Unaudited Segment Information
(in thousands)

	Quarter Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
FTD
Revenues:
Services	$	30,545		$	32,357		$	62,276		$	65,155
Products		121,971			114,589			246,458			227,854
Advertising		153			2,270			622			4,194
Total revenues		152,669			149,216			309,356			297,203

Operating expenses:
Cost of revenues		95,175			85,553			195,514			175,706
Sales and marketing		28,126			26,039			55,017			50,927
Technology and development		3,360			3,491			7,251			6,857
General and administrative		10,360			11,498			22,788			22,864
Amortization of intangible assets		6,594			6,636			13,237			13,193
Restructuring charges		13			-			1,082			-
Total operating expenses		143,628			133,217			294,889			269,547

Operating income		9,041			15,999			14,467			27,656

Depreciation		1,941			1,274			3,918			2,290
Amortization of intangible assets		6,594			6,636			13,237			13,193
Segment income from operations		17,576			23,909			31,622			43,139
Stock-based compensation		1,653			2,243			3,875			4,053
Restructuring charges		13			-			1,082			-
Litigation or dispute settlement charges		640			-			640			-
Transaction-related costs		-			-			659			-
Segment adjusted OIBDA	$	19,882		$	26,152		$	37,878		$	47,192

Classmates Media
Revenues:
Services	$	33,213		$	38,718		$	67,165		$	76,939
Advertising		15,571			19,437			32,121			39,689
Total revenues		48,784			58,155			99,286			116,628

Operating expenses:
Cost of revenues		9,528			10,421			19,189			20,790
Sales and marketing		15,711			18,955			33,137			39,089
Technology and development		6,017			7,235			11,858			14,849
General and administrative		9,617			10,161			19,546			20,786
Amortization of intangible assets		1,259			1,747			2,517			3,519
Restructuring charges		(91	)		-			(91	)		-
Total operating expenses		42,041			48,519			86,156			99,033

Operating income		6,743			9,636			13,130			17,595

Depreciation		2,954			2,740			5,404			5,164
Amortization of intangible assets		1,262			1,747			2,520			3,519
Segment income from operations		10,959			14,123			21,054			26,278
Stock-based compensation		2,268			3,766			4,315			7,430
Restructuring charges		(91	)		-			(91	)		-
Litigation or dispute settlement charges		960			-			1,327			-
Transaction-related costs		4			-			663			-
Segment adjusted OIBDA	$	14,100		$	17,889		$	27,268		$	33,708

Communications
Revenues:
Services	$	35,265		$	45,658		$	72,283		$	93,707
Advertising		6,774			8,489			14,997			18,418
Total revenues		42,039			54,147			87,280			112,125

Operating expenses:
Cost of revenues		10,359			12,534			21,615			26,421
Sales and marketing		5,815			9,350			12,275			20,807
Technology and development		4,269			6,070			8,886			12,231
General and administrative		7,282			8,450			15,909			16,873
Amortization of intangible assets		262			264			524			526
Total operating expenses		27,987			36,668			59,209			76,858

Operating income		14,052			17,479			28,071			35,267

Depreciation		2,002			2,526			4,242			5,178
Amortization of intangible assets		262			265			524			527
Segment income from operations		16,316			20,270			32,837			40,972
Stock-based compensation		2,440			4,237			6,031			8,129
Transaction-related costs		5			-			667			-
Segment adjusted OIBDA	$	18,761		$	24,507		$	39,535		$	49,101

Consolidated adjusted OIBDA	$	52,743		$	68,548		$	104,681		$	130,001

Reconciliation of segment revenues to consolidated revenues:
FTD	$	152,669		$	149,216		$	309,356		$	297,203
Classmates Media		48,784			58,155			99,286			116,628
Communications		42,039			54,147			87,280			112,125
Intersegment eliminations		(806	)		(729	)		(1,511	)		(1,520	)
Consolidated revenues	$	242,686		$	260,789		$	494,411		$	524,436

Reconciliation of segment operating expenses to consolidated operating expenses:
FTD	$	143,628		$	133,217		$	294,889		$	269,547
Classmates Media		42,041			48,519			86,156			99,033
Communications		27,987			36,668			59,209			76,858
Intersegment eliminations		(806	)		(729	)		(1,511	)		(1,520	)
Consolidated operating expenses	$	212,850		$	217,675		$	438,743		$	443,918

Reconciliation of segment income from operations to consolidated operating income:
FTD	$	17,576		$	23,909		$	31,622		$	43,139
Classmates Media		10,959			14,123			21,054			26,278
Communications		16,316			20,270			32,837			40,972
Total segment income from operations		44,851			58,302			85,513			110,389
Depreciation		(6,897	)		(6,540	)		(13,564	)		(12,632	)
Amortization of intangible assets		(8,118	)		(8,648	)		(16,281	)		(17,239	)
Consolidated operating income	$	29,836		$	43,114		$	55,668		$	80,518

UNITED ONLINE, INC.
Unaudited Selected Quarterly Historical Key Metrics(a)

	June 30, 2010			March 31, 2010			December 31, 2009			September 30, 2009			June 30, 2009

Consolidated:
Revenues (in thousands)	$	242,686		$	251,725		$	249,490		$	216,206		$	260,789

FTD:
Revenues (in thousands)	$	152,669		$	156,687		$	141,116		$	107,526		$	149,216
% of consolidated revenues		63	%		62	%		57	%		50	%		57	%

Consumer orders⁽⁴⁾ (in thousands)		1,851			1,813			1,594			1,075			1,711
Average order value⁽⁴⁾	$	58.76		$	59.42		$	60.14		$	61.29		$	59.78
Average foreign currency exchange rate: GBP to USD		1.49			1.54			1.63			1.64			1.55

Classmates Media:
Segment revenues (in thousands)	$	48,784		$	50,502		$	60,712		$	58,682		$	58,155
% of consolidated revenues		20	%		20	%		24	%		27	%		22	%

Pay accounts⁽⁵⁾ (in thousands)		4,982			4,988			4,886			4,785			4,621
Segment churn^(b)		3.1	%		3.2	%		3.8	%		3.8	%		4.3	%
ARPU^(c)	$	2.22		$	2.29		$	2.53		$	2.71		$	2.81
Segment active accounts⁽⁵⁾(in millions)		16.1			17.5			19.4			16.9			16.4

Communications:
Segment revenues (in thousands)	$	42,039		$	45,241		$	48,429		$	50,679		$	54,147
% of consolidated revenues		17	%		18	%		19	%		23	%		21	%

Pay accounts⁽⁵⁾ (in thousands):
Access		880			967			1,036			1,118			1,203
Other		300			306			314			322			329
Total Communications pay accounts		1,180			1,273			1,350			1,440			1,532

Segment churn^(b)		4.2	%		4.3	%		4.4	%		4.6	%		4.9	%
ARPU^(c)	$	9.57		$	9.41		$	9.43		$	9.43		$	9.55
Segment active accounts⁽⁵⁾(in millions)		2.0			2.1			2.2			2.3			2.4

(a) More information on the financial results for these quarters can be found in the company's filings with the Securities and Exchange Commission.

(b) Churn is calculated as the total number of pay accounts that terminated or expired in a period divided by the average number of pay accounts for the same period, divided by the number of months in that period.

(c) ARPU is calculated by dividing services revenues generated from the pay accounts of our Classmates Media or Communications segment, as applicable, for a period by the average number of pay accounts for that period, divided by the number of months in that period.

SOURCE: United Online, Inc.

United Online, Inc.
Investors:
Erik Randerson, CFA
818-287-3350
investor@untd.com
or
Press:
Scott Matulis
818-287-3388
pr@untd.com