| • | Classmates Media Segment Revenues Increase 27% and Expand to 42% of Total Revenues in the Fourth Quarter | ||
| • | Quarterly Net Growth of 216,000 Classmates Media Pay Accounts | ||
| • | Record Consolidated Adjusted OIBDA in Fourth Quarter and FY 2007 |
WOODLAND HILLS, Calif., Feb. 7, 2008 -- United Online, Inc. (Nasdaq:UNTD), a leading provider of consumer Internet and media services, today reported financial results for its fourth quarter and year ended December 31, 2007.
New Segment Reporting Structure Establishes Classmates Media as an Operating Segment:
United Online has modified its segment reporting structure to establish Classmates Media as a separate operating segment in the place of the former Content & Media segment that no longer will be reported. The new Classmates Media segment includes the company's online social networking and online loyalty marketing operations, which had formerly been part of the Content & Media segment. Web hosting and photo sharing, which also had formerly been part of the Content & Media segment, have been moved to the Communications segment. In addition, the company has eliminated its historical practice of separately reporting certain unallocated corporate expenses. Under the new reporting structure, corporate expenses will be allocated to the operating segments. The new segment reporting structure is aligned with how management reviews and measures segment performance for internal reporting purposes. All prior periods have been adjusted to conform to the current presentation. Historical financial results reflecting the new segment reporting structure are available within the "investors" section of the company's Web site located at http://www.unitedonline.com/.
Financial Highlights:
"United Online delivered another strong quarter in Q4, highlighted by our Classmates Media segment where we added a net 216,000 pay accounts, raising the full-year 2007 Classmates Media net additions to 1,030,000 pay accounts versus 403,000 in 2006," said Mark R. Goldston, chairman, president and chief executive officer. "Our strong growth in pay accounts helped Classmates Media achieve revenue growth of 27% for the fourth quarter versus the comparable prior-year period. Segment revenues expanded to 42% of total revenues in the fourth quarter."
Goldston continued, "The Communications segment also delivered impressive results in Q4 against our primary objective of operating the Communications business for profitability and cash flow, which helped United Online achieve a 76% increase in free cash flow during the fourth quarter and 32% for the full year versus the year-ago comparable periods."
Summary Results for Fourth Quarter and Year Ended December 31, 2007:
The following table summarizes key financial results for the fourth quarter and year ended December 31, 2007:
(in $millions, except per share,
percentage and pay account figures)
Financial Highlights Q4 Q4 % FY FY %
-------------------- 2007 2006 Change 2007 2006 Change
Classmates Media -------- -------- ----- -------- -------- -----
revenues $ 53.3 $ 42.0 27% $ 193.4 $ 139.4 39%
Communications
revenues 72.1 88.8 (19%) 320.1 383.2 (16%)
-------- -------- -------- --------
Consolidated
revenues $ 125.4 $ 130.8 (4%) $ 513.5 $ 522.7 (2%)
======== ======== ======== ========
GAAP operating
income $ 22.2 $ 9.3 138% $ 92.3 $ 74.0 25%
Adjusted OIBDA(1) $ 40.3 $ 36.6 10% $ 148.2 $ 146.0 1%
Adjusted OIBDA as
a % of
consolidated
revenues 32.1% 28.0% 28.9% 27.9%
GAAP net income $ 14.6 $ 4.6 220% $ 57.8 $ 42.3 37%
GAAP diluted net
income per share $ 0.21 $ 0.07 200% $ 0.83 $ 0.64 30%
Adjusted net
income(2) $ 23.3 $ 19.5 20% $ 81.8 $ 77.7 5%
Adjusted diluted
net income per
share(2) $ 0.33 $ 0.29 14% $ 1.16 $ 1.16 --
Net change in total
pay accounts(3) 110,000 (58,000) 495,000 (155,000)
-- Consolidated advertising revenues for the fourth quarter and full-
year 2007 were $33.9 million and $134.0 million, an increase of 8%
and 35% versus the prior-year comparable periods, respectively.
-- Pay accounts(3) totaled 5.3 million at December 31, 2007, a net
increase of 495,000, or 10%, from December 31, 2006.
-- GAAP operating income was impacted by pre-tax expenses of
$3.0 million for restructuring costs in Q4 2007 and $13.3 million
for non-cash asset impairment charges in Q4 2006.
-- Adjusted OIBDA(1) for the fourth quarter and full-year 2007
increased to quarterly and annual records of $40.3 million and
$148.2 million, representing quarterly and annual records of 32.1%
and 28.9% of consolidated revenues, respectively.
-- Q4 2007 GAAP operating income and adjusted OIBDA(1) were impacted
by pre-tax expenses of $0.5 million in connection with the
proposed initial public offering ("IPO") of the company's
Classmates Media Corporation ("CMC") subsidiary. In December
2007, the company determined that proceeding with the IPO under
then-current market conditions was not in the best interests of
the company's stockholders and the company withdrew its Form S-1
registration statement previously filed with the Securities and
Exchange Commission. It remains United Online's strategy to
complete an IPO of CMC. As such, certain additional IPO
transaction-related costs totaling $3.6 million associated with
the IPO have been deferred and are included in other assets on
United Online's balance sheet at December 31, 2007. If the
company does not proceed with this strategy, these assets will be
expensed and included in the Classmates Media segment results in a
future period.
-- Diluted net income per share and adjusted diluted net income per
share(2) increased 200% and 14%, respectively, during the fourth
quarter versus the year-ago comparable quarter.
Scott H. Ray, executive vice president and chief financial officer, commented, "The company achieved record levels of adjusted OIBDA during both the fourth quarter and full-year 2007, representing the sixth consecutive year in which United Online has achieved record annual adjusted OIBDA. Our business strategies coupled with a focus on disciplined financial management have enabled the company to continue to deliver solid financial performance while, at the same time, continuing to diversify the company."
Cash Flows, Balance Sheet and Dividend Highlights:
-- Cash flows from operations increased 43% to $32.6 million and 25%
to $127.2 million in the fourth quarter and full-year 2007,
respectively, versus the comparable prior-year periods.
-- Free cash flow(4) increased 76% to $28.1 million and 32% to
$108.1 million in the fourth quarter and full year, respectively,
versus the comparable prior-year periods.
-- Cash, cash equivalents and short-term investments at December 31,
2007 increased to a combined $218.3 million from $205.4 million at
September 30, 2007, representing a net increase of $12.9 million
during the fourth quarter and a net increase of $55.9 million
during the year ended December 31, 2007.
-- During the fourth quarter and year ended December 31, 2007, the
company paid $14.6 million and $57.1 million in cash dividends,
respectively.
-- The company's board of directors recently declared a regular
quarterly cash dividend of $0.20 for the twelfth consecutive
quarter. The dividend is payable on February 29, 2008 to
shareholders of record on February 14, 2008.Segment Results for Fourth Quarter and Year Ended December 31, 2007:
Classmates Media:
(in $millions, except percentages)
Q4 Q4 % FY FY % Financial Highlights 2007 2006 Change 2007 2006 Change -------------------- ------ ------ ------ ------- ------- ------ Billable services revenues $ 30.2 $ 21.1 43% $ 106.5 $ 81.1 31% Advertising revenues 23.1 20.9 10% 86.9 58.3 49% ------ ------ ------- ------- Segment revenues $ 53.3 $ 42.0 27% $ 193.4 $ 139.4 39% ====== ====== ======= ======= As a % of consolidated revenues 42.5% 32.1% 37.7% 26.7% Segment income from operations $ 10.1 $ 7.5 35% $ 28.2 $ 19.9 41% Segment adjusted OIBDA(1) $ 13.5 $ 8.5 58% $ 35.2 $ 24.8 42% Segment adjusted OIBDA as a % of segment revenues(1) 25.3% 20.3% 18.2% 17.8%
-- Segment revenues, segment income from operations and segment adjusted OIBDA(1) for all prior periods have been revised to conform with the new segment reporting structure previously outlined in this press release. -- Segment revenues increased 27% to $53.3 million and 39% to $193.4 million in the fourth quarter and full-year 2007, respectively, versus the comparable prior-year periods. The MyPoints acquisition occurred in April 2006 and, as such, approximately nine months of MyPoints revenues are included in the 2006 results. -- Segment adjusted OIBDA(1) increased to a record $13.5 million in the 2007 fourth quarter, surpassing the company's previous quarterly record by nearly $4.0 million, or 41%. -- Segment adjusted OIBDA(1) increased to 25.3% of segment revenues in the fourth quarter of 2007, its highest percentage in eight quarters, reflecting operating leverage associated with higher revenues in the Classmates Media segment. -- Pay accounts(3) increased by a net 216,000 during the fourth quarter of 2007 to 3.2 million as of December 31, 2007. Segment pay accounts(3) as of December 31, 2007 increased 48% from December 31, 2006. -- The segment represented 59.8% of total pay accounts(3) at December 31, 2007, compared to 44.7% at December 31, 2006.
Communications:
(in $millions, except percentages)
Q4 Q4 % FY FY % Financial Highlights 2007 2006 Change 2007 2006 Change ------- ------- ----- ------- ------- ----- Billable services revenues $ 61.3 $ 78.3 (22%) $273.0 $342.4 (20%) Advertising revenues 10.8 10.5 3% 47.1 40.8 15% ------- ------- ------- ------- Segment revenues $ 72.1 $ 88.8 (19%) $320.1 $383.2 (16%) ======= ======= ======= ======= As a % of consolidated revenues 57.5% 67.9% 62.3% 73.3% Segment income from operations $ 20.3 $ 11.8 72% $ 97.1 $ 93.0 4% Segment adjusted OIBDA(1) $ 26.8 $ 28.1 (5%) $113.0 $121.2 (7%) Segment adjusted OIBDA as a % of segment revenues(1) 37.2% 31.6% 35.3% 31.6%
-- Segment revenues, segment income from operations and segment adjusted OIBDA(1) for all prior periods have been revised to conform with the new segment reporting structure previously outlined in this press release. -- Segment adjusted OIBDA(1) as a percentage of segment revenues increased to a record 37.2% during the fourth quarter of 2007, reflecting the company's continuing efforts in expense management in the Communications segment with a strong focus on driving profitability and cash flow. -- Pay accounts(3) declined by a net 106,000 during the 2007 fourth quarter to 2.2 million, representing the lowest net decline in seven quarters since the period ended March 31, 2006. The decline in Communications pay accounts during the fourth quarter included a loss of 6,000 pay accounts(3) resulting from the company's previously disclosed decision to exit the VoIP business. -- The segment represented 40.2% of total pay accounts(3) at December 31, 2007, compared to 55.3% at December 31, 2006.
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.
Below is the company's guidance for the quarter ending March 31, 2008 and year ending December 31, 2008.
First Quarter 2008 Guidance:
The company expects to achieve continued year over year growth in Classmates Media segment revenues that will be more than offset by a continued decline in Communications segment revenues.
First Quarter 2008 (in $millions) Guidance --------------------------------------------------------------------- Revenues $116.0 - $120.0 --------------------------------------------------------------------- Adjusted OIBDA(1) $30.0 - $34.0 ---------------------------------------------------------------------
Full Year 2008 Guidance:
The company currently anticipates that total revenues in 2008 will decline when compared to 2007. The company expects a continued decrease in Communications segment revenues that will be partially offset by continued increases in Classmates Media segment revenues.
The table below reconciles the company's guidance for operating income, a GAAP measure, to adjusted OIBDA(1).
First Quarter and Full-Year 2008 Q1 2008 FY 2008
(in $millions) Guidance Guidance
---------------------------------------------------------------------
GAAP Operating Income $11.8 - $15.8 $74.7 - $80.7
---------------------------------------------------------------------
Depreciation 5.2 20.5
---------------------------------------------------------------------
Amortization 2.6 9.3
---------------------------------------------------------------------
Stock-based compensation* 9.9 38.0
---------------------------------------------------------------------
Restructuring and
related charges 0.5 0.5
---------------------------------------------------------------------
Adjusted OIBDA(1) $30.0 - $34.0 $143.0 - $149.0
---------------------------------------------------------------------
* The company's guidance for stock-based compensation expense is based, in part, on estimated grants to be made in 2008. Actual grants, as well as the expenses associated with such grants, could vary significantly from those estimated. Historically, bonuses for members of senior management were paid primarily in cash. It is anticipated that the bonuses for certain members of senior management for fiscal 2008 will be paid primarily in shares of the company's common stock. The anticipated change in bonus structure will positively impact adjusted OIBDA(1) in 2008 when compared to prior periods.
(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 and related charges; 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 (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 (such as restructuring and related charges), 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 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 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 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 and related charges and impairment of goodwill, intangible assets and long-lived assets. Management compensates for this limitation by providing supplemental information about restructuring and related charges and impairment charges 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.
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 and related charges and 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 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 and related charges), 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 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 on the face of the consolidated statements of operations. A further limitation associated with the use of these measures is that they do not reflect the costs of restructuring and related charges and impairment charges related to an operating segment. Management compensates for this limitation by providing supplemental information about restructuring and related charges and impairment charges by segment within its financial press releases and SEC filings, when applicable. A reconciliation to segment income from operations, its most comparable GAAP financial 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; restructuring and related 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 SFAS 123R, and the re-measurement of certain deferred tax assets. Management believes that adjusted net income and adjusted diluted net income per 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 (1) certain non-cash expenses (such as stock-based compensation, amortization, the cumulative effect of change in accounting principle, 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 (such as restructuring and related charges). Management also uses adjusted net income and adjusted diluted net income per share for this purpose. Adjusted net income and adjusted diluted net income per 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 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 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 share, directly ahead of adjusted net income and adjusted diluted net income per share within its financial press releases and by providing a reconciliation that shows and describes the adjustments made. Reconciliations to net income and diluted net income per share are 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. Classmates Media segment active accounts are defined as: 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 loyalty marketing members who have earned or redeemed points during such period. Communications segment active accounts are defined as all Communications pay accounts as of the date presented combined with the number of free Communications accounts (access and email users), excluding free Web hosting accounts, that logged on to the company's services at least once during the preceding 31 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 and related charges. 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 and related charges. 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, financial 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.
Investor Conference Call Today at 4:30 p.m. ET:
United Online will host a conference call today at 4:30 p.m. ET (1:30 p.m. PT) to discuss its quarterly results. A live Webcast of the call can be accessed through the "investors" section of the company's Web site located at http://www.unitedonline.com/. A recording of the call will be available on the site for seven days, or by dialing (800) 642-1687 (or 706-645-9291 outside of the United States) and the reservation number, 30945521.
About United Online:
United Online, Inc. (Nasdaq:UNTD) is a leading provider of consumer Internet and media services. The company's Classmates Media services include online 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, based on current expectations, estimates and projections about the company's operations, industry, financial condition, performance and results of operations. Statements containing words such as "guidance," "may," "believe," "anticipate," "expect," "intend," "plan," "project," "projections," "business outlook," and "estimate" or similar expressions constitute forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements include, without limitation, expectations regarding future: financial performance; depreciation and amortization; stock-based compensation; and restructuring and related 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. Reported results should not be considered an indication of future performance. Potential risks and uncertainties include, among others: the effect of competition; the company's inability to retain its free and pay accounts and the rate at which free and pay accounts sign up for or use the company's services; changes in pay accounts and the mix of pay accounts; the company's inability to increase or maintain its advertising revenues; the effects of changes in marketing expenditures or shifts in marketing expenditures; the effects of seasonality; changes in stock-based compensation; changes in amortization or depreciation due to a variety of factors; potential write down, reserve against or impairment of assets including receivables, goodwill, intangibles or other assets including capitalized transaction-related costs associated with the CMC IPO; that the company will incur additional restructuring and related charges or currently anticipated restructuring and related 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; the company's ability to successfully identify, consummate and integrate acquisitions; problems associated with the company's operations, systems or technologies; the company's inability to retain key customers and key personnel; risks associated with litigation; governmental regulation; and the effects of discontinuing or discontinued business operations. In addition, the payment of future dividends and any possible share repurchases are discretionary and will be subject to determination by the Board of Directors each quarter and from time to time following its review of the company's financial performance and other factors. 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 Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Quarter Ended Year Ended
December 31, December 31,
------------------- -------------------
2007 2006 2007 2006
-------- -------- -------- --------
Revenues $125,410 $130,786 $513,503 $522,654
Operating expenses:
Cost of revenues(a) 29,682 29,967 117,203 119,990
Sales and marketing(a) 36,277 43,976 163,424 176,980
Product development(a) 12,232 13,231 51,044 52,602
General and
administrative(a) 19,036 16,537 73,312 67,511
Amortization of
intangible assets 3,011 4,486 12,800 17,640
Restructuring charges 2,991 -- 3,419 627
Impairment of goodwill,
intangible assets and
long-lived assets -- 13,285 -- 13,285
-------- -------- -------- --------
Total operating
expenses 103,229 121,482 421,202 448,635
-------- -------- -------- --------
Operating income 22,181 9,304 92,301 74,019
Interest and other
income, net 2,100 1,549 7,555 6,076
Interest expense (204) (245) (1,164) (2,571)
-------- -------- -------- --------
Income before income
taxes 24,077 10,608 98,692 77,524
Provision for income
taxes 9,505 6,049 40,915 36,293
-------- -------- -------- --------
Income before cumulative
effect of change in
accounting principle 14,572 4,559 57,777 41,231
Cumulative effect of
change in accounting
principle, net of tax -- -- -- 1,041
-------- -------- -------- --------
Net income $ 14,572 $ 4,559 $ 57,777 $ 42,272
======== ======== ======== ========
Basic net income per
share
Income before
cumulative effect of
change in accounting
principle $ 0.22 $ 0.07 $ 0.87 $ 0.64
Cumulative effect of
change in accounting
principle, net of tax -- -- -- 0.02
-------- -------- -------- --------
Basic net income per
share $ 0.22 $ 0.07 $ 0.87 $ 0.66
======== ======== ======== ========
Diluted net income per
share
Income before
cumulative effect of
change in accounting
principle $ 0.21 $ 0.07 $ 0.83 $ 0.62
Cumulative effect of
change in accounting
principle, net of tax -- -- -- 0.02
-------- -------- -------- --------
Diluted net income per
share $ 0.21 $ 0.07 $ 0.83 $ 0.64
======== ======== ======== ========
Shares used to calculate
basic net income per
share 67,526 65,102 66,768 64,001
======== ======== ======== ========
Shares used to calculate
diluted net income per
share 70,166 67,616 69,287 66,269
======== ======== ======== ========
Shares outstanding at
end of period 68,019 65,805 68,019 65,805
======== ======== ======== ========
(a) Stock-based
compensation was
allocated as follows:
Cost of revenues $ 189 $ 148 $ 884 $ 817
Sales and marketing 1,068 714 4,031 3,457
Product development 1,127 1,119 4,941 5,367
General and
administrative 4,561 2,050 9,693 9,527
-------- -------- -------- --------
Total stock-based
compensation $ 6,945 $ 4,031 $ 19,549 $ 19,168
======== ======== ======== ========
UNITED ONLINE, INC.
Unaudited Reconciliations of Non-GAAP Financial Data
(in thousands)
Unaudited Reconciliation of Operating Income to Adjusted Operating
Income Before Depreciation and Amortization (OIBDA)(1)
Quarter Ended Year Ended
December 31, December 31,
------------------- -------------------
2007 2006 2007 2006
-------- -------- -------- --------
Operating income $ 22,181 $ 9,304 $ 92,301 $ 74,019
Depreciation 5,150 5,501 20,150 21,290
Amortization of
intangible assets 3,011 4,486 12,800 17,640
-------- -------- -------- --------
Operating income before
depreciation and
amortization 30,342 19,291 125,251 112,949
Stock-based compensation 6,945 4,031 19,549 19,168
Restructuring charges 2,991 -- 3,419 627
Impairment of goodwill,
intangible assets and
long-lived assets -- 13,285 -- 13,285
-------- -------- -------- --------
Adjusted operating
income before
depreciation and
amortization $ 40,278 $ 36,607 $148,219 $146,029
======== ======== ======== ========
Unaudited Reconciliation of Segment Income from Operations to Segment
Adjusted OIBDA(1)
Quarter Ended Year Ended
December 31, December 31,
------------------- -------------------
2007 2006 2007 2006
-------- -------- -------- --------
Classmates Media:
Segment income from
operations $ 10,052 $ 7,464 $ 28,177 $ 19,938
Stock-based compensation 3,383 1,079 6,987 4,872
Restructuring charges 42 -- 42 --
-------- -------- -------- --------
Segment adjusted
operating income before
depreciation and
amortization $ 13,477 $ 8,543 $ 35,206 $ 24,810
======== ======== ======== ========
Communications:
Segment income from
operations $ 20,290 $ 11,827 $ 97,074 $ 93,011
Stock-based compensation 3,562 2,952 12,562 14,296
Restructuring charges 2,949 -- 3,377 627
Impairment of goodwill,
intangible assets and
long-lived assets -- 13,285 -- 13,285
-------- -------- -------- --------
Segment adjusted
operating income before
depreciation and
amortization $ 26,801 $ 28,064 $113,013 $121,219
======== ======== ======== ========
UNITED ONLINE, INC.
Unaudited Reconciliation of Net Income to Adjusted Net Income(2)
(in thousands, except per share amounts)
Quarter Ended Year Ended
December 31, December 31,
------------------- -------------------
2007 2006 2007 2006
-------- -------- -------- --------
Net income $ 14,572 $ 4,559 $ 57,777 $ 42,272
Add (deduct):
Stock-based
compensation 6,945 4,031 19,549 19,168
Amortization of
intangible assets 3,011 4,486 12,800 17,640
Restructuring charges 2,991 -- 3,419 627
Impairment of goodwill,
intangible assets and
long-lived assets -- 13,285 -- 13,285
Cumulative effect of
change in accounting
principle, net of tax -- -- -- (1,041)
-------- -------- -------- --------
27,519 26,361 93,545 91,951
Income tax effect of
adjusting entries (4,170) (7,682) (11,051) (16,416)
Re-measurement of
certain deferred tax
assets -- 813 (658) 2,132
-------- -------- -------- --------
Adjusted net income $ 23,349 $ 19,492 $ 81,836 $ 77,667
======== ======== ======== ========
Basic net income per
share $ 0.22 $ 0.07 $ 0.87 $ 0.66
======== ======== ======== ========
Diluted net income per
share $ 0.21 $ 0.07 $ 0.83 $ 0.64
======== ======== ======== ========
Adjusted basic net
income per share $ 0.35 $ 0.30 $ 1.23 $ 1.21
======== ======== ======== ========
Adjusted diluted net
income per share $ 0.33 $ 0.29 $ 1.16 $ 1.16
======== ======== ======== ========
Shares used to calculate
basic net income per
share 67,526 65,102 66,768 64,001
======== ======== ======== ========
Shares used to calculate
diluted net income per
share 70,166 67,616 69,287 66,269
======== ======== ======== ========
Shares used to calculate
adjusted basic net
income per share 67,526 65,102 66,768 64,001
======== ======== ======== ========
Shares used to calculate
adjusted diluted net
income per share (a) 71,648 68,194 70,704 67,138
======== ======== ======== ========
---------------------------------------------------------------------
(a) Includes the adjustment of shares used to calculate diluted net
income per share resulting from the elimination of stock-based
compensation.
UNITED ONLINE, INC.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
Dec. 31, Dec. 31,
2007 2006
-------- --------
ASSETS
Cash, cash equivalents and
short-term investments $218,307 $162,362
Accounts receivable, net 28,765 32,226
Deferred tax assets, net 64,609 71,360
Property and equipment, net 39,570 34,296
Goodwill and intangible assets, net 173,267 186,671
Other assets 27,875 16,104
-------- --------
Total assets $552,393 $503,019
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 38,095 $ 36,550
Accrued liabilities 30,586 39,547
Member redemption liability 24,560 19,989
Deferred revenue 67,777 56,348
Capital leases 13 30
Other liabilities 10,734 3,589
-------- --------
Total liabilities 171,765 156,053
-------- --------
Stockholders' equity 380,628 346,966
-------- --------
Total liabilities and stockholders' equity $552,393 $503,019
======== ========
UNITED ONLINE, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Quarter Ended Year Ended
December 31, December 31,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income $ 14,572 $ 4,559 $ 57,777 $ 42,272
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation, amortization
and stock-based
compensation 15,107 14,018 52,500 58,098
Impairment of goodwill,
intangible assets and
long-lived assets -- 13,285 -- 13,285
Provision for doubtful
accounts receivable (1,037) (215) 1,323 (81)
Deferred taxes and other 1,873 (6,046) 8,177 (586)
Tax benefits from
stock-based compensation 391 1,093 4,622 5,781
Excess tax benefits from
stock-based compensation (436) (441) (3,168) (3,863)
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 (68) (5,747) 2,137 (3,215)
Other assets (4,460) (1,553) (9,018) 844
Accounts payable and
accrued liabilities 95 3,895 (9,025) (11,211)
Member redemption
liability 1,037 1,198 4,572 2,315
Deferred revenue (550) (1,180) 11,430 (999)
Other liabilities 6,086 (6) 5,898 (129)
--------- --------- --------- ---------
Net cash provided by
operating activities 32,610 22,860 127,225 101,470
--------- --------- --------- ---------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchases of property
and equipment (7,674) (7,437) (25,509) (24,329)
Purchases of rights,
patents and trademarks -- -- -- (509)
Purchases of short-term
investments (23,569) (67,733) (228,920) (324,328)
Proceeds from maturities
of short-term investments 21,245 27,415 72,890 115,581
Proceeds from sales of
short-term investments 48,395 30,199 229,994 209,599
Cash paid for acquisitions,
net of cash acquired -- (41) -- (61,155)
Increase in restricted cash -- 1,450 -- --
Payment related to
settlement of
pre-acquisition liability -- -- -- (4,800)
Proceeds from sales
of assets, net 7 17 71 104
--------- --------- --------- ---------
Net cash provided by
(used for) investing
activities 38,404 (16,130) 48,526 (89,837)
--------- --------- --------- ---------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Payments on term loan -- -- -- (54,209)
Payments on capital leases (4) (424) (16) (668)
Proceeds from exercises
of stock options 1,216 2,883 8,605 9,452
Proceeds from employee
stock purchase plan 1,928 2,039 5,413 5,004
Repurchases of common stock (929) (310) (5,601) (2,684)
Payments for dividends (14,564) (13,695) (57,130) (53,483)
Excess tax benefits from
stock-based compensation 436 441 3,168 3,863
--------- --------- --------- ---------
Net cash used for
financing activities (11,917) (9,066) (45,561) (92,725)
--------- --------- --------- ---------
Effect of exchange rate
changes on cash and
cash equivalents (102) (71) 65 (53)
Change in cash and
cash equivalents 58,995 (2,407) 130,255 (81,145)
Cash and cash equivalents,
beginning of period 90,512 21,659 19,252 100,397
--------- --------- --------- ---------
Cash and cash equivalents,
end of period $149,507 $ 19,252 $149,507 $ 19,252
========= ========= ========= =========
UNITED ONLINE, INC.
Unaudited Reconciliation of Net Cash Provided by Operating
Activities to Free Cash Flow(4)
(in thousands)
Quarter Ended Year Ended
December 31, December 31,
-------------------- --------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Net cash provided by
operating activities $ 32,610 $ 22,860 $ 127,225 $ 101,470
Add (deduct):
Capital expenditures (7,674) (7,437) (25,509) (24,329)
Excess tax benefits from
stock-based compensation 436 441 3,168 3,863
Cash paid for
restructuring charges 2,776 105 3,204 1,100
--------- --------- --------- ---------
Free cash flow $ 28,148 $ 15,969 $ 108,088 $ 82,104
========= ========= ========= =========
UNITED ONLINE, INC.
Unaudited Segment Information(a)
(in thousands)
Quarter Ended Year Ended
December 31, 2007 December 31, 2007
------------------------ --------------------------
Class- Class-
mates Communi- mates Communi-
Media cations Total Media cations Total
------- ------- -------- -------- -------- --------
Billable
services $30,200 $61,295 $ 91,495 $106,514 $273,012 $379,526
Advertising 23,073 10,842 33,915 86,905 47,072 133,977
------- ------- -------- -------- -------- --------
Total revenues 53,273 72,137 125,410 193,419 320,084 513,503
------- ------- -------- -------- -------- --------
Operating expenses:
Cost of revenue 12,128 17,554 29,682 41,978 75,225 117,203
Sales and
marketing 18,182 18,095 36,277 79,205 84,219 163,424
Product
development 4,777 7,455 12,232 16,809 34,235 51,044
General and
administrative 10,137 8,899 19,036 35,008 38,304 73,312
Amortization of
intangible assets 2,549 462 3,011 10,769 2,031 12,800
Restructuring
charges 42 2,949 2,991 42 3,377 3,419
------- ------- -------- -------- -------- --------
Total operating
expenses 47,815 55,414 103,229 183,811 237,391 421,202
------- ------- -------- -------- -------- --------
Operating income 5,458 16,723 22,181 9,608 82,693 92,301
------- ------- -------- -------- -------- --------
Depreciation 2,045 3,105 5,150 7,800 12,350 20,150
Amortization of
intangible assets 2,549 462 3,011 10,769 2,031 12,800
------- ------- -------- -------- -------- --------
Operating income
before
depreciation and
amortization 10,052 20,290 30,342 28,177 97,074 125,251
Stock-based
compensation 3,383 3,562 6,945 6,987 12,562 19,549
Restructuring
charges 42 2,949 2,991 42 3,377 3,419
------- ------- -------- -------- -------- --------
Adjusted operating
income before
depreciation and
amortization $13,477 $26,801 $ 40,278 $ 35,206 $113,013 $148,219
======= ======= ======== ======== ======== ========
Quarter Ended Year Ended
December 31, 2006 December 31, 2006
----------------------- --------------------------
Class- Class-
mates Communi- mates Communi-
Media cations Total Media cations Total
------- ------- -------- -------- -------- --------
Billable services $21,060 $78,292 $ 99,352 $ 81,146 $342,419 $423,565
Advertising 20,946 10,488 31,434 58,300 40,789 99,089
------- ------- -------- -------- -------- --------
Total revenues 42,006 88,780 130,786 139,446 383,208 522,654
------- ------- -------- -------- -------- --------
Operating expenses:
Cost of revenue 10,608 19,359 29,967 29,853 90,137 119,990
Sales and
marketing 16,984 26,992 43,976 60,782 116,198 176,980
Product
development 3,283 9,948 13,231 11,857 40,745 52,602
General and
administrative 5,763 10,774 16,537 25,217 42,294 67,511
Amortization of
intangible assets 3,683 803 4,486 12,731 4,909 17,640
Restructuring
charges -- -- -- -- 627 627
Impairment of
goodwill,
intangible assets
and long-lived
assets -- 13,285 13,285 -- 13,285 13,285
------- ------- -------- -------- -------- --------
Total operating
expenses 40,321 81,161 121,482 140,440 308,195 448,635
------- ------- -------- -------- -------- --------
Operating income
(loss) 1,685 7,619 9,304 (994) 75,013 74,019
------- ------- -------- -------- -------- --------
Depreciation 2,096 3,405 5,501 8,201 13,089 21,290
Amortization of
intangible assets 3,683 803 4,486 12,731 4,909 17,640
------- ------- -------- -------- -------- --------
Operating income
before
depreciation and
amortization 7,464 11,827 19,291 19,938 93,011 112,949
Stock-based
compensation 1,079 2,952 4,031 4,872 14,296 19,168
Restructuring
charges -- -- -- -- 627 627
Impairment of
goodwill,
intangible
assets and
long-lived
assets -- 13,285 13,285 -- 13,285 13,285
------- ------- -------- -------- -------- --------
Adjusted operating
income before
depreciation and
amortization $ 8,543 $28,064 $ 36,607 $ 24,810 $121,219 $146,029
======= ======= ======== ======== ======== ========
(a) Segment results for all prior periods have been adjusted to
conform with the new segment reporting structure previously
outlined in this press release.
UNITED ONLINE, INC.
Unaudited Selected Quarterly Historical Key Metrics (a)
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2007 2007 2007 2007 2006
------- ------- ------- ------- -------
Consolidated:
Total pay accounts
(b) (in thousands) 5,349 5,239 5,118 4,984 4,854
Number of employees
at end of period 928 999 985 1,008 1,006
Classmates Media:
Segment revenues(e)
(in thousands) $53,273 $49,972 $47,740 $42,434 $42,006
% of Total
revenues 42.5% 39.4% 36.3% 32.7% 32.1%
Pay accounts
(in thousands) 3,199 2,983 2,710 2,433 2,169
% of Total pay
accounts 59.8% 56.9% 53.0% 48.8% 44.7%
Segment active
accounts(c)(d)
(in millions) 12.6 12.8 11.7 11.4 11.2
Communications:
Segment revenues(e)
(in thousands) $72,137 $76,853 $83,677 $87,417 $88,780
% of Total
revenues 57.5% 60.6% 63.7% 67.3% 67.9%
Pay accounts(b)
(in thousands):
Access 1,786 1,886 2,016 2,158 2,282
Other 364 370 392 393 403
------- ------- ------- ------- -------
Total
Communications
pay accounts(b) 2,150 2,256 2,408 2,551 2,685
======= ======= ======= ======= =======
% of Total pay
accounts 40.2% 43.1% 47.0% 51.2% 55.3%
Segment active
accounts(f)
(in millions) 3.3 3.5 3.7 3.9 4.0
(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) Growth in pay accounts during the quarter ended September 30,
2007 includes a loss of 18,000 pay accounts resulting from the
company's decision to exit the photo sharing business. Growth in
pay accounts during the quarter ended December 31, 2007 includes
a loss of 6,000 pay accounts resulting from the company's
decision to exit the VoIP business.
(c) Classmates Media active accounts represent: 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 loyalty marketing members who have earned or redeemed
points during such period.
(d) The numbers of active international accounts prior to the
quarter ended June 30, 2007 were derived by dividing the actual
total numbers of visits by an estimate of the number of times a
user returned to the site during the period.
(e) Segment results for all prior periods have been adjusted to
conform with the new segment reporting structure previously
outlined in this press release.
(f) Communications segment active accounts are defined as all
Communications pay accounts as of the date presented combined
with the number of free Communications accounts (access and
email users), excluding free Web hosting accounts, that logged
on to the company's services at least once during the preceding
31 days.
CONTACT: United Online, Inc.
Investors:
Erik Randerson, CFA
818-287-3350
investor@untd.com
Press:
Scott Matulis
818-287-3388
pr@untd.com