United Online Reports GAAP Net Income of $4.7 Million, or $0.11 Per Share, in Fiscal Second Quarter

Pro Forma EBITDA Increases to $11.4 Million; Pay Subscribers Increase by 328,000 During Quarter to 2.18 Million

Press Release
February 6, 2003




WESTLAKE VILLAGE, Calif., Feb. 6, 2003 -- United Online, Inc. (Nasdaq:UNTD), a leading provider of value-priced Internet access through its NetZero, Juno and BlueLight Internet services, today reported results for its fiscal second quarter ended December 31, 2002.

-- Total revenues for the December 2002 quarter were a record $65.8
million, up 37 percent versus $48.0 million in the December 2001
quarter.
-- The company reported GAAP net income in the December 2002 quarter
of $4.7 million, or $0.11 per diluted share, versus a net loss of
($15.7) million, or ($0.41) per share, in the year-ago quarter.
-- Pay subscribers were a record 2.18 million at December 31, 2002, a
net increase of 328,000 subscribers during the quarter and a net
increase of 716,000, or 49 percent, during the preceding twelve
months. On November 4, 2002 the company acquired the BlueLight
Internet service, which at closing included 174,000 pay
subscribers. Excluding this acquisition, the company added
154,000 net pay subscribers during the December 2002 quarter.
United Online's total active users(1), including users of the
company's free services, totaled 5.0 million at December 31, 2002.
-- Pro forma EBITDA(2) in the December 2002 quarter was $11.4
million, or 17.3 percent of revenues, versus a pro forma EBITDA
loss of ($2.6) million in the year-ago quarter.
-- Pro forma net income(3) in the December 2002 quarter was $8.8
million, or $0.20 per diluted share, presented on a basis
consistent with the analyst consensus estimate as reported by
First Call. This compares to a pro forma net loss of ($6.0)
million or ($0.16) per diluted share, in the December 2001
quarter.
-- Free cash flow(4) was $19.2 million in the December 2002 quarter
versus a negative ($8.9) million in the year-ago quarter.

"Our results this quarter are further evidence that United Online is establishing itself as a leader in the growing value segment of the Internet access market," said Mark R. Goldston, chairman, CEO and president of United Online. "We posted solid revenue growth, expanded our billable services margin, and reported record net income, EBITDA and free cash flow. In a quarter when our largest competitors spent record sums promoting their services, United Online's net pay subscriber growth, even excluding our BlueLight Internet acquisition, outpaced the reported subscriber growth of AOL, MSN and Earthlink combined. These results reinforce our belief that value-priced services will continue to gain share in the Internet access market."

"Once again, we were able to accelerate pay subscriber growth during the quarter without significantly increasing our average subscriber acquisition cost," said Charles S. Hilliard, executive vice president and CFO of United Online. "Our disciplined reinvestment in expanded marketing programs during the past five quarters, combined with United Online's efficient cost structure, has enabled us to drive growth while at the same time expanding margins and profitability."

Additional Highlights of the December 2002 Quarter:

-- Billable services revenues were $58.1 million, or 88 percent of
total revenues, an increase of 42 percent versus $41.0 million, or
85 percent of total revenues, in the December 2001 quarter.
-- The billable services margin(5) was 62.2 percent versus 43.5
percent in the December 2001 quarter.
-- Cash balances at the end of the December 2002 quarter were $160.6
million, including cash, cash equivalents, short-term investments
and restricted cash.
-- On November 4, 2002, the company completed the acquisition of the
Internet access and email service assets of BlueLight.com, a
subsidiary of Kmart Corporation, for approximately $8.4 million in
cash. The acquisition included 174,000 pay subscribers. Upon the
close of the transaction, BlueLight Internet subscribers were
notified that their monthly service fee would increase to $9.95,
from a monthly fee of $8.95, effective in the March 2003 quarter.
This price increase, along with other potential service
modifications, may cause a reduction in the number of subscribers
to the BlueLight Internet service over time.
-- Annualized revenue per average number of employees was a record
$609,000, an increase of 49 percent versus $410,000 in the
December 2001 quarter.

Business Outlook:

The following discussion contains forward-looking information intended to provide certain of management's current projections for the company as of the date of this release. United Online does not intend to revise or update this information prior to its next quarterly earnings report and may not provide this type of information in the future. Due to a variety of factors, including changing business conditions, the competitive environment and other factors, actual results may differ significantly from those projected. These factors are referenced in the company's filings with the Securities and Exchange Commission and later in this announcement under the caption "Cautionary Information Regarding Forward-Looking Statements."

Fiscal Year Ended June 30, 2003 Guidance:

-- The company projects between $44 million and $45 million of pro
forma EBITDA for the fiscal year ended June 30, 2003, up from the
company's previous guidance of $37 million to $39 million.
-- The company estimates that the effective tax rate for purposes of
calculating its provision for income taxes will be 10 percent for
fiscal 2003.

March 2003 Quarter Guidance:

-- The company projects that it will add 120,000 to 150,000 new pay
subscribers, resulting in 2.30 million to 2.33 million pay
subscribers by March 31, 2003.
-- Pro forma EBITDA is projected to be between $11.5 million and
$12.1 million.
-- Pro forma net income is projected to be between $9.1 million and
$9.6 million, or between $0.20 and $0.21 per diluted share. Pro
forma net income is calculated on a basis consistent with the
analyst consensus estimate as reported by First Call.
-- GAAP net income is projected to be between $4.9 million and $5.4
million, or between $0.11 and $0.12 per diluted share.
-- Weighted average diluted shares outstanding are projected to be
between 45 million and 46 million. Total shares outstanding at
the end of the period are projected to be approximately 42
million.

The company projects that its billable services margin for the March 2003 quarter may be flat to slightly down from the 62.2 percent margin achieved in the December 2002 quarter due to potentially higher Internet usage in the mid and late winter months.

(1) Active users are defined as all free subscribers that logged on to our services at least once during the preceding 31 days, together with all subscribers to a billable service plan.

(2) Pro forma EBITDA represents the net income (loss) before interest, taxes, depreciation, amortization, and restructuring and merger-related charges. The company believes that pro forma EBITDA is a useful measure of operating performance because it better reflects the resources generated that could be utilized for strategic opportunities. Pro forma EBITDA is not indicative of cash provided or used by operations. Pro forma EBITDA is not determined in accordance with generally accepted accounting principles (GAAP) and should not be considered as an alternative to historical financial results presented in accordance with GAAP.

(3) Pro forma net income represents the net income (loss) before amortization and restructuring and merger-related charges, presented on a basis consistent with the analyst consensus estimate as reported by First Call. The company believes that pro forma net income is a useful measure of operating performance because it better reflects the resources generated that could be utilized for strategic opportunities. Pro forma net income is not determined in accordance with generally accepted accounting principles (GAAP) and should not be considered as an alternative to historical financial results presented in accordance with GAAP.

(4) Free cash flow represents cash flow from operations calculated in accordance with generally accepted accounting principles (GAAP) after adding back cash paid for restructuring and merger-related costs and deducting capital expenditures. The company believes that free cash flow is a useful measure of operating performance because it better reflects the resources generated that could be utilized for strategic opportunities. Free cash flow is not determined in accordance with GAAP and should not be considered as an alternative to historical financial results presented in accordance with GAAP.

(5) Billable services margin represents billable services revenues less pro forma cost of billable services divided by billable services revenues. The company believes that the billable services margin is a useful measure of operating performance because it represents the profitability of its core business -- pay subscription services -- after deducting the direct costs of providing those services. The billable services margin is not determined in accordance with generally accepted accounting principals (GAAP) and should not be considered as an alternative to results presented in accordance with GAAP.

About United Online

United Online, Inc. (Nasdaq:UNTD) is a leading provider of value-priced Internet access through its NetZero, Juno and BlueLight Internet services. The company's services are offered at less than half the standard monthly prices of its major competitors and are available in more than 6,000 cities across the United States and in Canada. United Online has approximately 444 employees worldwide and is headquartered in Westlake Village, CA, with offices in New York City, San Francisco, CA, and Hyderabad, India. For more information about United Online and its Internet access services, please visit www.untd.com

United Online will be hosting a conference call today at 8AM PST (11AM EST) to discuss its quarterly results. A live Web cast of the call can be accessed on the company's Web site at http://www.irconnect.com/untd/. A recording of the call will be available on the site for seven days.

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. These include, without limitation, statements regarding United Online's expected future financial performance, expected growth in its billable subscriber base and quotes from management in this press release. These statements are based on management's current expectations or beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The potential risks and uncertainties include, among others: United Online's unproven business model and limited operating history; the company's inability to integrate the BlueLight business and maintain the number of subscribers to that service; the company's inability to improve financial results, continue to generate positive free cash flow, EBITDA or net income, or achieve other financial parameters consistent with the stated projections; the company's inability to grow its pay user base as projected due to market conditions, competition or other factors; the company's inability to retain key customers and key personnel; unanticipated technological problems or developments; risks associated with litigation; and unanticipated governmental regulation. More information about potential factors that could affect the company's business and financial results is included in the company's Annual Report on Form 10-K for the fiscal year ended June 30, 2002 and in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2002, which are on file 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.
Condensed Consolidated Balance Sheets
(in thousands)

December 31, 2002 June 30, 2002
----------------- --------------
(unaudited)
ASSETS
Cash, cash equivalents and
short-term investments $159,780 $139,355
Restricted cash 811 6,185
Accounts receivable, net 11,312 7,977
Property and equipment, net 13,303 16,500
Intangible assets, net 57,521 58,119
Other assets 7,064 5,457
-------- --------
Total assets $249,791 $233,593
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 25,906 $ 21,575
Accrued liabilities 13,120 11,212
Deferred revenue 20,157 18,815
Capital leases 748 3,205
-------- --------
Total liabilities 59,931 54,807
-------- --------
Stockholders' equity 189,860 178,786
-------- --------

Total liabilities and
stockholders' equity $249,791 $233,593
======== ========


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

Three Months Ended December 31,
-------------------------------
2002 2001
-------- --------
Revenues:
Billable services $ 58,149 $ 41,035
Advertising and commerce 7,651 7,012
-------- --------
Total revenues 65,800 48,047
Operating expenses:
Cost of billable services 21,990 23,265
Cost of free services 3,161 8,722
Sales and marketing 19,863 10,059
Product development 5,740 7,418
General and administrative 7,087 9,151
Restructuring charges -- 2,075
Amortization of intangible assets 3,798 4,685
-------- --------
Total operating expenses 61,639 65,375
-------- --------
Income (loss) from operations 4,161 (17,328)
Interest income, net 1,073 1,585
-------- --------
Income (loss) before income taxes 5,234 (15,743)
Provision for income taxes 523 --
-------- --------
Net income (loss) $ 4,711 $(15,743)
======== ========
Basic net income (loss) per share $ 0.12 $ (0.41)
======== ========
Diluted net income (loss)
per share $ 0.11 $ (0.41)
======== ========
Shares used to calculate basic
income (loss) per share 40,937 38,863
======== ========
Shares used to calculate diluted
income (loss) per share 44,563 38,863
======== ========
Shares outstanding at end of period 41,764 39,877
======== ========


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

Three Months Ended December 31,
-------------------------------
2002 2001
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss): $ 4,711 $(15,743)
Adjustments to reconcile net income
(loss) to net cash provided by
(used for) operating activities:
Depreciation, amortization
and stock-based charges 6,881 12,204
Other 318 966
Change in operating assets and
liabilities (excluding the effects
of acquisitions):
Restricted cash 531 (1,801)
Accounts receivable (1,203) (464)
Other assets 641 1,445
Accounts payable and accrued
expenses 8,680 (9,472)
Deferred revenue 763 3,230
-------- --------
Net cash provided by (used for)
operating activities 21,322 (9,635)
-------- --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments (7,575) (20,405)
Proceeds from maturities of
short-term investments 10,000 11,527
Cash paid for acquisitions, net of
cash acquired (7,327) --
Purchase of patent rights -- (7)
Purchase of property and equipment (2,156) (265)
-------- --------
Net cash used for investing
activities (7,058) (9,150)
-------- --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable and
capital leases (1,118) (2,826)
Repayment of notes receivable 28 --
Proceeds from employee stock
purchase plan 843 111
Common stock repurchases -- (829)
Proceeds from exercise of
stock options 2,636 --
-------- --------
Net cash provided by (used for)
financing activities 2,389 (3,544)
-------- --------
Change in cash and cash equivalents 16,653 (22,329)
Cash and cash equivalents,
beginning of period 46,648 82,676
-------- --------
Cash and cash equivalents,
end of period $ 63,301 $ 60,347
======== ========
UNITED ONLINE, INC.
Reconciliation of GAAP Net Income to Pro Forma Net Income
(in thousands, except per-share data)

The following table is a reconciliation of the unaudited condensed
consolidated statements of operations prepared in accordance with
generally accepted accounting principles (GAAP) to pro forma net
income. Pro forma net income represents the net income (loss) before
amortization and restructuring and merger-related charges, presented
on a basis consistent with the analyst consensus estimate as reported
by First Call. The company believes that pro forma net income is a
useful measure of operating performance because it better
reflects the resources generated that could be utilized for strategic
opportunities. Pro forma net income is not determined in accordance
with GAAP and should not be considered as an alternative to
historical financial results presented in accordance with GAAP.

Three Months Ended
--------------------------------------------------------
December 31, 2002 December 31, 2001
-------------------------- ---------------------------
Pro Pro
Forma Pro Forma Pro
Reported Entries Forma Reported Entries Forma
------ ------ ------ ------- ------ --------
Revenues:
Billable
services $58,149 $ -- $58,149 $41,035 $ -- $41,035
Advertising
and
commerce 7,651 -- 7,651 7,012 -- 7,012
------ ------ ------ ------- ------ --------
Total
revenues 65,800 -- 65,800 48,047 -- 48,047
Operating
expenses:
Cost of
billable
services 21,990 (38)(a) 21,952 23,265 (75)(a) 23,190
Cost of
free
services 3,161 -- 3,161 8,722 (39)(a) 8,683
Sales and
marketing 19,863 (38)(a) 19,825 10,059 (278)(a) 9,781
Product
development 5,740 (209)(a) 5,531 7,418 (764)(a) 6,654
General and
adminis-
trative 7,087 (90)(a) 6,997 9,151 (1,797)(a) 7,354
Restructuring
charges -- -- -- 2,075 (2,075)(c) --
Amortization
of intangible
assets 3,798 (3,798)(b) -- 4,685 (4,685)(b) --
------ ------ ------ ------- ------ --------
Total
operating
expenses 61,639 (4,173) 57,466 65,375 (9,713) 55,662
------ ------ ------ ------- ------ --------
Income
(loss)
from
operations 4,161 4,173 8,334 (17,328) 9,713 (7,615)
Interest
income, net 1,073 -- 1,073 1,585 -- 1,585
------ ------ ------ ------- ------ --------
Income (loss)
before income
taxes 5,234 4,173 9,407 (15,743) 9,713 (6,030)
Provision
for income
taxes 523 68(d) 591 -- -- --
------ ------ ------ ------- ------ --------
Net income
(loss) $4,711 $4,105 $8,816 $(15,743) $9,713 $(6,030)
====== ====== ====== ======= ====== ========
Basic net
income
(loss) per
share $ 0.12 $ 0.22 $ (0.41) $ (0.16)
====== ====== ====== ======
Diluted net
income (loss)
per share $ 0.11 $ 0.20 $ (0.41) $ (0.16)
====== ====== ====== ======
Shares used
to calculate
basic income
(loss) per
share 40,937 40,937 38,863 38,863
====== ====== ====== ======
Shares used
to calculate
diluted income
(loss) per
share 44,563 44,563 38,863 38,863
====== ====== ====== ======
Shares
outstanding
at end of
period 41,764 41,764 39,877 39,877
====== ====== ====== ======

(a) Elimination of amortization of stock-based charges of $29 and
$2,524 and merger-related charges of $346 and $429, in 2002 and
2001, respectively

(b) Elimination of amortization of intangible assets

(c) Elimination of restructuring charges

(d) Income tax effect of pro forma entries

UNITED ONLINE, INC.
Supplemental Financial Data
(in thousands)


Three Months Ended
December 31,
-----------------------
2002 2001
-------- --------
Reconciliation of Pro Forma
EBITDA (f):
Income (loss) from
Operations $ 4,161 $(17,328)
Add (deduct):
Depreciation, amortization and
stock-based charges 6,881 12,204
Restructuring and merger-
related charges (e) 346 2,504
-------- --------
Pro forma EBITDA $ 11,388 $ (2,620)
======== ========
Reconciliation of Free Cash
Flow (g):
Cash flow from operations $ 21,322 $ (9,635)
Add (deduct):
Cash paid for restructuring and
merger-related charges (e) -- 1,001
Capital expenditures (2,156) (265)
-------- --------
Free cash flow $ 19,166 $ (8,899)
======== ========

(e) Represents restructuring and merger-related costs incurred in
connection with the merger of Juno and NetZero and the
acquisition of certain assets of BlueLight.com. These costs are
primarily attributable to stay bonuses, contract
termination fees, write-off of leasehold improvements and
employee severance payments.

(f) Pro forma EBITDA represents the net income (loss) before
interest, taxes, depreciation, amortization, and restructuring
and merger-related charges. The company believes that pro forma
EBITDA is a useful measure of operating performance because it
better reflects the resources generated that could be utilized
for strategic opportunities. Pro forma EBITDA is not indicative
of cash provided or used by operations. Pro forma EBITDA is not
determined in accordance with generally accepted accounting
principles (GAAP) and should not be considered as an alternative
to historical financial results presented in accordance with
GAAP.

(g) Free cash flow represents cash flow from operations calculated in
accordance with generally accepted accounting principles (GAAP)
after adding back cash paid for restructuring and merger-related
costs and deducting capital expenditures. The company believes
that free cash flow is a useful measure of operating performance
because it better reflects the resources generated that could be
utilized for strategic opportunities. Free cash flow is not
determined in accordance with GAAP and should not be considered
as an alternative to historical financial results presented in
accordance with GAAP.


UNITED ONLINE, INC.
Selected Historical Financial Data and Key Metrics (h)
(in thousands, except per share amounts,
number of employees and where noted)

Dec. 31, Sep. 30, June 30, March 31, Dec. 31,
2002 2002 2002 2002 2001
------- ------- ------- ------- --------
Total revenues $65,800 $58,068 $54,449 $50,911 $ 48,047
Net income (loss) $ 4,711 $ 1,525 $(2,679) $(7,254) $(15,743)
Net income (loss)
per diluted share $ 0.11 $ 0.03 $ (0.07) $ (0.19) $ (0.41)
Billable subscribers 2,176 1,848 1,707 1,598 1,460
Active users
(in millions) 5.0 4.8 4.8 5.2 5.6
Number of employees at
end of period 444 420 420 430 453
Annualized revenue per
average number of
employees $ 609 $ 553 $ 512 $ 461 $ 410

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

CONTACT: United Online, Inc.
Investor Contact:
Brent Zimmerman
(805) 418-2350
investor@untd.com

Press Contacts:
Liz Gengl
(805) 418-2076
pr@untd.com

Peter Delgrosso
(805) 418-2388
pr@untd.com


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