United Online Reports GAAP Net Income of $1.5 Million, or $0.03 Per Share, in Fiscal First Quarter

Pro Forma EBITDA of $9.0 Million up 27% Over Preceding Quarter; Pay Subscribers Grow by 141,000 to 1.85 Million

November 7, 2002






WESTLAKE VILLAGE, Calif., Nov. 7, 2002 -- United Online, Inc. (Nasdaq:UNTD), a leading provider of value-priced Internet access through its NetZero and Juno Internet services, today reported results for its fiscal first quarter ended September 30, 2002.

-- Total revenues for the September 2002 quarter were a record $58.1
million, up 7 percent versus $54.4 million in the June 2002
quarter.
-- The company reported its first-ever GAAP net income in the
September 2002 quarter of $1.5 million, or $0.03 per diluted
share, versus a net loss of ($2.7) million, or ($0.07) per share,
for the June 2002 quarter.
-- Pay subscribers were a record 1.85 million at September 30, 2002,
a net increase of 141,000 subscribers, or 8 percent, versus June
30, 2002, and a net increase of 602,000, or 48 percent, during the
preceding twelve months. Total active users(1), including users
of the company's free services, totaled 4.8 million at September
30, 2002.
-- Pro forma EBITDA(2) for the September 2002 quarter was a record
$9.0 million, or 15.5 percent of revenues. This was an increase
of 27 percent versus pro forma EBITDA of $7.1 million, or 13.0
percent of revenues, for the June 2002 quarter.
-- Pro forma net income(3) in the September 2002 quarter was a record
$6.5 million, or $0.15 per diluted share, presented on a basis
consistent with the analyst consensus estimate as reported by
First Call. This compares to pro forma net income of $4.1 million
or $0.09 per diluted share, in the June 2002 quarter.
-- Free cash flow(4) was $7.7 million for the September 2002 quarter
versus $12.3 million in the June 2002 quarter. Free cash flow was
impacted by the payment of $3.8 million of fiscal 2002 employee
bonuses in the September 2002 quarter.

"United Online's record performance this quarter highlights the growing momentum of the value segment of the Internet access market and our position as a leader in that segment," said Mark R. Goldston, chairman, CEO and president of United Online. "In what we expected to be a seasonally challenging quarter, the company reported a sequential increase in pay subscriber additions, sequential growth in advertising and commerce revenues, and a reduction in average subscriber acquisition cost. These achievements, combined with another consecutive quarter of margin expansion on our billable services, resulted in United Online reporting GAAP net income for the first time in its history -- an achievement of which we are extremely proud."

Added Goldston: "While other major Internet access players fight for share of the saturated premium-priced dial-up market, we continue to leverage our highly efficient infrastructure and execute a low-cost provider strategy that is delivering both growth and profitability."

"The effectiveness of our expanded marketing programs enabled us to accelerate pay user growth without increasing our average cost to sign up a new pay subscriber," said Charles S. Hilliard, executive vice president and CFO of United Online. "Also, for the first time ever, more than 50 percent of the pay subscribers who signed up during the quarter were new to our services, as opposed to upgrading from our free services. This illustrates the progress we have made during the past fifteen months in creating demand for our brands as value-priced alternatives in a market currently dominated by premium-priced services."

Additional Highlights of the September 2002 Quarter:


-- Billable services revenues were $51.2 million, an increase of 7
percent versus $47.9 million in the June 2002 quarter. Billable
services revenues comprised 88 percent of total revenues in both
periods.
-- The billable services margin (billable services revenues less cost
of billable services divided by billable services revenues)
improved to 59.6 percent in the September 2002 quarter, versus
57.0 percent in the June 2002 quarter.
-- Cash balances at the end of the September 2002 quarter were $146.9
million (including cash, cash equivalents, short-term investments
and restricted cash), representing net cash added during the
quarter of $1.4 million. During the quarter, the company used
$2.2 million for the repurchase of the company's common stock,
$1.2 million for the repayment of capital lease obligations, and
$1.0 million for a deposit on its purchase of BlueLight.com's
Internet access assets. Also during the quarter, the company
received approximately $1.1 million in proceeds from the exercise
of employee stock options.
-- The company received a favorable settlement on a contractual
dispute with a telecommunications vendor during the quarter that
is reflected as a $650,000 reduction of general and administrative
expenses.

On November 4, 2002, the company completed its previously announced acquisition of the Internet access and email service assets of BlueLight.com, a subsidiary of Kmart Corporation, for approximately $8.4 million. BlueLight.com reported approximately 170,000 pay subscribers as of the close of the transaction. United Online will operate the service as BlueLight Internet Service, and subscribers will retain their current email addresses. These subscribers have been notified that their monthly service fee will increase to $9.95, from the current price 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.

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 referenced below, actual results may differ significantly from those projected.

Fiscal Year Ended June 30, 2003:


-- The company projects between $37 million and $39 million of EBITDA
before restructuring and merger-related charges for the fiscal
year ended June 30, 2003, up from the company's previous guidance
of $30 million to $34 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.

December 2002 Quarter:


-- The company projects that it will add 260,000 to 300,000 new pay
subscribers, including acquired BlueLight subscribers, resulting
in 2.11 million to 2.15 million pay subscribers by December 31,
2002.
-- Average monthly revenue per billable user (ARPU) is expected to be
in the range of $9.55 to $9.65, and billable services revenues are
projected to comprise approximately 90 percent of total revenues.
ARPU is calculated by dividing billable services revenues for a
period by the average number of billable subscribers for that
period, calculated based on the number of pay subscribers at the
beginning and end of the period.
-- GAAP net income is projected to be between $2.5 million and $3.1
million, or between $0.06 and $0.08 per share.
-- EBITDA before restructuring and merger-related charges is
projected to be between $9.1 million and $9.7 million.
-- Pro forma net income is projected to be between $6.6 million and
$7.3 million, or between $0.15 and $0.16 per share.
-- Weighted average basic shares outstanding are estimated to be
approximately 40.5 million. Weighted average diluted shares
outstanding are projected to be between 44 million and 45 million.

The company projects that its billable services margin for the December 2002 quarter may decrease slightly from the 59.6 percent margin achieved in the September 2002 quarter due to (1) the expectation that average monthly hours of Internet usage per subscriber will increase during the late fall and early winter months; and (2) the inclusion of BlueLight subscribers, which currently generate lower margins than United Online's historical subscriber base, for approximately two months during the quarter.

(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 an additional meaningful measure of operating performance. 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 an additional meaningful measure of operating performance. 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 an additional meaningful measure of operating performance. 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.

About United Online

United Online, Inc. (Nasdaq:UNTD) is a leading provider of value-priced Internet access through its NetZero and Juno consumer brands. The company's services are offered at less than half the standard monthly prices of its major competitors and are available in more than 5,000 cities across the United States and in Canada. United Online has approximately 420 employees worldwide and is headquartered in Westlake Village, Calif., with offices in New York City 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.

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 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 Form 10-K and other 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."


UNITED ONLINE, INC.
Unaudited Results of Operations and Selected Data
(in thousands, except per share and subscriber data)

Three Months Ended,
September 30, June 30,
2002 2002
-------- --------
Income Statement Data:
Revenues:
Billable services $ 51,194 $ 47,888
Advertising and commerce 6,874 6,561
-------- --------
Total revenues 58,068 54,449
Operating expenses:
Cost of billable services 20,661 20,571
Cost of free services 3,736 4,365
Sales and marketing 16,626 14,605
Product development 5,774 5,506
General and administrative 5,597 6,386
-------- --------
Total operating expenses 52,394 51,433
-------- --------
Operating income before
other charges 5,674 3,016

Amortization of stock-
based charges 36 656
Amortization of intangible
assets 4,685 4,685
Restructuring and merger-
related charges (a) 247 1,398
-------- --------
Income (loss) from operations 706 (3,723)
Interest income, net 988 1,044
-------- --------
Income (loss) before income
taxes 1,694 (2,679)
Provision for income taxes 169 --
-------- --------
Net income (loss) $ 1,525 $ (2,679)
======== ========
Basic net income (loss)
per share $ 0.04 $ (0.07)
======== ========
Diluted net income (loss)
per share $ 0.03 $ (0.07)
======== ========
Shares used to calculate
basic income (loss) per share 40,181 39,738
======== ========
Shares used to calculate diluted
income (loss) per share 43,687 39,738
======== ========
Shares outstanding at end
of period 40,599 40,545
======== ========

September 30, June 30,
2002 2002
-------- --------
Balance Sheet Data:
Cash, cash equivalents,
short-term investments and
restricted cash $146,893 $145,540
Working capital 112,433 101,982
Total assets 231,235 233,593
Total stockholders' equity 181,179 178,786

Subscriber Data:
Active users in the last
month of the quarter
(in millions) 4.8 4.8
Billable subscribers 1,848,000 1,707,000

UNITED ONLINE, INC.
Selected Financial Information
(in thousands, except per share data)

Three Months Ended,
September 30, June 30,
2002 2002
-------- --------
Reconciliation of GAAP Net Income
to Pro Forma EBITDA (b):

Net income (loss) $ 1,525 $ (2,679)
Add (deduct):
Depreciation 3,332 4,051
Amortization of intangible
assets 4,685 4,685
Amortization of stock-
based charges 36 656
Restructuring and merger-
related charges (a) 247 1,398
Interest income, net (988) (1,044)
Provision for income taxes 169 --
-------- --------
Pro forma EBITDA $ 9,006 $ 7,067
======== ========

Reconciliation of Free Cash Flow (c):
Cash flow from operations $ 8,152 $ 12,595
Add (deduct):
Cash paid for restructuring and
merger-related charges (a) 44 224
Capital expenditures (477) (567)
-------- --------
Free cash flow $ 7,719 $ 12,252
======== ========

Reconciliation of GAAP Net Income
to Pro Forma Net Income (d):

Net income (loss) $ 1,525 $ (2,679)
Add (deduct):
Amortization of intangible
assets 4,685 4,685
Amortization of stock-
based charges 36 656
Restructuring and merger-
related charges (a) 247 1,398
-------- --------
$ 6,493 $ 4,060
======== ========
Pro forma net income per share:
Basic $ 0.16 $ 0.10
======== ========
Diluted $ 0.15 $ 0.09
======== ========

Shares used to calculate
pro forma net income
per share:

Basic 40,181 39,738
======== ========
Diluted 43,687 45,030
======== ========

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

(b) 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 an additional meaningful measure of operating performance. 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 an alternative to historical financial results presented in accordance with GAAP.

(c) 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 an additional meaningful measure of operating performance. 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.

(d) 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 an additional meaningful measure of operating performance. 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.


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

Liz Gengl, Press Contact
(805) 418-2076
pr@untd.com

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



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