* Content & Media Revenues Grow to 33% of Quarterly Consolidated Revenues in the Fourth Quarter * Content & Media Fourth-Quarter Pay Accounts Rise to 46% of All Pay Accounts * Fourth-Quarter Advertising Revenues Increase 101% Year-Over-Year
WOODLAND HILLS, Calif., Feb. 8, 2007 (PRIME NEWSWIRE) -- United Online, Inc. (Nasdaq:UNTD), a leading provider of consumer Internet and media services, today reported financial results for its fourth quarter and fiscal year ended December 31, 2006.
"Organic revenue growth in our Content & Media segment drove United Online's sequential revenue growth this quarter," said Mark R. Goldston, chairman and chief executive officer of United Online. "This achievement highlights the significant progress we made diversifying our business in 2006, with Content & Media comprising 33% of fourth-quarter revenues and 46% of total pay accounts."
Fourth-Quarter 2006 Consolidated Results:
* Total revenues were $130.8 million, versus $130.2 million in the year-ago quarter. * Including the impact of $13.3 million of non-cash asset impairment charges (see below), operating income was $9.3 million, or 7.1% of revenues, versus $22.1 million, or 17.0% of revenues, in the year-ago quarter. * Excluding the impact of impairment charges, adjusted operating income before depreciation and amortization (OIBDA)(1) increased 6% to $36.6 million, or 28.0% of revenues, versus $34.6 million, or 26.6% of revenues, in the year-ago quarter. * Pay accounts(2) decreased by 58,000 during the quarter to 4.9 million, and active accounts(2) totaled 20.1 million at December 31, 2006. * Net income was $4.6 million, after the impact of $8.0 million, net of tax, of impairment charges, versus net income of $12.4 million in the year-ago quarter. On a diluted per share basis, net income was $0.07, after the impact of $0.12 of asset impairment charges in the fourth quarter of 2006, versus $0.19 in the year-ago quarter. * Excluding the impact of impairment charges, adjusted net income(3) was $19.5 million, an increase of 5%, versus $18.6 million for the year-ago quarter. On a diluted per share basis, adjusted net income for the quarter was $0.29 per share, an increase of 4% versus $0.28 per share for the year-ago quarter. * The $13.3 million pre-tax, non-cash asset impairment charges are comprised of (i) Communications segment charges of $4.5 million related to the write-down of certain assets associated with the company's voice over Internet protocol (VoIP) business; and (ii) Content & Media segment charges of $8.8 million related to the write-down of goodwill and intangible assets associated with the March 2005 acquisition of PhotoSite. Certain non-GAAP metrics contained herein, including adjusted OIBDA, adjusted OIBDA for a segment, and adjusted net income have been adjusted to exclude impairment charges. See footnotes below.
Full-Year 2006 Consolidated Results:
* Total revenues were $522.7 million, versus $525.1 million in 2005. * Operating income was $74.0 million, after the impact of $13.3 million of impairment charges, or 14.2% of revenues, versus $86.6 million, or 16.5% of revenues, in 2005. * Adjusted operating income before depreciation and amortization (OIBDA)(1) increased 9% to $146.0 million, or 27.9% of revenues, versus $133.8 million, or 25.5% of revenues, in 2005. * Net income was $42.3 million, after the impact of $8.0 million, net of tax, of impairment charges, versus net income of $47.1 million in 2005. On a diluted per share basis, net income was $0.64 in 2006, after the impact of $0.12 of asset impairment charges in 2006, versus $0.74 in 2005. * Adjusted net income(3) was $77.7 million, an increase of 9%, versus $71.1 million in 2005. On a diluted per share basis, adjusted net income for 2006 was $1.16 per share, an increase of 6%, versus $1.09 per share in 2005.
"2006 marked the fifth year in a row that United Online has reported record consolidated adjusted OIBDA," said Charles S. Hilliard, president and chief financial officer of United Online. "2006 was also the third year in a row that we have reported record Content & Media revenues. We believe our profitability, strong balance sheet and free cash flow give us the flexibility needed to continue to execute our diversification strategy."
Fourth-Quarter 2006 Segment Results:
Communications:
* Communications revenues were $87.2 million, or 66.7% of consolidated revenues, versus $104.1 million, or 79.9% of consolidated revenues, in the year-ago quarter. * Communications operating income was $24.9 million, after the impact of $4.5 million of impairment charges, or 28.5% of Communications revenues, versus $26.8 million, or 25.7% of Communications revenues, in the year-ago quarter. * Communications adjusted OIBDA(1) was $32.9 million, or 37.7% of Communications revenues, an increase of 8%, versus $30.3 million, or 29.1% of Communications revenues, in the year-ago quarter. * Communications pay accounts decreased by 149,000 during the quarter to 2.6 million, or 53.5% of consolidated pay accounts.
Content & Media:
* Content & Media revenues grew 67% to $43.6 million, or 33.3% of consolidated revenues, versus $26.2 million, or 20.1% of consolidated revenues, in the year-ago quarter. * Content & Media operating loss was ($7.2) million, after the impact of $8.8 million of impairment charges, versus an operating profit of $3.1 million, or 11.8% of Content & Media revenues, in the year-ago quarter. * Content & Media adjusted OIBDA(1) was $8.1 million, or 18.5% of Content & Media revenues, versus $9.0 million, or 34.3% of Content & Media revenues, in the year-ago quarter. * Content & Media pay accounts increased by 91,000 during the quarter to 2.3 million, or 46.5% of consolidated pay accounts.
Other:
* Other reconciling items (unallocated corporate expenses) to arrive at consolidated adjusted OIBDA(1) were ($4.3) million, versus ($4.6) million in the year-ago quarter.
Additional Highlights:
* Cash balances at December 31, 2006 were $162.4 million, including cash, cash equivalents and short-term investments. * Cash flows from operations were $22.9 million in the fourth quarter of 2006, versus $22.8 million in the year-ago quarter. Cash flows from operations were $101.5 million in 2006, versus $137.0 million in 2005. In connection with the adoption of FAS 123R, certain tax benefits from exercised stock options that were previously reflected in the operating section of the company's statement of cash flows are now presented in the financing section. * Free cash flow(4) was $16.0 million in the fourth quarter of 2006, versus $17.6 million in the year-ago quarter. Free cash flow(4) was $82.1 million in 2006, versus $115.4 million in 2005. * The company's previously-authorized stock repurchase program has been extended through December 31, 2007. At December 31, 2006, the company had repurchased $139.2 million of its common stock under the program, leaving $60.8 million remaining under the program.
Full-Year 2006 Segment Results:
Communications:
* Communications revenues were $375.9 million, or 71.9% of consolidated revenues, versus $431.9 million, or 82.3% of consolidated revenues, in 2005. * Communications operating income was $118.4 million, after the impact of $4.5 million of impairment charges, or 31.5% of Communications revenues, versus $122.9 million, or 28.4% of Communications revenues, in 2005. * Communications adjusted OIBDA(1) was $138.0 million, or 36.7% of Communications revenues, an increase of 2%, versus $135.3 million, or 31.3% of Communications revenues, in 2005.
Content & Media:
* Content & Media revenues grew 58% to $146.7 million, or 28.1% of consolidated revenues, versus $93.1 million, or 17.7% of consolidated revenues, in 2005. * Content & Media operating loss was ($6.5) million, after the impact of $8.8 million of impairment charges, versus an operating loss of ($8.3) million in 2005. * Content & Media adjusted OIBDA(1) was $26.7 million, or 18.2% of Content & Media revenues, an increase of 61%, versus $16.5 million, or 17.8% of Content & Media revenues, in 2005.
Other:
* Other reconciling items (unallocated corporate expenses) to arrive at consolidated adjusted OIBDA(1) were ($18.6) million, versus ($18.0) million in 2005.
Business Outlook:
The following forward-looking information includes certain projections made by management as of the date of this press release. United Online does not intend to revise or update this information and may not provide this type of information in the future. Due to a variety of factors, actual results may differ significantly from those projected. Factors include, without limitation, the factors referenced later in this announcement under the caption "Cautionary Information Regarding Forward-Looking Statements." These and other factors are discussed in more detail in the company's filings with the Securities and Exchange Commission. In addition, the stock-based compensation and weighted average diluted shares projections are based on estimated equity grants for 2007, including a company-wide grant which has not yet been determined, and actual grants could vary significantly from those currently estimated.
Below is the company's guidance for the March 2007 quarter and the year ending December 31, 2007:
(in millions)
Q1 ending Full Year ending
3/31/07 12/31/07
-----------------------------------
Operating income $15.0 - $17.0 $78.5 - $83.5
Depreciation 5.0 21.0
Amortization 4.7 19.0
Stock-based compensation 3.8 21.0
Restructuring charges 1.5 1.5
-----------------------------------
Adjusted operating income before
depreciation and amortization(1) $30.0 - $32.0 $141.0 - $146.0
-----------------------------------
Weighted average diluted shares 68.5 - 69.5 70.0 - 71.0
Total revenues for the March 2007 quarter are estimated to be between approximately $124.0 million and approximately $126.0 million.
We currently anticipate a slight to moderate decline in total revenues for fiscal year 2007 when compared to total revenues for fiscal year 2006.
(1) Adjusted operating income before depreciation and amortization
(adjusted OIBDA) is defined by the company as operating income
before depreciation; amortization; stock-based compensation;
restructuring charges; and impairment of goodwill, intangible
assets and long-lived assets. Management believes that because
adjusted OIBDA excludes (1) certain non-cash expenses (such as
depreciation, amortization, stock-based compensation and
impairment of goodwill, intangible assets and long-lived assets);
and (2) expenses that are not reflective of the company's core
operating results over time, this measure provides investors with
additional useful information to measure the company's
performance, particularly with respect to changes in performance
from period to period. Management uses adjusted OIBDA to measure
the company's performance. The company's Board of Directors uses
this measure in determining certain compensation incentives for
certain members of the company's management. Adjusted OIBDA is
not determined in accordance with accounting principles generally
accepted in the United States of America (GAAP) and should be
considered in addition to, not as a substitute for or superior to,
financial measures determined in accordance with GAAP. A
limitation associated with the use of adjusted OIBDA is that it
does not reflect the periodic costs of certain capitalized
tangible and intangible assets used in generating revenues in the
company's business. Management evaluates the costs of such
tangible and intangible assets through other financial measures
such as capital expenditures and purchase accounting. An
additional limitation associated with this measure is that it does
not include stock-based compensation expenses related to the
company's workforce. Management compensates for this limitation
by providing supplemental information about stock compensation
expense on the face of the consolidated statements of operations.
A further limitation associated with the use of this measure is
that it does not reflect the costs of restructuring charges and
impairment charges. Management compensates for this limitation by
providing information about restructuring charges and impairment
charges. Management does not believe any of these limitations are
material, particularly when such measure is disclosed with its
most comparable GAAP financial measure, operating income. A
reconciliation to operating income is provided in the accompanying
tables.
Adjusted OIBDA for each of the company's segments is defined by
the company as segment income from operations as set forth in the
company's Form 10-Ks and Form 10-Qs before restructuring charges
and impairment of goodwill, intangible assets and long-lived
assets. Management believes that because adjusted OIBDA for a
segment excludes certain non-cash expenses and expenses that are
not reflective of the segment's core operating results over time,
this measure provides investors with additional useful information
to measure the company's segment performance, particularly with
respect to changes in performance from period to period. Adjusted
OIBDA for the company's segments 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 for a segment is that it does not reflect the costs
of restructuring charges and impairment charges related to an
operating segment. Management compensates for this limitation by
providing information about restructuring charges and impairment
charges by segment. Management does not believe this limitation
is material, particularly when such measure is disclosed with its
most comparable GAAP financial measure, segment income from
operations. A reconciliation to segment income from operations is
provided in the accompanying tables.
(2) A pay account represents a unique billing relationship with a
customer who subscribes to one or more of the company's services.
A pay account does not equate to a unique subscriber since one
subscriber could have several pay accounts. Active accounts are
defined as all free access, VoIP, social-networking and email
users that logged on to our services at least once during the
preceding 31 days, together with all pay accounts. Additionally,
active accounts include the number of free Web sites that received
at least one unique visitor within the preceding 90 days; the
number of free photo-sharing users that logged on to the service
at least once within the preceding 90 days; and the number of
MyPoints members who earned points or spent points within the
preceding 90 days.
(3) Adjusted net income is defined by the company as net income before
the after-tax effect of amortization of intangible assets;
stock-based compensation; restructuring charges; impairment of
goodwill, intangible assets and long-lived assets; and the
cumulative effect of a change in accounting principle as a result
of the adoption of FAS 123R, and the re-measurement of certain
deferred tax assets. Management believes that adjusted net income
and adjusted net income per share provide investors with
additional useful information to measure the company's financial
performance, particularly from period to period, because these
measures are exclusive of (1) certain non-cash expenses (such as
amortization, stock-based compensation and impairment of goodwill,
intangible assets and long-lived assets) and (2) expenses that are
not reflective of the company's core results over time.
Management also uses adjusted net income and adjusted net income
per share for this purpose. Adjusted net income and adjusted net
income per share are not determined in accordance with accounting
principles generally accepted in the United States of America
(GAAP) and should be considered in addition to, not as a
substitute for or superior to, financial measures determined in
accordance with GAAP. The limitations of adjusted net income and
adjusted net income per share are that, similar to adjusted OIBDA,
they do not include certain costs, and the terms adjusted net
income and adjusted 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 in the same industry. Management compensates for this
limitation by presenting the most comparable GAAP measure, net
income, directly ahead of adjusted net income in this earnings
release and by providing a reconciliation that shows and describes
the adjustments made. Management does not believe these
limitations are material, particularly when such measure is
disclosed with its most comparable GAAP financial measure, net
income. A reconciliation to net income is provided in the
accompanying tables.
(4) Free cash flow is defined by the company as net cash provided by
operating activities, less capital expenditures and including the
excess tax benefits from stock-based compensation and cash paid
for restructuring charges. Management believes that this measure
of free cash flow provides investors with additional useful
information to measure operating liquidity because it reflects the
company's operating cash flows after investing in capital assets.
This measure is used by management, and may also be useful for
investors, to assess the company's ability to pay its quarterly
dividend, repay debt obligations, generate cash flow for a variety
of strategic opportunities, including reinvestment in the
business, and effect potential acquisitions and share repurchases.
Free cash flow is not determined in accordance with accounting
principles generally accepted in the United States of America
(GAAP) and should be considered in addition to, not as a
substitute for or superior to, financial measures determined in
accordance with GAAP. The limitation of free cash flow is that it
does not represent the total increase or decrease in cash during
the period. Management does not believe that this is a material
limitation, particularly when such measure is disclosed with its
most comparable GAAP financial measure, net cash provided by
operating activities. A reconciliation to net cash provided by
operating activities is provided in the accompanying tables.
Conference Call
United Online will host a conference call today at 2:00 p.m. PST (5:00 p.m. EST) to discuss its quarterly results. A live Web cast of the call can be accessed through the Investors section of the company's Web site at www.untd.com. A recording of the call will be available on the site for seven days.
About United Online
United Online, Inc. (Nasdaq:UNTD) is a leading provider of consumer Internet and media services. The company's Content & Media services include social networking (Classmates) and online loyalty marketing (MyPoints). Its Communications services include Internet access (NetZero, Juno) and email. United Online is headquartered in Woodland Hills, CA, with offices in New York, NY; Fort Lee, NJ; Renton, WA; San Francisco, CA; Schaumburg, IL; Orem, UT; Erlangen, Germany; and Hyderabad, India. For more information about United Online, please visit www.untd.com.
Cautionary Information Regarding Forward-Looking Statements
This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, as amended. Statements containing words such as "guidance," "may," "believe," "will," "expect," "project," "projections," "business outlook" and "estimate" or similar expressions constitute forward-looking statements. These statements include, without limitation, expectations regarding future financial performance; weighted average diluted shares; depreciation and amortization; stock-based compensation and restructuring charges. Any such forward-looking statements are not guarantees of future performance or results, and involve risks and uncertainties that may cause actual performance and results to differ materially from those predicted and reported results should not be considered an indication of future performance. Potential risks and uncertainties include, among others: the effect of competition, including adoption of broadband services and changes in the company's pricing or competitors' pricing, and the use of promotional offers to acquire or retain subscribers; the company's inability to retain its existing subscribers and the rate at which new subscribers sign up for the company's services; changes in pay accounts and the mix of pay accounts; the effects of changes in marketing expenditures or shifts in marketing expenditures to support existing and new products and services; the effects of seasonality; changes in Internet usage; changes in the projected number of weighted average diluted shares due to the issuance of stock, restricted stock units and stock options, stock repurchases, fluctuations in the company's stock price or other factors; changes in stock-based compensation; changes in the projected amortization and depreciation figures due to capital spending or other factors; potential impairment of goodwill and intangibles; that the Company will incur additional restructuring charges or currently anticipated restructuring charges will be greater than anticipated; risks associated with the commercialization of new services; changes in tax laws, the company's business or other factors that would impact anticipated tax benefits; changes in usage by subscribers, additional telecommunications costs or other factors negatively impacting the company's cost of revenue; changes in active accounts; the company's inability to maintain, renew, or enter into new, agreements with telecommunications providers on attractive terms; the company's ability to successfully integrate acquisitions; problems associated with the company's billing systems; the company's inability to retain key customers and key personnel; technological problems or developments; risks associated with litigation; and governmental regulation. From time to time, the company considers acquisitions or divestitures that, if consummated, could be material. Forward-looking statements regarding financial metrics are based upon the assumption that no such acquisition or divestiture is consummated during the relevant periods. If an acquisition or divestiture were consummated, actual results could differ materially from any forward-looking statements. More information about potential factors that could affect the company's business and financial results is included in the company's annual and quarterly reports filed with the Securities and Exchange Commission (http://www.sec.gov), including, without limitation, information under the captions "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors."
UNITED ONLINE, INC.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
December 31, December 31,
2006 2005
------------ ------------
ASSETS
Cash, cash equivalents and
short-term investments $162,362 $244,362
Accounts receivable, net 32,226 19,201
Deferred tax assets, net 71,360 68,355
Property and equipment, net 34,296 33,093
Goodwill and intangible assets, net 186,671 139,837
Other assets 16,104 16,340
-------- --------
Total assets $503,019 $521,188
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 36,550 $ 46,955
Accrued liabilities 39,547 36,249
Member redemption liability 19,989 --
Deferred revenue 56,348 56,284
Capital leases 30 698
Term loan -- 54,208
Other liabilities 3,589 4,379
-------- --------
Total liabilities 156,053 198,773
-------- --------
Stockholders' equity 346,966 322,415
-------- --------
Total liabilities and
stockholders' equity $503,019 $521,188
======== ========
UNITED ONLINE, INC.
Unaudited Consolidated Statements of Operations
(in thousands, except per share amounts)
------------------ ------------------
Three Months Ended Year Ended
December 31, December 31,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
Revenues $130,786 $130,232 $522,654 $525,061
Operating expenses:
Cost of revenues(a) 29,967 28,241 120,049 110,672
Sales and marketing(a) 43,976 48,639 177,019 209,292
Product development(a) 13,231 11,229 52,933 40,009
General and
administrative(a) 16,537 15,126 67,709 56,729
Amortization of
intangible assets 4,486 4,915 17,640 21,799
Impairment of goodwill,
intangible assets and
long-lived assets 13,285 -- 13,285 --
-------- -------- -------- --------
Total operating
expenses 121,482 108,150 448,635 438,501
-------- -------- -------- --------
Operating income 9,304 22,082 74,019 86,560
Interest and other
income, net 1,549 2,201 6,076 6,885
Interest expense (245) (1,328) (2,571) (6,073)
-------- -------- -------- --------
Income before income taxes 10,608 22,955 77,524 87,372
Provision for income
taxes 6,049 10,581 36,293 40,245
-------- -------- -------- --------
Income before cumulative
effect of change in
accounting principle 4,559 12,374 41,231 47,127
Cumulative effect of
change in accounting
principle, net of tax -- -- 1,041 --
-------- -------- -------- --------
Net income $ 4,559 $ 12,374 $ 42,272 $ 47,127
======== ======== ======== ========
Basic net income per share
Income before cumulative
effect of change in
accounting principle $ 0.07 $ 0.20 $ 0.64 $ 0.77
Cumulative effect of
change in accounting
principle, net of tax -- -- 0.02 --
-------- -------- -------- --------
Basic net income per share $ 0.07 $ 0.20 $ 0.66 $ 0.77
======== ======== ======== ========
Diluted net income per share
Income before cumulative
effect of change in
accounting principle $ 0.07 $ 0.19 $ 0.62 $ 0.74
Cumulative effect of
change in accounting
principle, net of tax -- -- 0.02 --
-------- -------- -------- --------
Diluted net income per
share $ 0.07 $ 0.19 $ 0.64 $ 0.74
======== ======== ======== ========
Shares used to calculate
basic net income per share 65,102 61,899 64,001 61,135
======== ======== ======== ========
Shares used to calculate
diluted net income per
share 67,616 64,996 66,269 63,815
======== ======== ======== ========
Shares outstanding at
end of period 65,805 62,606 65,805 62,606
======== ======== ======== ========
(a) Stock-based compensation was allocated as follows:
Cost of revenues $ 148 $ 52 $ 817 $ 183
Sales and marketing 714 333 3,457 954
Product development 1,119 327 5,367 1,069
General and administrative 2,050 2,408 9,527 7,746
-------- -------- -------- --------
Total stock-based
compensation $ 4,031 $ 3,120 $ 19,168 $ 9,952
======== ======== ======== ========
UNITED ONLINE, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
------------------ ------------------
Three Months Ended Year Ended
December 31, December 31,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 4,559 $ 12,374 $ 42,272 $ 47,127
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation,
amortization and
stock-based compensation 14,018 12,538 58,098 47,232
Impairment of goodwill,
intangible assets
and long-lived assets 13,285 -- 13,285 --
Deferred taxes and other (6,046) 170 (586) 2,325
Tax benefits from
stock-based compensation 1,093 3,995 5,781 15,170
Excess tax benefits
from stock-based
compensation (441) -- (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 (5,962) 1,678 (3,296) (1,669)
Other assets (1,553) (1,764) 844 1,806
Accounts payable and
accrued liabilities 3,895 (5,231) (11,211) 17,677
Member redemption
liability 1,198 -- 2,315 --
Deferred revenue (1,180) (1,034) (999) 5,181
Other liabilities (6) 45 (129) 2,198
-------- -------- -------- --------
Net cash provided by
operating activities 22,860 22,771 101,470 137,047
-------- -------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property
and equipment (7,437) (5,199) (24,329) (21,653)
Purchases of rights,
patents and trademarks -- (8) (509) (5,562)
Purchases of short-term
investments (67,733) (38,151) (324,328) (320,869)
Proceeds from maturities
and sales of short-term
investments 57,614 101,755 325,180 353,333
Cash paid for acquisitions,
net of cash acquired (41) -- (61,155) (8,638)
Decrease in restricted
cash 1,450 -- -- --
Payment related to
settlement of
pre-acquisition
liability -- -- (4,800) --
Proceeds from sales
of assets, net 17 -- 104 --
-------- -------- -------- --------
Net cash provided
by (used for)
investing activities (16,130) 58,397 (89,837) (3,389)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payments on term loan -- (4,125) (54,209) (45,792)
Payments on capital leases (424) (91) (668) (621)
Proceeds from exercises
of stock options 2,883 1,142 9,452 5,874
Proceeds from employee
stock purchase plan 2,039 1,491 5,004 3,169
Repurchases of common
stock (310) -- (2,684) (14,206)
Payments for dividends (13,695) (12,808) (53,483) (38,067)
Excess tax benefits from
stock-based compensation 441 -- 3,863 --
-------- -------- -------- --------
Net cash used for
financing activities (9,066) (14,391) (92,725) (89,643)
-------- -------- -------- --------
Effect of exchange rate
changes on cash and cash
equivalents (71) (39) (53) (130)
Change in cash and cash
equivalents (2,407) 66,738 (81,145) 43,885
Cash and cash equivalents,
beginning of period 21,659 33,659 100,397 56,512
-------- -------- -------- --------
Cash and cash equivalents,
end of period $ 19,252 $100,397 $ 19,252 $100,397
======== ======== ======== ========
UNITED ONLINE, INC.
Reconciliation of Net Income to Adjusted Net Income(3)
(in thousands, except per-share data)
Three Months Ended Year Ended
December 31, December 31,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
Net income $ 4,559 $ 12,374 $ 42,272 $ 47,127
Add (deduct):
Stock-based compensation 4,031 3,120 19,168 9,952
Amortization of intangible
assets 4,486 4,915 17,640 21,799
Restructuring charges -- -- 627 --
Impairment of goodwill,
intangible assets and
long-lived assets 13,285 -- 13,285 --
Cumulative effect of
change in accounting
principle -- -- (1,041) --
-------- -------- -------- --------
26,361 20,409 91,951 78,878
Income tax effect of
adjusting entries (7,682) (1,819) 16,416) (8,777)
Re-measurement of certain
deferred tax assets 813 -- 2,132 1,008
-------- -------- -------- --------
Adjusted net income $ 19,492 $ 18,590 $ 77,667 $ 71,109
======== ======== ======== ========
Adjusted basic net income
per share $ 0.30 $ 0.30 $ 1.21 $ 1.16
======== ======== ======== ========
Adjusted diluted net income
per share $ 0.29 $ 0.28 $ 1.16 $ 1.09
======== ======== ======== ========
Shares used to calculate
adjusted basic net income
per share 65,102 61,899 64,001 61,135
======== ======== ======== ========
Shares used to calculate
adjusted diluted net income
per share(a) 68,194 66,236 67,138 65,127
======== ======== ======== ========
----------------------------------------------------------------------
(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.
Reconciliation of Non-GAAP Financial Data
(in thousands)
Three Months Ended Year Ended
December 31, December 31,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
Adjusted Operating Income
Before Depreciation and
Amortization(1)
Operating income $ 9,304 $ 22,082 $ 74,019 $ 86,560
Depreciation 5,501 4,503 21,290 15,481
Amortization 4,486 4,915 17,640 21,799
-------- -------- -------- --------
Operating income before
depreciation and
amortization 19,291 31,500 112,949 123,840
Stock-based compensation 4,031 3,120 19,168 9,952
Restructuring charges -- -- 627 --
Impairment of goodwill,
intangible assets and
long-lived assets 13,285 -- 13,285 --
-------- -------- -------- --------
Adjusted operating income
before depreciation and
amortization $ 36,607 $ 34,620 $146,029 $133,792
======== ======== ======== ========
Reconciliation of Segment
Income from Operations to
Adjusted OIBDA(1)
Communications:
Segment income from
operations $ 28,360 $ 30,292 $132,839 $135,286
Restructuring charges -- -- 619 --
Impairment of goodwill,
intangible assets and
long-lived assets 4,504 -- 4,504 --
-------- -------- -------- --------
Adjusted operating income
before depreciation and
amortization $ 32,864 $ 30,292 $137,962 $135,286
======== ======== ======== ========
Content & Media:
Segment income from
operations $ (725) $ 8,969 $ 17,913 $ 16,541
Restructuring charges -- -- 8 --
Impairment of goodwill,
intangible assets and
long-lived assets 8,781 -- 8,781 --
-------- -------- -------- --------
Adjusted operating income
before depreciation and
amortization $ 8,056 $ 8,969 $ 26,702 $ 16,541
======== ======== ======== ========
UNITED ONLINE, INC.
Reconciliation of Non-GAAP Financial Data
(in thousands)
Three Months Ended Year Ended
December 31, December 31,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
Free Cash Flow(4)
Net cash provided by
operating activities $ 22,860 $ 22,771 $101,470 $137,047
Add (deduct):
Capital expenditures (7,437) (5,199) (24,329) (21,653)
Excess tax benefits
from stock-based
compensation(a) 441 -- 3,863 --
Cash paid for
restructuring charges 105 -- 1,100 --
-------- -------- -------- --------
Free cash flow $ 15,969 $ 17,572 $ 82,104 $115,394
======== ======== ======== ========
----------------------------------------------------------------------
(a) In accordance with FAS 123R, certain tax benefits from exercised
stock options that were previously reflected in the operating
section of the statement of cash flows are now presented in the
financing section.
UNITED ONLINE, INC.
Supplemental Schedule of Segment Information
(in thousands)
Three Months Ended December 31, 2006
-----------------------------------------------
Unallocated
Communications Content & Corporate Total
Media Expenses
-------------- --------- ---------- --------
Billable services $ 77,047 $ 22,305 $ -- $ 99,352
Advertising 10,147 21,287 -- 31,434
-------- -------- -------- --------
Total revenues 87,194 43,592 -- 130,786
-------- -------- -------- --------
Operating expenses:
Cost of revenue 18,524 11,295 148 29,967
Sales and marketing 25,362 17,900 714 43,976
Product development 8,067 4,045 1,119 13,231
General and administrative 5,486 4,664 6,387 16,537
Amortization of
intangible assets 372 4,114 -- 4,486
Impairment of goodwill,
intangible assets and
long-lived assets 4,504 8,781 -- 13,285
-------- -------- -------- --------
Total operating expenses 62,315 50,799 8,368 121,482
-------- -------- -------- --------
Operating income (loss) 24,879 (7,207) (8,368) 9,304
-------- -------- -------- --------
Depreciation 3,109 2,368 24 5,501
Amortization 372 4,114 -- 4,486
-------- -------- -------- --------
Operating income before
depreciation and
amortization 28,360 (725) (8,344) 19,291
Stock-based compensation -- -- 4,031 4,031
Impairment of goodwill,
intangible assets and
long-lived assets 4,504 8,781 -- 13,285
-------- -------- -------- --------
Adjusted operating income
before depreciation and
amortization $ 32,864 $ 8,056 $ (4,313) $ 36,607
======== ======== ======== ========
Three Months Ended December 31, 2005
-----------------------------------------------
Unallocated
Communications Content & Corporate Total
Media Expenses
-------------- --------- ---------- --------
Billable services $ 95,058 $ 19,533 $ -- $114,591
Advertising 9,018 6,623 -- 15,641
-------- -------- -------- --------
Total revenues 104,076 26,156 -- 130,232
-------- -------- -------- --------
Operating expenses:
Cost of revenue 24,247 3,942 52 28,241
Sales and marketing 38,669 9,637 333 48,639
Product development 8,549 2,353 327 11,229
General and administrative 5,138 2,939 7,049 15,126
Amortization of
intangible assets 713 4,202 -- 4,915
-------- -------- -------- --------
Total operating expenses 77,316 23,073 7,761 108,150
-------- -------- -------- --------
Operating income (loss) 26,760 3,083 (7,761) 22,082
-------- -------- -------- --------
Depreciation 2,819 1,684 -- 4,503
Amortization 713 4,202 -- 4,915
-------- -------- -------- --------
Operating income before
depreciation and
amortization 30,292 8,969 (7,761) 31,500
Stock-based compensation -- -- 3,120 3,120
-------- -------- -------- --------
Adjusted operating income
before depreciation and
amortization $ 30,292 $ 8,969 $ (4,641) $ 34,620
======== ======== ======== ========
UNITED ONLINE, INC.
Supplemental Schedule of Segment Information
(in thousands)
Year Ended December 31, 2006
-----------------------------------------------
Unallocated
Communications Content & Corporate Total
Media Expenses
-------------- --------- ---------- --------
Billable services $336,924 $ 86,641 $ -- $423,565
Advertising 39,013 60,076 -- 99,089
-------- -------- -------- --------
Total revenues 375,937 146,717 -- 522,654
-------- -------- -------- --------
Operating expenses:
Cost of revenue 86,811 32,421 817 120,049
Sales and marketing 109,484 64,078 3,457 177,019
Product development 32,931 14,635 5,367 52,933
General and
administrative 21,401 18,095 28,213 67,709
Amortization of
intangible assets 2,424 15,216 -- 17,640
Impairment of goodwill,
intangible assets and
long-lived assets 4,504 8,781 -- 13,285
-------- -------- -------- --------
Total operating
expenses 257,555 153,226 37,854 448,635
-------- -------- -------- --------
Operating income (loss) 118,382 (6,509) (37,854) 74,019
-------- -------- -------- --------
Depreciation 12,033 9,206 51 21,290
Amortization 2,424 15,216 -- 17,640
-------- -------- -------- --------
Operating income before
depreciation and
amortization 132,839 17,913 (37,803) 112,949
Stock-based compensation -- -- 19,168 19,168
Restructuring charges 619 8 -- 627
Impairment of goodwill,
intangible assets and
long-lived assets 4,504 8,781 -- 13,285
-------- -------- -------- --------
Adjusted operating income
before depreciation and
amortization $137,962 $ 26,702 $(18,635) $146,029
======== ======== ======== ========
Year Ended December 31, 2005
-----------------------------------------------
Unallocated
Communications Content & Corporate Total
Media Expenses
-------------- --------- ---------- --------
Billable services $396,330 $ 69,649 $ -- $465,979
Advertising 35,614 23,468 -- 59,082
-------- -------- -------- --------
Total revenues 431,944 93,117 -- 525,061
-------- -------- -------- --------
Operating expenses:
Cost of revenue 94,946 15,543 183 110,672
Sales and marketing 162,242 46,096 954 209,292
Product development 30,015 8,925 1,069 40,009
General and
administrative 18,815 12,133 25,781 56,729
Amortization of
intangible assets 3,048 18,751 -- 21,799
-------- -------- -------- --------
Total operating
expenses 309,066 101,448 27,987 438,501
-------- -------- -------- --------
Operating income (loss) 122,878 (8,331) (27,987) 86,560
-------- -------- -------- --------
Depreciation 9,360 6,121 -- 15,481
Amortization 3,048 18,751 -- 21,799
-------- -------- -------- --------
Operating income before
depreciation and
amortization 135,286 16,541 (27,987) 123,840
Stock-based compensation -- -- 9,952 9,952
-------- -------- -------- --------
Adjusted operating income
before depreciation and
amortization $135,286 $ 16,541 $(18,035) $133,792
======== ======== ======== ========
UNITED ONLINE, INC.
Selected Quarterly Historical Financial Data and Key Metrics(a)
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2006 2006 2006 2006 2005
-------- -------- -------- -------- --------
Revenue
(in thousands) $130,786 $129,636 $134,900 $127,332 $130,232
Net income
(in thousands) $ 4,559 $ 13,436 $ 11,585 $ 12,692 $ 12,374
Net income per
diluted share $ 0.07 $ 0.20 $ 0.18 $ 0.20 $ 0.19
Pay accounts(2)
(in thousands) 4,854 4,912 4,996 5,093 5,009
Active accounts(2)
(in millions) 20.1 20.8 20.7 18.7 17.6
Number of
employees at
end of period 1,006 1,023 1,016 912 900
---------------------------------------------------------------------
(a) More information on the financial results for these quarters can
be found in the company's filings with the Securities and
Exchange Commission.
UNITED ONLINE, INC.
Analysis of Pay Accounts(2)
(in thousands)
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2006 2006 2006 2006 2005
-------- -------- -------- -------- --------
Communications(a)
Access 2,282 2,425 2,556 2,751 2,855
Other 317 323 330 321 313
-------- -------- -------- -------- --------
Total 2,599 2,748 2,886 3,072 3,168
-------- -------- -------- -------- --------
Content & Media(b)
Social
networking 2,169 2,079 2,029 1,945 1,766
Other 86 85 81 76 75
-------- -------- -------- -------- --------
Total 2,255 2,164 2,110 2,021 1,841
-------- -------- -------- -------- --------
Total pay
accounts(2) 4,854 4,912 4,996 5,093 5,009
======== ======== ======== ======== ========
---------------------------------------------------------------------
(a) Communications includes Internet access, VoIP, premium content,
premium email and security suite. (b) Content & Media includes
social networking, Web hosting and photo sharing.
(b) Content & Media includes social networking, Web hosting and photo
sharing.