* Content & Media Revenues Increase 37 Percent and Expand to 41 Percent of Total Revenues * Quarterly Net Growth of 255,000 Content & Media Pay Accounts * Free Cash Flow Increases 16 Percent to $28.5 Million
WOODLAND HILLS, Calif., Oct. 25, 2007 (PRIME NEWSWIRE) -- United Online, Inc. (Nasdaq:UNTD), a leading provider of consumer Internet and media services, today reported financial results for its third quarter ended September 30, 2007.
"United Online delivered another strong quarter, particularly in our Content & Media segment that now represents 41% of total revenues and 58% of total pay accounts," said Mark R. Goldston, chairman, president and chief executive officer. "Our exceptional growth in Content & Media pay accounts continued in the third quarter, which, along with our strong performance in advertising sales, generated organic revenue growth of 37% for the segment."
Summary Results for Third Quarter Ended September 30, 2007:
The following table summarizes key financial results for the third quarter ended September 30, 2007:
(in millions,
except per share
and account figures)
%
Financial Highlights Q3 2007 Q3 2006 Change
-------------------- -------- -------- -----
Content & Media revenues $ 51.4 $ 37.5 37%
Communications revenues 75.4 92.2 (18%)
-------- --------
Consolidated revenues $ 126.8 $ 129.6 (2%)
======== ========
GAAP operating income $ 23.3 $ 21.9 6%
Adjusted OIBDA(1) $ 37.2 $ 36.8 1%
Adjusted OIBDA as a % of consolidated
revenues 29.3% 28.4%
GAAP net income $ 14.0 $ 13.4 4%
GAAP diluted net income per share $ 0.20 $ 0.20 --
Adjusted net income(2) $ 20.5 $ 19.7 4%
Adjusted diluted net income per share(2) $ 0.29 $ 0.29 --
Change in total pay accounts(3) 121,000 (84,000)
* Consolidated advertising revenues were $32.2 million, an increase of
27% versus the year-ago quarter.
* Q3 2007 operating income and adjusted OIBDA(1) were impacted by
pretax expenses of $2.0 million in connection with the S-1
registration statement filing by the company's Classmates Media
Corporation (CMC) subsidiary relating to a proposed initial public
offering for CMC.
* Pay accounts(3) and active accounts(3) totaled 5.2 million and 16.3
million, respectively, at September 30, 2007.
"United Online delivered strong profitability during the third quarter, as operating income and adjusted operating income before depreciation and amortization (adjusted OIBDA) exceeded our guidance and reflected an increase compared to the year-ago quarter," Goldston said. "Our financial results demonstrate the flexibility of our business model that allows us to profitably and efficiently manage a mature Communications business while continuing to achieve strong growth in our Content & Media segment."
Cash Flows, Balance Sheet and Dividend Highlights for Q3 2007:
* Cash flows from operations increased 30% to $33.6 million, and free cash flow(4) increased 16% to $28.5 million during the third quarter of 2007 compared to the year-ago quarter. * Cash balances at September 30, 2007 increased to $205.4 million from $191.4 million at June 30, 2007, including cash, cash equivalents and short-term investments. * During the third quarter and nine months ended September 30, 2007, the company paid $14.4 million and $42.6 million in cash dividends, respectively. * The company's Board of Directors has declared a regular quarterly cash dividend of $0.20 for the eleventh consecutive quarter. The dividend is payable on November 30, 2007 to shareholders of record on November 14, 2007.
Third Quarter 2007 Segment Results:
Content & Media:
----------------
(in millions,
except percentages)
%
Financial Highlights Q3 2007 Q3 2006 Change
-------------------- -------- -------- -----
Billable services revenues $ 29.4 $ 22.1 33%
Advertising revenues 22.0 15.3 43%
-------- --------
Segment revenues $ 51.4 $ 37.5 37%
======== ========
as a % of consolidated revenues 40.5% 28.9%
Segment income from operations $ 11.3 $ 5.0 126%
Segment adjusted OIBDA(1) $ 11.3 $ 5.0 126%
Segment adjusted OIBDA
as a % of segment revenues(1) 22.0% 13.3%
* Segment adjusted OIBDA(1) as a percentage of segment revenues
increased to 22.0%, its highest percentage in six quarters,
reflecting operating leverage associated with higher revenues.
* Pay accounts(3) increased by a net 255,000 during the third quarter
to 3.1 million. The quarterly increase reflects net growth of
273,000 social networking pay accounts during the quarter, partially
offset by a loss of 18,000 pay accounts resulting from the company's
decision to exit the photo sharing business.
* The segment represented 58.3% of total pay accounts(3) at
September 30, 2007, compared to 54.7% at June 30, 2007 and 44.1% in
the year-ago quarter.
Communications:
---------------
(in millions,
except percentages)
%
Financial Highlights Q3 2007 Q3 2006 Change
-------------------- -------- -------- -----
Billable services revenues $ 65.2 $ 82.1 (21%)
Advertising revenues 10.3 10.1 2%
-------- --------
Segment revenues $ 75.4 $ 92.2 (18%)
======== ========
as a % of consolidated revenues 59.5% 71.1%
Segment income from operations $ 29.9 $ 35.4 (16%)
Segment adjusted OIBDA(1) $ 29.9 $ 36.1 (17%)
Segment adjusted OIBDA
as a % of segment revenues(1) 39.6% 39.1%
* Pay accounts(3) declined by 134,000 to 2.2 million.
* The segment represented 41.7% of total pay accounts(3) at
September 30, 2007, compared to 45.3% at June 30, 2007 and 55.9% in
the year-ago quarter.
* The increase in segment adjusted OIBDA(1) as a percentage of segment
revenues reflects the company's continuing focus on managing the
Communications segment for profitability and cash flow.
* The company has reduced the number of employees within its
Communications segment to better align the segment's cost structure
within a mature business for dial-up Internet access services. The
company has eliminated 69 positions, which will result in
restructuring and related charges during the fourth quarter of 2007
of approximately $3.5 million. In addition, 11 employees have
been transferred from the company's Communications segment to the
Content & Media segment.
Other:
------
* Other reconciling items (unallocated corporate expenses) to arrive
at consolidated adjusted OIBDA(1) totaled $4.0 million, versus
$4.3 million in the year-ago quarter.
Business Outlook:
"I am encouraged that our operating income as a percentage of revenues increased in both segments versus the year-ago quarter, despite our incurring significant audit and other expenses related to the Classmates Media IPO," commented Scott H. Ray, executive vice president and chief financial officer. "We remain confident in our ability to again deliver strong adjusted OIBDA in the fourth quarter, reflecting the company's disciplined financial management and continued focus on enhancing shareholder value."
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 fourth quarter and the year ending December 31, 2007. The guidance may be affected by the company's ongoing analysis of the accounting treatment related to its VoIP and photo sharing operations, which may result in reporting these operations as discontinued operations in the future. The company previously disclosed its intention to exit its VoIP and photo sharing businesses and recognized an impairment charge relating to its VoIP and photo sharing assets during the fourth quarter of 2006.
Fourth Quarter 2007 (in millions) Guidance -------------------------------------------------- Revenues $124.9 - $128.9 -------------------------------------------------- Adjusted OIBDA(1) $37.1 - $39.1 -------------------------------------------------- Full Year 2007 (in millions) Guidance Prior Guidance --------------------------------------------------------------------- Revenues $513.0 - $517.0 $512.0 - $520.0 --------------------------------------------------------------------- Adjusted OIBDA(1) $145.0 - $147.0 $143.0 - $147.0 ---------------------------------------------------------------------
The table below reconciles the company's guidance for adjusted operating income before depreciation and amortization (adjusted OIBDA(1)) to operating income, a GAAP measure.
----------------------------------------------
Fourth Quarter and Full Q4 2007 FY 2007 Prior 2007
Year 2007 (in millions) Guidance Guidance Guidance
---------------------------------------------------------------------
GAAP Operating Income $18.7 - $20.7 $88.8 - $90.8 $90.1 - $94.1
---------------------------------------------------------------------
Depreciation 5.2 20.2 20.7
---------------------------------------------------------------------
Amortization 3.0 12.8 12.8
---------------------------------------------------------------------
Stock-based
compensation 6.7 19.3 19.0
---------------------------------------------------------------------
Restructuring and
related charges 3.5 3.9 0.4
---------------------------------------------------------------------
Adjusted OIBDA(1) $37.1 - $39.1 $145.0 - $147.0 $143.0 - $147.0
---------------------------------------------------------------------
(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. 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 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. A reconciliation to operating income, its most comparable GAAP financial measure, 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 restructuring and related charges and impairment of goodwill, intangible assets and long-lived assets. Management believes that because segment adjusted OIBDA and segment adjusted OIBDA as a percentage of segment revenues exclude certain non-cash expenses and expenses that are not reflective of the segment's core operating results over time, these measures provide investors with additional useful information to evaluate the company's segment 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 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 amortization of intangible assets; stock-based compensation; 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 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 diluted net income per share for this purpose. Adjusted net income and adjusted diluted 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 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 in the same industry. 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 SEC filings 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. Active accounts are defined as: all pay accounts as of the date presented; the monthly average for the quarter ended, as of the date presented, of all free social networking accounts who have visited the company's domestic or international Web sites (excluding The Names Database) at least once during the reporting period; and the monthly average for the period of all loyalty marketing members who have earned or redeemed points during such period. Active accounts also include the number of free Communications accounts (access and email users) that logged on to the company's services at least once during the preceding 31 days. Prior to the quarter ended September 30, 2007, we measured active accounts using a different methodology for our free social networking and loyalty marketing members. Until the quarter ended September 30, 2007, active accounts for each quarterly period included all free social networking accounts that had logged on to our services at least once during the prior 31 days and loyalty marketing members who earned or redeemed points within the preceding 90 days. Prior to the quarter ended June 30, 2007, active accounts also included free accounts associated with VoIP and The Names Database that had logged on to the company's services within the preceding 31 days, Web hosting free accounts that received a Web site visit within the preceding 90 days, and photo sharing free accounts that logged on to the service within the preceding 90 days. These free accounts were removed from the active accounts definition in anticipation of the company's curtailment of photo sharing and VoIP services, and to better reflect the activity level of the company's member base.
(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 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 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. A reconciliation to net cash provided by operating activities, its most comparable GAAP financial measure, 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 at 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, 20875010.
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 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 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. Statements containing words such as "guidance," "may," "believe," "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 projected amortization and depreciation 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; governmental regulation; and the effects of discontinuing certain business operations. In addition, the payment of future dividends is discretionary and will be subject to determination by the Board of Directors each quarter 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
September 30,
--------------------
2007 2006
-------- --------
Revenues $126,825 $129,636
Operating expenses:
Cost of revenues(a) 27,865 28,987
Sales and marketing(a) 38,410 43,448
Product development(a) 12,276 13,170
General and administrative(a) 21,887 17,306
Amortization of intangible assets 3,090 4,213
Restructuring charges 34 627
-------- --------
Total operating expenses 103,562 107,751
-------- --------
Operating income 23,263 21,885
Interest and other income, net 1,874 1,457
Interest expense (228) (199)
-------- --------
Income before income taxes 24,909 23,143
Provision for income taxes 10,940 9,707
-------- --------
Net income $ 13,969 $ 13,436
======== ========
Basic net income per share $ 0.21 $ 0.21
======== ========
Diluted net income per share $ 0.20 $ 0.20
======== ========
Shares used to calculate basic net income
per share 67,207 64,573
======== ========
Shares used to calculate diluted net income
per share 69,525 66,583
======== ========
Shares outstanding at end of period 67,639 65,214
======== ========
(a) Stock-based compensation was allocated as follows:
Cost of revenues $ 247 $ 176
Sales and marketing 1,128 727
Product development 1,358 1,137
General and administrative 3,050 2,264
-------- --------
Total stock-based compensation $ 5,783 $ 4,304
======== ========
UNITED ONLINE, INC.
Reconciliation of Non-GAAP Financial Data
(in thousands)
Reconciliation of Operating Income to Adjusted Operating Income
Before Depreciation and Amortization (OIBDA)(1)
Quarter Ended
September 30,
--------------------
2007 2006
-------- --------
Operating income $ 23,263 $ 21,885
Depreciation 5,021 5,737
Amortization of intangible assets 3,090 4,213
-------- --------
Operating income before depreciation and
amortization 31,374 31,835
Stock-based compensation 5,783 4,304
Restructuring charges 34 627
-------- --------
Adjusted operating income before depreciation
and amortization $ 37,191 $ 36,766
======== ========
Reconciliation of Segment Income from Operations to Segment Adjusted
OIBDA(1)
Quarter Ended
September 30,
--------------------
2007 2006
-------- --------
Content & Media:
Segment income from operations $ 11,266 $ 4,987
Restructuring charges 34 8
-------- --------
Segment adjusted operating income before
depreciation and amortization $ 11,300 $ 4,995
======== ========
Communications:
Segment income from operations $ 29,863 $ 35,437
Restructuring charges -- 619
-------- --------
Segment adjusted operating income before
depreciation and amortization $ 29,863 $ 36,056
======== ========
UNITED ONLINE, INC.
Reconciliation of Net Income to Adjusted Net Income(2)
(in thousands, except per share amounts)
Quarter Ended
September 30,
--------------------
2007 2006
-------- --------
Net income $ 13,969 $ 13,436
Add:
Stock-based compensation 5,783 4,304
Amortization of intangible assets 3,090 4,213
Restructuring charges 34 627
-------- --------
22,876 22,580
Income tax effect of adjusting entries (2,349) (2,873)
-------- --------
Adjusted net income $ 20,527 $ 19,707
======== ========
Basic net income per share $ 0.21 $ 0.21
======== ========
Diluted net income per share $ 0.20 $ 0.20
======== ========
Adjusted basic net income per share $ 0.31 $ 0.31
======== ========
Adjusted diluted net income per share $ 0.29 $ 0.29
======== ========
Shares used to calculate basic net income
per share 67,207 64,573
======== ========
Shares used to calculate diluted net income
per share 69,525 66,583
======== ========
Shares used to calculate adjusted basic net
income per share 67,207 64,573
======== ========
Shares used to calculate adjusted diluted net
income per share(a) 71,171 67,482
======== ========
---------------------------------------------------------------------
(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)
Sept. 30, Dec. 31,
2007 2006
-------- --------
ASSETS
Cash, cash equivalents and short-term
investments $205,407 $162,362
Accounts receivable, net 27,660 32,226
Deferred tax assets, net 65,976 71,360
Property and equipment, net 37,053 34,296
Goodwill and intangible assets, net 176,631 186,671
Other assets 20,575 16,104
-------- --------
Total assets $533,302 $503,019
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 37,347 $ 36,550
Accrued liabilities 28,383 39,547
Member redemption liability 23,523 19,989
Deferred revenue 68,327 56,348
Capital leases 18 30
Other liabilities 4,648 3,589
-------- --------
Total liabilities 162,246 156,053
-------- --------
Stockholders' equity 371,056 346,966
-------- --------
Total liabilities and stockholders' equity $533,302 $503,019
======== ========
UNITED ONLINE, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Quarter Ended
September 30,
--------------------
2007 2006
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,969 $ 13,436
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and stock-based
compensation 13,894 14,254
Provision for doubtful accounts 1,267 (12)
Deferred taxes and other 5,246 2,339
Tax benefits from stock-based compensation 521 1,118
Excess tax benefits from stock-based
compensation (199) (839)
Change in operating assets and liabilities
(excluding the effects of acquisitions):
Accounts receivable 1,332 761
Other assets (234) 899
Accounts payable and accrued liabilities (5,504) (5,751)
Member redemption liability 706 247
Deferred revenue 2,688 (695)
Other liabilities (117) (35)
-------- --------
Net cash provided by operating activities 33,569 25,722
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (5,272) (2,939)
Purchases of short-term investments (40,846) (76,286)
Proceeds from maturities and sales of
short-term investments 97,663 69,245
Cash paid for acquisitions, net of cash
acquired -- (586)
Increase in restricted cash -- (1,450)
Payment related to settlement of
pre-acquisition liability -- (4,800)
Proceeds from sales of assets, net 43 87
-------- --------
Net cash provided by (used for) investing
activities 51,588 (16,729)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital leases (4) (98)
Proceeds from exercises of stock options 552 1,532
Repurchases of common stock (890) (417)
Payments for dividends (14,392) (13,546)
Excess tax benefits from stock-based
compensation 199 839
-------- --------
Net cash used for financing activities (14,535) (11,690)
-------- --------
Effect of exchange rate changes on cash and
cash equivalents 192 (6)
Change in cash and cash equivalents 70,814 (2,703)
Cash and cash equivalents, beginning of period 19,698 24,362
-------- --------
Cash and cash equivalents, end of period $ 90,512 $ 21,659
======== ========
UNITED ONLINE, INC.
Reconciliation of Net Cash Provided by Operating Activities to
Free Cash Flow(4)
(in thousands)
Quarter Ended
September 30,
--------------------
2007 2006
-------- --------
Free Cash Flow
Net cash provided by operating activities $ 33,569 $ 25,722
Add (deduct):
Capital expenditures (5,272) (2,939)
Excess tax benefits from stock-based
compensation(a) 199 839
Cash paid for restructuring charges 34 995
-------- --------
Free cash flow $ 28,530 $ 24,617
======== ========
---------------------------------------------------------------------
(a) In accordance with SFAS 123R, certain tax benefits from exercised
stock options that were previously reflected in the operating section
of the statements of cash flows are now presented in the financing
section.
UNITED ONLINE, INC.
Unaudited Quarterly Segment Information
(in thousands)
Quarter Ended September 30, 2007
--------------------------------------------
Unallocated
Content & Communi- Corporate
Media cations Expenses Total
-------- -------- -------- --------
Billable services $ 29,416 $ 65,170 $ -- $ 94,586
Advertising 21,959 10,280 -- 32,239
-------- -------- -------- --------
Total revenues 51,375 75,450 -- 126,825
-------- -------- -------- --------
Operating expenses:
Cost of revenue 10,742 16,876 247 27,865
Sales and marketing 19,586 17,697 1,127 38,410
Product development 4,170 6,748 1,358 12,276
General and
administrative 7,723 7,066 7,098 21,887
Amortization of
intangible assets 2,875 215 -- 3,090
Restructuring charges 34 -- -- 34
-------- -------- -------- --------
Total operating
expenses 45,130 48,602 9,830 103,562
-------- -------- -------- --------
Operating income (loss) 6,245 26,848 (9,830) 23,263
-------- -------- -------- --------
Depreciation 2,146 2,800 75 5,021
Amortization of
intangible assets 2,875 215 -- 3,090
-------- -------- -------- --------
Operating income before
depreciation and
amortization 11,266 29,863 (9,755) 31,374
Stock-based
compensation -- -- 5,783 5,783
Restructuring charges 34 -- -- 34
-------- -------- -------- --------
Adjusted operating income
before depreciation and
amortization $ 11,300 $ 29,863 $ (3,972) $ 37,191
======== ======== ======== ========
Quarter Ended September 30, 2006
--------------------------------------------
Unallocated
Content & Communi- Corporate
Media cations Expenses Total
-------- -------- -------- --------
Billable services $ 22,142 $ 82,057 $ -- $104,199
Advertising 15,341 10,096 -- 25,437
-------- -------- -------- --------
Total revenues 37,483 92,153 -- 129,636
-------- -------- -------- --------
Operating expenses:
Cost of revenue 8,532 20,279 176 28,987
Sales and marketing 17,197 25,524 727 43,448
Product development 4,279 7,754 1,137 13,170
General and
administrative 5,057 5,673 6,576 17,306
Amortization of
intangible assets 3,529 684 -- 4,213
Restructuring charges 8 619 -- 627
-------- -------- -------- --------
Total operating
expenses 38,602 60,533 8,616 107,751
-------- -------- -------- --------
Operating income (loss) (1,119) 31,620 (8,616) 21,885
-------- -------- -------- --------
Depreciation 2,577 3,133 27 5,737
Amortization of
intangible assets 3,529 684 -- 4,213
-------- -------- -------- --------
Operating income before
depreciation and
amortization 4,987 35,437 (8,589) 31,835
Stock-based
compensation -- -- 4,304 4,304
Restructuring charges 8 619 -- 627
-------- -------- -------- --------
Adjusted operating income
before depreciation and
amortization $ 4,995 $ 36,056 $ (4,285) $ 36,766
======== ======== ======== ========
UNITED ONLINE, INC.
Selected Quarterly Historical Financial Data and Key Metrics(a)
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2007 2007 2007 2006 2006
-------- -------- -------- -------- --------
Revenues
(in thousands):
Content & Media $ 51,375 $ 49,712 $ 44,175 $ 43,592 $ 37,483
Communications 75,450 81,705 85,676 87,194 92,153
-------- -------- -------- -------- --------
Total $126,825 $131,417 $129,851 $130,786 $129,636
======== ======== ======== ======== ========
Net income
(in thousands) $ 13,969 $ 16,208 $ 13,028 $ 4,559 $ 13,436
Diluted net income
per share $ 0.20 $ 0.23 $ 0.19 $ 0.07 $ 0.20
Pay accounts(3)(b)
(in thousands) 5,239 5,118 4,984 4,854 4,912
Active accounts(3)(c)
(in millions) 16.3 15.9 20.1 20.1 20.8
Number of employees
at end of period 999 985 1,008 1,006 1,023
---------------------------------------------------------------------
(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.
(c) Prior to the quarter ended June 30, 2007, active accounts
also included free accounts associated with VoIP and The Names
Database services that had logged on to the company's services
within the preceding 31 days, Web hosting free accounts that
received a web site visit within the preceding 90 days, and photo
sharing free accounts that logged on to the service within the
preceding 90 days. These free accounts were removed from the
active accounts definition in anticipation of the company's
curtailment of photo sharing and VoIP services, and to better
reflect the activity level of the company's member base.
Beginning with the quarter ended September 30, 2007, we measured
active accounts using a different methodology for the company's
free social networking and MyPoints members. Until the quarter
ended September 30, 2007, active accounts for each quarterly
period included all free social networking accounts that had
logged on to the company's services at least once during the
prior 31 days and MyPoint members who earned points or spent
points within the preceding 90 days. Beginning with the quarter
ended September 30, 2007, active accounts for free social
networking members and MyPoints members reflect the following
definitions: the monthly average for the quarter ended, as of the
date presented, of all free social networking accounts who have
visited the company's domestic or international Web sites
(excluding The Names Database) at least once during the reporting
period, and the monthly average for the period of all loyalty
marketing members who have earned or redeemed points during such
period.
UNITED ONLINE, INC.
Analysis of Pay Accounts (3)
(in thousands)
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2007 2007 2007 2006 2006
-------- -------- -------- -------- --------
Content & Media(a)
Social networking 2,983 2,710 2,433 2,169 2,079
Other(c) 70 88 87 86 85
-------- -------- -------- -------- --------
Total(c) 3,053 2,798 2,520 2,255 2,164
-------- -------- -------- -------- --------
Communications(b)
Access 1,886 2,016 2,158 2,282 2,425
Other 300 304 306 317 323
-------- -------- -------- -------- --------
Total 2,186 2,320 2,464 2,599 2,748
-------- -------- -------- -------- --------
Total pay
accounts(3)(c) 5,239 5,118 4,984 4,854 4,912
======== ======== ======== ======== ========
---------------------------------------------------------------------
(a) Content & Media includes social networking and Web hosting.
Periods prior to September 30, 2007 also include photo sharing.
(b) Communications includes Internet access, VoIP, premium content,
premium email and security suite.
(c) 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.