WESTLAKE VILLAGE, Calif., Aug. 6, 2002 (PRIMEZONE) -- 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 fourth quarter ended June 30, 2002.
-- Total revenues for the June 2002 quarter were a record
$54.4 million, up 7 percent versus $50.9 million in the March 2002
quarter.
-- Pro forma EBITDA(1) for the June 2002 quarter was a record
$7.1 million, or 13.0 percent of revenues. This was an increase
of 59 percent versus pro forma EBITDA of $4.5 million, or 8.7
percent of revenues, for the March 2002 quarter.
-- Pay subscribers grew 7 percent during the quarter to more than
1.7 million at June 30, 2002, a net increase of 109,000 pay
subscribers. Total active users(2), including users of the
company's free services, totaled 4.8 million in June 2002.
-- Pro forma net income(3) in the June 2002 quarter was a record
$4.1 million, or $0.09 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 $609,000, or
$0.01 per diluted share, in the March 2002 quarter.
-- The net loss for the June 2002 quarter was ($2.7) million, a
63 percent improvement from a net loss of ($7.3) million for the
March 2002 quarter. On a per-share basis, the net loss for the
June 2002 quarter was ($0.07) versus a net loss of ($0.19) for the
March 2002 quarter.
-- Free cash flow(4) was a record $12.3 million for the June 2002
quarter, more than triple the $3.7 million in the March 2002
quarter.
"United Online's record performance this quarter demonstrates our ability to grow our pay subscriber base while significantly improving financial results," said Mark R. Goldston, chairman, CEO and president of United Online. "Importantly, we were also able to expand our marketing efforts during the quarter - while still exceeding our financial goals - with a powerful new national advertising campaign focused on building consumer awareness of our value-priced Internet services. During our 2002 fiscal year, NetZero's and Juno's combined pay subscriber base grew by more than 56 percent. We see potential for further growth in the market for value-priced Internet services as the overall dial-up market commoditizes, and we will continue to employ cost-effective marketing strategies to further strengthen the NetZero and Juno brands."
"This quarter was highlighted by further cost savings from the merger, solid growth in pay subscribers during seasonally slower months, and the significant operating leverage of United Online's business model," said Charles S. Hilliard, CFO of United Online. "We expanded our billable services margin to 57 percent, grew pay subscribers 7 percent sequentially, and delivered impressive EBITDA growth while adding more than $13 million to our cash balances. The company's free services continued to serve an important role in our pay customer acquisition strategy, even as we reduced our cost of free services by 36 percent sequentially. The cost reduction, achieved with virtually no drop in advertising and commerce revenues, enabled us to reinvest in our national advertising campaign while keeping customer acquisition costs well below that of our major competitors."
Additional Highlights of the June 2002 Quarter:
-- Billable services revenues were $47.9 million, an increase of
8 percent versus $44.4 million in the March 2002 quarter.
Billable services revenues comprised 88 percent of total revenues
in the June 2002 quarter versus 87 percent in the preceding
quarter.
-- The billable services margin (billable services revenues less cost
of billable services divided by billable services revenues)
improved to 57.0 percent in the June 2002 quarter, versus
50.4 percent in the March 2002 quarter.
-- Cash balances at the end of the June 2002 quarter were
$145.5 million (including cash, cash equivalents, short-term
investments and restricted cash), representing net cash added
during the quarter of $13.2 million. During the June 2002
quarter, the company used $224,000 for restructuring and merger-
related charges and $1.2 million for the repayment of capital
lease obligations. Also during the quarter, the company received
approximately $2.1 million in proceeds from the exercise of stock
options and the purchase of shares through its employee stock
purchase program.
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 $30 million and $34 million of pro
forma EBITDA for the fiscal year ended June 30, 2003.
Calendar Year 2002:
-- The company currently projects between $26 million and $28 million
of pro forma EBITDA for calendar year 2002, up from the company's
previous guidance of between $19 million and $22 million.
-- The company projects its pay subscriber base will increase by
25 percent to 28 percent during calendar year 2002, up from the
company's previous guidance of 20 percent to 24 percent.
September 2002 Quarter:
-- The company projects that it will add 70,000 to 90,000 new pay
subscribers, resulting in 1.78 million to 1.80 million pay
subscribers by September 30, 2002.
-- Average monthly revenue per billable user (ARPU) is projected to
remain in the $9.60 to $9.70 range in the September
2002 quarter, 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.
-- EBITDA before restructuring and merger-related charges is
projected to be between $7.2 million and $8.2 million.
-- Pro forma net income is projected to be between $4.8 million
and $5.8 million, or between $0.10 and $0.13 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 45 million and 46 million.
The company projects that its billable services margin for the September 2002 quarter will be approximately in line with the 57.0 percent margin achieved in the June 2002 quarter. Free cash flow(4) for the September 2002 quarter is expected to be impacted by the payment of $3.9 million for fiscal year 2002 employee bonuses. Free cash flow(4) for the September 2002 quarter and for fiscal year 2003 is expected to be impacted by a significantly higher level of capital spending versus the average quarterly spending levels for fiscal year 2002.
(1) Pro forma EBITDA represents the net 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.
(2) Active users are defined as all registered user accounts that connected at least once during the preceding 31 days, together with all subscribers to a billable service plan, in each case regardless of the type of activity or activities engaged in by such subscribers.
(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 Internet service provider that commenced operations in September 2001 with the merger of NetZero and Juno Online Services. The company offers free and value-priced Internet access through its NetZero and Juno consumer brands in more than 5,000 cities in the United States and 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.unitedonline.net.
United Online will be hosting a conference call today at 2PM PST (5PM 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 Juno and NetZero and to realize anticipated cost savings and other benefits associated with the merger; that restructuring and merger-related costs will be greater than anticipated; that the company will not improve financial results, continue to generate positive free cash flow or positive EBITDA or achieve other financial parameters consistent with its stated projections; that the company's capital expenditures will vary from current projections; the impact of acquisitions of other companies, if any; 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 transition free users to pay services; the company's inability to compete effectively; that the company's accruals will be insufficient to cover litigation and other liabilities; the company's inability to continue to develop, market and sell new products and services; that the value segment of the ISP market will not grow as anticipated; the company's inability to retain key customers and key personnel; potential delays, bugs or other problems associated with new products; technological problems or developments; and 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-Q 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 and Selected Data
(in thousands, except per share and subscriber data)
Three Months Ended,
--------------------
June 30, March 31,
2002 2002
-------- --------
Income Statement Data:
Revenues:
Billable services $ 47,888 $ 44,419
Advertising and commerce 6,561 6,492
-------- --------
Total revenues 54,449 50,911
Operating expenses:
Cost of billable services 20,571 22,011
Cost of free services 4,365 6,786
Sales and marketing 14,605 10,844
Product development 5,506 5,920
General and administrative 6,386 5,881
-------- --------
Total operating expenses 51,433 51,442
-------- --------
Operating income (loss) before other charges 3,016 (531)
Amortization of stock-based charges 656 2,198
Amortization of intangible assets 4,685 4,685
Restructuring and merger-related charges(a) 1,398 980
-------- --------
Loss from operations (3,723) (8,394)
Interest income, net 1,044 1,082
Other income (expense), net -- 58
-------- --------
Net loss $ (2,679) $ (7,254)
======== ========
Basic and diluted net loss per share $ (0.07) $ (0.19)
======== ========
Shares used to calculate basic and
diluted loss per share 39,738 38,951
======== ========
Shares outstanding at end of period 40,545 40,128
======== ========
Calculation of Pro Forma EBITDA (b):
Net loss $ (2,679) $ (7,254)
Add (deduct):
Depreciation 4,051 4,927
Amortization of intangible assets 4,685 4,685
Amortization of stock-based charges 656 2,198
Restructuring and merger-related
charges(a) 1,398 980
Interest income, net (1,044) (1,082)
-------- --------
Pro forma EBITDA $ 7,067 $ 4,454
======== ========
Calculation of Free Cash Flow(c):
Cash flow from operations $ 12,595 $ 3,356
Add (deduct):
Cash paid for restructuring and
merger-related charges 224 575
Capital expenditures (567) (247)
-------- --------
Free cash flow $ 12,252 $ 3,684
======== ========
Calculation of Pro Forma Net
Income(d):
Net loss $ (2,679) $ (7,254)
Add (deduct):
Amortization of intangible assets 4,685 4,685
Amortization of stock-based charges 656 2,198
Restructuring and merger-related
charges(a) 1,398 980
-------- --------
Pro forma net income $ 4,060 $ 609
======== ========
Pro forma net income per share:
Basic $ 0.10 $ 0.02
======== ========
Diluted $ 0.09 $ 0.01
======== ========
Shares used to calculate pro forma
net income per share:
Basic 39,738 38,951
======== ========
Diluted 45,030 43,289
======== ========
June 30, March 31, June 30,
2002 2002 2001
---------- ---------- ----------
Balance Sheet Data
(in thousands):
Cash, cash equivalents,
short-term investments
and restricted cash $ 145,540 $ 132,310 $ 134,993
Working capital 103,055 93,412 105,998
Total assets 234,225 231,211 183,863
Capital leases and
notes payable,
less current portion -- 53 3,314
Total stockholders' equity 178,785 177,730 138,957
Subscriber Data:(e)
Active users in the last month
of the quarter (in millions) 4.8 5.2 6.7
Billable subscribers 1,707,000 1,598,000 1,094,000
------------------------
(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 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 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.
(e) United Online commenced operations with the merger of NetZero and Juno on September 25, 2001. In order to present comparable current and historical subscriber information, the subscriber data presented in this table assumes that the merger occurred on June 1, 2001.