Conference Call Transcript
WESTLAKE VILLAGE, Calif., Feb. 4, 2004 (PRIMEZONE) -- United Online, Inc. (Nasdaq:UNTD), the nation's leading provider of value-priced Internet access services, today reported results for its fourth quarter and fiscal year ended December 31, 2003. The company recently changed its fiscal year end from June 30 to December 31.
Summary of December 2003 Quarter Results:
-- Total revenues for the quarter were a record $96.9 million, up
47% versus $65.8 million for the year-ago quarter.
-- Total pay subscribers(1) increased by a net 172,000 during the
quarter, reaching a record 2.9 million at December 31, 2003.
Total active users(1), including users of the company's free
services, totaled 5.3 million at December 31, 2003.
-- Approximately 22% of total pay subscribers at December 31, 2003
also subscribed to one or more of the company's add-on services,
including accelerated dial-up and premium email services. Revenue
Generating Units(2) (RGUs) grew by a net 403,000, including
226,000 accelerated dial-up subscriptions during the quarter,
reaching 3.5 million at December 31, 2003. RGUs include total
pay subscribers and add-on subscription services.
-- Operating income for the quarter was a record $18.9 million, or
19.5% of revenues, more than a four-fold increase versus operating
income of $4.2 million, or 6.3% of revenues, in the year-ago quarter.
-- Operating income before depreciation and amortization (or "OIBDA")(3)
for the quarter was a record $24.4 million, or 25.2% of revenues, an
increase of 114% versus adjusted OIBDA(3) of $11.4 million, or 17.3%
of revenues, in the year-ago quarter.
-- Net income for the quarter was $24.4 million, or $0.35 per share,
which included a tax benefit of $12.3 million, or $0.18 per share,
related to the recognition of a portion of the company's deferred
tax assets.(4) Excluding this benefit, net income for the
December 2003 quarter increased 158% to a record $12.1 million,
or $0.18 per share, versus $4.7 million, or $0.07 per share, for the
year-ago quarter.
-- Adjusted net income(5) for the quarter, excluding the aforementioned
tax benefit, was a record $14.5 million, or $0.21 per share, an
increase of 65% versus adjusted net income of $8.8 million, or $0.13
per share, for the year-ago quarter. Adjusted net income is
calculated in a manner consistent with the analyst consensus
estimate as reported by First Call.
-- The year-to-year comparability of net income and adjusted net income,
excluding the aforementioned tax benefit, was impacted by an effective
tax rate of approximately 40% in the December 2003 quarter versus
approximately 10% in the year-ago quarter.(4)
-- Cash flows from operations were a record $29.0 million for the
quarter, versus $21.3 million for the year-ago quarter.
-- Free cash flow(6) for the quarter was a record $25.5 million, versus
$19.2 million for the year-ago quarter.
Summary of Results for the Year Ended December 31, 2003:
-- Total revenues for 2003 were a record $339.2 million, up 48% versus
$229.2 million for the prior year.
-- Pay subscribers(1) grew by a record 716,000, or 33%,
during 2003.
-- RGUs(2) increased by 1.36 million, or 62%, during 2003.
-- Operating income for 2003 was a record $49.5 million versus an
operating loss of ($7.3) million for the prior year.
-- Adjusted OIBDA(3) for 2003 was a record $73.5 million, or 21.7% of
revenues, an increase of 131% versus adjusted OIBDA of $31.9
million, or 13.9% of revenues, for 2002.
-- Net income for 2003 was $54.9 million, or $0.80 per share, which
included a tax benefit of $16.6 million, or $0.24 per share, related
to the recognition of a portion of the company's deferred tax
assets.(4) Excluding this benefit, net income for 2003 was a record
$38.3 million, or $0.56 per share, versus a net loss of ($3.7)
million, or ($0.06) per share, for the prior year.
-- Adjusted net income(5) for 2003, excluding the aforementioned tax
benefit, was a record $51.1 million, or $0.74 per share, an increase
of 156% versus adjusted net income of $19.9 million, or $0.30 per
share, for 2002. Adjusted net income is calculated in a manner
consistent with the analyst consensus estimate as reported by First
Call.
-- The year-to-year comparability of net income and adjusted net income,
excluding the aforementioned tax benefit, was impacted by an
effective tax rate of approximately 30% in 2003 versus a negligible
tax rate in the prior year.(4)
-- Cash flows from operations were a record $83.5 million for 2003, an
83% increase versus $45.7 million for the prior year.
-- Free cash flow(6) for 2003 was a record $77.0 million, up 79% versus
$42.9 million for 2002.
"The past year has been one of exceptional growth and success for United Online, ending 2003 with another quarter of strong pay subscriber gains, record new accelerated dial-up subscriptions and record profitability," said Mark R. Goldston, chairman, CEO and president of United Online. "We achieved many impressive milestones in 2003, including growing our accelerated dial-up services to 638,000 pay subscriptions in just over nine months, expanding our billable services margin to over 73% in the fourth quarter, and generating $77 million of free cash flow for the year. As we enter 2004, we are very excited about the long-term prospects for United Online and the value-priced Internet access segment that we dominate."
"United Online's financial results this quarter reflect outstanding performance across our entire business," said Charles S. Hilliard, executive vice president and CFO of United Online. "The powerful combination of pay subscriber and add-on subscription growth drove strong billable services revenues, while advertising revenues benefited from an improving online market and the implementation of our new search agreement. We are pleased to introduce our 2004 business outlook which, at its midpoint, anticipates more than 40% growth in adjusted OIBDA, reflecting our confidence in the continued growth opportunities for United Online."
Additional Highlights of the December 2003 Quarter:
-- Billable services revenues were a record $88.0 million in the
December 2003 quarter, or 91% of total revenues, an increase of
51% versus $58.1 million, or 88% of total revenues, for the December
2002 quarter.
-- Billable services margin(7) was a record 73.5% for the December
2003 quarter, up from 62.2% for the year-ago quarter.
-- Annualized revenue per average employee(8) was a record $787,000 for
the December 2003 quarter, up 29% versus $609,000 for the December
2002 quarter.
-- Cash balances at December 31, 2003 were $203.7 million, including
cash, cash equivalents and short-term investments. The company
recently added to its financial flexibility by obtaining a one-year,
$25 million unsecured revolving credit facility. No amounts were
outstanding under the facility and the company had no long-term debt
at December 31, 2003.
-- The company repurchased 2.02 million shares of its common stock at an
aggregate cost of $40.0 million during the December 2003 quarter.
Since the inception of its common stock repurchase program in March
2001, the company has repurchased 4.1 million shares of its common
stock at an aggregate cost of $51.3 million. Under the company's
existing stock repurchase plan, which expires on July 31, 2004, it
can repurchase up to an additional $48.7 million of its common stock.
-- In November 2003, the company announced a three-year extension of
its agreement with Overture Services to provide sponsored search
results to the United Online properties under the heading "Powered
by Yahoo! Search." In addition to providing its branding, Yahoo!
Inc., the parent company of Overture, will provide its own algorithmic
Web search results, further enhancing the user experience.
Business Outlook:
The following forward-looking information includes certain projections made by management as of the date of this 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.
Following is the company's current guidance for the March 2004 quarter and the year ending December 31, 2004:
-------------- --------------
(in millions) Mar'04 Q Est. CY 2004 Est.
-------------- --------------
Operating income $14.2 -- $15.2 $69.3 -- $77.3
Depreciation & amortization 5.6 22.9
Facility exit costs 3.7 5.2
Stock-based charges 0.5 2.6
-------------- --------------
Adjusted operating income
before depreciation and
amortization(3) $24.0 -- $25.0 $100.0 -- $108.0
============== ================
Weighted average diluted
shares 70.0 -- 70.5 71.0 -- 72.0
-- Total revenues for the March 2004 quarter are estimated to be
between $101 million and $103 million.
-- Billable services margin(7) in the March 2004 quarter is projected
to be approximately equal to the 73.5% achieved in the December 2003
quarter.
-- The company estimates that total pay subscribers will increase to
between 3.3 million and 3.5 million by December 31, 2004.
-- As noted above, while the timing and amounts remain uncertain, the
company anticipates incurring facility exit costs associated with
the relocation of its Westlake Village headquarters, which will
remain in Southern California.
(1) Total pay subscribers now include, in addition to Internet access subscribers, non-access premium email subscribers. Active users are defined as all free users that logged on to our services at least once during the preceding 31 days, together with all subscribers to a billable service.
(2) A revenue generating unit (RGU) represents a unique subscription to any individual pay service offered by the company. Internet access, accelerated dial-up and premium email subscriptions represent separate RGUs. For example, a subscriber to the company's accelerated dial-up access service who also subscribes to a premium email service is counted as three subscriptions (one for Internet access, one for accelerated dial-up and one for premium email). The company currently offers its accelerated dial-up service bundled with standard Internet access only. A detailed calculation of RGUs is provided in the tables accompanying this release.
(3) Adjusted operating income before depreciation and amortization is defined as operating income before depreciation, amortization and, in certain periods as reflected in the accompanying tables, stock-based charges, restructuring and merger-related costs, facility exit costs, and other income. Management believes that because operating income before depreciation and amortization and adjusted operating income before depreciation and amortization exclude certain items that either do not impact the company's cash flows or which management believes are not reflective of the company's core operating results over time, these measures provide investors with additional useful information to measure the company's performance, particularly with respect to changes in performance from period to period, and to assess the company's ability to make capital expenditures, fund working capital requirements, incur and repay indebtedness, and fund strategic initiatives. Management also uses operating income before depreciation and amortization and adjusted operating income before depreciation and amortization for these purposes, as well as to allocate resources in managing the company's business. Operating income before depreciation and amortization and adjusted operating income before depreciation and amortization are not determined in accordance with generally accepted accounting principles (GAAP) and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. Reconciliations to the most directly comparable GAAP financial measure are provided in the tables that follow this text.
(4) The company has potential future tax benefits, or deferred tax assets, associated with historical net operating losses that, because they were fully reserved by a valuation allowance, were not previously reported on its balance sheet. In the June 2003 and December 2003 quarters, the company released portions of the valuation allowance, which has resulted in (i) the recognition of a portion of its net deferred tax assets on its balance sheet, (ii) the recording of a tax benefit on its income statement in the June 2003 and December 2003 quarters, (iii) an increase in its effective tax rate beginning in the September 2003 quarter, and (iv) an adjustment to goodwill in the December 2003 quarter reflecting the recognition of deferred tax assets associated with Juno Online Services prior to the merger. It is reasonably possible that the company will release all, or a portion, of the remaining valuation allowance in the near term. Any such release would result in recording a tax benefit that would increase net income in the period the allowance was released. Neither the tax benefit from the release nor the increase in the effective tax rate have impacted, or will impact, the amount of cash paid for income taxes.
(5) Adjusted net income is defined as net income (loss) before the after-tax effect of amortization of intangible assets, stock-based charges, restructuring and merger-related costs, other income, and in the June 2003 and December 2003 quarters the tax benefit related to the recognition of a portion of the company's deferred tax assets. Management believes that adjusted net income provides investors with additional useful information to measure the company's financial performance, particularly from period to period, exclusive of certain non-cash expenses and other items which management believes are not reflective of the company's core operating results over time. Management also uses adjusted net income for these purposes. Adjusted net income is not determined in accordance with generally accepted accounting principles (GAAP) and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. Reconciliations to the most directly comparable GAAP financial measure are provided in the tables that follow this text.
(6) Free cash flow is defined as net cash provided by operating activities before cash paid for restructuring and merger-related costs, less capital expenditures. 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 excludes the cash impact of items which management believes are not reflective of the company's core operating results over time. This measure is used by management, and may also be useful for investors, to assess the company's ability to generate cash flow for a variety of strategic opportunities, including reinvestment in the business, effecting potential acquisitions, strengthening the balance sheet, and effecting share repurchases. Free cash flow is not determined in accordance with generally accepted accounting principles (GAAP) and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. Reconciliations to the most directly comparable GAAP financial measure are provided in the tables that follow this text.
(7) Billable services margin represents billable services revenues less cost of billable services divided by billable services revenues.
(8) Annualized revenue per average employee represents annualized total revenues for the period divided by the average number of employees during that period.
About United Online
United Online, Inc. (Nasdaq:UNTD) is the nation's leading provider of value-priced Internet access services through its NetZero, Juno and BlueLight consumer brands. The company's standard services are offered at less than half the standard monthly premium dial-up access prices of its major competitors and are available in more than 6,500 cities across the United States and in Canada. At December 31, 2003, United Online had 499 employees worldwide. The company is headquartered in Westlake Village, CA, with offices in New York City, San Francisco and Hyderabad, India. For more information about United Online and its Internet access services, please visit www.untd.com.
United Online will be hosting a conference call today at 8:00AM PDT (11:00AM EDT) to discuss its quarterly results. A live Web cast of the call can be accessed on 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.
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. 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, guidance for future financial performance; growth in pay subscribers; weighted average diluted shares; depreciation and amortization; facility exit costs; and future tax rates and benefits. Actual results may 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 pricing by us or our competitors; 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 the mix of our subscribers, particularly subscribers to our accelerated dial-up services; changes in the projected number of weighted average diluted shares due to the issuance of stock and stock options, stock repurchases, fluctuations in the company's stock price or other factors; changes in the projected amortization and depreciation figures due to capital spending or other factors; unanticipated usage by subscribers, additional telecommunications costs or other factors negatively impacting our billable services margin; changes in our free user base; the company's inability to realize the benefits of its deferred tax assets; the company's inability to maintain its agreements with telecommunications providers on attractive terms; problems associated with the company's billing systems; the company's inability to retain key customers and key personnel; unanticipated technological problems or developments; risks associated with litigation; and unanticipated governmental regulation. More information about potential factors that could affect the company's business and financial results is included in the company's annual 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
December 31,
2003 2002
-------- --------
ASSETS
Cash, cash equivalents and
short-term investments $203,723 $159,780
Restricted cash -- 811
Accounts receivable, net 14,065 11,312
Deferred tax assets, net 26,373 --
Property and equipment, net 13,428 13,303
Goodwill and intangible assets, net 40,268 57,521
Other assets 10,022 7,064
-------- --------
Total assets $307,879 $249,791
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 31,388 $ 25,906
Accrued liabilities 14,028 13,120
Deferred revenue 24,639 20,157
Capital leases -- 748
-------- --------
Total liabilities 70,055 59,931
-------- --------
Stockholders' equity 237,824 189,860
-------- --------
Total liabilities and stockholders' equity $307,879 $249,791
======== ========
UNITED ONLINE, INC.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
--------------------- ---------------------
Three Months Ended Year Ended
December 31, December 31,
--------------------- ---------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Revenues:
Billable services $ 87,993 $ 58,149 $ 306,086 $ 201,650
Advertising and
commerce 8,955 7,651 33,079 27,578
--------- --------- --------- ---------
Total revenues 96,948 65,800 339,165 229,228
Operating expenses:
Cost of billable
services 23,285 21,990 92,785 85,375
Cost of free services 1,869 3,161 9,659 18,048
Sales and marketing 36,587 19,863 120,619 62,752
Product development 5,368 5,740 21,881 24,359
General and
administrative 7,014 7,087 29,087 26,298
Restructuring charges -- -- (215) 1,793
Amortization of
intangible assets 3,964 3,798 15,856 17,853
--------- --------- --------- ---------
Total operating
expenses 78,087 61,639 289,672 236,478
--------- --------- --------- ---------
Operating income (loss) 18,861 4,161 49,493 (7,250)
Interest income, net 1,224 1,073 4,636 4,187
Other income, net -- -- -- 58
--------- --------- --------- ---------
Income (loss) before
income taxes 20,085 5,234 54,129 (3,005)
Provision (benefit)
for income taxes (4,340) 523 (754) 692
--------- --------- --------- ---------
Net income (loss) $ 24,425 $ 4,711 $ 54,883 $ (3,697)
========= ========= ========= =========
Basic net income (loss)
per share $ 0.38 $ 0.08 $ 0.87 $ (0.06)
========= ========= ========= =========
Diluted net income
(loss) per share $ 0.35 $ 0.07 $ 0.80 $ (0.06)
========= ========= ========= =========
Shares used to calculate
basic income (loss)
per share 64,166 61,406 63,369 59,936
========= ========= ========= =========
Shares used to calculate
diluted income (loss)
per share 68,878 66,845 68,752 59,936
========= ========= ========= =========
Shares outstanding at
end of period 63,944 62,646 63,944 62,646
========= ========= ========= =========
UNITED ONLINE, INC.
Unaudited Condensed Consolidated Cash Flow Statements
(in thousands)
Three Months Ended Year Ended
December 31, December 31,
------------------ ------------------
2003 2002 2003 2002
-------- -------- -------- --------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss): $ 24,425 $ 4,711 $ 54,883 $ (3,697)
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Depreciation, amortization
and stock-based charges 5,545 6,881 23,809 36,136
Deferred taxes, tax benefits
and other (4,396) 318 (446) 1,402
Change in operating assets
and liabilities (excluding
the effects of
acquisitions):
Restricted cash 700 531 811 5,816
Accounts receivable (1,310) (1,203) (2,753) (904)
Other assets (302) 641 (3,708) 3,151
Accounts payable and
accrued liabilities 3,945 8,680 6,386 2,856
Deferred revenue 382 763 4,482 963
-------- -------- -------- --------
Net cash provided by
operating activities 28,989 21,322 83,464 45,723
-------- -------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of short-term
investments (44,308) (7,575) (93,687) (89,239)
Proceeds from maturities of
short-term investments 46,947 10,000 55,602 60,491
Cash paid for acquisitions,
net of cash acquired -- (7,327) -- (8,327)
Proceeds from sale of
cost-basis investment -- -- 750 --
Purchases of property and
equipment (3,482) (2,156) (8,425) (3,662)
Proceeds from sales of
assets, net -- -- -- (179)
-------- -------- -------- --------
Net cash used for
investing activities (843) (7,058) (45,760) (40,916)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payments on notes payable
and capital leases (12) (1,118) (696) (5,113)
Repayments of notes receivable
from shareholders -- 28 1,597 62
Proceeds from employee stock
purchase plan 1,679 843 2,698 1,248
Common stock repurchases (40,002) -- (45,614) (4,669)
Proceeds from exercises of
stock options 951 2,636 12,244 6,619
-------- -------- -------- --------
Net cash provided by (used
for)financing activities (37,384) 2,389 (29,771) (1,853)
-------- -------- -------- --------
Change in cash and cash
equivalents (9,238) 16,653 7,933 2,954
Cash and cash equivalents,
beginning of period 80,472 46,648 63,301 60,347
-------- -------- -------- --------
Cash and cash equivalents,
end of period $ 71,234 $ 63,301 $ 71,234 $ 63,301
======== ======== ======== ========
UNITED ONLINE, INC.
Reconciliation of Net Income to Adjusted Net Income (5)
(in thousands, except per-share data)
Three Months Ended December 31, 2003
-----------------------------------
Reported Adjustments Adjusted
-------- ----------- --------
Revenues:
Billable services $ 87,993 $ -- $ 87,993
Advertising and commerce 8,955 -- 8,955
-------- -------- --------
Total revenues 96,948 -- 96,948
Operating expenses:
Cost of billable services 23,285 -- 23,285
Cost of free services 1,869 -- 1,869
Sales and marketing 36,587 -- 36,587
Product development 5,368 -- 5,368
General and administrative 7,014 -- 7,014
Restructuring charges -- -- --
Amortization of intangible
assets 3,964 (3,964)(b) --
-------- -------- --------
Total operating expenses 78,087 (3,964) 74,123
-------- -------- --------
Operating income 18,861 3,964 22,825
Interest income, net 1,224 -- 1,224
-------- -------- --------
Income before income taxes 20,085 3,964 24,049
Provision (benefit) for
income taxes (4,340) 13,883(c) 9,543
-------- -------- --------
Net income $ 24,425 $(9,919) $ 14,506
======== ======== ========
Basic net income
per share $ 0.38 $ 0.23
======== ========
Diluted net income
per share $ 0.35 $ 0.21
======== ========
Shares used to calculate
basic income per share 64,166 64,166
======== ========
Shares used to calculate
diluted income per share 68,878 68,878
======== ========
Shares outstanding at
end of period 63,944 63,944
======== ========
Three Months Ended December 31, 2002
-----------------------------------
Reported Adjustments Adjusted
-------- ----------- --------
Revenues:
Billable services $ 58,149 $ -- $ 58,149
Advertising and commerce 7,651 -- 7,651
-------- -------- --------
Total revenues 65,800 -- 65,800
Operating expenses:
Cost of billable services 21,990 (38)(a) 21,952
Cost of free services 3,161 -- 3,161
Sales and marketing 19,863 (38)(a) 19,825
Product development 5,740 (209)(a) 5,531
General and administrative 7,087 (90)(a) 6,997
Restructuring charges -- -- --
Amortization of intangible
assets 3,798 (3,798)(b) --
-------- -------- --------
Total operating expenses 61,639 (4,173) 57,466
-------- -------- --------
Operating income 4,161 4,173 8,334
Interest income, net 1,073 -- 1,073
-------- -------- --------
Other income, net -- -- --
-------- -------- --------
Income before income taxes 5,234 4,173 9,407
Provision (benefit) for
income taxes 523 68(c) 591
-------- -------- -------
Net income $ 4,711 $ 4,105 $ 8,816
======== ======== =======
Basic net income
per share $ 0.08 $ 0.14
======== =======
Diluted net income
per share $ 0.07 $ 0.13
======== =======
Shares used to calculate
basic income per share 61,406 61,406
======== =======
Shares used to calculate
diluted income per share 66,845 66,845
======== =======
Shares outstanding at
end of period 62,646 62,646
======== =======
-----------------------------------------------------------------
(a) Elimination of amortization of stock-based charges of $29 and
merger-related charges of $346.
(b) Elimination of amortization of intangible assets.
(c) Elimination of benefit recognized for deferred tax assets and
income tax effect of adjusting entries.
UNITED ONLINE, INC.
Reconciliation of Net Income (Loss) to Adjusted Net Income (5)
(in thousands, except per-share data)
-----------------------------------
Year Ended December 31, 2003
-----------------------------------
Reported Adjustments Adjusted
-------- ----------- --------
Revenues:
Billable services $306,086 $ -- $306,086
Advertising and commerce 33,079 -- 33,079
-------- -------- --------
Total revenues 339,165 -- 339,165
Operating expenses:
Cost of billable services 92,785 (41)(a) 92,744
Cost of free services 9,659 -- 9,659
Sales and marketing 120,619 (34)(a) 120,585
Product development 21,881 (267)(a) 21,614
General and administrative 29,087 (134)(a) 28,953
Restructuring charges (215) 215(b) --
Amortization of intangible
assets 15,856 (15,856)(c) --
-------- -------- --------
Total operating expenses 289,672 (16,117) 273,555
-------- -------- --------
Operating income (loss) 49,493 16,117 65,610
Interest income, net 4,636 -- 4,636
Other income, net -- --
-------- -------- --------
Income (loss) before income
taxes 54,129 16,117 70,246
Provision (benefit) for income
taxes (754) 19,944(e) 19,190
-------- -------- --------
Net income (loss) $ 54,883 $ (3,827) $ 51,056
======== ======== ========
Basic net income (loss)
per share $ 0.87 $ 0.81
======== ========
Diluted net income (loss)
per share $ 0.80 $ 0.74
======== ========
Shares used to calculate
basic income (loss)
per share 63,369 63,369
======== ========
Shares used to calculate
diluted income (loss)
per share 68,752 68,752
======== ========
Shares outstanding at
end of period 63,944 63,944
======== ========
-----------------------------------
Year Ended December 31, 2002
-----------------------------------
Reported Adjustments Adjusted
--------- ------------- --------
Revenues:
Billable services $201,650 $ -- $201,650
Advertising and commerce 27,578 -- 27,578
-------- ------- --------
Total revenues 229,228 -- 229,228
Operating expenses:
Cost of billable services 85,375 (180)(a) 85,195
Cost of free services 18,048 -- 18,048
Sales and marketing 62,752 (852)(a) 61,900
Product development 24,359 (1,628)(a) 22,731
General and administrative 26,298 (1,437)(a) 24,861
Restructuring charges 1,793 (1,793)(b) --
Amortization of intangible
assets 17,853 (17,853)(c) --
-------- ------- --------
Total operating expenses 236,478 (23,743) 212,735
-------- ------- --------
Operating income (loss) (7,250) 23,743 16,493
Interest income, net 4,187 -- 4,187
Other income, net 58 (58)(d) --
-------- ------- --------
Income (loss) before
income taxes (3,005) 23,685 20,680
Provision (benefit) for
income taxes 692 68(e) 760
-------- ------- --------
Net income (loss) $ (3,697) $23,617 $ 19,920
======== ======= ========
Basic net income (loss)
per share $ (0.06) $ 0.33
======== ========
Diluted net income
(loss) per share $ (0.06) $ 0.30
======== ========
Shares used to calculate
basic income (loss)
per share 59,936 59,936
======== ========
Shares used to calculate
diluted income (loss)
per share 59,936 66,217
======== ========
Shares outstanding at
end of period 62,646 62,646
======== ========
---------------------------------------------------------------------
(a) Elimination of amortization of stock-based charges of $42 and
$2,919 and merger-related charges of $434 and $1,178 in 2003 and
2002, respectively.
(b) Elimination of restructuring charges.
(c) Elimination of amortization of intangible assets.
(d) Elimination of other income, net.
(e) Elimination of benefit recognized for deferred tax assets and
income tax effect of adjusting entries.
UNITED ONLINE, INC.
Reconciliation of Non-GAAP Financial Data
(in thousands)
Three Months Ended Year Ended
December 31, December 31,
---------------- ----------------
2003 2002 2003 2002
------- ------- ------- -------
Adjusted Operating Income Before
Depreciation and Amortization (3)
Operating income (loss) $18,861 $ 4,161 $49,493 $(7,250)
Depreciation 1,581 3,054 7,911 15,364
Amortization 3,964 3,798 15,856 17,853
------- ------- ------- -------
Operating income before
depreciation and amortization 24,406 11,013 73,260 25,967
------- ------- ------- -------
Stock-based charges -- 29 42 2,919
Restructuring and merger-
related charges(a) -- 346 219 2,971
------- ------- ------- -------
Adjusted operating income
(loss) before depreciation
and amortization $24,406 $11,388 $73,521 $31,857
======= ======= ======= =======
Three Months Ended Year Ended
December 31, December 31,
---------------- ----------------
2003 2002 2003 2002
------- ------- ------- -------
Free Cash Flow (6):
Net cash provided by operating
activities $28,989 $21,322 $83,464 $45,723
Add (deduct):
Cash paid for restructuring and
merger-related charges(a) -- -- 1,915 843
Capital expenditures (3,482) (2,156) (8,425) (3,662)
------- ------- ------- -------
Free cash flow $25,507 $19,166 $76,954 $42,904
======= ======= ======= =======
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(a) Represents restructuring and merger-related costs incurred in
connection with the merger of Juno and NetZero and the
acquisition of certain assets of BlueLight.com. These costs are
primarily attributable to stay bonuses, contract termination
fees, write-off of leasehold improvements and employee severance
payments.
UNITED ONLINE, INC.
Selected Historical Financial Data and Key Metrics (a)
(in thousands, except per share amounts,
number of employees and where noted)
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2003 2003 2003 2003 2002
------- ------- ------- ------- -------
Total
revenues $96,948 $88,790 $79,608 $73,819 $65,800
Net
income $24,425 $ 8,902 $14,594 $ 6,962 $ 4,711
Net income
per diluted
share $ 0.35 $ 0.13 $ 0.21 $ 0.10 $ 0.07
Pay
subscribers 2,892 2,720 2,547 2,405 2,176
Active
users (in
millions)(1) 5.3 5.2 5.2 5.2 5.0
Number of
employees
at end of
period 499 487 461 447 444
Annualized
revenue per
average
employee (8) $ 787 $ 749 $ 701 $ 663 $ 609
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(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 Revenue Generating Units (2)
(in thousands)
Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31,
2003 2003 2003 2003 2002
----- ----- ----- ----- -----
Internet Access
Subscriptions 2,890 2,720 2,547 2,405 2,176
Add-on subscriptions:
Accelerated Dial-up
Subscriptions 638 412 210 22 --
Other Pay Subscriptions 7 -- -- -- --
----- ----- ----- ----- -----
Total Revenue Generating
Units 3,535 3,132 2,757 2,427 2,176
===== ===== ===== ===== =====
Total Pay Subscribers (a) 2,892 2,720 2,547 2,405 2,176
Add-on Subscription
Penetration (b) 22% 15% 8% 1%
-------------------------------------------------------------------
(a) Includes Internet access subscribers and other non-access pay
subscribers.
(b) Percentage of add-on subscription relationships to total pay
subscribers.