WESTLAKE VILLAGE, Calif., May 9, 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 third quarter ended March 31, 2002.
- Total revenues for the March 2002 quarter were $50.9 million, up
6 percent versus $48.0 million in the December 2001 quarter.
- Pro forma EBITDA(1) profit for the March 2002 quarter was $4.5
million, or 8.8 percent of revenues, versus a pro forma EBITDA
loss of ($2.6) million for the December 2001 quarter.
- Pay subscribers grew 9.5 percent during the quarter to 1.6
million at March 31, 2002, a net increase of 138,000 pay
subscribers. Total active users(2), including users of the
company's free services, totaled 5.2 million in March 2002.
- Pro forma net income(3) in the March 2002 quarter was $609,000,
or $0.01 per diluted share, presented on a basis consistent with
the analyst consensus estimate as reported by First Call. This
compares to a pro forma net loss of ($6.0) million, or ($0.16)
per share, in the December 2001 quarter.
- The net loss for the March 2002 quarter was ($7.3) million, a 54
percent improvement from a net loss of ($15.7) million for the
December 2001 quarter. On a per-share basis, the net loss for the
March 2002 quarter was ($0.19) versus a net loss of ($0.41) for
the December 2001 quarter.
- Free cash flow(4) was a positive $3.7 million for the March 2002
quarter versus a negative ($9.2) million in the December 2001
quarter.
"United Online's performance this quarter was driven by strong consumer demand for NetZero and Juno value-priced Internet services, operating leverage from the company's efficient cost structure, and outstanding execution delivered by all 430 United Online employees worldwide," said Mark R. Goldston, chairman, president and CEO of United Online. "The company has done an outstanding job of executing the NetZero-Juno merger integration plan. Throughout this time, we have remained focused on our key financial goals and are delighted to deliver positive EBITDA and free cash flow within two quarters of completing the merger. Our team is proud of these achievements and the successful integration of these two companies. The combination of NetZero and Juno to create United Online is clearly an example of a merger that has worked. We believe that the results generated during the March 2002 quarter further demonstrate our commitment to creating shareholder value."
"This quarter marked the beginning of key cost savings we expected from the merger and highlights the core strengths and efficiencies of United Online's business model," said Charles S. Hilliard, CFO of United Online. "We grew our pay subscriber base 9.5 percent sequentially, kept our customer acquisition costs low, and expanded our billable services margin to over 50 percent. Importantly, the company's free services have become a more cost-effective pay customer acquisition vehicle given that the cost to provide those services, net of the related advertising and commerce revenues, was close to breakeven during the quarter. By leveraging the efficiencies of our business model, we believe we can achieve $19 million to $22 million of pro forma EBITDA for calendar year 2002."
Additional Financial Highlights of the March 2002 Quarter:
- Billable services revenues were $44.4 million, an increase of 8
percent versus $41.0 million in the December 2001 quarter.
Billable services revenues comprised 87 percent of total revenues
in the March 2002 quarter versus 85 percent in the preceding
quarter.
- The billable services margin improved to 50.4 percent in the
March 2002 quarter, versus 43.5 percent in the December 2001
quarter.
- Cash balances at the end of the March 2002 quarter were $132.3
million (including cash, cash equivalents, short-term investments
and restricted cash), representing cash utilized during the
quarter of less than $100,000. During the March 2002 quarter, the
company used $2.5 million to repurchase shares of its common
stock, $1.6 million for the repayment of notes payable and
capital lease obligations and $575,000 for restructuring and
merger-related expenses. Also during the quarter, the company
received approximately $1.3 million in proceeds from the exercise
of stock options.
Business Outlook:
The following discussion contains forward-looking information intended to provide certain of management's current expectations 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 estimated.
Calendar Year 2002:
- The company intends to generate between $19 million and $22
million of pro forma EBITDA(1) for the calendar year 2002.
- The company intends to increase its pay subscriber base by 20
percent to 24 percent from December 31, 2001 to December 31,
2002, up from the company's previous guidance of 15 percent to 18
percent. Subscriber growth will be dependent upon a variety of
factors, including the company's spending levels for consumer
marketing.
June 2002 Quarter:
- The company intends to grow its pay subscriber base by 70,000 to
90,000 subscribers, resulting in 1.67 million to 1.69 million pay
subscribers by June 30, 2002. The company believes that, due to
the seasonal nature of consumer Internet usage patterns,
subscriber additions may be relatively lower in the spring and
early summer months.
- Total revenues for the June 2002 quarter are expected to grow 2
percent to 4 percent over the March 2002 quarter. This reflects
anticipated growth in billable services revenues, which are
expected to comprise approximately 90 percent of total revenues,
and a decline in advertising and commerce revenues.
- Average monthly revenue per billable user (ARPU) is anticipated
to remain in the $9.60 to $9.70 range in the June 2002 quarter.
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 subscribers at the
beginning and end of the period.
- EBITDA before restructuring and merger-related charges for the
June 2002 quarter is expected to be between $4.7 million and $5.7
million.
- Pro forma net income(3) for the June 2002 quarter is expected to
be between $1.0 million and $2.1 million, or between $0.02 and
$0.04 per share. Pro forma net income may be impacted by reduced
interest income due to lower interest rates.
- Weighted average basic shares outstanding for the June 2002
quarter will be approximately 40.5 million. Weighted average
diluted shares outstanding for the June 2002 quarter are expected
to be between 44 million and 46 million.
The company expects a modest improvement in its billable services margin in the June 2002 quarter resulting from a full quarter of efficiencies gained in billing and customer relationship management costs as well as seasonally lower average Internet usage. Free cash flow(4) in the June 2002 or later quarters may be reduced by the payment of Juno customer acquisition and telecom liabilities that existed prior to the merger and are currently subject to litigation. Juno accrued approximately $5.2 million for these liabilities prior to the merger, although there can be no assurance of the amount or timing of payments to resolve the liabilities or the litigation. The company has the option to settle a portion of these liabilities with common stock, although it currently anticipates using cash.
(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 (loss) 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 (loss) is an additional meaningful measure of operating performance. Pro forma net income (loss) 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 430 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. United Online undertakes no obligation to, and does not intend to, revise or update this information prior to its next earnings release, and may not provide this type of information in the future. 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 expectations; the company's inability to maintain or grow its pay and free user base; 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; 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,
-----------------------
March 31, December 31,
2002 2001
-------- --------
Income Statement Data:
Revenues:
Billable services $ 44,419 $ 41,035
Advertising and commerce 6,492 7,012
-------- --------
Total revenues 50,911 48,047
Operating expenses:
Cost of billable services 22,011 23,190
Cost of free services 6,786 8,683
Sales and marketing 10,844 9,781
Product development 5,920 6,654
General and administrative 5,881 7,354
-------- --------
Total operating expenses 51,442 55,662
-------- --------
Operating loss before
other charges (531) (7,615)
Amortization of stock-based
charges 2,198 2,524
Amortization of intangible
assets 4,685 4,685
Restructuring and merger-related
charges (a) 980 2,504
-------- --------
Loss from operations (8,394) (17,328)
Interest income, net 1,082 1,585
Other income, net 58 --
-------- --------
Net loss $ (7,254) $(15,743)
======== ========
Basic and diluted net
loss per share $ (0.19) $ (0.41)
======== ========
Shares used to calculate basic
and diluted loss per share 38,951 38,863
======== ========
Shares outstanding at
end of period 40,128 39,694
======== ========
Calculation of Pro Forma
EBITDA (b):
Net loss $ (7,254) $(15,743)
Add (deduct):
Depreciation 4,927 4,995
Amortization of intangible
assets 4,685 4,685
Amortization of stock-based
charges 2,198 2,524
Restructuring and merger-related
charges (a) 980 2,504
Interest income, net (1,082) (1,585)
-------- --------
Pro forma EBITDA $ 4,454 $ (2,620)
======== ========
Calculation of Free
Cash Flow (c):
Cash flow from operations $ 3,356 $ (9,886)
Add (deduct):
Cash paid for restructuring
and merger-related costs 575 1,001
Capital expenditures (247) (265)
-------- --------
Free cash flow $ 3,684 $ (9,150)
======== ========
Calculation of Pro Forma
Net Income (Loss) (d):
Net loss $ (7,254) $(15,743)
Add:
Amortization of intangible
assets 4,685 4,685
Amortization of stock-based
charges 2,198 2,524
Restructuring and merger-related
charges (a) 980 2,504
-------- --------
Pro forma net income (loss) $ 609 $ (6,030)
======== ========
Pro forma net income (loss)
per share:
Basic $ 0.02 $ (0.16)
======== ========
Diluted $ 0.01 $ (0.16)
======== ========
Shares used to calculate pro forma
net income (loss) per share:
Basic 38,951 38,863
======== ========
Diluted $ 43,289 38,863
======== ========
March 31, December 31, June 30,
2002 2001 2001
---------- ---------- -----------
Balance Sheet Data
(in thousands):
Cash, cash equivalents,
short-term investments and
restricted cash $ 132,310 $ 132,408 $ 134,993
Working capital 93,412 87,825 105,998
Total assets 231,211 242,633 183,863
Capital leases and notes payable,
less current portion 53 748 3,314
Total stockholders' equity 177,730 184,440 138,957
Subscriber Data: (e)
Active users in the last month
of the quarter (in millions) 5.2 5.6 6.7
Billable subscribers 1,598,000 1,460,000 1,094,000
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(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, lease
termination fees and write-off of leasehold improvements,
employee severance payments, and integration consulting.
(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 (loss) 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 (loss) is an additional
meaningful measure of operating performance. Pro forma net income
(loss) 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.