United Online Reports Third Quarter Results
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-- Total Revenues of $216.2 Million, Operating Income of $32.7 Million and
Adjusted OIBDA of $57.5 Million
-- Diluted Net Income Per Common Share of $0.18 and Adjusted Diluted Net
Income Per Common Share of $0.33
-- Reduction in Net Debt Position of $12.5 Million During Q3 2009 and
$100.8 Million in Past Four Quarters
WOODLAND HILLS, Calif.--(BUSINESS WIRE)-- United Online, Inc. (Nasdaq: UNTD), a leading provider of consumer products and services over the Internet, today reported financial results for its third quarter ended September 30, 2009. The results include three months of operations from FTD Group, Inc. ("FTD"), whereas in the prior-year comparable quarter FTD's operations were included in the company's financial results from August 26, 2008, the date of acquisition.
"United Online delivered strong results in the third quarter, highlighted by more than 700,000 gross pay account additions in our Classmates Media segment and a near tripling of our quarterly net growth in Classmates Media segment pay accounts to 164,000 compared to net growth of 58,000 pay accounts in the 2009 second quarter," commented Mark R. Goldston, Chairman, President and Chief Executive Officer of United Online. "Our improved growth in net pay accounts reflects increased use of promotional pricing campaigns, which were successful in stimulating consumer interest in paid subscriptions in the current economic environment, as well as a decrease in pay account churn. The Classmates Media segment also continued to deliver impressive bottom-line performance, including a 31 percent year-over-year increase in segment adjusted OIBDA to $20.4 million."
"On another positive note, we have continued to make progress on key business initiatives at FTD," Goldston added. "The marketing and operating enhancements we have implemented at FTD and Interflora following United Online's acquisition of FTD last year are helping to strengthen our competitive position within the floral industry - underscored by our recent announcement that FTD has become USAA's exclusive floral offering for its customers."
Summary Results for Third Quarter Ended September 30, 2009:
The following table summarizes key financial results for the third quarter ended September 30, 2009. The results include three months of operations from FTD, whereas FTD's operations were included in the quarter ended September 30, 2008 only from August 26, 2008, the date of acquisition.
(in millions, except per share and percentage
figures)
Financial Highlights Q3 2009 Q3 2008 % Change
FTD revenues $ 107.5 $ 48.3 123 %
Classmates Media revenues 58.7 58.7 --
Communications revenues 50.7 62.1 (18 %)
Intersegment eliminations (0.7 ) -- N/A
Consolidated revenues $ 216.2 $ 169.2 28 %
GAAP operating income $ 32.7 $ 28.8 13 %
Adjusted OIBDA(1) $ 57.5 $ 49.2 17 %
GAAP net income applicable to $ 14.9 $ 15.2 (2 %)
common stockholders
GAAP diluted net income per $ 0.18 $ 0.20 (10 %)
common share
Adjusted net income
applicable to common $ 28.3 $ 25.4 11 %
stockholders(2)
Adjusted diluted net income $ 0.33 $ 0.34 (3 %)
per common share(2)
-- Consolidated revenues were $216.2 million, an increase of 28% versus the
year-ago quarter. The increase was attributable to the company's
acquisition of FTD on August 26, 2008.
-- Adjusted OIBDA(1) was $57.5 million, an increase of 17% versus the
year-ago quarter. The increase was primarily attributable to the FTD
acquisition.
-- GAAP diluted net income per common share was $0.18 and adjusted diluted
net income per common share(2) was $0.33. In the year-ago quarter, the
company reported GAAP diluted net income per common share of $0.20 and
adjusted diluted net income per common share of $0.34.
Scott H. Ray, Executive Vice President and Chief Financial Officer, commented, "I am pleased that our cash position increased and our debt balance continued to decrease during the third quarter. In fact, we have reduced our net debt position by more than $100 million since the FTD acquisition closed in August 2008. Subsequent to the quarter's end, in early October we further de-levered the balance sheet by making a voluntary prepayment of $10 million on our FTD debt, demonstrating our continued confidence in FTD's ability to generate cash flows."
Cash Flows, Balance Sheet and Dividend Highlights:
-- Cash flows from operations and free cash flow(4) were $28.2 million and
$23.5 million, a decrease of 20% and 25%, respectively, versus the
year-ago quarter. The decrease in cash flows was primarily attributable
to changes in working capital.
-- Cash and cash equivalents at September 30, 2009 increased by $4.0
million to $121.4 million from $117.4 million at June 30, 2009.
-- Total debt, net of discounts, at September 30, 2009 was $374.0 million,
a decrease of $8.5 million versus $382.5 million at June 30, 2009.
Subsequent to quarter end, during October 2009 the company further
reduced its debt balance by making a voluntary prepayment of $10 million
on its FTD credit facilities.
-- Net debt at September 30, 2009 was $252.6 million, a decrease of $12.5
million versus $265.1 million at June 30, 2009.
-- The company paid $9.2 million in cash dividends during the quarter.
-- The company's Board of Directors recently declared a quarterly cash
dividend of $0.10 per share that is payable on November 30, 2009 to
stockholders of record on November 13, 2009.
Segment Results for Third Quarter Ended September 30, 2009:
FTD:
(in millions, except percentages and exchange rates)
Combined % Change @
Financial Highlights Q3 2009 Q3 2008 % Change Constant Currency
Products revenues(a) $ 77.9 $ 87.7 (11 %)
Services revenues(a) 28.5 32.2 (12 %)
Advertising revenues(a) 1.1 1.4 (22 %)
Segment revenues(a) $ 107.5 $ 121.4 (11 %) (7 %)
as a % of consolidated 50 % - N/A
revenues
Segment income from $ 15.3 $ - N/A
operations(b)
Segment adjusted OIBDA $ 17.3 $ - N/A
(1)(b)
as a % of segment 16.1 % - N/A
revenues(1)
(in thousands, except percentages, exchange rates and
AOV)
Combined % Change @
Metrics Highlights Q3 2009 Q3 2008 % Change Constant Currency
Consumer orders(5)(a) 1,075 1,154 (7 %)
Average order value(5) $ 61.29 $ 64.37 (5 %) 1 %
(a)
British Pound / U.S.
Dollar exchange rate 1.64 1.90 N/A
(average)
-- Segment revenues, including a $4.8 million year-over-year negative
impact from foreign currency exchange rates, were $107.5 million, a
decrease of 11% versus the year-ago quarter.
-- Segment revenues decreased 7% versus the year-ago quarter, excluding the
negative impact from foreign currency exchange rates resulting from a
strengthened U.S. Dollar versus the British Pound.
-- Segment adjusted OIBDA(1) was $17.3 million, representing 16.1% of
segment revenues.
-- Consumer orders(5) were 1.1 million, a decrease of 7% versus the
year-ago quarter.
-- Average order value(5)("AOV"), including a $3.74 year-over-year negative
impact from foreign currency exchange rates resulting from a
strengthened U.S. Dollar versus the British Pound, was $61.29, a 5%
decrease versus an AOV of $64.37 in the year-ago quarter. AOV increased
1% versus the year-ago quarter, excluding the negative impact from
foreign currency exchange rates.
a) Quarterly revenues, consumer orders and average order value for Q3 2008 reflect combined quarterly results (the "Combined Results") as supplemental disclosures for comparison purposes. The Combined Results were calculated by combining FTD's historical results and metrics prior to the acquisition (July 1, 2008 through August 25, 2008) with FTD's results post-acquisition (August 26, 2008 through September 30, 2008).
b) The company has not provided FTD segment income from operations or FTD segment adjusted OIBDA for Q3 2008 on a Combined Results basis as described in footnote a) above. FTD segment results on these measures for the partial quarter period in Q3 2008 from August 26, 2008, the date of acquisition, are available in the financial tables accompanying this press release.
Classmates Media:
(in millions, except percentages)
Financial Highlights Q3 2009 Q3 2008 % Change
Services revenues $ 38.3 $ 36.4 5 %
Advertising revenues 20.4 22.4 (9 %)
Segment revenues $ 58.7 $ 58.7 --
as a % of consolidated revenues 27 % 35 %
Segment income from operations $ 17.0 $ 12.2 40 %
Segment adjusted OIBDA(1) $ 20.4 $ 15.6 31 %
as a % of segment revenues(1) 34.8 % 26.5 %
(in thousands, except percentages)
Metrics Highlights Q3 2009 Q3 2008 % Change
Segment pay accounts(3) 4,785 4,087 17 %
Net growth in segment pay accounts(3) 164 278
Segment active accounts(3) 16,900 15,500 9 %
-- Segment revenues were $58.7 million, flat versus the year-ago quarter,
as growth in segment services revenues was offset by a decline in
segment advertising revenues.
-- Segment adjusted OIBDA increased to $20.4 million, up 31% versus $15.6
million in the year-ago quarter. The increase in segment operating
profitability reflects a 340 basis point expansion in segment gross
margin to 84.0% from 80.6% in the year-ago quarter, as well as
cost-efficient marketing initiatives that helped to reduce sales and
marketing spending in the third quarter versus the year-ago quarter.
-- Segment adjusted OIBDA as a percentage of segment revenues increased to
34.8% from 26.5% in the year-ago quarter.
-- Segment pay accounts(3) increased by a net 164,000, up from net growth
of 58,000 segment pay accounts in the 2009 second quarter. The
significant improvement on a sequential quarter basis primarily reflects
the company's increased promotion of discounted pricing plans during the
third quarter. In the year-ago quarter, net growth in segment pay
accounts was 278,000.
-- Segment pay accountsat September 30, 2009 were 4.8 million, an increase
of 17% versus 4.1 million at September 30, 2008.
-- Segment active accounts(3)were 16.9 million in the third quarter, an
increase of 9% versus 15.5 million in the year-ago quarter.
Communications:
(in millions, except percentages)
Financial Highlights Q3 2009 Q3 2008 % Change
Services revenues $ 42.1 $ 53.2 (21 %)
Advertising revenues 8.6 8.9 (3 %)
Segment revenues $ 50.7 $ 62.1 (18 %)
as a % of consolidated revenues 23 % 37 %
Segment income from operations $ 15.6 $ 18.8 (17 %)
Segment adjusted OIBDA(1) $ 19.7 $ 25.4 (22 %)
as a % of segment revenues(1) 39.0 % 40.9 %
(in thousands, except percentages)
Metrics Highlights Q3 2009 Q3 2008 % Change
Segment pay accounts(3) 1,440 1,821 (21 %)
-- Segment revenues were $50.7 million, a decrease of 18% versus the
year-ago quarter, primarily due to a continuing decline in segment pay
accounts.
-- Segment adjusted OIBDA was $19.7 million, a decrease of 22% versus the
year-ago quarter.
-- Segment adjusted OIBDA was 39.0% of segment revenues, versus 40.9% of
segment revenues in the year-ago quarter.
-- Segment pay accounts decreased by a net 92,000, versus a net decline of
121,000 pay accounts in the second quarter of 2009 and a net decline of
95,000 pay accounts in the year-ago quarter.
-- Segment pay accounts at September 30, 2009 were 1.4 million, a decrease
of 21% versus 1.8 million at September 30, 2008.
Business Outlook:
The following forward-looking information includes certain projections made by management as of the date of this press release. The company does not intend to revise or update this information, except as required by law, 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.
Fourth-Quarter 2009 Guidance:
Fourth-Quarter 2009 (in millions) Guidance Revenues $235.0 $243.0 Adjusted OIBDA(1) $56.0 $61.0
Full-Year 2009 Guidance:
Full-Year 2009 (in millions) Guidance Revenues $975.6 $983.6 Adjusted OIBDA(1) $243.5 $248.5
The table below reconciles the company's guidance for operating income, a GAAP measure, to adjusted OIBDA.
Fourth-Quarter and Full-Year 2009 Q4 2009 Full-Year 2009 (in millions) Guidance Guidance GAAP Operating Income $29.1 $34.1 $142.3 $147.3 Depreciation 6.0 24.8 Amortization of intangible assets 8.6 34.9 Stock-based compensation 10.2 39.4 Restructuring charges 2.1 2.1 Adjusted OIBDA(1) $56.0 $61.0 $243.5 $248.5
Investor Conference Call Today at 5:30 p.m. ET (2:30 p.m. PT):
United Online will host a conference call today at 5:30 p.m. ET (2:30 p.m. PT) to discuss its quarterly results. To participate, please dial 877-718-5098 (or 719-325-4797 outside of the U.S.), and provide the confirmation code, 5211343. A live webcast of the call, along with a presentation containing financial highlights for the quarter ended September 30, 2009, can also be accessed through the "investors" section of the company's Web site located at www.unitedonline.com. The presentation and a replay of the broadcast will be available on the Web site for seven days, or by dialing 888-203-1112 (or 719-457-0820 outside of the U.S.) and the confirmation code, 5211343. The telephone replay will be available through 5 p.m. ET on November 11, 2009.
Definitions of Non-GAAP Measures:
(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. The company's definition of adjusted OIBDA has been modified from time to time. Management believes that because adjusted OIBDA excludes (i) certain non-cash expenses (such as depreciation, amortization, stock-based compensation, and impairment of goodwill, intangible assets and long-lived assets) and (ii) expenses that are not reflective of the company's core operating results over time (such as restructuring and related charges), this measure provides investors with additional useful information to measure the company's financial 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 has used this measure as a basis 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 the 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 Securities and Exchange Commission ("SEC") filings, when applicable. An additional limitation associated with the use of this measure is that the term "adjusted OIBDA" does not have a standardized meaning. Therefore, other companies may use the same or a similarly named measure 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. Management compensates for this limitation by presenting the most comparable GAAP measure, operating income, directly ahead of adjusted OIBDA within its financial press releases and by providing a reconciliation that shows and describes the adjustments made. A reconciliation to operating income is provided in the accompanying tables.
Adjusted OIBDA for each of the company's segments is defined by the company as segment income from operations, as set forth in the company's Forms 10-K and Forms 10-Q, before stock-based compensation, restructuring and related charges and the impairment of goodwill, intangible assets and long-lived assets. The company's definition of adjusted OIBDA for each of the company's segments has been modified from time to time. Management believes that because segment adjusted OIBDA and segment adjusted OIBDA as a percentage of segment revenues exclude (1) certain non-cash expenses (such as stock-based compensation, and the impairment of goodwill, intangible assets and long-lived assets); and (2) expenses that are not reflective of the segment's core operating results over time (such as restructuring and related charges), these measures provide investors with additional useful information to evaluate the company's segment financial 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 these measures is that they do 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 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 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: stock-based compensation; amortization of intangible assets; restructuring and related charges; impairment of goodwill, intangible assets and long-lived assets; the cumulative effect of a change in accounting principle as a result of the adoption of Accounting Standards Codification 718, Compensation - Stock Compensation; and the re-measurement of certain deferred tax assets. Management believes that adjusted net income and adjusted diluted net income per common share provide investors with additional useful information to measure the company's financial performance, particularly with respect to changes in performance from period to period, because these measures are exclusive of (i) certain non-cash expenses (such as stock-based compensation, amortization, the cumulative effect of a change in accounting principle, and the impairment of goodwill, intangible assets and long-lived assets) and (ii) expenses that are not reflective of the company's core results over time (such as restructuring and related charges). Management also uses adjusted net income and adjusted diluted net income per common share for this purpose. Adjusted net income and adjusted diluted net income per common share 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. The limitations of adjusted net income and adjusted diluted net income per common 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 common 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. Management compensates for this limitation by presenting the most comparable GAAP measures, net income and diluted net income per common share, directly ahead of adjusted net income and adjusted diluted net income per common share within its financial press releases and by providing a reconciliation of adjusted net income that shows and describes the adjustments made. A reconciliation of adjusted net income to net income, the most comparable GAAP measure, is provided in the accompanying tables.
(3) A pay account is defined as a member who has subscribed to, and paid for, our Classmates Media or Communications services, and whose subscription has not expired. A pay account does not equate to a unique subscriber since one subscriber could have several pay accounts. At any point in time, our pay account base includes a number of accounts receiving a free period of service as either a promotion or retention tool and a number of accounts that have notified us that they are terminating their service but whose service remains in effect.
Classmates Media segment active accounts are defined as the sum of all social networking pay accounts as of the date presented; the monthly average for the period of all free social networking accounts who have visited the company's domestic or international social networking Web sites (excluding The Names Database) at least once during the period; and the monthly average for the period of all online loyalty marketing members who have earned or redeemed points during such period. Communications segment active accounts include all Communications segment pay accounts as of the date presented combined with the number of free Internet access and email accounts that logged on to the company's services at least once during the preceding 31 days.
(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 by the company 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 GAAP and should be considered in addition to, not as a substitute for or superior to, measures determined in accordance with GAAP. A limitation of free cash flow is that it does not represent the total increase or decrease in cash during the period. An additional limitation associated with the use of this measure is that the term "free cash flow" does not have a standardized meaning. Therefore, other companies may use the same or a similarly named measure 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. Management compensates for this limitation by presenting the most comparable GAAP measure, net cash provided by operating activities, directly ahead of free cash flow within its financial press releases and by providing a reconciliation that shows and describes the adjustments made. A reconciliation to net cash provided by operating activities is provided in the accompanying tables.
(5) Consumer orders are orders delivered during the period that originated in the U.S. and Canada, primarily from the www.ftd.com Web site and the 1-800-SEND-FTD telephone number, and in the U.K. and the Republic of Ireland, primarily from the www.interflora.co.uk Web site and a toll-free telephone number. Orders originating with a florist or other retail location for delivery to consumers are not included.
Average order value represents the average U.S. Dollar amount received for consumer orders delivered during a period. This average U.S. Dollar amount is determined after translating the British Pound amounts received for orders delivered in the United Kingdom and the Republic of Ireland into U.S. Dollars. Average order value includes merchandise revenue and shipping and service fees paid by the consumer, less certain discounts and certain refunds.
About United Online(R):
United Online, Inc. (Nasdaq: UNTD) is a leading provider of consumer products and services over the Internet, where the company's brands have attracted a large online audience that includes more than 60 million registered consumer accounts. The company's floral and related offerings include products and services for consumers and retail florists, as well as for other retail locations offering floral products and services, in the U.S., Canada, the United Kingdom, and the Republic of Ireland. The floral business utilizes the highly recognized FTD (www.ftd.com) and Interflora (www.interflora.co.uk) brands, both supported by the Mercury Man logo that is displayed in approximately 45,000 retail floral shops worldwide. The company's Classmates Media services include online social networking (www.classmates.com) and online loyalty marketing (www.mypoints.com) in North America. Classmates Media also operates online social networking Web sites in a number of European countries. The company's Communications services include value-priced Internet access and email provided by NetZero (www.netzero.com) and Juno (www.juno.com).
Headquartered in Woodland Hills, CA, United Online operates through a global network of locations in the U.S., Canada, the United Kingdom, Germany, and India. More information about United Online is available on the company's Web site located at: (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, based on our current expectations, estimates and projections about our operations, industry, financial condition, performance, results of operations, and liquidity. Statements containing words such as "may," "believe," "anticipate," "expect," "intend," "plan," "project," "projections," "business outlook," "estimate," or similar expressions constitute forward-looking statements. These forward-looking statements include, but are not limited to, statements about future financial performance; revenues; operating expenses; operating income; capital expenditures; depreciation and amortization; and stock-based compensation. Potential factors that could cause actual results to differ materially from those in the forward-looking statements include, among others: the severity and duration of current economic conditions; the effect of competition; financial market risk resulting from fluctuations in foreign currency exchange rates, particularly the British Pound and Euro; the company's inability to retain or grow its free and pay accounts; the company's inability to acquire and retain florist members; the company's inability to increase or maintain its advertising revenues; failure to achieve expanded marketing opportunities and efficiencies and other benefits associated with the acquisition of FTD Group, Inc. and its subsidiaries ("FTD"), or to implement any or all planned marketing initiatives; the effects of seasonality; changes in stock-based compensation due to future equity issuances or other reasons; changes in amortization or depreciation due to a variety of factors; potential write down, reserve against or impairment of assets including receivables, goodwill, intangible assets or other assets; changes in tax laws, the company's business or other factors that would impact anticipated tax benefits; the company's inability to achieve the expected benefits of its reductions-in-force or any other cost-reduction initiatives; that the company will incur additional restructuring and related charges; risks associated with the commercialization of new services; the company's inability to enforce or defend its ownership and use of intellectual property; problems associated with the company's operations, systems or technologies; the company's inability to retain key customers, vendors and personnel; risks associated with litigation and governmental regulation; changes in marketing conditions and laws; changes in the floral industry; the inability to successfully integrate the financial, accounting and administrative functions of United Online, Inc. and FTD; the impact of, and restrictions associated with, the company's indebtedness; as well as the risk factors disclosed in the company's 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." Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as the date hereof. 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. Reported results should not be considered an indication of future performance. Except as required by law, the company undertakes no obligation to publicly release the results of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
UNITED ONLINE, INC.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Quarter Ended September 30, Nine Months Ended September 30,
2009 2008 2009 2008
Revenues
Services $ 138,337 $ 133,999 $ 434,919 $ 378,083
Products 77,869 35,158 305,723 35,158
Total revenues 216,206 169,157 740,642 413,241
Operating
expenses:
Cost of revenues - 26,274 28,539 83,879 83,208
services(a)
Cost of revenues - 58,288 26,305 223,466 26,305
products(a)
Sales and 46,146 42,376 155,584 114,966
marketing(a)
Technology and 15,700 14,983 49,637 40,406
development(a)
General and 28,111 23,096 88,632 66,754
administrative(a)
Amortization of 9,013 4,966 26,252 9,824
intangible assets
Restructuring - 93 - 656
charges
Total operating 183,532 140,358 627,450 342,119
expenses
Operating income 32,674 28,799 113,192 71,122
Interest income 498 1,053 1,184 4,037
Interest expense (7,542 ) (3,751 ) (24,547 ) (3,751 )
Other income, net 567 492 698 718
Income before 26,197 26,593 90,527 72,126
income taxes
Provision for 10,042 10,427 38,052 29,220
income taxes
Net income (b) $ 16,155 $ 16,166 $ 52,475 $ 42,906
Income allocated
to participating (1,222 ) (982 ) (3,491 ) (2,710 )
securities (b)
Net income
applicable to $ 14,933 $ 15,184 $ 48,984 $ 40,196
common
stockholders (b)
Basic net income
per common share $ 0.18 $ 0.20 $ 0.59 $ 0.57
(b)
Shares used to
calculate basic 84,028 74,108 83,372 70,382
net income per
common share(b)
Diluted net income
per common share $ 0.18 $ 0.20 $ 0.58 $ 0.56
(b)
Shares used to
calculate diluted 84,688 74,865 83,807 71,156
net income per
common share(b)
Shares outstanding 84,236 81,785 84,236 81,785
at end of period
(a) Stock-based
compensation was
allocated as
follows:
Cost of revenues - $ 201 $ 381 $ 728 $ 775
services
Cost of revenues - 20 - 20 -
products
Sales and 1,421 2,135 4,120 5,528
marketing
Technology and 1,202 2,664 3,713 5,263
development
General and 6,748 4,775 20,623 16,540
administrative
Total stock-based $ 9,592 $ 9,955 $ 29,204 $ 28,106
compensation
(b) The Company computes earnings per share in accordance with Financial
Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC")
260, which requires the allocation of net income between common stockholders and
participating securities when computing earnings per share. ASC 260 has been
retroactively applied to the company's unaudited condensed consolidated
statement of operations for the quarter and nine months ended September 30, 2008
and did not have a material impact on the calculation of basic or diluted net
income per share applicable to common stockholders.
UNITED ONLINE, INC.
Unaudited Reconciliations of Non-GAAP Financial Data
(in thousands)
Unaudited Reconciliation of Operating Income to Adjusted Operating Income Before
Depreciation and Amortization (OIBDA)(1)
Quarter Ended September 30, Nine Months Ended September 30,
2009 2008 2009 2008
Operating income $ 32,674 $ 28,799 $ 113,192 $ 71,122
Depreciation 6,177 5,348 18,809 15,673
Amortization of 9,013 4,966 26,252 9,824
intangible assets
Operating income
before 47,864 39,113 158,253 96,619
depreciation and
amortization
Stock-based 9,592 9,955 29,204 28,106
compensation
Restructuring - 93 - 656
charges
Adjusted operating
income before $ 57,456 $ 49,161 $ 187,457 $ 125,381
depreciation and
amortization
Unaudited Reconciliation of Segment Income from Operations to Segment Adjusted
OIBDA(1)
Quarter Ended September 30, Nine Months Ended September 30,
2009 2008 2009 2008
FTD:
Segment income $ 15,253 $ 8,184 $ 58,392 $ 8,184
from operations
Stock-based 2,005 - 6,058 -
compensation
Segment adjusted
operating income
before $ 17,258 $ 8,184 $ 64,450 $ 8,184
depreciation and
amortization
Classmates Media:
Segment income $ 16,998 $ 12,158 $ 43,276 $ 28,048
from operations
Stock-based 3,451 3,435 10,881 10,006
compensation
Segment adjusted
operating income
before $ 20,449 $ 15,593 $ 54,157 $ 38,054
depreciation and
amortization
Communications:
Segment income $ 15,613 $ 18,771 $ 56,585 $ 60,387
from operations
Stock-based 4,136 6,520 12,265 18,100
compensation
Restructuring - 93 - 656
charges
Segment adjusted
operating income
before $ 19,749 $ 25,384 $ 68,850 $ 79,143
depreciation and
amortization
UNITED ONLINE, INC.
Unaudited Reconciliation of Net Income to Adjusted Net Income(2)
(in thousands, except per share amounts)
Quarter Ended September 30, Nine Months Ended September 30,
2009 2008 2009 2008
Net income $ 16,155 $ 16,166 $ 52,475 $ 42,906
Income allocated
to participating (1,222 ) (982 ) (3,815 ) (2,710 )
securities
Net income
applicable to 14,933 15,184 48,660 40,196
common
stockholders
Add:
Stock-based 9,592 9,955 29,204 28,106
compensation
Amortization of 9,013 4,966 26,252 9,824
intangible assets
Restructuring - 93 - 656
charges
33,538 30,198 104,116 78,782
Income tax effect
of adjusting (5,259 ) (4,779 ) (15,706 ) (11,620 )
entries
Adjusted net
income applicable $ 28,279 $ 25,419 $ 88,410 $ 67,162
to common
stockholders
GAAP Earnings Per
Share:
Basic net income $ 0.18 $ 0.20 $ 0.59 $ 0.57
per common share
Shares used to
calculate basic 84,028 74,108 83,372 70,382
net income per
common share
Diluted net income $ 0.18 $ 0.20 $ 0.58 $ 0.56
per common share
Shares used to
calculate diluted 84,688 74,865 83,807 71,156
net income per
common share
Adjusted Earnings
Per Share:
Adjusted basic net
income per common $ 0.34 $ 0.34 $ 1.06 $ 0.95
share
Shares used to
calculate adjusted 84,028 74,108 83,372 70,382
basic net income
per common share
Adjusted diluted
net income per $ 0.33 $ 0.34 $ 1.05 $ 0.94
common share(a)
Shares used to
calculate adjusted
diluted net income 84,878 74,985 84,075 71,161
per common share
(a)
(a) Includes the adjustment of shares used to calculate diluted net income per
common share resulting from the elimination of stock-based compensation.
UNITED ONLINE, INC.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2009 2008
ASSETS
Cash and cash equivalents $ 121,424 $ 104,514
Accounts receivable, net 52,288 58,901
Deferred tax assets, net 14,867 16,170
Property and equipment, net 60,501 61,822
Goodwill and intangible assets, net 762,906 779,584
Other assets 41,740 52,536
Total assets $ 1,053,726 $ 1,073,527
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 55,230 $ 83,372
Accrued liabilities 39,011 43,148
Member redemption liability 24,890 25,976
Deferred revenue 80,862 83,261
Debt, net of discounts 374,011 413,477
Deferred tax liabilities, net 48,139 60,834
Other liabilities 19,541 19,342
Total liabilities 641,684 729,410
Stockholders' equity 412,042 344,117
Total liabilities and stockholders' equity $ 1,053,726 $ 1,073,527
UNITED ONLINE, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Quarter Ended September 30, Nine Months Ended September 30,
2009 2008 2009 2008
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net income $ 16,155 $ 16,166 $ 52,475 $ 42,906
Adjustments to
reconcile net
income to net cash
provided by
operating
activities:
Depreciation,
amortization and 24,782 20,269 74,265 53,603
stock-based
compensation
Accretion of
discounts and 1,061 447 3,883 447
amortization of
debt issue costs
Provision for
doubtful accounts 1,811 402 4,687 988
receivable
Deferred taxes and 1,130 3,802 (4,089 ) 3,907
other
Tax benefits
(shortfalls) from (1,078 ) 161 (2,704 ) 386
equity awards
Excess tax
benefits from (81 ) (75 ) (94 ) (339 )
equity awards
Change in
operating assets
and liabilities
(excluding the
effects of
acquisitions):
Accounts (4,638 ) 2,779 2,211 4,066
receivable
Other assets 2,466 (1,700 ) 10,312 5,073
Accounts payable
and accrued (9,905 ) (6,201 ) (33,933 ) (20,411 )
liabilities
Member redemption 74 (340 ) (1,086 ) 1,787
liability
Deferred revenue (3,049 ) 1,629 (1,254 ) 9,916
Other liabilities (507 ) (1,848 ) (398 ) (1,748 )
Net cash provided
by operating 28,221 35,491 104,275 100,581
activities
CASH FLOWS FROM
INVESTING
ACTIVITIES:
Purchases of
property and (4,758 ) (4,227 ) (17,190 ) (11,483 )
equipment
Purchases of
short-term - - - (120,378 )
investments
Proceeds from
maturities of - 34,465 - 82,765
short-term
investments
Proceeds from
sales of - 91,841 - 106,364
short-term
investments
Cash paid for
acquisitions, net - (303,995 ) - (307,160 )
of cash acquired
Proceeds from
sales of assets, - 16 14 45
net
Net cash used for
investing (4,758 ) (181,900 ) (17,176 ) (249,847 )
activities
CASH FLOWS FROM
FINANCING
ACTIVITIES:
Proceeds from term - 421,041 - 421,041
loans and revolver
Payments on term (9,452 ) (302,280 ) (42,930 ) (302,280 )
loans and revolver
Payments on - (5 ) - (13 )
capital leases
Payments for debt - (249 ) - (249 )
issue costs
Proceeds from
exercises of stock 410 618 535 1,661
options
Proceeds from
employee stock - - 2,490 2,576
purchase plan
Repurchases of (1,843 ) (1,257 ) (5,217 ) (8,381 )
common stock
Payments for (9,203 ) (14,857 ) (27,118 ) (44,326 )
dividends
Excess tax
benefits from 81 75 94 339
equity awards
Net cash provided
by (used for) (20,007 ) 103,086 (72,146 ) 70,368
financing
activities
Effect of foreign
currency exchange
rate changes on 546 (674 ) 1,957 (939 )
cash and cash
equivalents
Change in cash and 4,002 (43,997 ) 16,910 (79,837 )
cash equivalents
Cash and cash
equivalents, 117,422 113,667 104,514 149,507
beginning of
period
Cash and cash
equivalents, end $ 121,424 $ 69,670 $ 121,424 $ 69,670
of period
UNITED ONLINE, INC.
Unaudited Reconciliation of Net Cash Provided by Operating Activities to Free
Cash Flow(4)
(in thousands)
Quarter Ended September 30, Nine Months Ended September 30,
2009 2008 2009 2008
Net cash provided
by operating $ 28,221 $ 35,491 $ 104,275 $ 100,581
activities
Add (deduct):
Capital (4,758 ) (4,227 ) (17,190 ) (11,483 )
expenditures
Excess tax
benefits from 81 75 94 339
equity awards
Cash paid for
restructuring - 119 - 546
charges
Free cash flow $ 23,544 $ 31,458 $ 87,179 $ 89,983
UNITED ONLINE, INC.
Unaudited Segment Information
(in thousands)
Quarter Ended September 30, Nine Months Ended September 30,
2009 2008 2009 2008
FTD
Revenues:
Services $ 28,535 $ 13,122 $ 93,690 $ 13,122
Products 77,869 35,158 305,723 35,158
Advertising 1,122 - 5,316 -
Total revenues 107,526 48,280 404,729 48,280
Operating
expenses:
Cost of revenues 62,995 28,272 238,701 28,272
Sales and 16,757 7,247 67,684 7,247
marketing
Technology and 3,462 914 10,319 914
development
General and 10,236 4,081 33,100 4,081
administrative
Amortization of 6,698 2,719 19,891 2,719
intangible assets
Total operating 100,148 43,233 369,695 43,233
expenses
Operating income 7,378 5,047 35,034 5,047
Depreciation 1,177 418 3,467 418
Amortization 6,698 2,719 19,891 2,719
Segment income 15,253 8,184 58,392 8,184
from operations
Stock-based 2,005 - 6,058 -
compensation
Segment adjusted
operating income
before $ 17,258 $ 8,184 $ 64,450 $ 8,184
depreciation and
amortization
Classmates Media
Revenues:
Services $ 38,283 $ 36,386 $ 115,222 $ 101,761
Advertising 20,399 22,360 60,088 65,882
Total revenues 58,682 58,746 175,310 167,643
Operating
expenses:
Cost of revenues 9,416 11,407 30,206 33,158
Sales and 19,229 21,576 58,318 62,207
marketing
Technology and 6,299 6,102 21,148 17,028
development
General and 9,288 9,679 30,074 33,529
administrative
Amortization of 2,053 1,984 5,572 6,119
intangible assets
Total operating 46,285 50,748 145,318 152,041
expenses
Operating income 12,397 7,998 29,992 15,602
Depreciation 2,548 2,176 7,712 6,327
Amortization 2,053 1,984 5,572 6,119
Segment income 16,998 12,158 43,276 28,048
from operations
Stock-based 3,451 3,435 10,881 10,006
compensation
Segment adjusted
operating income
before $ 20,449 $ 15,593 $ 54,157 $ 38,054
depreciation and
amortization
Communications
Revenues:
Services $ 42,050 $ 53,208 $ 135,757 $ 168,763
Advertising 8,629 8,923 27,047 28,555
Total revenues 50,679 62,131 162,804 197,318
Operating
expenses:
Cost of revenues 12,187 15,165 38,608 48,083
Sales and 10,805 13,553 31,612 45,512
marketing
Technology and 5,939 7,967 18,170 22,464
development
General and 8,587 9,336 25,460 29,144
administrative
Amortization of 262 263 788 986
intangible assets
Restructuring - 93 - 656
charges
Total operating 37,780 46,377 114,638 146,845
expenses
Operating income 12,899 15,754 48,166 50,473
Depreciation 2,452 2,754 7,630 8,928
Amortization 262 263 789 986
Segment income 15,613 18,771 56,585 60,387
from operations
Stock-based 4,136 6,520 12,265 18,100
compensation
Restructuring - 93 - 656
charges
Segment adjusted
operating income
before $ 19,749 $ 25,384 $ 68,850 $ 79,143
depreciation and
amortization
Consolidated
adjusted operating
income before $ 57,456 $ 49,161 $ 187,457 $ 125,381
depreciation and
amortization
Reconciliation of
segment revenues
to consolidated
revenues:
FTD $ 107,526 $ 48,280 $ 404,729 $ 48,280
Classmates Media 58,682 58,746 175,310 167,643
Communications 50,679 62,131 162,804 197,318
Intersegment (681 ) - (2,201 ) -
eliminations
Consolidated $ 216,206 $ 169,157 $ 740,642 $ 413,241
revenues
Reconciliation of
segment operating
expenses to
consolidated
operating
expenses:
FTD $ 100,148 $ 43,233 $ 369,695 $ 43,233
Classmates Media 46,285 50,748 145,318 152,041
Communications 37,780 46,377 114,638 146,845
Intersegment (681 ) - (2,201 ) -
eliminations
Consolidated $ 183,532 $ 140,358 $ 627,450 $ 342,119
operating expenses
Reconciliation of
segment income
from operations to
consolidated
operating income:
FTD $ 15,253 $ 8,184 $ 58,392 $ 8,184
Classmates Media 16,998 12,158 43,276 28,048
Communications 15,613 18,771 56,585 60,387
Total segment
income from 47,864 39,113 158,253 96,619
operations
Depreciation (6,177 ) (5,348 ) (18,809 ) (15,673 )
Amortization of (9,013 ) (4,966 ) (26,252 ) (9,824 )
intangible assets
Consolidated $ 32,674 $ 28,799 $ 113,192 $ 71,122
operating income
UNITED ONLINE, INC.
Unaudited Selected Quarterly Historical Key Metrics (a)
September June 30, March 31, December September
30, 31, 30,
2009 2009
2009 2008 2008
Consolidated:
Revenues (in $ 216,206 $ 260,789 $ 263,647 $ 256,162 $ 169,157
thousands)
FTD:
Basis of Combined
Presentation(b)
Revenues (in $ 107,526 $ 149,216 $ 147,987 $ 133,685 $ 121,427
thousands)
% of
consolidated 50 % 57 % 56 % 52 % N/A
revenues
Consumer orders
(5) (in 1,075 1,711 1,691 1,467 1,154
thousands)
Average order $ 61.29 $ 59.78 $ 57.70 $ 58.80 $ 64.37
value(5)
Average foreign
currency 1.64 1.55 1.43 1.56 1.90
exchange rate:
GBP to USD
Classmates
Media:
Segment
revenues (in $ 58,682 $ 58,155 $ 58,473 $ 62,592 $ 58,746
thousands)
% of
consolidated 27 % 22 % 22 % 24 % 35 %
revenues
Pay accounts 4,785 4,621 4,563 4,319 4,087
(in thousands)
Segment churn 3.8 % 4.3 % 4.1 % 4.4 % 4.1 %
(c)
ARPU(d) $ 2.71 $ 2.81 $ 2.87 $ 2.98 $ 3.07
Segment active
accounts(in 16.9 16.4 16.8 16.0 15.5
millions)
Communications:
Segment
revenues (in $ 50,679 $ 54,147 $ 57,978 $ 60,120 $ 62,131
thousands)
% of
consolidated 23 % 21 % 22 % 23 % 37 %
revenues
Pay accounts
(in thousands):
Access 1,118 1,203 1,316 1,388 1,468
Other 322 329 337 347 353
Total
Communications 1,440 1,532 1,653 1,735 1,821
pay accounts
Segment churn 4.6 % 4.9 % 4.8 % 4.3 % 4.4 %
(c)
ARPU(d) $ 9.43 $ 9.55 $ 9.45 $ 9.31 $ 9.49
Segment active
accounts(in 2.3 2.4 2.6 2.7 2.8
millions)
(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) Combined quarterly results were calculated by adding historical results
prior to the FTD acquisition (July 1, 2008 through August 25, 2008) to FTD's
results following the acquisition (August 26, 2008 through September 30, 2008).
The company has not verified the accuracy of the pre-acquisition historical
results of FTD and makes no representations with respect to such information.
(c) Churn is calculated as the total number of pay accounts that terminated or
expired in a period divided by the average number of pay accounts for the same
period, divided by the number of months in that period.
(d) ARPU is calculated by dividing billable services revenues for a period by
the average number of pay accounts for that period, divided by the number of
months in that period.
Source: United Online, Inc.
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