United Online Reports Fourth-Quarter and Fiscal 2006 Results


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        Content & Media Revenues Grow to 33% of Quarterly Consolidated Revenues in the Fourth Quarter
    Content & Media Fourth-Quarter Pay Accounts Rise to 46% of All Pay Accounts
    Fourth-Quarter Advertising Revenues Increase 101% Year-Over-Year

WOODLAND HILLS, Calif., Feb. 8, 2007 (GLOBE NEWSWIRE) -- United Online, Inc. (Nasdaq:UNTD), a leading provider of consumer Internet and media services, today reported financial results for its fourth quarter and fiscal year ended December 31, 2006.

"Organic revenue growth in our Content & Media segment drove United Online's sequential revenue growth this quarter," said Mark R. Goldston, chairman and chief executive officer of United Online. "This achievement highlights the significant progress we made diversifying our business in 2006, with Content & Media comprising 33% of fourth-quarter revenues and 46% of total pay accounts."

Fourth-Quarter 2006 Consolidated Results:


        Total revenues were $130.8 million, versus $130.2 million in the year-ago quarter.
    Including the impact of $13.3 million of non-cash asset impairment charges (see below), operating income was $9.3 million, or 7.1% of revenues, versus $22.1 million, or 17.0% of revenues, in the year-ago quarter.
    Excluding the impact of impairment charges, adjusted operating income before depreciation and amortization (OIBDA)(1) increased 6% to $36.6 million, or 28.0% of revenues, versus $34.6 million, or 26.6% of revenues, in the year-ago quarter.
    Pay accounts(2) decreased by 58,000 during the quarter to 4.9million, and active accounts(2) totaled 20.1 million at December 31, 2006.
    Net income was $4.6 million, after the impact of $8.0 million, net of tax, of impairment charges, versus net income of $12.4 million in the year-ago quarter. On a diluted per share basis, net income was$0.07, after the impact of $0.12 of asset impairment charges in the fourth quarter of 2006, versus $0.19 in the year-ago quarter.
    Excluding the impact of impairment charges, adjusted net income(3) was $19.5 million, an increase of 5%, versus $18.6 million for the year-ago quarter. On a diluted per share basis, adjusted net income for the quarter was $0.29 per share, an increase of 4% versus $0.28 per share for the year-ago quarter.
    The $13.3 million pre-tax, non-cash asset impairment charges are comprised of (i) Communications segment charges of $4.5 million related to the write-down of certain assets associated with the company's voice over Internet protocol (VoIP) business; and (ii) Content & Media segment charges of $8.8 million related to the write-down of goodwill and intangible assets associated with the March 2005 acquisition of PhotoSite. Certain non-GAAP metrics contained herein, including adjusted OIBDA, adjusted OIBDA for a segment, and adjusted net income have been adjusted to exclude impairment charges. See footnotes below.

Full-Year 2006 Consolidated Results:

        Total revenues were $522.7 million, versus $525.1 million in 2005.
    Operating income was $74.0 million, after the impact of $13.3 million of impairment charges, or 14.2% of revenues, versus $86.6 million, or 16.5% of revenues, in 2005.
    Adjusted operating income before depreciation and amortization (OIBDA)(1) increased 9% to $146.0 million, or 27.9% of revenues, versus $133.8 million, or 25.5% of revenues, in 2005.
    Net income was $42.3 million, after the impact of $8.0 million, net of tax, of impairment charges, versus net income of $47.1 million in 2005. On a diluted per share basis, net income was $0.64 in 2006, after the impact of $0.12 of asset impairment charges in 2006, versus $0.74 in 2005.
    Adjusted net income(3) was $77.7 million, an increase of 9%, versus $71.1 million in 2005. On a diluted per share basis, adjusted net income for 2006 was $1.16 per share, an increase of 6%, versus $1.09 per share in 2005.

"2006 marked the fifth year in a row that United Online has reported record consolidated adjusted OIBDA," said Charles S. Hilliard, president and chief financial officer of United Online. "2006 was also the third year in a row that we have reported record Content & Media revenues. We believe our profitability, strong balance sheet and free cash flow give us the flexibility needed to continue to execute our diversification strategy."

Fourth-Quarter 2006 Segment Results:

Communications:

        Communications revenues were $87.2 million, or 66.7% of consolidated revenues, versus $104.1 million, or 79.9% of consolidated revenues, in the year-ago quarter.
    Communications operating income was $24.9 million, after the impact of $4.5 million of impairment charges, or 28.5% of Communications revenues, versus $26.8 million, or 25.7% of Communications revenues, in the year-ago quarter.
    Communications adjusted OIBDA(1) was $32.9 million, or 37.7% of Communications revenues, an increase of 8%, versus $30.3 million, or 29.1% of Communications revenues, in the year-ago quarter.
    Communications pay accounts decreased by 149,000 during the quarter to 2.6 million, or 53.5% of consolidated pay accounts.

Content & Media:

        Content & Media revenues grew 67% to $43.6 million, or 33.3% of consolidated revenues, versus $26.2 million, or 20.1% of consolidated revenues, in the year-ago quarter.
    Content & Media operating loss was ($7.2) million, after the impact of $8.8 million of impairment charges, versus an operating profit of $3.1 million, or 11.8% of Content & Media revenues, in the year-ago quarter.
    Content & Media adjusted OIBDA(1) was $8.1 million, or 18.5% of Content & Media revenues, versus $9.0 million, or 34.3% of Content & Media revenues, in the year-ago quarter.
    Content & Media pay accounts increased by 91,000 during the quarter to 2.3 million, or 46.5% of consolidated pay accounts.

Other:

        Other reconciling items (unallocated corporate expenses) to arrive at consolidated adjusted OIBDA(1) were ($4.3) million, versus ($4.6) million in the year-ago quarter.

Additional Highlights:

        Cash balances at December 31, 2006 were $162.4 million, including cash, cash equivalents and short-term investments.
    Cash flows from operations were $22.9 million in the fourth quarter of 2006, versus $22.8 million in the year-ago quarter. Cash flows from operations were $101.5 million in 2006, versus $137.0 million in 2005. In connection with the adoption of FAS 123R, certain tax benefits from exercised stock options that were previously reflected in the operating section of the company's statement of cash flows are now presented in the financing section.
    Free cash flow(4) was $16.0 million in the fourth quarter of 2006, versus $17.6 million in the year-ago quarter. Free cash flow(4) was $82.1 million in 2006, versus $115.4 million in 2005.
    The company's previously-authorized stock repurchase program has been extended through December 31, 2007. At December 31, 2006, the company had repurchased $139.2 million of its common stock under the program, leaving $60.8 million remaining under the program.

Full-Year 2006 Segment Results:

Communications:

        Communications revenues were $375.9 million, or 71.9% of consolidated revenues, versus $431.9 million, or 82.3% of consolidated revenues, in 2005.
    Communications operating income was $118.4 million, after the impact of $4.5 million of impairment charges, or 31.5% of Communications revenues, versus $122.9 million, or 28.4% of Communications revenues, in 2005.
    Communications adjusted OIBDA(1) was $138.0 million, or 36.7% of Communications revenues, an increase of 2%, versus $135.3 million, or 31.3% of Communications revenues, in 2005.

Content & Media:

        Content & Media revenues grew 58% to $146.7 million, or 28.1% of consolidated revenues, versus $93.1 million, or 17.7% of consolidated revenues, in 2005.
    Content & Media operating loss was ($6.5) million, after the impact of $8.8 million of impairment charges, versus an operating loss of ($8.3) million in 2005.
    Content & Media adjusted OIBDA(1) was $26.7 million, or 18.2% of Content & Media revenues, an increase of 61%, versus $16.5 million, or 17.8% of Content & Media revenues, in 2005.

Other:

        Other reconciling items (unallocated corporate expenses) to arrive at consolidated adjusted OIBDA(1) were ($18.6) million, versus ($18.0) million in 2005.

Business Outlook:

The following forward-looking information includes certain projections made by management as of the date of this press release. United Online does not intend to revise or update this information and may not provide this type of information in the future. Due to a variety of factors, actual results may differ significantly from those projected. Factors include, without limitation, the factors referenced later in this announcement under the caption "Cautionary Information Regarding Forward-Looking Statements." These and other factors are discussed in more detail in the company's filings with the Securities and Exchange Commission. In addition, the stock-based compensation and weighted average diluted shares projections are based on estimated equity grants for 2007, including a company-wide grant which has not yet been determined, and actual grants could vary significantly from those currently estimated.

Below is the company's guidance for the March 2007 quarter and the year ending December 31, 2007:


 (in millions)
                                         Q1 ending    Full Year ending
                                          3/31/07         12/31/07
                                   -----------------------------------
 Operating income                      $15.0 - $17.0    $78.5 - $83.5
 Depreciation                               5.0             21.0
 Amortization                               4.7             19.0
 Stock-based compensation                   3.8             21.0
 Restructuring charges                      1.5              1.5
                                   -----------------------------------
 Adjusted operating income before
  depreciation and amortization(1)     $30.0 - $32.0   $141.0 - $146.0
                                   -----------------------------------
 Weighted average diluted shares        68.5 - 69.5      70.0 - 71.0

Total revenues for the March 2007 quarter are estimated to be between approximately $124.0 million and approximately $126.0 million.

We currently anticipate a slight to moderate decline in total revenues for fiscal year 2007 when compared to total revenues for fiscal year 2006.

 (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 charges; and impairment of goodwill, intangible
     assets and long-lived assets.  Management believes that because
     adjusted OIBDA excludes (1) certain non-cash expenses (such as
     depreciation, amortization, stock-based compensation and
     impairment of goodwill, intangible assets and long-lived assets);
     and (2) expenses that are not reflective of the company's core
     operating results over time, this measure provides investors with
     additional useful information to measure the company's
     performance, particularly with respect to changes in performance
     from period to period.  Management uses adjusted OIBDA to measure
     the company's performance.  The company's Board of Directors uses
     this measure in determining certain compensation incentives for
     certain members of the company's management.  Adjusted OIBDA is
     not determined in accordance with accounting principles generally
     accepted in the United States of America (GAAP) and should be
     considered in addition to, not as a substitute for or superior to,
     financial measures determined in accordance with GAAP.  A
     limitation associated with the use of adjusted OIBDA is that it
     does not reflect the periodic costs of certain capitalized
     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 measures
     such as 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 supplemental information about stock compensation
     expense 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 charges and
     impairment charges.  Management compensates for this limitation by
     providing information about restructuring charges and impairment
     charges.  Management does not believe any of these limitations are
     material, particularly when such measure is disclosed with its
     most comparable GAAP financial measure, operating income.  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 Form 10-Ks and Form 10-Qs before restructuring charges
     and impairment of goodwill, intangible assets and long-lived
     assets. Management believes that because adjusted OIBDA for a
     segment excludes certain non-cash expenses and expenses that are
     not reflective of the segment's core operating results over time,
     this measure provides investors with additional useful information
     to measure the company's segment performance, particularly with
     respect to changes in performance from period to period.  Adjusted
     OIBDA for the company's segments is not determined in accordance
     with GAAP and should be considered in addition to, not as a
     substitute for or superior to, financial measures determined in
     accordance with GAAP.  A limitation associated with the use of
     adjusted OIBDA for a segment is that it does not reflect the costs
     of restructuring charges and impairment charges related to an
     operating segment.  Management compensates for this limitation by
     providing information about restructuring charges and impairment
     charges by segment.  Management does not believe this limitation
     is material, particularly when such measure is disclosed with its
     most comparable GAAP financial measure, segment income from
     operations.  A reconciliation to segment income from operations is
     provided in the accompanying tables.
 (2) A pay account represents a unique billing relationship with a
     customer who subscribes to one or more of the company's services.
     A pay account does not equate to a unique subscriber since one
     subscriber could have several pay accounts.  Active accounts are
     defined as all free access, VoIP, social-networking and email
     users that logged on to our services at least once during the
     preceding 31 days, together with all pay accounts.  Additionally,
     active accounts include the number of free Web sites that received
     at least one unique visitor within the preceding 90 days; the
     number of free photo-sharing users that logged on to the service
     at least once within the preceding 90 days; and the number of
     MyPoints members who earned points or spent points within the
     preceding 90 days.
 (3) Adjusted net income is defined by the company as net income before
     the after-tax effect of amortization of intangible assets;
     stock-based compensation; restructuring charges; impairment of
     goodwill, intangible assets and long-lived assets; and the
     cumulative effect of a change in accounting principle as a result
     of the adoption of FAS 123R, and the re-measurement of certain
     deferred tax assets.  Management believes that adjusted net income
     and adjusted net income per share provide investors with
     additional useful information to measure the company's financial
     performance, particularly from period to period, because these
     measures are exclusive of (1) certain non-cash expenses (such as
     amortization, stock-based compensation and impairment of goodwill,
     intangible assets and long-lived assets) and (2) expenses that are
     not reflective of the company's core results over time.
     Management also uses adjusted net income and adjusted net income
     per share for this purpose.  Adjusted net income and adjusted net
     income per share are not determined in accordance with accounting
     principles generally accepted in the United States of America
     (GAAP) and should be considered in addition to, not as a
     substitute for or superior to, financial measures determined in
     accordance with GAAP.  The limitations of adjusted net income and
     adjusted net income per share are that, similar to adjusted OIBDA,
     they do not include certain costs, and the terms adjusted net
     income and adjusted net income per share do not have standardized
     meanings.  Therefore, other companies may use the same or
     similarly named measures but exclude different items or use
     different computations, which may not provide investors a
     comparable view of the company's performance in relation to other
     companies in the same industry.  Management compensates for this
     limitation by presenting the most comparable GAAP measure, net
     income, directly ahead of adjusted net income in this earnings
     release and by providing a reconciliation that shows and describes
     the adjustments made.  Management does not believe these
     limitations are material, particularly when such measure is
     disclosed with its most comparable GAAP financial measure, net
     income.  A reconciliation to net income is provided in the
     accompanying tables.
 (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 charges.  Management believes that this measure
     of 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.
     This measure is used by management, and may also be useful for
     investors, to assess the company's ability to pay its quarterly
     dividend, repay debt obligations, generate cash flow for a variety
     of strategic opportunities, including reinvestment in the
     business, and effect potential acquisitions and share repurchases.
     Free cash flow is not determined in accordance with accounting
     principles generally accepted in the United States of America
     (GAAP) and should be considered in addition to, not as a
     substitute for or superior to, financial measures determined in
     accordance with GAAP.  The limitation of free cash flow is that it
     does not represent the total increase or decrease in cash during
     the period.  Management does not believe that this is a material
     limitation, particularly when such measure is disclosed with its
     most comparable GAAP financial measure, net cash provided by
     operating activities.  A reconciliation to net cash provided by
     operating activities is provided in the accompanying tables.

Conference Call

United Online will host a conference call today at 2:00 p.m. PST (5:00 p.m. EST) to discuss its quarterly results. A live Web cast of the call can be accessed through 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.

About United Online

United Online, Inc. (Nasdaq:UNTD) is a leading provider of consumer Internet and media services. The company's Content & Media services include social networking (Classmates) and online loyalty marketing (MyPoints). Its Communications services include Internet access (NetZero, Juno) and email. United Online is headquartered in Woodland Hills, CA, with offices in New York, NY; Fort Lee, NJ; Renton, WA; San Francisco, CA; Schaumburg, IL; Orem, UT; Erlangen, Germany; and Hyderabad, India. For more information about United Online, please visit www.untd.com.

Cautionary Information Regarding Forward-Looking Statements

This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, as amended. Statements containing words such as "guidance," "may," "believe," "will," "expect," "project," "projections," "business outlook" and "estimate" or similar expressions constitute forward-looking statements. These statements include, without limitation, expectations regarding future financial performance; weighted average diluted shares; depreciation and amortization; stock-based compensation and restructuring charges. Any such forward-looking statements are not guarantees of future performance or results, and involve risks and uncertainties that may cause actual performance and results to differ materially from those predicted and reported results should not be considered an indication of future performance. Potential risks and uncertainties include, among others: the effect of competition, including adoption of broadband services and changes in the company's pricing or competitors' pricing, and the use of promotional offers to acquire or retain subscribers; the company's inability to retain its existing subscribers and the rate at which new subscribers sign up for the company's services; changes in pay accounts and the mix of pay accounts; the effects of changes in marketing expenditures or shifts in marketing expenditures to support existing and new products and services; the effects of seasonality; changes in Internet usage; changes in the projected number of weighted average diluted shares due to the issuance of stock, restricted stock units and stock options, stock repurchases, fluctuations in the company's stock price or other factors; changes in stock-based compensation; changes in the projected amortization and depreciation figures due to capital spending or other factors; potential impairment of goodwill and intangibles; that the Company will incur additional restructuring charges or currently anticipated restructuring charges will be greater than anticipated; risks associated with the commercialization of new services; changes in tax laws, the company's business or other factors that would impact anticipated tax benefits; changes in usage by subscribers, additional telecommunications costs or other factors negatively impacting the company's cost of revenue; changes in active accounts; the company's inability to maintain, renew, or enter into new, agreements with telecommunications providers on attractive terms; the company's ability to successfully integrate acquisitions; problems associated with the company's billing systems; the company's inability to retain key customers and key personnel; technological problems or developments; risks associated with litigation; and governmental regulation. From time to time, the company considers acquisitions or divestitures that, if consummated, could be material. Forward-looking statements regarding financial metrics are based upon the assumption that no such acquisition or divestiture is consummated during the relevant periods. If an acquisition or divestiture were consummated, actual results could differ materially from any forward-looking statements. More information about potential factors that could affect the company's business and financial results is included in the company's annual and quarterly reports filed with the Securities and Exchange Commission (http://www.sec.gov), including, without limitation, information under the captions "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors."

                          UNITED ONLINE, INC.
            Unaudited Condensed Consolidated Balance Sheets
                            (in thousands)
                                       December 31,       December 31,
                                           2006               2005
                                       ------------       ------------
 ASSETS
   Cash, cash equivalents and
    short-term investments               $162,362           $244,362
   Accounts receivable, net                32,226             19,201
   Deferred tax assets, net                71,360             68,355
   Property and equipment, net             34,296             33,093
   Goodwill and intangible assets, net    186,671            139,837
   Other assets                            16,104             16,340
                                         --------           --------
     Total assets                        $503,019           $521,188
                                         ========           ========
 LIABILITIES AND STOCKHOLDERS' EQUITY
   Accounts payable                      $ 36,550           $ 46,955
   Accrued liabilities                     39,547             36,249
   Member redemption liability             19,989                 --
   Deferred revenue                        56,348             56,284
   Capital leases                              30                698
   Term loan                                   --             54,208
   Other liabilities                        3,589              4,379
                                         --------           --------
     Total liabilities                    156,053            198,773
                                         --------           --------
   Stockholders' equity                   346,966            322,415
                                         --------           --------
     Total liabilities and 
      stockholders' equity               $503,019           $521,188
                                         ========           ========

                          UNITED ONLINE, INC.
            Unaudited Consolidated Statements of Operations
               (in thousands, except per share amounts)
                             ------------------     ------------------
                             Three Months Ended         Year Ended 
                                 December 31,           December 31,
                             ------------------     ------------------
                               2006      2005         2006      2005
                             --------  --------     --------  --------
 Revenues                    $130,786  $130,232     $522,654  $525,061
 Operating expenses:
   Cost of revenues(a)         29,967    28,241      120,049   110,672
   Sales and marketing(a)      43,976    48,639      177,019   209,292
   Product development(a)      13,231    11,229       52,933    40,009
   General and
    administrative(a)          16,537    15,126       67,709    56,729
   Amortization of
    intangible assets           4,486     4,915       17,640    21,799
   Impairment of goodwill,
    intangible assets and
    long-lived assets          13,285        --       13,285        --
                             --------  --------     --------  --------
     Total operating
      expenses                121,482   108,150      448,635   438,501
                             --------  --------     --------  --------
 Operating income               9,304    22,082       74,019    86,560
 Interest and other
  income, net                   1,549     2,201        6,076     6,885
 Interest expense                (245)   (1,328)      (2,571)   (6,073)
                             --------  --------     --------  --------
 Income before income taxes    10,608    22,955       77,524    87,372
   Provision for income
    taxes                       6,049    10,581       36,293    40,245
                             --------  --------     --------  --------
 Income before cumulative
  effect of change in
  accounting principle          4,559    12,374       41,231    47,127
 Cumulative effect of
  change in accounting
  principle, net of tax            --        --        1,041        --
                             --------  --------     --------  --------
 Net income                  $  4,559  $ 12,374     $ 42,272  $ 47,127
                             ========  ========     ========  ========
 Basic net income per share
   Income before cumulative
    effect of change in
    accounting principle     $   0.07  $   0.20     $   0.64  $   0.77
   Cumulative effect of
    change in accounting
    principle, net of tax          --        --         0.02        --
                             --------  --------     --------  --------
 Basic net income per share  $   0.07  $   0.20     $   0.66  $   0.77
                             ========  ========     ========  ========
 Diluted net income per share
   Income before cumulative
    effect of change in
    accounting principle     $   0.07  $   0.19     $   0.62  $   0.74
   Cumulative effect of
    change in accounting
    principle, net of tax          --        --         0.02        --
                             --------  --------     --------  --------
 Diluted net income per
  share                      $   0.07  $   0.19     $   0.64  $   0.74
                             ========  ========     ========  ========
 Shares used to calculate
  basic net income per share   65,102    61,899       64,001    61,135
                             ========  ========     ========  ========
 Shares used to calculate
  diluted net income per
  share                        67,616    64,996       66,269    63,815
                             ========  ========     ========  ========
 Shares outstanding at
  end of period                65,805    62,606       65,805    62,606
                             ========  ========     ========  ========
 (a)  Stock-based compensation was allocated as follows:
 Cost of revenues            $    148  $     52     $    817  $    183
 Sales and marketing              714       333        3,457       954
 Product development            1,119       327        5,367     1,069
 General and administrative     2,050     2,408        9,527     7,746
                             --------  --------     --------  --------
   Total stock-based
    compensation             $  4,031  $  3,120     $ 19,168  $  9,952
                             ========  ========     ========  ========

                          UNITED ONLINE, INC.
       Unaudited Condensed Consolidated Statements of Cash Flows
                            (in thousands)
                             ------------------     ------------------
                             Three Months Ended         Year Ended
                                 December 31,           December 31,
                             ------------------     ------------------
                               2006      2005         2006      2005
                             --------  --------     --------  --------
 CASH FLOWS FROM OPERATING
  ACTIVITIES:
 Net income                  $  4,559  $ 12,374     $ 42,272  $ 47,127
 Adjustments to reconcile
  net income to net cash
  provided by operating
  activities:
   Depreciation,
    amortization and
    stock-based compensation   14,018    12,538       58,098    47,232
   Impairment of goodwill,
    intangible assets
    and long-lived assets      13,285        --       13,285        --
   Deferred taxes and other    (6,046)      170         (586)    2,325
   Tax benefits from
    stock-based compensation    1,093     3,995        5,781    15,170
   Excess tax benefits
    from stock-based
    compensation                 (441)       --       (3,863)       --
   Cumulative effect of
    change in accounting
    principle, net of tax          --        --       (1,041)       --
   Change in operating assets
    and liabilities (excluding
    the effects of
    acquisitions):
     Accounts receivable       (5,962)    1,678       (3,296)   (1,669)
     Other assets              (1,553)   (1,764)         844     1,806
     Accounts payable and
      accrued liabilities       3,895    (5,231)     (11,211)   17,677
     Member redemption
      liability                 1,198        --        2,315        --
     Deferred revenue          (1,180)   (1,034)        (999)    5,181
     Other liabilities             (6)       45         (129)    2,198
                             --------  --------     --------  --------
       Net cash provided by
        operating activities   22,860    22,771      101,470   137,047
                             --------  --------     --------  --------
 CASH FLOWS FROM INVESTING
  ACTIVITIES:
   Purchases of property
    and equipment              (7,437)   (5,199)     (24,329)  (21,653)
   Purchases of rights,
    patents and trademarks         --        (8)        (509)   (5,562)
   Purchases of short-term
    investments               (67,733)  (38,151)    (324,328) (320,869)
   Proceeds from maturities
    and sales of short-term
    investments                57,614   101,755      325,180   353,333
   Cash paid for acquisitions,
    net of cash acquired          (41)       --      (61,155)   (8,638)
   Decrease in restricted
    cash                        1,450        --           --        --
   Payment related to
    settlement of
    pre-acquisition
    liability                      --        --       (4,800)       --
   Proceeds from sales
    of assets, net                 17        --          104        --
                             --------  --------     --------  --------
       Net cash provided
        by (used for)
        investing activities  (16,130)   58,397      (89,837)   (3,389)
                             --------  --------     --------  --------
 CASH FLOWS FROM FINANCING
  ACTIVITIES:
   Payments on term loan           --    (4,125)     (54,209)  (45,792)
   Payments on capital leases    (424)      (91)        (668)     (621)
   Proceeds from exercises
    of stock options            2,883     1,142        9,452     5,874
   Proceeds from employee
    stock purchase plan         2,039     1,491        5,004     3,169
   Repurchases of common
    stock                        (310)       --       (2,684)  (14,206)
   Payments for dividends     (13,695)  (12,808)     (53,483)  (38,067)
   Excess tax benefits from
    stock-based compensation      441        --        3,863        --
                             --------  --------     --------  --------
       Net cash used for
       financing activities    (9,066)  (14,391)     (92,725)  (89,643)
                             --------  --------     --------  --------
   Effect of exchange rate
    changes on cash and cash
    equivalents                   (71)      (39)         (53)     (130)
 Change in cash and cash
  equivalents                  (2,407)   66,738      (81,145)   43,885
 Cash and cash equivalents,
  beginning of period          21,659    33,659      100,397    56,512
                             --------  --------     --------  --------
 Cash and cash equivalents,
  end of period              $ 19,252  $100,397     $ 19,252  $100,397
                             ========  ========     ========  ========

                          UNITED ONLINE, INC.
        Reconciliation of Net Income to Adjusted Net Income(3)
                 (in thousands, except per-share data)
                             Three Months Ended         Year Ended
                                 December 31,           December 31,
                             ------------------     ------------------
                               2006      2005         2006      2005
                             --------  --------     --------  --------
 Net income                  $  4,559  $ 12,374     $ 42,272  $ 47,127
 Add (deduct):
   Stock-based compensation     4,031     3,120       19,168     9,952
   Amortization of intangible                                  
    assets                      4,486     4,915       17,640    21,799
   Restructuring charges           --        --          627        --
   Impairment of goodwill,                                     
    intangible assets and                                      
    long-lived assets          13,285        --       13,285        --
   Cumulative effect of                                        
    change in accounting                                       
    principle                      --        --       (1,041)       --
                             --------  --------     --------  --------
                               26,361    20,409       91,951    78,878
 Income tax effect of 
  adjusting entries            (7,682)   (1,819)      16,416)   (8,777)
 Re-measurement of certain                                     
  deferred tax assets             813        --        2,132     1,008
                             --------  --------     --------  --------
 Adjusted net income         $ 19,492  $ 18,590     $ 77,667  $ 71,109
                             ========  ========     ========  ========
                                                               
 Adjusted basic net income                                     
  per share                  $   0.30  $   0.30     $   1.21  $   1.16
                             ========  ========     ========  ========
 Adjusted diluted net income                                   
  per share                  $   0.29  $   0.28     $   1.16  $   1.09
                             ========  ========     ========  ========
                                                              
 Shares used to calculate
  adjusted basic net income
  per share                    65,102    61,899       64,001    61,135
                             ========  ========     ========  ========
 Shares used to calculate
  adjusted diluted net income
  per share(a)                 68,194    66,236       67,138    65,127
                             ========  ========     ========  ========
----------------------------------------------------------------------
 (a) Includes the adjustment of shares used to calculate diluted net
     income per share resulting from the elimination of stock-based
     compensation.

                          UNITED ONLINE, INC.
               Reconciliation of Non-GAAP Financial Data
                            (in thousands)
                             Three Months Ended         Year Ended
                                 December 31,           December 31,
                             ------------------     ------------------
                               2006      2005         2006      2005
                             --------  --------     --------  --------
 Adjusted Operating Income
  Before Depreciation and
  Amortization(1)
 Operating income            $  9,304  $ 22,082     $ 74,019  $ 86,560
   Depreciation                 5,501     4,503       21,290    15,481
   Amortization                 4,486     4,915       17,640    21,799
                             --------  --------     --------  --------
 Operating income before
  depreciation and
  amortization                 19,291    31,500      112,949   123,840
   Stock-based compensation     4,031     3,120       19,168     9,952
   Restructuring charges           --        --          627        --
   Impairment of goodwill,
    intangible assets and
    long-lived assets          13,285        --       13,285        --
                             --------  --------     --------  --------
 Adjusted operating income
  before depreciation and
  amortization               $ 36,607  $ 34,620     $146,029  $133,792
                             ========  ========     ========  ========

 Reconciliation of Segment 
  Income from Operations to 
  Adjusted OIBDA(1)
 Communications:
 Segment income from
  operations                 $ 28,360  $ 30,292     $132,839  $135,286
   Restructuring charges           --        --          619        --
   Impairment of goodwill,
    intangible assets and
    long-lived assets           4,504        --        4,504        --
                             --------  --------     --------  --------
 Adjusted operating income
  before depreciation and
  amortization               $ 32,864  $ 30,292     $137,962  $135,286
                             ========  ========     ========  ========
 Content & Media:
 Segment income from
  operations                 $   (725) $  8,969     $ 17,913  $ 16,541
   Restructuring charges           --        --            8        --
   Impairment of goodwill,
    intangible assets and
    long-lived assets           8,781        --        8,781        --
                             --------  --------     --------  --------
 Adjusted operating income
  before depreciation and
  amortization               $  8,056  $  8,969     $ 26,702  $ 16,541
                             ========  ========     ========  ========

                          UNITED ONLINE, INC.
               Reconciliation of Non-GAAP Financial Data
                            (in thousands)
                             Three Months Ended         Year Ended
                                 December 31,           December 31,
                             ------------------     ------------------
                               2006      2005         2006      2005
                             --------  --------     --------  --------
 Free Cash Flow(4)
 Net cash provided by
  operating activities       $ 22,860  $ 22,771     $101,470  $137,047
 Add (deduct):
   Capital expenditures        (7,437)   (5,199)     (24,329)  (21,653)
   Excess tax benefits 
    from stock-based 
    compensation(a)               441        --        3,863        --
   Cash paid for 
    restructuring charges         105        --        1,100        --
                             --------  --------     --------  --------
 Free cash flow              $ 15,969  $ 17,572     $ 82,104  $115,394
                             ========  ========     ========  ========
----------------------------------------------------------------------
 (a) In accordance with FAS 123R, certain tax benefits from exercised
     stock options that were previously reflected in the operating
     section of the statement of cash flows are now presented in the
     financing section.

                          UNITED ONLINE, INC.
             Supplemental Schedule of Segment Information
                            (in thousands)
                            Three Months Ended December 31, 2006
                      -----------------------------------------------
                                                Unallocated
                      Communications  Content &  Corporate    Total
                                       Media      Expenses
                      --------------  --------- ----------   --------
 Billable services          $ 77,047   $ 22,305   $     --   $ 99,352
 Advertising                  10,147     21,287         --     31,434
                            --------   --------   --------   --------
   Total revenues             87,194     43,592         --    130,786
                            --------   --------   --------   --------
 Operating expenses:
   Cost of revenue            18,524     11,295        148     29,967
   Sales and marketing        25,362     17,900        714     43,976
   Product development         8,067      4,045      1,119     13,231
   General and administrative  5,486      4,664      6,387     16,537
   Amortization of
    intangible assets            372      4,114         --      4,486
   Impairment of goodwill,
    intangible assets and
    long-lived assets          4,504      8,781         --     13,285
                            --------   --------   --------   --------
     Total operating expenses 62,315     50,799      8,368    121,482
                            --------   --------   --------   --------
 Operating income (loss)      24,879     (7,207)    (8,368)     9,304
                            --------   --------   --------   --------
   Depreciation                3,109      2,368         24      5,501
   Amortization                  372      4,114         --      4,486
                            --------   --------   --------   --------
 Operating income before
  depreciation and
  amortization                28,360       (725)    (8,344)    19,291
   Stock-based compensation       --         --      4,031      4,031
   Impairment of goodwill,
    intangible assets and
    long-lived assets          4,504      8,781         --     13,285
                            --------   --------   --------   --------
 Adjusted operating income
  before depreciation and
  amortization              $ 32,864   $  8,056   $ (4,313)  $ 36,607
                            ========   ========   ========   ========

                            Three Months Ended December 31, 2005
                      -----------------------------------------------
                                                Unallocated
                      Communications  Content &  Corporate    Total
                                       Media      Expenses
                      --------------  --------- ----------   --------
 Billable services          $ 95,058   $ 19,533   $     --   $114,591
 Advertising                   9,018      6,623         --     15,641
                            --------   --------   --------   --------
   Total revenues            104,076     26,156         --    130,232
                            --------   --------   --------   --------
 Operating expenses:
   Cost of revenue            24,247      3,942         52     28,241
   Sales and marketing        38,669      9,637        333     48,639
   Product development         8,549      2,353        327     11,229
   General and administrative  5,138      2,939      7,049     15,126
   Amortization of
    intangible assets            713      4,202         --      4,915
                            --------   --------   --------   --------
     Total operating expenses 77,316     23,073      7,761    108,150
                            --------   --------   --------   --------
 Operating income (loss)      26,760      3,083     (7,761)    22,082
                            --------   --------   --------   --------
   Depreciation                2,819      1,684         --      4,503
   Amortization                  713      4,202         --      4,915
                            --------   --------   --------   --------
 Operating income before
  depreciation and
  amortization                30,292      8,969     (7,761)    31,500
    Stock-based compensation      --         --      3,120      3,120
                            --------   --------   --------   --------
 Adjusted operating income
  before depreciation and
  amortization              $ 30,292   $  8,969   $ (4,641)  $ 34,620
                            ========   ========   ========   ========

                          UNITED ONLINE, INC.
             Supplemental Schedule of Segment Information
                            (in thousands)
                                Year Ended December 31, 2006
                      -----------------------------------------------
                                                Unallocated
                      Communications  Content &  Corporate    Total
                                       Media      Expenses
                      --------------  --------- ----------   --------
 Billable services          $336,924   $ 86,641   $     --   $423,565
 Advertising                  39,013     60,076         --     99,089
                            --------   --------   --------   --------
   Total revenues            375,937    146,717         --    522,654
                            --------   --------   --------   --------
 Operating expenses:
   Cost of revenue            86,811     32,421        817    120,049
   Sales and marketing       109,484     64,078      3,457    177,019
   Product development        32,931     14,635      5,367     52,933
   General and
    administrative            21,401     18,095     28,213     67,709
   Amortization of
    intangible assets          2,424     15,216         --     17,640
   Impairment of goodwill,
    intangible assets and
    long-lived assets          4,504      8,781         --     13,285
                            --------   --------   --------   --------
     Total operating
      expenses               257,555    153,226    37,854     448,635
                            --------   --------   --------   --------
 Operating income (loss)     118,382     (6,509)   (37,854)    74,019
                            --------   --------   --------   --------
   Depreciation               12,033      9,206         51     21,290
   Amortization                2,424     15,216         --     17,640
                            --------   --------   --------   --------
 Operating income before
  depreciation and
  amortization               132,839     17,913    (37,803)   112,949
   Stock-based compensation       --         --     19,168     19,168
   Restructuring charges         619          8         --        627
   Impairment of goodwill,
    intangible assets and
    long-lived assets          4,504      8,781         --     13,285
                            --------   --------   --------   --------
 Adjusted operating income
  before depreciation and
  amortization              $137,962   $ 26,702   $(18,635)  $146,029
                            ========   ========   ========   ========

                                Year Ended December 31, 2005
                      -----------------------------------------------
                                                Unallocated
                      Communications  Content &  Corporate    Total
                                       Media      Expenses
                      --------------  --------- ----------   --------
 Billable services          $396,330   $ 69,649   $     --   $465,979
 Advertising                  35,614     23,468         --     59,082
                            --------   --------   --------   --------
   Total revenues            431,944     93,117         --    525,061
                            --------   --------   --------   --------
 Operating expenses:
   Cost of revenue            94,946     15,543        183    110,672
   Sales and marketing       162,242     46,096        954    209,292
   Product development        30,015      8,925      1,069     40,009
   General and
    administrative            18,815     12,133     25,781     56,729
   Amortization of
    intangible assets          3,048     18,751         --     21,799
                            --------   --------   --------   --------
     Total operating
      expenses               309,066    101,448     27,987    438,501
                            --------   --------   --------   --------
 Operating income (loss)     122,878     (8,331)   (27,987)    86,560
                            --------   --------   --------   --------
   Depreciation                9,360      6,121         --     15,481
   Amortization                3,048     18,751         --     21,799
                            --------   --------   --------   --------
 Operating income before
  depreciation and
  amortization               135,286     16,541    (27,987)   123,840
   Stock-based compensation       --         --      9,952      9,952
                            --------   --------   --------   --------
 Adjusted operating income
  before depreciation and
  amortization              $135,286   $ 16,541   $(18,035)  $133,792
                            ========   ========   ========   ========

                          UNITED ONLINE, INC.
    Selected Quarterly Historical Financial Data and Key Metrics(a)
                   Dec 31,    Sep 30,    Jun 30,    Mar 31,    Dec 31,
                    2006       2006       2006       2006       2005
                  --------   --------   --------   --------   --------
 Revenue
  (in thousands)  $130,786   $129,636   $134,900   $127,332   $130,232
 Net income
  (in thousands)  $  4,559   $ 13,436   $ 11,585   $ 12,692   $ 12,374
 Net income per
  diluted share   $   0.07   $   0.20   $   0.18   $   0.20   $   0.19
 Pay accounts(2)
  (in thousands)     4,854      4,912      4,996      5,093      5,009
 Active accounts(2)
  (in millions)       20.1       20.8       20.7       18.7       17.6
 Number of
  employees at
  end of period      1,006      1,023      1,016        912        900
 ---------------------------------------------------------------------
 (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 Pay Accounts(2)
                            (in thousands)
                   Dec 31,    Sep 30,    Jun 30,    Mar 31,    Dec 31,
                    2006       2006       2006       2006       2005
                  --------   --------   --------   --------   --------
 Communications(a)
   Access            2,282      2,425      2,556      2,751      2,855
   Other               317        323        330        321        313
                  --------   --------   --------   --------   --------
     Total           2,599      2,748      2,886      3,072      3,168
                  --------   --------   --------   --------   --------
 Content & Media(b)
   Social
    networking       2,169      2,079      2,029      1,945      1,766
   Other                86         85         81         76         75
                  --------   --------   --------   --------   --------
     Total           2,255      2,164      2,110      2,021      1,841
                  --------   --------   --------   --------   --------
       Total pay
        accounts(2)  4,854      4,912      4,996      5,093      5,009
                  ========   ========   ========   ========   ========
 ---------------------------------------------------------------------
 (a) Communications includes Internet access, VoIP, premium content,
     premium email and security suite. (b) Content & Media includes 
     social networking, Web hosting and photo sharing.
 (b) Content & Media includes social networking, Web hosting and photo 
     sharing.
CONTACT:  United Online, Inc.
          Press:
          Scott Matulis
          818-287-3388
          Liz Gengl
          818-287-3076
          pr@untd.com
          PondelWilkinson Inc.
          Investors and Press:
          Evan Pondel
          310-279-5980
          investor@pondel.com

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