United Online Reports Fourth Quarter and Full Year 2011 Results


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  • Total Quarterly Revenues of $217.9 Million, Operating Income of $23.7 Million and Adjusted OIBDA of $47.0 Million
  • Quarterly Operating Cash Flow of $39.4 Million and Free Cash Flow of $35.2 Million
  • FTD Quarterly Segment Revenues and Adjusted OIBDA Increase Year Over Year for Fourth Consecutive Quarter

WOODLAND HILLS, Calif.--(BUSINESS WIRE)--Feb. 22, 2012-- United Online, Inc. (Nasdaq: UNTD), a leading provider of consumer products and services over the Internet, today reported financial results for its fourth quarter and year ended December 31, 2011.

“Consolidated adjusted OIBDA was at the high end of our guidance range for the quarter, and consolidated revenues were within our guidance range,” said Mark R. Goldston, Chairman, President and Chief Executive Officer of United Online. “FTD delivered year-over-year growth for the fourth consecutive quarter. For the quarter, FTD revenues were $143.3 million and segment adjusted OIBDA was $21.8 million, increases of 2% and 12%, respectively, compared to the fourth quarter of 2010. For the full year 2011, FTD revenues were $587.2 million and segment adjusted OIBDA was $83.5 million, increases of 6% and 11%, respectively, compared to 2010.”

“In November 2011, we announced that we will begin selling 4G high-speed mobile broadband Internet access nationwide under the NetZero brand,” Goldston added. “We anticipate launching our affordably-priced 4G mobile broadband service to consumers by the end of the first quarter.”

“With regard to Memory Lane, 2011 was a year of testing and analysis. The results have led us to conclude that our domestic high school nostalgia focus continues to resonate with our members and that, of all the new nostalgic content we have offered to consumers, our digital yearbooks initiative has been the primary content offering that has driven engagement as well as subscriptions. We now have nearly 115,000 yearbooks on our site and expect to have 200,000 by year-end 2012, which we estimate will give us coverage of over 50% of the U.S. over-40 population. Based on this, we are implementing a number of yearbook-based initiatives during 2012 that are designed to increase engagement as well as to position us for growth in revenues and pay subscribers in the future,” said Goldston.

Added Neil P. Edwards, Executive Vice President and Chief Financial Officer, “United Online generated $35.2 million in free cash flow during the quarter and $90.0 million during the year, helping to increase our cash and cash equivalents to $136 million and reduce net debt to $125 million. In January 2012, we declared a cash dividend of $0.10 per share, our 28th consecutive quarterly cash dividend.”

Summary Results for Fourth Quarter Ended December 31, 2011:

The following table summarizes key financial results for the fourth quarter ended December 31, 2011:

    (in millions, except per share amounts and percentages)

Financial Highlights

Q4 2011     Q4 2010     % Change
FTD revenues $ 143.3 $ 140.2 2%
Content & Media revenues 45.7 53.3 (14%)
Communications revenues 29.3 39.7 (26%)
Intersegment eliminations   (0.3 )   (0.5 ) 36%
Consolidated revenues $ 217.9   $ 232.6   (6%)
 
GAAP operating income $ 23.7 $ 31.4 (25%)
 
Adjusted OIBDA(1) $ 47.0 $ 53.4 (12%)
 
GAAP net income attributable to common stockholders $ 12.5 $ 15.5 (19%)
GAAP diluted net income per common share $ 0.14 $ 0.18 (22%)
 
Adjusted net income attributable to common stockholders(2) $ 22.7 $ 26.5 (14%)
Adjusted diluted net income per common share(2) $ 0.25 $ 0.30 (17%)
  • Consolidated revenues were $217.9 million, a decrease of 6% versus the year-ago quarter.
  • GAAP operating income was $23.7 million, a decrease of 25% versus the year-ago quarter.
  • Adjusted OIBDA(1) was $47.0 million, a decrease of 12% versus the year-ago quarter.
  • The company recorded $4.9 million in restructuring and other exit costs related to cost reduction initiatives at each of the segments and to the departure of the company’s former chief financial officer.
  • Interest expense was $3.5 million, down 41% from the year-ago quarter, driven by reduced interest rates resulting from the June 2011 refinancing of FTD’s credit facility and lower average debt outstanding.
  • Our effective income tax rate was 39%, versus 38% in the year-ago quarter.
  • GAAP diluted net income per common share was $0.14, down 22% compared to the year-ago quarter.
  • Adjusted diluted net income per common share(2) was $0.25, versus $0.30 in the year-ago quarter.

Cash Flows, Balance Sheet and Dividend Highlights:

  • Cash flows from operating activities and free cash flow(3) for the quarter ended December 31, 2011 were $39.4 million and $35.2 million, respectively, decreases of 19% and 14%, respectively, versus the year-ago quarter.
  • Cash and cash equivalents at December 31, 2011 increased by $23.3 million to $136.1 million from $112.8 million at September 30, 2011.
  • Net debt at December 31, 2011 was $125.0 million, a decrease of $23.8 million from September 30, 2011. The company defines net debt as total debt, net of discounts, less cash and cash equivalents.
  • The company paid $9.3 million in cash dividends during the quarter.
  • In January 2012, the company’s Board of Directors declared a quarterly cash dividend of $0.10 per share that is payable on February 29, 2012 to stockholders of record on February 14, 2012.

Segment Financial Results for 2010 Revised to Conform to Current Year Presentation:

Effective the first quarter of 2011, the company modified its segment reporting to separately report unallocated corporate expenses. Previously, such expenses were fully allocated to the company’s reportable segments. The company has revised prior periods to conform to the current year presentation.

Segment Results for Fourth Quarter Ended December 31, 2011:

FTD:

    (in millions, except percentages and metrics)

Financial Highlights

Q4 2011     Q4 2010     % Change
Products revenues $ 114.5 $ 109.8 4%
Services revenues 28.8 30.2 (5%)
Advertising revenues   -     0.1   N/A
Segment revenues $ 143.3   $ 140.2   2%
 
Segment income from operations $ 19.9 $ 18.3 9%
Segment adjusted OIBDA(1) $ 21.8 $ 19.5 12%
as a % of segment revenues(1) 15.2 % 13.9 %
 

Metrics Highlights

Q4 2011 Q4 2010 % Change
Consumer orders(4) (in thousands) 1,615 1,612 -
Average order value(4) $ 62.31 $ 60.43 3%
 
British Pound / U.S. Dollar exchange rate (average) 1.57 1.58 -
  • Segment revenues were $143.3 million, an increase of 2% versus the year-ago quarter.
  • Segment adjusted OIBDA(1) was $21.8 million, an increase of 12% versus the year-ago quarter.
  • Consumer orders(4) were 1.6 million, unchanged versus the year-ago quarter.
  • Average order value(4) (“AOV”) was $62.31, an increase of 3% versus an AOV of $60.43 in the year-ago quarter.

Content & Media:

    (in millions, except percentages and metrics)

Financial Highlights

Q4 2011     Q4 2010     % Change
Products revenues $ 0.5 $ - N/A
Services revenues 28.4 33.7 (16%)
Advertising revenues   16.8     19.6   (14%)
Segment revenues $ 45.7   $ 53.3   (14%)
 
Segment income from operations $ 12.6 $ 15.8 (20%)
Segment adjusted OIBDA(1) $ 14.9 $ 17.0 (13%)
as a % of segment revenues(1) 32.5 % 32.0 %
 

Metrics Highlights

Q4 2011 Q4 2010 % Change
Segment pay accounts(5) (in thousands) 3,484 4,499 (23%)
Net quarterly decline in segment pay accounts(5) (in thousands) (296 ) (296 ) -
Segment active accounts(5) (in millions) 10.3 13.7 (25%)
ARPU(6) $ 2.60 $ 2.42 7%
 
Euro / U.S. Dollar Exchange Rate (average) 1.35 1.36 (1%)
  • Segment revenues were $45.7 million, a decrease of 14% versus the year-ago quarter.
  • Segment adjusted OIBDA was $14.9 million, a decrease of 13% versus the year-ago quarter.
  • Segment pay accounts at December 31, 2011 were 3.5 million, a decrease of 23% versus December 31, 2010.

Communications:

    (in millions, except percentages and metrics)

Financial Highlights

Q4 2011     Q4 2010     % Change
Services revenues $ 22.6 $ 30.2 (25%)
Advertising revenues   6.7     9.5   (30%)
Segment revenues $ 29.3   $ 39.7   (26%)
 
 
Segment income from operations $ 14.1 $ 18.6 (24%)
Segment adjusted OIBDA(1) $ 15.3 $ 21.2 (28%)
as a % of segment revenues(1) 52.3 % 53.5 %
 

Metrics Highlights

Q4 2011 Q4 2010 % Change
Segment pay accounts(5) (in thousands) 794 1,020 (22%)
ARPU(6) $ 9.09 $ 9.46 (4%)

  • Segment revenues were $29.3 million, a decrease of 26% versus the year-ago quarter.
  • Segment adjusted OIBDA was $15.3 million, a decrease of 28% versus the year-ago quarter.
  • Segment pay accounts at December 31, 2011 were 0.8 million, a decrease of 22% versus 1.0 million at December 31, 2010.

Unallocated Corporate Expenses:

For the quarter ended December 31, 2011, the impact of unallocated corporate expenses on consolidated adjusted OIBDA was $5.0 million, compared to $4.4 million in the year-ago quarter. The increase primarily related to the structure of the 2011 Management Bonus Plan as a cash-based rather than stock-based plan.

Business Outlook:

The following forward-looking information includes certain of the 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.

First Quarter 2012 Guidance:

First Quarter 2012 (in millions)     Guidance
Revenues $238.0 - $243.0
Adjusted OIBDA(1) $31.0 - $35.0
First Quarter 2012 Supplemental Information (in millions)     Guidance
Net interest expense $3.1
Shares used to calculate diluted net income per common share 90.0
Shares used to calculate adjusted diluted net income per common share(2) 90.2

The table below reconciles the company’s guidance for operating income, a GAAP measure, to adjusted OIBDA.

First Quarter 2012 (in millions)     Guidance
Operating Income $12.9 - $16.9
Depreciation $6.6
Amortization of intangible assets $7.9
Stock-based compensation $3.6
Adjusted OIBDA(1) $31.0 - $35.0

Investor Conference Call on February 22, 2012 at 5:00 p.m. ET (2:00 p.m. PT):

United Online will host a conference call on Wednesday, February 22, 2012 at 5:00 p.m. ET (2:00 p.m. PT) to discuss its financial results for the fourth quarter and year ended December 31, 2011. The conference call dial-in number is 888-417-8465 for domestic participants and 719-325-2397 for international participants. The passcode is 6406579. Alternatively, a live webcast of the conference call, along with a presentation containing financial highlights for the fourth quarter and year ended December 31, 2011, can be accessed within the Investor Relations section of the company’s website at www.unitedonline.com.

The presentation and a replay of the broadcast will also be available for seven days following the call on the company’s website, or by dialing 888-203-1112 (or 719-457-0820 outside of the United States) and the replay passcode, 6406579.

Non-GAAP Measures:

In evaluating the company's performance, management uses one or more of the following measures that are not determined in accordance with accounting principles generally accepted in the United States of America ("GAAP"): adjusted OIBDA, adjusted net income, adjusted basic and diluted net income per common share, and free cash flow. These measures are adjusted to exclude certain non-cash expenses such as depreciation, amortization, stock-based compensation, and impairment of goodwill, intangible assets and long-lived assets. In addition, these measures are adjusted to exclude the items discussed below because such items are either operating expenses which would not otherwise have been incurred by the company in the normal course of the company's business operations or are not reflective of the company's core results over time. These items may include recurring as well as non-recurring items. These adjustments should not be construed as an inference that all of these adjustments or costs are unusual, infrequent or non-recurring. For example, certain restructuring and other exit costs may be considered recurring given the company's ongoing efforts to be more cost effective and efficient, certain litigation or dispute settlement charges or gains may be viewed as recurring given that the company is continually involved in, and resolving, litigation, arbitration, investigations, disputes and similar matters, and certain transaction-related costs may be deemed recurring given the company's regular evaluation of potential transactions. Notwithstanding that certain charges, costs or gains may be considered recurring, in order to provide meaningful comparisons, the company believes that it is appropriate to adjust for such charges, costs or gains because they are not reflective of the company's core results and tend to vary based on timing, frequency and magnitude.

Restructuring and Other Exit Costs — Restructuring and other exit costs consist primarily of employee termination costs, facility closure and relocation costs and contract termination costs.

Litigation or Dispute Settlement Charges or Gains — These charges or gains include estimated losses for which we have established a reserve, as well as actual settlements, judgments, fines, penalties, assessments or other resolutions against, or in favor of, the company related to litigation, arbitration, investigations, disputes or similar matters. Insurance recoveries received by the company related to such matters are also included in these adjustments.

Transaction-Related Costs — The company excludes certain expense items resulting from actual or potential transactions such as business combinations, mergers, acquisitions, and financing transactions, including, without limitation, (i) compensation expenses and (ii) expenses for advisors and representatives such as investment bankers, consultants, attorneys, and accounting firms. The compensation expenses may include transition and integration costs such as retention bonuses and acquisition-related milestone payments to acquired employees.

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 other exit costs; litigation or dispute settlement charges or gains; transaction-related costs; 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 other exit costs, litigation or dispute settlement charges or gains, and transaction-related costs), 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 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 within the accompanying tables and in the footnotes accompanying its financial statements. A further limitation associated with the use of this measure is that it does not reflect the costs of restructuring and other exit costs, litigation or dispute settlement charges or gains, transaction-related costs, and the impairment of goodwill, intangible assets and long-lived assets. Management compensates for this limitation by providing supplemental information about such charges, gains and costs within its financial press releases and 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. In addition, many of the adjustments to our GAAP financial measures reflect the exclusion of items that are recurring in nature and will be reflected in our financial results for the foreseeable future.

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 other exit costs, litigation or dispute settlement charges or gains, transaction-related costs 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 (i) certain non-cash expenses (such as stock-based compensation, and the impairment of goodwill, intangible assets and long-lived assets); and (ii) expenses that are not reflective of the segment's core operating results over time (such as restructuring and other exit costs, litigation or dispute settlement charges or gains, and transaction-related costs), 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 within the accompanying tables and in the footnotes accompanying its financial statements. A further limitation associated with the use of these measures is that they do not reflect the costs of restructuring and other exit costs, litigation or dispute settlement charges or gains, transaction-related costs and impairment charges related to an operating segment. Management compensates for this limitation by providing supplemental information about such charges, gains and costs 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; impairment of goodwill, intangible assets and long-lived assets; restructuring and other exit costs; litigation or dispute settlement charges or gains; transaction-related costs; and the re-measurement of certain deferred tax assets. Adjusted diluted net income per common share includes the adjustment for shares resulting from the elimination of stock-based compensation. 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 of intangible assets, 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 other exit costs, litigation or dispute settlement charges or gains, and transaction-related costs). 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, its most comparable GAAP measure, is provided in the accompanying tables.

(3) Free cash flow is defined by the company as net cash provided by operating activities, less capital expenditures and cash received for litigation or dispute settlement gains, and plus the excess tax benefits from equity awards, cash paid for restructuring and other exit costs, cash paid for litigation or dispute settlement charges, and cash paid for transaction-related costs. 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 other exit costs, cash paid or received for litigation or dispute settlement charges or gains, and cash paid for transaction-related costs. 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.

(4) Consumer orders are orders delivered during the period that originated in the U.S. and Canada, primarily from the www.ftd.com and www.ftd.ca websites 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 and www.interflora.ie websites and various telephone numbers. The number of consumer orders is not adjusted for non-delivered orders that are refunded after the scheduled delivery. 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 local currency amounts received for orders delivered principally in the U.K. and the Republic of Ireland into U.S. Dollars. Average order value includes merchandise revenues and shipping and service fees paid by the consumer, less discounts and refunds (net of refund-related fees charged to floral network members).

(5) A pay account is defined as a member who has paid for a subscription to a Content & Media or Communications service, and whose subscription has not terminated or expired. A subscription provides the member with access to our service for a specific term (for example, a month or a year) and may be renewed upon the expiration of each term. One-time purchases of our services, such as Memory Lane's one-day All-Access Pass, are not considered subscriptions and thus, are not included in the pay accounts metric. 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.

Content & Media segment active accounts are defined as the sum of all pay accounts as of the date presented; the monthly average for the period of all free accounts who have visited the company's domestic or international online nostalgia websites (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.

(6) ARPU is calculated by dividing services revenues generated from the pay accounts of our Content & Media or Communications segment, as applicable, for a period (after translation into U.S. Dollars) by the average number of segment pay accounts for that period, divided by the number of months in that period.

(7) 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 that period, divided by the number of months in that period.

About United Online®:

United Online, Inc. (Nasdaq: UNTD), through its operating subsidiaries, is a leading provider of consumer products and services over the Internet, where their respective brands have attracted a large online audience that includes more than 55 million registered accounts. The company's FTD segment provides floral and related products and services (FTD and Interflora) for consumers and retail florists, as well as other retail locations offering floral and related products and services. The company's Content & Media segment provides online nostalgia products and services (Memory Lane, Classmates, StayFriends, and Trombi) and online loyalty marketing services (MyPoints). Its primary Communications segment service is Internet access (NetZero and Juno).

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; stock-based compensation; and planned business initiatives, products, services and features. Potential factors that could cause actual results to differ materially from those in the forward-looking statements include, among others: risks associated with the launch or commercialization of new products, services or features or the success of new business models; the severity and duration of current economic conditions; the effect of competition; risks associated with litigation and governmental regulations or investigations, including reviews of business practices such as marketing, billing, renewal, and post-transaction sales practices; the company’s inability to maintain or increase the number of free and pay accounts, visitors to its websites, and members of the floral network; risks associated with the procurement of goods and services; problems associated with the company’s operations, systems or technologies; changes in marketing conditions and laws; the company’s inability to maintain or increase its advertising revenues; the company’s inability to enforce or defend its ownership and use of intellectual property; financial market risk resulting from fluctuations in foreign currency exchange rates, particularly the British Pound and Euro; 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 the floral industry; the company’s inability to retain key customers, vendors and personnel; 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 restructuring and other exit costs; changes in tax laws, the company’s business or other factors that would impact anticipated tax benefits; 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 (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 Year Ended
December 31, December 31,
  2011     2010     2011     2010  
 
Revenues:
Products $ 115,037 $ 109,817 $ 472,749 $ 434,035
Services   102,884     122,784     424,936     486,518  
Total revenues 217,921 232,601 897,685 920,553
Operating expenses:

Cost of revenues-products(a)

85,410 83,164 351,946 327,963

Cost of revenues-services(a)

23,505 26,000 92,538 101,688
Sales and marketing(a) 36,499 41,939 166,760 175,865
Technology and development(a) 11,892 13,052 51,068 55,381
General and administrative(a) 24,474 27,465 104,939 112,041
Amortization of intangible assets 7,541 7,812 30,455 32,110
Restructuring and other exit costs   4,926     1,754     5,677     2,815  
Total operating expenses   194,247     201,186     803,383     807,863  
 
Operating income 23,674 31,415 94,302 112,690
 
Interest income 396 414 1,536 1,673
Interest expense (3,511 ) (5,966 ) (23,075 ) (24,900 )
Other income, net   426     357     2,643     452  
 
Income before income taxes 20,985 26,220 75,406 89,915
Provision for income taxes   8,120     9,870     23,676     36,228  
Net income $ 12,865   $ 16,350   $ 51,730   $ 53,687  
Income allocated to participating securities   (392 )   (863 )   (1,993 )   (3,233 )
Net income attributable to common stockholders $ 12,473   $ 15,487   $ 49,737   $ 50,454  
 
Basic net income per common share $ 0.14   $ 0.18   $ 0.56   $ 0.58  
Shares used to calculate basic net income per common share   89,192     86,280     88,478     86,429  
Diluted net income per common share $ 0.14   $ 0.18   $ 0.56   $ 0.58  
Shares used to calculate diluted net income per common share   89,251     86,848     88,631     87,062  
 
Shares outstanding at end of period   89,423     86,745     89,423     86,745  
 
(a) Stock-based compensation was allocated as follows:
Cost of revenues-products $ 9 $ 4 $ 46 $ 41
Cost of revenues-services 71 76 354 502
Sales and marketing 562 778 2,329 3,957
Technology and development 465 559 2,159 3,109
General and administrative   2,592     4,713     12,325     19,434  
Total stock-based compensation $ 3,699   $ 6,130   $ 17,213   $ 27,043  
 
 

UNITED ONLINE, INC.
Unaudited Reconciliations of Non-GAAP Financial Measures
(in thousands)
                                 
Unaudited Reconciliation of Operating Income to Adjusted OIBDA(1)
 
Quarter Ended Year Ended
December 31, December 31,
  2011     2010     2011     2010  
 
 
Operating income $ 23,674 $ 31,415 $ 94,302 $ 112,690
Depreciation 6,736 6,244 25,854 26,412
Amortization of intangible assets   7,860     7,898     31,506     32,233  
Operating income before depreciation and amortization 38,270 45,557 151,662 171,335
Stock-based compensation 3,699 6,130 17,213 27,043
Restructuring and other exit costs 4,926 1,754 5,677 2,815
Litigation or dispute settlement charges 75 - 2,999 1,367
Transaction-related costs   -     -     -     1,989  
Adjusted OIBDA $ 46,970   $ 53,441   $ 177,551   $ 204,549  
 
Unaudited Reconciliation of Segment Income from Operations to Segment Adjusted OIBDA(1)
 
Quarter Ended Year Ended
December 31, December 31,
  2011     2010     2011     2010  
 
FTD:
Segment income from operations $ 19,879 $ 18,316 $ 78,660 $ 70,198
Stock-based compensation 983 770 3,878 3,193
Restructuring and other exit costs 876 422 876 1,574
Litigation or dispute settlement charges   75     -     75     400  
Segment adjusted OIBDA $ 21,813   $ 19,508   $ 83,489   $ 75,365  
 
Content & Media:
Segment income from operations $ 12,593 $ 15,820 $ 43,450 $ 56,618
Stock-based compensation 650 1,222 3,301 4,793
Restructuring and other exit costs (benefits) 1,616 - 1,616 (91 )
Litigation or dispute settlement charges   -     -     2,924     967  
Segment adjusted OIBDA $ 14,859   $ 17,042   $ 51,291   $ 62,287  
 
Communications:
Segment income from operations $ 14,084 $ 18,583 $ 61,196 $ 77,092
Stock-based compensation 601 1,326 2,493 6,773
Restructuring and other exit costs   648     1,332     1,399     1,332  
Segment adjusted OIBDA $ 15,333   $ 21,241   $ 65,088   $ 85,197  
 
Unallocated corporate expenses(a) $ (5,035 ) $ (4,350 ) $ (22,317 ) $ (18,300 )
 
Consolidated adjusted OIBDA $ 46,970   $ 53,441   $ 177,551   $ 204,549  
                                           
(a) Effective the first quarter of 2011, the company modified its segment reporting to separately report unallocated corporate expenses. Historically, such expenses were fully allocated to the company's reportable segments.
 
 

UNITED ONLINE, INC.
Unaudited Reconciliation of Net Income to Adjusted Net Income(2)
(in thousands, except per share amounts)
                                 
Quarter Ended Year Ended
December 31, December 31,
  2011     2010     2011     2010  
 
 
Net income $ 12,865 $ 16,350 $ 51,730 $ 53,687
Income allocated to participating securities   (392 )   (863 )   (1,993 )   (3,233 )
Net income attributable to common stockholders 12,473 15,487 49,737 50,454
 
Adjustments:
Stock-based compensation 3,699 6,130 17,213 27,043
Amortization of intangible assets 7,860 7,898 31,506 32,233
Restructuring and other exit costs 4,926 1,754 5,677 2,815
Litigation or dispute settlement charges 75 - 2,999 1,117
Transaction-related costs(a)   -     -     6,078     1,989  
29,033 31,269 113,210 115,651
 
Income tax effect of adjusting entries   (6,323 )   (4,786 )   (21,353 )   (19,659 )
Adjusted net income attributable to common stockholders $ 22,710   $ 26,483   $ 91,857   $ 95,992  
 
GAAP net income per common share:
Basic net income per common share $ 0.14   $ 0.18   $ 0.56   $ 0.58  
Shares used to calculate basic net income per common share   89,192     86,280     88,478     86,429  
Diluted net income per common share $ 0.14   $ 0.18   $ 0.56   $ 0.58  
Shares used to calculate diluted net income per common share   89,251     86,848     88,631     87,062  
 
Adjusted net income per common share:
Adjusted basic net income per common share $ 0.25   $ 0.31   $ 1.04   $ 1.11  
Shares used to calculate adjusted basic net income per common share   89,192     86,280     88,478     86,429  
Adjusted diluted net income per common share $ 0.25   $ 0.30   $ 1.03   $ 1.10  
Shares used to calculate adjusted diluted net income per common share   89,449     86,903     88,788     87,155  
                                           
(a) Includes a $6.1 million loss on extinguishment recorded in the quarter ended June 30, 2011 in connection with the refinancing of FTD's credit facilities and a $2.0 million charge recorded in the quarter ended March 31, 2010 related to a potential transaction that failed to consummate.
 
 

UNITED ONLINE, INC.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
                         
December 31, December 31,
2011             2010
 
ASSETS
Cash and cash equivalents $ 136,105 $ 100,264
Accounts receivable, net 43,177 49,797
Deferred tax assets, net 15,587 14,200
Property and equipment, net 62,460 63,893
Goodwill and intangible assets, net 693,279 722,184
Other assets   45,749   41,820
Total assets $ 996,357 $ 992,158
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 64,649 $ 71,659
Accrued liabilities 54,850 48,881
Member redemption liability 22,453 24,866
Deferred revenue 57,915 74,694
Debt, net of discounts 261,124 258,084
Deferred tax liabilities, net 44,098 42,677
Other liabilities   11,133   16,816
Total liabilities   516,222   537,677
 
Stockholders' equity 480,135 454,481
   
Total liabilities and stockholders' equity $ 996,357 $ 992,158
 
 

UNITED ONLINE, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
                               
Quarter Ended Year Ended
December 31, December 31,
  2011     2010     2011     2010  
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 12,865 $ 16,350 $ 51,730 $ 53,687
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and stock-based compensation 18,295 20,272 74,573 85,688
Provision for doubtful accounts receivable 1,014 1,379 2,808 5,449
Accretion of discounts and amortization of debt issue costs 203 1,109 1,484 4,446
Loss on extinguishment of debt - - 6,078 -
Deferred taxes and other 455 4,742 (503 ) 628
Tax shortfalls from equity awards (568 ) 131 (711 ) (390 )
Excess tax benefits from equity awards - (657 ) (265 ) (1,099 )
Change in operating assets and liabilities:
Accounts receivable (6,081 ) (6,128 ) 3,736 286
Other assets (8,003 ) (8,151 ) (3,100 ) (871 )
Accounts payable and accrued liabilities 26,063 20,422 (370 ) (82 )
Member redemption liability (344 ) 791 (2,412 ) (890 )
Deferred revenue (4,667 ) (345 ) (16,322 ) (1,969 )
Other liabilities   151     (1,533 )   (5,609 )   (1,080 )
Net cash provided by operating activities   39,383     48,382     111,117     143,803  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (5,341 ) (8,205 ) (24,552 ) (27,269 )
Purchases of rights, content and intellectual property (408 ) (2,517 ) (3,313 ) (4,722 )
Proceeds from sales of investments 403 - 403 -
Proceeds from sales of assets, net   -     16     221     235  
Net cash used for investing activities   (5,346 )   (10,706 )   (27,241 )   (31,756 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from term loan - - 261,325 -
Payments on term loans (662 ) (20,000 ) (265,950 ) (74,819 )
Payments for debt issue costs - - (778 ) -
Proceeds from exercises of stock options 4 1,444 37 1,698
Proceeds from employee stock purchase plans 1,558 1,828 3,907 4,440
Repurchases of common stock (764 ) (1,440 ) (7,743 ) (20,565 )
Dividends and dividend equivalents paid on outstanding shares and restricted stock units (9,267 ) (9,162 ) (37,213 ) (36,966 )
Excess tax benefits from equity awards   -     657     265     1,099  
Net cash used for financing activities   (9,131 )   (26,673 )   (46,150 )   (125,113 )
 
Effect of foreign currency exchange rate changes on cash and cash equivalents (1,643 ) (419 ) (1,885 ) (2,179 )
 
Change in cash and cash equivalents 23,263 10,584 35,841 (15,245 )
Cash and cash equivalents, beginning of period   112,842     89,680     100,264     115,509  
Cash and cash equivalents, end of period $ 136,105   $ 100,264   $ 136,105   $ 100,264  
 
 

UNITED ONLINE, INC.
Unaudited Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow(3)
(in thousands)
                               
 
Quarter Ended Year Ended
December 31, December 31,
  2011     2010     2011     2010  
 
 
Net cash provided by operating activities $ 39,383 $ 48,382 $ 111,117 $ 143,803
Adjustments:
Capital expenditures (5,341 ) (8,205 ) (24,552 ) (27,269 )
Excess tax benefits from equity awards - 657 265 1,099
Cash paid for restructuring and other exit costs 886 380 2,923 1,543
Cash paid for litigation or dispute settlement charges 320 - 247 1,102
Cash paid for transaction-related costs   -     -     -     1,994  
Free cash flow $ 35,248   $ 41,214   $ 90,000   $ 122,272  
 
 

UNITED ONLINE, INC.
Unaudited Segment Information
(in thousands)
                                 
Quarter Ended Year Ended
December 31, December 31,
  2011    

2010(a)

 

  2011    

2010(a)

 

 

FTD

Revenues:
Products $ 114,520 $ 109,817 $ 471,885 $ 434,035
Services 28,784 30,220 115,342 119,641
Advertising   -     137     22     900  
Total revenues 143,304 140,174 587,249 554,576
 
Operating expenses:
Cost of revenues 90,164 87,902 371,716 347,565
Sales and marketing 22,851 22,689 97,605 94,230
Technology and development 3,627 3,320 14,450 13,890
General and administrative 8,405 9,420 32,776 34,912
Amortization of intangible assets 6,275 6,280 25,188 26,008
Restructuring and other exit costs   876     422     876     1,574  
Total operating expenses   132,198     130,033     542,611     518,179  
 
Operating income 11,106 10,141 44,638 36,397
 
Depreciation 2,498 1,895 8,834 7,793
Amortization of intangible assets   6,275     6,280     25,188     26,008  
Segment income from operations 19,879 18,316 78,660 70,198
Stock-based compensation 983 770 3,878 3,193
Restructuring and other exit costs 876 422 876 1,574
Litigation or dispute settlement charges   75     -     75     400  
Segment adjusted OIBDA $ 21,813   $ 19,508   $ 83,489   $ 75,365  
 

Content & Media

Revenues:
Products $ 517 $ - $ 864 $ -
Services 28,388 33,687 123,992 134,055
Advertising   16,760     19,566     60,619     67,589  
Total revenues 45,665 53,253 185,475 201,644
 
Operating expenses:
Cost of revenues 11,058 12,075 38,765 41,563
Sales and marketing 11,867 15,331 59,913 63,047
Technology and development 5,474 6,245 25,113 24,695
General and administrative 6,217 6,542 28,351 26,864
Amortization of intangible assets 1,052 1,270 4,358 5,054
Restructuring and other exit costs (benefits)   1,616     -     1,616     (91 )
Total operating expenses   37,284     41,463     158,116     161,132  
 
Operating income 8,381 11,790 27,359 40,512
 
Depreciation 2,841 2,674 10,682 10,929
Amortization of intangible assets   1,371     1,356     5,409     5,177  
Segment income from operations 12,593 15,820 43,450 56,618
Stock-based compensation 650 1,222 3,301 4,793
Restructuring and other exit costs (benefits) 1,616 - 1,616 (91 )
Litigation or dispute settlement charges   -     -     2,924     967  
Segment adjusted OIBDA $ 14,859   $ 17,042   $ 51,291   $ 62,287  
 

Communications

Revenues:
Services $ 22,621 $ 30,163 $ 100,770 $ 135,342
Advertising   6,674     9,545     25,762     31,811  
Total revenues 29,295 39,708 126,532 167,153
 
Operating expenses:
Cost of revenues 7,825 9,426 34,637 41,185
Sales and marketing 1,992 4,214 10,179 20,746
Technology and development 2,791 3,487 11,505 16,796
General and administrative 3,301 4,244 13,818 17,204
Amortization of intangible assets 214 262 909 1,048
Restructuring and other exit costs   648     1,332     1,399     1,332  
Total operating expenses   16,771     22,965     72,447     98,311  
 
Operating income 12,524 16,743 54,085 68,842
 
Depreciation 1,346 1,578 6,202 7,202
Amortization of intangible assets   214     262     909     1,048  
Segment income from operations 14,084 18,583 61,196 77,092
Stock-based compensation 601 1,326 2,493 6,773
Restructuring and other exit costs   648     1,332     1,399     1,332  
Segment adjusted OIBDA $ 15,333   $ 21,241   $ 65,088   $ 85,197  
 
Total segment adjusted OIBDA $ 52,005   $ 57,791   $ 199,868   $ 222,849  
 
Reconciliation of segment revenues to consolidated revenues:
FTD $ 143,304 $ 140,174 $ 587,249 $ 554,576
Content & Media 45,665 53,253 185,475 201,644
Communications 29,295 39,708 126,532 167,153
Intersegment eliminations   (343 )   (534 )   (1,571 )   (2,820 )
Consolidated revenues $ 217,921   $ 232,601   $ 897,685   $ 920,553  
 
Reconciliation of segment operating expenses to consolidated operating expenses:
FTD $ 132,198 $ 130,033 $ 542,611 $ 518,179
Content & Media 37,284 41,463 158,116 161,132
Communications 16,771 22,965 72,447 98,311
Unallocated corporate expenses(a) 8,337 7,259 31,780 33,061
Intersegment eliminations   (343 )   (534 )   (1,571 )   (2,820 )
Consolidated operating expenses $ 194,247   $ 201,186   $ 803,383   $ 807,863  
 
Reconciliation of segment income from operations to consolidated operating income:
FTD $ 19,879 $ 18,316 $ 78,660 $ 70,198
Content & Media 12,593 15,820 43,450 56,618
Communications   14,084     18,583     61,196     77,092  
Total segment income from operations 46,556 52,719 183,306 203,908
Depreciation (6,736 ) (6,244 ) (25,854 ) (26,412 )
Amortization of intangible assets (7,860 ) (7,898 ) (31,506 ) (32,233 )
Unallocated corporate expenses, excluding depreciation(a)   (8,286 )   (7,162 )   (31,644 )   (32,573 )
Consolidated operating income $ 23,674   $ 31,415   $ 94,302   $ 112,690  
 
Reconciliation of segment adjusted OIBDA to consolidated adjusted OIBDA:
FTD adjusted OIBDA $ 21,813 $ 19,508 $ 83,489 $ 75,365
Content & Media adjusted OIBDA 14,859 17,042 51,291 62,287
Communications adjusted OIBDA   15,333     21,241     65,088     85,197  
Total segment adjusted OIBDA 52,005 57,791 199,868 222,849
Unallocated corporate expenses(a)   (5,035 )   (4,350 )   (22,317 )   (18,300 )
Consolidated adjusted OIBDA $ 46,970   $ 53,441   $ 177,551   $ 204,549  
                                           
(a) Effective the first quarter of 2011, the company modified its segment reporting to separately report unallocated corporate expenses. Historically, such expenses were fully allocated to the company's reportable segments.
 
 

UNITED ONLINE, INC.
Unaudited Selected Quarterly Historical Key Metrics (a)
                                         
 
December 31, September 30, June 30, March 31, December 31,
2011 2011 2011 2011 2010
 
Consolidated:
Revenues (in thousands) $ 217,921 $ 182,694 $ 255,565 $ 241,505 $ 232,601
 
FTD:
Segment revenues (in thousands) $ 143,304 $ 108,747 $ 176,299 $ 158,899 $ 140,174
% of consolidated revenues 66 % 60 % 69 % 66 % 60 %
 
Consumer orders(4) (in thousands) 1,615 1,104 2,167 1,742 1,612
Average order value(4) $ 62.31 $ 63.46 $ 60.45 $ 63.28 $ 60.43
Average foreign currency exchange rate: GBP to USD 1.57 1.61 1.63 1.61 1.58
 
Content & Media:
Segment revenues (in thousands) $ 45,665 $ 44,070 $ 47,427 $ 48,313 $ 53,253
% of consolidated revenues 21 % 24 % 19 % 20 % 23 %
 
Pay accounts(5) (in thousands) 3,484 3,780 4,007 4,260 4,499
Segment churn(7) 4.1 % 3.9 % 3.8 % 3.9 % 4.1 %
ARPU(6) $ 2.60 $ 2.64 $ 2.60 $ 2.47 $ 2.42
Segment active accounts(5) (in millions) 10.3 11.9 12.5 13.6 13.7
Currency exchange rate: EUR to USD 1.35 1.41 1.44 1.37 1.36
 
Communications:
Segment revenues (in thousands) $ 29,295 $ 30,260 $ 32,279 $ 34,698 $ 39,708
% of consolidated revenues 13 % 17 % 13 % 14 % 17 %
 
Pay accounts(5) (in thousands):
Access 535 577 622 675 732
Other   259     266     272     279     288  
Total Communications pay accounts   794     843     894     954     1,020  
 
Segment churn(7) 3.4 % 3.4 % 3.5 % 3.8 % 3.8 %
ARPU(6) $ 9.09 $ 9.14 $ 9.28 $ 9.33 $ 9.46
Segment active accounts(5) (in millions) 1.5 1.6 1.7 1.7 1.8
                                                     
(a) More information on the financial results for these quarters can be found in the company's filings with the Securities and Exchange Commission.

Source: United Online, Inc.

United Online, Inc.
Investors:
David Bigelow
818-287-3560
dbigelow@corp.untd.com
or
Press:
Scott Matulis
818-287-3388
pr@untd.com