Stock Quote

United Online Reports Third Quarter 2013 Results

United Online, Inc. (Nasdaq: UNTD), a leading provider of consumer products and services over the Internet, today reported financial results for its third quarter ended September 30, 2013.

“The tax-free spin off of FTD Companies from United Online at a distribution ratio of one share of FTD stock for every five shares of United Online, along with United Online’s 1-for-7 reverse stock split, are scheduled to take place before the market opens on Friday, November 1, 2013,” said Mark R. Goldston, Chairman, President and Chief Executive Officer. “As we have previously announced, the spin-off date will also be my last day with United Online, after leading the company for 15 years. I am grateful to United Online’s Board of Directors, employees and investors for their support over the years. Looking ahead, I believe both companies will be in good hands, as Francis Lobo, the incoming President and Chief Executive Officer of United Online, and FTD President Robert S. Apatoff, who will assume the additional role of Chief Executive Officer at FTD, will each have outstanding teams as they transition into their new roles.”

“Third quarter 2013 consolidated revenues of $174.7 million and adjusted OIBDA of $25.9 million were both at the high end of our guidance range,” Goldston added. “In its last full quarter before the spin off, FTD achieved year-over-year growth of 2% in segment revenues and 4% in segment adjusted OIBDA in what is seasonally FTD’s slowest quarter. Consumer orders increased 1% versus the year-ago quarter, and average order value, excluding the unfavorable impact of foreign currency exchange rates, increased 2%.”

“During the third quarter, the Content & Media and Communications segments each recorded their lowest average monthly churn in United Online’s history, at 2.9% and 2.7%, respectively,” said Neil P. Edwards, Executive Vice President and Chief Financial Officer. “Content & Media segment pay accounts declined by 30,000, our seventh consecutive quarterly improvement, compared to 66,000 in the second quarter of 2013 and 133,000 in the year-ago quarter. In our Communications segment, mobile broadband accounts increased to 44,000, compared to 41,000 at the end of the second quarter of 2013 and 19,000 at the end of the third quarter of 2012. As previously announced, following the spin off, the company’s Board of Directors anticipates declaring a quarterly cash dividend of $0.15 per share of common stock, which reflects the planned 1-for-7 reverse stock split.”

“In the third quarter, the company recorded an estimated $50.2 million goodwill impairment charge due to a material decline in the fair value of our Classmates reporting unit, consisting of our domestic and international online nostalgia services,” Edwards added. “This was a non-cash charge, which did not impact adjusted OIBDA, cash flows from operating activities or free cash flow.”

Summary Results for Third Quarter Ended September 30, 2013:

The following table summarizes key financial results for the third quarter ended September 30, 2013:

(in millions, except per share amounts and percentages)

Financial Highlights

Q3 2013Q3 2012% Change
FTD revenues $ 118.5 $ 116.4 2 %
Content & Media revenues 32.2 36.6 (12 %)
Communications revenues 24.4 25.2 (3 %)
Intersegment eliminations (0.4 ) (0.4 ) (8 %)
Consolidated revenues$174.7$177.8(2%)
GAAP operating income (loss)$(42.1)$8.4*
Adjusted OIBDA(1)$25.9$26.8(3%)
GAAP net income (loss) attributable to common stockholders$(47.6)$5.1*
GAAP diluted net income (loss) per common share$(0.51)$0.06*
Adjusted net income attributable to common stockholders(2)$11.6$12.5(7%)
Adjusted diluted net income per common share(2)$0.12$0.14(14%)

*Not meaningful

  • Revenues were $174.7 million, a 2% decrease compared to the year-ago quarter.
  • GAAP operating loss was $42.1 million, which included an estimated $50.2 million goodwill impairment charge due to a material decline in the fair value of the Classmates reporting unit. This was compared to GAAP operating income of $8.4 million in the year-ago quarter.
  • Adjusted OIBDA was $25.9 million, a decrease of 3% versus the year-ago quarter.
  • Interest expense was $4.1 million, which included a $2.3 million loss on extinguishment of debt in connection with the refinancing of FTD’s credit facilities.
  • GAAP diluted net loss per common share was $0.51, which was negatively impacted by an estimated $50.2 million goodwill impairment charge. This was compared to GAAP diluted net income per share of $0.06 in the year-ago quarter.
  • Adjusted diluted net income per common share was $0.12 versus $0.14 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 September 30, 2013 were $10.7 million and $8.6 million, respectively, versus $10.6 million and $7.9 million, respectively, in the year-ago quarter.
  • Cash and cash equivalents at September 30, 2013 were $100.8 million, compared to $122.4 million at June 30, 2013. During the quarter, FTD refinanced its credit facilities and used $19 million of its existing cash to repay in full its previously-outstanding credit facilities and pay fees and expenses related to the refinancing.
  • Net debt at September 30, 2013 was $119.2 million, compared to $111.0 million at June 30, 2013. The company defines net debt as total debt, net of discounts, less cash and cash equivalents.
  • The company paid $9.7 million in cash dividends during the quarter.
  • Following the spin off, the company’s Board of Directors anticipates declaring a cash dividend of $0.15 per share of common stock, which reflects the planned 1-for-7 reverse stock split.

Segment Results for Third Quarter Ended September 30, 2013:

FTD:

(in millions, except percentages and metrics)

Financial Highlights

Q3 2013Q3 2012% Change
Products revenues $ 88.6 $ 85.8 3 %
Services revenues 29.9 30.6 (2 %)
Segment revenues$118.5$116.42%
Segment income from operations $ 11.5 $ 14.2 (19 %)
Segment adjusted OIBDA(1)$15.8$15.24%
as a % of segment revenues(1)13.4%13.1%

Metrics Highlights

Q3 2013Q3 2012% Change
Consumer orders(4) (in thousands) 1,250 1,239 1 %
Average order value(4) $ 61.69 $ 61.06 1 %
British Pound / U.S. Dollar exchange rate (average) 1.55 1.58 (2 %)

  • Segment revenues were $118.5 million, an increase of 2% versus the year-ago quarter.
  • Segment income from operations was $11.5 million, a decrease of 19% versus the year-ago quarter.
  • Segment adjusted OIBDA was $15.8 million, an increase of 4% versus the year-ago quarter.
  • Consumer orders were 1.2 million, up 1% versus the year-ago quarter.
  • Average order value (“AOV”) was $61.69, an increase of 1% versus the year-ago quarter. Excluding the unfavorable impact of foreign currency exchange rates, AOV increased 2% versus the year-ago quarter.

Content & Media:

(in millions, except percentages and metrics)

Financial Highlights

Q3 2013Q3 2012% Change
Products revenues $ 0.8 $ 1.1 (24 %)
Services revenues 20.5 23.0 (11 %)
Advertising revenues 10.9 12.4 (12 %)
Segment revenues$32.2$36.6(12%)
Segment income (loss) from operations $ (41.3 ) $ 8.0 *
Segment adjusted OIBDA(1)$6.9$7.3(5%)
as a % of segment revenues(1)21.5%19.9%

Metrics Highlights

Q3 2013Q3 2012% Change
Segment pay accounts(5) (in thousands) 2,690 2,987 (10 %)
Net quarterly decline in segment pay accounts(5) (in thousands) (30 ) (133 ) 77 %
Segment active accounts(5) (in millions) 10.3 10.9 (6 %)
ARPU(6) $ 2.52 $ 2.50 1 %
Euro / U.S. Dollar Exchange Rate (average) 1.33 1.25 6 %

*Not meaningful

  • Segment revenues were $32.2 million, a decrease of 12% versus the year-ago quarter. Excluding the favorable impact of foreign currency exchange rates, segment revenues decreased 13% versus the year-ago quarter.
  • Segment loss from operations was $41.3 million, which included an estimated $50.2 million goodwill impairment charge due to a material decline in the fair value of the Classmates reporting unit. This was compared to segment income from operations of $8.0 million in the year-ago quarter.
  • Segment adjusted OIBDA was $6.9 million, a decrease of 5% versus the year-ago quarter. Excluding the favorable impact of foreign currency exchange rates, segment adjusted OIBDA decreased 8% versus the year-ago quarter.
  • Segment pay accounts at September 30, 2013 were 2.7 million, a decrease of 10% versus September 30, 2012.
  • Segment ARPU was $2.52, an increase of 1% versus the year-ago quarter. Excluding the favorable impact of foreign currency exchange rates, segment ARPU decreased 1% versus the year ago quarter.

Communications:

(in millions, except percentages and metrics)

Financial Highlights

Q3 2013Q3 2012% Change

Products revenues

$

0.8

$

0.7

13

%

Services revenues

16.7

18.9

(12

%)

Advertising revenues 6.9 5.6 22 %
Segment revenues$24.4$25.2(3%)
Segment income from operations $ 8.1 $ 8.8 (7 %)
Segment adjusted OIBDA(1)$8.6$9.3(7%)
as a % of segment revenues(1)35.3%36.9%

Metrics Highlights

Q3 2013Q3 2012% Change
Segment pay accounts(5) (in thousands) 573 675 (15 %)
ARPU(6) $ 9.41 $ 8.97 5 %
  • Segment revenues were $24.4 million, a decrease of 3% versus the year-ago quarter.
  • Segment income from operations was $8.1 million, a decrease of 7% versus the year-ago quarter.
  • Segment adjusted OIBDA was $8.6 million, a decrease of 7% versus the year-ago quarter. The investment in the NetZero Mobile Broadband service resulted in a negative adjusted OIBDA impact of $1.9 million during the third quarter of 2013, compared to a negative adjusted OIBDA impact of $2.7 million in the year-ago quarter.
  • Segment pay accounts at September 30, 2013 were 0.6 million, a decrease of 15% versus September 30, 2012.
  • Segment ARPU was $9.41, an increase of 5% versus the year-ago quarter.

Unallocated Corporate Expenses:

For the quarter ended September 30, 2013, the impact of unallocated corporate expenses on consolidated adjusted OIBDA was $5.5 million, a 9% increase compared to the year-ago quarter.

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.

United Online’s fourth quarter 2013 guidance does not include guidance for FTD. United Online anticipates that its fourth quarter 2013 results of operations will include one month of FTD, which will be reported as discontinued operations. United Online’s fourth quarter 2013 guidance reflects the planned 1-for-7 reverse stock split.

United Online, Inc. Fourth Quarter 2013 Guidance:

United Online, Inc. Fourth Quarter 2013 (in millions)Guidance
Revenues $58.5–$61.5
Adjusted OIBDA(1) $10.0–$13.0
United Online, Inc. Fourth Quarter 2013 Supplemental Information (in millions)Guidance
Shares used to calculate diluted net income per common share 13.3
Shares used to calculate adjusted diluted net income per common share(2) 13.4

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

United Online, Inc. Fourth Quarter 2013 (in millions)Guidance
Operating Loss ($7.8)–($4.8)
Depreciation $3.2
Amortization of intangible assets $1.7
Stock-based compensation $4.5
Transaction-related costs $8.4
Adjusted OIBDA(1) $10.0–$13.0

Investor Conference Call on October 30, 2013 at 5:00 pm ET (2:00 pm PT):

The company will host a conference call to discuss the results at 5:00 pm ET (2:00 pm PT) on Wednesday, October 30, 2013. The conference call dial-in number is 888-430-8691 for U.S. and Canadian participants and 719-457-2628 for participants outside the U.S. and Canada. The passcode is 5975665. Alternatively, a live webcast of the conference call, along with a presentation containing financial highlights for the third quarter ended September 30, 2013, is accessible within the Investor Relations section of the company’s website at www.unitedonline.com.

The presentation and a replay of the broadcast will be available on the company’s website for seven days following the call. A replay of the broadcast will also be available for seven days following the call by dialing 888-203-1112 (or 719-457-0820 outside of the U.S. and Canada) and the replay passcode, 5975665.

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, dispositions, spin offs, financing transactions, and other strategic transactions, including, without limitation, (i) compensation expenses and (ii) expenses for advisors and representatives such as investment bankers, consultants, attorneys, and accounting firms. Transaction-related costs may also include, without limitation, 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 website 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 website and various telephone numbers. The number of consumer orders is not adjusted for non-delivered orders that are refunded after the scheduled delivery date. 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. For orders placed outside the U.S. (principally in the U.K. and the Republic of Ireland), this average U.S. Dollar amount is determined after translating the local currency amounts received into U.S. Dollars. Average order value includes merchandise revenues and shipping, handling 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, with the exception of our free NetZero Mobile Broadband service, 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. In addition, 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, such as the subscribers receiving our free NetZero Mobile Broadband service, 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 our domestic or international online nostalgia websites (excluding schoolFeed and 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 dial-up Internet access and email accounts that logged on to our 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) Our average monthly churn rate 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. Our average monthly churn percentage may fluctuate from period to period due to our mix of subscription terms, which affects the timing of subscription expirations, and other factors. We make certain normalizing adjustments to the calculation of our churn percentage for periods in which we add a significant number of pay accounts due to acquisitions. For our Communications segment pay accounts, we do not include in our churn calculation accounts canceled during the first 30 days of service, other than dial-up accounts that have upgraded from free accounts. A number of such accounts nevertheless will be included in our account totals at any given measurement date. Subscribers who cancel one pay service but subscribe to another pay service are not necessarily considered to have canceled a pay account depending on the services and, as such, our segment churn rates are not necessarily indicative of the percentage of subscribers canceling any particular service.

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 100 million registered accounts worldwide. The company's FTD segment provides floral-related products and services (FTD, Interflora, Flying Flowers, and Flowers Direct) 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 (Classmates and StayFriends) and online loyalty marketing (MyPoints). Its primary Communications segment service is Internet access (NetZero and Juno), including NetZero Mobile Broadband (NetZero Wireless).

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 the planned spin off of the FTD segment; the planned reverse stock split; changes to senior management; future financial performance; revenues; operating expenses; operating income; capital expenditures; depreciation and amortization; stock-based compensation; and transaction-related costs. Potential factors that could cause actual results to differ materially from those in the forward-looking statements include, among others: the effects of the planned spin off or other transactions on our businesses; the effect of competition; the company’s inability to maintain or increase its advertising revenues; risks associated with the integration or commercialization of new businesses, products, services, applications or features or the success of new business models; the severity and duration of current economic conditions; the company’s inability to maintain or increase the number of free and pay accounts, visitors to its websites, and members; risks associated with litigation and governmental regulations or investigations, including reviews of business practices such as marketing, billing, renewal, and post-transaction sales practices; problems associated with the company’s operations, systems or technologies; changes in marketing conditions and laws; the write down, reserve against or impairment of assets including receivables, goodwill, intangible assets or other assets; 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 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; the company’s inability to retain key customers, vendors and personnel; changes in tax laws, the company’s business or other factors that would impact anticipated tax benefits or the tax treatment of the planned spin off transaction; 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 September 30,Nine Months Ended September 30,
2013201220132012
Revenues:
Products $ 90,249 $ 87,544 $ 376,202 $ 363,956
Services 84,464 90,207 267,644 287,944
Total revenues 174,713 177,751 643,846 651,900
Operating expenses:

Cost of revenues-products(a)

69,809 67,892 289,317 279,726

Cost of revenues-services(a)

19,581 21,483 63,738 66,192
Sales and marketing(a) 34,224 37,012 121,730 130,571
Technology and development(a) 11,481 11,859 36,406 35,363
General and administrative(a) 24,091 24,663 74,486 72,199
Amortization of intangible assets 7,082 7,813 22,586 22,659
Acquisition-related contingent consideration - (1,387 ) (5,124 ) (1,387 )
Restructuring and other exit costs 276 - 2,503 14
Impairment of goodwill, intangible assets and long-lived assets 50,221 - 50,221 -
Total operating expenses 216,765 169,335 655,863 605,337
Operating income (loss) (42,052 ) 8,416 (12,017 ) 46,563
Interest income 240 511 619 962
Interest expense (4,067 ) (3,260 ) (10,450 ) (10,301 )
Other income (expense), net (38 ) (3 ) 550 768
Income (loss) before income taxes (45,917 ) 5,664 (21,298 ) 37,992
Provision for income taxes 1,315 217 9,563 12,512
Net income (loss) $ (47,232 ) $ 5,447 $ (30,861 ) $ 25,480
Income allocated to participating securities (379 ) (344 ) (1,015 ) (895 )
Net income (loss) attributable to common stockholders $ (47,611 ) $ 5,103 $ (31,876 ) $ 24,585
Basic net income (loss) per common share $ (0.51 ) $ 0.06 $ (0.35 ) $ 0.27
Shares used to calculate basic net income (loss) per common share 92,764 90,657 92,247 90,311
Diluted net income (loss) per common share $ (0.51 ) $ 0.06 $ (0.35 ) $ 0.27
Shares used to calculate diluted net income (loss) per common share 92,764 90,735 92,247 90,379
Shares outstanding at end of period 92,920 90,676 92,920 90,676
(a) Stock-based compensation was allocated as follows:
Cost of revenues-products $ 6 $ 19 $ 27 $ 25
Cost of revenues-services 36 67 118 192
Sales and marketing 650 639 1,908 1,781
Technology and development 362 403 1,088 1,198
General and administrative 2,099 2,302 6,159 6,721
Total stock-based compensation $ 3,153 $ 3,430 $ 9,300 $ 9,917

UNITED ONLINE, INC.
Unaudited Reconciliation of Operating Income (Loss) to Adjusted OIBDA(1)
(in thousands)
Quarter Ended September 30,Nine Months Ended September 30,
2013201220132012
Operating income (loss) $ (42,052 ) $ 8,416 $ (12,017 ) $ 46,563
Depreciation 5,313 6,464 17,625 19,559
Amortization of intangible assets 7,334 8,185 25,444 23,817
Operating income (loss) before depreciation and amortization (29,405 ) 23,065 31,052 89,939
Stock-based compensation 3,153 3,430 9,300 9,917
Restructuring and other exit costs 276 - 2,503 14
Litigation or dispute settlement charges (2,838 ) (193 ) (1,960 ) (589 )
Transaction-related costs 4,470 452 2,484 1,790
Impairment of goodwill, intangible assets and long-lived assets 50,221 - 50,221 -
Adjusted OIBDA $ 25,877 $ 26,754 $ 93,600 $ 101,071
UNITED ONLINE, INC.
Unaudited Reconciliation of Segment Income (Loss) from Operations to Segment Adjusted OIBDA(1)
(in thousands)
Quarter Ended September 30,Nine Months Ended September 30,
2013201220132012
FTD:
Segment income from operations $ 11,455 $ 14,190 $ 59,394 $ 60,931
Stock-based compensation 1,039 1,216 2,942 3,350
Litigation or dispute settlement charges - (193 ) 578 (193 )
Transaction-related costs 3,349 19 4,722 619
Segment adjusted OIBDA $ 15,843 $ 15,232 $ 67,636 $ 64,707
Content & Media:
Segment income (loss) from operations $ (41,293 ) $ 8,002 $ (29,719 ) $ 21,933
Stock-based compensation 554 580 1,858 1,723
Restructuring and other exit costs 276 - 2,503 (91 )
Litigation or dispute settlement charges (2,838 ) - (2,538 ) (396 )
Transaction-related costs - (1,305 ) (5,108 ) (567 )
Impairment of goodwill, intangible assets and long-lived assets 50,221 - 50,221 -
Segment adjusted OIBDA $ 6,920 $ 7,277 $ 17,217 $ 22,602
Communications:
Segment income from operations $ 8,118 $ 8,770 $ 23,036 $ 27,701
Stock-based compensation 486 529 1,437 1,615
Restructuring and other exit costs - - - (8 )
Segment adjusted OIBDA $ 8,604 $ 9,299 $ 24,473 $ 29,308
Unallocated corporate expenses $ (5,490 ) $ (5,054 ) $ (15,726 ) $ (15,546 )
Consolidated adjusted OIBDA $ 25,877 $ 26,754 $ 93,600 $ 101,071

UNITED ONLINE, INC.

Unaudited Reconciliation of Net Income (Loss) to Adjusted Net Income(2)

(in thousands, except per share amounts)
Quarter Ended September 30,Nine Months Ended September 30,
2013201220132012
Net income (loss) $ (47,232 ) $ 5,447 $ (30,861 ) $ 25,480
Income allocated to participating securities (379 ) (344 ) (1,015 ) (895 )
Net income (loss) attributable to common stockholders (47,611 ) 5,103 (31,876 ) 24,585
Adjustments:
Stock-based compensation 3,153 3,430 9,300 9,917
Amortization of intangible assets 7,334 8,185 25,444 23,817
Restructuring and other exit costs 276 - 2,503 14
Litigation or dispute settlement charges (2,838 ) (193 ) (1,960 ) (589 )
Transaction-related costs 4,470 452 2,484 1,790
Impairment of goodwill, intangible assets and long-lived assets 50,221 - 50,221 -
15,005 16,977 56,116 59,534
Income tax effect of adjusting entries (3,435 ) (4,474 ) (13,873 ) (11,866 )
Adjusted net income attributable to common stockholders $ 11,570 $ 12,503 $ 42,243 $ 47,668
GAAP net income (loss) per common share:
Basic net income (loss) per common share $ (0.51 ) $ 0.06 $ (0.35 ) $ 0.27
Shares used to calculate basic net income (loss) per common share 92,764 90,657 92,247 90,311
Diluted net income (loss) per common share $ (0.51 ) $ 0.06 $ (0.35 ) $ 0.27
Shares used to calculate diluted net income (loss) per common share 92,764 90,735 92,247 90,379
Adjusted net income per common share:
Adjusted basic net income per common share $ 0.12 $ 0.14 $ 0.46 $ 0.53
Shares used to calculate adjusted basic net income per common share 92,764 90,657 92,247 90,311
Adjusted diluted net income per common share $ 0.12 $ 0.14 $ 0.45 $ 0.53
Shares used to calculate adjusted diluted net income per common share 93,580 90,952 92,843 90,608

UNITED ONLINE, INC.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
September 30,

2013

December 31,

2012

ASSETS
Cash and cash equivalents $ 100,787 $ 136,444
Accounts receivable, net 41,407 43,721
Inventories 14,280 16,116
Deferred tax assets, net 18,404 12,279
Property and equipment, net 53,077 57,877
Goodwill and intangible assets, net 598,104 668,479
Other assets 30,869 28,503
Total assets $ 856,928 $ 963,419
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 54,855 $ 80,543
Accrued liabilities 49,561 45,253
Member redemption liability 20,996 22,575
Deferred revenue 47,909 49,581
Debt, net of discounts 220,000 244,000
Deferred tax liabilities, net 24,025 31,896
Other liabilities 9,295 14,485
Total liabilities 426,641 488,333
Stockholders' equity 430,287 475,086
Total liabilities and stockholders' equity $ 856,928 $ 963,419

UNITED ONLINE, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Quarter Ended September 30,Nine Months Ended September 30,
2013201220132012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (47,232 ) $ 5,447 $ (30,861 ) $ 25,480
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and stock-based compensation 15,800 18,079 52,369 53,293
Provision for doubtful accounts receivable 548 524 1,536 1,646
Acquisition-related contingent consideration - (1,387 ) (5,124 ) (1,387 )
Accretion of discounts and amortization of debt issue costs 191 188 664 822
Loss on extinguishment of debt 2,348 - 2,348 -
Impairment of goodwill, intangible assets and long-lived assets 50,221 - 50,221 -
Deferred taxes and other, net (10,796 ) 657 (14,092 ) (2,505 )
Tax benefits (shortfalls) from equity awards 146 99 633 (153 )
Excess tax benefits from equity awards (63 ) (1 ) (334 ) (14 )
Change in operating assets and liabilities (excluding the effects of acquisitions):
Accounts receivable, net (5,079 ) (4,577 ) 756 1,311
Inventories (1,538 ) (1,721 ) 2,202 (4,078 )
Other assets (1,185 ) (1,725 ) 1,355 5,190
Accounts payable and accrued liabilities 8,381 1,748 (17,888 ) (22,810 )
Member redemption liability (684 ) (8 ) (1,579 ) (853 )
Deferred revenue (866 ) (2,807 ) (1,933 ) (6,738 )
Other liabilities 483 (3,911 ) (501 ) (5,751 )
Net cash provided by operating activities 10,675 10,605 39,772 43,453
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (4,327 ) (4,771 ) (14,244 ) (13,218 )
Purchases of rights, content and intellectual property (317 ) (586 ) (919 ) (1,726 )
Purchases of investments (110 ) (31 ) (143 ) (96 )
Proceeds from sales of investments 2 70 212 444
Cash paid for acquisitions, net of cash acquired - - - (11,355 )
Net cash used for investing activities (4,752 ) (5,318 ) (15,094 ) (25,951 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from term loan 220,000 - 220,000 -
Payments on term loan (235,156 ) - (246,013 ) (17,663 )
Payments for debt issue costs (2,924 ) - (2,924 ) -
Proceeds from exercises of stock options 2,709 - 2,709 5
Proceeds from employee stock purchase plans - - 1,699 1,793
Repurchases of common stock (15 ) (117 ) (3,357 ) (2,261 )
Dividends and dividend equivalents paid on outstanding shares and restricted stock units (9,684 ) (9,417 ) (28,773 ) (28,087 )
Excess tax benefits from equity awards 63 1 334 14
Cash paid for contingent consideration (3,437 ) - (3,437 ) -
Net cash used for financing activities (28,444 ) (9,533 ) (59,762 ) (46,199 )
Effect of foreign currency exchange rate changes on cash and cash equivalents 885 950 (573 ) 732
Change in cash and cash equivalents (21,636 ) (3,296 ) (35,657 ) (27,965 )
Cash and cash equivalents, beginning of period 122,423 111,436 136,444 136,105
Cash and cash equivalents, end of period $ 100,787 $ 108,140 $ 100,787 $ 108,140

UNITED ONLINE, INC.
Unaudited Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow(3)
(in thousands)
Quarter Ended September 30,Nine Months Ended September 30,
2013201220132012
Net cash provided by operating activities $ 10,675 $ 10,605 $ 39,772 $ 43,453
Adjustments:
Capital expenditures (4,327 ) (4,771 ) (14,244 ) (13,218 )
Excess tax benefits from equity awards 63 1 334 14
Cash paid for restructuring and other exit costs 496 527 2,100 3,948
Cash paid for litigation or dispute settlement charges 739 656 1,569 764
Cash paid for transaction-related costs 975 836 3,961 1,636
Free cash flow $ 8,621 $ 7,854 $ 33,492 $ 36,597

UNITED ONLINE, INC.
Unaudited Segment Information
(in thousands)
Quarter Ended September 30,Nine Months Ended September 30,
2013201220132012

FTD

Revenues:
Products $ 88,633 $ 85,753 $ 370,980 $ 359,151
Services 29,894 30,609 102,109 101,185
Total revenues 118,527 116,362 473,089 460,336
Operating expenses:
Cost of revenues 72,470 71,153 297,947 290,795
Sales and marketing 21,185 21,181 79,195 78,588
Technology and development 3,868 3,710 11,817 11,198
General and administrative 11,751 8,641 31,364 26,306
Amortization of intangible assets 5,721 6,431 18,524 19,092
Total operating expenses 114,995 111,116 438,847 425,979
Operating income 3,532 5,246 34,242 34,357
Depreciation 2,202 2,513 6,628 7,482
Amortization of intangible assets 5,721 6,431 18,524 19,092
Segment income from operations 11,455 14,190 59,394 60,931
Stock-based compensation 1,039 1,216 2,942 3,350
Litigation or dispute settlement charges - (193 ) 578 (193 )
Transaction-related costs 3,349 19 4,722 619
Segment adjusted OIBDA $ 15,843 $ 15,232 $ 67,636 $ 64,707

Content & Media

Revenues:
Products $ 838 $ 1,105 $ 2,492 $ 2,886
Services 20,501 23,033 62,256 72,886
Advertising and other 10,894 12,418 33,230 38,215
Total revenues 32,233 36,556 97,978 113,987
Operating expenses:
Cost of revenues 8,570 10,231 29,628 30,912
Sales and marketing 9,729 11,813 31,275 39,074
Technology and development 5,104 5,793 17,287 16,488
General and administrative 2,100 5,186 12,884 16,419
Amortization of intangible assets 1,361 1,382 4,062 3,567
Acquisition-related contingent consideration - (1,387 ) (5,124 ) (1,387 )
Restructuring and other exit costs 276 - 2,503 (91 )
Impairment of goodwill, intangible assets and long-lived assets 50,221 - 50,221 -
Total operating expenses 77,361 33,018 142,736 104,982
Operating income (loss) (45,128 ) 3,538 (44,758 ) 9,005
Depreciation 2,222 2,710 8,119 8,203
Amortization of intangible assets 1,613 1,754 6,920 4,725
Segment income (loss) from operations (41,293 ) 8,002 (29,719 ) 21,933
Stock-based compensation 554 580 1,858 1,723
Restructuring and other exit costs 276 - 2,503 (91 )
Litigation or dispute settlement charges (2,838 ) - (2,538 ) (396 )
Transaction-related costs - (1,305 ) (5,108 ) (567 )
Impairment of goodwill, intangible assets and long-lived assets 50,221 - 50,221 -
Segment adjusted OIBDA $ 6,920 $ 7,277 $ 17,217 $ 22,602

Communications

Revenues:
Products $ 778 $ 686 $ 2,730 $ 1,919
Services 16,706 18,882 51,861 59,895
Advertising 6,870 5,635 19,338 16,959
Total revenues 24,354 25,203 73,929 78,773
Operating expenses:
Cost of revenues 8,419 8,079 25,741 24,585
Sales and marketing 3,642 4,300 12,149 13,731
Technology and development 2,509 2,356 7,302 7,677
General and administrative 2,467 2,880 8,346 8,779
Restructuring and other exit costs - - - (8 )
Total operating expenses 17,037 17,615 53,538 54,764
Operating income 7,317 7,588 20,391 24,009
Depreciation 801 1,182 2,645 3,692
Segment income from operations 8,118 8,770 23,036 27,701
Stock-based compensation 486 529 1,437 1,615
Restructuring and other exit costs - - - (8 )
Segment adjusted OIBDA $ 8,604 $ 9,299 $ 24,473 $ 29,308
Total segment adjusted OIBDA $ 31,367 $ 31,808 $ 109,326 $ 116,617
Reconciliation of segment revenues to consolidated revenues:
FTD $ 118,527 $ 116,362 $ 473,089 $ 460,336
Content & Media 32,233 36,556 97,978 113,987
Communications 24,354 25,203 73,929 78,773
Intersegment eliminations (401 ) (370 ) (1,150 ) (1,196 )
Consolidated revenues $ 174,713 $ 177,751 $ 643,846 $ 651,900
Reconciliation of segment operating expenses to consolidated operating expenses:
FTD $ 114,995 $ 111,116 $ 438,847 $ 425,979
Content & Media 77,361 33,018 142,736 104,982
Communications 17,037 17,615 53,538 54,764
Unallocated corporate expenses 7,773 7,956 21,892 20,808
Intersegment eliminations (401 ) (370 ) (1,150 ) (1,196 )
Consolidated operating expenses $ 216,765 $ 169,335 $ 655,863 $ 605,337
Reconciliation of segment income (loss) from operations to consolidated operating income:
FTD $ 11,455 $ 14,190 $ 59,394 $ 60,931
Content & Media (41,293 ) 8,002 (29,719 ) 21,933
Communications 8,118 8,770 23,036 27,701
Total segment income (loss) from operations (21,720 ) 30,962 52,711 110,565
Depreciation (5,313 ) (6,464 ) (17,625 ) (19,559 )
Amortization of intangible assets (7,334 ) (8,185 ) (25,444 ) (23,817 )
Unallocated corporate expenses, excluding depreciation (7,685 ) (7,897 ) (21,659 ) (20,626 )
Consolidated operating income (loss) $ (42,052 ) $ 8,416 $ (12,017 ) $ 46,563
Reconciliation of segment adjusted OIBDA to consolidated adjusted OIBDA:
FTD adjusted OIBDA $ 15,843 $ 15,232 $ 67,636 $ 64,707
Content & Media adjusted OIBDA 6,920 7,277 17,217 22,602
Communications adjusted OIBDA 8,604 9,299 24,473 29,308
Total segment adjusted OIBDA 31,367 31,808 109,326 116,617
Unallocated corporate expenses (5,490 ) (5,054 ) (15,726 ) (15,546 )
Consolidated adjusted OIBDA $ 25,877 $ 26,754 $ 93,600 $ 101,071

UNITED ONLINE, INC.

Unaudited Selected Quarterly Historical Key Metrics(a)

September 30,

2013

June 30,

2013

March 31,

2013

December 31,

2012

September 30,

2012

Consolidated:
Revenues (in thousands) $ 174,713 $ 221,749 $ 247,384 $ 218,983 $ 177,751
FTD:
Segment revenues (in thousands) $ 118,527 $ 164,279 $ 190,283 $ 153,178 $ 116,362
% of consolidated revenues 68 % 74 % 77 % 70 % 65 %
Consumer orders(4) (in thousands) 1,250 1,921 2,204 1,787 1,239
Average order value(4) $ 61.69 $ 61.27 $ 61.01 $ 60.13 $ 61.06
Average foreign currency exchange rate: GBP to USD 1.55 1.54 1.54 1.61 1.58
Content & Media:
Segment revenues (in thousands) $ 32,233 $ 32,919 $ 32,826 $ 39,509 $ 36,556
% of consolidated revenues 18 % 15 % 13 % 18 % 21 %
Pay accounts(5) (in thousands) 2,690 2,720 2,786 2,864 2,987
Segment churn(7) 2.9 % 3.1 % 3.3 % 3.5 % 3.4 %
ARPU(6) $ 2.52 $ 2.48 $ 2.48 $ 2.52 $ 2.50
Segment active accounts(5) (in millions) 10.3 10.5 11.4 11.5 10.9
Currency exchange rate: EUR to USD 1.33 1.31 1.32 1.30 1.25
Communications:
Segment revenues (in thousands) $ 24,354 $ 24,935 $ 24,640 $ 26,669 $ 25,203
% of consolidated revenues 14 % 11 % 10 % 12 % 14 %
Pay accounts(5) (in thousands):
Internet access 360 378 404 421 440
Other 213 217 222 229 235
Total Communications pay accounts 573 595 626 650 675
Segment churn(7) 2.7 % 3.0 % 3.0 % 2.9 % 3.1 %
ARPU(6) $ 9.41 $ 9.34 $ 9.21 $ 9.05 $ 8.97

Segment active accounts(5) (in millions)

1.2 1.2 1.3 1.3 1.4

(a)

More information on the financial results for these quarters can be found in the company's filings with the Securities and Exchange Commission.

Contacts:

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

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