United Online Reports Record Fourth-Quarter and Fiscal 2003 Results

Fourth-Quarter Revenues Grow 46% Over Prior-Year Quarter; Pay Subscribers Grow by 142,000 During Quarter to 2.55 Million


Conference Call Transcript

WESTLAKE VILLAGE, Calif., July 31, 2003 (PRIMEZONE) -- United Online, Inc. (Nasdaq:UNTD), a leading provider of value-priced Internet services, today reported results for its fourth quarter and fiscal year ended June 30, 2003.



 Summary of June 2003 Quarter Results:

 - Total revenues for the quarter were a record $79.6 million, up 46%
   versus $54.4 million for the year-ago quarter.
 - Total pay subscribers increased by a net 142,000 during the
   quarter, reaching a record 2.55 million at June 30, 2003.  Total
   active users(1), including users of the company's free services,
   totaled 5.2 million at June 30, 2003. 
 - Approximately 8% of the 2.55 million total pay subscribers at June
   30, 2003 were subscribers to the company's recently launched
   accelerated dial-up services - NetZero HiSpeed and Juno SpeedBand.
 - Operating income for the quarter was $10.2 million, or 12.8% of
   revenues, versus an operating loss of ($3.7) million in the year-
   ago quarter.
 - Adjusted operating income before depreciation and amortization(2)
   for the quarter was $16.2 million, or 20.3% of revenues, an
   increase of 129% versus adjusted operating income before
   depreciation and amortization of $7.1 million, or 13.0% of
   revenues, in the year-ago quarter.
 - Net income for the quarter was $14.6 million, or $0.32 per share,
   which included a tax benefit of $4.3 million, or $0.10 per share,
   related to the recognition of a portion of the company's deferred
   tax assets.(3)  Excluding this benefit, net income for the June
   2003 quarter was a record $10.3 million, or $0.23 per share, versus
   a net loss of ($2.7) million, or ($0.07) per share, for the year-
   ago quarter.  
 - Adjusted net income(4) for the quarter was a record $14.2 million,
   or $0.31 per share, versus adjusted net income of $4.1 million, or
   $0.09 per share, for the year-ago quarter.  Adjusted net income is
   calculated in a manner consistent with the analyst consensus
   estimate as reported by First Call.
 - Cash flows from operations were $19.6 million for the quarter,
   versus $12.6 million for the year-ago quarter.
 - Free cash flow(5) for the quarter was $18.2 million, versus $12.2
   million for the year-ago quarter.

 Summary of Fiscal-Year 2003 Results:

 - Total revenues for fiscal 2003 were a record $277.3 million, up 66%
   versus $167.5 million for fiscal 2002.
 - Pay subscribers increased by 840,000, or 49%, during fiscal year
   2003.
 - Operating income for fiscal 2003 was $21.7 million, or 7.8% of
   revenues, versus an operating loss of ($53.9) million for fiscal
   2002.
 - Adjusted operating income before depreciation and amortization(2)
   for fiscal 2003 was $50.2 million, or 18.1% of revenues, versus an
   adjusted operating loss before depreciation and amortization of
   ($9.9) million for fiscal 2002.
 - Net income for fiscal year 2003 was $27.8 million, or $0.62 per
   share, which included a tax benefit of $4.3 million, or $0.10 per
   share, related to the company's deferred tax assets.(3)  Excluding
   this benefit, net income for fiscal 2003 was $23.5 million, or
   $0.52 per share, versus a net loss of ($47.8) million, or ($1.35)
   per share, for fiscal 2002.
 - Adjusted net income(4) for fiscal 2003, excluding the
   aforementioned tax benefit, was $40.6 million, or $0.91 per share,
   calculated in a manner consistent with the analyst consensus
   estimate as reported by First Call.  This compares to an adjusted
   net loss of ($23.1) million, or ($0.65) per share, for fiscal 2002.
 - Cash flows from operations was $65.1 million for fiscal 2003,
   versus a negative ($4.6) million for fiscal 2002.
 - Free cash flow(5) for fiscal 2003 was $61.1 million, versus a
   negative ($2.4) million for fiscal 2002. 

"We are very pleased to report another outstanding quarter across the board, highlighted by surpassing a milestone of 200,000 NetZero HiSpeed and Juno SpeedBand subscribers by quarter end," said Mark R. Goldston, chairman, CEO and president of United Online. "We are also proud to have surpassed 2.5 million pay subscribers in our first full year as a profitable company. Our 49% pay subscriber growth in the past year demonstrates that consumers want quality Internet services from recognized brands, but they also demand the best value. We believe that three major areas of focus - quality, brand and value - have been the key drivers of our business and will continue to deliver growth for United Online as the Internet access market evolves."

"Generating over $61 million of free cash flow in fiscal 2003 is a tremendous achievement and a testament to the focus and operational excellence delivered by all 461 United Online employees worldwide," said Charles S. Hilliard, executive vice president and CFO of United Online. "Key financial metrics for our June 2003 quarter, which include over $700,000 in annualized revenue per average employee and a billable services margin exceeding 68 percent, demonstrate that we continue to make significant progress in meeting our financial objectives. Given these results and the successful launch of our accelerated dial-up services, we are revising our financial guidance upward for fiscal 2004."Additional Highlights of the June 2003 Quarter:

- Billable services revenues were $72.4 million in the June 2003 quarter, or 91% of total revenues, an increase of 51% versus $47.9 million, or 88% of total revenues, for the June 2002 quarter.

- Billable services margin(6) was 68.2% for the June 2003 quarter, up from 57.0% for the June 2002 quarter.

- Annualized revenue per average employee(7) was $701,000 for the June 2003 quarter, up 37% versus $512,000 for the year-ago quarter.

- Cash balances at June 30, 2003 quarter were $193.0 million, including cash, cash equivalents, short-term investments and restricted cash.

- The company repurchased 187,000 shares of its common stock at an aggregate cost of $3.8 million during the June 2003 quarter. Since inception of the common stock repurchase program in March 2001, the company has repurchased 1.5 million shares of its common stock at an aggregate cost of $11.3 million. On July 29, 2003, the company's Board of Directors extended its stock repurchase program through July 31, 2004, and increased the plan limit to $100 million.

- In April 2003, the company launched its accelerated dial-up Internet access services that deliver Web surfing speeds up to five-times faster than traditional dial-up Internet access from any phone jack. Marketed as NetZero HiSpeed and Juno SpeedBand, these services are offered at $14.95 per month.

Business Outlook:

The following forward-looking information includes certain projections made by management as of the date of this release. United Online does not intend to revise or update this information and may not provide this type of information in the future. Due to a variety of factors, actual results may differ significantly from those projected. Factors include, without limitation, the factors referenced later in this announcement under the caption "Cautionary Information Regarding Forward-Looking Statements." These and other factors are discussed in more detail in the company's filings with the Securities and Exchange Commission.

Following is the company's current guidance for the September 2003 quarter and the fiscal year ending June 30, 2004 (in millions):



                            Current         Current        Previous
                        Sep 2003 Q est.   FY 2004 est.   FY 2004 est.
                         -------------   -------------  --------------
 Operating income before                
  depreciation and
  amortization(2)        $16.5 - $17.5   $74.0 - $79.0   $68.0 - $73.0
   Depreciation                    1.6             6.6             6.6
   Amortization                    4.0            15.9            15.9
                         -------------   -------------  --------------
 Operating income        $10.9 - $11.9   $51.5 - $56.5   $45.5 - $50.5
                         =============   =============  ==============
 Weighted average
  diluted shares          45.8 - 46.3     46.5 - 48.0     46.0 - 48.0

 - Total revenues for the September 2003 quarter are estimated to be
   between $83 million and $85 million.
 - Billable services margin(6) in the September 2003 quarter is
   projected to be approximately equal to the 68.2% margin achieved in
   the June 2003 quarter.
 - The effective tax rate for fiscal 2004 financial reporting purposes
   is expected to increase to approximately 40.5%.  Given the
   company's tax net operating loss carryforwards, actual cash taxes
   paid for fiscal 2004 are estimated to be significantly less than
   the income tax expense reported on the company's financial
   statements. 
 - The company estimates that pay subscribers will increase to between
   2.9 million and 3.1 million by June 30, 2004. 

(1) Active users are defined as all free users that logged on to our services at least once during the preceding 31 days, together with all subscribers to a billable service.

(2) Adjusted operating income (loss) before depreciation and amortization is defined as operating income before depreciation, amortization, stock-based charges and restructuring and merger-related costs. Management believes that because operating income (loss) before depreciation and amortization and adjusted operating income (loss) before depreciation and amortization exclude certain items that either do not impact the company's cash flows or which management believes are not reflective of the company's core operating results over time, these measures provide investors with additional useful information to measure the company's performance, particularly with respect to changes in performance from period to period, and to assess the company's ability to make capital expenditures, fund working capital requirements, incur and repay indebtedness, and fund strategic initiatives. Management also uses operating income (loss) before depreciation and amortization and adjusted operating income (loss) before depreciation and amortization for these purposes, as well as to allocate resources in managing the company's business. Operating income (loss) before depreciation and amortization and adjusted operating income (loss) before depreciation and amortization are not determined in accordance with generally accepted accounting principles (GAAP) and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. Reconciliations to the most directly comparable GAAP financial measure are provided in the tables that follow this text.

(3) The company has potential future tax benefits, or deferred tax assets, associated with historical net operating losses that, because they were fully reserved by a valuation allowance, were not previously reported on its balance sheet. In the June 2003 quarter, the company released a portion of the valuation allowance, which has resulted in (i) the recognition of a portion of its net deferred tax assets on its balance sheet at June 30, 2003, (ii) the recording of a tax benefit on its income statement in the June 2003 quarter, and (iii) an increase in its estimated effective tax rate in fiscal 2004 to approximately 40.5%. It is reasonably possible that the company will release all, or a portion, of the remaining valuation allowance in the near term. Any such release would result in recording a tax benefit that would increase net income in the period the allowance was released. Neither the tax benefit from the current release, or any future release, nor the increase in the estimated effective tax rate in fiscal 2004 have impacted, or will impact, the amount of cash paid for income taxes.

(4) Adjusted net income (loss) is defined as net income (loss) before the after-tax effect of amortization of intangible assets, stock-based charges, restructuring and merger-related costs, other income, and in the June 2003 quarter the tax benefit related to the recognition of a portion of the company's deferred tax assets. Management believes that adjusted net income (loss) provides investors with additional useful information to measure the company's financial performance, particularly from period to period, exclusive of certain non-cash expenses and other items which management believes are not reflective of the company's core operating results over time. Management also uses adjusted net income (loss) for these purposes. Adjusted net income (loss) is not determined in accordance with generally accepted accounting principles (GAAP) and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. Reconciliations to the most directly comparable GAAP financial measure are provided in the tables that follow this text.

(5) Free cash flow is defined as net cash provided by (used for) operating activities before cash paid for restructuring and merger-related costs, less capital expenditures. 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 excludes the cash impact of items which management believes are not reflective of the company's core operating results over time. This measure is used by management, and may also be useful for investors, to assess the company's ability to generate cash flow for a variety of strategic opportunities, including reinvestment in the business, effecting potential acquisitions, strengthening the balance sheet, and effecting share repurchases. Free cash flow is not determined in accordance with generally accepted accounting principles (GAAP) and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. Reconciliations to the most directly comparable GAAP financial measure are provided in the tables that follow this text.

(6) Billable services margin represents billable services revenues less cost of billable services divided by billable services revenues.

(7) Annualized revenue per average employee represents annualized total revenues for the period divided by the average number of employees during that period.

About United Online

United Online, Inc. (Nasdaq:UNTD) is a leading provider of value-priced Internet services through its NetZero, Juno and BlueLight Internet consumer brands. The company's standard services are offered at less than half the standard monthly prices of its major competitors and are available in more than 6,500 cities across the United States and in Canada. At June 30, 2003, United Online had approximately 461 employees worldwide. The company is headquartered in Westlake Village, CA, with offices in New York City, San Francisco and Hyderabad, India. For more information about United Online and its Internet access services, please visit www.untd.com.

United Online will be hosting a conference call today at 8:00AM PDT (11:00AM EDT) to discuss its quarterly results. A live Web cast of the call can be accessed on the Investors section of the company's Web site at www.untd.com. A recording of the call will be available on the site for seven days.

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. Statements containing words such as "guidance," "may," "believe," "will," "expect," "project" and "estimate" or similar expressions constitute forward-looking statements. These statements include, without limitation, guidance for future financial performance; growth in billable subscribers; weighted average diluted shares; depreciation and amortization; and future tax rates and benefits. Actual results may differ materially from those predicted and reported results should not be considered an indication of future performance. Potential risks and uncertainties include, among others: the effect of competition, including adoption of broadband services and changes in pricing by our competitors; the company's inability to retain its existing subscribers; and the rate at which new subscribers sign up for the company's services; changes in the projected number of weighted average diluted shares due to stock issuances, stock repurchases, fluctuations in the company's stock price or other factors; changes in the projected amortization and depreciation figures due to capital spending or other factors; unanticipated usage by subscribers, additional telecommunications costs or other factors negatively impacting our billable services margin; changes in our free user base; the company's inability to realize the benefits of its deferred tax assets; the company's inability to maintain its agreements with telecommunications providers on attractive terms; problems associated with the company's billing systems; the company's inability to retain key customers and key personnel; unanticipated technological problems or developments; risks associated with litigation; and unanticipated governmental regulation. More information about potential factors that could affect the company's business and financial results is included in the company's annual and quarterly reports filed with the Securities and Exchange Commission (http://www.sec.gov), including without limitation information under the captions "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors."



                         UNITED ONLINE, INC.
                Condensed Consolidated Balance Sheets

                                       June 30, 2003   June 30, 2002
                                       -------------   -------------
 ASSETS
 Cash, cash equivalents and
  short-term investments                  $192,228        $139,355
 Restricted cash                               811           6,185
 Accounts receivable, net                   12,420           7,977
 Deferred tax assets, net                    8,056              --
 Property and equipment, net                11,535          16,500
 Goodwill and intangible assets, net        49,595          58,119
 Other assets                                6,031           5,457
                                          --------        --------
   Total assets                           $280,676        $233,593
                                          ========        ========
 LIABILITIES AND STOCKHOLDERS' EQUITY 
  Accounts payable                        $ 23,041        $ 21,575
  Accrued liabilities                       17,073          11,212
  Deferred revenue                          23,616          18,815
  Capital leases                                34           3,205
                                          --------        --------
   Total liabilities                        63,764          54,807
                                          --------        --------

  Stockholders' equity                     216,912         178,786
                                          --------        --------
   Total liabilities and
    stockholders' equity                  $280,676        $233,593
                                          ========        ========


                         UNITED ONLINE, INC.
           Condensed Consolidated Statements of Operations
               (in thousands, except per share amounts)

                             Three Months Ended    Fiscal Year Ended
                                   June 30,             June 30,
                              -----------------   -------------------
                                2003     2002       2003       2002
                                 (unaudited)
                              -------   -------   --------   --------
 Revenues:
  Billable services           $72,412   $47,888   $247,790   $141,005
  Advertising and commerce      7,196     6,561     29,505     26,510
                              -------   -------   --------   --------
    Total revenues             79,608    54,449    277,295    167,515

 Operating expenses:
  Cost of billable
   services                    23,011    20,612     89,293     74,227
  Cost of free services         2,572     4,365     12,603     33,129
  Sales and marketing          26,470    14,644     86,623     40,220
  Product development           5,429     6,320     23,054     24,779
  General and
   administrative               7,939     6,433     27,805     30,722
  Restructuring charges            --     1,113       (215)     4,228
  Amortization of
   intangible assets            3,964     4,685     16,411     14,156
                              -------   -------   --------   --------
   Total operating
    expenses                   69,385    58,172    255,574    221,461
                              -------   -------   --------   --------

 Operating income (loss)       10,223    (3,723)    21,721    (53,946)

  Interest income, net          1,124     1,044      4,290      5,070
  Other income, net                --        --         --      1,066
                              -------   -------   --------   --------

 Income (loss) before
  income taxes                 11,347    (2,679)    26,011    (47,810)

  Provision (benefit) for
   income taxes                (3,247)       --     (1,781)        --

                              -------   -------   --------   --------
 Net income (loss)            $14,594   $(2,679)  $ 27,792   $(47,810)
                              =======   =======   ========   ========

 Basic net income (loss)
  per share                   $  0.35   $ (0.07)  $   0.68   $  (1.35)
                              =======   =======   ========   ========
 Diluted net income (loss)
  per share                   $  0.32   $ (0.07)  $   0.62   $  (1.35)
                              =======   =======   ========   ========

 Shares used to calculate
  basic income (loss)
  per share                    41,944    39,738     41,125     35,539
                              =======   =======   ========   ========
 Shares used to calculate
  diluted income (loss)
  per share                    45,551    39,738     44,716     35,539
                              =======   =======   ========   ========
 Shares outstanding at
  end of period                42,473    40,567     42,473     40,567
                              =======   =======   ========   ========



                          UNITED ONLINE, INC
             Condensed Consolidated Cash Flow Statements
                            (in thousands)
   
                             Three Months Ended    Fiscal Year Ended 
                                  June 30,              June 30,
                             ------------------   -------------------
                              2003       2002       2003       2002
                                (unaudited)
                             -------   --------   --------   --------
 CASH FLOWS FROM OPERATING
 ACTIVITIES:

 Net income (loss)           $14,594   $ (2,679)  $ 27,792   $(47,810)
 Adjustments to reconcile
 net income (loss) to net
 cash provided by (used
 for) operating activities:
  Depreciation, amortization
   and stock-based charges     5,932      9,392     27,667     38,832
  Deferred taxes and other    (3,020)       802     (2,006)       373
  Change in operating
   assets and liabilities
   (excluding the effects
   of acquisitions):
    Restricted cash               --        223      5,374      9,592
    Accounts receivable         (490)       582     (2,832)     3,730
    Other assets               1,514      3,885     (1,324)     6,948
    Accounts payable and
     accrued liabilities       1,323     (2,943)     6,678    (20,103)
    Deferred revenue            (286)     3,351      3,757      3,885
                             -------   --------   --------   --------
     Net cash provided by
     (used for) operating
     activities               19,567     12,613     65,106     (4,553)
                             -------   --------   --------   --------

 CASH FLOWS FROM INVESTING
 ACTIVITIES:

 Purchases of short-term
  investments                 (5,079)   (50,439)   (45,522)   (97,026)
 Proceeds from maturities
  of short-term investments    8,400      9,735     38,600     58,491
 Purchases of property
  and equipment               (1,326)      (594)    (5,983)    (1,465)
 Proceeds from sale of
  cost-basis investment          750         --        750         --
 Cash paid for acquisitions,
  net of cash acquired            --         --     (8,388)    32,496
 Purchases of patent rights       --         --         --        (18)
 Proceeds from sales
  of assets                       --       (351)        --      1,011
                             -------   --------   --------   --------
   Net cash provided by
    (used for) investing
    activities                 2,745    (41,649)   (20,543)    (6,511)
                             -------   --------   --------   --------

 CASH FLOWS FROM FINANCING
 ACTIVITIES:

 Payments on notes payable
  and capital leases             (64)    (1,247)    (2,968)    (7,340)
 Repayments of notes
  receivable                   1,587          6      1,653          6
 Proceeds from employee
  stock purchase plan          1,019        405      1,862        516
 Common stock repurchases     (3,797)       (50)    (7,777)    (3,592)
 Proceeds from exercises
  of stock options             3,018      1,699      6,962      2,930
                             -------   --------   --------   --------
   Net cash provided by
    (used for) financing
    activities                 1,763        813       (268)    (7,480)
                             -------   --------   --------   --------
 Change in cash and cash
  equivalents                 24,075    (28,223)    44,295    (18,544)
 Cash and cash equivalents,
  beginning of period         61,763     69,766     41,543     60,087
                             -------   --------   --------   --------
 Cash and cash equivalents,
  end of period              $85,838   $ 41,543   $ 85,838   $ 41,543
                             =======   ========   ========   ========



                          UNITED ONLINE, INC.
    Reconciliation of Net Income (Loss) to Adjusted Net Income(4)
                 (in thousands, except per-share data)


                    Three Months Ended        Three Months Ended
                       June 30, 2003             June 30, 2002
              ---------------------------- ---------------------------
                        Adjust-                     Adjust-       
              Reported   ments    Adjusted Reported   ments   Adjusted
               -------  -------    ------- -------  -------    -------
 Revenues:
  Billable
   services    $72,412  $    --    $72,412 $47,888  $    --    $47,888
  Advertising
   and
   commerce      7,196       --      7,196   6,561       --      6,561
               -------  -------    ------- -------  -------    -------
   Total
    revenues    79,608       --     79,608  54,449       --     54,449

 Operating
 expenses:
  Cost of bill-
   able
   services     23,011       (1)(a) 23,010  20,612      (41)(a) 20,571
  Cost of free
   services      2,572       --      2,572   4,365       --      4,365
  Sales and
   marketing    26,470       (3)(a) 26,467  14,644      (39)(a) 14,605
  Product
   development   5,429       (1)(a)  5,428   6,320     (814)(a)  5,506
  General and
   admini-
   strative      7,939       (9)(a)  7,930   6,433      (47)(a)  6,386
  Restructuring
   charges          --       --         --   1,113   (1,113)(b)     --
  Amortization
   of
   intangible
   assets        3,964   (3,964)(c)     --   4,685   (4,685)(c)     --
               -------  -------    ------- -------  -------    -------
   Total
   operating
    expenses    69,385   (3,978)    65,407  58,172   (6,739)    51,433
               -------  -------    ------- -------  -------    -------

 Operating
  income
  (loss)        10,223    3,978     14,201  (3,723)   6,739      3,016

   Interest
   income,
    net          1,124       --      1,124   1,044       --      1,044
               -------  -------    ------- -------  -------    -------

 Income (loss)
  before
  income
  taxes         11,347    3,978     15,325  (2,679)   6,739      4,060

   Provision
    (benefit)
    for income
    taxes       (3,247)   4,384(d)   1,137      --       --         --
               -------  -------    ------- -------  -------    -------
 Net income
  (loss)       $14,594  $  (406)   $14,188 $(2,679) $ 6,739    $ 4,060
               =======  =======    ======= =======  =======    =======

 Basic net
  income (loss)
  per share    $  0.35             $  0.34 $ (0.07)            $  0.10
               =======             ======= =======             =======
 Diluted net
  income (loss)
  per share    $  0.32             $  0.31 $ (0.07)            $  0.09
               =======             ======= =======             =======
 Shares used to
 calculate basic
 income (loss)
 per share      41,944              41,944  39,738              39,738
               =======             ======= =======             =======
 Shares used to
 calculate
 diluted
 income (loss)
 per share      45,551              45,551  39,738              45,030
               =======             ======= =======             =======
 Shares
  outstanding
  at end of
  period        42,473              42,473  40,567              40,567
               =======             ======= =======             =======
 -------------------------------------------------------

 (a) Elimination of stock-based charges of $14 in 2003 and stock-based
     charges and merger-related charges of $656 and $285 in 2002.

 (b) Elimination of restructuring charges.

 (c) Elimination of amortization of intangible assets.

 (d) Elimination of benefit recognized for deferred tax assets and
     income tax effect of adjusting entries.



                         UNITED ONLINE, INC.
 Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss)(4)
                (in thousands, except per-share data)

                   Fiscal Year Ended           Fiscal Year Ended 
                     June 30, 2003               June 30, 2002
             ---------------------------- ---------------------------
                       Adjust-                     Adjust-   
             Reported   ments    Adjusted Reported  ments    Adjusted
             --------  -------   -------- -------- --------  ---------
 Revenues:
  Billable
   services  $247,790  $    --   $247,790 $141,005 $     --  $141,005
  Advertising
   and
   commerce    29,505       --     29,505   26,510       --    26,510
             --------  -------   -------- -------- --------  ---------
   Total
    revenues  277,295       --    277,295  167,515       --   167,515
 Operating
 expenses:
  Cost of
   billable
   services    89,293     (118)(a) 89,175   74,227    (193)(a) 74,034
  Cost of free
   services    12,603       --     12,603   33,129     (72)(a) 33,057
  Sales and
   marketing   86,623     (113)(a) 86,510   40,220    (659)(a) 39,561
  Product
   development 23,054     (623)(a) 22,431   24,779  (2,360)(a) 22,419
  General and
   adminis-
   trative     27,805     (280)(a) 27,525   30,722  (4,149)(a) 26,573
  Restructuring
   charges       (215)     215(b)      --    4,228  (4,228)(b)     --
  Amortization
   of
   intangible
   assets      16,411  (16,411)(c)     --   14,156 (14,156)(c)     --
             --------  -------    ------- --------  ------    -------
   Total
   operating
   expenses   255,574  (17,330)   238,244  221,461 (25,817)   195,644
             --------  -------    ------- --------  ------    -------
 Operating
  income
  (loss)       21,721   17,330     39,051  (53,946) 25,817    (28,129)

   Interest
    income,
    net         4,290       --      4,290    5,070      --      5,070
  Other income,
   net             --       --         --    1,066  (1,066)(e)     --
             --------  -------    ------- --------  ------    -------
 Income (loss)
  before
  income
  taxes        26,011   17,330     43,341  (47,810)  24,751   (23,059)
 Provision
  (benefit)
  for income
  taxes        (1,781)   4,524(d)   2,743       --      --         --
             --------  -------    ------- --------  ------    -------
 Net income
  (loss)     $ 27,792  $12,806   $ 40,598 $(47,810) $24,751  $(23,059)
             ========  ========  ======== ======== ========  =========
 Basic net
  income
  (loss) per
  share      $   0.68            $   0.99 $  (1.35)          $  (0.65)
             ========            ======== ========           =========
 Diluted net
  income
  (loss) per
  share      $   0.62            $   0.91 $  (1.35)          $  (0.65)
             ========            ======== ========           =========
 Shares used
  to calculate
  basic income
  (loss) per
  share        41,125              41,125   35,539             35,539
             ========            ======== ========           =========
 Shares used
  to calculate
  diluted
  income
  (loss) per
  share        44,716              44,716   35,539             35,539
             ========            ======== ========           =========
 Shares
  outstanding
  at end of
  period       42,473              42,473   40,567             40,567
             ========            ======== ========           =========

 --------------------------
 (a) Elimination of stock-based charges of $107 and $6,417 and
     merger-related charges of $1,027 and $1,016, in 2003 and 2002,
     respectively.

 (b) Elimination of restructuring charges.

 (c) Elimination of amortization of intangible assets.

 (d) Elimination of benefit recognized for deferred tax assets and
     income tax effect of adjusting entries.

 (e) Elimination of other income, net.



                         UNITED ONLINE, INC.
              Reconciliation of Non-GAAP Financial Data
                            (in thousands)

                              Three Months Ended   Fiscal Year Ended
                                   June 30,             June 30,
                              ------------------   ------------------
                                2003      2002       2003      2002
                              --------  --------   --------  --------
 Adjusted Operating Income
  (Loss) Before Depreciation
  and Amortization(2)

 Operating income (loss)      $ 10,223  $ (3,723)  $ 21,721  $(53,946)
  Depreciation                   1,954     4,051     11,149    18,259
  Amortization                   3,964     4,685     16,411    14,156
                              --------  --------   --------  --------
 Operating income (loss)
  before depreciation
  and amortization              16,141     5,013     49,281   (21,531)
                              --------  --------   --------  --------
  Stock-based charges               14       656        107     6,417
  Restructuring and merger-
   related charges(a)               --     1,398        812     5,244
                              --------  --------   --------  --------
 Adjusted operating income
  (loss) before depreciation
  and amortization            $ 16,155  $  7,067   $ 50,200  $ (9,870)
                              ========  ========   ========  ========


                              Three Months Ended   Fiscal Year Ended
                                   June 30,             June 30,
                              ------------------   ------------------
                                2003      2002       2003      2002
                              --------  --------   --------  --------
 Free Cash Flow(5):                   
 Net cash provided by (used
  for) operating activities   $ 19,567  $ 12,613   $ 65,106  $ (4,553)
 Add (deduct):
  Cash paid for restructuring
   and merger-related
   charges(a)                       --       224      1,959     3,651
  Capital expenditures          (1,326)     (594)    (5,983)   (1,465)
                              --------  --------   --------  --------
 Free cash flow               $ 18,241  $ 12,243   $ 61,082  $ (2,367)
                              ========  ========   ========  ========
 -----------------------------

 (a) Represents restructuring and merger-related costs incurred in
     connection with the merger of Juno and NetZero and the
     acquisition of certain assets of BlueLight.com. These costs are
     primarily attributable to stay bonuses, contract termination
     fees, write-off of leasehold improvements and employee severance
     payments.


                         UNITED ONLINE, INC.
        Selected Historical Financial Data and Key Metrics (a)
               (in thousands, except per share amounts,
                 number of employees and where noted)


                     Jun. 30,  Mar. 31,  Dec. 31,  Sep. 30,  Jun. 30,
                       2003      2003      2002      2002      2002  
                      -------   -------   -------   -------   -------
 Total revenues       $79,608   $73,819   $65,800   $58,068   $54,449
 Net income (loss)    $14,594   $ 6,962   $ 4,711   $ 1,525   $(2,679)
 Net income (loss)
  per diluted share   $  0.32   $  0.15   $  0.11   $  0.03   $ (0.07)
 Billable subscribers   2,547     2,405     2,176     1,848     1,707
 Active users
  (in millions)(1)        5.2       5.2       5.0       4.8       4.8
 Number of employees
  at end of period        461       447       444       420       420
 Annualized revenue
  per average
  employee(7)         $   701   $   663   $   609   $   553   $   512

 --------------------------

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


            

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