United Online Reports Fourth-Quarter and Fiscal 2003 Results

Fourth-Quarter Revenues Grow 47% Over Prior-Year Quarter; Pay Subscribers Grow by 172,000 During Quarter to 2.9 Million; Accelerated Dial-Up Subscriptions Grow by 226,000 During Quarter to 638,000


Conference Call Transcript

WESTLAKE VILLAGE, Calif., Feb. 4, 2004 (PRIMEZONE) -- United Online, Inc. (Nasdaq:UNTD), the nation's leading provider of value-priced Internet access services, today reported results for its fourth quarter and fiscal year ended December 31, 2003. The company recently changed its fiscal year end from June 30 to December 31.

Summary of December 2003 Quarter Results:



 -- Total revenues for the quarter were a record $96.9 million, up
    47% versus $65.8 million for the year-ago quarter.
 -- Total pay subscribers(1) increased by a net 172,000 during the 
    quarter, reaching a record 2.9 million at December 31, 2003.  
    Total active users(1), including users of the company's free 
    services, totaled 5.3 million at December 31, 2003.
 -- Approximately 22% of total pay subscribers at December 31, 2003 
    also subscribed to one or more of the company's add-on services,
    including accelerated dial-up and premium email services.  Revenue
    Generating Units(2) (RGUs) grew by a net 403,000, including 
    226,000 accelerated dial-up subscriptions during the quarter, 
    reaching 3.5 million at December 31, 2003.  RGUs include total 
    pay subscribers and add-on subscription services.
 -- Operating income for the quarter was a record $18.9 million, or
    19.5% of revenues, more than a four-fold increase versus operating
    income of $4.2 million, or 6.3% of revenues, in the year-ago quarter.
 -- Operating income before depreciation and amortization (or "OIBDA")(3)
    for the quarter was a record $24.4 million, or 25.2% of revenues, an
    increase of 114% versus adjusted OIBDA(3) of $11.4 million, or 17.3%
    of revenues, in the year-ago quarter.
 -- Net income for the quarter was $24.4 million, or $0.35 per share,
    which included a tax benefit of $12.3 million, or $0.18 per share,
    related to the recognition of a portion of the company's deferred
    tax assets.(4)  Excluding this benefit, net income for the
    December 2003 quarter increased 158% to a record $12.1 million,
    or $0.18 per share, versus $4.7 million, or $0.07 per share, for the
    year-ago quarter.
 -- Adjusted net income(5) for the quarter, excluding the aforementioned
    tax benefit, was a record $14.5 million, or $0.21 per share, an
    increase of 65% versus adjusted net income of $8.8 million, or $0.13
    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.
 -- The year-to-year comparability of net income and adjusted net income,
    excluding the aforementioned tax benefit, was impacted by an effective
    tax rate of approximately 40% in the December 2003 quarter versus
    approximately 10% in the year-ago quarter.(4)
 -- Cash flows from operations were a record $29.0 million for the 
    quarter, versus $21.3 million for the year-ago quarter.
 -- Free cash flow(6) for the quarter was a record $25.5 million, versus
    $19.2 million for the year-ago quarter.

 Summary of Results for the Year Ended December 31, 2003:

 -- Total revenues for 2003 were a record $339.2 million, up 48% versus
    $229.2 million for the prior year.
 -- Pay subscribers(1) grew by a record 716,000, or 33%, 
    during 2003. 
 -- RGUs(2) increased by 1.36 million, or 62%, during 2003. 
 -- Operating income for 2003 was a record $49.5 million versus an
    operating loss of ($7.3) million for the prior year.
 -- Adjusted OIBDA(3) for 2003 was a record $73.5 million, or 21.7% of
    revenues, an increase of 131% versus adjusted OIBDA of $31.9 
    million, or 13.9% of revenues, for 2002.
 -- Net income for 2003 was $54.9 million, or $0.80 per share, which
    included a tax benefit of $16.6 million, or $0.24 per share, related
    to the recognition of a portion of the company's deferred tax
    assets.(4)  Excluding this benefit, net income for 2003 was a record
    $38.3 million, or $0.56 per share, versus a net loss of ($3.7) 
    million, or ($0.06) per share, for the prior year.
 -- Adjusted net income(5) for 2003, excluding the aforementioned tax
    benefit, was a record $51.1 million, or $0.74 per share, an increase
    of 156% versus adjusted net income of $19.9 million, or $0.30 per
    share, for 2002.  Adjusted net income is calculated in a manner
    consistent with the analyst consensus estimate as reported by First
    Call.
 -- The year-to-year comparability of net income and adjusted net income, 
    excluding the aforementioned tax benefit, was impacted by an 
    effective tax rate of approximately 30% in 2003 versus a negligible 
    tax rate in the prior year.(4) 
 -- Cash flows from operations were a record $83.5 million for 2003, an
    83% increase versus $45.7 million for the prior year.
 -- Free cash flow(6) for 2003 was a record $77.0 million, up 79% versus
    $42.9 million for 2002.

"The past year has been one of exceptional growth and success for United Online, ending 2003 with another quarter of strong pay subscriber gains, record new accelerated dial-up subscriptions and record profitability," said Mark R. Goldston, chairman, CEO and president of United Online. "We achieved many impressive milestones in 2003, including growing our accelerated dial-up services to 638,000 pay subscriptions in just over nine months, expanding our billable services margin to over 73% in the fourth quarter, and generating $77 million of free cash flow for the year. As we enter 2004, we are very excited about the long-term prospects for United Online and the value-priced Internet access segment that we dominate."

"United Online's financial results this quarter reflect outstanding performance across our entire business," said Charles S. Hilliard, executive vice president and CFO of United Online. "The powerful combination of pay subscriber and add-on subscription growth drove strong billable services revenues, while advertising revenues benefited from an improving online market and the implementation of our new search agreement. We are pleased to introduce our 2004 business outlook which, at its midpoint, anticipates more than 40% growth in adjusted OIBDA, reflecting our confidence in the continued growth opportunities for United Online."

Additional Highlights of the December 2003 Quarter:



 -- Billable services revenues were a record $88.0 million in the 
    December 2003 quarter, or 91% of total revenues, an increase of 
    51% versus $58.1 million, or 88% of total revenues, for the December
    2002 quarter.
 -- Billable services margin(7) was a record 73.5% for the December 
    2003 quarter, up from 62.2% for the year-ago quarter.
 -- Annualized revenue per average employee(8) was a record $787,000 for
    the December 2003 quarter, up 29% versus $609,000 for the December
    2002 quarter.
 -- Cash balances at December 31, 2003 were $203.7 million, including
    cash, cash equivalents and short-term investments.  The company
    recently added to its financial flexibility by obtaining a one-year,
    $25 million unsecured revolving credit facility.  No amounts were
    outstanding under the facility and the company had no long-term debt
    at December 31, 2003.
 -- The company repurchased 2.02 million shares of its common stock at an
    aggregate cost of $40.0 million during the December 2003 quarter.  
    Since the inception of its common stock repurchase program in March
    2001, the company has repurchased 4.1 million shares of its common
    stock at an aggregate cost of $51.3 million.  Under the company's
    existing stock repurchase plan, which expires on July 31, 2004, it 
    can repurchase up to an additional $48.7 million of its common stock.
 -- In November 2003, the company announced a three-year extension of 
    its agreement with Overture Services to provide sponsored search
    results to the United Online properties under the heading "Powered 
    by Yahoo! Search."  In addition to providing its branding, Yahoo! 
    Inc., the parent company of Overture, will provide its own algorithmic
    Web search results, further enhancing the user experience.

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 March 2004 quarter and the year ending December 31, 2004:



                                   --------------      --------------
 (in millions)                     Mar'04 Q Est.         CY 2004 Est.
                                   --------------      --------------
 Operating income                  $14.2 -- $15.2      $69.3 -- $77.3
   Depreciation & amortization          5.6                22.9
   Facility exit costs                  3.7                 5.2
   Stock-based charges                  0.5                 2.6
                                   --------------      --------------
 Adjusted operating income
  before depreciation and
  amortization(3)                  $24.0 -- $25.0     $100.0 -- $108.0
                                   ==============     ================
 Weighted average diluted
  shares                            70.0 -- 70.5        71.0 -- 72.0

 -- Total revenues for the March 2004 quarter are estimated to be 
    between $101 million and $103 million.
 -- Billable services margin(7) in the March 2004 quarter is projected
    to be approximately equal to the 73.5% achieved in the December 2003
    quarter.
 -- The company estimates that total pay subscribers will increase to
    between 3.3 million and 3.5 million by December 31, 2004.
 -- As noted above, while the timing and amounts remain uncertain, the
    company anticipates incurring facility exit costs associated with 
    the relocation of its Westlake Village headquarters, which will 
    remain in Southern California.  

(1) Total pay subscribers now include, in addition to Internet access subscribers, non-access premium email subscribers. 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) A revenue generating unit (RGU) represents a unique subscription to any individual pay service offered by the company. Internet access, accelerated dial-up and premium email subscriptions represent separate RGUs. For example, a subscriber to the company's accelerated dial-up access service who also subscribes to a premium email service is counted as three subscriptions (one for Internet access, one for accelerated dial-up and one for premium email). The company currently offers its accelerated dial-up service bundled with standard Internet access only. A detailed calculation of RGUs is provided in the tables accompanying this release.

(3) Adjusted operating income before depreciation and amortization is defined as operating income before depreciation, amortization and, in certain periods as reflected in the accompanying tables, stock-based charges, restructuring and merger-related costs, facility exit costs, and other income. Management believes that because operating income before depreciation and amortization and adjusted operating income 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 before depreciation and amortization and adjusted operating income before depreciation and amortization for these purposes, as well as to allocate resources in managing the company's business. Operating income before depreciation and amortization and adjusted operating income 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.

(4) 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 and December 2003 quarters, the company released portions of the valuation allowance, which has resulted in (i) the recognition of a portion of its net deferred tax assets on its balance sheet, (ii) the recording of a tax benefit on its income statement in the June 2003 and December 2003 quarters, (iii) an increase in its effective tax rate beginning in the September 2003 quarter, and (iv) an adjustment to goodwill in the December 2003 quarter reflecting the recognition of deferred tax assets associated with Juno Online Services prior to the merger. 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 release nor the increase in the effective tax rate have impacted, or will impact, the amount of cash paid for income taxes.

(5) Adjusted net income 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 and December 2003 quarters the tax benefit related to the recognition of a portion of the company's deferred tax assets. Management believes that adjusted net income 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 for these purposes. Adjusted net income 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) Free cash flow is defined as net cash provided by 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.

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

(8) 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 the nation's leading provider of value-priced Internet access services through its NetZero, Juno and BlueLight consumer brands. The company's standard services are offered at less than half the standard monthly premium dial-up access prices of its major competitors and are available in more than 6,500 cities across the United States and in Canada. At December 31, 2003, United Online had 499 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," "projections," "business outlook" and "estimate" or similar expressions constitute forward-looking statements. These statements include, without limitation, guidance for future financial performance; growth in pay subscribers; weighted average diluted shares; depreciation and amortization; facility exit costs; 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 us or 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 mix of our subscribers, particularly subscribers to our accelerated dial-up services; changes in the projected number of weighted average diluted shares due to the issuance of stock and stock options, 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.
             Unaudited Condensed Consolidated Balance Sheets

                                                    December 31,
                                                   2003       2002
                                                 --------   --------
                                                          
 ASSETS
   Cash, cash equivalents and
    short-term investments                       $203,723   $159,780
   Restricted cash                                     --        811
   Accounts receivable, net                        14,065     11,312
   Deferred tax assets, net                        26,373         --
   Property and equipment, net                     13,428     13,303
   Goodwill and intangible assets, net             40,268     57,521
   Other assets                                    10,022      7,064
                                                 --------   --------
      Total assets                               $307,879   $249,791
                                                 ========   ========

 LIABILITIES AND STOCKHOLDERS' EQUITY
   Accounts payable                              $ 31,388   $ 25,906
   Accrued liabilities                             14,028     13,120
   Deferred revenue                                24,639     20,157
   Capital leases                                      --        748
                                                 --------   --------
      Total liabilities                            70,055     59,931
                                                 --------   --------
   Stockholders' equity                           237,824    189,860
                                                 --------   --------
     Total liabilities and stockholders' equity  $307,879   $249,791
                                                 ========   ========

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

                         ---------------------  ---------------------
                          Three Months Ended         Year Ended
                              December 31,          December 31,
                         ---------------------  ---------------------
                           2003        2002       2003        2002
                         ---------   ---------  ---------   ---------

 Revenues:
  Billable services      $  87,993   $  58,149  $ 306,086   $ 201,650
  Advertising and
   commerce                  8,955       7,651     33,079      27,578
                         ---------   ---------  ---------   ---------
    Total revenues          96,948      65,800    339,165     229,228

 Operating expenses:
  Cost of billable
   services                 23,285      21,990     92,785      85,375
  Cost of free services      1,869       3,161      9,659      18,048
  Sales and marketing       36,587      19,863    120,619      62,752
  Product development        5,368       5,740     21,881      24,359
  General and
   administrative            7,014       7,087     29,087      26,298
  Restructuring charges         --          --       (215)      1,793
  Amortization of
   intangible assets         3,964       3,798     15,856      17,853
                         ---------   ---------  ---------   ---------
    Total operating
     expenses              78,087      61,639    289,672     236,478
                         ---------   ---------  ---------   ---------

 Operating income (loss)    18,861       4,161     49,493      (7,250)

  Interest income, net       1,224       1,073      4,636       4,187
  Other income, net             --          --         --          58
                         ---------   ---------  ---------   ---------
 Income (loss) before
  income taxes              20,085       5,234     54,129      (3,005)

   Provision (benefit)
    for income taxes        (4,340)        523       (754)        692
                         ---------   ---------  ---------   ---------
 Net income (loss)       $  24,425   $   4,711  $  54,883   $  (3,697)
                         =========   =========  =========   =========
 Basic net income (loss)
  per share              $    0.38   $    0.08  $    0.87   $   (0.06)
                         =========   =========  =========   =========
 Diluted net income
  (loss) per share       $    0.35   $    0.07  $    0.80   $   (0.06)
                         =========   =========  =========   =========
 Shares used to calculate
  basic income (loss)
  per share                 64,166      61,406     63,369      59,936
                         =========   =========  =========   =========
 Shares used to calculate
  diluted income (loss)
  per share                 68,878      66,845     68,752      59,936
                         =========   =========  =========   =========
 Shares outstanding at
  end of period             63,944      62,646     63,944      62,646
                         =========   =========  =========   =========


                          UNITED ONLINE, INC.
         Unaudited Condensed Consolidated Cash Flow Statements
                            (in thousands)

                               Three Months Ended      Year Ended
                                  December 31,        December 31,
                               ------------------  ------------------
                                 2003      2002      2003      2002
                               --------  --------  --------  --------
 CASH FLOWS FROM OPERATING
 ACTIVITIES:

 Net income (loss):            $ 24,425  $  4,711  $ 54,883  $ (3,697)
 Adjustments to reconcile
  net income (loss) to net

  cash provided by operating
  activities:
   Depreciation, amortization
    and stock-based charges       5,545     6,881    23,809    36,136
   Deferred taxes, tax benefits
    and other                    (4,396)      318      (446)    1,402
   Change in operating assets
    and liabilities (excluding
    the effects of
    acquisitions):
     Restricted cash                700       531       811     5,816
     Accounts receivable         (1,310)   (1,203)   (2,753)     (904)
     Other assets                  (302)      641    (3,708)    3,151
     Accounts payable and
      accrued liabilities         3,945     8,680     6,386     2,856
     Deferred revenue               382       763     4,482       963
                               --------  --------  --------  --------
     Net cash provided by
      operating activities       28,989    21,322    83,464    45,723
                               --------  --------  --------  --------
 CASH FLOWS FROM INVESTING
 ACTIVITIES:

  Purchase of short-term
   investments                  (44,308)   (7,575)  (93,687)  (89,239)
  Proceeds from maturities of
   short-term investments        46,947    10,000    55,602    60,491
  Cash paid for acquisitions,
   net of cash acquired              --    (7,327)       --    (8,327)
  Proceeds from sale of
   cost-basis investment             --        --       750        --
  Purchases of property and
   equipment                     (3,482)   (2,156)   (8,425)   (3,662)
  Proceeds from sales of
   assets, net                       --        --        --      (179)
                               --------  --------  --------  --------
   Net cash used for
    investing activities           (843)   (7,058)  (45,760)  (40,916)
                               --------  --------  --------  --------
 CASH FLOWS FROM FINANCING
 ACTIVITIES:

  Payments on notes payable
   and capital leases               (12)   (1,118)     (696)   (5,113)
  Repayments of notes receivable
   from shareholders                 --        28     1,597        62
  Proceeds from employee stock
   purchase plan                  1,679       843     2,698     1,248
  Common stock repurchases      (40,002)       --   (45,614)   (4,669)
  Proceeds from exercises of
   stock options                    951     2,636    12,244     6,619
                               --------  --------  --------  --------
   Net cash provided by (used
    for)financing activities    (37,384)    2,389   (29,771)   (1,853)
                               --------  --------  --------  --------
 Change in cash and cash
  equivalents                    (9,238)   16,653     7,933     2,954
 Cash and cash equivalents,
  beginning of period            80,472    46,648    63,301    60,347
                               --------  --------  --------  --------
 Cash and cash equivalents,
  end of period                $ 71,234  $ 63,301  $ 71,234  $ 63,301
                               ========  ========  ========  ========


                          UNITED ONLINE, INC.
        Reconciliation of Net Income to Adjusted Net Income (5)
                 (in thousands, except per-share data)

                              Three Months Ended December 31, 2003
                               -----------------------------------
                               Reported  Adjustments      Adjusted
                               --------  -----------      --------
 Revenues:
  Billable services            $ 87,993    $     --       $ 87,993
  Advertising and commerce        8,955          --          8,955
                               --------    --------       --------
   Total revenues                96,948          --         96,948

 Operating expenses:
  Cost of billable services      23,285          --         23,285
  Cost of free services           1,869          --          1,869
  Sales and marketing            36,587          --         36,587
  Product development             5,368          --          5,368
  General and administrative      7,014          --          7,014
  Restructuring charges              --          --             --
  Amortization of intangible
   assets                         3,964      (3,964)(b)         --
                               --------    --------       --------
   Total operating expenses      78,087      (3,964)        74,123
                               --------    --------       --------
 Operating income                18,861       3,964         22,825

 Interest income, net             1,224          --          1,224

                               --------    --------       --------
 Income before income taxes      20,085       3,964         24,049

 Provision (benefit) for
  income taxes                   (4,340)     13,883(c)       9,543
                               --------    --------       --------
 Net income                    $ 24,425    $(9,919)       $ 14,506
                               ========    ========       ========
 Basic net income
  per share                    $   0.38                   $   0.23
                               ========                   ========
 Diluted net income
  per share                    $   0.35                   $   0.21
                               ========                   ========
 Shares used to calculate
  basic income per share         64,166                     64,166
                               ========                   ========
 Shares used to calculate
  diluted income per share       68,878                     68,878
                               ========                   ========
 Shares outstanding at
  end of period                  63,944                     63,944
                               ========                   ========


                              Three Months Ended December 31, 2002
                               -----------------------------------
                               Reported    Adjustments    Adjusted
                               --------    -----------    --------
 Revenues:
  Billable services            $ 58,149    $    --        $ 58,149
  Advertising and commerce        7,651         --           7,651
                               --------    --------       --------
   Total revenues                65,800         --          65,800

 Operating expenses:
  Cost of billable services      21,990         (38)(a)     21,952
  Cost of free services           3,161         --           3,161
  Sales and marketing            19,863         (38)(a)     19,825
  Product development             5,740        (209)(a)      5,531
  General and administrative      7,087         (90)(a)      6,997
  Restructuring charges             --          --             --
  Amortization of intangible
   assets                         3,798      (3,798)(b)        --
                               --------    --------       --------
   Total operating expenses      61,639      (4,173)        57,466
                               --------    --------       --------
 Operating income                 4,161       4,173          8,334

 Interest income, net             1,073         --           1,073
                               --------    --------       --------
 Other income, net                 --           --             --
                               --------    --------       --------

 Income before income taxes       5,234       4,173         9,407

 Provision (benefit) for
  income taxes                      523          68(c)        591
                               --------    --------       -------
 Net income                    $  4,711    $  4,105       $ 8,816
                               ========    ========       =======
 Basic net income
  per share                    $   0.08                   $  0.14
                               ========                   =======
 Diluted net income
  per share                    $   0.07                   $  0.13
                               ========                   =======
 Shares used to calculate
  basic income per share         61,406                    61,406
                               ========                   =======
 Shares used to calculate
  diluted income per share       66,845                    66,845
                               ========                   =======
 Shares outstanding at
  end of period                  62,646                    62,646
                               ========                   =======

 -----------------------------------------------------------------
 (a) Elimination of amortization of stock-based charges of $29 and
     merger-related charges of $346.

 (b) Elimination of amortization of intangible assets.

 (c) 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 (5)
                 (in thousands, except per-share data)

                                  -----------------------------------
                                       Year Ended December 31, 2003
                                  -----------------------------------
                                  Reported   Adjustments     Adjusted
                                  --------   -----------     --------
 Revenues:

  Billable services               $306,086    $     --       $306,086
  Advertising and commerce          33,079          --         33,079
                                  --------    --------       --------
   Total revenues                  339,165          --        339,165
 Operating expenses:
  Cost of billable services         92,785         (41)(a)     92,744
  Cost of free services              9,659          --          9,659
  Sales and marketing              120,619         (34)(a)    120,585
  Product development               21,881        (267)(a)     21,614
  General and administrative        29,087        (134)(a)     28,953
  Restructuring charges               (215)        215(b)          --
  Amortization of intangible
   assets                           15,856     (15,856)(c)         --
                                  --------    --------       --------
   Total operating expenses        289,672     (16,117)       273,555
                                  --------    --------       --------
 Operating income (loss)            49,493      16,117         65,610

 Interest income, net                4,636          --          4,636
 Other income, net                      --          --
                                  --------    --------       --------
 Income (loss) before income
  taxes                             54,129      16,117         70,246

 Provision (benefit) for income
  taxes                               (754)     19,944(e)      19,190

                                  --------    --------       --------
 Net income (loss)                $ 54,883    $ (3,827)      $ 51,056
                                  ========    ========       ========

 Basic net income (loss)
  per share                       $   0.87                   $   0.81
                                  ========                   ========
 Diluted net income (loss)
  per share                       $   0.80                   $   0.74
                                  ========                   ========
 Shares used to calculate
  basic income (loss)
  per share                         63,369                     63,369
                                  ========                   ========
 Shares used to calculate
  diluted income (loss)
  per share                         68,752                     68,752
                                  ========                   ========
 Shares outstanding at
  end of period                     63,944                     63,944
                                  ========                   ========

                                  -----------------------------------
                                      Year Ended December 31, 2002
                                  -----------------------------------
                                  Reported    Adjustments    Adjusted
                                  ---------  -------------   --------

 Revenues:
  Billable services               $201,650     $   --        $201,650
  Advertising and commerce          27,578         --          27,578
                                  --------     -------       --------
   Total revenues                  229,228         --         229,228
 Operating expenses:
  Cost of billable services         85,375        (180)(a)     85,195
  Cost of free services             18,048         --          18,048
  Sales and marketing               62,752        (852)(a)     61,900
  Product development               24,359      (1,628)(a)     22,731
  General and administrative        26,298      (1,437)(a)     24,861
  Restructuring charges              1,793      (1,793)(b)        --
  Amortization of intangible
   assets                           17,853     (17,853)(c)        --
                                  --------     -------       --------
   Total operating expenses        236,478     (23,743)       212,735
                                  --------     -------       --------

 Operating income (loss)            (7,250)     23,743         16,493

 Interest income, net                4,187         --           4,187
 Other income, net                      58         (58)(d)        --
                                  --------     -------       --------
 Income (loss) before
  income taxes                      (3,005)     23,685         20,680

 Provision (benefit) for
  income taxes                         692          68(e)         760
                                  --------     -------       --------
 Net income (loss)                $ (3,697)    $23,617       $ 19,920
                                  ========     =======       ========
 Basic net income (loss)
  per share                       $  (0.06)                  $   0.33
                                  ========                   ========
 Diluted net income
  (loss) per share                $  (0.06)                  $   0.30
                                  ========                   ========
 Shares used to calculate
  basic income (loss)
  per share                         59,936                     59,936
                                  ========                   ========
 Shares used to calculate
  diluted income (loss)
  per share                         59,936                     66,217
                                  ========                   ========
 Shares outstanding at
  end of period                     62,646                     62,646
                                  ========                   ========

 ---------------------------------------------------------------------
 (a)  Elimination of amortization of stock-based charges of $42 and
      $2,919 and merger-related charges of $434 and $1,178 in 2003 and
      2002, respectively.
 (b)  Elimination of restructuring charges.
 (c)  Elimination of amortization of intangible assets.
 (d)  Elimination of other income, net.
 (e)  Elimination of benefit recognized for deferred tax assets and
      income tax effect of adjusting entries.


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

                                    Three Months Ended    Year Ended 
                                       December 31,      December 31,
                                     ----------------  ----------------
                                      2003     2002     2003     2002
                                     -------  -------  -------  -------
 Adjusted Operating Income Before
 Depreciation and Amortization (3)

 Operating income (loss)             $18,861  $ 4,161  $49,493  $(7,250)
  Depreciation                         1,581    3,054    7,911   15,364
  Amortization                         3,964    3,798   15,856   17,853
                                     -------  -------  -------  -------
 Operating income before
  depreciation and amortization       24,406   11,013   73,260   25,967
                                     -------  -------  -------  -------
   Stock-based charges                    --       29       42    2,919
   Restructuring and merger-
    related charges(a)                    --      346      219    2,971
                                     -------  -------  -------  -------
 Adjusted operating income
  (loss) before depreciation
  and amortization                   $24,406  $11,388  $73,521  $31,857
                                     =======  =======  =======  =======


                                    Three Months Ended    Year Ended 
                                       December 31,      December 31,
                                     ----------------  ----------------
                                      2003     2002     2003     2002
                                     -------  -------  -------  -------
 Free Cash Flow (6):

 Net cash provided by operating
  activities                         $28,989  $21,322  $83,464  $45,723
 Add (deduct):
  Cash paid for restructuring and
   merger-related charges(a)             --       --     1,915      843
  Capital expenditures                (3,482)  (2,156)  (8,425)  (3,662)
                                     -------  -------  -------  -------
 Free cash flow                      $25,507  $19,166  $76,954  $42,904
                                     =======  =======  =======  =======

 --------------------------------------------------------------------
 (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)

                Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, 
                  2003    2003   2003    2003    2002    
                ------- ------- ------- ------- ------- 
 Total
  revenues      $96,948 $88,790 $79,608 $73,819 $65,800 
 Net
  income        $24,425 $ 8,902 $14,594 $ 6,962 $ 4,711 
 Net income
  per diluted
  share         $  0.35 $  0.13 $  0.21 $  0.10 $  0.07 
 Pay
  subscribers     2,892   2,720   2,547   2,405   2,176   
 Active
  users (in
  millions)(1)      5.3     5.2     5.2     5.2     5.0     
 Number of
  employees
  at end of
  period            499     487     461     447     444     
 Annualized
  revenue per
  average
  employee (8)  $   787 $   749 $   701 $   663 $   609 

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


                          UNITED ONLINE, INC.
               Analysis of Revenue Generating Units (2)
                            (in thousands)

                           Dec. 31,  Sep. 30, Jun. 30, Mar. 31, Dec. 31, 
                             2003     2003     2003     2003     2002
                             -----    -----    -----    -----    -----
 Internet Access
  Subscriptions              2,890    2,720    2,547    2,405    2,176
 Add-on subscriptions:
  Accelerated Dial-up
   Subscriptions               638      412      210       22       --
  Other Pay Subscriptions        7       --       --       --       --
                             -----    -----    -----    -----    -----
 Total Revenue Generating
  Units                      3,535    3,132    2,757    2,427    2,176
                             =====    =====    =====    =====    =====

 Total Pay Subscribers (a)   2,892    2,720    2,547    2,405    2,176
 Add-on Subscription
  Penetration (b)               22%      15%       8%       1%       

 -------------------------------------------------------------------
 (a)  Includes Internet access subscribers and other non-access pay
      subscribers.
 (b)  Percentage of add-on subscription relationships to total pay
      subscribers.


            

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