United Online Reports Second-Quarter 2005 Results and Declares Quarterly Cash Dividend




                   Record Revenues of $131.5 Million
                   Operating Income of $20.9 Million
                Record Adjusted OIBDA of $33.2 Million
              Quarterly Cash Dividend of $0.20 per Share

WOODLAND HILLS, Calif., Aug. 2, 2005 (PRIMEZONE) -- United Online, Inc. (Nasdaq:UNTD), a leading provider of consumer Internet subscription services, today reported results for its second quarter ended June 30, 2005. The company also announced that its Board of Directors has declared a quarterly cash dividend of $0.20. The dividend is payable on August 31, 2005 to shareholders of record as of the close of business on August 12, 2005.



 Summary of June 2005 Quarter Results:

 -- Total revenues for the quarter were a record $131.5 million, up
    19% versus $110.6 million for the year-ago quarter.

 -- Operating income for the quarter was $20.9 million, or 15.9% of
    revenues, up 4% versus operating income of $20.0 million, or
    18.1% of revenues, in the year-ago quarter.

 -- Adjusted operating income before depreciation and amortization
    ("OIBDA")(1) for the quarter was a record $33.2 million, or 25.3%
    of revenues, an increase of 17% versus adjusted OIBDA of $28.4
    million, or 25.7% of revenues, in the year-ago quarter.

 -- Pay accounts(2) increased by 81,000 during the quarter to 5.03
    million; subscriptions(3) increased by 138,000 to 6.3 million;
    active accounts(2) totaled 16.9 million at June 30, 2005. In April
    2005, the company completed the transition period associated with
    its March 2005 PhotoSite acquisition, which upon completion had
    approximately 6,000 pay accounts (and subscriptions), and active
    accounts of approximately 87,000.

 -- Net income for the quarter was $10.7 million, or $0.17 per
    share, versus $12.3 million, or $0.19 per share, for the year-ago
    quarter. Net income for the quarter includes a tax charge of $1.0
    million related to the re-measurement of certain deferred tax
    assets due to a change in the tax law. Excluding this charge, net
    income for the quarter was $11.7 million, or $0.19 per share.

 -- Adjusted net income(4) for the quarter was $17.7 million, an
    increase of 7% versus adjusted net income of $16.6 million for the
    year-ago quarter. On a per share basis, adjusted net income for
    the quarter was $0.27 per share, an increase of 8% versus adjusted
    net income of $0.25 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 a record $40.7 million for the
    quarter, an increase of 43% versus $28.5 million for the year-ago
    quarter.

 -- Free cash flow(5) for the quarter was a record $35.7 million, an
    increase of 38% versus $25.9 million for the year-ago quarter.

"Our strong second quarter performance, which resulted in our 16th consecutive quarter of record revenues, was driven by United Online's growing interactive content business, particularly our Classmates social networking service," said Mark R. Goldston, chairman, CEO and president of United Online. "Q2 marked the first time that 100% of our quarterly revenue growth was generated by non-access businesses -- a testament to our diversification strategy and focused execution. As we continue to manage the growing diversity and evolution of our business, we look forward to a second half of 2005 with the anticipated launch of our VoIP service in the fourth quarter."

"Beyond growing revenues, pay accounts and the relative percentage of these metrics represented by non-access in the second quarter, United Online again delivered record adjusted OIBDA and free cash flow," said Charles S. Hilliard, executive vice president and CFO of United Online. "Our large consumer audience, combined with the increasing diversity of our subscription and advertising revenues, enabled United Online to deliver these solid results during a quarter where we invested a record amount in new product development. While pay access accounts declined by a net 52,000, the flagship NetZero brand continued to grow its pay account base to record levels."



 Additional Highlights: 

 -- Billable services margin(6) was a record 79.4% for the June 2005
    quarter, up from 77.3% for the year-ago quarter.

 -- Cash balances at June 30, 2005 were $223.8 million, including
    cash, cash equivalents and short-term investments. During the
    quarter, the company repaid $5.8 million of its senior term loan
    facility, bringing the balance of the facility to $63.3 million at
    June 30, 2005.

 -- In June 2005, United Online released NetZero HiSpeed 3G, the
    fastest dial-up Internet access service available on the market.

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 2005 quarter and the year ending December 31, 2005:



                     ---------------  ---------------  ---------------
 (in millions)       Sept'05 Q Est.      CY'05 Est.    Prior CY'05 Est.
                     ---------------  ---------------  ---------------
 Operating income     $20.8 - $21.8    $83.6 - $86.6    $80.2 - $85.2
   Depreciation            4.0             15.4              15.0
   Amortization            5.3             21.9              22.2
   Stock-based
    charges                2.9             10.1               9.6
                      -------------   ---------------  ---------------
 Adjusted operating
  income before
  depreciation and
  amortization(1)     $33.0 - $34.0   $131.0 - $134.0  $127.0 - $132.0
                      -------------   ---------------  ---------------
 Weighted average
  diluted shares       64.5 - 65.0      65.0 - 66.0      65.0 - 66.0

 -- Total revenues for the September 2005 quarter are estimated to
    be between $131 million and $133 million.

 -- The company estimates that total pay accounts will be between
    5.03 million and 5.08 million by September 30, 2005.

 (1) Adjusted operating income before depreciation and amortization
     (adjusted OIBDA) is defined as operating income before
     depreciation, amortization, stock-based compensation and
     facility-exit costs. Management believes that because adjusted
     OIBDA excludes certain items that do not impact the company's
     cash flows, this measure provides investors with additional
     useful information to measure the company's performance,
     particularly with respect to changes in performance from period
     to period, 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 adjusted OIBDA for these purposes, as well as to allocate
     resources in managing the company's business. The company's Board
     of Directors uses this measure in determining certain
     compensation incentives for certain members of the company's
     management. Adjusted OIBDA is not determined in accordance with
     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 accompanying tables.

 (2) A pay account represents a unique billing relationship with a
     customer who subscribes to one or more of the company's services.
     A pay account does not equate to a unique subscriber since one
     subscriber could have several pay accounts. Active accounts are
     defined as all free access, social networking and email users
     that logged on to our services at least once during the preceding
     31 days, together with all pay accounts. Additionally, active
     accounts include the number of free Web sites that received at
     least one unique visitor within the preceding 90 days and the
     number of free photo-sharing users that logged on to the service
     at least once within the preceding 90 days. A table entitled
     "Analysis of Pay Accounts and Subscriptions" is presented
     elsewhere in this release.

 (3) A subscription represents a unique subscription to any
     individual pay service offered by the company. Internet access
     and accelerated dial-up are counted as two subscriptions,
     although most subscribers to the accelerated service purchase it
     bundled with our standard Internet access. A table entitled
     "Analysis of Pay Accounts and Subscriptions" is presented
     elsewhere in this release.

 (4) Adjusted net income is defined as net income before the
     after-tax effect of amortization of intangible assets,
     stock-based compensation, facility-exit costs and the
     re-measurement of certain 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 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 accompanying tables.

 (5) Free cash flow is defined as net cash provided by operating
     activities before cash paid for relocation 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
     accompanying tables.

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

About United Online

United Online, Inc. (Nasdaq: UNTD) is a leading provider of consumer Internet subscription services through a number of brands, including NetZero, Juno and Classmates. The company's services include Internet access, accelerated dial-up services, premium email, personal web hosting, domain services, photo sharing services and social networking. At June 30, 2005, United Online had 828 employees worldwide. United Online is headquartered in Woodland Hills, CA, with offices in New York City, NY, Renton, WA, San Francisco, CA, Orem, UT, Munich, Germany, Jarfalla, Sweden, and Hyderabad, India. For more information about United Online and its Internet services, please visit http://www.untd.com.

United Online will be hosting a conference call today at 2:00PM PT (5:00PM ET) 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, expectations regarding: guidance for future financial performance; changes in pay accounts; weighted average diluted shares; depreciation and amortization; and stock-based compensation. 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 the company's pricing or competitors' pricing, and the use of promotional offers to acquire or retain subscribers; the company's inability to retain its existing subscribers and the rate at which new subscribers sign up for the company's services; changes in the mix of pay accounts; the effects of seasonality and changes in Internet usage; 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; changes in usage by subscribers, additional telecommunications costs or other factors negatively impacting the company's billable services margin; changes in active accounts; the company's inability to maintain its agreements with telecommunications providers on attractive terms; the company's ability to successfully integrate acquisitions, including Classmates Online and PhotoSite, or develop, implement or commercialize new or enhanced services, including our proposed VoIP service; 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. From time to time, the company considers acquisitions that, if consummated, could be material. Forward-looking statements regarding financial metrics are based upon the assumption that no such acquisition is consummated during the relevant periods. If an acquisition were consummated, actual results could differ materially from any forward-looking statements. More information about potential factors that could affect the company's business and financial results is included in the company's annual and quarterly reports filed with the Securities and Exchange Commission (http://www.sec.gov), including, without limitation, information under the captions "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors."



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

                                         June 30, 2005   Dec. 31, 2004
                                         -------------   -------------
                                          (unaudited)
 ASSETS
  Cash, cash equivalents and short-term
   investments                              $223,828        $232,793
  Accounts receivable, net                    18,763          17,534
  Deferred tax assets, net                    72,257          76,203
  Property and equipment, net                 28,115          27,006
  Goodwill and intangible assets, net        151,277         147,016
  Other assets                                16,580          19,300
                                            --------        --------
   Total assets                             $510,820        $519,852
                                            ========        ========
                                                            
                                                            
 LIABILITIES AND STOCKHOLDERS' EQUITY                       
  Accounts payable                          $ 47,109        $ 45,379
  Accrued liabilities                         27,457          18,320
  Deferred revenue                            57,564          50,954
  Capital leases                                 879           1,319
  Term loan                                   63,334         100,000
  Other liabilities                            3,913           2,181
                                            --------        --------
   Total liabilities                         200,256         218,153
                                            --------        --------
  Stockholders' equity                       310,564         301,699
                                            --------        --------
   Total liabilities and stockholders'                      
    equity                                  $510,820        $519,852
                                            ========        ========

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

                                        ---------------------------
                                        Three Months Ended June 30,
                                        ---------------------------
                                            2005           2004
                                         ---------       ---------
 Revenues:
  Billable services                      $ 117,490       $ 102,496
  Advertising and commerce                  14,030           8,122
                                         ---------       ---------
   Total revenues                          131,520         110,618

 Operating expenses:
  Cost of billable services                 24,190          23,294
  Cost of free services                      3,172           1,589
  Sales and marketing                       53,579          44,738
  Product development                        9,208           6,286
  General and administrative                11,938           9,568
  Stock-based compensation (1)               2,920             739
  Amortization of intangible assets          5,654           4,393
                                         ---------       ---------
   Total operating expenses                110,661          90,607
                                         ---------       ---------

 Operating income                           20,859          20,011

 Interest and other income, net              1,592           1,367
 Interest expense                           (1,355)           (342)
                                         ---------       ---------
 Income before income taxes                 21,096          21,036

  Provision for income taxes                10,424           8,726
                                         ---------       ---------
 Net income                              $  10,672       $  12,310
                                         =========       =========
 Basic net income per share              $    0.18       $    0.20
                                         =========       =========
 Diluted net income per share            $    0.17       $    0.19
                                         =========       =========
 Shares used to calculate
  basic net income per share                60,831          61,669
                                         =========       =========
 Shares used to calculate
  diluted net income per share              63,093          66,238
                                         =========       =========
 Shares outstanding at end of period        61,760          62,764
                                         =========       =========
 (1) Stock-based compensation is
     allocated as follows:

 Cost of billable services               $      57       $      --
 Sales and marketing                           224             124
 Product development                           350              --
 General and administrative                  2,289             615
                                         ---------       ---------
 Total stock-based compensation          $   2,920       $     739
                                         =========       =========

                          UNITED ONLINE, INC.
       Unaudited Condensed Consolidated Statement of Cash Flows
                            (in thousands)

                                                  ---------------------
                                                   Three Months Ended 
                                                        June 30,
                                                  ---------------------
                                                    2005         2004
                                                  --------    ---------
 CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income:                                     $ 10,672    $  12,310
  Adjustments to reconcile net income to
   net cash provided by operating activities:
    Depreciation, amortization and
    stock-based compensation                       12,358        7,259
    Deferred taxes, tax benefits and other          5,716        8,317
    Change in operating assets and liabilities
     (excluding the effects of acquisitions):
     Accounts receivable                           (1,526)      (1,566)
     Other assets                                  (1,031)      (6,373)
     Accounts payable and accrued liabilities      11,750        9,289
     Other liabilities                                907           --
     Deferred revenue                               1,880         (761)
                                                 --------    ---------
      Net cash provided by operating activities    40,726       28,475
                                                 --------    ---------

 CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of short-term investments             (94,120)    (101,021)
  Proceeds from maturities and sales of
   short-term investments                          69,475       76,764
  Purchases of rights, patents and trademarks         (54)        (901)
  Cash paid for acquisitions                          (98)     (11,917)
  Purchases of property and equipment              (5,018)      (3,849)
                                                 --------    ---------
   Net cash used for investing activities         (29,815)     (40,924)
                                                 --------    ---------

 CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on capital leases                         (152)          --
  Payments on term loan                            (5,833)          --
  Payment for dividends                           (12,590)          --
  Proceeds from employee stock purchase plan        1,678        1,636
  Proceeds from exercises of stock options          2,024        2,986
                                                 --------    ---------
   Net cash provided by(used for) financing
    activities                                    (14,873)       4,622
                                                 --------    ---------

  Effect of exchange rate changes on cash
   and cash equivalents                               (75)          --

 Change in cash and cash equivalents               (4,037)      (7,827)
 Cash and cash equivalents, beginning of period    44,722       12,823
                                                 --------    ---------
 Cash and cash equivalents, end of period        $ 40,685    $   4,996
                                                 ========    =========

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

                  Three Months Ended          Three Months Ended
                     June 30, 2005              June 30, 2004
              --------------------------- --------------------------
              Reported  Adjust-  Adjusted Reported Adjust-  Adjusted
                         ments                      ments
              -------- --------- -------- -------- -------- --------
 Revenues:
  Billable
   services   $117,490 $   --    $117,490 $102,496 $   --   $102,496
  Advertising
   and
   commerce     14,030     --      14,030    8,122     --      8,122
              -------- --------- -------- -------- -------- --------
  Total
   revenues    131,520     --     131,520  110,618     --    110,618
 Operating
 expenses:
  Cost of
   billable
   services     24,190     --      24,190   23,294     --     23,294
  Cost of
   free
   services      3,172     --       3,172    1,589     --      1,589
  Sales and
   marketing    53,579     --      53,579   44,738     --     44,738
  Product
   development   9,208     --       9,208    6,286     --      6,286
  General and
   admini-
   strative     11,938     --      11,938    9,568 (1,601)(a)  7,967
  Stock- based
   compensation  2,920 (2,920)(b)    --        739   (739)(b)   --
  Amortization
   of intangible
   assets        5,654 (5,654)(c)    --      4,393 (4,393)(c)   --
              -------- --------- -------- -------- -------- --------
  Total
   operating
   expenses    110,661    (8,574) 102,087   90,607   (6,733)  83,874
              -------- --------- -------- -------- -------- --------
  Operating
   income       20,859     8,574   29,433   20,011    6,733   26,744
  Interest
   and other
   income, net   1,592      --      1,592    1,367     --      1,367
  Interest
   expense      (1,355)     --     (1,355)    (342)    --       (342)
              -------- --------- -------- -------- -------- --------
  Income
   before
   income
   taxes        21,096     8,574   29,670   21,036    6,733   27,769
  Provision
   for income
   taxes        10,424   1,538(d)  11,962    8,726   2,440(d) 11,166
              -------- --------- -------- -------- -------- --------
  Net income  $ 10,672 $   7,036 $ 17,708 $ 12,310 $  4,293 $ 16,603
              ======== ========= ======== ======== ======== ========
 Basic net
  income per
  share       $   0.18           $   0.29 $   0.20          $   0.27
              ========           ======== ========          ========
 Diluted net
  income per
  share       $   0.17           $   0.27 $  0.19           $   0.25
              ========           ======== ========          ========
 Shares used
  to calculate
  basic net
  income per
  share         60,831             60,831   61,669            61,669
              ========           ======== ========          ========
 Shares used
  to calculate
  diluted net
  income per
  share         63,093           64,899(e)  66,238          66,238(e)
              ========           ======== ========          ========
 Shares
  outstanding
  at end of
  period        61,760             61,760   62,764            62,764
              ========           ======== ========          ========

 (a)  Elimination of facility-exit costs incurred as a result of the
      relocation of the Company's corporate offices.
 (b)  Elimination of stock-based compensation.
 (c)  Elimination of amortization of intangible assets.
 (d)  Income tax effect of adjusting entries and re-measurement of
      certain deferred tax assets.
 (e)  Includes the adjustment of shares used to calculate diluted net
      income per share resulting from the elimination of stock-based
      compensation.

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

                                                     Three Months
                                                     Ended June 30,
                                                  --------------------
                                                   2005         2004
                                                  -------      -------
 Adjusted Operating Income Before Depreciation
  and Amortization (1)
 Operating income                                 $20,859      $20,011
  Depreciation                                      3,784        1,680
  Amortization                                      5,654        4,393
                                                  -------      -------
 Operating income before depreciation                        
  and amortization                                 30,297       26,084
   Stock-based compensation                         2,920          739
   Facility-exit costs (a)                             --        1,601
                                                  -------      -------
 Adjusted operating income before depreciation               
  and amortization                                $33,217      $28,424
                                                  =======      =======

                                                          Twelve Months
                                         Three Months         Ended
                                        Ended June 30,       June 30,
                                     --------------------    --------
                                       2005        2004        2005
                                     --------    --------    --------
 Free Cash Flow (5)
 Net cash provided by operating
  activities                         $ 40,726    $ 28,475    $133,111
 Add (deduct):
  Capital expenditures                 (5,018)     (3,849)    (16,129)
  Cash paid for relocation costs (b)       --       1,315       5,095
                                     --------    --------    --------
 Free cash flow                      $ 35,708    $ 25,941    $122,077
                                     ========    ========    ========
 ---------------------------------------------------------------------
 (a) Represents costs incurred in connection with the relocation of
     the Company's corporate offices. These costs are attributable to
     lease termination fees and accelerated depreciation incurred in
     connection with terminated leases.

 (b) Represents cash payments made in connection with the
     relocation of the Company's corporate offices. These payments
     relate primarily to lease termination fees and capital
     expenditures for the new corporate offices.

                          UNITED ONLINE, INC.
   Selected Quarterly 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,
                   2005       2005       2004        2004       2004
                 --------   --------   --------    --------   --------
 Total revenues  $131,520   $130,531   $119,620    $110,704   $110,618

 Net income      $ 10,672   $ 11,487   $ 80,189(b) $ 12,620   $ 12,310

 Net income per
  diluted share  $   0.17   $   0.18   $   1.27    $   0.19   $   0.19

 Pay accounts(2)    5,033      4,952      4,826       3,232      3,189

 Active
  accounts(2)
  (in millions)      16.9       17.0       15.2         6.6        6.8

 Number of
  employees at
  end of period       828        769        742         598        582

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

 (a) More information on the financial results for these quarters
     can be found in the company's filings with the Securities and
     Exchange Commission.
 (b) Includes $68.6 million tax benefit related to the recognition
     of a portion of the company's deferred tax assets.


                          UNITED ONLINE, INC.
          Analysis of Pay Accounts (2) and Subscriptions (3)
                            (in thousands)
                 Jun. 30,   Mar. 31,   Dec. 31,   Sep. 30,    Jun. 30,
                   2005       2005       2004       2004       2004
                ---------  ---------  ---------  ----------  ---------
 Internet
  access            3,078      3,130      3,100       3,111      3,102
 Non-access
  services(a)       1,955      1,822      1,726         121         87
                ---------  ---------  ---------  ----------  ---------
  Total pay
   accounts(2)      5,033      4,952      4,826       3,232      3,189
                =========  =========  =========  ==========  =========
 Internet
  access            3,078      3,130      3,100       3,111      3,102
 Accelerator        1,196      1,170      1,105       1,074      1,001
 Non-access
  services(a)       2,064      1,900      1,781         165        124
                ---------  ---------  ---------  ----------  ---------
  Total
  subscrip-
  tions(3)          6,338      6,200      5,986       4,350      4,227
                =========  =========  =========  ==========  =========
 ---------------------------------------------------------------------

 (a) Non-access services include social networking, premium email,
     Web-hosting and domain name registration, premium content and
     photo sharing.


            

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