United Online, Inc. (Nasdaq: UNTD), a leading provider of
consumer products and services over the Internet, today reported
financial results for its fourth quarter and year ended December
31, 2011.
“Consolidated adjusted OIBDA was at the high end of our guidance
range for the quarter, and consolidated revenues were within our
guidance range,” said Mark R. Goldston, Chairman, President and
Chief Executive Officer of United Online. “FTD delivered
year-over-year growth for the fourth consecutive quarter. For the
quarter, FTD revenues were $143.3 million and segment adjusted
OIBDA was $21.8 million, increases of 2% and 12%, respectively,
compared to the fourth quarter of 2010. For the full year 2011, FTD
revenues were $587.2 million and segment adjusted OIBDA was $83.5
million, increases of 6% and 11%, respectively, compared to
2010.”
“In November 2011, we announced that we will begin selling 4G
high-speed mobile broadband Internet access nationwide under the
NetZero brand,” Goldston added. “We anticipate launching our
affordably-priced 4G mobile broadband service to consumers by the
end of the first quarter.”
“With regard to Memory Lane, 2011 was a year of testing and
analysis. The results have led us to conclude that our domestic
high school nostalgia focus continues to resonate with our members
and that, of all the new nostalgic content we have offered to
consumers, our digital yearbooks initiative has been the primary
content offering that has driven engagement as well as
subscriptions. We now have nearly 115,000 yearbooks on our site and
expect to have 200,000 by year-end 2012, which we estimate will
give us coverage of over 50% of the U.S. over-40 population. Based
on this, we are implementing a number of yearbook-based initiatives
during 2012 that are designed to increase engagement as well as to
position us for growth in revenues and pay subscribers in the
future,” said Goldston.
Added Neil P. Edwards, Executive Vice President and Chief
Financial Officer, “United Online generated $35.2 million in free
cash flow during the quarter and $90.0 million during the year,
helping to increase our cash and cash equivalents to $136 million
and reduce net debt to $125 million. In January 2012, we declared a
cash dividend of $0.10 per share, our 28th consecutive quarterly
cash dividend.”
Summary Results for Fourth Quarter
Ended December 31, 2011:
The following table summarizes key financial results for the
fourth quarter ended December 31, 2011:
(in millions, except per share amounts and
percentages)
Financial
Highlights
Q4 2011 Q4 2010 %
Change FTD revenues $ 143.3 $ 140.2 2% Content & Media
revenues 45.7 53.3 (14%) Communications revenues 29.3 39.7 (26%)
Intersegment eliminations (0.3 ) (0.5 ) 36%
Consolidated revenues $ 217.9 $
232.6 (6%) GAAP operating income
$ 23.7 $ 31.4 (25%)
Adjusted OIBDA(1) $ 47.0 $
53.4 (12%) GAAP net income attributable to
common stockholders $ 12.5 $ 15.5
(19%) GAAP diluted net income per common share
$ 0.14 $ 0.18 (22%)
Adjusted net income attributable to common
stockholders(2) $ 22.7 $
26.5 (14%) Adjusted diluted net income per common
share(2) $ 0.25 $ 0.30
(17%)
- Consolidated revenues were $217.9
million, a decrease of 6% versus the year-ago quarter.
- GAAP operating income was $23.7
million, a decrease of 25% versus the year-ago quarter.
- Adjusted OIBDA(1) was $47.0 million, a
decrease of 12% versus the year-ago quarter.
- The company recorded $4.9 million in
restructuring and other exit costs related to cost reduction
initiatives at each of the segments and to the departure of the
company’s former chief financial officer.
- Interest expense was $3.5 million, down
41% from the year-ago quarter, driven by reduced interest rates
resulting from the June 2011 refinancing of FTD’s credit facility
and lower average debt outstanding.
- Our effective income tax rate was 39%,
versus 38% in the year-ago quarter.
- GAAP diluted net income per common
share was $0.14, down 22% compared to the year-ago quarter.
- Adjusted diluted net income per common
share(2) was $0.25, versus $0.30 in the year-ago quarter.
Cash Flows, Balance Sheet and Dividend
Highlights:
- Cash flows from operating activities
and free cash flow(3) for the quarter ended December 31, 2011 were
$39.4 million and $35.2 million, respectively, decreases of 19% and
14%, respectively, versus the year-ago quarter.
- Cash and cash equivalents at December
31, 2011 increased by $23.3 million to $136.1 million from $112.8
million at September 30, 2011.
- Net debt at December 31, 2011 was
$125.0 million, a decrease of $23.8 million from September 30,
2011. The company defines net debt as total debt, net of discounts,
less cash and cash equivalents.
- The company paid $9.3 million in cash
dividends during the quarter.
- In January 2012, the company’s Board of
Directors declared a quarterly cash dividend of $0.10 per share
that is payable on February 29, 2012 to stockholders of record on
February 14, 2012.
Segment Financial Results for 2010
Revised to Conform to Current Year Presentation:
Effective the first quarter of 2011, the company modified its
segment reporting to separately report unallocated corporate
expenses. Previously, such expenses were fully allocated to the
company’s reportable segments. The company has revised prior
periods to conform to the current year presentation.
Segment Results for Fourth Quarter
Ended December 31, 2011:
FTD:
(in millions, except percentages and metrics)
Financial
Highlights
Q4 2011 Q4 2010 %
Change Products revenues $ 114.5 $ 109.8 4% Services revenues
28.8 30.2 (5%) Advertising revenues - 0.1
N/A
Segment revenues $ 143.3
$ 140.2 2% Segment income from
operations $ 19.9 $ 18.3 9%
Segment adjusted OIBDA(1)
$ 21.8 $ 19.5 12% as a % of
segment revenues(1) 15.2 % 13.9 %
Metrics
Highlights
Q4 2011 Q4 2010 % Change Consumer orders(4)
(in thousands) 1,615 1,612 - Average order value(4) $ 62.31 $ 60.43
3% British Pound / U.S. Dollar exchange rate (average) 1.57
1.58 -
- Segment revenues were $143.3 million,
an increase of 2% versus the year-ago quarter.
- Segment adjusted OIBDA(1) was $21.8
million, an increase of 12% versus the year-ago quarter.
- Consumer orders(4) were 1.6 million,
unchanged versus the year-ago quarter.
- Average order value(4) (“AOV”) was
$62.31, an increase of 3% versus an AOV of $60.43 in the year-ago
quarter.
Content & Media:
(in millions, except percentages and metrics)
Financial
Highlights
Q4 2011 Q4 2010 %
Change Products revenues $ 0.5 $ - N/A Services revenues 28.4
33.7 (16%) Advertising revenues 16.8 19.6
(14%)
Segment revenues $ 45.7
$ 53.3 (14%) Segment income from
operations $ 12.6 $ 15.8 (20%)
Segment adjusted
OIBDA(1) $ 14.9 $ 17.0
(13%) as a % of segment revenues(1)
32.5 % 32.0 %
Metrics
Highlights
Q4 2011 Q4 2010 % Change Segment pay
accounts(5) (in thousands) 3,484 4,499 (23%) Net quarterly decline
in segment pay accounts(5) (in thousands) (296 ) (296 ) - Segment
active accounts(5) (in millions) 10.3 13.7 (25%) ARPU(6) $ 2.60 $
2.42 7% Euro / U.S. Dollar Exchange Rate (average) 1.35 1.36
(1%)
- Segment revenues were $45.7 million, a
decrease of 14% versus the year-ago quarter.
- Segment adjusted OIBDA was $14.9
million, a decrease of 13% versus the year-ago quarter.
- Segment pay accounts at December 31,
2011 were 3.5 million, a decrease of 23% versus December 31,
2010.
Communications:
(in millions, except percentages and metrics)
Financial
Highlights
Q4 2011 Q4 2010 %
Change Services revenues $ 22.6 $ 30.2 (25%) Advertising
revenues 6.7 9.5 (30%)
Segment
revenues $ 29.3 $ 39.7
(26%) Segment income from operations $
14.1 $ 18.6 (24%)
Segment adjusted OIBDA(1) $
15.3 $ 21.2 (28%) as a % of segment
revenues(1) 52.3 % 53.5 %
Metrics
Highlights
Q4 2011 Q4 2010 % Change Segment pay
accounts(5) (in thousands) 794 1,020 (22%) ARPU(6) $ 9.09 $ 9.46
(4%)
- Segment revenues were $29.3 million, a
decrease of 26% versus the year-ago quarter.
- Segment adjusted OIBDA was $15.3
million, a decrease of 28% versus the year-ago quarter.
- Segment pay accounts at December 31,
2011 were 0.8 million, a decrease of 22% versus 1.0 million at
December 31, 2010.
Unallocated Corporate
Expenses:
For the quarter ended December 31, 2011, the impact of
unallocated corporate expenses on consolidated adjusted OIBDA was
$5.0 million, compared to $4.4 million in the year-ago quarter. The
increase primarily related to the structure of the 2011 Management
Bonus Plan as a cash-based rather than stock-based plan.
Business Outlook:
The following forward-looking information includes certain of
the projections made by management as of the date of this press
release. The company does not intend to revise or update this
information, except as required by law, and may not provide this
type of information in the future. Due to a variety of factors,
actual results may differ significantly from those projected.
Factors include, without limitation, the factors referenced later
in this announcement under the caption “Cautionary Information
Regarding Forward-Looking Statements.” These and other factors are
discussed in more detail in the company’s filings with the
Securities and Exchange Commission.
First Quarter 2012
Guidance:
First Quarter 2012 (in millions)
Guidance Revenues $238.0 - $243.0
Adjusted
OIBDA(1) $31.0 - $35.0
First Quarter 2012
Supplemental Information (in millions)
Guidance Net interest expense $3.1 Shares used to calculate
diluted net income per common share 90.0 Shares used to calculate
adjusted diluted net income per common share(2) 90.2
The table below reconciles the company’s guidance for operating
income, a GAAP measure, to adjusted OIBDA.
First Quarter 2012 (in millions)
Guidance Operating Income $12.9 - $16.9 Depreciation
$6.6 Amortization of intangible assets $7.9 Stock-based
compensation $3.6
Adjusted OIBDA(1) $31.0 - $35.0
Investor Conference Call on February
22, 2012 at 5:00 p.m. ET (2:00 p.m. PT):
United Online will host a conference call on Wednesday, February
22, 2012 at 5:00 p.m. ET (2:00 p.m. PT) to discuss its financial
results for the fourth quarter and year ended December 31, 2011.
The conference call dial-in number is 888-417-8465 for domestic
participants and 719-325-2397 for international participants. The
passcode is 6406579. Alternatively, a live webcast of the
conference call, along with a presentation containing financial
highlights for the fourth quarter and year ended December 31, 2011,
can be accessed within the Investor Relations section of the
company’s website at www.unitedonline.com.
The presentation and a replay of the broadcast will also be
available for seven days following the call on the company’s
website, or by dialing 888-203-1112 (or 719-457-0820 outside of the
United States) and the replay passcode, 6406579.
Non-GAAP Measures:
In evaluating the company's performance, management uses one or
more of the following measures that are not determined in
accordance with accounting principles generally accepted in the
United States of America ("GAAP"): adjusted OIBDA, adjusted net
income, adjusted basic and diluted net income per common share, and
free cash flow. These measures are adjusted to exclude certain
non-cash expenses such as depreciation, amortization, stock-based
compensation, and impairment of goodwill, intangible assets and
long-lived assets. In addition, these measures are adjusted to
exclude the items discussed below because such items are either
operating expenses which would not otherwise have been incurred by
the company in the normal course of the company's business
operations or are not reflective of the company's core results over
time. These items may include recurring as well as non-recurring
items. These adjustments should not be construed as an inference
that all of these adjustments or costs are unusual, infrequent or
non-recurring. For example, certain restructuring and other exit
costs may be considered recurring given the company's ongoing
efforts to be more cost effective and efficient, certain litigation
or dispute settlement charges or gains may be viewed as recurring
given that the company is continually involved in, and resolving,
litigation, arbitration, investigations, disputes and similar
matters, and certain transaction-related costs may be deemed
recurring given the company's regular evaluation of potential
transactions. Notwithstanding that certain charges, costs or gains
may be considered recurring, in order to provide meaningful
comparisons, the company believes that it is appropriate to adjust
for such charges, costs or gains because they are not reflective of
the company's core results and tend to vary based on timing,
frequency and magnitude.
Restructuring and Other Exit Costs — Restructuring and other
exit costs consist primarily of employee termination costs,
facility closure and relocation costs and contract termination
costs.
Litigation or Dispute Settlement Charges or Gains — These
charges or gains include estimated losses for which we have
established a reserve, as well as actual settlements, judgments,
fines, penalties, assessments or other resolutions against, or in
favor of, the company related to litigation, arbitration,
investigations, disputes or similar matters. Insurance recoveries
received by the company related to such matters are also included
in these adjustments.
Transaction-Related Costs — The company excludes certain expense
items resulting from actual or potential transactions such as
business combinations, mergers, acquisitions, and financing
transactions, including, without limitation, (i) compensation
expenses and (ii) expenses for advisors and representatives such as
investment bankers, consultants, attorneys, and accounting firms.
The compensation expenses may include transition and integration
costs such as retention bonuses and acquisition-related milestone
payments to acquired employees.
Definitions of Non-GAAP
Measures:
(1) Adjusted operating income before depreciation and
amortization ("adjusted OIBDA") is defined by the company as
operating income before depreciation; amortization; stock-based
compensation; restructuring and other exit costs; litigation or
dispute settlement charges or gains; transaction-related costs; and
impairment of goodwill, intangible assets and long-lived assets.
The company's definition of adjusted OIBDA has been modified from
time to time. Management believes that because adjusted OIBDA
excludes (i) certain non-cash expenses (such as depreciation,
amortization, stock-based compensation, and impairment of goodwill,
intangible assets and long-lived assets) and (ii) expenses that are
not reflective of the company's core operating results over time
(such as restructuring and other exit costs, litigation or dispute
settlement charges or gains, and transaction-related costs), this
measure provides investors with additional useful information to
measure the company's financial performance, particularly with
respect to changes in performance from period to period. Management
uses adjusted OIBDA to measure the company's performance. The
company's board of directors has used this measure as a basis in
determining certain compensation incentives for certain members of
the company's management. Adjusted OIBDA is not determined in
accordance with GAAP and should be considered in addition to, not
as a substitute for or superior to, financial measures determined
in accordance with GAAP. A limitation associated with the use of
adjusted OIBDA is that it does not reflect the periodic costs of
certain tangible and intangible assets used in generating revenues
in the company's business. Management evaluates the costs of such
tangible and intangible assets through other financial activities
such as evaluations of capital expenditures and purchase
accounting. An additional limitation associated with this measure
is that it does not include stock-based compensation expenses
related to the company's workforce. Management compensates for this
limitation by providing a summary of stock-based compensation
expenses within the accompanying tables and in the footnotes
accompanying its financial statements. A further limitation
associated with the use of this measure is that it does not reflect
the costs of restructuring and other exit costs, litigation or
dispute settlement charges or gains, transaction-related costs, and
the impairment of goodwill, intangible assets and long-lived
assets. Management compensates for this limitation by providing
supplemental information about such charges, gains and costs within
its financial press releases and SEC filings, when applicable. An
additional limitation associated with the use of this measure is
that the term "adjusted OIBDA" does not have a standardized
meaning. Therefore, other companies may use the same or a similarly
named measure but exclude different items or use different
computations, which may not provide investors a comparable view of
the company's performance in relation to other companies.
Management compensates for this limitation by presenting the most
comparable GAAP measure, operating income, directly ahead of
adjusted OIBDA within its financial press releases and by providing
a reconciliation that shows and describes the adjustments made. A
reconciliation to operating income is provided in the accompanying
tables. In addition, many of the adjustments to our GAAP financial
measures reflect the exclusion of items that are recurring in
nature and will be reflected in our financial results for the
foreseeable future.
Adjusted OIBDA for each of the company's segments is defined by
the company as segment income from operations, as set forth in the
company's Forms 10-K and Forms 10-Q, before stock-based
compensation, restructuring and other exit costs, litigation or
dispute settlement charges or gains, transaction-related costs and
the impairment of goodwill, intangible assets and long-lived
assets. The company's definition of adjusted OIBDA for each of the
company's segments has been modified from time to time. Management
believes that because segment adjusted OIBDA and segment adjusted
OIBDA as a percentage of segment revenues exclude (i) certain
non-cash expenses (such as stock-based compensation, and the
impairment of goodwill, intangible assets and long-lived assets);
and (ii) expenses that are not reflective of the segment's core
operating results over time (such as restructuring and other exit
costs, litigation or dispute settlement charges or gains, and
transaction-related costs), these measures provide investors with
additional useful information to evaluate the company's segment
financial performance, particularly with respect to changes in
performance from period to period. Segment adjusted OIBDA and
segment adjusted OIBDA as a percentage of segment revenues are not
determined in accordance with GAAP and should be considered in
addition to, not as a substitute for or superior to, financial
measures determined in accordance with GAAP. A limitation
associated with these measures is that they do not include
stock-based compensation expenses related to the company's
workforce. Management compensates for this limitation by providing
a summary of stock-based compensation expenses within the
accompanying tables and in the footnotes accompanying its financial
statements. A further limitation associated with the use of these
measures is that they do not reflect the costs of restructuring and
other exit costs, litigation or dispute settlement charges or
gains, transaction-related costs and impairment charges related to
an operating segment. Management compensates for this limitation by
providing supplemental information about such charges, gains and
costs by segment within its financial press releases and SEC
filings, when applicable. A reconciliation to segment income from
operations, its most comparable GAAP measure, is provided in the
accompanying tables.
(2) Adjusted net income is defined by the company as net income
before the after-tax effect of: stock-based compensation;
amortization of intangible assets; impairment of goodwill,
intangible assets and long-lived assets; restructuring and other
exit costs; litigation or dispute settlement charges or gains;
transaction-related costs; and the re-measurement of certain
deferred tax assets. Adjusted diluted net income per common share
includes the adjustment for shares resulting from the elimination
of stock-based compensation. Management believes that adjusted net
income and adjusted diluted net income per common share provide
investors with additional useful information to measure the
company's financial performance, particularly with respect to
changes in performance from period to period, because these
measures are exclusive of (i) certain non-cash expenses (such as
stock-based compensation, amortization of intangible assets, and
the impairment of goodwill, intangible assets and long-lived
assets) and (ii) expenses that are not reflective of the company's
core results over time (such as restructuring and other exit costs,
litigation or dispute settlement charges or gains, and
transaction-related costs). Management also uses adjusted net
income and adjusted diluted net income per common share for this
purpose. Adjusted net income and adjusted diluted net income per
common share are not determined in accordance with GAAP and should
be considered in addition to, not as a substitute for or superior
to, financial measures determined in accordance with GAAP. The
limitations of adjusted net income and adjusted diluted net income
per common share are that, similar to adjusted OIBDA, they do not
include certain costs, and the terms "adjusted net income" and
"adjusted diluted net income per common share" do not have
standardized meanings. Therefore, other companies may use the same
or similarly named measures but exclude different items or use
different computations, which may not provide investors a
comparable view of the company's performance in relation to other
companies. Management compensates for this limitation by presenting
the most comparable GAAP measures, net income and diluted net
income per common share, directly ahead of adjusted net income and
adjusted diluted net income per common share within its financial
press releases and by providing a reconciliation of adjusted net
income that shows and describes the adjustments made. A
reconciliation of adjusted net income to net income, its most
comparable GAAP measure, is provided in the accompanying
tables.
(3) Free cash flow is defined by the company as net cash
provided by operating activities, less capital expenditures and
cash received for litigation or dispute settlement gains, and plus
the excess tax benefits from equity awards, cash paid for
restructuring and other exit costs, cash paid for litigation or
dispute settlement charges, and cash paid for transaction-related
costs. Management believes that free cash flow provides investors
with additional useful information to measure operating liquidity
because it reflects the company's operating cash flows after
investing in capital assets and prior to cash paid for
restructuring and other exit costs, cash paid or received for
litigation or dispute settlement charges or gains, and cash paid
for transaction-related costs. It also fully reflects the tax
benefits realized by the company from stock-based compensation.
This measure is used by management, and may also be useful for
investors, to assess the company's ability to pay its quarterly
dividend, repay debt obligations, generate cash flow for a variety
of strategic opportunities, including reinvestment in the business,
and effect potential acquisitions and share repurchases. Free cash
flow is not determined in accordance with GAAP and should be
considered in addition to, not as a substitute for or superior to,
measures determined in accordance with GAAP. A limitation of free
cash flow is that it does not represent the total increase or
decrease in cash during the period. An additional limitation
associated with the use of this measure is that the term "free cash
flow" does not have a standardized meaning. Therefore, other
companies may use the same or a similarly named measure but exclude
different items or use different computations, which may not
provide investors a comparable view of the company's performance in
relation to other companies. Management compensates for this
limitation by presenting the most comparable GAAP measure, net cash
provided by operating activities, directly ahead of free cash flow
within its financial press releases and by providing a
reconciliation that shows and describes the adjustments made. A
reconciliation to net cash provided by operating activities is
provided in the accompanying tables.
(4) Consumer orders are orders delivered during the period that
originated in the U.S. and Canada, primarily from the www.ftd.com
and www.ftd.ca websites and the 1-800-SEND-FTD telephone number,
and in the U.K. and the Republic of Ireland, primarily from the
www.interflora.co.uk and www.interflora.ie websites and various
telephone numbers. The number of consumer orders is not adjusted
for non-delivered orders that are refunded after the scheduled
delivery. Orders originating with a florist or other retail
location for delivery to consumers are not included.
Average order value represents the average U.S. Dollar amount
received for consumer orders delivered during a period. This
average U.S. Dollar amount is determined after translating the
local currency amounts received for orders delivered principally in
the U.K. and the Republic of Ireland into U.S. Dollars. Average
order value includes merchandise revenues and shipping and service
fees paid by the consumer, less discounts and refunds (net of
refund-related fees charged to floral network members).
(5) A pay account is defined as a member who has paid for a
subscription to a Content & Media or Communications service,
and whose subscription has not terminated or expired. A
subscription provides the member with access to our service for a
specific term (for example, a month or a year) and may be renewed
upon the expiration of each term. One-time purchases of our
services, such as Memory Lane's one-day All-Access Pass, are not
considered subscriptions and thus, are not included in the pay
accounts metric. A pay account does not equate to a unique
subscriber since one subscriber could have several pay accounts. At
any point in time, our pay account base includes a number of
accounts receiving a free period of service as either a promotion
or retention tool and a number of accounts that have notified us
that they are terminating their service but whose service remains
in effect.
Content & Media segment active accounts are defined as the
sum of all pay accounts as of the date presented; the monthly
average for the period of all free accounts who have visited the
company's domestic or international online nostalgia websites
(excluding The Names Database) at least once during the period; and
the monthly average for the period of all online loyalty marketing
members who have earned or redeemed points during such period.
Communications segment active accounts include all Communications
segment pay accounts as of the date presented combined with the
number of free Internet access and email accounts that logged on to
the company's services at least once during the preceding 31
days.
(6) ARPU is calculated by dividing services revenues generated
from the pay accounts of our Content & Media or Communications
segment, as applicable, for a period (after translation into U.S.
Dollars) by the average number of segment pay accounts for that
period, divided by the number of months in that period.
(7) Churn is calculated as the total number of pay accounts that
terminated or expired in a period divided by the average number of
pay accounts for that period, divided by the number of months in
that period.
About United
Online®:
United Online, Inc. (Nasdaq: UNTD), through its operating
subsidiaries, is a leading provider of consumer products and
services over the Internet, where their respective brands have
attracted a large online audience that includes more than 55
million registered accounts. The company's FTD segment provides
floral and related products and services (FTD and Interflora) for
consumers and retail florists, as well as other retail locations
offering floral and related products and services. The company's
Content & Media segment provides online nostalgia products and
services (Memory Lane, Classmates, StayFriends, and Trombi) and
online loyalty marketing services (MyPoints). Its primary
Communications segment service is Internet access (NetZero and
Juno).
Cautionary Information Regarding
Forward-Looking Statements:
This release contains forward-looking statements within the
meaning of the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995, as amended, based on our current
expectations, estimates and projections about our operations,
industry, financial condition, performance, results of operations,
and liquidity. Statements containing words such as “may,”
“believe,” “anticipate,” “expect,” “intend,” “plan,” “project,”
“projections,” “business outlook,” “estimate,” or similar
expressions constitute forward-looking statements. These
forward-looking statements include, but are not limited to,
statements about future financial performance; revenues; operating
expenses; operating income; capital expenditures; depreciation and
amortization; stock-based compensation; and planned business
initiatives, products, services and features. Potential factors
that could cause actual results to differ materially from those in
the forward-looking statements include, among others: risks
associated with the launch or commercialization of new products,
services or features or the success of new business models; the
severity and duration of current economic conditions; the effect of
competition; risks associated with litigation and governmental
regulations or investigations, including reviews of business
practices such as marketing, billing, renewal, and post-transaction
sales practices; the company’s inability to maintain or increase
the number of free and pay accounts, visitors to its websites, and
members of the floral network; risks associated with the
procurement of goods and services; problems associated with the
company’s operations, systems or technologies; changes in marketing
conditions and laws; the company’s inability to maintain or
increase its advertising revenues; the company’s inability to
enforce or defend its ownership and use of intellectual property;
financial market risk resulting from fluctuations in foreign
currency exchange rates, particularly the British Pound and Euro;
changes in stock-based compensation due to future equity issuances
or other reasons; changes in amortization or depreciation due to a
variety of factors; potential write down, reserve against or
impairment of assets including receivables, goodwill, intangible
assets or other assets; changes in the floral industry; the
company’s inability to retain key customers, vendors and personnel;
the company’s inability to achieve the expected benefits of its
reductions-in-force or any other cost-reduction initiatives; that
the company will incur restructuring and other exit costs; changes
in tax laws, the company’s business or other factors that would
impact anticipated tax benefits; the impact of, and restrictions
associated with, the company’s indebtedness; as well as the risk
factors disclosed in the company’s filings with the Securities and
Exchange Commission (www.sec.gov),
including, without limitation, information under the captions
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and “Risk Factors.” Readers are cautioned
not to place undue reliance on these forward-looking statements,
which reflect management’s analysis only as the date hereof. Any
such forward-looking statements are not guarantees of future
performance or results and involve risks and uncertainties that may
cause actual performance and results to differ materially from
those predicted. Reported results should not be considered an
indication of future performance. Except as required by law, the
company undertakes no obligation to publicly release the results of
any revision to these forward-looking statements that may be made
to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
UNITED ONLINE, INC. Unaudited Condensed Consolidated
Statements of Operations (in thousands, except per share
amounts)
Quarter Ended Year Ended December 31,
December 31, 2011 2010
2011 2010
Revenues: Products $ 115,037 $ 109,817 $ 472,749 $ 434,035 Services
102,884 122,784 424,936
486,518 Total revenues 217,921 232,601 897,685
920,553 Operating expenses:
Cost of revenues-products(a)
85,410 83,164 351,946 327,963
Cost of revenues-services(a)
23,505 26,000 92,538 101,688 Sales and marketing(a) 36,499 41,939
166,760 175,865 Technology and development(a) 11,892 13,052 51,068
55,381 General and administrative(a) 24,474 27,465 104,939 112,041
Amortization of intangible assets 7,541 7,812 30,455 32,110
Restructuring and other exit costs 4,926 1,754
5,677 2,815 Total operating
expenses 194,247 201,186 803,383
807,863 Operating income 23,674 31,415
94,302 112,690 Interest income 396 414 1,536 1,673 Interest
expense (3,511 ) (5,966 ) (23,075 ) (24,900 ) Other income, net
426 357 2,643 452
Income before income taxes 20,985 26,220 75,406
89,915 Provision for income taxes 8,120 9,870
23,676 36,228 Net income $
12,865 $ 16,350 $ 51,730 $ 53,687
Income allocated to participating securities (392 )
(863 ) (1,993 ) (3,233 ) Net income attributable to
common stockholders $ 12,473 $ 15,487 $ 49,737
$ 50,454 Basic net income per common share $ 0.14
$ 0.18 $ 0.56 $ 0.58 Shares used to
calculate basic net income per common share 89,192
86,280 88,478 86,429
Diluted net income per common share $ 0.14 $ 0.18 $
0.56 $ 0.58 Shares used to calculate diluted net
income per common share 89,251 86,848
88,631 87,062 Shares outstanding
at end of period 89,423 86,745
89,423 86,745 (a) Stock-based
compensation was allocated as follows: Cost of revenues-products $
9 $ 4 $ 46 $ 41 Cost of revenues-services 71 76 354 502 Sales and
marketing 562 778 2,329 3,957 Technology and development 465 559
2,159 3,109 General and administrative 2,592
4,713 12,325 19,434 Total
stock-based compensation $ 3,699 $ 6,130 $ 17,213
$ 27,043
UNITED ONLINE, INC.
Unaudited Reconciliations of Non-GAAP Financial Measures
(in thousands)
Unaudited Reconciliation of Operating Income to
Adjusted OIBDA(1) Quarter Ended Year
Ended December 31, December 31,
2011 2010 2011
2010 Operating income $
23,674 $ 31,415 $ 94,302 $ 112,690 Depreciation 6,736 6,244 25,854
26,412 Amortization of intangible assets 7,860
7,898 31,506 32,233 Operating
income before depreciation and amortization 38,270 45,557 151,662
171,335 Stock-based compensation 3,699 6,130 17,213 27,043
Restructuring and other exit costs 4,926 1,754 5,677 2,815
Litigation or dispute settlement charges 75 - 2,999 1,367
Transaction-related costs - - -
1,989 Adjusted OIBDA $ 46,970 $ 53,441
$ 177,551 $ 204,549
Unaudited
Reconciliation of Segment Income from Operations to Segment
Adjusted OIBDA(1) Quarter Ended Year
Ended December 31, December 31,
2011 2010 2011
2010 FTD: Segment income
from operations $ 19,879 $ 18,316 $ 78,660 $ 70,198 Stock-based
compensation 983 770 3,878 3,193 Restructuring and other exit costs
876 422 876 1,574 Litigation or dispute settlement charges
75 - 75 400
Segment adjusted OIBDA $ 21,813 $ 19,508 $ 83,489
$ 75,365
Content & Media: Segment
income from operations $ 12,593 $ 15,820 $ 43,450 $ 56,618
Stock-based compensation 650 1,222 3,301 4,793 Restructuring and
other exit costs (benefits) 1,616 - 1,616 (91 ) Litigation or
dispute settlement charges - -
2,924 967 Segment adjusted OIBDA $ 14,859
$ 17,042 $ 51,291 $ 62,287
Communications: Segment income from operations $ 14,084 $
18,583 $ 61,196 $ 77,092 Stock-based compensation 601 1,326 2,493
6,773 Restructuring and other exit costs 648
1,332 1,399 1,332 Segment
adjusted OIBDA $ 15,333 $ 21,241 $ 65,088 $
85,197 Unallocated corporate expenses(a) $ (5,035 ) $
(4,350 ) $ (22,317 ) $ (18,300 ) Consolidated adjusted OIBDA
$ 46,970 $ 53,441 $ 177,551 $ 204,549
(a) Effective the first quarter of
2011, the company modified its segment reporting to separately
report unallocated corporate expenses. Historically, such expenses
were fully allocated to the company's reportable segments.
UNITED ONLINE, INC. Unaudited Reconciliation of
Net Income to Adjusted Net Income(2) (in thousands,
except per share amounts)
Quarter Ended Year Ended
December 31, December 31, 2011
2010 2011
2010 Net income $ 12,865 $ 16,350 $
51,730 $ 53,687 Income allocated to participating securities
(392 ) (863 ) (1,993 ) (3,233 ) Net income
attributable to common stockholders 12,473 15,487 49,737 50,454
Adjustments: Stock-based compensation 3,699 6,130 17,213
27,043 Amortization of intangible assets 7,860 7,898 31,506 32,233
Restructuring and other exit costs 4,926 1,754 5,677 2,815
Litigation or dispute settlement charges 75 - 2,999 1,117
Transaction-related costs(a) - -
6,078 1,989 29,033 31,269 113,210 115,651
Income tax effect of adjusting entries (6,323 )
(4,786 ) (21,353 ) (19,659 ) Adjusted net
income attributable to common stockholders $ 22,710 $ 26,483
$ 91,857 $ 95,992 GAAP net income per
common share: Basic net income per common share $ 0.14 $
0.18 $ 0.56 $ 0.58 Shares used to calculate
basic net income per common share 89,192
86,280 88,478 86,429 Diluted net
income per common share $ 0.14 $ 0.18 $ 0.56 $
0.58 Shares used to calculate diluted net income per common
share 89,251 86,848 88,631
87,062 Adjusted net income per common
share: Adjusted basic net income per common share $ 0.25 $
0.31 $ 1.04 $ 1.11 Shares used to calculate
adjusted basic net income per common share 89,192
86,280 88,478 86,429
Adjusted diluted net income per common share $ 0.25 $ 0.30
$ 1.03 $ 1.10 Shares used to calculate
adjusted diluted net income per common share 89,449
86,903 88,788 87,155
(a) Includes a $6.1 million loss on
extinguishment recorded in the quarter ended June 30, 2011 in
connection with the refinancing of FTD's credit facilities and a
$2.0 million charge recorded in the quarter ended March 31, 2010
related to a potential transaction that failed to consummate.
UNITED ONLINE, INC. Unaudited Condensed
Consolidated Balance Sheets (in thousands)
December 31, December 31, 2011
2010 ASSETS
Cash and cash equivalents $ 136,105 $ 100,264 Accounts receivable,
net 43,177 49,797 Deferred tax assets, net 15,587 14,200 Property
and equipment, net 62,460 63,893 Goodwill and intangible assets,
net 693,279 722,184 Other assets 45,749 41,820 Total
assets $ 996,357 $ 992,158 LIABILITIES AND STOCKHOLDERS'
EQUITY Accounts payable $ 64,649 $ 71,659 Accrued liabilities
54,850 48,881 Member redemption liability 22,453 24,866 Deferred
revenue 57,915 74,694 Debt, net of discounts 261,124 258,084
Deferred tax liabilities, net 44,098 42,677 Other liabilities
11,133 16,816 Total liabilities 516,222
537,677 Stockholders' equity 480,135 454,481
Total liabilities and stockholders' equity $ 996,357 $ 992,158
UNITED ONLINE, INC. Unaudited Condensed
Consolidated Statements of Cash Flows (in thousands)
Quarter
Ended Year Ended December 31, December 31,
2011 2010
2011 2010 CASH FLOWS FROM
OPERATING ACTIVITIES: Net income $ 12,865 $ 16,350 $ 51,730 $
53,687 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation, amortization and stock-based
compensation 18,295 20,272 74,573 85,688 Provision for doubtful
accounts receivable 1,014 1,379 2,808 5,449 Accretion of discounts
and amortization of debt issue costs 203 1,109 1,484 4,446 Loss on
extinguishment of debt - - 6,078 - Deferred taxes and other 455
4,742 (503 ) 628 Tax shortfalls from equity awards (568 ) 131 (711
) (390 ) Excess tax benefits from equity awards - (657 ) (265 )
(1,099 ) Change in operating assets and liabilities: Accounts
receivable (6,081 ) (6,128 ) 3,736 286 Other assets (8,003 ) (8,151
) (3,100 ) (871 ) Accounts payable and accrued liabilities 26,063
20,422 (370 ) (82 ) Member redemption liability (344 ) 791 (2,412 )
(890 ) Deferred revenue (4,667 ) (345 ) (16,322 ) (1,969 ) Other
liabilities 151 (1,533 ) (5,609 )
(1,080 ) Net cash provided by operating activities
39,383 48,382 111,117
143,803 CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (5,341 ) (8,205 ) (24,552 )
(27,269 ) Purchases of rights, content and intellectual property
(408 ) (2,517 ) (3,313 ) (4,722 ) Proceeds from sales of
investments 403 - 403 - Proceeds from sales of assets, net -
16 221 235 Net
cash used for investing activities (5,346 ) (10,706 )
(27,241 ) (31,756 ) CASH FLOWS FROM FINANCING
ACTIVITIES: Proceeds from term loan - - 261,325 - Payments on term
loans (662 ) (20,000 ) (265,950 ) (74,819 ) Payments for debt issue
costs - - (778 ) - Proceeds from exercises of stock options 4 1,444
37 1,698 Proceeds from employee stock purchase plans 1,558 1,828
3,907 4,440 Repurchases of common stock (764 ) (1,440 ) (7,743 )
(20,565 ) Dividends and dividend equivalents paid on outstanding
shares and restricted stock units (9,267 ) (9,162 ) (37,213 )
(36,966 ) Excess tax benefits from equity awards -
657 265 1,099 Net cash
used for financing activities (9,131 ) (26,673 )
(46,150 ) (125,113 ) Effect of foreign
currency exchange rate changes on cash and cash equivalents (1,643
) (419 ) (1,885 ) (2,179 ) Change in cash and cash
equivalents 23,263 10,584 35,841 (15,245 ) Cash and cash
equivalents, beginning of period 112,842
89,680 100,264 115,509 Cash and
cash equivalents, end of period $ 136,105 $ 100,264 $
136,105 $ 100,264
UNITED ONLINE,
INC. Unaudited Reconciliation of Net Cash Provided by
Operating Activities to Free Cash Flow(3) (in
thousands)
Quarter Ended Year Ended December 31,
December 31, 2011 2010
2011 2010
Net cash provided by operating activities $ 39,383 $ 48,382
$ 111,117 $ 143,803 Adjustments: Capital expenditures (5,341 )
(8,205 ) (24,552 ) (27,269 ) Excess tax benefits from equity awards
- 657 265 1,099 Cash paid for restructuring and other exit costs
886 380 2,923 1,543 Cash paid for litigation or dispute settlement
charges 320 - 247 1,102 Cash paid for transaction-related costs
- - - 1,994
Free cash flow $ 35,248 $ 41,214 $ 90,000 $
122,272
UNITED ONLINE, INC.
Unaudited Segment Information (in thousands)
Quarter
Ended Year Ended December 31, December 31,
2011
2010(a)
2011
2010(a)
FTD
Revenues: Products $ 114,520 $ 109,817 $ 471,885 $ 434,035 Services
28,784 30,220 115,342 119,641 Advertising -
137 22 900 Total revenues
143,304 140,174 587,249 554,576 Operating expenses: Cost of
revenues 90,164 87,902 371,716 347,565 Sales and marketing 22,851
22,689 97,605 94,230 Technology and development 3,627 3,320 14,450
13,890 General and administrative 8,405 9,420 32,776 34,912
Amortization of intangible assets 6,275 6,280 25,188 26,008
Restructuring and other exit costs 876 422
876 1,574 Total operating
expenses 132,198 130,033 542,611
518,179 Operating income 11,106 10,141
44,638 36,397 Depreciation 2,498 1,895 8,834 7,793
Amortization of intangible assets 6,275 6,280
25,188 26,008 Segment income
from operations 19,879 18,316 78,660 70,198 Stock-based
compensation 983 770 3,878 3,193 Restructuring and other exit costs
876 422 876 1,574 Litigation or dispute settlement charges
75 - 75 400
Segment adjusted OIBDA $ 21,813 $ 19,508 $ 83,489
$ 75,365
Content &
Media
Revenues: Products $ 517 $ - $ 864 $ - Services 28,388 33,687
123,992 134,055 Advertising 16,760 19,566
60,619 67,589 Total revenues
45,665 53,253 185,475 201,644 Operating expenses: Cost of
revenues 11,058 12,075 38,765 41,563 Sales and marketing 11,867
15,331 59,913 63,047 Technology and development 5,474 6,245 25,113
24,695 General and administrative 6,217 6,542 28,351 26,864
Amortization of intangible assets 1,052 1,270 4,358 5,054
Restructuring and other exit costs (benefits) 1,616
- 1,616 (91 ) Total operating
expenses 37,284 41,463 158,116
161,132 Operating income 8,381 11,790
27,359 40,512 Depreciation 2,841 2,674 10,682 10,929
Amortization of intangible assets 1,371 1,356
5,409 5,177 Segment income from
operations 12,593 15,820 43,450 56,618 Stock-based compensation 650
1,222 3,301 4,793 Restructuring and other exit costs (benefits)
1,616 - 1,616 (91 ) Litigation or dispute settlement charges
- - 2,924 967
Segment adjusted OIBDA $ 14,859 $ 17,042 $ 51,291
$ 62,287
Communications
Revenues: Services $ 22,621 $ 30,163 $ 100,770 $ 135,342
Advertising 6,674 9,545 25,762
31,811 Total revenues 29,295 39,708 126,532
167,153 Operating expenses: Cost of revenues 7,825 9,426
34,637 41,185 Sales and marketing 1,992 4,214 10,179 20,746
Technology and development 2,791 3,487 11,505 16,796 General and
administrative 3,301 4,244 13,818 17,204 Amortization of intangible
assets 214 262 909 1,048 Restructuring and other exit costs
648 1,332 1,399 1,332
Total operating expenses 16,771 22,965
72,447 98,311 Operating
income 12,524 16,743 54,085 68,842 Depreciation 1,346 1,578
6,202 7,202 Amortization of intangible assets 214
262 909 1,048 Segment
income from operations 14,084 18,583 61,196 77,092 Stock-based
compensation 601 1,326 2,493 6,773 Restructuring and other exit
costs 648 1,332 1,399
1,332 Segment adjusted OIBDA $ 15,333 $ 21,241
$ 65,088 $ 85,197 Total segment
adjusted OIBDA $ 52,005 $ 57,791 $ 199,868 $
222,849 Reconciliation of segment revenues to
consolidated revenues: FTD $ 143,304 $ 140,174 $ 587,249 $ 554,576
Content & Media 45,665 53,253 185,475 201,644 Communications
29,295 39,708 126,532 167,153 Intersegment eliminations (343
) (534 ) (1,571 ) (2,820 ) Consolidated
revenues $ 217,921 $ 232,601 $ 897,685 $
920,553 Reconciliation of segment operating expenses
to consolidated operating expenses: FTD $ 132,198 $ 130,033 $
542,611 $ 518,179 Content & Media 37,284 41,463 158,116 161,132
Communications 16,771 22,965 72,447 98,311 Unallocated corporate
expenses(a) 8,337 7,259 31,780 33,061 Intersegment eliminations
(343 ) (534 ) (1,571 ) (2,820 )
Consolidated operating expenses $ 194,247 $ 201,186 $
803,383 $ 807,863 Reconciliation of segment
income from operations to consolidated operating income: FTD $
19,879 $ 18,316 $ 78,660 $ 70,198 Content & Media 12,593 15,820
43,450 56,618 Communications 14,084 18,583
61,196 77,092 Total segment
income from operations 46,556 52,719 183,306 203,908 Depreciation
(6,736 ) (6,244 ) (25,854 ) (26,412 ) Amortization of intangible
assets (7,860 ) (7,898 ) (31,506 ) (32,233 ) Unallocated corporate
expenses, excluding depreciation(a) (8,286 ) (7,162 )
(31,644 ) (32,573 ) Consolidated operating income $
23,674 $ 31,415 $ 94,302 $ 112,690
Reconciliation of segment adjusted OIBDA to consolidated
adjusted OIBDA: FTD adjusted OIBDA $ 21,813 $ 19,508 $ 83,489 $
75,365 Content & Media adjusted OIBDA 14,859 17,042 51,291
62,287 Communications adjusted OIBDA 15,333
21,241 65,088 85,197 Total
segment adjusted OIBDA 52,005 57,791 199,868 222,849 Unallocated
corporate expenses(a) (5,035 ) (4,350 )
(22,317 ) (18,300 ) Consolidated adjusted OIBDA $ 46,970
$ 53,441 $ 177,551 $ 204,549
(a) Effective the first quarter of 2011, the
company modified its segment reporting to separately report
unallocated corporate expenses. Historically, such expenses were
fully allocated to the company's reportable segments.
UNITED ONLINE, INC. Unaudited Selected Quarterly
Historical Key Metrics (a)
December
31, September 30, June 30, March 31,
December 31, 2011 2011 2011 2011
2010 Consolidated: Revenues (in thousands) $
217,921 $ 182,694 $ 255,565 $ 241,505 $ 232,601
FTD:
Segment revenues (in thousands) $ 143,304 $ 108,747 $ 176,299 $
158,899 $ 140,174 % of consolidated revenues 66 % 60 % 69 % 66 % 60
% Consumer orders(4) (in thousands) 1,615 1,104 2,167 1,742
1,612 Average order value(4) $ 62.31 $ 63.46 $ 60.45 $ 63.28 $
60.43 Average foreign currency exchange rate: GBP to USD 1.57 1.61
1.63 1.61 1.58
Content & Media: Segment revenues
(in thousands) $ 45,665 $ 44,070 $ 47,427 $ 48,313 $ 53,253 % of
consolidated revenues 21 % 24 % 19 % 20 % 23 % Pay
accounts(5) (in thousands) 3,484 3,780 4,007 4,260 4,499 Segment
churn(7) 4.1 % 3.9 % 3.8 % 3.9 % 4.1 % ARPU(6) $ 2.60 $ 2.64 $ 2.60
$ 2.47 $ 2.42 Segment active accounts(5) (in millions) 10.3 11.9
12.5 13.6 13.7 Currency exchange rate: EUR to USD 1.35 1.41 1.44
1.37 1.36
Communications: Segment revenues (in
thousands) $ 29,295 $ 30,260 $ 32,279 $ 34,698 $ 39,708 % of
consolidated revenues 13 % 17 % 13 % 14 % 17 % Pay
accounts(5) (in thousands): Access 535 577 622 675 732 Other
259 266 272 279
288 Total Communications pay accounts 794
843 894 954
1,020 Segment churn(7) 3.4 % 3.4 % 3.5 % 3.8 % 3.8 %
ARPU(6) $ 9.09 $ 9.14 $ 9.28 $ 9.33 $ 9.46 Segment active
accounts(5) (in millions) 1.5 1.6 1.7 1.7 1.8
(a) More information on
the financial results for these quarters can be found in the
company's filings with the Securities and Exchange Commission.
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