United Online Reports First Quarter 2013 Results
United Online Reports First Quarter 2013 Results
Filed an Initial Registration Statement on Form 10 for FTD Companies, Inc. as Further Progress Continues Toward Planned Spin Off
Consolidated Revenues Increase 2% Year Over Year to $247.4 Million
Consolidated Operating Income of $16.0 Million and Consolidated Adjusted OIBDA of $33.1 Million
FTD Segment Revenues and Segment Adjusted OIBDA Reach Highest Levels Since Acquisition in 2008
WOODLAND HILLS, Calif.--(BUSINESS WIRE)-- United Online, Inc. (NAS: UNTD) , a leading provider of consumer products and services over the Internet, today reported financial results for its first quarter ended March 31, 2013.
"Today, FTD Companies, Inc. filed an initial registration statement on Form 10 with the SEC in connection with United Online's previously announced plan to spin off the FTD business," said Mark R. Goldston, Chairman, President and Chief Executive Officer. "We continue to be on track to complete FTD's tax-free spin off as an independent, publicly-traded company by the end of the third quarter of 2013."
"Today, I also am announcing that I will be leaving the company at the completion of the FTD spin off," Goldston said. "At that point, our stockholders will own shares in two publicly-traded companies: FTD Companies and United Online, with the former consisting of FTD and Interflora and the latter consisting of what today are the Communications and Content & Media segments. After more than 14 years as Chairman and CEO of United Online and its predecessor, NetZero, a raw startup that I joined back in March 1999, we have built an outstanding company that has generated in excess of $1.6 billion of adjusted OIBDA since 2002, distributed $359 million in cash dividends to stockholders and amassed a registered member base exceeding 100 million people around the world with our portfolio of outstanding brands. Given the very talented and experienced senior management teams we have at United Online and FTD Companies and my extreme confidence in the Presidents of the various business units, I feel that when the tax-free spin off of FTD Companies is completed, it would be the appropriate time for me to move on and pursue career opportunities outside of United Online. After the spin off, Rob Apatoff, the current FTD President, will become President and CEO of FTD Companies. In connection with the spin off of FTD, the United Online Board of Directors will conduct a search for a new CEO of United Online."
"First quarter 2013 consolidated revenues increased 2% year over year and were near the high end of our guidance range, while adjusted OIBDA was above our guidance range," said Neil P. Edwards, Executive Vice President and Chief Financial Officer.
"FTD segment revenues and segment adjusted OIBDA reached their highest levels since FTD was acquired by United Online in August 2008. FTD segment revenues and segment adjusted OIBDA increased 8% and 9%, respectively, compared to the year-ago period. Consumer orders increased 10% compared to the year-ago period, including orders from the Flying Flowers and Flowers Direct businesses acquired in April 2012," said Goldston.
"In our Content & Media segment, pay accounts declined by 78,000 during the quarter, our lowest decline in pay accounts since the second quarter of 2010. The quarterly net decrease in segment pay accounts has now improved for five consecutive quarters. We have seen a significant increase in the number of photos, completed profiles and other user-generated content on our Classmates website, which has resulted in higher levels of user engagement, improved email response rates, better conversion from free to pay, and an overall reduction in churn. This improvement in user engagement began during the second half of 2012 and has continued throughout Q1 2013," said Goldston.
"In our Communications segment, NetZero 4G mobile broadband accounts grew 28% from 32,000 at December 31, 2012 to 41,000 at March 31, 2013, and have provided us with an opportunity to expand the NetZero brand name into a major growth market," added Goldston. "The continued operation of the dial-up business combined with the exciting new growth potential of our NetZero 4G mobile broadband business present an opportunity for the Communications segment to pursue a revenue growth strategy for the first time in many years."
Summary Results for First Quarter Ended March 31, 2013:
The following table summarizes key financial results for the first quarter ended March 31, 2013:
(in millions, except per share amounts and percentages) | |||||||||||||
Financial Highlights | Q1 2013 | Q1 2012 | % Change | ||||||||||
FTD revenues | $ | 190.3 | $ | 176.4 | 8 | % | |||||||
Content & Media revenues | 32.8 | 39.4 | (17 | %) | |||||||||
Communications revenues | 24.6 | 26.8 | (8 | %) | |||||||||
Intersegment eliminations | (0.4 | ) | (0.4 | ) | (1 | %) | |||||||
Consolidated revenues | $ | 247.4 | $ | 242.3 | 2 | % | |||||||
GAAP operating income | $ | 16.0 | $ | 21.2 | (25 | %) | |||||||
Adjusted OIBDA(1) | $ | 33.1 | $ | 39.1 | (15 | %) | |||||||
GAAP net income attributable to common stockholders | $ | 7.9 | $ | 11.2 | (29 | %) | |||||||
GAAP diluted net income per common share | $ | 0.09 | $ | 0.12 | (25 | %) | |||||||
Adjusted net income attributable to common stockholders(2) | $ | 15.0 | $ | 19.1 | (22 | %) | |||||||
Adjusted diluted net income per common share(2) | $ | 0.16 | $ | 0.21 | (24 | %) | |||||||
Consolidated revenues were $247.4 million, a 2% increase compared to the year-ago quarter.
GAAP operating income was $16.0 million compared to GAAP operating income of $21.2 million in the year-ago quarter.
Consolidated adjusted OIBDA(1) was $33.1 million, a decrease of 15% versus the year-ago quarter.
Interest expense was $3.2 million, a decrease of 8% compared to the year-ago quarter.
The effective income tax rate was 39%, versus 37% in the year-ago quarter.
GAAP diluted net income per common share was $0.09 versus $0.12 in the year-ago quarter.
Adjusted diluted net income per common share(2) was $0.16 versus $0.21 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 March 31, 2013 were $15.1 million and $12.8 million, respectively, decreases of 10% and 17%, respectively, compared to the year-ago quarter.
Cash and cash equivalents at March 31, 2013 were $132.3 million, compared to $136.4 million at December 31, 2012.
Net debt at March 31, 2013 was $111.8 million, compared to $107.6 million at December 31, 2012. The company defines net debt as total debt, net of discounts, less cash and cash equivalents.
The company paid $9.4 million in cash dividends during the quarter.
In April 2013, the company's Board of Directors declared a quarterly cash dividend of $0.10 per share of common stock that is payable on May 31, 2013 to stockholders of record on May 14, 2013.
Segment Results for First Quarter Ended March 31, 2013:
FTD:
(in millions, except percentages and metrics) | |||||||||||||
Financial Highlights | Q1 2013 | Q1 2012 | % Change | ||||||||||
Products revenues | $ | 153.2 | $ | 141.4 | 8 | % | |||||||
Services revenues | 37.1 | 35.0 | 6 | % | |||||||||
Segment revenues | $ | 190.3 | $ | 176.4 | 8 | % | |||||||
Segment income from operations | $ | 26.7 | $ | 24.1 | 11 | % | |||||||
Segment adjusted OIBDA(1) | $ | 27.8 | $ | 25.5 | 9 | % | |||||||
as a % of segment revenues(1) | 14.6 | % | 14.4 | % | |||||||||
Metrics Highlights | Q1 2013 | Q1 2012 | % Change | ||||||||||
Consumer orders(4) (in thousands) | 2,204 | 1,997 | 10 | % | |||||||||
Average order value(4) | $ | 61.01 | $ | 62.91 | (3 | %) | |||||||
British Pound / U.S. Dollar exchange rate (average) | 1.54 | 1.58 | (3 | %) | |||||||||
Segment revenues were $190.3 million, an increase of 8% versus the year-ago quarter. Excluding the unfavorable impact of foreign currency exchange rates, segment revenues increased 9% versus the year-ago quarter.
Segment income from operations was $26.7 million, an increase of 11% versus the year-ago quarter.
Segment adjusted OIBDA(1) was $27.8 million, an increase of 9% versus the year-ago quarter. Excluding the unfavorable impact of foreign currency exchange rates, segment adjusted OIBDA increased 10% versus the year-ago quarter.
Consumer orders(4) were 2.2 million, an increase of 10% versus the year-ago quarter. Excluding consumer orders from the Flying Flowers and Flowers Direct businesses acquired in April 2012, consumer orders increased 5% compared to the year-ago quarter.
Average order value(4) ("AOV") was $61.01, a decrease of 3% compared to the year-ago quarter. Excluding the impact of foreign currency exchange rates and consumer orders from the Flying Flowers and Flowers Direct businesses acquired in April 2012, which have lower AOVs, AOV increased slightly compared to the year-ago quarter.
Content & Media:
(in millions, except percentages and metrics) | |||||||||||||
Financial Highlights | Q1 2013 | Q1 2012 | % Change | ||||||||||
Products revenues | $ | 0.6 | $ | 0.9 | (31 | %) | |||||||
Services revenues | 21.2 | 25.8 | (18 | %) | |||||||||
Advertising revenues | 11.0 | 12.8 | (13 | %) | |||||||||
Segment revenues | $ | 32.8 | $ | 39.4 | (17 | %) | |||||||
Segment income from operations | $ | 5.8 | $ | 7.3 | (21 | %) | |||||||
Segment adjusted OIBDA(1) | $ | 3.7 | $ | 7.9 | (53 | %) | |||||||
as a % of segment revenues(1) | 11.3 | % | 20.0 | % | |||||||||
Metrics Highlights | Q1 2013 | Q1 2012 | % Change | ||||||||||
Segment pay accounts(5) (in thousands) | 2,786 | 3,293 | (15 | %) | |||||||||
Net quarterly decline in segment pay accounts(5) (in thousands) | (78 | ) | (191 | ) | 59 | % | |||||||
Segment active accounts(5) (in millions) | 11.4 | 11.3 | 1 | % | |||||||||
ARPU(6) | $ | 2.48 | $ | 2.54 | (2 | %) | |||||||
Euro / U.S. Dollar Exchange Rate (average) | 1.32 | 1.31 | (1 | %) | |||||||||
Segment revenues were $32.8 million, a decrease of 17% versus the year-ago quarter.
Segment income from operations was $5.8 million, compared to $7.3 million in the year-ago quarter.
Segment adjusted OIBDA was $3.7 million, a decrease of 53% versus the year-ago quarter.
Segment pay accountsat March 31, 2013 were 2.8 million, a decrease of 15% versus March 31, 2012.
Segment ARPU(6) was $2.48, a decline of 2% versus the year-ago quarter.
Communications:
(in millions, except percentages and metrics) | |||||||||||||
Financial Highlights | Q1 2013 | Q1 2012 | % Change | ||||||||||
Products revenues | $ | 1.3 | $ | 0.3 | 325 | % | |||||||
Services revenues | 17.8 | 21.1 | (15 | %) | |||||||||
Advertising revenues | 5.5 | 5.4 | 3 | % | |||||||||
Segment revenues | $ | 24.6 | $ | 26.8 | (8 | %) | |||||||
Segment income from operations | $ | 6.6 | $ | 10.4 | (36 | %) | |||||||
Segment adjusted OIBDA(1) | $ | 7.1 | $ | 11.0 | (35 | %) | |||||||
as a % of segment revenues(1) | 28.8 | % | 41.1 | % | |||||||||
Metrics Highlights | Q1 2013 | Q1 2012 | % Change | ||||||||||
Segment pay accounts(5) (in thousands) | 626 | 747 | (16 | %) | |||||||||
ARPU(6) | $ | 9.21 | $ | 8.99 | 2 | % | |||||||
Segment revenues were $24.6 million, a decrease of 8% versus the year-ago quarter.
Segment income from operations was $6.6 million, a decrease of 36% versus the year-ago quarter.
Segment adjusted OIBDA was $7.1 million, a decrease of 35% versus the year-ago quarter. The investment in the NetZero 4G mobile broadband business resulted in a negative adjusted OIBDA impact of $2.7 million during the first quarter of 2013, compared to $2.2 million in the year-ago period.
Segment pay accounts at March 31, 2013 were 0.6 million, a decrease of 16% versus March 31, 2012.
Unallocated Corporate Expenses:
For the quarter ended March 31, 2013, the impact of unallocated corporate expenses on consolidated adjusted OIBDA was $5.6 million, a 6% increase compared to the year-ago quarter.
Business Outlook:
The following forward-looking information includes certain of the projections made by management as of the date of this press release. The company does not intend to revise or update this information, except as required by law, and may not provide this type of information in the future. Due to a variety of factors, actual results may differ significantly from those projected. Factors include, without limitation, the factors referenced later in this announcement under the caption "Cautionary Information Regarding Forward-Looking Statements." These and other factors are discussed in more detail in the company's filings with the Securities and Exchange Commission.
Second Quarter 2013 Guidance:
Second Quarter 2013 (in millions) | Guidance | |||
Revenues | $222 - $230 | |||
Adjusted OIBDA(1) | $27.5 - $32.5 | |||
Second Quarter 2013 Supplemental Information (in millions) | Guidance | |||
Net interest expense | $3.1 | |||
Shares used to calculate diluted net income per common share | 92.6 | |||
Shares used to calculate adjusted diluted net income per common share(2) | 92.8 | |||
The table below reconciles the company's guidance for operating income, a GAAP measure, to adjusted OIBDA.
Second Quarter 2013 (in millions) | Guidance | |||
Operating Income | $8.5 - $13.5 | |||
Depreciation | $6.0 | |||
Amortization of intangible assets | $8.2 | |||
Stock-based compensation | $3.3 | |||
Transaction-related costs | $1.5 | |||
Adjusted OIBDA(1) | $27.5 - $32.5 | |||
Investor Conference Call on April 30, 2013 at 5:00 pm ET (2:00 pm PT):
The company will host a conference call to discuss the results at 5:00 pm ET (2:00 pm PT) on Tuesday, April 30, 2013. The conference call dial-in number is 888-401-4668 for U.S. and Canadian participants and 719-325-2491 for participants outside the U.S. and Canada. The passcode is 6794878. Alternatively, a live webcast of the conference call, along with a presentation containing financial highlights for the first quarter ended March 31, 2013, 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 be available on the company's website for seven days following the call. A replay of the broadcast will also be available for seven days following the call by dialing 888-203-1112 (or 719-457-0820 outside of the U.S. and Canada) and the replay passcode, 6794878.
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
