United Online Reports Second Quarter 2013 Results
United Online Reports Second Quarter 2013 Results
Spin Off of FTD Targeted to be Effective October 1, 2013
Recent Refinancing of FTD Credit Facilities Expected to Reduce Annual Interest Expense by Approximately $7 Million
NetZero Wireless Announces Mobile Broadband Wholesale Agreements with Verizon and Sprint, Significantly Expanding NetZero Wireless Coverage Area
Consolidated Revenues of $221.7 Million, Consolidated Operating Income of $14.0 Million and Consolidated Adjusted OIBDA of $34.7 Million
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 second quarter ended June 30, 2013.
"The planned tax-free spin off of FTD from United Online remains on track," said Mark R. Goldston, Chairman, President and Chief Executive Officer. "We expect the spin-off transaction will be effected before the market opens on October 1, 2013 and the proposed reverse stock split of United Online stock, if approved by the stockholders and the Board of Directors, will take place immediately prior to the spin off."
"We recently completed the refinancing of FTD's credit facilities, an important step as we progress toward the spin off," Goldston said. "This new credit agreement will reduce FTD's interest expense by approximately $7 million annually based on current LIBOR rates and will provide FTD with substantial capital and financial flexibility going forward. We believe this significant annual interest savings will more than offset the public company costs and the incremental ongoing operating expenses that FTD anticipates it will incur annually as a result of the separation once the spin off is complete. The new credit agreement provides FTD with a $350 million five-year secured revolving credit facility, of which $220 million was drawn at closing."
"We are pleased to announce two agreements that will significantly expand the coverage and enhance the offerings of our NetZero Mobile Broadband service," added Goldston. "We have signed a three-year agreement with Verizon to offer the NetZero Mobile Broadband service on Verizon's nationwide 3G network. When the service is launched, we expect NetZero Mobile Broadband will be available in approximately 500 markets and cover more than 300 million people, or approximately 95% of the entire U.S. population. Also, we have signed a five-year agreement with Sprint to offer the NetZero Mobile Broadband service via Sprint's 4G LTE and 3G networks. This agreement will allow us to expand our NetZero Mobile Broadband coverage to a projected 200 million people in 2014 on the Sprint 4G LTE network."
"Second quarter 2013 consolidated revenues of $221.7 million were slightly below our guidance range, while adjusted OIBDA of $34.7 million exceeded our guidance range by $2.2 million," Goldston said. "FTD segment revenues decreased 2% and segment adjusted OIBDA was relatively flat versus the year-ago period. During the quarter, FTD results were unfavorably impacted by the timing of the Easter Holiday. Approximately $3 million in revenues and $0.4 million in segment adjusted OIBDA were recorded in the first quarter of 2013, which in the prior year were recorded in the second quarter. Adjusting for the timing of the Easter Holiday and excluding the unfavorable impact of foreign currency exchange rates, FTD segment revenues remained relatively flat versus the year-ago quarter, while segment adjusted OIBDA increased 2%."
"In our Content & Media segment, pay accounts declined by 66,000 during the quarter, our lowest decline in pay accounts since the second quarter of 2010," Goldston continued. "The quarterly net decrease in segment pay accounts has now improved for six consecutive quarters. Year over year, Content & Media segment revenues and adjusted OIBDA declined 13% and 12%, respectively. Content & Media segment revenues and adjusted OIBDA both increased on a sequential quarter basis."
"During the quarter, Communications segment revenues and adjusted OIBDA declined 7% and 3%, respectively, compared to the year-ago quarter," said Goldston. "Communications segment revenues and adjusted OIBDA both increased on a sequential quarter basis."
"After the spin off of FTD, United Online will consist of its Content & Media and Communications segments, which delivered $243 million in segment revenues and $58 million in segment adjusted OIBDA during the last four quarters," said Neil P. Edwards, Executive Vice President and Chief Financial Officer. "Over the last several quarters, the Content & Media segment's net quarterly subscriber loss has been reduced to less than 25% of its peak level and we have created a new growth opportunity with the NetZero Mobile Broadband service, which will now be enhanced with the new Verizon and Sprint agreements."
The completion of the spin off is subject to certain customary conditions, including receipt of a ruling from the U.S. Internal Revenue Service as to the tax-free nature of the spin off, effectiveness of appropriate filings with the U.S. Securities and Exchange Commission, receipt of legal opinions, and final approval of the transactions contemplated by the spin off. There can be no assurance that the spin off will occur and, if it does occur, there can be no assurance as to its terms or timing.
Summary Results for Second Quarter Ended June 30, 2013:
The following table summarizes key financial results for the second quarter ended June 30, 2013:
(in millions, except per share amounts and percentages) | ||||||||||||||
Financial Highlights | Q2 2013 | Q2 2012 | % Change | |||||||||||
FTD revenues | $ | 164.3 | $ | 167.5 | (2 | %) | ||||||||
Content & Media revenues | 32.9 | 38.0 | (13 | %) | ||||||||||
Communications revenues | 24.9 | 26.8 | (7 | %) | ||||||||||
Intersegment eliminations | (0.4 | ) | (0.5 | ) | 18 | % | ||||||||
Consolidated revenues | $ | 221.7 | $ | 231.9 | (4 | %) | ||||||||
GAAP operating income | $ | 14.0 | $ | 16.9 | (17 | %) | ||||||||
Adjusted OIBDA(1) | $ | 34.7 | $ | 35.2 | (2 | %) | ||||||||
GAAP net income attributable to common stockholders | $ | 5.9 | $ | 8.2 | (29 | %) | ||||||||
GAAP diluted net income per common share | $ | 0.06 | $ | 0.09 | (33 | %) | ||||||||
Adjusted net income attributable to common stockholders(2) | $ | 15.7 | $ | 16.0 | (1 | %) | ||||||||
Adjusted diluted net income per common share(2) | $ | 0.17 | $ | 0.18 | (6 | %) | ||||||||
Revenues were $221.7 million, a 4% decrease compared to the year-ago quarter.
GAAP operating income was $14.0 million compared to $16.9 million in the year-ago quarter.
Adjusted OIBDA was $34.7 million, a decrease of 2% versus the year-ago quarter.
Interest expense was $3.2 million, a decrease of 11% compared to the year-ago quarter.
The effective income tax rate was 45% versus 40% in the year-ago quarter.
GAAP diluted net income per common share was $0.06 versus $0.09 in the year-ago quarter.
Adjusted diluted net income per common share was $0.17 versus $0.18 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 June 30, 2013 were $14.0 million and $12.1 million, respectively, decreases of 13% and 10%, respectively, compared to the year-ago quarter.
Cash and cash equivalents at June 30, 2013 were $122.4 million, compared to $132.3 million at March 31, 2013.
Net debt at June 30, 2013 was $111.0 million, compared to $111.8 million at March 31, 2013. The company defines net debt as total debt, net of discounts, less cash and cash equivalents.
The company paid $9.7 million in cash dividends during the quarter.
In July 2013, the company's Board of Directors declared a quarterly cash dividend of $0.10 per share of common stock that is payable on August 30, 2013 to stockholders of record on August 14, 2013.
Segment Results for Second Quarter Ended June 30, 2013:
FTD: | ||||||||||||||
(in millions, except percentages and metrics) | ||||||||||||||
Financial Highlights | Q2 2013 | Q2 2012 | % Change | |||||||||||
Products revenues | $ | 129.1 | $ | 132.0 | (2 | %) | ||||||||
Services revenues | 35.1 | 35.5 | (1 | %) | ||||||||||
Segment revenues | $ | 164.3 | $ | 167.5 | (2 | %) | ||||||||
Segment income from operations | $ | 21.2 | $ | 22.7 | (6 | %) | ||||||||
Segment adjusted OIBDA(1) | $ | 24.0 | $ | 24.0 | — | |||||||||
as a % of segment revenues(1) | 14.6 | % | 14.3 | % | ||||||||||
Metrics Highlights | Q2 2013 | Q2 2012 | % Change | |||||||||||
Consumer orders(4) (in thousands) | 1,921 | 1,997 | (4 | %) | ||||||||||
Average order value(4) | $ | 61.27 | $ | 60.75 | 1 | % | ||||||||
British Pound / U.S. Dollar exchange rate (average) | 1.54 | 1.58 | (3 | %) | ||||||||||
Segment revenues were $164.3 million, a decrease of 2% versus the year-ago quarter. Adjusting for the timing of the Easter Holiday, segment revenues remained relatively flat versus the year-ago quarter.
Segment income from operations was $21.2 million, a decrease of 6% versus the year-ago quarter.
Segment adjusted OIBDA was $24.0 million, relatively flat versus the year-ago quarter. Adjusting for the timing of the Easter Holiday and excluding the unfavorable impact of foreign currency exchange rates, segment adjusted OIBDA increased 2% versus the year-ago quarter.
Consumer orders were 1.9 million, down 4% versus the year-ago quarter. Adjusting for the timing of the Easter Holiday, consumer orders decreased 1%.
Average order value("AOV") was $61.27, an increase of 1% compared to the year-ago quarter. Excluding the unfavorable impact of foreign currency exchange rates, AOV increased 2%.
Content & Media: | ||||||||||||||
(in millions, except percentages and metrics) | ||||||||||||||
Financial Highlights | Q2 2013 | Q2 2012 | % Change | |||||||||||
Products revenues | $ | 1.0 | $ | 0.9 | 17 | % | ||||||||
Services revenues | 20.6 | 24.1 | (14 | %) | ||||||||||
Advertising revenues | 11.3 | 13.0 | (13 | %) | ||||||||||
Segment revenues | $ | 32.9 | $ | 38.0 | (13 | %) | ||||||||
Segment income from operations | $ | 5.8 | $ | 6.6 | (13 | %) | ||||||||
Segment adjusted OIBDA | $ | 6.6 | $ | 7.4 | (12 | %) | ||||||||
as a % of segment revenues | 20.0 | % | 19.6 | % | ||||||||||
Metrics Highlights | Q2 2013 | Q2 2012 | % Change | |||||||||||
Segment pay accounts(5) (in thousands) | 2,720 | 3,120 | (13 | %) | ||||||||||
Net quarterly decline in segment pay accounts(5) (in thousands) | (66 | ) | (173 | ) | 62 | % | ||||||||
Segment active accounts(5) (in millions) | 10.5 | 10.3 | 2 | % | ||||||||||
ARPU(6) | $ | 2.48 | $ | 2.50 | (1 | %) | ||||||||
Euro / U.S. Dollar Exchange Rate (average) | 1.31 | 1.28 | 2 | % | ||||||||||
Segment revenues were $32.9 million, a decrease of 13% versus the year-ago quarter.
Segment income from operations was $5.8 million, compared to $6.6 million in the year-ago quarter.
Segment adjusted OIBDA was $6.6 million, a decrease of 12% versus the year-ago quarter.
Segment pay accountsat June 30, 2013 were 2.7 million, a decrease of 13% versus June 30, 2012.
Segment ARPU was $2.48, a decline of 1% versus the year-ago quarter.
Communications: | ||||||||||||||
(in millions, except percentages and metrics) | ||||||||||||||
Financial Highlights | Q2 2013 | Q2 2012 | % Change | |||||||||||
Products revenues | $ | 0.7 | $ | 0.9 | (26 | %) | ||||||||
Services revenues | 17.3 | 19.9 | (13 | %) | ||||||||||
Advertising revenues | 6.9 | 5.9 | 17 | % | ||||||||||
Segment revenues | $ | 24.9 | $ | 26.8 | (7 | %) | ||||||||
Segment income from operations | $ | 8.3 | $ | 8.6 | (3 | %) | ||||||||
Segment adjusted OIBDA | $ | 8.8 | $ | 9.0 | (3 | %) | ||||||||
as a % of segment revenues | 35.2 | % | 33.6 | % | ||||||||||
Metrics Highlights | Q2 2013 | Q2 2012 | % Change | |||||||||||
Segment pay accounts (in thousands) | 595 | 709 | (16 | %) | ||||||||||
ARPU | $ | 9.34 | $ | 8.97 | 4 | % | ||||||||
Segment revenues were $24.9 million, a decrease of 7% versus the year-ago quarter.
Segment income from operations was $8.3 million, a decrease of 3% versus the year-ago quarter.
Segment adjusted OIBDA was $8.8 million, a decrease of 3% versus the year-ago quarter. The investment in the NetZero Mobile Broadband business resulted in a negative adjusted OIBDA impact of $1.8 million during the second quarter of 2013, compared to a negative adjusted OIBDA impact of $4.0 million in the year-ago quarter.
Segment pay accounts at June 30, 2013 were 0.6 million, a decrease of 16% versus June 30, 2012.
Segment ARPU was $9.34, an increase of 4% versus the year-ago quarter.
Unallocated Corporate Expenses:
For the quarter ended June 30, 2013, the impact of unallocated corporate expenses on consolidated adjusted OIBDA was $4.7 million, an 11% decrease 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. This guidance assumes that the FTD segment remains part of the company through the end of the third quarter of 2013.
Third Quarter 2013 Guidance: | |||||||||
Third Quarter 2013 (in millions) | Guidance | ||||||||
Revenues | $169 - $175 | ||||||||
Adjusted OIBDA | $22 - $26 | ||||||||
Third Quarter 2013 Supplemental Information (in millions) | Guidance | ||
Net interest expense | $3.6 | ||
Shares used to calculate diluted net income per common share | 92.6 | ||
Shares used to calculate adjusted diluted net income per common share(2) | 92.9 | ||
The table below reconciles the company's guidance for operating income, a GAAP measure, to adjusted OIBDA.
Third Quarter 2013 (in millions) | Guidance | ||||||||
Operating Income |
