United Online Surges on Strong Earnings, Subscriber Numbers

The ISP says its expanding product portfolio boosts first-quarter returns.
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Updated from 9:42 a.m.

United Online

(UNTD)

shares surged 8% after the Internet access provider reported impressive profit and subscriber gains.

The Westlake Village, Calif., operator of the NetZero and Juno ISPs posted stronger-than-expected first-quarter earnings and boosted its guidance for coming quarters. The company said its expanding product portfolio boosted numbers in the latest period.

On Monday, United Online shares rose $1.37 to $17.90.

"Just a year ago we introduced our NetZero HiSpeed and Juno SpeedBand accelerator services, the first leg of our strategy to expand beyond our growing access business with new sources of subscription revenue," said CEO Mark Goldston. "Since then, we have added premium email services and, most recently, acquired a personal Web-site services business that further extends our cross-marketing opportunities and subscription reach."

For the quarter ended March 31, United Online earned $12.4 million, or 18 cents a share, up from the year-ago $7 million, or 10 cents a share. Revenue rose 46% from a year ago to $107.7 million.

On a so-called adjusted basis, excluding the after-tax effect of amortization of intangible assets, stock-based compensation, and restructuring and merger-related charges, latest-quarter earnings surged to 23 cents a share from 16 cents a year ago. That was two pennies ahead of the Wall Street analyst estimate quoted by Thomson First Call. United Online said its tax rate rose to 41.5% from 10% a year earlier.

United Online said pay subscribers grew 203,000 during the quarter to 3.1 million, while revenue generating units grew 472,000 to 4 million. The company said active users totaled 5.4 million at March 31.

Adjusted operating income before depreciation and amortization, or OIBDA, surged 90% to $26 million. Free cash flow jumped to $33.8 million from $15.9 million a year earlier.

The company also boosted its second-quarter and 2004 guidance, citing the strong first-quarter numbers. The new 2004 guidance projects "48% growth in adjusted OIBDA," financial chief Charles S. Hilliard said. Meanwhile, United Online forecast second-quarter revenue of $111 million, which is $3 million ahead of the consensus estimate.