August 1, 2003 United Online, Inc. (UNTD)
O.K. how about one more before I call it for the evening? I am a big fan of cable modems and DSL and have not been very impressed with AOL and dial-up services but perhaps this company deserves a second look....

United Online, Inc. (UNTD), according to CNN.Money "...is an Internet Service Provider formed as the result of the merger of NetZero and Juno. The Company offers billable dial-up Internet access services in more than 5,000 cities for $9.95 per month."

United had a wonderful day today closing at $33.64 up $2.25 or 7.20% on the day. They reported their fourth quarter results yesterday (7/31/03) as reported on Yahoo.com: revenue for the quarter was $79.6 million up 46% from $54.4 million for the year ago quarter. Total pay subscribers increased by a net 142,000 during the quarter reaching a record 2.55 million. Excluding a one time tax benefit, net income was a record $10.3 million or $.23/share vs a loss of ($2.7) million or ($.07) per share for the year-ago quarter.

Morningstar.com shows a pretty picture of revenue growth starting with a miniscule $5 million in 1999, $55.5 million in 2000, $57.2 million in 2001, $167.5 million in 2002, and $168 million in 2002. The latest quarter earnings report also reported that 2003 revenue was $277.3 million.

Free cash flow has been improving and is now turning positive: ($104) million in 2000, ($103) million in 2001, ($6) million in 2002 and $53 million in the trailing twelve months.

The balance sheet is pristine with $171.5 million in cash reported with $18.9 million in other current assets. This can be compared to the liabilities picture with $62.8 million of current liabilities and NO long-term liabilities at all.

Per Yahoo.com, UNTD has a market cap of $1.32 billion with 42.1 million shares outstanding, while 37.8 million of those float. There is no dividend.
The p/e while steep at 138.24 represents a company that is just now turning profitable and should come down quickly if growth continues. As of July 8, 2003, there are 5.47 million shares out short, representing 4.63 days of trading for average volume days.

Overall, this company is very attractive with the only negative I could see is that it is a dial-up service...and the p/e is steep. However, with the company just now turning profitable, we can hope that earnings growth will quickly drop the p/e into reasonable territory. Otherwise, lots of cash on hand and an explosive growth story!

Have a great weekend friends! Thanks for stopping by.

Bob