NetZero Reports Fourth-Quarter Results; Billable Services Revenues Grow 137% vs. Preceding Quarter; Cash Balances of $135 Million At Quarter End; Pro Forma Net Loss of $0.33 Per Share WESTLAKE VILLAGE, Calif., Aug. 27, 2001 (PRIMEZONE) -- NetZero, Inc. (Nasdaq:NZRO), a leading provider of Internet access services, today reported total revenues of $12.0 million for its fourth fiscal quarter ended June 30, 2001. Billable services revenues, which comprised $4.2 million or 35 percent of total revenues, increased 137 percent versus the March 2001 quarter, in which billable services comprised $1.8 million or 14 percent of total revenues of $12.8 million. Billable services include NetZero's new pay service introduced earlier this year, "NetZero Platinum" -- a $9.95 monthly subscription service with no ad banner window. Total revenues in the June 2000 quarter were $18.7 million and included $226,000 from billable services. The decrease in total revenues in the June 2001 quarter versus the June 2000 and March 2001 quarters was driven by a decline in advertising and commerce revenues. The pro forma net loss for the June 2001 quarter was $38.5 million, compared to a pro forma net loss of $23.0 million in the year-ago quarter and a pro forma net loss of $31.6 million in the March 2001 quarter. On a per-share basis, the pro forma net loss for the June 2001 quarter was $0.33 per share, compared to a pro forma net loss of $0.22 in the prior-year quarter and a pro forma net loss of $0.27 in the March 2001 quarter. The pro forma net loss excludes stock-based charges, amortization of intangible assets, and, in the March 2001 quarter, a non-cash charge of $48.6 million ($0.42 per share) associated primarily with a write-down of goodwill and intangible assets related to the acquisitions of AimTV, RocketCash, Simpli.com and Freei Networks. The net loss for the June 2001 quarter was $42.1 million, versus a net loss of $26.9 million for the year-ago quarter and a net loss of $91.4 million for the March 2001 quarter, which includes the non-cash charge to write down goodwill and intangible assets of $48.6 million. On a per-share basis, the net loss for the June 2001 quarter was $0.36. NetZero ended the June 2001 quarter with $135 million of cash and cash equivalents, short-term investments and restricted cash. These balances decreased during the quarter by $28.0 million versus $18.8 million during the March 2001 quarter, primarily reflecting increased spending in the June 2001 quarter for pre-existing marketing commitments that terminated in June, including the company's "NetZero @ the Half" sponsorship of the NBA on NBC. Approximately 3.4 million users accessed NetZero's service during the month of June 2001 ("active users"), including 210,000 billable subscribers to the company's pay services as of June 30, 2001. Billable subscribers grew by 180 percent during the quarter and represented 6 percent of total active users in June 2001, up from 2 percent in March 2001 when the company had 3.9 million active users. In an effort to manage the growth in its free user base and control telecommunications costs, the company launched its "Extended Access Pass" in January 2001, which limited free access to 40 hours per month (previously unlimited) and requires users to pay $9.95 if they need to exceed that limit in a given month. As a result, average hours per average active user were reduced by 33 percent in the June 2001 quarter versus the December 2000 quarter. During this period, telecommunications cost per average active user was reduced by 22 percent and cost of revenues per average active user fell 13 percent. The company recently announced that is taking further actions to streamline its cost structure and improve financial results, including additional limitations on its free services and a reduction in personnel. Expected to be effective in October 2001, free access will be limited to 10 hours per month per household. In addition, NetZero's free service will no longer be offered in certain outlying areas where high telecommunications costs make the free offering cost prohibitive. The company will continue to offer users in these areas a subscription service for a monthly fee. During June 2001, approximately 30 percent of NetZero's free users accessed the Internet for more than 10 hours, and approximately 8 percent of NetZero's free users accessed the Internet solely from dial-up numbers where the free service will no longer be available. Due to multiple users within many households, a significantly greater number of users may be impacted by the 10-hour limit. The company also recently announced that it has reduced its employee base by approximately 26 percent effective August 1, 2001. The reductions included the company's first-ever layoffs, affecting 66 employees in six of its U.S. locations. This 26 percent workforce reduction also included an additional 27 employees at the company's RocketCash business, which was sold on August 1, 2001. These employees are expected to remain at the RocketCash business under its new ownership. "Over the past two quarters, we've made some very aggressive moves inaltering NetZero's business model to meet the demands of a rapidly changing environment," said Mark R. Goldston, chairman, president and CEO of NetZero. "We are proud of the progress we've made in such a short time, particularly in adding more than 200,000 paying subscribers to our NetZero Platinum service less than four months after its launch. As we look ahead to our merger with Juno Online Services to form the new United Online, we see valuable opportunities to leverage the strengths of both these franchises to create a major force in the market for billable Internet access services." "As anticipated, the company's operating expenses in the June 2001 quarter were adversely impacted by legacy marketing agreements that terminated in June," said Charles S. Hilliard, NetZero senior vice president and CFO. "Looking ahead, we expect to reduce total operating expenses by 40 to 45 percent sequentially in the September 2001 quarter, excluding merger- and restructuring-related charges, as a result of decreased marketing spending, savings from the recent headcount reductions and the sale of the RocketCash business." The terms of the strategic merger agreement announced on June 7, 2001 call for Juno and NetZero to become wholly owned subsidiaries of United Online, Inc., a newly formed company. United Online filed its initial Form S-4 with the Securities and Exchange Commission on June 22, 2001 and, following the closing of the merger, is expected to trade on the Nasdaq National Market under the symbol UNTD. To unsubscribe, send a message to listar@xxxxxxxxxxxxxxxxx with "unsubscribe juno_accmail" in the body or subject. OR visit http://freelists.dhs.org ~*~