Not applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

There were 92,509,447 shares of the Registrant's common stock outstanding at May 3, 2013.

In this document, "United Online," "UOL," the "Company," "we," "us" and "our" refer to United Online, Inc. and its subsidiaries.

benefits of our acquisitions; the Company's strategies, including the planned separation of the Company and FTD into separate, publicly-traded companies and the expected benefits of such transaction; anticipated changes to senior management; future financial performance; revenues; segment metrics; operating expenses; market trends, including those in the markets in which we compete; liquidity; cash flows and uses of cash; dividends; capital expenditures; depreciation and amortization; tax payments; foreign currency exchange rates; hedging arrangements; our ability to repay indebtedness, pay dividends and invest in initiatives; our products and services; pricing; marketing plans; competition; settlement of legal matters; and the impact of accounting pronouncements. Potential factors that could affect the matters about which the forward-looking statements are made include, among others, the factors disclosed in the section entitled "Risk Factors" in this Quarterly Report on Form 10-Q and additional factors that accompany the related forward-looking statements in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that may cause actual performance and results to differ materially from those predicted. Reported results should not be considered an indication of future performance. Except as required by law, we undertake no obligation to publicly release the results of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

UNITED ONLINE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	March 31, 2013			December 31, 2012

Assets
Current assets:
Cash and cash equivalents	$	132,268		$	136,444
Accounts receivable, net of allowance for doubtful accounts		42,248			43,721
Inventories, net		12,071			16,116
Deferred tax assets, net		12,037			12,279
Other current assets		12,074			14,918

Total current assets		210,698			223,478
Property and equipment, net		54,817			57,877
Goodwill		442,991			452,042
Intangible assets, net		204,368			216,437
Other assets		13,561			13,585

Total assets	$	926,435		$	963,419

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	68,181		$	80,543
Accrued liabilities		39,706			45,253
Member redemption liability		17,451			18,033
Deferred revenue		48,162			47,556
Current portion of long-term debt		10,856			10,856

Total current liabilities		184,356			202,241
Member redemption liability		4,400			4,542
Deferred revenue		1,983			2,025
Long-term debt, net of discounts		233,236			233,144
Deferred tax liabilities, net		29,230			31,896
Other liabilities		9,327			14,485

Total liabilities		462,532			488,333

Commitments and contingencies
Stockholders' equity:
Common stock		9			9
Additional paid-in capital		493,135			500,769
Accumulated other comprehensive loss		(39,946	)		(28,133	)
Retained earnings		10,705			2,441

Total stockholders' equity		463,903			475,086

Total liabilities and stockholders' equity	$	926,435		$	963,419

The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.

UNITED ONLINE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Quarter Ended March 31,

	2013			2012
Revenues:
Products	$	155,087		$	142,599
Services		92,297			99,693

Total revenues		247,384			242,292
Operating expenses:
Cost of revenues—products		119,191			109,008
Cost of revenues—services		22,366			22,183
Sales and marketing		45,961			46,759
Technology and development		12,424			11,586
General and administrative		26,562			24,287
Amortization of intangible assets		7,747			7,309
Contingent consideration—fair value adjustment		(5,149	)		—
Restructuring and other exit costs		2,289			(71	)

Total operating expenses		231,391			221,061

Operating income		15,993			21,231
Interest income		153			238
Interest expense		(3,192	)		(3,458	)
Other income, net		367			204

Income before income taxes		13,321			18,215
Provision for income taxes		3,202			6,712

Net income	$	10,119		$	11,503

Income allocated to participating securities		(262	)		(335	)

Net income attributable to common stockholders	$	9,857		$	11,168

Basic net income per common share	$	0.11		$	0.12

Shares used to calculate basic net income per common share		91,579			89,794

Diluted net income per common share	$	0.11		$	0.12

Shares used to calculate diluted net income per common share		91,812			89,894

Dividends paid per common share	$	0.10		$	0.10

The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.

UNITED ONLINE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

	Quarter Ended March 31,

	2013			2012
Net income	$	10,119		$	11,503
Other comprehensive income (loss):
Cash flow hedges:
Changes in net gains (losses) on derivatives, net of tax of $20 and $(31) for the quarter ended March 31, 2013 and 2012, respectively		31			(44	)
Derivative settlement losses (gains) reclassified into earnings, net of tax of $(36) and $18 for the quarter ended March 31, 2013 and 2012, respectively		60			(30	)
Other hedges:
Changes in net gains (losses) on derivatives, net of tax of $49 and $(40) for the quarters ended March 31, 2013 and 2012, respectively		77			(58	)
Foreign currency translation		(11,981	)		5,577

Other comprehensive income (loss)		(11,813	)		5,445

Comprehensive income (loss)	$	(1,694	)	$	16,948

The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.

UNITED ONLINE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(in thousands)

	Common Stock							Accumulated Other Comprehensive Loss

	Common Stock				Additional Paid-In Capital						Retained Earnings			Total Stockholders' Equity
	Shares		Amount		Additional Paid-In Capital						Retained Earnings			Total Stockholders' Equity
Balance at December 31, 2012		91,092	$	9	$	500,769		$	(28,133	)	$	2,441		$	475,086
Vesting of restricted stock units		993		—		—			—			—			—
Repurchases of common stock		—		—		(3,272	)		—			—			(3,272	)
Dividends and dividend equivalents paid on shares outstanding and restricted stock units		—		—		(7,583	)		—			(1,855	)		(9,438	)
Stock-based compensation		—		—		3,046			—			—			3,046
Tax benefits from equity awards		—		—		175			—			—			175
Other comprehensive loss		—		—		—			(11,813	)		—			(11,813	)
Net income		—		—		—			—			10,119			10,119

Balance at March 31, 2013		92,085	$	9	$	493,135		$	(39,946	)	$	10,705		$	463,903

The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.

UNITED ONLINE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Quarter Ended March 31,

	2013			2012
Cash flows from operating activities:
Net income	$	10,119		$	11,503
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		15,005			14,219
Stock-based compensation		3,046			3,454
Provision for doubtful accounts receivable		569			729
Contingent consideration—fair value adjustment		(5,149	)		—
Accretion of discounts and amortization of debt issue costs		188			202
Deferred taxes, net		(1,833	)		(1,315	)
Tax benefits (shortfalls) from equity awards		206			(274	)
Excess tax benefits from equity awards		(213	)		(13	)
Other, net		(159	)		91
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable, net		580			3,077
Inventories, net		3,996			(1,614	)
Other assets		2,732			6,283
Accounts payable and accrued liabilities		(13,839	)		(18,773	)
Member redemption liability		(725	)		(501	)
Deferred revenue		1,105			(286	)
Other liabilities		(481	)		93

Net cash provided by operating activities		15,147			16,875

Cash flows from investing activities:
Purchases of property and equipment		(5,312	)		(4,212	)
Purchases of rights, content and intellectual property		(287	)		(519	)
Purchases of investments		(11	)		(18	)
Proceeds from sales of investments		56			89

Net cash used for investing activities		(5,554	)		(4,660	)

Cash flows from financing activities:
Payments on term loan		—			(663	)
Proceeds from exercises of stock options		—			4
Repurchases of common stock		(3,272	)		(2,082	)
Dividends and dividend equivalents paid on outstanding shares and restricted stock units		(9,438	)		(9,250	)
Excess tax benefits from equity awards		213			13

Net cash used for financing activities		(12,497	)		(11,978	)

Effect of foreign currency exchange rate changes on cash and cash equivalents		(1,272	)		1,318
Change in cash and cash equivalents		(4,176	)		1,555
Cash and cash equivalents, beginning of period		136,444			136,105

Cash and cash equivalents, end of period	$	132,268		$	137,660

The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.

UNITED ONLINE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS

United Online, Inc. (together with its subsidiaries, "United Online" or the "Company"), through its operating subsidiaries, is a leading provider of consumer products and services over the Internet under a number of brands, including FTD, Interflora, Flying Flowers, Flowers Direct, Drake Algar, Classmates, schoolFeed, StayFriends, Trombi, MyPoints, NetZero, and Juno. The Company reports its business in three reportable segments: FTD, Content & Media and Communications. The Company's FTD segment provides floral, gift and related products and services to consumers and retail florists, as well as to other retail locations offering floral, gift and related products and services. The Company's Content & Media segment provides online nostalgia products and services and an online loyalty marketing service. The Company's primary Communications service is Internet access. On a combined basis, the Company's web properties attract a significant number of Internet users and the Company offers a broad array of Internet marketing services for advertisers.

On April 30, 2013, FTD Companies, Inc. filed an initial registration statement on Form 10 with the Securities and Exchange Commission (the "SEC") in connection with the separation of FTD Companies, Inc. from United Online, Inc.

The Company's corporate headquarters are located in Woodland Hills, California, and the Company also maintains offices in Downers Grove, Illinois; Centerbrook, Connecticut; Medford, Oregon; Sleaford, England; Quebec, Canada; Seattle, Washington; San Mateo, California; Erlangen, Germany; Berlin, Germany; San Francisco, California; Schaumburg, Illinois; Fort Lee, New Jersey; and Hyderabad, India.

The Company's unaudited condensed consolidated financial statements for the quarters ended March 31, 2013 and 2012 have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), including those for interim financial information, and with the instructions for Form 10-Q and Article 10 of Regulation S-X issued by the SEC. Accordingly, such financial statements do not include all of the information and note disclosures required by GAAP for complete financial statements. All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the results for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for any future periods. The unaudited condensed consolidated balance sheet information at December 31, 2012 was derived from the Company's audited consolidated financial statements, filed on March 4, 2013, with the SEC in

1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

the Company's Annual Report on Form 10-K for the year ended December 31, 2012, but does not include all of the disclosures required by GAAP.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities and the reported amounts of revenues and expenses. Actual results could differ from these estimates and assumptions. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2012 included in the Company's Annual Report on Form 10-K.

The most significant areas of the unaudited condensed consolidated financial statements that require management judgment include the Company's revenue recognition, goodwill and indefinite-lived intangible assets, definite-lived intangible assets and other long-lived assets, member redemption liability, income taxes, contingent consideration, and legal contingencies.

The Company believes that its existing cash and cash equivalents and cash generated from operations will be sufficient to service its debt obligations and fund its working capital requirements, capital expenditures, dividend payments, and other obligations through at least the next twelve months.

Reclassifications and Revisions—Certain prior-period amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on the previously-reported consolidated results of operations or stockholders' equity. Certain revisions have been recorded in prior periods, which had immaterial impacts on the previously-reported consolidated financial statements.

The Company identified an error related to the elimination of intercompany revenues within its FTD segment, whereby intercompany revenues were being eliminated in consolidation from services revenues instead of products revenues. Reported revenues, both consolidated and for the FTD segment, were correct in total; however, the error resulted in an overstatement of products revenues and an understatement of services revenues. The Company evaluated this error and concluded that it did not result in a material misstatement of the Company's previously-issued consolidated financial statements. Accordingly, the Company has determined to revise, in this report and future filings, its previously-reported products revenues and services revenues reported in the Company's consolidated statements of operations, as well as FTD segment products revenues and FTD segment services revenues within Note 2—"Segment Information". The error represented an overstatement of products revenues and an understatement of services revenues totaling $18.4 million, $17.7 million, $13.6 million, and $4.8 million for the years ended December 31, 2012, 2011 and 2010 and for the quarter ended March 31, 2012, respectively.

The Company identified an error in the calculation of the MyPoints member redemption liability, which impacted prior-period balances. The Company evaluated this error and concluded that it did not result in a material misstatement of the Company's previously-issued consolidated financial statements, although the cumulative impact of correcting for the adjustment in the quarter ended March 31, 2013 could be material to the year ending December 31, 2013. Accordingly, the Company has determined to revise, in this report and future filings, its previously-reported consolidated financial statements, including the Company's consolidated balance sheet at December 31, 2012 and the Company's unaudited condensed consolidated statement of operations and unaudited condensed consolidated statement of cash flows for the quarter ended March 31, 2012, to adjust for this error. As a result of

1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

this error, accrued liabilities, additional paid-in capital and retained earnings were overstated by $0.4 million, $0.2 million and $0.8 million, respectively, at December 31, 2012 and member redemption liability—current, member redemption liability—long-term, and other liabilities were understated by $0.9 million, $0.2 million and $0.3 million, respectively, at December 31, 2012. Additionally, cost of revenues—services was understated by $26,000 for the quarter ended March 31, 2012 and provision for income taxes and net income were overstated by $10,000 and $16,000, respectively, for the quarter ended March 31, 2012. There was no impact on net cash provided by operating activities; however, adjustments to deferred taxes, net, and changes in member redemption liability within cash flows from operating activities were understated by $0.3 million and $26,000, respectively, for the quarter ended March 31, 2012 and changes in accounts payable and accrued liabilities within cash flows from operating activities was overstated by $0.3 million for the quarter ended March 31, 2012.

The Company identified an error in the calculation of provision for income taxes as it relates to changes in the estimated fair value of contingent consideration. Changes in the estimated fair value of contingent consideration are recorded in the consolidated statements of operations, while, for tax purposes, such changes are treated as a purchase price adjustment; however, the Company previously recorded a provision for income taxes associated with such changes. The Company evaluated this error and concluded that it did not result in a material misstatement of the Company's previously-reported consolidated financial statements. Accordingly, the Company has determined to revise, in this report and future filings, its previously-reported consolidated financial statements, including the Company's consolidated balance sheet at December 31, 2012. As a result of this error, other current assets, accrued liabilities and retained earnings were understated by $0.4 million, $0.1 million and $0.3 million, respectively, at December 31, 2012.

Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2012 for a complete discussion of all significant accounting policies.

Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income —Effective January 1, 2013, the Company adopted the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, as codified in Accounting Standards Codification ("ASC") 220. The amendments in this update require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. The adoption of this update did not have a material impact on the Company's consolidated financial statements.

Segment revenues and segment income from operations were as follows (in thousands):

See Note 1—"Description of Business, Basis of Presentation, Accounting Policies, and Recent Accounting Pronouncements—Basis of Presentation—Reclassifications and Revisions" for information related to the revisions of FTD segment products revenues and services revenues.

A reconciliation of segment revenues to consolidated revenues was as follows for each period presented (in thousands):

A reconciliation of segment operating expenses (which excludes depreciation and amortization of intangible assets) to consolidated operating expenses was as follows for each period presented (in thousands):

	Quarter Ended March 31,

	2013			2012
Segment operating expenses:
FTD	$	163,546		$	152,367
Content & Media		27,032			32,134
Communications		18,010			16,395

Total segment operating expenses		208,588			200,896
Depreciation		6,145			6,475
Amortization of intangible assets		8,860			7,744
Unallocated corporate expenses		8,163			6,306
Intersegment eliminations		(365	)		(360	)

Consolidated operating expenses	$	231,391		$	221,061

A reconciliation of segment income from operations (which excludes depreciation and amortization of intangible assets) to consolidated operating income was as follows for each period presented (in thousands):

	Quarter Ended March 31,

	2013			2012
Segment income from operations:
FTD	$	26,737		$	24,080
Content & Media		5,794			7,311
Communications		6,630			10,365

Total segment income from operations		39,161			41,756
Depreciation		(6,145	)		(6,475	)
Amortization of intangible assets		(8,860	)		(7,744	)
Unallocated corporate expenses		(8,163	)		(6,306	)

Consolidated operating income	$	15,993		$	21,231

International revenues are primarily generated by the Company's operations in Europe. International revenues totaled $63.4 million and $62.0 million for the quarters ended March 31, 2013 and 2012, respectively. The FTD segment's international revenues, which are primarily generated by Interflora in the U.K. and the Republic of Ireland, totaled $55.0 million and $52.6 million for the quarters ended March 31, 2013 and 2012, respectively.

Geographic information for long-lived assets, which consist of property and equipment and other assets, was as follows (in thousands):

Segment assets are not reported to, or used by, the Company's chief operating decision maker to allocate resources to, or assess performance of, the segments and therefore, total segment assets have not been disclosed.

A significant majority of the past due financing receivables at March 31, 2013 and December 31, 2012 were 120 days or more past due. Financing receivables on nonaccrual status at March 31, 2013 and December 31, 2012 totaled $3.5 million and $3.6 million, respectively.

The changes in allowance for credit losses related to financing receivables were as follows (in thousands):

	March 31, 2013		December 31, 2012

Employee compensation and related liabilities	$	18,155	$	24,672
Non-income taxes payable		6,140		6,166
Contingent consideration		3,389		3,899
Customer deposits		1,655		1,713
Income taxes payable		1,517		1,668
Accrued restructuring and other exit costs		1,068		68
Reserves for legal settlements		257		700
Other		7,525		6,367

Total	$	39,706	$	45,253

The changes in goodwill by reportable segment for the quarter ended March 31, 2013 were as follows (in thousands):

	FTD			Content & Media			Communications			Total

Balance at December 31, 2012:
Goodwill (excluding impairment charges)	$	447,987		$	137,172		$	13,227		$	598,386
Accumulated impairment charges		(114,000	)		(26,606	)		(5,738	)		(146,344	)

Goodwill at December 31, 2012		333,987			110,566			7,489			452,042
Foreign currency translation		(9,046	)		(5	)		—			(9,051	)

Balance at March 31, 2013:
Goodwill (excluding impairment charges)		438,941			137,167			13,227			589,335
Accumulated impairment charges		(114,000	)		(26,606	)		(5,738	)		(146,344	)

Goodwill at March 31, 2013	$	324,941		$	110,561		$	7,489		$	442,991

The Company's acquired trademarks and trade names related to the acquisition by the Company of FTD Group, Inc. (together with its subsidiaries, "FTD") in August 2008 are indefinite-lived and, accordingly, there is no associated amortization expense or accumulated amortization. At March 31, 2013 and December 31, 2012, such trademarks and trade names after impairment and foreign currency translation adjustments totaled $155.5 million and $158.5 million, respectively.

Amortization expense related to intangible assets for the quarters ended March 31, 2013 and 2012 was $8.9 million and $7.7 million, respectively.

Estimated future intangible assets amortization expense at March 31, 2013 was as follows (in thousands):

National Association, as Administrative Agent (the "2008 Credit Agreement"), consisting of (i) a term loan A facility of $75 million, (ii) a term loan B facility of $300 million, and (iii) a revolving credit facility of up to $50 million. On June 10, 2011, FTD Group, Inc. entered into a new credit agreement (the "Credit Agreement") with Wells Fargo Bank, National Association, as Administrative Agent for the lenders, to refinance the 2008 Credit Agreement. The Credit Agreement provides FTD Group, Inc. with a $315 million senior secured credit facility consisting of (i) a $265 million seven-year term loan (the "Term Loan") and (ii) a $50 million five-year revolving credit facility (the "Revolving Credit Facility" and together with the Term Loan, the "Credit Facilities"), and certain other financial accommodations, including letters of credit.

On June 10, 2011, FTD Group, Inc. repaid in full all outstanding indebtedness under the 2008 Credit Agreement. No penalties were paid in connection with such repayment. The repayment of obligations under the 2008 Credit Agreement was financed with the proceeds of the $265 million of term loan borrowings under the Credit Agreement and FTD's available cash. No funds were borrowed under the Revolving Credit Facility at closing.

The obligations under the Credit Agreement are guaranteed by the parent of FTD Group, Inc., FTD Companies, Inc., (formerly known as UNOL Intermediate, Inc.) ("FTD Companies"), and certain of the wholly-owned domestic subsidiaries of FTD Group, Inc. (the "Subsidiary Guarantors"). In addition, the obligations under the Credit Agreement are secured by a lien on substantially all of the assets of FTD Group, Inc., FTD Companies and the Subsidiary Guarantors (collectively, the "Loan Parties"), including a pledge of all (except with respect to foreign subsidiaries, in which case such pledges are limited to 66%) of the outstanding capital stock of certain direct subsidiaries of the Loan Parties.

The interest rates on both the Term Loan and the Revolving Credit Facility are either a base rate plus 2.5% per annum, or LIBOR plus 3.5% per annum (with a LIBOR floor of 1.25% in the case of the Term Loan and step downs in the LIBOR margin on the Revolving Credit Facility depending on FTD's net leverage ratio). In addition, there is a commitment fee, which is currently equal to 0.45% per annum (with additional step-downs in the commitment fee depending on FTD's net leverage ratio) on the unused portion of the Revolving Credit Facility. The Credit Agreement contains customary representations and warranties, events of default, affirmative covenants, and negative covenants, that require, among other things, FTD to maintain compliance with a maximum net leverage ratio and a minimum fixed-charge coverage ratio, and impose restrictions and limitations on, among other things, capital expenditures, investments, dividends, asset sales, and incurrence of additional debt or liens by FTD Companies, FTD Group, Inc. and their subsidiaries. The Credit Agreement also provides for an additional $100 million in borrowing, subject to certain conditions, including compliance with covenants and approval by the lender group.

The changes in the Company's debt balances, net of discounts, for the quarter ended March 31, 2013 under the Credit Agreement were as follows (in thousands):

Future minimum principal payments based upon the scheduled mandatory debt payments under the Credit Agreement, excluding required prepayments based on excess cash flows, were as follows at March 31, 2013 (in thousands):

At March 31, 2013, the borrowing capacity under the Revolving Credit Facility, which was reduced by $1.0 million in outstanding letters of credit, was $49.0 million.

During the year ended December 31, 2012, FTD Group, Inc. made a voluntary debt prepayment of $17.0 million, which eliminated all future scheduled mandatory principal payments. Commencing in 2013 for fiscal year 2012, subject to certain exceptions, FTD Group, Inc. is required to make annual repayments of a portion of the Term Loan based on excess cash flow as defined in the Credit Agreement. Such excess cash flow payment, which was paid in April 2013, totaled $10.9 million.

Under the terms of the Credit Agreement, FTD Group, Inc. is generally restricted from transferring funds to United Online, Inc., with certain exceptions, including an annual basket of $15 million (subject to adjustment based on excess cash flow calculations) which may be used to make cash dividends, loans and advances to United Online, Inc., provided certain terms and conditions specified in the Credit Agreement are satisfied. These restrictions have resulted in the restricted net assets (as defined in Rule 4-08(e)(3) of Regulation S-X) of FTD Group Inc. and its subsidiaries totaling $258.7 million and $277.6 million at March 31, 2013 and December 31, 2012, respectively, which exceeded 25% of the consolidated net assets of United Online, Inc. and its subsidiaries. FTD Group, Inc. was in compliance with all covenants under the Credit Agreement at March 31, 2013.

The fair and notional values of outstanding derivative instruments were as follows (in thousands):

The effect of the Company's interest rate caps on accumulated other comprehensive loss was as follows (in thousands):

At March 31, 2013, the effective portion, before tax effect, of the Company's interest rate caps was $1.2 million, none of which was expected to be reclassified from accumulated other comprehensive loss into interest expense in the consolidated statements of operations within the next 12 months.

The following table presents information about assets and liabilities that were required to be measured at fair value on a recurring basis (in thousands):

	March 31, 2013

Description	Total Fair Value		Level 1 Fair Value		Level 2 Fair Value		Level 3 Fair Value
Assets:
Money market funds	$	89,484	$	89,484	$	—	$	—
Time deposits		7,241		—		7,241		—
Derivative assets		884		—		884		—

Total	$	97,609	$	89,484	$	8,125	$	—

Liabilities:
Contingent consideration	$	3,412	$	—	$	—	$	3,412
Derivative liabilities		41		—		41		—

Total	$	3,453	$	—	$	41	$	3,412

	December 31, 2012

Description	Total Fair Value		Level 1 Fair Value		Level 2 Fair Value		Level 3 Fair Value
Assets:
Money market funds	$	89,507	$	89,507	$	—	$	—
Time deposits		9,021		—		9,021		—
Derivative assets		699		—		699		—

Total	$	99,227	$	89,507	$	9,720	$	—

Liabilities:
Contingent consideration	$	8,561	$	—	$	—	$	8,561
Derivative liabilities		245		—		245		—

Total	$	8,806	$	—	$	245	$	8,561

The estimated fair value of contingent consideration was $3.4 million at March 31, 2013 using a Monte-Carlo simulation. Contingent consideration is measured based on three annual earnout periods ending June 30, 2013, 2014 and 2015 (each period, an "Earnout Period" and together, the "Earnout Periods") and, if earned, will be paid annually shortly after the closing of each Earnout Period. The range of the amounts the Company could pay under the contingent consideration arrangement is between $0 and $27.5 million. The key assumptions used in calculating the estimated fair value of contingent consideration included estimated probabilities of U.S. and other target market daily registrations; mean growth rates of 0% for both U.S. registrations and other target market registrations, each with a standard deviation of 50%, during the Earnout Periods; an estimated rate of conversion of new subscribers to pay accounts; and a discount rate of 18.5%. Changes to one or multiple inputs to the Monte-Carlo simulation, including the discount rate, mean growth rates, volatility rates, the estimated number of daily registrations, and the estimated rate of conversion of new subscribers to pay accounts, could significantly impact the estimated fair value of contingent consideration. A 100 basis point increase or decrease in the discount rate would have resulted in a decrease or an increase of $8,000 in the estimated fair value of contingent consideration at March 31, 2013.

The changes in the estimated fair value of contingent consideration were as follows (in thousands):

During the quarter ended March 31, 2013, Facebook restricted certain functionality of the schoolFeed app, which limited schoolFeed's ability to use the Facebook service to contact users who are not registered members of schoolFeed. As a result, the Company has not been able to register as many new members through the app as originally anticipated. As such, the Company decreased the estimates and mean growth rates for U.S. and other target market daily registrations assumptions used in calculating the estimated fair value of contingent consideration at March 31, 2013. The decrease in the estimated fair value of contingent consideration since December 31, 2012 was attributable to such decrease in the estimates and mean growth rates for U.S. and other target market daily registrations assumptions.

Facebook recently notified the Company that it intends to discontinue the schoolFeed app's access to the Facebook service on or about May 10, 2013, which would result in the termination of future new installations of the schoolFeed app through Facebook, as well as the discontinuance of the sharing of Facebook content through the schoolFeed app. The Company does not believe such change will result in a material decline in the estimated fair value of contingent consideration.

During the year ended December 31, 2012, the Company recorded a goodwill impairment charge and an intangible assets impairment charge related to MyPoints totaling $26.6 million and $0.3 million, respectively. As such, the MyPoints goodwill and trademarks were required to be measured at fair value on a non-recurring basis (in thousands):

The Company estimated the fair value of the MyPoints reporting unit using a combination of the income approach and the market approach. The inputs for the fair value calculations of the reporting unit included a 4.0% growth rate to calculate the terminal value and a discount rate of 14.0%. In addition, the Company assumed revenue growth and applied margin and other cost assumptions consistent with the reporting unit's historical trends. The Company estimated the fair value of the MyPoints trademarks using the relief from royalty method, which is a form of the income approach that incorporates elements of the market approach. The inputs for the fair value calculations of the trademarks included revenue projections, a trademarks loyalty rate of 0.3% and a discount rate of 14.5%.

The Company estimated the fair value of its long-term debt using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration and risk profile. In determining the market interest yield curve, the Company considered, among other factors, its estimate of its credit rating. At March 31, 2013, the Company estimated its credit rating as BB+ for the long-term debt associated with the Credit Agreement, resulting in a discount rate of 4.1%. At December 31, 2012, the Company estimated its credit rating as BB+/BB for the long-term debt associated with the Credit Agreement, resulting in a discount rate of 3.8%. The table below summarizes the estimated fair values for long-term debt (in thousands):

United Online, Inc.'s Board of Directors authorized a common stock repurchase program (the "Program") that allows United Online, Inc. to repurchase shares of its common stock through open market or privately negotiated transactions based on prevailing market conditions and other factors.

From August 2001 through December 31, 2010, United Online, Inc. had repurchased $150.2 million of its common stock under the Program, leaving $49.8 million of authorization remaining under the Program. In February 2011, the Board of Directors extended the Program through December 31, 2011 and authorized an increase in the $49.8 million authorization amount to $80.0 million. In December 2011, the Board of Directors extended the Program through December 31, 2012. In January 2013, the Board of Directors approved and ratified the extension of the Program through December 31, 2013. There were no repurchases under the Program in the year ended December 31, 2012 or the quarter ended March 31, 2013 and, at March 31, 2013, the authorization remaining under the Program was $80.0 million.

Shares withheld upon the vesting of restricted stock units to pay minimum statutory employee withholding taxes are considered common stock repurchases, but are not counted as purchases against the Program. Upon vesting of restricted stock units, the Company currently does not collect the minimum statutory withholding taxes from employees. Instead, the Company automatically withholds, from the restricted stock units that vest, the portion of those shares with a fair market value equal to the amount of the minimum statutory employee withholding taxes due, which is accounted for as a repurchase of common stock. The Company then pays the minimum statutory withholding taxes in cash. The amounts remitted in the quarters ended March 31, 2013 and 2012 were $3.3 million and $2.1 million, respectively, for which the Company withheld 0.5 million and 0.4 million shares of common stock, respectively, that were underlying the restricted stock units that vested.

Dividends are paid on shares of common stock outstanding as of the record date. In addition, dividend equivalents are generally paid on nonvested restricted stock units outstanding as of the record date.

In January 2013, United Online, Inc.'s Board of Directors declared a quarterly cash dividend of $0.10 per share of common stock. The record date for the dividend was February 14, 2013 and the dividend, which totaled $9.4 million, including dividend equivalents paid on nonvested restricted stock units, was paid on February 28, 2013. In April 2013, the Board of Directors declared a quarterly cash dividend of $0.10 per share of common stock. The record date for the dividend is May 14, 2013 and the dividend will be paid on May 31, 2013.

The payment of future dividends is discretionary and is subject to determination by United Online, Inc.'s Board of Directors each quarter following its review of the Company's financial performance and other factors. Dividends that are declared by the Board of Directors are currently paid out of the Company's surplus, as defined and computed in accordance with the General Corporation Law of the State of Delaware.

The following table summarizes the stock-based compensation that has been included in the following line items within the unaudited condensed consolidated statements of operations (in thousands):

Effective March 6, 2013, the Compensation Committee of the Board of Directors of United Online, Inc. approved restricted stock unit grants to certain executive officers totaling 0.9 million shares. The restricted stock units will vest as to one-third of the total number of units awarded annually over a three-year period beginning February 15, 2013.

Effective March 6, 2013, the Secondary Compensation Committee of the Board of Directors of United Online, Inc. approved restricted stock unit grants to certain non-executive officer employees totaling 1.4 restricted stock units will vest as to one-quarter of the total number of units awarded annually over a four-year period beginning February 15, 2013.

The Company's provision for income taxes for the quarter ended March 31, 2013 was lower than the U.S. federal statutory tax rate of 35% primarily due to the permanent exclusion from taxable income of the changes in the estimated fair value of contingent consideration. No such benefit was recorded in the quarter ended March 31, 2012.

The following table sets forth the computation of basic and diluted net income per common share (in thousands, except per share amounts):

	Quarter Ended March 31,

	2013			2012
Numerator:
Net income	$	10,119		$	11,503
Income allocated to participating securities		(262	)		(335	)

Net income attributable to common stockholders	$	9,857		$	11,168

Denominator:
Weighted-average common shares		91,579			89,794

Add: Dilutive effect of non-participating securities		233			100

Shares used to calculate diluted net income per common share		91,812			89,894

Basic net income per common share	$	0.11		$	0.12

Diluted net income per common share	$	0.11		$	0.12

The diluted net income per common share computations exclude stock options and restricted stock units which are antidilutive. Weighted-average antidilutive shares for the quarters ended March 31, 2013 and 2012 were 3.0 million and 5.5 million, respectively.

In the quarter ended March 31, 2013, the Company recorded restructuring and other exit costs totaling $2.3 million, consisting of $2.1 million and $0.2 million of employee termination costs and contract termination costs, respectively, in the Content & Media segment. These restructuring charges were a result of management's decision to streamline segment operations and increase segment profitability. The restructuring and other exit benefits totaled $71,000 for the quarter ended March 31, 2012.

In October 2008, Anthony Michaels filed a purported class action complaint against Classmates Online, Inc., now known as Memory Lane, Inc., Classmates Media Corporation and United Online, Inc. in Superior Court of the State of California, County of Los Angeles, alleging causes of action for intentional misrepresentation, negligent misrepresentation, negligence, fraudulent concealment, and for violations of California Business and Professions Code sections 17200 and 17500 et seq. In December 2008, Xavier Vasquez filed a purported class action complaint against Classmates Online, Inc., Classmates Media Corporation and United Online, Inc. in Superior Court of Washington, Kings County, alleging causes of action for violation of the Washington Consumer Protection Act, violation of California's Unfair Competition Law, violation of California's Consumer Legal Remedies Act, unjust enrichment and violation of California Civil Code section 1694, dealing with dating services contracts. In both actions, the plaintiffs sought injunctive relief and damages. In April 2009, the United States District Court of the Western District of Washington consolidated the Michaels and the Vasquez actions and designated the Michaels action as the lead case. In March 2010, the parties entered into a comprehensive class action settlement agreement. In February 2011, the court denied final approval of such settlement agreement. In March 2011, the parties entered into a revised settlement agreement and, in July 2011, the court issued an order granting preliminary approval of the revised settlement agreement. The parties subsequently modified the settlement agreement in August 2011. In June 2012, the District Court issued an order granting final approval of the settlement and certifying the class. In July 2012, four separate notices of appeal of the District Court order were filed with the United States Court of Appeals for the Ninth Circuit. Such appeals have since been resolved and the order granting final approval of the settlement and certifying the class is final. The settlement administrator is in the process of paying the claimants. The distribution to all claimants was completed in March 2013.

In June 2011, Memory Lane, Inc., a California corporation, filed a complaint in United States District Court, Central District of California, against Classmates International, Inc., Classmates Online, Inc. and the Company's Memory Lane, Inc. subsidiary ("Memory Lane"), alleging false designation of origin under the Lanham Act, 15 U.S.C. section 1125, and state and common law unfair competition. The complaint includes requests for an award of damages and for preliminary and permanent injunctive relief. Notwithstanding the request for preliminary injunctive relief, no motion for such relief has been filed. Memory Lane responded to the complaint in September 2011. In October 2011, the plaintiff amended its complaint to, among other things, dismiss Classmates International, Inc. and add United Online, Inc. as a defendant. The discovery cut-off date was in October 2012. A trial date of June 18, 2013 has been set.

In March 2012, Hope Kelm, Barbara Timmcke, Regina Warfel, Brett Reilly, Juan M. Restrepo, and Jennie H. Pham filed a purported class action complaint (the "Kelm Class Action") in United States District Court, District of Connecticut, against the following defendants: (i) Chase Bank USA, N.A., Bank of America, N.A., Capital One Financial Corporation, Citigroup, Inc., and Citibank, N.A. (collectively, the "Credit Card Company Defendants"); (ii) 1-800-Flowers.com, Inc., United Online, Inc., Memory Lane, Inc., Classmates International, Inc., FTD Group, Inc., Days Inns Worldwide, Inc., Wyndham Worldwide Corporation, PeopleFindersPro, Inc., Beckett Media LLC, Buy.com, Inc., Rakuten USA, Inc., IAC/InterActiveCorp, and Shoebuy.com, Inc. (collectively, the "E-Merchant Defendants"); and (iii) Trilegiant Corporation, Inc. ("Trilegiant"), Affinion Group, LLC ("Affinion"), and Apollo Global Management, LLC ("Apollo"). The complaint alleges (1) violations of the Racketeer Influenced Corrupt Organizations Act ("RICO") by all defendants, and aiding and

abetting violations of such act by the Credit Card Company Defendants; (2) aiding and abetting violations of federal mail fraud, wire fraud and bank fraud statutes by the Credit Card Company Defendants; (3) violations of the Electronic Communications Privacy Act ("ECPA") by Trilegiant, Affinion and the E-Merchant Defendants, and aiding and abetting violations of such act by the Credit Card Company Defendants; (4) violations of the Connecticut Unfair Trade Practices Act by Trilegiant, Affinion, Apollo, and the E-Merchant Defendants, and aiding and abetting violations of such act by the Credit Card Company Defendants; (5) violation of California Business and Professions Code section 17602 by Trilegiant, Affinion, Apollo, and the E-Merchant Defendants; and (6) unjust enrichment by all defendants. The plaintiffs seek class certification, restitution and disgorgement of all amounts wrongfully charged to and received from plaintiffs, damages, treble damages, punitive damages, preliminary and permanent injunctive relief, attorneys' fees, costs of suit, and pre- and post-judgment interest on any amounts awarded.

In March 2012, Debra Miller and William Thompson filed a purported class action complaint (the "Miller Class Action") in United States District Court, District of Connecticut, against the following defendants: (i) Trilegiant, Affinion, Apollo, Vertrue, Inc., Webloyalty.com, Inc., and Adaptive Marketing, LLC (collectively, the "Membership Companies"); (ii) 1-800-Flowers.com, Inc., Beckett Media LLC, Buy.com, Inc., Classmates International, Inc., Days Inn Worldwide, Inc., FTD Group, Inc., IAC/Interactivecorp, Inc., Memory Lane, Inc., Peoplefinderspro, Inc., Rakuten USA, Inc., Shoebuy.com, Inc., United Online, Inc., Wells Fargo & Company, and Wyndham Worldwide Corporation (collectively, the "Marketing Companies"); and (iii) Bank of America, N.A., Capital One Financial Corporation, Chase Bank USA, N.A., and Citibank, N.A. (collectively, the "Credit Card Companies"). The complaint alleges (1) violations of the RICO by all defendants, and aiding and abetting violations of such act by the Credit Card Companies; (2) aiding and abetting violations of federal mail fraud, wire fraud and bank fraud statutes by the Credit Card Companies; (3) violations of the ECPA by the Membership Companies and the Marketing Companies, and aiding and abetting violations of such act by the Credit Card Companies; (4) violations of the Connecticut Unfair Trade Practices Act by the Membership Companies and the Marketing Companies, and aiding and abetting violations of such act by the Credit Card Companies; (5) violation of California Business and Professions Code section 17602 by the Membership Companies and the Marketing Companies; and (6) unjust enrichment by all defendants. The plaintiffs seek class certification, restitution and disgorgement of all amounts wrongfully charged to and received from plaintiffs, damages, treble damages, punitive damages, preliminary and permanent injunctive relief, attorneys' fees, costs of suit, and pre- and post-judgment interest on any amounts awarded.

In April 2012, the Kelm Class Action and the Miller Class Action were consolidated with a related case under the case caption In re Trilegiant Corporation, Inc. In September 2012, the plaintiffs filed their consolidated amended complaint and named five additional defendants. The defendants have responded to the consolidated amended complaint. No trial date has been set.

In addition, in December 2012, David Frank filed a purported class action complaint (the "Frank Class Action") in United States District Court, District of Connecticut, against the following defendants: Trilegiant, Affinion, Apollo (collectively, the "Frank Membership Companies"); 1-800-Flowers.com, Inc., Beckett Media LLC, Buy.com, Inc., Classmates International, Inc., Days Inn Worldwide, Inc., FTD Group, Inc., Hotwire, Inc., IAC/Interactivecorp, Inc., Memory Lane, Inc., Orbitz Worldwide, LLC, PeopleFindersPro, Inc., Priceline.com, Inc., Shoebuy.com, Inc., TigerDirect, Inc., United Online, Inc., and Wyndham Worldwide Corporation (collectively, the "Frank Marketing

Companies"); Bank of America, N.A., Capital One Financial Corporation, Chase Bank USA, N.A., Chase Paymentech Solutions, LLC, Citibank, N.A., Citigroup, Inc., and Wells Fargo Bank, N.A. (collectively, the "Frank Credit Card Companies"). The complaint alleges (1) violations of RICO by all defendants; (2) aiding and abetting violations of such act by the Frank Credit Card Companies; (3) aiding and abetting commissions of mail fraud, wire fraud and bank fraud by the Frank Credit Card Companies; (4) violation of the ECPA by the Frank Membership Companies and the Frank Marketing Companies, and aiding and abetting violations of such act by the Frank Credit Card Companies; (5) violations of the Connecticut Unfair Trade Practices Act by the Frank Membership Companies and the Frank Marketing Companies, and aiding and abetting violations of such act by the Frank Credit Card Companies; (6) violation of California Business and Professions Code section 17602 by the Frank Membership Companies and the Frank Marketing Companies; and (7) unjust enrichment by all defendants. The plaintiffs seek class certification, restitution and disgorgement of all amounts wrongfully charged to and received from plaintiffs, damages, treble damages, punitive damages, preliminary and permanent injunctive relief, attorneys' fees, costs of suit, and pre- and post-judgment interest on any amounts awarded. On January 23, 2013, the plaintiff moved to consolidate the Frank Class Action with the In re Trilegiant Corporation, Inc. action. In response, the court ordered the plaintiff to show cause as to why, among other things, the plaintiff should be afforded named plaintiff status. The plaintiff filed his response to the order to show cause on February 15, 2013. The court has not yet ruled upon the request for consolidation or the order to show cause.

In December 2008, Interflora, Inc. (in which United Online has an indirect, two-thirds ownership interest) and Interflora British Unit (an indirect, wholly-owned subsidiary of United Online) issued proceedings against Marks and Spencer plc ("Marks and Spencer") seeking injunctive relief, damages, interest, and costs in an action claiming infringement of U.K. trademark registration number 1329840 and European Community trademark registration number 909838, both for the word "Interflora". Marks and Spencer did not make a counterclaim. In July 2009, the High Court of Justice of England and Wales (the "High Court"), referred questions to the Court of Justice of European Union ("CJEU") for a preliminary ruling. In September 2011, the CJEU handed down its judgment on the questions referred by the High Court. In February 2012, the High Court scheduled the trial for April 2013. In September 2012, Interflora British Unit executed an indemnity agreement by which Interflora British Unit agreed to indemnify Interflora, Inc. against all losses and expenses arising out of this action which Interflora, Inc. may incur after July 10, 2012. The trial in this matter has concluded. The High Court has not yet issued a ruling. If Marks and Spencer successfully defends the action, Interflora, Inc. and Interflora British Unit could be ordered to pay Marks and Spencer's legal fees, costs and expenses, together with interest on any amounts awarded, for which Interflora British Unit would be solely liable under the indemnity agreement.

The Company has been cooperating with certain governmental authorities in connection with their respective investigations of its former post-transaction sales practices and certain other current or former business practices.

The Company cannot predict the outcome of these or any other governmental investigations or other legal actions or their potential implications for its business. There are no assurances that additional governmental investigations or other legal actions will not be instituted in connection with the Company's former post-transaction sales practices or other current or former business practices.

The Company records a liability when it believes that it is both probable that a loss will be incurred, and the amount of loss can be reasonably estimated. The Company evaluates, at least quarterly, developments in its legal matters that could affect the amount of liability that has been previously accrued, and makes adjustments as appropriate. Significant judgment is required to determine both probability and the estimated amount. The Company may be unable to estimate a possible loss or range of possible loss due to various reasons, including, among others: (i) if the damages sought are indeterminate; (ii) if the proceedings are in early stages, (iii) if there is uncertainty as to the outcome of pending appeals, motions or settlements, (iv) if there are significant factual issues

to be determined or resolved, and (v) if there are novel or unsettled legal theories presented. In such instances, there is considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any. At March 31, 2013, the Company had a reserve of $0.1 million for the settlement of the Michaels class action. With respect to the other legal matters described above, the Company has determined, based on its current knowledge, that the amount of possible loss or range of loss, including any reasonably possible losses in excess of amounts already accrued, is not reasonably estimable. However, legal matters are inherently unpredictable and subject to significant uncertainties, some of which are beyond the Company's control. As such, there can be no assurance that the final outcome of these matters will not materially and adversely affect the Company's business, financial condition, results of operations, or cash flows.

On August 1, 2012, United Online, Inc. announced that its Board of Directors had approved a preliminary plan to separate the Company into two independent, publicly-traded companies: FTD Companies, Inc., which will include the domestic and international operations of the Company's FTD segment, and United Online, Inc., which will continue to include the businesses of the Company's Content & Media and Communications segments (the "FTD Spin-Off Transaction"). The FTD Spin-Off Transaction is expected to take the form of a tax-free pro rata distribution to stockholders of United Online, Inc. and is subject to a number of conditions, including final approval of transaction specifics by the Board of Directors of United Online, Inc., receipt of a favorable private letter ruling from the IRS and an opinion of counsel, the filing and effectiveness of a registration statement with the SEC, and other related matters. The Company anticipates that the IRS ruling will confirm that the distribution of shares of FTD Companies, Inc. common stock will not result in the recognition, for U.S. federal income tax purposes, of income, gain or loss by United Online, Inc. or its stockholders. The FTD Spin-Off Transaction will not require stockholder approval. On April 30, 2013, FTD Companies, Inc. filed an initial registration statement on Form 10 with the SEC in connection with the FTD Spin-Off Transaction. While the Company expects that the FTD Spin-Off Transaction will be completed by the end of the third quarter of 2013, there can be no assurance that it will be completed on the anticipated schedule or that its terms will not change. Following completion of the FTD Spin-Off Transaction, the historical results of the FTD segment will be presented as discontinued operations in the Company's consolidated financial statements. The Company recorded $1.7 million of transaction-related costs in the quarter ended March 31, 2013 in connection with the FTD Spin-Off Transaction and its exploration of strategic alternatives for its other businesses and monetization opportunities for its portfolio of patents and patent applications.

On April 30, 2013, Mark R. Goldston, Chairman, President and Chief Executive Officer of United Online, Inc., announced that, subject to the completion of the FTD Spin-Off Transaction, he would resign as a director and officer of United Online immediately thereafter. Under the terms of Mr. Goldston's employment agreement, the FTD Spin-Off Transaction would constitute a change in control of United Online. His resignation following the FTD Spin-Off Transaction would constitute an involuntary termination for purposes of his employment agreement due to there having been a material decrease in his authorities, duties and responsibilities following a change in control. As a result, effective upon such resignation, and subject to the terms and conditions of his employment agreement,

Mr. Goldston would be entitled to the severance and other benefits described in his employment agreement in connection with an involuntary termination, including an estimated cash severance payment totaling approximately $7.1 million (assuming a September 30, 2013 termination date), as well as full and accelerated vesting of Mr. Goldston's outstanding nonvested restricted stock units and unvested stock options. Mr. Goldston's employment agreement has previously been filed with the SEC.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain certain forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, as amended, based on our current expectations, estimates and projections about our operations, industry, financial condition, performance, results of operations, and liquidity. Statements containing words such as "may," "believe," "anticipate," "expect," "intend," "plan," "project," "projections," "business outlook," "estimate," or similar expressions constitute forward-looking statements. These forward-looking statements include, but are not limited to, statements about the expected benefits of our acquisitions; the Company's strategies, including the planned separation of the Company and FTD into separate, publicly-traded companies and the expected benefits of such transaction; anticipated changes to senior management; future financial performance; revenues; segment metrics; operating expenses; market trends, including those in the markets in which we compete; liquidity; cash flows and uses of cash; dividends; capital expenditures; depreciation and amortization; tax payments; foreign currency exchange rates; hedging arrangements; our ability to repay indebtedness, pay dividends and invest in initiatives; our products and services; pricing; marketing plans; competition; settlement of legal matters; and the impact of accounting pronouncements. Potential factors that could affect the matters about which the forward-looking statements are made include, among others, the factors disclosed in the section entitled "Risk Factors" in this Quarterly Report on Form 10-Q and additional factors that accompany the related forward-looking statements in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward- looking statements, which reflect management's analysis only as of the date hereof. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that may cause actual performance and results to differ materially from those predicted. Reported results should not be considered an indication of future performance. Except as required by law, we undertake no obligation to publicly release the results of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

United Online, through its operating subsidiaries, is a leading provider of consumer products and services over the Internet under a number of brands, including FTD, Interflora, Flying Flowers, Flowers Direct, Drake Algar, Classmates, schoolFeed, StayFriends, Trombi, MyPoints, NetZero, and Juno.

United Online, Inc. is a Delaware corporation, headquartered in Woodland Hills, California, that commenced operations in 2001 following the merger of dial-up Internet access providers NetZero, Inc. ("NetZero") and Juno Online Services, Inc. ("Juno"). In 2004, we acquired Classmates Online, Inc. (whose name was changed to Memory Lane, Inc. in February 2011), a provider of online nostalgia services, and in 2006, we acquired MyPoints.com, Inc. ("MyPoints"), a provider of an online loyalty marketing service. In 2008, we acquired FTD Group, Inc. (together with its subsidiaries, "FTD"), a provider of floral, gift and related products and services to consumers and retail florists, as well as to other retail locations offering floral, gift and related products and services under the FTD and Interflora brands. In April 2012, we acquired certain assets of the Gifts Division of Flying Brands Limited, specifically the Flying Flowers, Flowers Direct and Drake Algar businesses. In June 2012, we acquired schoolFeed, Inc. ("schoolFeed"), owner of the schoolFeed Facebook app and a leading online high school social network that enables members to reconnect and interact with their former classmates.


Segment		Products and Services
FTD		Floral, gift and related products and services for consumers, retail florists and other retail locations
Content & Media		Online nostalgia products and services and an online loyalty marketing service
Communications		Internet access services and devices, including dial-up, NetZero 4G mobile broadband, and DSL, and email, Internet security and web hosting services

On August 1, 2012, United Online, Inc. announced that its Board of Directors had approved a preliminary plan to separate the Company into two independent, publicly-traded companies: FTD Companies, Inc., which will include the domestic and international operations of the Company's FTD segment, and United Online, Inc., which will continue to include the businesses of the Company's Content & Media and Communications segments (the "FTD Spin-Off Transaction"). The FTD Spin-Off Transaction is expected to take the form of a tax-free pro rata distribution to stockholders of United Online, Inc. and is subject to a number of conditions, including final approval of transaction specifics by the Board of Directors, receipt of a favorable private letter ruling from the IRS and an opinion of counsel, the filing and effectiveness of a registration statement with the Securities and Exchange Commission (the "SEC"), and other related matters. The Company anticipates that the IRS ruling will confirm that the distribution of shares of FTD Companies, Inc. common stock will not result in the recognition, for U.S. federal income tax purposes, of income, gain or loss by United Online, Inc. or its stockholders. The FTD Spin-Off Transaction will not require stockholder approval. While the Company expects that the FTD Spin-Off Transaction will be completed by the end of the third quarter of 2013, there can be no assurance that it will be completed on the anticipated schedule or that its terms will not change. On April 30, 2013, FTD Companies, Inc. filed an initial registration statement on Form 10 with the SEC in connection with the FTD Spin-Off Transaction. See Note 14—"Planned

Spin Off" of the Notes to the Unaudited Condensed Consolidated Financial Statements and "Part I, Item 1A—Risk Factors" for additional information and risk factors associated with the FTD Spin-Off Transaction.

FTD is a premier floral and gift products and services company. FTD provides floral, gift and related products and services to consumers and retail florists, as well as to other retail locations offering floral and gift products primarily in the U.S., Canada, the U.K., and the Republic of Ireland. FTD's business uses the highly-recognized FTD and Interflora brands, both supported by the Mercury Man logo that is displayed in tens of thousands of floral shops worldwide. FTD's portfolio of brands also includes Flying Flowers, Flowers Direct and Drake Algar in the U.K. FTD is a leading provider of floral and gift items to consumers, which FTD refers to as its consumer business, and a provider of floral network products and services, which FTD refers to as its floral network business. These businesses are complementary as the majority of floral orders generated by the consumer business are fulfilled and hand delivered by members of FTD's floral networks, with the remaining orders delivered via direct shipment from third-party suppliers. FTD owns and operates one retail shop and six concession stands in the U.K. FTD does not maintain significant physical inventory because its floral network members and third-party suppliers maintain substantially all floral and gift physical inventory and facilities. FTD generally receives payment from consumers before paying its floral network members and third parties for fulfillment and delivery of products.

Consumer Business. FTD operates in the U.S. and Canada, primarily through the www.ftd.com website and the 1-800-SEND-FTD telephone number, and in the U.K. and the Republic of Ireland, primarily through the www.interflora.co.uk website and various telephone numbers. FTD also operates mobile websites for these same markets that are optimized for mobile devices with Internet connections. While floral arrangements and plants are FTD's primary offerings, FTD also markets and sells gift items, including jewelry, sweets, gift baskets, wine, fruit, and spa products.

Consumers place orders on FTD's websites and, to a much lesser extent, over the telephone. Orders are transmitted to floral network members or third-party suppliers for processing and delivery. The majority of consumer orders are hand-delivered by FTD's floral network members, who provide same-day and future-day delivery services. The other consumer orders are fulfilled and shipped directly to the consumer in an elegant gift box by third parties, who provide next-day and future-day delivery services.

Floral Network Business. FTD provides a comprehensive suite of products and services to members of its floral networks, including services that enable such members to send, receive and deliver floral orders. Floral network members include traditional retail florists, as well as other retail locations offering floral and related products, that are located primarily in the U.S., Canada, the U.K., and the Republic of Ireland. The large networks of floral network members provide an order fulfillment vehicle for FTD's consumer business and allow FTD to offer same-day delivery capability (subject to certain limitations) to populations throughout the U.S., Canada, the U.K., and the Republic of Ireland.

FTD's products and services available to floral network members include access to the FTD and Interflora brands and the Mercury Man logo, supported by various marketing campaigns; access to the floral networks; credit card processing services; e-commerce website services; online advertising tools; clearinghouse services; order transmission services; and system support services, as well as floral-related products, such as fresh flowers and containers. FTD provides point-of-sale systems and related technology services that enable FTD's floral network members to transmit and receive orders and manage several back office functions of a floral retailer's business, including accounting, customer

relationship management, direct marketing campaigns, delivery route management, event planning, and mobile applications. FTD also acts as a national wholesaler to its floral network members, providing branded and non-branded hard goods and cut flowers, as well as packaging, promotional products and a wide variety of other floral-related supplies. Wholesaling branded vases and other hard goods to floral network members helps to ensure consistency between the consumer orders fulfilled by FTD's floral network members and the product imagery displayed on FTD's websites.

Our Content & Media segment provides online nostalgia products and services under the Classmates, schoolFeed, StayFriends, and Trombi brands. Our Content & Media products consist of yearbook reprints, as well as third-party merchandise. Our Content & Media segment also offers an online loyalty marketing service under the MyPoints brand.

Online Nostalgia Services. We operate our nostalgia services as a platform to enable users to locate and interact with acquaintances from their past, with high school affiliations as the primary focus. Our domestic and international nostalgia services comprise a large and diverse population of users, with over 100 million registered accounts at March 31, 2013.

Domestic. Visitors to the Classmates website can experience a substantial amount of nostalgic content free of charge. Members with free accounts can use our search feature to locate individuals in our database or in our collection of yearbooks; post information and view information posted by other members; tag yearbook photos; and organize reunions and engage in other reunion-related activities. To engage in the premium features, including access to our Classmates® Guestbook, access to our Classmates location feature and ability to send double-blind emails through our Classmates website to other members and respond to email messages from any other member, a member is required to purchase an All-Access Pass, which is generally available for terms ranging from three months to two years. Revenues from our Classmates website are derived primarily from the sale of these subscriptions and, to a lesser extent, from advertising fees and other transactions on our website, including the sale of yearbook reprints.

International. In addition to our Classmates website, we operate five international websites that offer nostalgia services, primarily as a social networking platform to reconnect friends and acquaintances from high school. We operate StayFriends in Germany, Sweden, Austria, and Switzerland (www.stayfriends.de, www.stayfriends.se, www.stayfriends.at, and www.stayfriends.ch, respectively), and Trombi in France (www.trombi.com). Similar to the Classmates website, each international website includes free and pay memberships, although the features of our international pay services differ from those of the Classmates pay services.

Online Loyalty Marketing. Our online loyalty marketing service, MyPoints, connects advertisers with its members by allowing members to earn rewards points for engaging in online activities. MyPoints is a free service for consumers who register and provide certain identifying information to receive direct email marketing and other online loyalty promotions. The MyPoints website (www.mypoints.com) serves as a shopping portal for our advertising clients and direct sales partners. Members earn points for responding to email offers, shopping online at the MyPoints website, taking market research companies' surveys, playing MyPoints branded online games, searching the Internet through a MyPoints branded toolbar, and engaging in other online activities. In addition to these online point earning opportunities, MyPoints also offers a member credit card with opportunities to earn points through both online and offline shopping. Rewards points are redeemable primarily in the form of third-party gift cards currently from approximately 80 merchants, including, among others, leading retailers, theaters, restaurants, airlines, and hotels.

Our principal Communications pay service is dial-up Internet access, offered under the NetZero and Juno brands. We also offer 4G mobile broadband, DSL, email, Internet security, web hosting services, and other services. In total, we had 0.6 million Communications pay accounts at March 31, 2013, of which 0.4 million were access accounts and 0.2 million were pay accounts subscribed to our other Communications services, including email, Internet security and web hosting services. Most of our Communications revenues are derived from dial-up Internet access pay accounts.

Internet Access Services. Our Internet access services consist of dial-up and, to a much lesser extent, our NetZero 4G mobile broadband service and DSL service. Our dial-up Internet access services are provided on both a free and pay basis, with the free services subject to hourly and other limitations. Basic pay dial-up Internet access services include Internet access and an email account. In addition, we offer accelerated dial-up Internet access services which can significantly reduce the time required for certain web pages to load during Internet browsing when compared to our basic dial-up Internet access services. Our accelerated dial-up Internet access services are also bundled with additional benefits, including antivirus software and enhanced email storage, although we also offer each of these features and certain other value-added features as stand-alone pay services. Our dial-up Internet access services are available in more than 12,500 cities across the U.S. and Canada.

In 2012, we began offering NetZero 4G mobile broadband service as part of a wholesale agreement with Clearwire. We offer consumers the option to access the service by purchasing either a NetZero USB modem to connect a single device such as a PC or a Mac® computer, or a NetZero personal hotspot that can connect up to eight Wi-Fi enabled devices simultaneously. NetZero USB modem and NetZero hotspot customers are able to connect to the NetZero 4G mobile broadband service within the Clearwire coverage area using a variety of devices, including a PC, Mac® computer, iPad® mobile digital device, and other tablets, netbooks and smartphones. The NetZero 4G mobile broadband service is generally available for use in the home, at the office or on the go by customers across the U.S. within the Clearwire coverage area.

Our DSL broadband Internet access service consists of digital subscriber lines (also known as "DSL") service that we purchase from third parties and resell under our own brands. This service is primarily used as a means to retain members who are leaving our dial-up Internet access services. Since we have conducted very limited marketing of our DSL service to the general public, we have experienced limited adoption of our DSL service.

We review a number of key business metrics to help us monitor our performance and trends affecting our businesses, and to develop forecasts and budgets. These key measures include the following:

Consumer Orders. We monitor the number of consumer orders for floral, gift and related products during a given period. Consumer orders are orders delivered during the period that originated in the U.S. and Canada, primarily from the www.ftd.com website and the 1-800-SEND-FTD telephone number, and in the U.K. and the Republic of Ireland, primarily from the www.interflora.co.uk website and various telephone numbers. The number of consumer orders is not adjusted for non-delivered orders that are refunded on or after the scheduled delivery date. Orders originating with a florist or other retail location for delivery to consumers are not included. The number of consumer orders received may fluctuate significantly from period to period due to seasonality resulting from the timing of key holidays; general economic conditions; fluctuations in marketing expenditures on initiatives designed to attract new and retain existing customers; changes in pricing for our floral, plant and gift

products or competitive offerings; new or terminated partnerships; and changing consumer preferences, among other factors.

Average Order Value. We monitor the average value for consumer orders delivered in a given period, which we refer to as the average order value. Average order value represents the average U.S. Dollar amount received for consumer orders delivered during a period. For orders placed outside the U.S. (principally in the U.K. and the Republic of Ireland), this average U.S. Dollar amount is determined after translating the local currency amounts received into U.S. Dollars. Average order value includes merchandise revenues and shipping and service fees paid by the consumer, less discounts and refunds (net of refund-related fees charged to floral network members). Average order values may fluctuate from period to period based on the average foreign currency exchange rates; product mix; changes in merchandise pricing, shipping and service fees; levels of refunds issued; and discounts, among other factors.

Pay Accounts. We generate a significant portion of our revenues from our pay accounts and they represent one of the most important drivers of our business model. A pay account is defined as a member who has paid for a subscription to a Content & Media or Communications service, and whose subscription has not terminated or expired. A subscription provides the member with access to our service for a specific term (for example, a month or a year) and may be renewed upon the expiration of each term. One time purchases of our services are not considered subscriptions and thus, are not included in the pay accounts metric. A pay account does not equate to a unique subscriber since one subscriber could have several pay accounts. In addition, at any point in time, our pay account base includes a number of accounts receiving a free period of service as either a promotion or retention tool, such as the subscribers receiving our free NetZero 4G mobile broadband service, and a number of accounts that have notified us that they are terminating their service but whose service remains in effect. In general, the key metrics that affect our revenues from our pay accounts base include the number of pay accounts and ARPU. A pay account generally becomes a free account following the expiration or termination of the related subscription.

ARPU. We monitor ARPU, which is a monthly measure calculated by dividing services revenues generated from the pay accounts of our Content & Media or Communications segment, as applicable, for a period (after translation into U.S. Dollars) by the average number of segment pay accounts for that period, divided by the number of months in that period. The average number of pay accounts is the simple average of the number of pay accounts at the beginning and the end of a period. ARPU may fluctuate significantly from period to period as a result of a variety of factors, including, but not limited to, the extent to which promotional, discounted or retention pricing is used to attract new, or retain existing, paying subscribers; changes in the mix of pay services and the related pricing plans; increases or decreases in the price of our services; the timing of pay accounts being added or removed during a period; and for the Content & Media segment the average foreign currency exchange rate between the U.S. Dollar and the Euro.

Churn. To evaluate the retention characteristics of our membership base, we also monitor the percentage of pay accounts that terminate or expire, which we refer to as our average monthly churn rate. Our average monthly churn rate is calculated as the total number of pay accounts that terminated or expired in a period divided by the average number of pay accounts for that period, divided by the number of months in that period. Our average monthly churn percentage may fluctuate from period to period due to our mix of subscription terms, which affects the timing of subscription expirations, and other factors. We make certain normalizing adjustments to the calculation of our churn percentage for periods in which we add a significant number of pay accounts due to acquisitions. For our Communications segment pay accounts, we do not include in our churn calculation accounts canceled

during the first 30 days of service, other than dial-up accounts that have upgraded from free accounts. A number of such accounts nevertheless will be included in our account totals at any given measurement date. Subscribers who cancel one pay service but subscribe to another pay service are not necessarily considered to have canceled a pay account depending on the services and, as such, our segment churn rates are not necessarily indicative of the percentage of subscribers canceling any particular service.

Active Accounts. We monitor the number of active accounts among our membership base. Content & Media segment active accounts are defined as the sum of all pay accounts as of the date presented; the monthly average for the period of all free accounts who have visited our domestic or international online nostalgia websites (excluding schoolFeed and The Names Database) at least once during the period; and the monthly average for the period of all online loyalty marketing members who have earned or redeemed points during such period. Communications segment active accounts include all Communications segment pay accounts as of the date presented combined with the number of free dial-up Internet access and email accounts that logged on to our services at least once during the preceding 31 days. Content & Media segment and Communications segment active accounts for the six-month, nine-month and annual periods, as applicable, are calculated as a simple average of the quarterly active accounts for each respective segment.

In general, we count and track pay accounts and free accounts by unique member identifiers. Users have the ability to register for separate services under separate brands and member identifiers independently. We do not track whether a pay account has purchased more than one of our services unless the account uses the same member identifier. As a result, total active accounts may not represent total unique users.

Revenues and operating results from the FTD segment are impacted by seasonal holiday timing variations and fluctuations in foreign currency exchange rates. As such, we believe that comparisons of the FTD segment's revenues and operating results for any period with those of the immediately preceding period or, in some instances, the same period of the preceding fiscal year, may be of limited relevance in evaluating its historical financial performance and predicting its future financial performance.

The pay accounts and ARPU metrics for the Content & Media segment may fluctuate significantly from period to period due to various factors, including, but not limited to, the extent to which discounted pricing is offered in prior and current periods, the percentage of pay accounts being represented by international pay accounts, which, on average, have lower-priced subscription plans compared to U.S. pay accounts, and the churn rate.

The pay accounts, churn and ARPU metrics for the Communications segment may fluctuate significantly from period to period due to various factors, including, but not limited to, the number of wireless pay accounts, which have a higher churn rate and ARPU.

The table below sets forth, for the periods presented, as applicable, our consolidated revenues, segment revenues, consumer orders, average order value, average currency exchange rates, pay accounts, segment churn, ARPU, and segment active accounts.

	Quarter Ended

	March 31, 2013			December 31, 2012			September 30, 2012			June 30, 2012			March 31, 2012
Consolidated:
Revenues (in thousands)	$	247,384		$	218,983		$	177,751		$	231,857		$	242,292
FTD:
Segment revenues (in thousands)	$	190,283		$	153,178		$	116,362		$	167,527		$	176,447
% of consolidated revenues		77	%		70	%		65	%		72	%		73	%
Consumer orders (in thousands)		2,204			1,787			1,239			1,997			1,997
Average order value	$	61.01		$	60.13		$	61.06		$	60.75		$	62.91
Average currency exchange rate: GBP to USD		1.54			1.61			1.58			1.58			1.58
Content & Media:
Segment revenues (in thousands)	$	32,826		$	39,509		$	36,556		$	37,986		$	39,445
% of consolidated revenues		13	%		18	%		21	%		16	%		16	%
Pay accounts (in thousands)		2,786			2,864			2,987			3,120			3,293
Segment churn		3.3	%		3.5	%		3.4	%		3.6	%		3.9	%
ARPU	$	2.48		$	2.52		$	2.50		$	2.50		$	2.54
Segment active accounts (in millions)		11.4			11.5			10.9			10.3			11.3
Average currency exchange rate: EUR to USD		1.32			1.30			1.25			1.28			1.31
Communications:
Segment revenues (in thousands)	$	24,640		$	26,669		$	25,203		$	26,810		$	26,760
% of consolidated revenues		10	%		12	%		14	%		12	%		11	%
Pay accounts (in thousands):
Access		404			421			440			467			498
Other		222			229			235			242			249

Total pay accounts		626			650			675			709			747
Segment churn		3.0	%		2.9	%		3.1	%		3.2	%		3.4	%
ARPU	$	9.21		$	9.05		$	8.97		$	8.97		$	8.99
Segment active accounts (in millions)		1.3			1.3			1.4			1.4			1.5

Products revenues are derived primarily from selling floral, gift and related products to consumers and the related shipping and service fees. Products revenues also include revenues generated from sales of branded and non-branded hard goods, software and hardware systems, cut flowers, packaging and promotional products, and a wide variety of other floral-related supplies to floral network members.

Products revenues consist of revenues generated from the sale of yearbook reprints and related shipping and handling fees, as well as revenues generated from reselling third-party merchandise.

Products revenues consist of revenues generated from the sale of NetZero 4G mobile broadband service devices and the related shipping and handling fees.

FTD services revenues are derived primarily from orders sent to floral network members and fees for floral network services.

Content & Media services revenues primarily consist of amounts charged to pay accounts for online nostalgia services. Communications services revenues consist of amounts charged to pay accounts for dial-up Internet access, NetZero 4G mobile broadband, DSL, email, Internet security, web hosting, and other services, with substantially all of such revenues associated with Internet access. Our Content & Media and Communications services revenues are primarily dependent on two factors: the average number of pay accounts for a period and ARPU. In general, we charge our pay accounts in advance of providing a service, which results in the deferral of services revenue to the period in which the services are provided. Communications services revenues also include revenues generated from the resale of telecommunications to third parties.

We provide advertising opportunities to marketers with both brand and direct response objectives through a full suite of display, search, email, and text-link opportunities across our various properties.

Our online nostalgia services generate advertising revenues primarily from display advertisements on our websites. Advertising inventory on our online nostalgia websites includes text and graphic placements on the user home page, profile page, class list page, and most other pages on our websites.

Our online loyalty marketing service revenues are derived from advertising fees, consisting primarily of fees based on performance measures, that are generated when emails are transmitted to members, when members respond to emails, when members complete online transactions, and when members engage in a variety of other online activities, including, but not limited to, games, Internet searches and market research surveys. Our online loyalty marketing service revenues also include revenues generated from the sale of gift cards.

Our Communications services generate advertising revenues from search placements, display advertisements and online market research associated with our Internet access and email services. Advertising revenues also include intercompany commissions from the Content & Media segment which are included in reported segment results and are eliminated upon consolidation.

FTD cost of revenues includes product costs; shipping and delivery costs; costs associated with taking orders; printing and postage costs; systems installation, training and support costs; data center costs; depreciation of network computers and equipment; license fees; costs related to customer billing and billing support for floral network members; fees associated with the storage and processing of customer credit cards and associated bank fees; and domain name registration fees.

Content & Media cost of revenues includes costs related to the sale of gift cards; costs of points earned by members of our online loyalty marketing service; data center costs; personnel- and overhead-related costs associated with operating our networks and data centers; depreciation of network computers and equipment; amortization of content purchases; license fees; costs related to providing customer support; costs related to customer billing and billing support for our pay accounts; fees associated with the storage and processing of customer credit cards and associated bank fees; domain name registration fees; costs associated with the sale of yearbook reprints and the related shipping and handling costs; and costs related to third-party merchandise.

Communications cost of revenues includes telecommunications and data center costs; personnel- and overhead-related costs associated with operating our networks and data centers; depreciation of network computers and equipment; license fees; costs related to providing customer support; costs related to customer billing and billing support for our pay accounts; fees associated with the storage and processing of customer credit cards and associated bank fees; domain name registration fees, and the costs associated with the sale of NetZero 4G mobile broadband service devices, including the related shipping and handling costs.

Sales and marketing expenses include expenses associated with promoting our brands, products and services and with generating advertising revenues. Expenses associated with promoting our brands, products and services include advertising and promotion expenses; fees paid to distribution partners, third-party advertising networks and co-registration partners to acquire new pay and free accounts; personnel and overhead-related expenses for marketing, merchandising, customer service, and sales personnel; and telemarketing costs incurred to acquire and retain pay accounts and up-sell pay accounts to additional services. Expenses associated with generating advertising revenues include sales commissions and personnel-related expenses. We have expended significant amounts on sales and marketing, including branding and customer acquisition campaigns consisting of television, Internet, public relations, sponsorships, print, and outdoor advertising, and on retail and other performance-based distribution relationships. Marketing and advertising costs to promote our products and services are expensed in the period incurred. Advertising and promotion expenses include media, agency and promotion expenses. Media production costs are expensed the first time the advertisement is run. Media and agency costs are expensed over the period the advertising runs.

Technology and development expenses include expenses for product development, maintenance of existing software, technology and websites, and development of new or improved software and technology, including personnel-related expenses for our technology group in various office locations. Costs incurred by us to manage and monitor our technology and development activities are expensed as incurred.

General and administrative expenses, which include unallocated corporate expenses, consist of personnel-related expenses for executive, finance, legal, human resources, facilities, internal audit, investor relations, internal customer support personnel and personnel associated with operating our corporate network systems. In addition, general and administrative expenses include, among other costs, professional fees for legal, accounting and financial services; insurance; occupancy and other

overhead-related costs; office relocation costs; non-income taxes; gains and losses on the sale of assets; bad debt expense; and reserves or expenses incurred as a result of settlements, judgments, fines, penalties, assessment, or other resolutions related to litigation, arbitration, investigations, disputes, or similar matters. General and administrative expenses also include expenses resulting from actual or potential transactions such as business combinations, mergers, acquisitions, dispositions, spin offs, financing transactions, and other strategic transactions, including, without limitation, expenses for advisors and representatives such as investment bankers, consultants, attorneys, and accounting firms.

Amortization of intangible assets includes amortization of acquired pay accounts and free accounts; certain acquired trademarks and trade names; acquired software and technology; acquired customer and advertising contracts and related relationships; acquired rights, content and intellectual property; and other acquired identifiable intangible assets. In accordance with the provisions set forth in ASC 350, goodwill and indefinite-lived intangible assets are not being amortized but are tested for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would indicate the fair value may be below the carrying amount.

Contingent consideration—fair value adjustment includes changes in the estimated fair value of contingent consideration, as well as interest expense related to such contingent consideration. Changes to one or multiple inputs to the Monte-Carlo simulation used to estimate fair value, including the discount rate, mean growth rates, volatility rates, the estimated number of daily registrations, and the estimated rate of conversion of new subscribers to pay accounts, could significantly impact the estimated fair value of contingent consideration. We review and reassess the estimated fair value of contingent consideration on a quarterly basis, and future fair value estimates could differ from the initial estimate.

Restructuring and other exit costs consist of costs associated with the realignment and reorganization of our operations and other employee termination events. Restructuring and other exit costs include employee termination costs, facility closure and relocation costs, and contract termination costs. The timing of associated cash payments is dependent upon the type of exit cost and can extend over a 12-month period. We record restructuring and other exit cost liabilities in accrued liabilities or other liabilities in the consolidated balance sheets.

Interest income consists primarily of earnings on our cash and cash equivalents and interest on long-term receivables, including those from FTD's technology system sales.

Interest expense consists of interest expense on our credit facilities, including accretion of discounts and amortization of debt issue costs and loss on extinguishment of debt.

Other income (expense), net, consists of gains and losses on foreign currency exchange rate transactions; realized and unrealized gains and losses on certain forward foreign currency exchange contracts; gains or losses related to ineffectiveness of derivative instruments; equity earnings on investments in subsidiaries; and other non-operating income and expenses.

The following tables set forth, for the periods presented, selected historical consolidated statements of operations and segment information data. The information contained in the tables below should be read in conjunction with Liquidity and Capital Resources, Contractual Obligations, and Other Commitments included in this Item 2, as well as "Quantitative and Qualitative Disclosures About Market Risk" included in Part I, Item 3 of this Quarterly Report on Form 10-Q, and the unaudited condensed consolidated financial statements and notes thereto included in Part 1, Item 1 of this Quarterly Report on Form 10-Q. If we complete the FTD Spin-Off Transaction, we will be a substantially smaller company than we were prior to the FTD Spin-Off Transaction, and we anticipate that our consolidated revenues, results of operations and cash flows will be substantially lower when compared to periods prior to the FTD Spin-Off Transaction.

	Quarter Ended March 31,

	2013			2012
Revenues	$	247,384		$	242,292
Operating expenses:
Cost of revenues		141,557			131,191
Sales and marketing		45,961			46,759
Technology and development		12,424			11,586
General and administrative		26,562			24,287
Amortization of intangible assets		7,747			7,309
Contingent consideration—fair value adjustment		(5,149	)		—
Restructuring and other exit costs		2,289			(71	)

Total operating expenses		231,391			221,061

Operating income		15,993			21,231
Interest income		153			238
Interest expense		(3,192	)		(3,458	)
Other income, net		367			204

Income before income taxes		13,321			18,215
Provision for income taxes		3,202			6,712

Net income	$	10,119		$	11,503

Information for our three reportable segments, which excludes depreciation and amortization of intangible assets, was as follows (in thousands):

	FTD				Content & Media						Communications

	Quarter Ended March 31,				Quarter Ended March 31,						Quarter Ended March 31,
	2013		2012		2013			2012			2013		2012
Revenues	$	190,283	$	176,447	$	32,826		$	39,445		$	24,640	$	26,760
Operating expenses:
Cost of revenues		121,183		111,956		7,742			8,274			8,624		7,687
Sales and marketing		30,263		28,714		11,301			14,119			4,566		3,908
Technology and development		2,966		2,797		5,190			4,409			2,014		1,944
General and administrative		9,134		8,900		5,659			5,395			2,806		2,864
Contingent consideration—fair value adjustment		—		—		(5,149	)		—			—		—
Restructuring and other exit costs		—		—		2,289			(63	)		—		(8	)

Total operating expenses		163,546		152,367		27,032			32,134			18,010		16,395

Segment income from operations	$	26,737	$	24,080	$	5,794		$	7,311		$	6,630	$	10,365

The increase in consolidated revenues was due to a $13.8 million increase in revenues from our FTD segment, partially offset by a $6.6 million decrease in revenues from our Content & Media segment and a $2.1 million decrease in revenues from our Communications segment.

The increase in consolidated cost of revenues was due to a $9.2 million increase in cost of revenues associated with our FTD segment, a $0.9 million increase in cost of revenues associated with our Communications segment and a $0.7 million increase in amortization expense. These increases were partially offset by a $0.5 million decrease in cost of revenues associated with our Content & Media segment.

The decrease in consolidated sales and marketing expenses was due to a $2.8 million decrease in sales and marketing expenses associated with our Content & Media segment, partially offset by a $1.5 million increase in sales and marketing expenses associated with our FTD segment and a $0.7 million increase in sales and marketing expenses associated with our Communications segment.

The increase in consolidated technology and development expenses was primarily due to an increase in technology and development expenses associated with our Content & Media segment.

The increase in consolidated general and administrative expenses was primarily due to a $1.9 million increase in unallocated corporate expenses and, to a lesser extent, a $0.3 million increase in general and administrative expenses associated with our Content & Media segment and a $0.2 million increase in general and administrative expenses associated with our FTD segment.

The increase in consolidated amortization of intangible assets was primarily due to a $0.3 million increase in Content & Media amortization of intangible assets primarily related to the acquisition of schoolFeed in the second quarter of 2012.

Contingent consideration—fair value adjustment for the quarter ended March 31, 2013 was comprised of a $5.5 million change in the estimated fair value of contingent consideration, partially offset by $0.4 million of interest expense related to such contingent consideration. The decrease in the estimated fair value of contingent consideration since December 31, 2012 was attributable to a decrease in the estimates and mean growth rates for U.S. and other target market daily registrations assumptions used in calculating the estimated fair value of contingent consideration at March 31, 2013. See "Fair Value Measurements" for additional information.

Consolidated restructuring and other exit costs for the quarter ended March 31, 2013 included $2.1 million of employee termination costs, as well as $0.2 million of contract termination costs in the Content & Media segment. See "Content & Media Segment Results—Content & Media Restructuring and Other Exit Costs" for additional information.

Consolidated interest income remained relatively flat for the quarter ended March 31, 2013, compared to the quarter ended March 31, 2012.

The decrease in consolidated interest expense was primarily due to lower amounts outstanding under FTD's credit agreement as a result of repayments.

The increase in consolidated other income, net, was primarily due to an increase in realized and unrealized gains related to forward foreign currency exchange contracts, partially offset by an increase in losses associated with foreign currency exchange transactions.

The decrease in the effective income tax rate was primarily due to the treatment of the reduction in the estimated fair value of contingent consideration in the quarter ended March 31, 2013 as a permanent difference. Changes in the estimated fair value of contingent consideration are recorded in the unaudited condensed consolidated statements of operations, while, for tax purposes, such changes are treated as a purchase price adjustment.

Excluding the unfavorable impact of foreign currency exchange rates of $1.4 million due to a weaker British Pound versus the U.S. Dollar, FTD revenues increased by $15.2 million, or 9%. The increase was due to a 10% increase in consumer orders of which 5% was due to growth in the U.S consumer business and the remaining 5% due to the acquisition of the Gifts Division of Flying Brands Limited, which was acquired in the second quarter of 2012. Partially offsetting this increase was a decrease in average order value primarily due to consumer orders generated by the Gifts Division of Flying Brands Limited, which have lower average order values compared to FTD's existing consumer business.

Excluding the favorable impact of foreign currency exchange rates of $1.0 million, cost of revenues increased by $10.2 million, or 9%, primarily due to an increase in consumer orders.

The increase in FTD sales and marketing expenses was primarily due to a $1.0 million increase in marketing costs in the consumer business and an $0.8 million increase in marketing expenditures related to an increase in floral network order volume. Marketing costs increased in the consumer business as a result of an increase in consumer orders and the addition of marketing costs related to the Gifts Division of Flying Brands Limited, which was offset, in part, by decreases in certain marketing expenditures, primarily related to Interflora in the U.K.

The increase in FTD technology and development expenses was primarily due to an increase in personnel- and overhead-related costs.

The increase in FTD general and administrative expenses was primarily due to a $0.4 million increase in legal costs, partially offset by a $0.3 million decrease in stock-based compensation.

The decrease in Content & Media services revenues was a result of a 17% decrease in our average number of pay accounts, as well as a 2% decrease in ARPU. Content & Media advertising and other revenues decreased due to a decrease in advertising revenues from our online loyalty marketing services as a result of a decline in the number of retail partners and advertisers, as well as a decrease in online loyalty marketing active accounts. The decrease in Content & Media products revenues was primarily related to a decrease in revenues generated from the sale of third-party merchandise. We anticipate that Content & Media pay accounts and revenues will continue to decline year over year, at least in the near term. The schoolFeed app has been a source of new free members and significant user-generated content for our Classmates business. However, Facebook recently notified us that it intends to discontinue the schoolFeed app's access to the Facebook service on or about May 10, 2013, which would result in the termination of future new installations of the schoolFeed app through Facebook, as well as the discontinuance of the sharing of Facebook content through the schoolFeed app. These changes may result in a decline in the number of active accounts for our online nostalgia services.

The decrease in Content & Media cost of revenues was primarily due to a $0.5 million decrease in costs of points earned by members of our online loyalty marketing service, a $0.3 million decrease in credit card-related fees due to a decrease in pay accounts and a $0.3 million decrease in personnel- and overhead-related costs. These decreases were partially offset by a $0.6 million increase in costs related to the sale of gift cards.

The decrease in Content & Media sales and marketing expenses was primarily due to a $2.3 million decrease in online marketing costs to acquire new online nostalgia members, as well as a $0.6 million decrease in personnel- and overhead-related costs.

The increase in Content & Media technology and development expenses was the result of an increase in personnel- and overhead-related expenses primarily due to the acquisition of schoolFeed in the second quarter of 2012.

The increase in Content & Media general and administrative expenses was due to a $0.4 million increase in professional services and consulting fees, partially offset by a $0.2 million decrease in personnel- and overhead-related costs.

Content & Media contingent consideration—fair value adjustment for the quarter ended March 31, 2013 was comprised of a $5.5 million change in the estimated fair value of contingent consideration, partially offset by $0.4 million of interest expense related to such contingent consideration. The decrease in the fair value of contingent consideration since December 31, 2012 was attributable to a decrease in the estimates and mean growth rates for U.S. and other target market daily registrations assumptions used in calculating the fair value of contingent consideration at March 31, 2013. See "Fair Value Measurements" for additional information.

Content & Media restructuring and other exit costs for the quarter ended March 31, 2013 totaled $2.3 million, including $2.1 million of employee termination costs, as well as $0.2 million of contract termination costs. These restructuring and other exit costs were a result of management's initiative to improve the operational effectiveness and efficiency of the Content & Media segment, as well as segment profitability. At March 31, 2013, accrued restructuring and other exit costs totaled $1.1 million, which will be paid over the next 12 months.

The decrease in Communications services revenues was primarily due to a 28% decrease in our average number of dial-up Internet access pay accounts, partially offset by a 2% increase in ARPU. The increase in ARPU was attributable to a higher percentage of NetZero 4G mobile broadband subscribers, which have higher ARPUs. The decrease in Communications services revenues was partially offset by a $1.0 million increase in Communications products revenues related to the sale of

NetZero 4G mobile broadband devices. We anticipate that Communications pay accounts and revenues will continue to decline year over year, at least in the near term.

The increase in Communications cost of revenues was due to a $2.5 million increase in costs associated with our NetZero 4G mobile broadband service that was launched in March 2012, partially offset by a $0.6 million decrease in telecommunications, customer support and billing-related costs due to a decrease in dial-up Internet access pay accounts, a $0.5 million decrease in costs associated with our DSL service and a $0.3 million decrease in costs associated with our email, Internet security and web hosting services.

The increase in Communications sales and marketing expenses was attributable to a $1.1 million increase in marketing costs associated with the promotion of our NetZero 4G mobile broadband service, partially offset by a $0.4 million decrease in advertising, promotion and distribution costs primarily related to our dial-up Internet access services. We anticipate that Communications sales and marketing costs will decrease in 2013 as compared to 2012 primarily due to a decline in advertising costs for the NetZero 4G mobile broadband service.

Communications technology and development expenses remained relatively flat for the quarter ended March 31, 2013, compared to the quarter ended March 31, 2012.

Communications general and administrative expenses remained relatively flat for the quarter ended March 31, 2013, compared to the quarter ended March 31, 2012.

Communications restructuring and other exit costs remained relatively flat for the quarter ended March 31, 2013, compared to the quarter ended March 31, 2012.

The increase in unallocated corporate expenses, excluding depreciation and amortization of intangible assets, was primarily due to $1.7 million of transaction-related costs recorded in the quarter ended March 31, 2013 in connection with the FTD Spin-Off Transaction and the Strategic Transactions.

In connection with the FTD acquisition in August 2008, UNOLA Corp., which was then an indirect wholly-owned subsidiary of United Online, Inc., and which subsequently merged into FTD Group, Inc., entered into a $425 million senior secured credit agreement with Wells Fargo Bank, National Association, as Administrative Agent (the "2008 Credit Agreement"), consisting of (i) a term loan A facility of $75 million, (ii) a term loan B facility of $300 million, and (iii) a revolving credit facility of up to $50 million. On June 10, 2011, FTD Group, Inc. entered into a new credit agreement (the "Credit Agreement") with Wells Fargo Bank, National Association, as Administrative Agent for the lenders, to refinance the 2008 Credit Agreement. The Credit Agreement provides FTD Group, Inc. with a $315 million senior secured credit facility consisting of (i) a $265 million seven-year term loan (the "Term Loan") and (ii) a $50 million five-year revolving credit facility (the "Revolving Credit Facility" and together with the Term Loan, the "Credit Facilities"), and certain other financial accommodations, including letters of credit.

term loan borrowings under the Credit Agreement and FTD's available cash. No funds were borrowed under the Revolving Credit Facility at closing or through March 31, 2013.

The obligations under the Credit Agreement are guaranteed by FTD's parent, FTD Companies, Inc. (formerly known as UNOL Intermediate, Inc.) ("FTD Companies"), and certain of the wholly-owned domestic subsidiaries of FTD Group, Inc. (the "Subsidiary Guarantors"). In addition, the obligations under the Credit Agreement are secured by a lien on substantially all of the assets of FTD Group, Inc., FTD Companies and the Subsidiary Guarantors (collectively, the "Loan Parties"), including a pledge of all (except with respect to foreign subsidiaries, in which case such pledges are limited to 66%) of the outstanding capital stock of certain direct subsidiaries of the Loan Parties.

The interest rates on both the Term Loan and the Revolving Credit Facility are either a base rate plus 2.5% per annum, or LIBOR plus 3.5% per annum (with a LIBOR floor of 1.25% in the case of the Term Loan and step downs in the LIBOR margin on the Revolving Credit Facility depending on FTD's net leverage ratio). In addition, there is a commitment fee, which is currently equal to 0.45% per annum (with additional step-downs in the commitment fee depending on FTD's net leverage ratio), on the unused portion of the Revolving Credit Facility. The Credit Agreement contains customary representations and warranties, events of default, affirmative covenants, and negative covenants, that require, among other things, FTD to maintain compliance with a maximum net leverage ratio and a minimum fixed-charge coverage ratio, and impose restrictions and limitations on, among other things, capital expenditures, investments, dividends, asset sales, and incurrence of additional debt or liens by FTD Companies, FTD Group, Inc. and their subsidiaries. The Credit Agreement also provides for an additional $100 million in borrowing, subject to certain conditions, including compliance with covenants and approval by the lender group.

Our total cash and cash equivalents balance decreased by $4.2 million, or 3%, to $132.3 million at March 31, 2013, compared to $136.4 million at December 31, 2012. Our summary cash flows for the periods presented were as follows (in thousands):

Net cash provided by operating activities decreased by $1.7 million, or 10%. Net cash provided by operating activities is driven by our net income adjusted for non-cash items and changes in working capital, including, but not limited to, depreciation and amortization, stock-based compensation, impairment of goodwill, intangible assets and long-lived assets, and deferred taxes. The decrease in net cash provided by operating activities was due to a $1.4 million decrease in net income and a $5.4 million decrease in non-cash items primarily related to the decrease in contingent consideration resulting from the fair value adjustment, partially offset by a $5.1 million favorable change in working capital. Changes in working capital can cause variation in our cash flows provided by operating activities due to seasonality, timing and other factors.

Net cash used for investing activities increased by $0.9 million, or 19%. The increase was primarily due to a $1.1 million increase in purchases of property and equipment, partially offset by a $0.2 million decrease in purchases of rights, content and intellectual property.

Capital expenditures for the quarter ended March 31, 2013 totaled $5.3 million. At March 31, 2013 and December 31, 2012, we had $1.3 million and $3.0 million, respectively, of property and equipment

that was not yet paid for and was included in accounts payable and other liabilities in the consolidated balance sheets. We currently anticipate that our total capital expenditures for 2013 will be in the range of $21 million to $25 million, which includes the aforementioned $3.0 million of purchases on account at December 31, 2012. The actual amount of future capital expenditures may fluctuate due to a number of factors, including, without limitation, potential future acquisitions and new business initiatives, which are difficult to predict and which could change significantly over time. Additionally, technological advances may require us to make capital expenditures to develop or acquire new equipment or technology in order to replace aging or technologically obsolete equipment.

Net cash used for financing activities increased by $0.5 million, or 4%. Repurchases of common stock increased by $1.2 million, partially offset by a repayment of $0.7 million on the outstanding balance under the Credit Agreement in the quarter ended March 31, 2012.

The payment of dividends and dividend equivalents is a cash outflow from financing activities. In January 2013, United Online, Inc.'s Board of Directors declared a quarterly cash dividend of $0.10 per share of common stock. The record date for the dividend was February 14, 2013 and the dividend, which totaled $9.4 million, including dividend equivalents paid on nonvested restricted stock units, was paid on February 28, 2013. In April 2013, United Online, Inc.'s Board of Directors declared a quarterly cash dividend of $0.10 per share of common stock. The record date for the dividend is May 14, 2013 and the dividend will be paid on May 31, 2013. The payment of future dividends is discretionary and is subject to determination by United Online, Inc.'s Board of Directors each quarter following its review of our financial performance and other factors.

On an ongoing basis, we assess opportunities for improved operational effectiveness and efficiency. We recorded $2.3 million of restructuring and other exit costs in the quarter ended March 31, 2013 in our Content & Media segment, which consisted of $2.1 million of employee termination costs, as well as $0.2 million of contract termination costs. During the quarter ended March 31, 2013, we paid $1.3 million of restructuring and other exit costs. At March 31, 2013, accrued restructuring and other exit costs totaled $1.1 million, which will be paid over the next 12 months.

Future cash flows from financing activities may also be affected by our repurchases of our common stock. United Online, Inc.'s Board of Directors authorized a common stock repurchase program (the "Program") that allows us to repurchase shares of our common stock through open market or privately negotiated transactions based on prevailing market conditions and other factors. From August 2001 through December 31, 2010, we repurchased a total of $150.2 million of our common stock under the Program, leaving $49.8 million of authorization remaining under the Program. In February 2011, the Board of Directors extended the Program through December 31, 2011 and authorized an increase in the $49.8 million authorization remaining to $80.0 million. In December 2011, the Board of Directors extended the Program through December 31, 2012. In January 2013, the Board of Directors approved and ratified the extension of the Program through December 31, 2013. We did not make any repurchases under the Program during the year ended December 31, 2012 or the quarter ended March 31, 2013 and, at March 31, 2013, the authorization remaining under the Program was $80.0 million.

Cash flows from financing activities may also be negatively impacted by the withholding of a portion of shares underlying the restricted stock units we grant to employees. In general, we currently do not collect the minimum statutory employee withholding taxes from employees upon vesting of restricted stock units. Instead, we automatically withhold, from the restricted stock units that vest, the portion of those shares with a fair market value equal to the amount of the minimum statutory employee withholding taxes due. We then pay the minimum statutory withholding taxes in cash. The withholding of these shares, although accounted for as a common stock repurchase, does not reduce the amount available under the Program. Similar to repurchases of common stock under the Program, the net effect of such withholding will adversely impact our cash flows from financing activities. The

amounts remitted in the quarter ended March 31, 2013 and 2012 were $3.3 million and $2.1 million, respectively, for which we withheld 0.5 million and 0.4 million shares of common stock, respectively, that were underlying the restricted stock units that vested. The amount we pay in future periods will vary based on our stock price and the number of applicable restricted stock units vesting during the period.

Based on our current projections, we expect to continue to generate positive cash flows from operations, at least for the next twelve months. If we complete the FTD Spin-Off Transaction, we will be a substantially smaller company than we were prior to the FTD Spin-Off Transaction, and we anticipate that our consolidated cash flows will be substantially lower when compared to periods prior to the FTD Spin-Off Transaction. We may use our existing cash balances and future cash generated from operations to fund, among other things, both contractual payments and optional prepayments on the outstanding balance under the Credit Agreement; dividend payments, if declared by United Online, Inc.'s Board of Directors; the development and/or acquisition of other services, businesses or technologies; the repurchase of our common stock underlying restricted stock units to pay the minimum statutory employee withholding taxes due on vested restricted stock units; the repurchase of our common stock under the Program; future capital expenditures; and future acquisitions of intangible assets, including rights, content and intellectual property.

Under the terms of the Credit Agreement, FTD Group, Inc., a subsidiary of United Online, Inc., is generally restricted from transferring funds and other assets to United Online, Inc., with certain exceptions, including an annual basket of $15 million (subject to adjustment based on excess cash flow calculations) which may be used to make cash dividends, loans and advances to United Online, Inc., provided certain terms and conditions specified in the Credit Agreement are satisfied. These restrictions have resulted in restricted net assets (as defined in Rule 4-08(e)(3) of Regulation S-X) of FTD Group, Inc. and its subsidiaries totaling $258.7 million, including cash of $69.7 million, at March 31, 2013. In May 2012, FTD Group, Inc. made a voluntary debt prepayment of $17.0 million on the outstanding borrowings under the Credit Agreement, which has eliminated all future scheduled mandatory principal payments. The Credit Agreement also includes provisions which require us to make debt prepayments in the event that we generate consolidated excess cash flow and the net leverage ratio is higher than a threshold level, as defined in the Credit Agreement, on an annual basis commencing in April 2013 for fiscal year 2012. Such excess cash flow payment, which was paid in April 2013, totaled $10.9 million. The degree to which our assets are leveraged and the terms of our debt could materially and adversely affect our ability to obtain additional capital, as well as the terms at which such capital might be offered to us. We currently expect to have sufficient liquidity to fulfill our debt service obligations, at least in the next twelve months. FTD Group, Inc. was in compliance with all covenants under the Credit Agreement at March 31, 2013.

On April 30, 2013, Mark R. Goldston, Chairman, President and Chief Executive Officer of United Online, announced that, subject to the completion of the FTD Spin-Off Transaction, he would resign as a director and officer of United Online immediately thereafter. Under the terms of Mr. Goldston's employment agreement, the FTD Spin-Off Transaction would constitute a change in control of United Online. His resignation following the FTD Spin-Off Transaction would constitute an involuntary termination for purposes of his employment agreement due to there having been a material decrease in his authorities, duties and responsibilities following a change in control. As a result, effective upon such resignation, and subject to the terms and conditions of his employment agreement, Mr. Goldston would be entitled to the severance and other benefits described in his employment agreement in connection with an involuntary termination, including an estimated cash severance payment totaling approximately $7.1 million (assuming a September 30, 2013 termination date), as well as full and accelerated vesting of Mr. Goldston's outstanding nonvested restricted stock units and unvested stock options. Mr. Goldston's employment agreement has previously been filed with the SEC.

If we need to raise additional capital through public or private debt or equity financings, strategic relationships or other arrangements, this capital might not be available to us in a timely manner, on acceptable terms, or at all. Our failure to raise sufficient capital when needed could severely constrain or prevent us from, among other factors, developing new or enhancing existing services or products, repurchasing our common stock, acquiring other services, businesses or technologies or funding significant capital expenditures and/or purchases of intangible assets, including rights, content and intellectual property, and have a material adverse effect on our business, financial position, results of operations, and cash flows, as well as impair our ability to pay future dividends and our ability to service our debt obligations. If additional funds were raised through the issuance of equity or convertible debt securities, the percentage of stock owned by the then-current stockholders could be reduced. Furthermore, such equity or any debt securities that we issue might have rights, preferences or privileges senior to holders of our common stock. In addition, trends in the securities and credit markets may restrict our ability to raise any such additional funds, at least in the near term.

We measure contingent consideration at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy. The estimated fair value of contingent consideration related to the schoolFeed acquisition was estimated at $3.4 million at March 31, 2013, which equaled 99% of total liabilities measured at fair value on a recurring basis at such date. Contingent consideration is measured based on three annual earnout periods ending June 30, 2013, 2014 and 2015 (each period, an "Earnout Period" and together, the "Earnout Periods") and, if earned, will be paid annually shortly after the closing of each Earnout Period. The range of the amounts the Company could pay under the contingent consideration arrangement is between $0 and $27.5 million. The fair value of contingent consideration was estimated using a Monte-Carlo simulation based on estimated probabilities of U.S. and other target market daily registrations; mean growth rates of 0% for both U.S. registrations and other target market registrations, each with a standard deviation of 50%, during the Earnout Periods; an estimated rate of conversion of new subscribers to pay accounts; and a discount rate of 18.5%. Contingent consideration—fair value adjustment for the quarter ended March 31, 2013 was comprised of a $5.5 million change in the estimated fair value of contingent consideration, partially offset by $0.4 million of interest expense related to such contingent consideration.

During the quarter ended March 31, 2013, Facebook restricted certain functionality of the schoolFeed app, which limited schoolFeed's ability to use the Facebook service to contact users who are not registered members of schoolFeed. As a result, we have not been able to register as many new members through the app as originally anticipated. As such, we decreased the estimates and mean growth rates for U.S. and other target market daily registrations assumptions used in calculating the estimated fair value of contingent consideration at March 31, 2013. The decrease in the estimated fair value of contingent consideration since December 31, 2012 was attributable to such decrease in the estimates and mean growth rates for U.S. and other target market daily registrations assumptions.

Changes to one or multiple inputs to the Monte-Carlo simulation, including the discount rate, mean growth rates, volatility rates, the estimated number of daily registrations, and the estimated rate of conversion of new subscribers to pay accounts, could significantly impact the estimated fair value of contingent consideration. We review and reassess the estimated fair value of contingent consideration on a quarterly basis, and future fair value estimates could differ from the initial estimate.

	Total		Less than 1 Year		1 Year to Less than 3 Years		3 Years to Less than 5 Years		More than 5 Years

Debt, including interest	$	290,146	$	19,380	$	16,970	$	16,986	$	236,810
Member redemption liability		21,851		17,451		4,400		—		—
Noncancelable operating leases		25,117		11,334		9,515		4,144		124
Contingent consideration		3,412		3,389		23		—		—
Purchase obligations		14,305		12,803		1,502		—		—
Other liabilities		2,686		891		1,109		204		482

Total	$	357,517	$	65,248	$	33,519	$	21,334	$	237,416

At March 31, 2013, we had liabilities for uncertain tax positions totaling $5.2 million, of which $0.2 million was included in other liabilities in the contractual obligations table above and, at March 31, 2013, was expected to be due in less than one year. We are not able to reasonably estimate when or if cash payments for long-term liabilities related to uncertain tax positions will occur.

Commitments under letters of credit at March 31, 2013 were scheduled to expire as follows (in thousands):

Letters of credit are maintained pursuant to certain of our lease arrangements. The letters of credit remain in effect at declining levels through the terms of the related leases. Standby letters of credit are maintained by FTD to secure credit card processing activity and additional letters of credit are maintained related to inventory purchases.

In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, sureties and insurance companies, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of such agreements, services to be provided by us, or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with our directors and certain of our officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. We have also agreed to indemnify certain former officers, directors and employees of acquired companies in connection with the acquisition of such companies. We maintain director and officer insurance, which may cover certain liabilities, including those arising from our obligation to indemnify our directors and certain of our officers and employees, and former officers, directors and employees of acquired companies, in certain circumstances.

It is not possible to determine the maximum potential amount of exposure under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements may not be subject to maximum loss clauses.

At March 31, 2013, we did not have any off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of Regulation S-K) that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources.

Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income —Effective January 1, 2013, we adopted the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, as codified in ASC 220. The amendments in this update require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. The adoption of this update did not have a material impact on our consolidated financial statements.

We are exposed to certain market risks arising from transactions in the normal course of business, principally risk associated with interest rate and foreign currency exchange rate fluctuations.

We are exposed to interest rate risk on our cash and cash equivalents and the outstanding balance under the Credit Agreement. The interest rate set forth in the Credit Agreement for the Term Loan and the Revolving Credit Facility is either a base rate plus 2.5% per annum, or LIBOR plus 3.5% per annum (with a LIBOR floor of 1.25% in the case of the Term Loan). In March 2012, FTD Group, Inc. entered into forward starting interest rate cap instruments based on 3-month LIBOR that are effective from January 2015 to June 2018 and have aggregated notional values totaling $130 million. The interest rate cap instruments are designated as cash flow hedges against expected future cash flows attributable to future 3-month LIBOR interest payments on the outstanding borrowings under the Credit Agreement. The gains or losses on the instruments are reported in other comprehensive income to the extent that they are effective and will be reclassified into earnings when the expected future cash flows, beginning in January 2015 through June 2018 and attributable to future 3-month LIBOR interest payments, are recognized in earnings. A 100 basis point increase in LIBOR rates would result in an estimated annual increase in our interest expense related to the outstanding debt under the Credit Agreement of approximately $0.2 million.

While we do not currently maintain any short-term investments, we still maintain deposits, which are classified as cash equivalents. Therefore, our interest income is sensitive to changes in the general level of U.S. and certain foreign interest rates.

We transact business in foreign currencies, and we are exposed to risk resulting from fluctuations in foreign currency exchange rates, particularly the British Pound ("GBP"), the Euro ("EUR") and the Indian Rupee ("INR") and, to a much lesser extent, the Swedish Krona ("SEK"), the Swiss Franc

("CHF") and the Canadian Dollar ("CAD"), which may result in gains or losses reported in our results of operations. The volatilities in GBP, EUR, INR, SEK, CHF, and CAD (and all other applicable foreign currencies) are monitored by us throughout the year. We face two risks related to foreign currency exchange rates—translation risk and transaction risk. Amounts invested in our foreign operations are translated into U.S. Dollars using period-end exchange rates. The resulting translation adjustments are recorded as a component of accumulated other comprehensive loss in the unaudited condensed consolidated balance sheets. Revenues and expenses in foreign currencies translate into higher or lower revenues and expenses in U.S. Dollars as the U.S. Dollar weakens or strengthens against other currencies. Substantially all of the revenues of our foreign subsidiaries are received, and substantially all expenses are incurred, in currencies other than the U.S. Dollar, which increases or decreases the related U.S. Dollar-reported revenues and expenses depending on the exchange rate trend in currencies. Therefore, changes in foreign currency exchange rates may negatively affect our consolidated revenues and net income. A 10% adverse change in overall foreign currency exchange rates over an entire year would not have a material impact on estimated annual revenues or estimated annual income before income taxes. These estimates assume an adverse shift in all foreign currency exchange rates against the U.S. Dollar, which do not always move in the same direction or in the same degrees, and actual results may differ materially. Net foreign currency transaction gains or losses arising from transactions denominated in currencies other than the local functional currency are included in other income, net, in the unaudited condensed consolidated statements of operations.

We currently utilize forward foreign currency exchange contracts to protect the value of our net investments in certain foreign subsidiaries and certain forecasted cash flows denominated in currencies other than the U.S. Dollar. These contracts are designated as hedges of net investments in foreign entities and hedges of cash flows. At March 31, 2013, the notional value of open forward foreign currency exchange contracts accounted for as net investment and cash flow hedges totaled $0.9 million and $0.8 million, respectively.

Periodically, we enter into forward foreign currency exchange contracts which are not designated as hedging instruments for accounting purposes. We enter into these derivative instruments to hedge intercompany transactions and partially offset the economic effect of fluctuations in foreign currency exchange rates. At March 31, 2013, the notional value of open forward foreign currency exchange contracts that did not qualify for hedge accounting treatment totaled $3.9 million. We may, in the future, also use other derivative financial instruments, if it is determined that such hedging activities are appropriate to reduce risk.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

For a description of our material pending legal proceedings, please refer to Note 13 "Contingencies—Legal Matters" of the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

The risk factors set forth below are substantially the same as those included in our Annual Report on Form 10-K for the year ended December 31, 2012, with the exception of modifications to (i) under "Risks Relating to our Business Generally," the risk factor related to new business initiatives and the risk factor related to the loss of senior management and other key employees, and (ii) under "Additional Risks Relating to our Content & Media Segment," the risk factor related to competition and the risk factor related to our free accounts and active accounts.

On August 1, 2012, United Online, Inc. announced that its Board of Directors had approved a preliminary plan with respect to the FTD Spin-Off Transaction. There can be no assurance that the FTD Spin-Off Transaction will be completed in the manner or timeframe contemplated by the Board of Directors' preliminary plan, or at all. Completion of the FTD Spin-Off Transaction and the timing thereof may be affected by a number of factors and conditions, including, without limitation, the following:

If the FTD Spin-Off Transaction is not completed in the manner or timeframe contemplated by the Board of Directors' preliminary plan, or not completed at all, the price of United Online, Inc.'s common stock may decline.

There are a number of risks associated with the FTD Spin-Off Transaction and they may have a material and adverse impact on our business, financial condition, results of operations, and cash flows.

There are a number of risks associated with the FTD Spin-Off Transaction, including, without limitation, the following:

Any of the foregoing, in addition to any other risks related to the contemplated transactions that are not specifically described above, could materially and adversely affect our business, financial condition, results of operations, and cash flows.

If the FTD Spin-Off Transaction were to fail to qualify as a tax-free transaction for U.S. federal income tax purposes, then the FTD Spin-Off Transaction could result in significant tax liabilities.

United Online, Inc. has requested a private letter ruling from the Internal Revenue Service ("IRS"), substantially to the effect that, for U.S. federal income tax purposes, the FTD Spin-Off Transaction will qualify as a tax-free transaction for U.S. federal income tax purposes under Section 355 of the Internal Revenue Code of 1986, as amended. In addition, United Online, Inc. expects to receive a legal opinion, substantially to the effect that the FTD Spin-Off Transaction so qualifies. The IRS ruling and the tax opinion will rely on certain facts, assumptions and undertakings, and certain representations from United Online, Inc. and FTD, regarding the past and future conduct of both respective businesses and other matters, and the tax opinion will rely on the IRS ruling. Notwithstanding the IRS ruling and the tax opinion, the IRS could determine that the FTD Spin-Off Transaction should be treated as a taxable transaction if it determines that any of these facts, assumptions, representations, or undertakings is not correct, or that the FTD Spin-Off Transaction should be taxable for other reasons, including if the IRS were to disagree with the conclusions in the tax opinion that are not covered by the IRS ruling.

If the FTD Spin-Off Transaction ultimately is determined to be taxable, then a stockholder of United Online, Inc. that received shares of FTD common stock in the FTD Spin-Off Transaction would be treated as having received a distribution of property in an amount equal to the fair market value of such shares on the distribution date and could incur significant income tax liabilities. Such distribution would be taxable to such stockholder as a dividend to the extent of United Online's current and accumulated earnings and profits. Any amount that exceeded United Online's earnings and profits would be treated first as a non-taxable return of capital to the extent of such stockholder's tax basis in its shares of United Online, Inc. stock with any remaining amount being taxed as a capital gain. In addition, United Online would recognize a taxable gain in an amount equal to the excess, if any, of the fair market value of the shares of common stock of FTD held by United Online, Inc. on the distribution date over United Online, Inc.'s tax basis in such shares.

Current or future economic conditions may have a material and adverse impact on our business, financial condition, results of operations, and cash flows.

Economic conditions in the U.S. and the European Union have been depressed and may remain challenging for the foreseeable future. Our products and services are discretionary and dependent upon levels of consumer spending. Consumer spending patterns are difficult to predict and are sensitive to, among other factors, the general economic climate, the consumers' levels of disposable income, consumer debt, and overall consumer confidence. The challenging economic conditions have adversely impacted certain aspects of our businesses in a number of ways, including reduced demand, more aggressive pricing for similar products and services by our competitors, decreased spending by advertisers, increased credit risks, increased credit card failures, a loss of customers, and increased use of discounted pricing for certain of our products and services. It is likely that these and other factors will continue to adversely impact our businesses, at least in the near term. The challenging economic conditions may adversely impact our key vendors and customers. Such economic conditions and decreased consumer spending have, in certain cases, resulted in, and may in the future result in, a variety of negative effects such as a reduction in revenues, increased costs, lower gross margin and operating margin percentages, increased allowances for doubtful accounts and write-offs of accounts receivable, increased provisions for excess and obsolete inventories, and recognition of impairments of assets, including goodwill and other intangible and long-lived assets. Any of the above factors could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Our results of operations and changes in our key business metrics from period to period have varied in the past and may fluctuate significantly in the future due to a variety of factors, many of which are outside of our control and difficult to predict. Each of the risk factors discussed in this Item 1A and the other factors described elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the SEC may affect us from period to period and may affect our long-term performance. As a result, you should not rely on period-to-period comparisons as an indication of our future performance. In addition, these factors and the challenging economic conditions create difficulties with respect to our ability to forecast our financial performance and business metrics accurately. We believe that these difficulties in forecasting present even greater challenges for financial analysts who publish their own estimates of our future financial results and business metrics. We cannot assure you that we will achieve the expectations of, or projections made by, our management or the financial analysts. In the event we do not achieve such expectations or projections, our financial results and the price of our common stock could be adversely affected.

New business initiatives, products, services, features, applications, or functionality may not be successful, which could adversely impact our key metrics and financial results.

We have expended, and may continue to expend, significant resources in developing, integrating and implementing new business initiatives, products, services, features, applications, and functionality, such as those related to the NetZero 4G mobile broadband service, our high school yearbook initiatives related to the Classmates website and the schoolFeed app. Such development, integration and implementation involve a number of uncertainties, including unanticipated delays and expenses and technological problems. New business initiatives, products, services, features, applications, or functionality also may not be accepted by consumers or commercially successful. We cannot assure you that we will be successful in such development, integration and implementation efforts, including those related to the NetZero 4G mobile broadband service, our high school yearbook initiatives or the schoolFeed app, or that any new business initiatives, products, services, features, applications, or functionality will be accepted by consumers or commercially successful. For example, the schoolFeed

app has been a source of new free members and significant user-generated content for our Classmates business. However, Facebook recently notified us that it intends to discontinue the schoolFeed app's access to the Facebook service on or about May 10, 2013, which would result in the termination of future new installations of the schoolFeed app through Facebook, as well as the discontinuance of the sharing of Facebook content through the schoolFeed app. These changes may result in a decline in the number of active accounts for our online nostalgia services. If our development, integration and implementation efforts are not successful, or such new business initiatives, products, services, features, applications, or functionality are not accepted by consumers or commercially successful, our key metrics and financial results could be materially and adversely impacted.

Our marketing efforts may not be successful or may become more expensive, either of which could increase our costs and adversely impact our key metrics and financial results.

We spend significant resources marketing our brands, products and services. We rely on relationships with a wide variety of third parties, including Internet search providers such as Google, Internet advertising networks, co-registration partners, retailers, distributors, and direct marketers, to source new customers and to promote or distribute our products and services. In addition, in connection with the launch of new products or services, we may spend a significant amount on marketing, including through television advertising. With any of our brands, products and services, if our marketing activities are inefficient or unsuccessful, if important third-party relationships or marketing strategies, such as Internet search engine marketing and search engine optimization, become more expensive or unavailable, or are suspended or terminated, for any reason, if there is an increase in the proportion of consumers visiting our websites or purchasing our products and services by way of marketing channels with higher marketing costs as compared to channels that have lower or no associated marketing costs, or if our marketing efforts do not result in our products and services being prominently ranked in Internet search listings, our key metrics and financial results could be materially and adversely impacted.

We may be unable to maintain or grow our advertising revenues. Reduced advertising revenues may reduce our profits.

Advertising revenues are a key component of revenues and profitability for our Content & Media and Communications segments. Factors that have caused, or may cause in the future, our advertising revenues to fluctuate include, without limitation, changes in the number of visitors to our websites, active accounts or consumers purchasing our products and services, the effect of, changes to, or terminations of key advertising relationships, changes to our websites and advertising inventory, changes in applicable laws, regulations or business practices, including those related to behavioral or targeted advertising, user privacy and taxation, changes in business models, changes in the online advertising market, changes in the economy, advertisers' budgeting and buying patterns, competition, and changes in usage of our services. Decreases in our advertising revenues are likely to adversely impact our profitability.

Advertising revenues generated by our Content & Media and Communications segments generally have been declining, when compared to prior periods, and may continue to decline in the future as a result of various factors, including, without limitation, the risks and uncertainties discussed above, in other risk factors, and elsewhere in this Quarterly Report on Form 10-Q. Any or all of the above factors have caused, and could continue to cause, our advertising revenues and profits to significantly decline in the future.

Fluctuations in foreign currency exchange rates could adversely affect comparisons of our operating results.

We transact business in different foreign currencies and may be exposed to financial market risk resulting from fluctuations in foreign currency exchange rates, including the British Pound, the Euro,

the Indian Rupee, the Swedish Krona, the Swiss Franc, and the Canadian Dollar. Revenues and expenses in foreign currencies translate into higher or lower revenues and expenses in U.S. Dollars as the U.S. Dollar weakens or strengthens against such other currencies. Substantially all of the revenues of our international businesses are received, and substantially all expenses are incurred, in currencies other than the U.S. Dollar, which increases or decreases the related U.S. Dollar-reported revenues and expenses depending on the fluctuations in foreign currency exchange rates. Certain of our key business metrics, such as the FTD segment's average order value and the Content & Media segment's ARPU, are similarly affected by such foreign currency exchange rate fluctuations. Changes in global economic conditions, market factors, and governmental actions, among other factors, can affect the value of these currencies in relation to the U.S. Dollar. A strengthening of the U.S. Dollar compared to these currencies and, in particular, to the British Pound and the Euro, has had, and in future periods could have, an adverse effect on the comparisons of our revenues and operating income against prior periods. We cannot accurately predict the impact of future foreign currency exchange rate fluctuations on our operating results, and such fluctuations could negatively impact the comparisons of such results against prior periods.

Significant problems with our key systems or those of our third-party vendors could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

The systems underlying the operations of each of our business segments are complex and diverse, and must efficiently integrate with third-party systems, such as credit card processors. Key systems include, without limitation, order transmission, fulfillment and processing, including the system for transmitting orders through the floral network; billing; website and database management; customer support; telecommunications network management; advertisement serving and management systems; and internal financial systems. Some of these systems, such as customer support for our Content & Media and Communications segments, are outsourced to third parties, and other systems, such as Interflora's order transmission, fulfillment and billing system and FTD's customer service telephone system, are not redundant. We have experienced systems problems in the past, and we or these third parties may experience problems in the future. All information technology and communication systems are subject to reliability issues, integration and compatibility concerns, and security-threatening intrusions. The continued and uninterrupted performance of our key systems is critical to our success. Unanticipated problems affecting these systems could cause interruptions in our services. In addition, if our third-party vendors face financial or other difficulties, our business could be adversely impacted. Any significant errors, damage, failures, interruptions, delays, or other problems with our systems or our third-party vendors or their systems could adversely impact our ability to satisfy our customers and could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

In addition, our Content & Media and Communications businesses outsource a majority of their live technical and billing support functions. These businesses rely on customer support vendors, and we maintain only a small number of internal customer support personnel for these businesses. Our internal customer support personnel are not equipped to provide the necessary range of customer support functions in the event that our vendors unexpectedly become unable or unwilling to provide these services to us.

Legal actions or investigations could subject us to substantial liability, require us to change our business practices, and adversely affect our business, financial condition, results of operations, and cash flows.

We are currently, and have been in the past, party to various legal actions and investigations. These actions may include, without limitation, claims by private parties in connection with consumer protection and other laws, claims that we infringe third-party patents, trademarks, copyrights or other intellectual property or proprietary rights, securities laws claims, claims involving marketing practices or

unfair competition, claims in connection with employment practices, breach of contract claims, and other business-related claims. The nature of our business could subject us to additional claims for similar matters, as well as a wide variety of other claims, including, without limitation, claims for defamation, right of publicity, negligence, and privacy and security matters. The failure to successfully defend against these and other types of claims, including claims relating to our business practices, could result in our incurring significant liabilities related to judgments or settlements or require us to change our business practices. Infringement claims may also result in our being required to obtain licenses from third parties, which licenses may not be available on acceptable terms, if at all. Both the cost of defending claims, as well as the effect of settlements and judgments, could cause our results of operations to fluctuate significantly from period to period and could materially and adversely affect our business, financial condition, results of operations, and cash flows. In addition, we also file actions against third parties from time to time for various reasons, including, without limitation, to protect our intellectual property rights, to enforce our contractual rights, or to make other business-related claims. The legal fees, costs and expenses associated with these actions may be significant, and if we were to lose these actions, we may be required to pay the other party's legal fees, costs and expenses, which also may be significant and could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Various governmental agencies have in the past asserted claims, instituted legal actions, inquiries or investigations, or imposed obligations relating to our business practices, such as our marketing, billing, customer retention, renewal, cancelation, refund, or disclosure practices, and they may continue to do so in the future. We have received civil investigative demands and subpoenas, as applicable, from the Federal Trade Commission ("FTC") and the Attorneys General of various states, primarily regarding their respective investigations into certain former post-transaction sales practices and certain of our marketing, billing, renewal, and privacy practices and disclosures. We have been cooperating with these investigations. However, the outcome of these or any other governmental investigations or their potential implications for our business are uncertain. We may not prevail in existing or future claims and any judgment against us or settlement or resolution of such claims may involve the payment of significant sums, including damages, fines, penalties, or assessments, or changes to our business practices. For example, in 2010, Memory Lane, Inc. (then known as Classmates Online, Inc.) and FTD, Inc. paid $960,000 and $640,000, respectively, to resolve an investigation of the Attorney General for the State of New York related to their former post-transaction sales practices. Defending against lawsuits, inquiries and investigations also involves significant expense and diversion of management's attention and resources from other matters. There are no assurances that additional governmental investigations or other legal actions will not be instituted in connection with our former post-transaction sales practices or other current or former business practices. Enforcement actions or changes in enforcement policies and procedures could result in changes to our business practices, as well as significant damages, fines, penalties or assessments, which could decrease our revenues or increase the costs of operating our business. To the extent that our services and business practices change as a result of claims or actions by governmental agencies or private parties, or we are required to pay significant sums, including damages, fines, penalties, or assessments, our business, financial condition, results of operations, and cash flows could be materially and adversely affected. For more information, see Note 13 "Contingencies—Legal Matters" of the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Governmental regulation of the collection and use of personal information or our failure to comply with these regulations could harm our businesses.

The FTC has regulations regarding the collection and use of personal information obtained from individuals when accessing websites, with particular emphasis on access by minors. In addition, other governmental authorities have regulations to govern the collection and use of personal information that may be obtained from customers or visitors to websites. These regulations include requirements that procedures be established to disclose and notify users of our websites of our privacy and security

policies, obtain consent from users for collection and use of personal information and provide users with the ability to access, correct or delete personal information stored by us. In addition, the FTC and other governmental authorities have made inquiries and investigations of companies' practices with respect to their users' personal information collection and dissemination practices to confirm these are consistent with stated privacy policies and to determine whether precautions are taken to secure consumers' personal information. The FTC and certain state agencies also have made inquiries, and, in a number of situations, brought actions against companies to enforce the privacy policies of these companies, including policies relating to security of consumers' personal information.

As discussed in the preceding risk factor, we have been cooperating with the Attorneys General of various states in connection with their inquiries and investigations of, among other things, the privacy policies of our Classmates.com and FTD.com businesses. Becoming subject to the regulatory and enforcement efforts of the FTC, a state agency or other governmental authority could have a material adverse effect on our ability to collect demographic and personal information from users, which, in turn, could have a material adverse effect on our marketing efforts, business, financial condition, results of operations, and cash flows. In addition, the adverse publicity regarding the existence or results of an investigation could have an adverse impact on customers' willingness to use our websites and services and thus could adversely impact our future revenues.

Certain of our international businesses, such as FTD's international consumer and floral network businesses, must also comply with data protection and privacy laws in the U.K., including the Data Protection Act 1998. If we or any of the third-party services on which we rely fail to transmit customer information and payment details in a secure manner, or if they otherwise fail to protect customer privacy in online transactions or if they transfer personal information outside the European Economic Area without complying with certain required conditions, then we risk being exposed to civil and criminal liability in the U.K., usually in the form of fines, as well as claims from individuals alleging damages as a result of the alleged non-compliance. We may also be required to alter our data collection and use practices. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Our business is subject to online security risks and a security breach or inappropriate access to, or use of, our networks, computer systems or services or those of third-party vendors could expose us to liability, claims and a loss of revenue.

The success of our business depends on the security of our networks and, in part, on the security of the network infrastructures of our third-party vendors. In connection with conducting our business in the ordinary course, we store and transmit customer and member information, including personally identifiable information. Unauthorized or inappropriate access to, or use of, our networks, computer systems or services, whether intentional, unintentional or as a result of criminal activity, could potentially jeopardize the security of confidential information, including credit card information, of our customers and of third parties. A number of other websites have publicly disclosed breaches of their security, some of which have involved sophisticated and highly targeted attacks on portions of their sites. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, the perception of the effectiveness of our security measures could be harmed and we could lose members, customers or vendors. A party that is able to circumvent our security measures could misappropriate our proprietary information or the information of our members or customers, cause interruption in our operations, or damage our computers or those of our members or customers.

A significant number of our members and customers authorize us to bill their payment card accounts (credit or debit) directly for all amounts charged by us. These members and customers provide payment card information and other personally identifiable information which, depending on

the particular payment plan, may be maintained to facilitate future payment card transactions. We rely on third-party and internally-developed encryption and authentication technology to provide the security and authentication to effectively secure transmission of confidential information, including payment card numbers. Advances in computer capabilities, new discoveries in the field of cryptography or other developments may result in the technology used by us to protect transaction data being breached or compromised. Non-technical means, for example, actions by an employee, can also result in a data breach. Under payment card rules and our contracts with our card processors, if there is a breach of payment card information that we store, we could be liable to the banks that issue the payment cards for their related expenses and penalties. In addition, if we fail to follow payment card industry security standards, even if there is no compromise of customer information, we could incur significant fines or lose our ability to give our members and customers the option of using payment cards. If we were unable to accept payment cards, our businesses would be seriously harmed.

We may need to expend significant resources to protect against security breaches or to address problems caused by breaches. Security breaches, including any breach related to us or the parties with which we have commercial relationships, could damage our reputation and expose us to a risk of loss, litigation and possible liability. We cannot assure you that the security measures we take will be effective in preventing these types of activities. We also cannot assure you that the security measures of our third-party vendors, including network providers, providers of customer and billing support services, and other vendors, will be adequate. In addition to potential legal liability, these activities may adversely impact our reputation or our revenues and may interfere with our ability to provide our products and services, all of which could adversely impact our business. In addition, the coverage and limits of our insurance policies may not be adequate to reimburse us for losses caused by security breaches.

Changes in laws and regulations and new laws and regulations may adversely affect our business, financial condition, results of operations, and cash flows.

We are subject to a variety of international, federal, state, and local laws and regulations, including, without limitation, those relating to taxation, bulk email or "spam," advertising, including, without limitation, targeted or behavioral advertising, user privacy and data protection, consumer protection, antitrust, and unclaimed property. Compliance with the various laws and regulations, which in many instances are unclear or unsettled, is complex. New laws and regulations, such as those being considered or recently enacted by certain states or the federal government related to automatic-renewal practices, user privacy, targeted or behavioral advertising, floral-related fees and advertising, and taxation, could impact our revenues or certain of our business practices or those of our advertisers. Any changes in the laws and regulations applicable to us, the enactment of any additional laws or regulations, or the failure to comply with, or increased enforcement activity of, such laws and regulations, could significantly impact our products and services, our costs, or the manner in which we or our advertisers conduct business, all of which could adversely impact our results of operations and cause our business to suffer.

Our online nostalgia and online loyalty marketing services, as well as our FTD segment's consumer business, rely heavily on email campaigns, and any disruptions or restrictions on the sending of emails or increase in the associated costs could adversely affect our business, financial condition, results of operations, and cash flows.

Our emails have historically generated the majority of the traffic on our online nostalgia websites and are the most important driver of member activity for our online loyalty marketing service. A significant number of members of our online nostalgia and online loyalty marketing services elect to opt-out of receiving certain types of emails. Without the ability to email these members, we have very limited means of inducing these members to return to our websites and utilize our services. In addition, each month, a significant number of email addresses for members of our online nostalgia and online

loyalty marketing services become invalid. This disrupts our ability to email these members and also prevents our online nostalgia members from being able to contact these members, which is one of the reasons why members use our online nostalgia services.

Our FTD segment generates a significant portion of its consumer orders from the emails we send to customers who have previously ordered products from us. We also engage in a number of third-party email marketing campaigns in which such third parties include our marketing offers in the emails they send.

An increase in the number of members or customers to whom we are not able to send emails, or who elect to not receive, or are unable to receive, our emails could adversely affect our business, financial condition, results of operations, and cash flows. From time to time, Internet service providers block bulk email transmissions or otherwise experience technical difficulties that result in our inability to successfully deliver emails to our members or customers. Third parties may also block, impose restrictions on, or start to charge for, the delivery of emails through their email systems. Due to the importance of email to our businesses, any disruption or restriction on the distribution of emails or increase in the associated costs could materially and adversely affect our revenues and profitability.

Our intellectual property and proprietary rights are important to our businesses.

Our trade names, trademarks, service marks, patents, copyrights, domain names, trade secrets, and other intellectual property are important to the success of our businesses. In particular, we view our primary trademarks as critical to our success. We principally rely upon patent, trademark, copyright, trade secret, and domain name laws in the U.S. and similar laws in other countries, as well as licenses and other agreements with our employees, members, consumers, suppliers, and other parties, to establish and maintain our intellectual property and proprietary rights in the technology, products, services, and content used in our operations. These laws and agreements may not guarantee that our proprietary rights will be protected and our intellectual property and proprietary rights could be challenged or invalidated. We have applied for the registration of, and have been issued, trademark registrations for trademarks and service marks used in our businesses in the U.S. and various foreign countries; however, in some other countries, there are certain pre-existing and potentially conflicting trademark registrations held by third parties. We also license some of our intellectual property rights, including the Mercury Man logo, to third parties. The steps we and such third parties have taken to protect our intellectual property and proprietary rights may not be adequate, and other third parties may infringe or misappropriate our intellectual property and proprietary rights. This could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Furthermore, the validity, enforceability, and scope of protection of intellectual property in Internet-related industries are uncertain and still evolving. The protection of our intellectual property and proprietary rights may require the expenditure of significant financial and internal resources. We cannot assure you that we have taken adequate steps to prevent infringement or misappropriation of our intellectual property and proprietary rights. Our failure to adequately protect our intellectual property and proprietary rights could adversely affect our brands and could harm our business. We are also subject to the risk of claims alleging that our business practices infringe on the intellectual property rights of others. These claims could result in lengthy and costly litigation. Moreover, resolution of any such claim against us may require us or one of our subsidiaries to obtain a license to use the intellectual property rights at issue or possibly to cease using those rights altogether. Any of those events could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We may be unsuccessful at acquiring additional businesses, services or technologies. Even if we complete an acquisition, it may not improve our results of operations and may also adversely impact our business, financial condition and cash flows.

Acquisitions of businesses, services or technologies may provide us with an opportunity to diversify the products and services we offer, leverage our assets and core competencies, complement our existing businesses, or expand our geographic reach.

We may evaluate a wide variety of potential strategic transactions that we believe may complement our existing businesses. However, we may not realize the anticipated benefits and synergies of an acquisition, and our attempts at integrating an acquired business may not be successful. Acquiring a business, service or technology involves many operational and financial risks, including risks relating to:

In addition, an acquisition of a foreign business involves risks in addition to those set forth above, including risks associated with foreign currency exchange rates, potentially unfamiliar economic, political and regulatory environments, and integration difficulties due to language, cultural and geographic differences. Any of these risks could harm our business, financial condition, results of operations, and cash flows.

FTD has a substantial amount of indebtedness which could adversely affect our ability to raise additional capital to fund operations, our flexibility in operating our business and our ability to react to changes in the economy or our industry.

FTD has a substantial amount of indebtedness which could have significant consequences for our business and financial condition. For example:

Under the terms of the Credit Agreement, we are permitted to incur additional indebtedness subject to certain conditions, and the risks described above may be increased if we incur additional indebtedness.

The Credit Agreement includes guarantees on a joint and several basis by FTD Companies, Inc. and certain of FTD Group, Inc.'s existing and future, direct and indirect, domestic subsidiaries and is secured by first priority security interests in, and mortgages on, substantially all of the tangible and intangible assets of FTD Companies, Inc., FTD Group, Inc. and certain of FTD Group, Inc.'s direct and indirect subsidiaries and first priority pledges of all the equity interests owned by FTD Companies, Inc. in FTD Group, Inc. and by FTD Group, Inc. in certain of its existing and future direct and indirect subsidiaries (except with respect to foreign subsidiaries in which case such pledges are limited to 66% of the outstanding capital stock). The occurrence of an event of default under the Credit Agreement could permit the lenders to cause all amounts outstanding under the Credit Agreement to become immediately due and payable, to terminate the commitments of such lenders to make further extensions of credit under the Credit Agreement, to call and enforce the guarantees, and to foreclose on the collateral securing such debt.

Our ability to operate our business could be seriously harmed if we lose members of our senior management team or other key employees or we are not able to attract qualified new personnel.

Our business is largely dependent on the efforts and abilities of our senior management and other key personnel. Any of our officers or employees can terminate his or her employment relationship at any time, including prior to or in connection with the completion of the FTD Spin-Off Transaction. On

April 30, 2013, Mark R. Goldston, our chairman, president and chief executive officer, announced that, subject to completion of the FTD Spin-Off Transaction, he would resign as a director and officer of United Online, Inc. immediately thereafter. In connection with the FTD Spin-Off Transaction, United Online, Inc.'s Board of Directors will conduct a search for a new chief executive officer of United Online, Inc. However, we may not be able to identify and hire a qualified candidate in a timely manner.

The loss of any of our key employees or our inability to attract or retain a new chief executive officer or other qualified employees could seriously harm our business and prospects. We do not carry key-person life insurance on any of our employees.

The payment of future dividends is discretionary and is subject to determination by our Board of Directors each quarter following its review of our financial condition, results of operations and cash flows and such other factors as are deemed relevant by our Board of Directors. Our cash flows have been declining, and we expect our cash flows to continue to decline. Declines in our cash flows, the effects of the FTD Spin-Off Transaction, any other Strategic Transactions or other transactions on our businesses, changes in our business needs, including working capital and funding for business initiatives or acquisitions, changes in tax laws relating to dividends, or changes in corporate strategy, among other factors, could cause our Board of Directors to decide to reduce or cease the payment of dividends in the future. We cannot assure you that we will not decrease or discontinue quarterly cash dividends, and if we do, our stock price could be negatively impacted.

We may not realize the benefits associated with our assets and may be required to record a significant charge to earnings if we are required to expense certain costs or impair our assets.

We have capitalized goodwill and identifiable intangible assets in connection with our acquisitions and certain business initiatives such as the content archives on the Classmates website. We perform an impairment test of our goodwill and indefinite-lived intangible assets annually during the fourth quarter of our fiscal year or when events occur or circumstances change that would more likely than not indicate that goodwill or any such assets might be permanently impaired. If our acquisitions or business initiatives are not commercially successful or, if due to economic or other conditions, our assumptions regarding the performance of our businesses or business initiatives are not achieved, we would likely be required to record impairment charges which would negatively impact our financial condition and results of operations. We have experienced impairment charges in the past, including a $26.9 million goodwill and intangible asset impairment charge in the quarter ended December 31, 2012 with respect to our MyPoints reporting unit. Given the current economic environment and the uncertainties regarding the impact on our businesses, there can be no assurance that our estimates and assumptions regarding the duration of the challenging economic conditions, or the period or strength of recovery, made for purposes of our goodwill and identifiable intangible assets impairment testing will prove to be accurate predictions of the future. If our assumptions regarding forecasted revenues or growth rates of certain reporting units or other factors are not achieved or are revised downward, we may be required to record additional impairment charges in future periods. In addition, from time to time, we record tangible or intangible assets on our balance sheet that, due to changes in value or in our strategy, may have to be expensed in future periods. Write-downs or impairments of assets, whether tangible or intangible, could adversely and materially impact our financial condition and results of operations.

Foreign, state and local governments may attempt to impose additional income taxes, sales and use taxes, value added taxes or other taxes on our business activities and Internet-based transactions, including our past sales, which could decrease our ability to compete, reduce our sales, or have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We are subject to income and various other taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating our consolidated provision for income taxes. During the ordinary course of business, there are many transactions for which the ultimate tax determination is uncertain. In addition, our effective income tax rates could be adversely affected by earnings being less than anticipated in countries where we have lower statutory rates and more (or determined to be more by a particular taxing jurisdiction) than anticipated in countries where we have higher statutory rates, by changes in the valuation of our deferred tax assets and liabilities or by, among other factors, changes in the relevant tax, accounting and other laws, regulations, principles, and interpretations. We are subject to audit in various jurisdictions, and such jurisdictions may assess additional income and other taxes against us. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions, and our historical recognition of other tax matters. The results of an audit or litigation could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

In connection with our Internet-based transactions, a number of states have been considering or adopting legislation or instituting policy initiatives, including those that would facilitate a finding of nexus to exist between Internet companies with the states, aimed at expanding the reach of sales and use taxes or imposing state income or other taxes on various innovative theories, including agency attribution from independent third-party service providers. Such legislation or initiatives could result in the imposition of additional sales and use taxes, or the payment of state income or other taxes, on certain transactions conducted over the Internet. In addition, advertisers and other third parties may choose to not do business with us in order to avoid nexus with certain states. If such legislation is enacted, or such initiatives are instituted, and unless overturned by the courts, the legislation or initiatives could subject us to substantially increased tax liabilities for past and future sales or state income or other taxes, require us to collect additional sales and use taxes, cause our future sales to decrease, or otherwise negatively impact our businesses, and thus have a material adverse effect on us.

We face risks relating to operating and doing business internationally that could adversely affect our businesses and results of operations.

Our businesses operate in a number of countries outside the U.S. Conducting international operations involves risks and uncertainties, including:

The occurrence of any one of these risks could negatively affect our international operations, our key business metrics, and our financial results.

Our businesses could be shut down or severely impacted by a catastrophic event.

Our businesses could be materially and adversely affected by a catastrophic event. A disaster such as a fire, earthquake, flood, power loss, terrorism, or other similar event, affecting any of our facilities, data centers or computer systems, or those of our third-party vendors, or a system interruption or delay that slows down the Internet or makes the Internet or our websites temporarily unavailable, could result in a significant and extended disruption of our operations and services. Any prolonged disruption of our services due to these or other events would severely impact our businesses. We do not carry flood insurance for certain of our facilities, and the property, business interruption and other insurance we do carry may not be sufficient to cover, if at all, losses that may occur as a result of any events which cause interruptions in our services.

We cannot predict our future capital needs and we may not be able to secure additional financing, which could adversely impact us.

We may need to raise additional funds in the future to fund our operations, for acquisitions of businesses, services or technologies or for other purposes. Additional financing may not be available in a timely manner, on terms favorable to us, or at all. The terms of FTD's indebtedness, in addition to the degree to which we are leveraged, could adversely affect our ability to obtain additional financing. In addition, the current volatility of, and disruption in, the securities and credit markets may restrict our ability to raise any such additional funds. If adequate funds are not available or not available when required and in sufficient amounts or on acceptable terms, our businesses and future prospects may suffer.

Our certificate of incorporation, our bylaws and Delaware law contain provisions that could delay or discourage takeover attempts that stockholders may consider favorable or beneficial.

Certain provisions of our certificate of incorporation, our bylaws and Delaware law limit the ability of our stockholders to elect directors and take other corporate actions. These provisions could have the effect of delaying or discouraging takeover attempts that our stockholders may consider favorable or beneficial because of the premium price that would be offered by a potential acquirer. In addition, although our previous stockholder rights plan expired in 2011, there are no assurances that our Board of Directors will not implement a new stockholder rights plan in the future.

The market price of our common stock has fluctuated significantly and it may continue to be volatile with extreme trading volume fluctuations. Since the announcement of the FTD Spin-Off Transaction, the market price of our common stock has increased significantly. However, the completion of the FTD Spin-Off Transaction is subject to a number of factors and risks, and the market price of our common stock may decrease if the completion of the FTD Spin-Off Transaction is delayed or does not occur. Further, if we complete the FTD Spin-Off Transaction, we will be a substantially smaller company than we were prior to the FTD Spin-Off Transaction, and we cannot predict the prices at which our common stock may trade after the FTD Spin-Off Transaction. In addition, the Nasdaq Global Select Market has experienced substantial price and trading volume fluctuations. The broad market and industry factors that influence or affect such fluctuations may harm the market price of our common stock, regardless of our actual operating performance. As a result of these or other reasons, we have experienced and may continue to experience significant volatility in the market price of our common stock.

Competition could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

The consumer market for flowers and gifts is highly competitive and fragmented as consumers can purchase the products we offer from numerous sources, including traditional local retail florists, supermarkets, mass merchants, gift retailers, and floral and gift mass marketers. The floral network services market is highly competitive as well, and retail florists and supermarkets may choose from a variety of providers that offer similar products and services. In the U.S., our key competitors in the consumer market include online, catalog and floral and gift retailers and mass market retailers with floral departments, including such companies as 1-800-FLOWERS.COM, Inc., Proflowers.com and Teleflora. Our key competitors in the U.S. floral network services market include providers of online or e-commerce services, retailers and wholesalers of floral-related products and other floral network services, such as Teleflora and BloomNet Wire Service, a subsidiary of 1-800-FLOWERS.COM, Inc. International key competitors in the consumer market include mass market retailers, such as Asda, Marks & Spencer, Next, and Waitrose/John Lewis, as well as online, catalog and specialty gift retailers, such as eFlorist, Serenata Flowers and Arena.

We face intense competition in the consumer market. We expect that the sales volumes at supermarkets and mass merchants will continue to increase, and that other online floral mass marketers will continue to increase their competition with us. In particular, the nature of the Internet as a marketplace facilitates competitive entry and comparative shopping, and we have experienced increased competition. Some of our competitors may have significant competitive advantages over us, may engage in more significant discounting, may devote significantly greater resources to marketing campaigns or other aspects of their business or may respond more quickly and effectively than we can to new or changing opportunities or customer requirements.

We face intense competition in the market for floral network services. In addition, the number of retail florists has been declining over a number of years. As the number of retail florists decreases, competition for the business of the remaining retail florists will intensify.

Increased competition in the consumer market or the floral network services market may result in lower revenues, reduced gross margins, loss of market share, and increased marketing expenditures. We cannot provide assurance that we will be able to compete successfully or that competitive pressures will not have a material adverse effect on our business, financial condition, results of operations, and cash flows.

FTD is dependent on its strategic relationships to help promote its consumer websites; failure to establish, maintain or enhance these relationships could have a material adverse effect on FTD's business, financial condition, results of operations, and cash flows.

We believe that our strategic relationships with leading online retailers and direct marketers are critical to attract customers, facilitate broad market acceptance of our products and brands and enhance our sales and marketing capabilities. A failure to maintain existing strategic relationships or to establish additional relationships that generate a significant amount of traffic from other websites could limit the growth of our business. Establishing and maintaining relationships with leading online retailers and direct marketers is competitive and expensive. We may not successfully enter into additional strategic relationships. In addition, we may not be able to renew existing strategic relationships beyond their current terms or may be required to pay significant fees to maintain and expand these strategic relationships. Further, many online retailers and direct marketers that we may approach to establish an advertising presence or with whom we already have an existing relationship may also provide advertising services for our competitors. As a result, these companies may be reluctant to enter into, maintain or expand a strategic relationship with us. Our business, financial condition, results of

operations, and cash flows may suffer if we fail to enter into new strategic relationships, or maintain or expand existing strategic relationships, or if these strategic relationships do not result in traffic on our websites sufficient to justify their costs.

In addition, we are subject to many risks beyond our control that influence the success or failure of our strategic relationships. For example, if any of the online retailers or direct marketers with which we have strategic relationships experience financial or operational difficulties that materially and adversely affect their ability to satisfy their obligations under their agreements with us, our business, financial condition, results of operations, and cash flows could be materially and adversely affected.

We are dependent on third parties who fulfill orders and deliver goods and services to our customers and their failure to provide our customers with high-quality products within the required timeframe and a high level of customer service may harm our brands and could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We believe that our success in promoting and enhancing our brands depends on our ability to provide our customers high-quality products within the required timeframe and a high level of customer service. Our business depends, in part, on the ability of our independent floral network members and third-party suppliers who fulfill our orders to do so at high-quality levels. We work with our floral network members and third-party suppliers to develop best practices for quality assurance; however, we generally do not directly control or continuously monitor any floral network member or third-party supplier. The failure of our floral network members or third-party suppliers to fulfill orders to our customers' satisfaction, at an acceptable level of quality and within the required timeframe, could adversely impact our brands and cause us to lose customers, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Additionally, because we depend upon third parties for the delivery of our products to customers, strikes or other service interruptions affecting these shippers could have an adverse effect on our ability to deliver our products on a timely basis. If any of our shippers are unable or unwilling to deliver our products, we would have to engage alternative shippers, which could increase our costs. A disruption in any of our shippers' delivery of our products could cause us to lose customers or could increase our costs, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

The success of our business is dependent on our floral network members and on the financial performance of the retail floral industry.

A significant portion of our profitability is dependent on our floral network members. We have lost, and may continue to lose, floral network members as a result of both declines in the number of local retail florists as a result of economic factors and competition, as well as our members choosing not to do business with us. If we lose a significant number of floral network members, or if we are not able to maintain or increase revenues from our floral network members, our business, financial condition, results of operations, and cash flows could be materially and adversely affected.

In addition, the operating and financial success of our business has been, and is expected to continue to be, dependent on the financial performance of the retail floral industry. There can be no assurance that the retail floral industry will not decline, that consumer preferences for, and purchases of, floral products will not decline, or that retail florist revenues or inter-city floral delivery transactions will not decline in absolute terms. A sustained decline in the sales volume of the retail floral industry could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

FTD's revenues and operating results fluctuate on a seasonal basis and may suffer if revenues during peak seasons do not meet our expectations.

FTD's business is seasonal, and our quarterly revenues and operating results typically exhibit seasonality. For example, revenues and operating results tend to be lower for the quarter ending September 30 because none of the most popular floral and gift holidays, which include Valentine's Day, Easter, Mother's Day, Thanksgiving, and Christmas, fall within that quarter. In addition, depending on the year, Easter and the U.K. Mother's Day sometimes fall within the quarter ending March 31 and sometimes fall within the quarter ending June 30.

Our operating results may suffer if revenues during our peak seasons do not meet expectations, as we may not generate sufficient revenues to offset increased costs incurred in preparation for peak seasons. Our working capital, cash and short-term borrowings also fluctuate during the year as a result of the factors set forth above. Moreover, the operational risks described elsewhere in these risk factors may be significantly exacerbated if those risks were to occur during a peak season.

Shifts in the mix of products versus services sold, and types of products and services sold, may adversely affect our financial results.

The cost of revenues associated with our products revenues is generally higher than that associated with our services revenues. In addition, the cost of revenues associated with certain products and services may be higher than that associated with other products and services. As a result, changes in the proportion of FTD segment revenues that is represented by products revenues versus services revenues, and certain types of products and services versus others, may adversely affect our revenues, cost of revenues, cost of revenues as a percentage of revenues, and segment income from operations.

Shifts in the mix of products and services sold at standard pricing as compared to discounted pricing or the failure to maintain our standard pricing for products and services could have adverse effects on our financial results.

Due to economic conditions and for competitive and other reasons, we have been offering broader and greater discounts to the consumer, both on a promotional basis to consumers generally, as well as through strategic arrangements with third parties that have a fixed, and in certain cases greater, discount or other associated costs. We also offer discounts on our floral network service fees from time to time on a promotional basis. Shifts in the mix of products and services sold that have resulted in increases in the proportion of products and services sold at a discount, and at times at greater discounts, including through such strategic arrangements, have resulted, and may in the future result, in reduced revenues, an increase in cost of revenues as a percentage of revenues, and a decrease in segment income from operations. We currently intend to continue selling a portion of our products and services at a discount, including through such strategic arrangements, and there are no assurances that the portion of products and services sold at a discount will not continue to increase. The continued use of discounts, including through such strategic arrangements, for our products and services may result in our becoming more reliant upon offering discounts in order to sell our products and services, which could result in our having to reduce our standard pricing, and may adversely impact our financial results.

If the supply of flowers becomes limited, the price of these products could rise or these products may become unavailable, which could result in our not being able to meet consumer demand and could have a material effect on our business, financial condition, results of operations, and cash flows.

Many factors, such as weather conditions, agricultural limitations, restrictions relating to the management of pests and disease, and fair trade and other social or environmental issues, affect the supply of flowers and the price of our floral products. If the supply of flowers available for sale is

limited, the wholesale prices of flowers could rise, which would cause us to increase our prices or reduce our profits. An increase in our prices could result in a decline in customer demand for our floral products, which would decrease our revenues.

Alternatively, we may not be able to obtain high-quality flowers in an amount sufficient to meet customer demand. Even if available, flowers from alternative sources may be of lesser quality or more expensive than those currently offered by us. A large portion of our supply of flowers is sourced from Colombia, Ecuador and Holland.

The availability and price of our products could be affected by a number of other factors affecting suppliers, including:

Foreign, state and local governments may attempt to impose additional sales and use taxes, value added taxes or other taxes on our business activities, including our past sales, which could decrease our ability to compete, reduce our sales, and have a material adverse effect on our business, financial condition, results of operations, and cash flows.

In accordance with current industry practice by domestic floral and gift order gatherers and our interpretation of applicable law, our FTD consumer business collects and remits sales and use taxes on orders that are delivered in a limited number of states where it has a physical presence or other form of jurisdictional nexus. If states successfully challenge this practice and impose sales and use taxes on orders delivered in states where we do not have physical presence or another form of jurisdictional nexus, we could incur substantial tax liabilities for past sales and lose future sales as a result of the increased tax cost that would be borne by the customer. Also, states may seek to reclassify the status of Internet order gatherers, such as our FTD consumer business, as persons that are deemed to fulfill the underlying order, in which case, a state may seek to impose taxes on the receipts generated by our FTD consumer business for orders fulfilled and delivered by florists outside such state. In addition, future changes in the operation of our online and telephonic sales channels could result in the imposition of additional sales and use tax or other tax obligations.

Additionally, in accordance with current industry practice by international floral and gift direct marketers and our interpretation of applicable law, we collect and remit value added taxes on certain consumer orders placed through Interflora. Future changes in the operation of our business could result in the imposition of additional tax obligations. Moreover, if a foreign taxing authority successfully challenges our current practice or implements new legislative initiatives, we could incur substantial tax liabilities for past sales and lose future sales as a result of the increased tax costs that would be borne by the customer. The imposition of additional tax liabilities for past or future sales could decrease our ability to compete with traditional retailers and reduce our sales, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We utilize outsourced staff and temporary employees, who may not be as well trained or committed to our customers as our permanent employees, and their failure to provide our customers with high-quality customer service may cause our customers not to return, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We utilize and rely on a significant number of outsourced staff and temporary employees in addition to our permanent employees, to take orders and respond to customer inquiries. These outsourced staff and temporary employees may not have the same level of commitment to our customers or be as well trained as our permanent employees. In addition, we may not hire enough outsourced staff or temporary employees to adequately handle the increased volume of telephone calls we receive during peak periods. If our customers are dissatisfied with the quality of the customer service they receive, they may not place orders with us again, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We face intense competition that could result in the failure of our online nostalgia services to be commercially successful.

As consumers continue to spend more time and money online, the competition for their time and engagement has continued to intensify. Consumers have a great number of options for online content and entertainment, including, by way of example, games, websites offering news and current events, movies, television shows, videos, information about any and virtually every topic, and the opportunity to communicate, socialize and interact with acquaintances and others. Certain aspects of the value proposition of our online nostalgia services compete with major social networking websites such as Facebook and Google+, as well as Internet search engines such as Google. Many of our competitors offer their content and services free of charge.

The market for online loyalty marketing services is highly competitive, and we expect competition to significantly increase in the future as loyalty marketing programs continue to grow in popularity. Our MyPoints online loyalty marketing service faces competition for members from other online loyalty marketing programs, such as Ebates, as well as offline loyalty marketing programs that have a significant online presence, such as those operated by credit card, airline and hotel companies. In addition, we also face competition for members from online providers of discounted offerings and coupons, such as Groupon and LivingSocial.

Some of our competitors have longer operating histories, greater name and brand recognition, larger user bases, significantly greater financial, technical, sales, and marketing resources, and engage in more extensive research and development than we do. Some of our competitors also have lower customer acquisition costs than we do, offer a wider variety of services, have more compelling websites with more extensive user-generated or third-party content or offer their services or content free to their users. Some of our competitors have been more successful than we have been in attracting and retaining visitors and members, and our ability to attract visitors to our websites and maintain a large

and growing member base has been adversely affected by such competition. In particular, Facebook's membership base currently far exceeds that of any of its competitors, and Google+ has been growing its membership base at a rapid pace. If our competitors provide services similar to our online nostalgia services for free, we may not be able to charge for our online nostalgia services. We rely on some of our competitors to promote our services and for new member acquisitions, such as Facebook in connection with our Facebook high school fan pages and the schoolFeed app. Any changes to Facebook's rules or policies or any other changes implemented by Facebook could adversely affect our business or our strategies. For example, the number of new installations of the schoolFeed app has been adversely affected by certain changes to Facebook's policies, and Facebook recently notified us that it intends to discontinue the schoolFeed app's access to the Facebook service on or about May 10, 2013. Competition has adversely affected our subscription revenues from online nostalgia services, as well as our advertising revenues from our online nostalgia services and online loyalty marketing service. More intense competition could also require us to increase our marketing or other expenditures. As a result of competition, our key business metrics, revenues, cash flows, and profitability have been adversely affected.

Continued declines in the number of pay accounts for our online nostalgia services could cause our business and financial results, including cash flows, to suffer.

Pay accounts are critical to our business model. Only a small percentage of users visiting our websites or initially registering for our online nostalgia services sign up for a paid subscription at the time of registration. As a result, our ability to generate subscription revenues is highly dependent on our ability to attract visitors to our websites, register them as free members, encourage them to return to our websites, and convince them to become pay accounts in order to access the pay features of our websites. We believe the integration of the schoolFeed app will increase the number of visitors to our Classmates.com website. However, our experience with the schoolFeed app and its users is limited, and there are no assurances that we will be able to convince these users to become pay accounts.

A number of our pay account subscriptions each month are not renewed or are canceled, which, for the Content & Media segment, we refer to as "churn." The level of churn we experience fluctuates from quarter to quarter due to a variety of factors, including our mix of subscription terms, which affects the timing of subscription expirations, as well as the degree of credit card failures. To maintain or reduce the level of churn, we must continually add new pay accounts both to replace pay accounts who churn and to grow our business beyond our current pay account base. We expect that our churn rate will continue to fluctuate from period to period. A significant majority of our pay accounts are on plans that automatically renew at the end of their subscription period and we have received complaints with respect to our renewal policies and practices. As discussed in the risk factors related to changes in laws and regulations and to legal actions and investigations, the laws being considered and those that have been enacted by certain states regarding automatic-renewal practices will, and enforcement action or changes in enforcement policies and procedures could, impact certain of our business practices. We also experience an increase in the percentage of credit card failures from time to time. Any change in our renewal policies or practices, or in the degree of credit card failures, could have a material impact on our churn rate. If we experience a higher than expected level of churn, it will make it more difficult for us to increase or maintain the number of pay accounts, which could reduce our revenues and adversely affect our financial results.

Pay accounts and free active accounts have been decreasing, and we believe such trend will continue. If we are not able to attract visitors to our websites and convert a significant portion to pay accounts, the number of pay accounts for our online nostalgia services and related advertising revenues will continue to decline and the financial results of the Content & Media segment will be adversely affected.

Failure to increase or maintain the number of visitors to our websites and members for our online nostalgia and online loyalty marketing services or the activity level of these visitors and members could cause our business and financial results to suffer.

The success of our online nostalgia and online loyalty marketing services depends upon our ability to increase or maintain the number of visitors to our websites, our base of free members and the level of activity of those visitors and members. A decline in the number of visitors, registered or active free online nostalgia members, or a decline in the activity of those members, could result in decreased pay accounts, decreased content on our websites and decreased advertising revenues. A decline in the number of registered or active online loyalty marketing service members could also result in decreased advertising revenues. We have experienced a decline in the number of active members, from time to time. The schoolFeed app has been a source of new free members and significant user-generated content for our Classmates business. However, Facebook recently notified us that it intends to discontinue the schoolFeed app's access to the Facebook service on or about May 10, 2013, which would result in the termination of future new installations of the schoolFeed app through Facebook, as well as the discontinuance of the sharing of Facebook content through the schoolFeed app. These changes may result in a decline in the number of active accounts for our online nostalgia services. The failure to increase or maintain the number of visitors to our websites, our base of free members, or the failure to convince our free members to actively participate in our websites or services, could have a material adverse effect on our business and our financial results.

Failure to maintain our standard pricing could have adverse effects on our financial results.

Due to economic conditions and for competitive and other reasons, we have been offering a large percentage of discounted pricing plans on a promotional basis. In general, these discounted pricing plans offer a subscription term at a significant discount compared to the standard pricing for such subscription term. Any increases in the percentage of pay accounts under a discounted pricing plan and any increases in the level of the discounts will likely result in a decrease in subscription revenues and ARPU, in particular, if such increases continue. Although these discounted pricing plans, by their terms, renew at the then-current standard pricing for such subscription term upon the expiration of the initial term, there are no assurances as to the number of pay accounts that will renew at the then current-standard pricing or at all. We intend to continue offering discounted pricing plans in the future, and there are no assurances that the volume or level of the discounts offered during a period will not be higher than anticipated. Our continued use of discounted pricing plans has resulted in our becoming dependent on offering such plans in order to obtain new pay accounts and retain existing pay accounts and may result in our having to reduce our standard pricing, which would adversely impact our financial results.

We compete with numerous providers of broadband services, as well as other dial-up Internet access providers. Our principal competitors for NetZero 4G mobile broadband and DSL services include, among others, local exchange carriers such as AT&T and Verizon, wireless and satellite service providers, and cable service providers. Our principal dial-up Internet access competitors include established online service and content providers, such as AOL and MSN, and independent national Internet service providers, such as EarthLink and its PeoplePC subsidiary. Dial-up Internet access services do not compete favorably with broadband services with respect to connection speed and do not have a significant, if any, price advantage over certain broadband services. Many broadband providers, including cable companies and local exchange carriers, bundle their offerings with telephone, entertainment or other services, which may result in lower prices than standalone services. Certain portions of the U.S., primarily rural areas, currently have limited or no access to broadband services.

However, the U.S. government has indicated its intention to facilitate the provision of broadband services to such rural areas. Such expansion of the availability of broadband services will increase the competition for Internet access subscribers in such areas and will likely adversely affect our business. In addition to competition from broadband providers, competition among dial-up Internet access service providers is intense and neither our pricing nor our features provides us with a significant competitive advantage, if any, over certain of our dial-up Internet access competitors. We expect that competition, particularly with respect to price, both for broadband, as well as dial-up Internet access services, will continue. We also expect that our dial-up Internet access subscriber base will continue to decrease, potentially at an increasing rate, and that our broadband services will not experience significant growth.

In order to compete effectively against other dial-up Internet access providers, we may have to make significant revisions to our pricing and marketing strategies. For example, we may have to lower our introductory rates, offer additional free periods of service, or reduce the standard pricing of our services. Measures such as these would decrease our average revenue per dial-up Internet access pay account and may decrease our revenues. All of the foregoing risks would adversely affect the profitability of our dial-up Internet access services which could materially and adversely impact our business, financial condition, results of operations, and cash flows.

Revenues and profitability of our Communications segment are expected to decrease.

Most of our Communications segment revenues and profits come from our dial-up Internet access services. Our dial-up Internet access pay accounts and revenues have been declining and are expected to continue to decline due to the continued maturation of the market for dial-up Internet access. Consumers continue to migrate to broadband access, primarily due to the faster connection and download speeds provided by broadband access. Advanced applications such as online gaming, music downloads and videos require greater bandwidth for optimal performance, which adds to the demand for broadband access. The pricing for basic broadband services has been declining as well, making it a more viable option for consumers. In addition, the popularity of accessing the Internet through tablets and mobile devices has been growing and may accelerate the migration of consumers away from dial-up Internet access. The number of dial-up Internet access pay accounts has been adversely impacted by both a decrease in the number of new pay accounts signing up for our services, as well as the impact of subscribers canceling their accounts, which we refer to as "churn." Churn has increased from time to time and may increase in the future.

We expect our dial-up Internet access pay accounts to continue to decline. As a result of expected continuing decreases in our dial-up Internet access pay accounts and, potentially, ARPU, we expect that our Communications services revenues, advertising revenues and the profitability of this segment will continue to decline over time. The rate of decline in Communications services revenues has accelerated in some periods and may continue to accelerate. Although we have been reducing our expenses in order to manage the profitability of our Communications segment, we will not be able to continue making the same level of expense reductions in the future. In addition, we increased our marketing expenses in 2012 in connection with the launch of the NetZero 4G mobile broadband service, which is subject to a number of risks. Continued declines in Communications revenues, particularly if such declines accelerate, will materially and adversely impact the profitability of this segment.

We started offering a mobile broadband service under the NetZero brand in 2012. However, the new service may not be accepted by consumers or commercially successful, especially given its dependence on Clearwire's limited coverage areas. We have been testing various marketing initiatives, including offering discounts on our devices, but there are no assurances that such initiatives will increase the number of accounts. The free version of the service is limited to a one-year term and these

accounts are automatically terminated upon the expiration of the one-year service term if they do not upgrade to one of the paid subscription plans. There are no assurances that we will be successful in upgrading these accounts before they terminate. Some of our prospective competitors have longer operating histories, greater name and brand recognition, larger user bases, wider coverage areas, and significantly greater financial, technical, sales, and marketing resources than we do. We cannot assure you that we will be successful in growing the number of accounts in the NetZero 4G mobile broadband service as planned, or that the service will be commercially successful. The failure to grow the number of accounts as planned, or the service's failure to be commercially successful, could materially and adversely impact our business, financial condition, results of operations, and cash flows.

Our Internet access business is dependent on the availability of telecommunications services and compatibility with third-party systems and products.

Our Internet access business substantially depends on the availability, capacity, affordability, reliability, and security of our telecommunications networks. Only a limited number of telecommunications providers offer the network and data services we currently require, and we purchase most of our telecommunications services from a few providers. In addition, our NetZero 4G mobile broadband service is entirely dependent upon services acquired from Clearwire and is subject to its limited coverage areas. Some of our telecommunications services are provided pursuant to short-term agreements that the providers can terminate or elect not to renew. In addition, some telecommunications providers may cease to offer network services for certain less populated areas, which would reduce the number of providers from which we may purchase services and may entirely eliminate our ability to purchase services for certain areas. If we are unable to maintain, renew or obtain new agreements with telecommunications providers, our business, financial condition, results of operations, and cash flows could be materially and adversely affected.

Our dial-up Internet access services also rely on their compatibility with other third-party systems, products and features, including operating systems. Incompatibility with third-party systems and products could adversely affect our ability to deliver our services or a user's ability to access our services and could also adversely impact the distribution channels for our services. Our services are dependent on dial-up modems and an increasing number of computer manufacturers, including certain manufacturers with whom we have distribution relationships, do not pre-load their new computers with dial-up modems, requiring the user to separately acquire a modem to access our services. There can be no assurance that, as the dial-up Internet access market declines and new technologies emerge, we will be able to continue to effectively distribute and deliver our services.

United Online, Inc.'s Board of Directors authorized a common stock repurchase program (the "Program") that allowed us to repurchase shares of our common stock through open market or privately negotiated transactions based on prevailing market conditions and other factors through December 31, 2009. From time to time, the Board of Directors has increased the amount authorized for repurchase under this Program and has extended the Program. In April 2004, the Board of Directors authorized us to purchase up to an additional $100 million of our common stock under the Program, bringing the total amount authorized under the Program to $200 million. In December 2009, the Board of Directors again further extended the Program through December 31, 2010. From August 2001 through December 31, 2010, we had repurchased $150.2 million of our common stock under the Program, leaving $49.8 million of authorization remaining under the Program. In February 2011, the Board of Directors extended the Program through December 31, 2011 and authorized an increase in

the $49.8 million authorization remaining to $80.0 million. In December 2011, the Board of Directors extended the Program through December 31, 2012. In January 2013, the Board of Directors approved and ratified the extension of the Program through December 31, 2013. There were no repurchases under the Program during the year ended December 31, 2012 or the quarter ended March 31, 2013 and, at March 31, 2013, the authorization remaining under the Program was $80.0 million.

Common stock repurchases during the quarter ended March 31, 2013 were as follows (in thousands, except per share amounts):

See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

				Incorporated by Reference to

			Filed with this Form 10-Q	Incorporated by Reference to
No.		Exhibit Description	Filed with this Form 10-Q	Form	File No.	Date Filed
	3.1	Amended and Restated Certificate of Incorporation		10-K	000-33367	3/1/2007
	3.2	Amended and Restated Bylaws		10-K	000-33367	3/1/2007
	31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X		000-33367	5/8/2013
	31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X		000-33367	5/8/2013
	32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X		000-33367	5/8/2013
	32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X		000-33367	5/8/2013
	101.INS	XBRL Instance Document	X		000-33367	5/8/2013
	101.SCH	XBRL Taxonomy Extension Schema Document	X		000-33367	5/8/2013
	101.CAL	XBRL Taxonomy Calculation Linkbase Document	X		000-33367	5/8/2013
	101.LAB	XBRL Taxonomy Label Linkbase Document	X		000-33367	5/8/2013
	101.PRE	XBRL Taxonomy Presentation Linkbase Document	X		000-33367	5/8/2013
	101.DEF	XBRL Taxonomy Extension Definition Document	X		000-33367	5/8/2013


(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2013
Or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Delaware		77-0575839
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
21301 Burbank Boulevard Woodland Hills, California (Address of principal executive office)		91367 (Zip Code)


Large accelerated filer o	Accelerated filer ý	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)


			Page
PART I.		FINANCIAL INFORMATION	4
	Item 1.	Financial Statements:	4
		Unaudited Condensed Consolidated Balance Sheets at March 31, 2013 and December 31, 2012	4
		Unaudited Condensed Consolidated Statements of Operations for the Quarters Ended March 31, 2013 and 2012	5
		Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Quarters Ended March 31, 2013 and 2012	6
		Unaudited Condensed Consolidated Statement of Stockholders' Equity for the Quarter Ended March 31, 2013	7
		Unaudited Condensed Consolidated Statements of Cash Flows for the Quarters Ended March 31, 2013 and 2012	8
		Notes to Unaudited Condensed Consolidated Financial Statements	9
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
	Item 4.	Controls and Procedures	59
PART II.		OTHER INFORMATION	60
	Item 1.	Legal Proceedings	60
	Item 1A.	Risk Factors	60
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	82
	Item 3.	Defaults Upon Senior Securities	83
	Item 4.	Mine Safety Disclosures	83
	Item 5.	Other Information	83
	Item 6.	Exhibits	83
SIGNATURES			84

	March 31, 2013		December 31, 2012

United States	$	58,039	$	60,622
Europe		10,339		10,840

Total long-lived assets	$	68,378	$	71,462

	Quarter Ended March 31,

	2013			2012
Segment revenues:
FTD	$	190,283		$	176,447
Content & Media		32,826			39,445
Communications		24,640			26,760

Total segment revenues		247,749			242,652
Intersegment eliminations		(365	)		(360	)

Consolidated revenues	$	247,384		$	242,292

	Quarter Ended March 31,

	2013			2012
Balance at January 1	$	3,464		$	3,655
Current period provision		15			57
Write-offs charged against allowance		(96	)		(218	)

Balance at March 31	$	3,383		$	3,494

	March 31, 2013		December 31, 2012

Prepaid expenses	$	7,304	$	7,178
Prepaid advertising and promotion expense		1,228		1,573
Prepaid floral catalog expenses		745		957
Prepaid insurance		608		1,139
Other		2,189		4,071

Total	$	12,074	$	14,918

	March 31, 2013

	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Pay accounts and free accounts	$	103,238	$	(96,938	)	$	6,300
Customer contracts and relationships		104,693		(80,349	)		24,344
Trademarks and trade names		182,545		(22,533	)		160,012
Software and technology		49,457		(43,495	)		5,962
Rights, content and intellectual property		14,069		(6,319	)		7,750

Total	$	454,002	$	(249,634	)	$	204,368

					Year Ending December 31,

			April-Dec 2013		Year Ending December 31,
	Total		April-Dec 2013		2014		2015		2016		2017		2018		Thereafter
Estimated amortization of intangible assets	$	48,847	$	21,667	$	17,727	$	3,409	$	2,891	$	1,829	$	743	$	581

		Fair Value of Derivative Instruments				Notional Value of Derivative Instruments

	Balance Sheet Location	March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012
Derivative Assets:
Interest rate caps	Other assets	$	717	$	699	$	130,000	$	130,000
Other derivative assets	Other current assets	$	167	$	—	$	3,742	$	—
Derivative Liabilities:
Other derivative liabilities	Accrued liabilities	$	41	$	245	$	1,884	$	7,333

	Changes in Gains (Losses) Recognized in Accumulated Other Comprehensive Loss on Derivatives Before Tax

	Quarter Ended March 31,
	2013		2012
Interest rate caps	$	18	$	(309	)


Estimated fair value at December 31, 2012	$	8,561
Change in estimated fair value		(5,533	)
Interest expense		384

Estimated fair value at March 31, 2013	$	3,412

	March 31, 2013				December 31, 2012

			Estimated Fair Value				Estimated Fair Value
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	Carrying Amount		Level 2		Carrying Amount		Level 2
Long-term debt, net of discounts, including current portion	$	244,092	$	256,111	$	244,000	$	261,090

	Employee Termination Costs			Contract Termination Costs			Total

Accrued restructuring and other exit costs at December 31, 2012	$	68		$	—		$	68
Restructuring and other exit costs		2,060			229			2,289
Cash paid for restructuring and other exit costs		(1,084	)		(205	)		(1,289	)

Accrued restructuring and other exit costs at March 31, 2013	$	1,044		$	24		$	1,068

	Quarter Ended March 31,						Change

	2013			2012			$		%
	(in thousands, except percentages)
Revenues	$	247,384		$	242,292		$	5,092		2	%
Revenues as a percentage of total segment revenues:
FTD		76.8	%		72.7	%
Content & Media		13.2	%		16.3	%
Communications		9.9	%		11.0	%

	Quarter Ended March 31,

	2013			2012
	(in thousands, except percentages)
Provision for income taxes	$	3,202		$	6,712
Effective income tax rate		24.0	%		36.8	%

Period		Average Price Paid per Share			Maximum Approximate Dollar Value that May Yet be Purchased Under the Program

January 1 - January 31, 2013	—	$	—	—	$	80,000
February 1 - February 28, 2013	506	$	6.34	—	$	80,000
March 1 - March 31, 2013	11	$	6.11	—	$	80,000


Date: May 8, 2013	UNITED ONLINE, INC. (Registrant)
	By:	/s/ NEIL P. EDWARDS Neil P. Edwards Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)