America Online Posts Record Earnings - Company Financial Information

Edge: Work-Group Computing Report, April 24, 2000

America Online, Inc. (NYSE: AOL) Tuesday announced record results for the third quarter of fiscal 2000, ended March 31, 2000 -- reaching new highs for consolidated revenues, advertising and commerce revenues, operating income, and EBITDA .

The quarter's net income, fully taxed and excluding one-time items, totaled $271 million, or $0.11 per diluted share, up from $104 million, or $0.04 per diluted share, on the same basis last year. The Company reported net income of $438 million, or $0.17 per diluted share, up from $411 million, or $0.16 per diluted share, in fiscal 1999's third quarter. Reported net income included one-time gains from the sale of investments totaling $275 million this quarter and $567 million in last year's third quarter. The year-ago quarter also includes one-time charges of $103 million. Excluding these items, operating income for the quarter climbed more than 155% over the year-ago quarter to $383 million.

Third quarter revenues rose to $1.8 billion, or 47% over last year's March quarter. Advertising, commerce and other revenues climbed 103% over fiscal 1999's third quarter to $557 million - marking a record $120 million increase, or 27%, over this year's second quarter.

The AOL service added 1.7 million new members worldwide, and finished the quarter with 22.2 million subscribers. During the quarter, the CompuServe 2000 service added 373,000 members, bringing the combined CompuServe 2000 and CompuServe Classic membership to 2.7 million. Gateway.net added more than 100,000 subscribers for a worldwide total of more than 850,000. In total, the Company added 2.0 million new subscribers worldwide and ended with 25.8 million subscribers of its family of interactive services.

Steve Case, Chairman and Chief Executive Officer, said: "This quarter's results underscore the tremendous strength of America Online's operations, and demonstrate that we are on a clear path to continued strong growth and increased profitability. Since we announced our landmark merger with Time Warner, we haven't missed a beat."

Mr. Case added: "At the same time, we have taken major strides to expand our success by leading the Internet's next wave of growth. Specifically, we are fast turning the great promise of 'AOL Anywhere' into reality, we've launched breakthrough Netscape browser technology to enrich the Internet experience, and we are actively building the medium in key markets around the world. In short, our results highlight just how strong America Online is today, and how well-positioned it is for the future."

Bob Pittman, President and Chief Operating Officer, said: "This quarter is an excellent example of how America Online is uniquely positioned in the Internet industry. We have built an unmatched collection of interactive brands, which will be further enhanced by the Time Warner merger, and we have an unparalleled connection to consumers. We're taking online advertising and commerce to new heights, yet we've barely scratched the surface in terms of the impact our medium can have."

Mr. Pittman added: "Looking to the future, we are rolling out our 'AOL Anywhere' strategy on multiple fronts - from wireless to broadband content, Internet appliances to AOL TV - delivering even more value and convenience to our members. We have stepped up our international expansion, with AOL Europe growing at a record pace and several Latin American launches planned over the next year. With Netscape 6 and the Gecko technology, we are driving the Internet experience to multiple devices and stimulating a new generation of Web-based applications for the PC and other devices. All these initiatives will help ensure that we make the most of Time Warner's assets, and our transition team is already working to identify the most promising opportunities."

For the nine-month period ending March 31, 2000, fully taxed net income, excluding one-time items, was $679 million and total revenues were $4.9 billion, compared to fully taxed net income, on a comparable basis, of $240 million and total revenues of $3.4 billion in the corresponding period of fiscal 1999.

Key operating metrics from the quarter included: --Subscription Revenues: Quarterly subscription revenues reached $1.15 billion, up 33%, from $869 million during fiscal 1999's corresponding quarter.

--Advertising, Commerce and Other Revenues: Revenues from advertising, commerce and other revenues climbed to $557 million - an increase of 103% from $275 million during the year-ago quarter, and an increase of 27%, or a record $120 million, over this year's second quarter.

--Backlog: The Company brought its consolidated backlog of advertising and commerce revenue to more than $2.7 billion at the end of the quarter, up from $2.4 billion on December 31, 1999.

--AOL Member Usage: AOL members averaged 64 minutes daily online during the quarter, an increase of 16% over last year's third quarter.

--Sales and Marketing Expenses: Consolidated sales and marketing expenses declined to 14.5% of revenues, compared with 17.4% in fiscal 1999's third quarter.